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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
(MARK ONE)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-828
BIRD CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-3082903
(I.R.S. EMPLOYER IDENTIFICATION NO.)
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
1077 PLEASANT STREET, NORWOOD, MA 02062
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 551-0656
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
REGISTERED
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $1 PER SHARE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of common stock, par value $1 per share, held by
non-affiliates as of March 1, 1996 was $23,150,000. As of March 1, 1996 there
were 4,123,178 shares of Bird Corporation common stock, par value $1 per share,
outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
NONE
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
As a result of the sale of its vinyl building products business, window
fabrication business and San Leon hydrocarbon waste recycling center (see
"Recent Business Developments" below), Bird Corporation's current manufacturing
operation consists of one primary business unit--roofing manufacturing and
sales and marketing. Products currently manufactured at Bird Corporation's
roofing facility include asphalt shingles and roll roofing for commercial and
residential use. These products are marketed through independent wholesalers,
including wholesalers whose primary customers are roofing contractors. All
references herein to the "Company" or "Bird" refer to Bird Corporation and its
subsidiaries unless otherwise indicated by the context.
RECENT BUSINESS DEVELOPMENTS
There have been a number of significant developments in the business of the
Company since December 31, 1994, including the following:
. The Company signed an Amended and Restated Agreement and Plan of Merger,
dated as of April 8, 1996 (the "Merger Agreement"), among the Company,
CertainTeed Corporation, a Delaware corporation ("CertainTeed"), and BI
Expansion Corp., a Massachusetts corporation and a wholly owned
subsidiary of CertainTeed ("Acquisition Sub"), pursuant to which
Acquisition Sub will be merged with and into the Company (the "Merger"),
with the Company surviving the Merger as a subsidiary of CertainTeed. In
the Merger, each share of the Company's common stock, par value $1 per
share ("Common Stock"), outstanding on the effective date of the Merger
and each share of the Company's $1.85 Cumulative Convertible Preference
Stock par value $1 per share ("Preference Stock"), outstanding on the
effective date of the Merger (other than shares held by CertainTeed or
Acquisition Sub, shares held in the Company's treasury and other than
shares held by stockholders who perfect their appraisal rights under
Massachusetts law) will be converted into the right to receive (in the
case of Common Stock) $7.50 per share of Common Stock and (in the case of
Preference Stock) $20 plus all accrued and unpaid dividends through the
effective date of the Merger per share of Preference Stock, in each case
in cash, without interest. All outstanding shares of the Company's 5%
Cumulative Preferred Stock, par value $100 per share (the "5% Stock"),
will remain issued and outstanding after the Merger and will be called
for redemption and retirement as soon as practicable following the Merger
at a price equal to $110 per share, plus all accrued and unpaid dividends
through the date of redemption and retirement.
The Merger is the second step in a two-part transaction, the purpose of
which is the acquisition of the Company by CertainTeed. On April 12,
1996, Acquisition Sub commenced a tender offer (the "Offer") to purchase
all outstanding shares of Common Stock and Preference Stock at a price of
$7.50 per share of Common Stock and $20 plus all accrued and unpaid
dividends through the expiration date of the Offer per share of
Preference Stock. The Offer is conditioned upon, among other things, (i)
there being validly tendered and not withdrawn prior to the expiration of
the Offer at least 66 2/3% of all outstanding shares of Common Stock
(determined on a fully diluted basis on the expiration of the Offer) and
(ii) either (x) there being validly tendered and not withdrawn prior to
the expiration of the Offer at least 66 2/3% of all outstanding shares of
Preference Stock or (y) Acquisition Sub having elected to require the
Company to redeem all outstanding shares of Preference Stock in
accordance with the Merger Agreement.
Pursuant to the Merger Agreement, upon the acquisition by Acquisition Sub
of at least a majority of the outstanding shares of Common Stock pursuant
to the Offer, Acquisition Sub shall be entitled to designate such number
of directors to be appointed to the Company's Board of Directors as is
required to constitute a majority of the members of the Company's Board
of Directors.
Completion of the transaction is subject to approval by Bird's
shareholders, appropriate governmental approvals and other customary
conditions.
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. On November 29, 1995, the Company sold all of the outstanding capital
stock of Bird Environmental Gulf Coast, Inc. ("BEGCI") which owned the
Company's interest in the San Leon, Texas based hydrocarbon waste
recycling center, to GTS Duratek, Inc. ("Purchaser") for a purchase price
of $1.00. In addition, BETI agreed to pay the Purchaser the amount by
which BEGCI's current liabilities exceeded its current assets at August
31, 1995, which was approximately $1.3 million. The sale of the recycling
center completes the Company's withdrawal from the environmental
remediation and recycling industry. The resulting loss of $11,252,000 is
reflected as discontinued operations in the Company's consolidated
statements of operations.
. On September 26, 1994, the Company announced that it had signed a
definitive agreement to sell the assets of its vinyl building products
manufacturing operation located in Bardstown, Kentucky to Jannock, Inc.
("Jannock"). This transaction also included an option to purchase the
Company's interest in Kensington Partners ("Kensington"), a window
fabrication business. At a special meeting of the shareholders held in
Dedham, Massachusetts on March 7, 1995, the shareholders of the Company
voted to sell the assets of the Company's vinyl building products
operation to Jannock essentially in accordance with the terms and
conditions as outlined in the definitive agreement between the Company
and Jannock dated September 23, 1994. On March 8, 1995, the sale was
closed for a gross purchase price of $47.5 million which was reduced to
approximately $42.5 million by post- closing working capital adjustments
(the "Vinyl Sale"). The sale included the assumption by the purchaser of
certain specified liabilities of the vinyl business. Proceeds from the
sale were used to reduce bank debt. Net of adjustments, the Company's
gain on this sale totaled $20,579,000 million and is reflected as
discontinued business activity income in the consolidated statements of
operations.
. On June 2, 1995, the Company sold all of the outstanding capital stock of
Bird-Kensington Holding Corp. ("Bird-Kensington"), which owned the
Company's interest in Kensington to Jannock, Inc. The sale was
consummated pursuant to the exercise by Jannock of an option granted
under the Asset Purchase Agreement dated as of September 23, 1994 (as
amended by amendments dated as of January 24, 1995, January 31, 1995, and
April 27, 1995). The purchase price consisted of cash in the amount of
$2,780,000 and the assumption of certain liabilities related to the
Kensington business. Cash proceeds of $1 million were used to acquire the
minority partner's interest in Kensington. In addition, $4,090,000 was
invested by the Company in Bird-Kensington, as a condition of the sale,
to enable Kensington to pay certain liabilities and to meet equity
requirements as stipulated in the Asset Purchase Agreement. The sale
resulted in a loss of $1,959,000 and is reflected as discontinued
business activity expense in the Company's consolidated statements of
operations.
HOUSING GROUP
Asphalt roofing products are manufactured and sold at the Company's
facilities in Norwood, Massachusetts. Asphalt shingles and roll roofing are
produced by coating a fiberglass mat with a mixture of hot asphalt and crushed
rock filler and covering the coated mat with Company-manufactured roofing
granules. The Company's facilities include a roofing manufacturing facility, a
granule plant, a quarry, an asphalt plant and a private landfill for the
Company's use.
The Company's Housing Group produced vinyl siding products at its plant in
Bardstown, Kentucky prior to the sale of such facility in March 1995.
Additionally, the Company sold its interest in Kensington, its joint venture in
the replacement window fabrication business in June 1995. The Housing Group
also carried on a distribution business through wholesale building materials
distributors based in New England, New York, Kentucky, Texas, Louisiana, and
Arizona until such businesses were sold in August and November 1994.
Net sales of the components of the Housing Group as a percentage of
consolidated net sales of the Company were as follows: sales of asphalt roofing
products, 80% in 1995, 31% in 1994 and 23% in 1993; sales of vinyl products,
20% in 1995, 24% in 1994 and 20% in 1993; and sales through building materials
distribution centers (including roofing and vinyl products manufactured by the
Company), 45% in 1994 and 57% in 1993.
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The principal geographic markets for the Company's manufactured roofing
products, due to limitations imposed by freight costs, are the northeastern
United States. The building materials business is seasonal to the extent that
outside repair and remodeling and new construction decline during the winter
months. To reduce the impact of this seasonal factor, the Company generally
employs what it believes to be an industry-wide practice of "winter dating",
pursuant to which extended or discounted payment terms are offered to
creditworthy customers who order and accept delivery of roofing products during
specified periods of time in the slow season.
Raw Materials
The principal raw materials used in the manufacture of asphalt roofing
products are fiberglass mat, asphalt saturants and coatings and crushed
granules. The Company's requirements for fiberglass mat are met primarily under
a Glass Mat Supply Agreement with one vendor which expires on December 31,
1996. Fiberglass mat is also generally available in adequate quantities from a
number of outside suppliers. Asphalt saturants and coatings were, until
recently, purchased from a major oil refinery. These materials are also
available from other sources at a higher delivered cost. After the refinery's
discontinuation of its production of asphalt in April 1994, the Company relied
on a number of alternative sources for this raw material. Since completion of
construction of an asphalt plant in January 1995, the Company has been able to
process asphalt at its roofing facility, thereby reducing its costs and
decreasing the potential for temporary interruptions in its manufacturing
operations. The Company believes that it can produce all of its current granule
requirements at its granule plant and quarry.
Backlog
Order backlog is not a meaningful measure of the Company's building materials
business because there are fewer sales during the last quarter of the fiscal
year and the order-to-shipment cycle is relatively short. Additionally, it is
very rare, at any time, to require more than 30 days from the receipt of a
product order to delivery of the product.
Competition
The building materials business is, to a large degree, a commodities-type
business and is highly competitive with respect to price, delivery terms and
consistent product quality. Many of the Company's competitors are larger and
financially stronger than the Company, but none is dominant in any of its
markets.
The strengths of the Company's asphalt roofing business arise, in part, from
the unique marketing programs the Company directs toward its indirect customer
base, professional roofing contractors, combined with an industry-wide
reputation for providing quality products with a high level of service. The
Company's comprehensive contractor marketing program is designed to support the
position of the Company's contractors in the industry. Such marketing programs
include a special system for in-home sales promotions. Pursuant to its
exclusive certification program, the Company also certifies contractors who
have recorded three (3) successful years in business, who provide the Company
with names of customers for quality checks, sign a letter of ethics, have a
good credit history, warrant their workmanship for two (2) years and attend
annual training meetings. Contractors must be recertified every two years.
Certified contractors are supplied with a wide array of marketing materials,
including customized sample cases, special mailers and custom job site signs.
Intellectual Property
The Company owns a number of trademarks, as well as significant technology
and know-how, which it utilizes in connection with its asphalt roofing
business. The Company believes that its trademarks are strong and well
recognized in the industry.
COMPLIANCE WITH CERTAIN ENVIRONMENTAL LAWS
The Company has expended, and expects to continue to expend, funds to comply
with federal, state and local provisions and orders which relate to the
environment. Based on the information available to the
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Company at this time, the Company believes that the effect of compliance with
these provisions on the capital expenditures, earnings and competitive position
of the Company is not material. Litigation and other proceedings involving
environmental matters are described under the heading "Environmental Matters"
in Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and in Item 3, "Legal Proceedings".
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
While the Company formerly operated in two major business segments, its
housing segment and its environmental segment, the Company no longer operates
its environmental segment. Financial information about the industrial segments
in which the Company operates, for the three years ended December 31, 1995,
appear in Note 12 of the Notes to Consolidated Financial Statements which are
included herein.
EMPLOYEES
At December 31, 1995, the Company employed 174 people.
ITEM 2. PROPERTIES
The Company's executive offices are located at its plant in Norwood,
Massachusetts. The Company believes that its plant and facilities, as described
below, are suitable and adequate for its current and anticipated business.
Operating capacity can be increased by additional man hours, changing product
mix, and/or minimal capital investment should the need arise. The Company's
facilities are well maintained, in sound operating condition, and in regular
use.
Roofing Manufacturing Facility
The Company owns its asphalt roofing manufacturing facility in Norwood,
Massachusetts. The Norwood plant includes the roofing manufacturing facility, a
granule plant and an asphalt plant. The Company's quarry is located in
Wrentham, Massachusetts, and its private landfill is located in Walpole,
Massachusetts. The Company leases an industrial laminator and certain other
equipment which were fabricated for use in its roofing plant. The laminator
lease expires in 1998. The Company completed the construction of an asphalt
oxidizer plant at the Norwood premises in January 1995 to ensure a continuous
supply of asphalt. The Company also leases an asphalt storage tank and terminal
facilities in Providence, Rhode Island.
ITEM 3. LEGAL PROCEEDINGS
On or about April 18, 1996 Bird Incorporated, a subsidiary of the Company,
received a grand jury subpoena issued upon application of the United States
Department of Justice, Antitrust Division, for the production of certain
documents. In addition, an executive officer and a senior manager of the
Company have received grand jury subpoenas requiring the production of certain
documents as well as their providing testimony before the grand jury. The
Company and such executive officer and senior manager are in the process of
evaluating the subpoena and intend to cooperate fully with the Department of
Justice. It appears that the subpoena relates to an investigation of the
roofing materials industry.
The Company monitors its compliance with environmental regulations on an
ongoing basis. The Company's general counsel receives environmental site
assessments from the operating managers responsible for site environmental
compliance. Appropriate action is undertaken where needed. When environmental
claims are asserted against the Company, the claims are evaluated by the
Company's general counsel and operating management in conjunction with external
legal counsel and environmental engineers as necessary, and action is taken
with respect to all known sites, as appropriate. The Company is currently
engaged in proceedings relating to or has received notice of the following
environmental matters:
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On March 15, 1994 the Company received a draft of an Administrative Consent
Order and Notice of Noncompliance from the Massachusetts Department of
Environmental Protection ("DEP") concerning operations at its Norwood,
Massachusetts manufacturing facility and associated rock granule processing
facility. The draft alleges that the Company was not in compliance with
regulations of the DEP relating to air emissions, granule plant operation, and
labeling, handling and storage of certain hazardous waste. The draft proposes
certain corrective action on the part of the Company as well as payment of
civil administrative penalties. On June 10, 1994, the Company's roofing
division entered into an administrative consent order and notice of
noncompliance with respect to the alleged violations. The consent order
requires the Company to undertake certain modifications and corrective actions
with respect to certain hazardous waste handling and storage facilities at the
Norwood facility, to conduct an environmental audit of its operations at such
facility and to undertake various modifications of air pollution control
equipment. On May 13, 1994, the Company paid an administrative penalty of
$30,000. The Company estimated that the cost of corrective action to be taken
by it in accordance with the consent order would be approximately $100,000. The
majority of the corrective actions were completed in 1995.
On March 25, 1994, the Company received a notice from the United States
Environmental Protection Agency (the "EPA") regarding a site inspection
prioritization report prepared by the DEP. The notice alleges a potential
release of hazardous substances into the environment at the Company's former
mill site in East Walpole, Massachusetts. The EPA has reserved the right to
conduct further site tests on the location. A site assessment performed on the
mill site for the Company by its environmental consultants, GZA
GeoEnvironmental Inc. ("GZA"), showed no environmental cleanup was necessary.
This report was submitted to the DEP in July 1995. In the opinion of management
and based on management's and GZA's understanding that the alleged releases are
in de minimis quantities, this matter should not have a material adverse effect
on the Company's financial position or on the results of its operations.
On June 21, 1994, the Arizona Department of Environmental Quality ("ADEQ")
issued a notice of violation ("NV") to Southwest Roofing Supply, a previously
owned division of the Company ("Southwest"), which directed Southwest to
conduct a site investigation of property formerly leased by Southwest. A
consent order between the ADEQ and the Company was issued on September 23,
1994. Pursuant to the consent order, the Company agreed to submit a work plan
with a view to remediating the soil and groundwater that may have been
contaminated by leaks from an underground storage tank previously removed by
the Company. The Company's management believes that the remediation cost to the
Company will be in the range of $200,000 to $700,000. As of December 31, 1995,
the Company has provided a reserve of $450,000 for the estimated cost of
cleanup. The Company anticipates that $200,000 will be reimbursed to the
Company by the ADEQ in accordance with Arizona law and regulation.
In 1986, the Company, along with numerous other companies, was named by the
EPA and other governmental agencies responsible for regulation of the
environment as a Potentially Responsible Person ("PRP") pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. Paragraph 9601, et seq. ("CERCLA") in connection with
hazardous substances at a site known as the Fulton Terminal Superfund site
located in Fulton, Oswego County, New York. On September 28, 1990, the Company
and a number of other PRPs reached a negotiated settlement with the EPA
pursuant to which the settling PRPs agreed to pay the costs of certain expenses
in connection with the proceedings and to pay certain other expenses, including
the costs and expenses of administering a trust fund to be established by the
settling PRPs. The settlement agreement is embodied in a consent decree lodged
with the United States District Court for the Western District of New York and
fixed the Company's proportionate share of the total expenses. The ultimate
cost to the Company of the remedial work and other expenses covered by the
settlement agreement is estimated to be between $1 million to $2 million
payable over a period of 3 to 15 years (depending upon the duration of
remediation efforts). At December 31, 1995, the Company has provided a reserve
of approximately $1 million to cover the estimated cost of the Company's
remaining proportionate share (i.e., 17%) of the ultimate total cost of
cleanup. Under a cost-sharing arrangement set forth in a consent decree with
the EPA, the other PRPs have agreed to incur 83% of the aggregate cost of
remediation of this site.
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The Company has been named as a PRP with respect to certain other sites which
are being investigated by federal or state agencies responsible for regulation
of the environment. As a consequence of its status as a PRP, the Company may be
jointly and severally liable for all of the potential monetary sanctions and
remediation costs applicable to each site. In assessing the potential liability
of the Company at each site, management has considered, among other things, the
aggregate potential cleanup costs of each site; the apparent involvement of the
Company at each site and its prospective share of the remediation costs
attributable thereto; the number of PRPs identified with respect to each site
and their financial ability to contribute their proportionate shares of the
remediation costs for such site; the availability of insurance coverage for the
Company's involvement at each site and the likelihood that such coverage may be
contested; and whether and to what extent potential sources of contribution
from other PRPs or indemnification by insurance companies constitute reliable
sources of recovery for the Company. Similar consideration has been given in
determining the exposure and potential liability of the Company in connection
with other significant legal proceedings to which the Company is a party. On
the basis of such consideration, management has determined that such
environmental matters will not have a material adverse effect on the Company's
financial position or results of operations. The Company has provided an
aggregate reserve amounting to approximately $300,000 for its estimated share
of the ultimate cost of clean-up for claims arising from other such sites
(without taking into account any potential indemnification or recovery from
third parties).
The Company's roofing facility at Norwood, Massachusetts is one of 4,000
sites on the DEP List of Confirmed Disposal Sites. The DEP significantly
revised the regulations that govern the reporting, assessment and remediation
of hazardous waste sites in Massachusetts. The new Massachusetts Contingency
Plan ("MCP") however, does not alter the ultimate liability for any remediation
that may be necessary at the Norwood facility. Under the new MCP, the roofing
facility was listed on the August 1993 "Transition List of Confirmed Disposal
Sites and Locations to be Investigated."
A site assessment of the Norwood facility was performed for the Company by
its environmental consultants GZA GeoEnvironmental, Inc. because the Company
was on the DEP List of Confirmed Disposal Sites. The Company was required to
complete certain additional remedial activities described in the new MCP on or
before August 2, 1996. The Phase I and Phase II plan was completed in 1995 and
submitted to the DEP in January 1996. In the opinion of management, no
additional material costs will be incurred.
Since 1981 Bird has been named as a defendant in approximately 550 product
liability cases throughout the United States by persons claiming to have
suffered asbestos-related diseases as a result of alleged exposure to asbestos
used in products manufactured and sold by Bird. Approximately 140 of these
cases are currently pending and costs of approximately $2 million in the
aggregate have been incurred in the defense of these claims since 1981.
Employers Insurance of Wausau ("Wausau") has accepted the defense of these
cases under an agreement for sharing of the costs of defense, settlements and
judgments, if any. At December 31, 1995, the Company has recorded a reserve of
$950,000 to cover the estimated cost of these claims. In light of the nature
and merits of the claims alleged, in the opinion of management, the resolution
of these remaining claims will not have a material adverse effect on the
results of operations or financial condition of the Company.
In 1992, a subsidiary of the Company, Bird Atlantic Corporation, formerly
Atlantic Building Products Corporation ("ABPCO"), commenced an action against a
former vendor, alleging violation of an exclusive distributorship without
adequate and fair compensation to ABPCO. A jury trial was held in November 1995
in the Superior Court of Plymouth County, Massachusetts. The jury found in
favor of ABPCO and judgement was entered on January 26, 1996 in the principal
amount of approximately $1.8 million. The award, with interest accruing at 12%
per annum, is expected to be in excess of $3 million and will not be reported
as income until collected. The defendant has appealed the judgement.
Insurance and Product Liability Claims
On April 16, 1996 Paul Lindholm filed a class action suit in the Superior
Court of the Commonwealth of Massachusetts for Norfolk County against Bird
Incorporated. The complaint alleges that Bird
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Incorporated has knowingly manufactured, distributed and falsely advertised
defectively designed fiber glass based roofing shingles. The complaint lists
claims of fraud, negligent misrepresentation, negligence and breach of express
and implied warranty. The Company is currently in the process of evaluating the
complaint.
On June 1, 1993, Wausau commenced action in the Superior Court for Norfolk
County, Massachusetts, against Bird seeking a declaratory judgment that certain
built-up roofing and glass shingle claims made against Bird were not covered by
liability insurance policies issued by Wausau. Bird asserts that the claims are
covered and has answered the complaint. A trial is scheduled for 1997. In the
opinion of management, the above matter will not have a material adverse effect
on the Company's financial position or results of operations.
The Company is also exposed to a number of other asserted and unasserted
potential claims encountered in the normal course of business. In the opinion
of management, the resolution of such claims will not have a material adverse
effect on the Company's financial position or results of operations.
The Company is a defendant in a number of suits alleging product defects, the
outcome of which management believes will not in the aggregate have a material
impact on the Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
quarter ended December 31, 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
COMMON STOCK INFORMATION
The Company had 2,123 common shareholders of record at December 31, 1995.
The common stock is quoted in the National Market System under the NASDAQ
symbol BIRD. The range of high and low prices for the common stock as reported
by NASDAQ for the periods indicated is set forth below.
<TABLE>
<CAPTION>
1995 1994
----------- ------------
QUARTER HIGH LOW HIGH LOW
------- ----- ----- ------ -----
<S> <C> <C> <C> <C>
First............................................. 9 7 3/4 12 1/4 8
Second............................................ 8 5/8 6 1/4 11 1/4 8 1/2
Third............................................. 8 1/2 5 7/8 10 1/2 7
Fourth............................................ 6 5/8 4 1/2 10 8
</TABLE>
The Company paid no cash dividends on its common stock during 1995 or 1994.
Under the terms of the Loan Agreement between the Company and Fleet Capital,
the Company has agreed that it will refrain from paying cash dividends on its
common stock or its $1.85 cumulative preference stock, without prior approval
from the Bank.
The Company is in arrears in the payment of four dividends on its preference
stock. The Articles of Organization of the Company provide that as long as any
arrearage on the payment of dividends on the Company's 5% preferred stock
exists, no dividends may be declared or paid on any other class of stock of the
Company and further provides that in the event that full cumulative dividends
on the preference stock have not been declared and paid, the Company may not
declare or pay any dividends or make any distributions on, or purchase, redeem,
or otherwise acquire, its common stock until full cumulative dividends on the
preference stock have been declared and paid or set aside for payment.
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ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth certain financial data and are qualified in
their entirety by the more detailed Consolidated Financial Statements and
information included elsewhere herein:
SELECTED CONSOLIDATED STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales.................... $ 54,180 $167,886 $187,745 $164,202 $137,059
-------- -------- -------- -------- --------
Costs and expenses:
Cost of sales.............. 48,007 136,878 151,664 128,371 107,226
Selling, general and
administrative expenses... 11,817 28,786 32,716 27,811 23,023
Interest expense........... 927 4,782 2,472 1,506 1,026
Discontinued business
activities (income)....... (17,570) (1,313) 268 178 189
Other (income) expense..... 372 4,680 5,903 (197) (331)
-------- -------- -------- -------- --------
Earnings (loss) from
continuing operations before
income taxes................ 10,627 (5,927) (5,278) 6,533 5,926
Provision (benefit) for
income taxes................ 11,424 (7,010) (637) 869 498
-------- -------- -------- -------- --------
Earnings (loss) from
continuing operations before
cumulative effect of
accounting change........... (797) 1,083 (4,641) 5,664 5,428
-------- -------- -------- -------- --------
Discontinued operations:
Gain (loss) from operations
of discontinued
businesses, net of taxes.. 0 1,245 (15,414) (2,573) (249)
Loss on disposal of
businesses, net of taxes.. (11,252) (6,011) (11,000) 0 0
-------- -------- -------- -------- --------
Net loss from discontinued
operations.................. (11,252) (4,766) (26,414) (2,573) (249)
-------- -------- -------- -------- --------
Cumulative effect of
accounting change........... 0 0 2,733 0 0
-------- -------- -------- -------- --------
Net earnings (loss).......... $(12,049) $ (3,683) $(28,322) $ 3,091 $ 5,179
======== ======== ======== ======== ========
Primary earnings (loss) per
common share:
Continuing operations...... $ (0.57) $ (0.11) $ (1.51) $ 1.00 $ 1.01
Discontinued operations.... (2.74) (1.20) (6.45) (0.62) (0.06)
Cumulative effect of
accounting change......... 0.00 0.00 0.67 0.00 0.00
-------- -------- -------- -------- --------
Net earnings (loss) per
common share................ $ (3.31) $ (1.31) $ (7.29) $ 0.38 $ 0.95
======== ======== ======== ======== ========
Cash dividend per common
share....................... $ 0.00 $ 0.00 $ 0.15 $ 0.20 $ 0.20
======== ======== ======== ======== ========
Book value per common share.. $ 1.45 $ 5.07 $ 5.75 $ 12.83 $ 12.61
======== ======== ======== ======== ========
</TABLE>
SELECTED CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1995 1994 1993 1992 1991
------- ------- -------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total assets......................... $43,703 $85,705 $123,229 $119,075 $99,904
Working capital...................... $ 5,978 $ 5,627 $ 30,090 $ 43,782 $34,179
Long-term debt, excluding current
portion............................. $ 4,869 $12,504 $ 43,127 $ 30,374 $12,150
Stockholders' equity................. $24,416 $37,718 $ 40,561 $ 69,101 $68,602
</TABLE>
9
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
TENDER OFFER AND PROPOSED MERGER
The Company signed an Amended and Restated Agreement and Plan of Merger,
dated as of April 8, 1996 (the "Merger Agreement"), among the Company,
CertainTeed Corporation, a Delaware corporation ("CertainTeed"), and BI
Expansion Corp., a Massachusetts corporation and a wholly owned subsidiary of
CertainTeed ("Acquisition Sub"), pursuant to which Acquisition Sub will be
merged with and into the Company (the "Merger"), with the Company surviving the
Merger as a subsidiary of CertainTeed. In the Merger, each share of the
Company's common stock, par value $1 per share ("Common Stock"), outstanding on
the effective date of the Merger and each share of the Company's $1.85
Cumulative Convertible Preference Stock par value $1 per share ("Preference
Stock"), outstanding on the effective date of the Merger (other than shares
held by CertainTeed or Acquisition Sub, shares held in the Company's treasury
and other than shares held by stockholders who perfect their appraisal rights
under Massachusetts law) will be converted into the right to receive (in the
case of Common Stock) $7.50 per share of Common Stock and (in the case of
Preference Stock) $20 plus all accrued and unpaid dividends through the
effective date of the Merger per share of Preference Stock, in each case in
cash, without interest. All outstanding shares of the Company's 5% Cumulative
Preferred Stock, par value $100 per share (the "5% Stock"), will remain issued
and outstanding after the Merger and will be called for redemption and
retirement as soon as practicable following the Merger at a price equal to $110
per share, plus all accrued and unpaid dividends through the date of redemption
and retirement.
The Merger is the second step in a two-part transaction, the purpose of which
is the acquisition of the Company by CertainTeed. On April 12, 1996,
Acquisition Sub commenced a tender offer (the "Offer") to purchase all
outstanding shares of Common Stock and Preference Stock at a price of $7.50 per
share of Common Stock and $20 plus all accrued and unpaid dividends through the
expiration date of the Offer per share of Preference Stock. The Offer is
conditioned upon, among other things, (i) there being validly tendered and not
withdrawn prior to the expiration of the Offer at least 66 2/3% of all
outstanding shares of Common Stock (determined on a fully diluted basis on the
expiration of the Offer) and (ii) either (x) there being validly tendered and
not withdrawn prior to the expiration of the Offer at least 66 2/3% of all
outstanding shares of Preference Stock or (y) Acquisition Sub having elected to
require the Company to redeem all outstanding shares of Preference Stock in
accordance with the Merger Agreement.
Pursuant to the Merger Agreement, upon the acquisition by Acquisition Sub of
at least a majority of the outstanding shares of Common Stock pursuant to the
Offer, Acquisition Sub shall be entitled to designate such number of directors
to be appointed to the Company's Board of Directors as is required to
constitute a majority of the members of the Company's Board of Directors.
Completion of the transaction is subject to approval by the Company's
shareholders and appropriate governmental authorities. The Merger is not
subject to a financing contingency. The Company's Board of Directors has
received a fairness opinion from its investment bankers regarding the Merger.
The closing of the Merger is anticipated at the end of the second quarter,
following distribution of proxy materials to the Company's shareholders and
approval at a special meeting.
FINANCIAL CONDITION
Prior to November 30, 1994, the Company's external financial needs were
satisfied by borrowing under the Second and Third Amended Credit Agreements
with The First National Bank of Boston, Philadelphia National Bank incorporated
as Corestates Bank, N.A. and The Bank of Tokyo Trust Company.
On November 30, 1994, Bird Incorporated entered into a three year $39 million
Loan Agreement with Fleet Capital Corporation ("Fleet Capital"), previously
Barclays Business Credit, Inc. and Shawmut Capital
10
<PAGE>
Corporation. At the end of the three year period, the Loan Agreement will be
automatically renewed for successive one year periods unless terminated
specifically in writing. The Loan Agreement consisted of a $24 million
revolving credit commitment and two equal term loans (Term loan A and Term loan
B, as defined in the Loan Agreement) totaling $15 million. On March 8, 1995 the
Company sold the assets of its vinyl siding operation to Jannock, Inc. for
$47.5 million which was reduced to approximately $42.5 million by post-closing
working capital adjustments. The proceeds from the sale were used to reduce
bank debt. Concurrent with the sale, Fleet Capital executed the First Amendment
to the Loan Agreement amending the amount of the facility to $20 million
consisting of a $15 million revolving credit commitment and a $5 million term
loan. At December 31, 1995, $5 million of debt was outstanding. On January 10,
1996, the Company paid down the term loan so that the outstanding principal
balance equaled $2.5 million. Up to $5 million of the revolving credit facility
can be used for letters of credit. Letters of credit outstanding as of December
31, 1995 totaled $2,233,000 compared to $2,927,000 as of December 31, 1994.
Borrowings by Bird Incorporated under the Loan Agreement are guaranteed by
the Company and the Company's other subsidiaries and are secured by
substantially all of the assets of the Company and its subsidiaries. The
revolving credit line availability is determined with reference to a percentage
of accounts receivable and inventory which are pledged to the lender. During
the period January 1 through April 30, the Loan Agreement provides a $2 million
over advance on accounts receivable and inventories in order to assist the
Company in assuring adequate funding of any seasonal build up of accounts
receivable which may occur under sales programs offered during the winter
months. Currently, the availability calculation does not allow borrowings to
the full extent of the revolving credit commitment, due to the seasonality of
the building materials manufacturing business. As of March 15, 1996, an
aggregate of $7,683,000 was available to the Company under the terms of the
revolving credit facility under the Loan Agreement.
The Loan Agreement contains financial and operating covenants which, among
other things, (i) require the Company to maintain prescribed levels of tangible
net worth, net cash flow and working capital and (ii) place limits on the
Company's capital expenditures. The Loan Agreement also contains restrictions
on indebtedness, liens, investments, distributions (including payment of common
and preference dividends), mergers, acquisitions and disposition of assets. As
of September 30, 1995, the Company was in default under Section 8.3.3 of the
Loan Agreement as a result of failing to achieve a stated level of cash flow
for the third quarter of 1995. As a result of the weak remodeling market during
1995, sales volume and earnings were less than anticipated, negatively
impacting cash flow. At the request of the Company, Fleet Capital waived the
cash flow requirements for the third quarter without penalty and amended this
and other financial covenants for subsequent periods based on a review of the
Company's financial condition and future projections. As of December 31, 1995,
the Company was in compliance with all covenants.
Interest on the revolving credit commitment under the First Amended Loan
Agreement accrues at the Fleet Capital base rate (as specified in such
Agreement) or the London Interbank Offering Rate ("LIBOR") plus 2 3/4% at the
Company's election on all borrowings plus the greater of $25,000 per annum or
1/4% on any unused portion of the commitment payable monthly in arrears. The
interest on the term loan accrues at the base rate or the LIBOR rate plus 2
3/4% at the Company's election. The interest rate on outstanding borrowings at
December 31, 1995 was 8.69%. The repayment of the principal on the term loan is
at the rate of $62,500 per month through November 1996 and $71,417 per month
thereafter with a final principal payment of $3,455,800 due on November 30,
1997. Proceeds in excess of $100,000 from the sale of fixed assets may, at
Fleet Capital's discretion, be applied to the outstanding principal payments of
the term loan.
In order to control its cost and supply of asphalt, the Company constructed
an asphalt oxidizer plant at its roofing facility in Norwood, Massachusetts.
Construction was completed during January 1995. The Company's decision to build
the oxidizer was triggered by the decision of Exxon (the only remaining
supplier of asphalt in New England) to exit the New England market. The cost of
this plant expansion was approximately $5.5 million.
On March 8, 1995, the Company sold substantially all of the assets of its
vinyl siding operation to Jannock, Inc. for $47.5 million in cash subject to
certain downward adjustments which totaled $4,962,000. Net of adjustments, the
gain on the sale of the vinyl business totaled $20,579,000.
11
<PAGE>
On June 2, 1995, the Company sold all of the outstanding capital stock of
Bird-Kensington Holding Corp. ("Bird-Kensington"), which owned the Company's
interest in Kensington Partners ("Kensington"), to Jannock, Inc. ("Jannock").
The sale was consummated pursuant to the exercise by Jannock of an option
granted under an Asset Purchase Agreement related to the sale of the Company's
vinyl business dated as of September 23, 1994 (as amended by amendments dated
as of January 24, 1995, January 31, 1995, and April 27, 1995, the "Asset
Purchase Agreement"). The purchase price consisted of cash in the amount of
$2,780,000 and the assumption of certain liabilities related to the Kensington
business. Cash proceeds of $1 million were used to acquire the minority
partner's interest in Kensington. In addition, $3,692,000 was invested by the
Company in Bird-Kensington, as a condition of the sale, to enable Kensington to
pay certain liabilities and to assure that the equity of Kensington was not
less than $1,150,000 at the time of closing as stipulated in the Asset Purchase
Agreement.
Following the closing date, Jannock presented to the Company financial
statements of Kensington as of June 2, 1995, indicating that net equity was
$471,000 less than the amount required by the Asset Purchase Agreement. The
Company had established a reserve for the full amount of the shortfall at June
30, 1995 and subsequently paid to Jannock $398,000 in full settlement of the
terms of the Asset Purchase Agreement. Net of certain purchase price
adjustments, the loss on the sale of Kensington was $1,959,000.
One June 18, 1994, the Company agreed to cause the sale of its 80% interest
in Bird Environmental Gulf Coast, Inc. ("BEGCI") to the minority shareholders
thereof, subject to financing, resulting in the complete withdrawal from the
environmental business. During 1995, the minority partner became unable to
finance the purchase of the facility and efforts to attract another purchaser
were unsuccessful. In July 1995, the Company's Board of Directors suspended
further funding of the facility. As a result of this action, during the second
quarter of 1995, the Company's remaining investment of $8.6 million was
written-off and a $3 million reserve was established for the costs associated
with the closure of the facility. On November 29, 1995, the Company caused the
sale all of the outstanding capital stock of BEGCI to GTS Duratek, Inc. for a
purchase price of $1.00. In addition, the Company agreed to pay the purchaser
the amount by which BEGCI's current liabilities exceeded its current assets at
August 31, 1995 which was approximately $1.3 million. Of the $3 million reserve
established in the second quarter of 1995, $2,050,000 was utilized, while
$650,000 remains at December 31, 1995 for future claims against discontinued
operations.
Net cash and cash equivalents increased during fiscal 1995 by $3.4 million
primarily due to cash received from the sale of the vinyl business. The cash
used by continuing operations for the fiscal period ended December 31, 1995
increased $6.7 million, from $11.6 million to $18.3 million. In 1995, the
Company recorded a gain of $20.6 million on the sale of its vinyl business.
This gain was offset by charges of $11.3 million and $2 million related to the
disposal of the environmental and window fabrication businesses, respectively.
Cash used by operations in 1995 was also attributable to several significant
changes in the balance sheet such as a reversal of future tax benefits of $11.3
million, a decrease of $3.1 million in trade accounts receivable, a decrease of
$14.3 million in liabilities not relating to financing activities and an
increase of $2.7 million relating to inventories.
Additionally, the vinyl and window fabrication business activities which were
discontinued in 1995 had a significant impact on the changes in the balance
sheet accounts between December 31, 1994 and December 31, 1995. As a result of
these sales, inventory decreased $6.3 million, accounts and notes receivable
decreased $11 million, and current liabilities decreased $9 million. In
addition, assets held for sale decreased $7.5 million due to the write-off of
the Company's interest in Bird Environmental Gulf Coast, Inc. ("BEGCI").
The Company had approximately $47.3 million of net cash provided from
investing activities for the period ended December 31, 1995 as compared to a
total of approximately $19.4 million for the period ended December 31, 1994.
The change is primarily the result of $50.7 million of cash receipts from the
proceeds of the sale of certain of the Company's assets (primarily, the sale of
the assets of the vinyl and window fabrication businesses to Jannock, Inc. in
March and June 1995, respectively), offset by cash used for capital
expenditures of the roofing business and additional investments in discontinued
operations. In the prior comparable period, net cash provided by investing
activities resulted primarily from the proceeds of the sale of the Company's
distribution business to Wm. Cameron & Co., offset by cash used for capital
expenditures.
12
<PAGE>
The net cash resulting from financing activities changed by $11 million from
the prior year. Cash used in financing activities during 1995 resulted from the
net repayment of debt of $24 million and $1.6 million of dividend payments, as
compared to 1994 when the Company had net repayments of debt of approximately
$16 million and made minimal dividend payments.
ENVIRONMENTAL MATTERS
The Company monitors its compliance with environmental regulations on an
ongoing basis. The Company's general counsel receives environmental site
assessments from the operating managers responsible for site environmental
compliance. Appropriate action is undertaken where needed. When environmental
claims are asserted against the Company, the claims are evaluated by the
Company's general counsel and operating management in conjunction with external
legal counsel and environmental engineers as necessary, and action is taken
with respect to all known sites, as appropriate. The Company is currently
engaged in proceedings relating to or has received notice of the following
environmental matters:
On March 15, 1994 the Company received a draft of an Administrative Consent
Order and Notice of Noncompliance from the Massachusetts Department of
Environmental Protection ("DEP") concerning operations at its Norwood,
Massachusetts manufacturing facility and associated rock granule processing
facility. The draft alleges that the Company was not in compliance with
regulations of the DEP relating to air emissions, granule plant operation, and
labeling, handling and storage of certain hazardous waste. The draft proposes
certain corrective action on the part of the Company as well as payment of
civil administrative penalties. On June 10, 1994, the Company's roofing
division entered into an administrative consent order and notice of
noncompliance with respect to the alleged violations. The consent order
requires the Company to undertake certain modifications and corrective actions
with respect to certain hazardous waste handling and storage facilities at the
Norwood facility, to conduct an environmental audit of its operations at such
facility and to undertake various modifications of air pollution control
equipment. On May 13, 1994, the Company paid an administrative penalty of
$30,000. The Company estimated that the cost of corrective action to be taken
by it in accordance with the consent order would be approximately $100,000. The
majority of the corrective actions were completed in 1995.
On March 25, 1994, the Company received a notice from the United States
Environmental Protection Agency (the "EPA") regarding a site inspection
prioritization report prepared by the DEP. The notice alleges a potential
release of hazardous substances into the environment at the Company's former
mill site in East Walpole, Massachusetts. The EPA has reserved the right to
conduct further site tests on the location. A site assessment performed on the
mill site in East Walpole for the Company by its environmental consultants,
GZA, showed no environmental cleanup was necessary. This report was submitted
to the DEP in July 1995. In the opinion of management and based on management's
and GZA's understanding that the alleged releases are in de minimis quantities,
this matter should not have a material adverse effect on the Company's
financial position or on the results of its operations.
On June 21, 1994, the Arizona Department of Environmental Quality ("ADEQ")
issued a notice of violation ("NV") to Southwest Roofing Supply, a previously
owned division of the Company ("Southwest"), which directed Southwest to
conduct a site investigation of property formerly leased by Southwest. A
consent order between the ADEQ and the Company was issued on September 23,
1994. Pursuant to the consent order, the Company agreed to submit a work plan
with a view to remediating the soil and groundwater that may have been
contaminated by leaks from an underground storage tank previously removed by
the Company. The Company's management believes that the remediation cost to the
Company will be in the range of $200,000 to $700,000. As of December 31, 1995,
the Company has provided a reserve of $450,000 for the estimated cost of
cleanup. The Company anticipates that $200,000 will be reimbursed to the
Company by the ADEQ in accordance with Arizona law and regulation.
In 1986, the Company, along with numerous other companies, was named by the
EPA and other governmental agencies responsible for regulation of the
environment as a Potentially Responsible Person ("PRP") pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, as
13
<PAGE>
amended, 42 U.S.C. Paragraph 9601, et seq. ("CERCLA") in connection with
hazardous substances at a site known as the Fulton Terminal Superfund site
located in Fulton, Oswego County, New York. On September 28, 1990, the Company
and a number of other PRPs reached a negotiated settlement with the EPA
pursuant to which the settling PRPs agreed to pay the costs of certain expenses
in connection with the proceedings and to pay certain other expenses, including
the costs and expenses of administering a trust fund to be established by the
settling PRPs. The settlement agreement is embodied in a consent decree lodged
with the United States District Court for the Western District of New York and
fixed the Company's proportionate share of the total expenses. The ultimate
cost to the Company of the remedial work and other expenses covered by the
settlement agreement is estimated to be between $1 million to $2 million
payable over a period of 3 to 15 years (depending upon the duration of
remediation efforts). At December 31, 1995, the Company has provided a reserve
of approximately $1 million to cover the estimated cost of the Company's
remaining proportionate share (i.e., 17%) of the ultimate total cost of
cleanup. Under a cost-sharing arrangement set forth in a consent decree with
the EPA, the other PRPs have agreed to incur 83% of the aggregate cost of
remediation of this site.
The Company has been named as a PRP with respect to certain other sites which
are being investigated by federal or state agencies responsible for regulation
of the environment. As a consequence of its status as a PRP, the Company may be
jointly and severally liable for all of the potential monetary sanctions and
remediation costs applicable to each site. In assessing the potential liability
of the Company at each site, management has considered, among other things, the
aggregate potential cleanup costs of each site; the apparent involvement of the
Company at each site and its prospective share of the remediation costs
attributable thereto; the number of PRPs identified with respect to each site
and their financial ability to contribute their proportionate shares of the
remediation costs for such site; the availability of insurance coverage for the
Company's involvement at each site and the likelihood that such coverage may be
contested; and whether and to what extent potential sources of contribution
from other PRPs or indemnification by insurance companies constitute reliable
sources of recovery for the Company. Similar consideration has been given in
determining the exposure and potential liability of the Company in connection
with other significant legal proceedings to which the Company is a party. On
the basis of such consideration, management has determined that such
environmental matters will not have a material adverse effect on the Company's
financial position or results of operations. The Company has provided an
aggregate reserve amounting to approximately $300,000 for its estimated share
of the ultimate cost of clean-up for claims arising from other such sites
(without taking into account any potential indemnification or recovery from
third parties).
The Company's roofing facility at Norwood, Massachusetts is one of 4,000
sites on the DEP List of Confirmed Disposal Sites. The DEP significantly
revised the regulations that govern the reporting, assessment and remediation
of hazardous waste sites in Massachusetts. The new Massachusetts Contingency
Plan ("MCP") however, does not alter the ultimate liability for any remediation
that may be necessary at the Norwood facility. Under the new MCP, the roofing
facility was listed on the August 1993 "Transition List of Confirmed Disposal
Sites and Locations to be Investigated."
A site assessment of the Norwood facility was performed for the Company by
its environmental consultants GZA GeoEnvironmental, Inc. because the Company
was on the DEP List of Confirmed Disposal Sites. The Company must complete
certain additional remedial activities described in the new MCP on or before
August 2, 1996. The Phase I and Phase II plan was completed and submitted to
the DEP in January 1996. In the opinion of management, no additional material
costs will be incurred.
Since 1981 Bird has been named as a defendant in approximately 550 product
liability cases throughout the United States by persons claiming to have
suffered asbestos-related diseases as a result of alleged exposure to asbestos
used in products manufactured and sold by Bird. Approximately 140 of these
cases are currently pending and costs of approximately $2 million in the
aggregate have been incurred in the defense of these claims since 1981.
Employers Insurance of Wausau ("Wausau") has accepted the defense of these
cases under an agreement for sharing of the costs of defense, settlements and
judgments, if any. At December 31, 1995, the Company has recorded a reserve of
$950,000 to cover the estimated cost of these claims. In light of the
14
<PAGE>
nature and merits of the claims alleged, in the opinion of management, the
resolution of these remaining claims will not have a material adverse effect on
the results of operations or financial condition of the Company.
INSURANCE AND PRODUCT LIABILITY CLAIMS
On April 16, 1996 Paul Lindholm filed a class action suit in the Superior
Court of the Commonwealth of Massachusetts for Norfolk County against Bird
Incorporated. The complaint alleges that Bird Incorporated has knowingly
manufactured, distributed and falsely advertised defectively designed fiber
glass based roofing shingles. The complaint lists claims of fraud, negligent
misrepresentation, negligence and breach of express and implied warranty. The
Company is currently in the process of evaluating the complaint.
On June 1, 1993, Wausau commenced action in the Superior Court for Norfolk
County, Massachusetts, against Bird seeking a declaratory judgment that certain
built-up roofing and glass shingle claims made against Bird were not covered by
liability insurance policies issued by Wausau. Bird asserts that the claims are
covered and has answered the complaint. A trial is scheduled for 1997. In the
opinion of management, the above matter will not have a material adverse effect
on the Company's financial position or results of operations.
The Company is also exposed to a number of other asserted and unasserted
potential claims encountered in the normal course of business. In the opinion
of management, the resolution of such claims will not have a material adverse
effect on the Company's financial position or results of operations.
The Company is a defendant in a number of suits alleging product defects, the
outcome of which management believes will not in the aggregate have a material
impact on the Company's financial position or results of operations.
LEGAL MATTERS
On or about April 18, 1996 Bird Incorporated received a grand jury subpoena
issued upon application of the United States Department of Justice, Antitrust
Division, for the production of certain documents. In addition, an executive
officer and a senior manager of the Company have received grand jury subpoenas
requiring the production of certain documents as well as their providing
testimony before the grand jury. The Company and such executive officer and
senior manager are in the process of evaluating the subpoena and intend to
cooperate fully with the Department of Justice. It appears that the subpoena
relates to an investigation of the roofing materials industry.
In 1992, a subsidiary of the company, Bird Atlantic Corporation, formerly
Atlantic Building Products Corporation ("ABPCO"), commenced an action against a
former vendor, alleging violation of an exclusive distributorship without
adequate and fair compensation to ABPCO. A jury trial was held in November 1995
in the Superior Court of Plymouth County, Massachusetts. The jury found in
favor of ABPCO and judgement was entered on January 26, 1996 in the principal
amount of approximately $1.8 million. The award, with interest accruing at 12%
per annum, is expected to be in excess of $3 million and will not be reported
as income until collected. The defendant has appealed the judgement.
RESULTS OF OPERATIONS
The Company's future prospects and sales are tied solely to one line of
business (roofing manufacturing) which is dependent upon the economy in the
northeastern United States. The Company produces all of its output at a single
plant which relies on one major supplier for glass mat, a critical raw
material. Nevertheless, the Company believes it has significant competitive
advantages in this business. These advantages stem from, and are expected to
continue in light of the Company's leading market share, its low cost
production abilities resulting from a state-of-the-art plant, its internal
supply of granules from its own quarry and granule plant and its asphalt
oxidizing plant.
1995 Compared With 1994
Earnings from continuing operations before income taxes in fiscal 1995 were
$10,627,000 compared to losses of $5,927,000 in fiscal 1994. Net sales from
continuing operations decreased 67.7% from $167,886,000
15
<PAGE>
to $54,180,000 as compared to 1994, primarily due to the sale of the Company's
distribution and vinyl products business units. Sales from the roofing
manufacturing business decreased $10,857,000 or 19.9% due to price weakness and
a decline in volume. The decreased volume was attributable to a weak re-roofing
market in the northeast caused by a mild 1994/1995 winter followed by a hot,
dry summer. The Company is expanding its sales territories to include areas
bordering the northeastern United States in an effort to replace lost volume.
Cost of sales in 1995 was $48,007,000 as compared to $136,878,000 in 1994,
constituting a decrease of 64.9%. The decline was primarily a result of the
sale of the Company's distribution and vinyl products business units. Cost of
sales for the roofing business decreased 18.4% or $8,662,000 due primarily to
decreased manufacturing costs related to a decrease in sales volume. Although
the Company experienced raw material price increases in glass mat and dry felt,
the cost of asphalt, along with related freight, was reduced significantly as a
result of the newly constructed asphalt oxidizer, which produces asphalt
saturant and coatings. The oxidizer became operational in February 1995. From
November 1995 through mid-February 1996, the oxidizer was temporarily shut down
for repairs as a result of a fire within the tank farm area of the plant.
Cost of sales, stated as a percentage of net sales, was 88.6% in fiscal 1995
as compared to 81.5% in fiscal 1994. Roofing manufacturing cost of sales, as a
percentage of sales, increased 1.6% from 86.2% to 87.8% in 1995. Increases in
raw material costs and decreases in sales prices contributed to the percentage
increase.
Selling, general and administrative ("SG&A") expenses for fiscal 1995
decreased 59% from $28,786,000 to $11,817,000. The decrease was primarily
attributable to the sale of the Company's distribution and vinyl products
business units. However, SG&A expenses, as a percentage of sales, increased
approximately 5% from year-to-year. The increase was due primarily to the
amortized refinancing costs associated with the 1994 refinancing of an earlier
credit agreement, additional charges related to environmental remediation and
costs associated with closing the Company's corporate office. The decrease in
sales in the roofing business without a corresponding decline in certain fixed
costs also contributed to the increase as a percentage of sales.
Interest expense was $927,000 in 1995 as compared to $4,782,000 in 1994, an
80.6% decrease. The decrease resulted from the reduction of debt which occurred
through the use of proceeds from the sale of the vinyl products and
distribution business units.
Discontinued business activities income in 1995 reflects primarily the gain
of $20,579,000 on the sale of the vinyl manufacturing business, the loss of
$1,959,000 on the sale of the window fabrication business and a charge of
$1,500,000 for costs associated with the Company's employee benefit plans and
future product liability claims, both related to former roofing operations.
Fiscal 1994 discontinued business activities income reflects primarily the gain
of $2,727,000 on the sale of all of the Company's building materials
distribution businesses reduced by the loss of $1,261,000 on the sale of the
Company's 40% interest in Mid-South Building Supply, Inc.
Equity losses from the Company's partnership in the Kensington window
fabrication business amounted to $372,000 for the period January 1, through
February 28, 1995 as compared to $4,680,000 for the twelve month period ended
December 31, 1994.
A provision for income taxes from continuing operations amounting to
$11,424,000 was recorded in 1995 compared to a benefit of $7,010,000 in 1994.
The Company's decision to reverse $4 million of the valuation reserve in 1994
and subsequent decision to increase the reserve to $15.1 million in 1995 is the
primary reason the effective tax rates differ from the statutory rate. At
December 31, 1995 the Company's net deferred tax asset is approximately $19.1
million less a valuation reserve of $15.1 million. As required under FAS 109,
this valuation reserve was determined based upon the Company's review of all
available evidence including projections of future taxable income. During 1995,
the Company disposed of Bird-Kensington Holding Corporation and Bird
Environmental Gulf Coast, Inc. resulting in losses not anticipated at the end
of the previous year. In addition, the lower overall demand and price weakness
in the northeast caused by a mild 1994/1995 winter followed by a hot, dry
summer negatively impacted profits of the roofing operations.
16
<PAGE>
During the second quarter of 1995, the Company's remaining investment in
BEGCI of $8.6 million was written-off to discontinued operations and a $3
million reserve was established for additional costs associated with the
closure and disposition of the facility (see Note 9 to Consolidated Financial
Statements). In November 1995, the Company caused the sale of all the
outstanding capital stock of BEGCI to GTS Duratek, Inc. for a purchase price of
$1.00. Of the $3 million reserve established in the second quarter of 1995,
$2,050,000 was utilized, while $650,000 remains at December 31, 1995 for future
claims against discontinued operations.
In connection with the Board of Director's 1994 decision to withdraw from the
off-site environmental business and the Company's agreement on June 18, 1994 to
cause the sale of its shares in BEGCI to the minority stockholders on or before
February 28, 1995, subject to financing, the Company reclassified the
environmental business results as discontinued operations as of June 30, 1994
and adjusted the book value associated with BEGCI, resulting in an aggregate
charge for the twelve months ended December 31, 1994 of $11,586,000.
In 1993, in connection with its decision to withdraw from the "on-site"
environmental remediation business, the Company charged the results of
operations for the write-down of assets, the expected loss from operations and
general expenses related to closing of such "on-site" remediation business (see
notes to Consolidated Financial Statements). Based upon the actual outcome of
the sale of assets and results of operations, excess costs of $3,861,000
charged in 1993 were reversed and recorded as discontinued operations in the
consolidated statement of operations for the year ending December 31, 1994.
1994 Compared With 1993
Losses from continuing operations before income taxes in 1994 were
approximately $5.9 million compared to losses of approximately $5.3 million in
1993. Net sales from continuing operations decreased 10.6% from $187,745,000 in
1993 to $167,886,000 in 1994. Sales from the Company's roofing manufacturing
business and its vinyl business increased 14.9% and 5.9%, respectively.
Improved weather conditions and renewed strength in the remodeling market
caused by low interest rates and a generally favorable economy contributed to
the improvement in these businesses. However, a decrease in sales volume due to
the sale of substantially all of the Company's building materials distribution
businesses in August and November of 1994 significantly offset the improvement
attained by the roofing and vinyl businesses.
The Company's cost of sales from continuing operations in 1994 as compared to
1993 decreased 9.7% from $151,664,000 to $136,878,000. Cost of sales from
continuing operations in the roofing and vinyl manufacturing businesses
increased 15.4% and 7.9%, respectively, due to increased manufacturing costs
related to volume, higher raw material costs related to the increase in resin
prices for the vinyl business and higher asphalt prices for the roofing
manufacturing business. The increase was more than offset by the decline in
cost of sales due to the August and November 1994 sales of the Company's
building materials distribution businesses.
Cost of sales stated as a percentage of net sales was 81.5% in 1994 as
compared to 80.8% in 1993. The roofing manufacturing business cost of sales as
a percentage of sales increased .3% from 85.9% to 86.2% in 1994. The vinyl
business cost of sales as a percentage of sales for fiscal 1994 increased from
76.0% to 77.5% or 1.5% over fiscal 1993. The major factor in such percentage
increase was the increased cost of raw materials.
Selling, general and administrative ("SG&A") expenses for fiscal 1994
decreased 12.0% from $32,716,000 in 1993 to $28,786,000 in 1994. The decrease
was primarily attributable to the sale of the Company's building materials
distribution businesses. The SG&A expenses of the Company's roofing and vinyl
manufacturing businesses, on a combined basis, decreased 7.2% from year-to-
year. However, SG&A expenses, as a percentage of sales remained relatively
constant at approximately 17%.
Interest expense was $4,782,000 in 1994 as compared to $2,472,000 in 1993,
constituting a 93% increase. The increased interest expense reflects the nearly
$10 million increased debt level and higher overall interest costs in 1994.
Between April 11, 1994 and November 30, 1994 the Company was required to pay a
default
17
<PAGE>
interest rate of 4% above the rate otherwise applicable to the revolving credit
and term loans, compared to an approximate rate of 4.5% to 5% for 1993. Default
interest expense totaled $1,032,000 during fiscal 1994.
Discontinued business activities income in 1994 reflects primarily the gain
of $2,727,000 on the sale of all of the Company's building materials
distribution businesses reduced by the loss of $1,261,000 on the sale of the
Company's 40% interest in Mid-South Building Supply, Inc.
Other non-recurring expenses totalled $4,680,000 in 1994 as compared to
$5,903,000 in 1993. Kensington continued to experience operations problems and
incurred losses of $4,680,000 and $2,625,000 in 1994 and 1993, respectively.
A higher tax benefit from continuing operations was recorded in 1994 compared
to the benefit booked in 1993. The Company's decision to record a $9 million
valuation reserve in 1993 and subsequent decision to reverse $4 million in 1994
is the primary reason the effective tax rates differ from the statutory rate.
In connection with the Board of Director's decision to withdraw from the
environmental business and the Company's agreement on June 18, 1994 to cause
the sale of its shares in BEGCI to the minority stockholders on or before
February 28, 1995, subject to financing, the Company reclassified BEGCI results
as a discontinued operation as of June 30, 1994 and adjusted its book value,
resulting in an aggregate charge for the twelve months ended December 31, 1994
of $11,586,000. The Company intended to operate the San Leon Facility until the
sale of its interest in BEGCI was consummated.
Due to the Company's decision to exit the off-site environmental business by
selling its interest in the San Leon Facility as described above, the Company
completely withdrew from the environmental business. As a result, historical
results of operations for all of the environmental businesses have been
classified as discontinued operations. In 1993, in connection with its decision
to withdraw from the "on-site" environmental remediation business, the Company
recorded a charge for the write-down of assets, the expected loss from
operations and general expenses related to the closing of such "on-site"
remediation business (see notes to Consolidated Financial Statements). Based
upon the outcome of the sales of assets and results of operations, excess costs
of $3,861,000 charged in 1993 were reversed and recorded as discontinued
operations in the consolidated statement of operations for the year ending
December 31, 1994.
INFLATION
The Company is continually seeking ways to deal with raw material cost
increases by productivity improvements and cost reduction programs. In recent
years, the Company has not always been able to pass on increased raw material
costs to customers by increasing selling prices because of intense competitive
pressures. The Company has an ongoing program of updating productive capacity
to take advantage of improved technology, and although the cumulative impact of
inflation has resulted in higher costs for replacement of plant and equipment,
these costs have been offset, in part, by productivity savings.
NEW ACCOUNTING PRONOUNCEMENTS
During 1995, the Financial Accounting Standards Board issued "Statement of
Financial Accounting Standards No. 123 Accounting For Stock Based Compensation"
("FAS 123"). The Company intends to adopt FAS 123 through disclosure only in
1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and schedules of the Company are
included in a separate section of this report and are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
18
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The table below sets forth certain information with respect to the current
Board of Directors and executive officers of the Company.
<TABLE>
<CAPTION>
EXPIRATION
POSITION WITH THE COMPANY; FIRST OF PRESENT
PRINCIPAL OCCUPATION AND ELECTED OR TERM OF
NAME AND AGE OTHER BUSINESS AFFILIATIONS(1) APPOINTED(2) OFFICE
------------ --------------------------------- ------------ ----------
<S> <C> <C> <C>
Frank S. Anthony, 49........ Vice President, General Counsel 1984 N/A
and Corporate Secretary of the
Company since May 1984; Attorney;
formerly served in the law
department of Westinghouse
Electric Corporation from 1976 to
1983
Robert P. Bass, Jr., 72(3).. Director; Attorney, Counsel to 1961 1997
Cleveland, Waters and Bass, P.A.,
Concord, NH; Director of Bank of
New Hampshire Corp., Manchester,
NH
Charles S. Bird, III, 71(3). Director; Trustee of family 1962 1998
trusts
Francis J. Dunleavy, 81..... Director; Retired Vice Chairman 1982 1997
of ITT Corporation; formerly
President, Chief Operating
Officer and Member of Executive
Committee of ITT Corporation;
Director of AEL Industries, Inc.,
Crown Cork & Seal Company, Inc.,
Quaker Chemical Corporation,
Scan-Graphics, Inc., and Selas
Corp. of America
John T. Dunlop, 80.......... Director; The Lamont University 1984 1996
Professor, Emeritus of Harvard
University, Cambridge, MA;
Harvard Community Health Plan
Chair; Commission on the Future
of Worker/Manager Relations;
formerly Secretary of the U.S.
Department of Labor
Guy W. Fiske, 70............ Director; Chairman of the Board 1984 1996
of Directors of the Company from
May 1994 to April 1995; Chairman
and President, Fiske Associates,
Inc., Hobe Sound, FL, (private
investment firm); formerly
Executive Vice President and
Director of General Dynamics
Corporation, Undersecretary of
the U.S. Department of Energy,
and Deputy Secretary of the U.S.
Department of Commerce; Director,
Graphic Controls Corporation,
Buffalo, NY; Director, Gunther
International and Vice Chairman
and Director, Educational
Publishing Corporation of Oak
Lawn, IL
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
EXPIRATION
POSITION WITH THE COMPANY; FIRST OF PRESENT
PRINCIPAL OCCUPATION AND ELECTED OR TERM OF
NAME AND AGE OTHER BUSINESS AFFILIATIONS(1) APPOINTED(2) OFFICE
------------ --------------------------------- ------------ ----------
<S> <C> <C> <C>
Richard C. Maloof, 51....... Director; President and Chief 1995(4) 1998
Operating Officer of the Company
since April 1995; Vice President
and Chief Operating Officer of
the Company from April 1994 to
April 1995; Vice President of the
Company and President, Roofing
and Distribution Groups of the
Company for more than five years
prior thereto
Joseph D. Vecchiolla, 40.... Director; Executive Vice 1993 1997
President--Corporate Finance of
S. N. Phelps & Company and
affiliates since May 1995;
Chairman of the Board of
Directors of the Company since
April 1995; President and Chief
Executive Officer of the Company
from January 1994 to May 1995;
President, Chief Operating
Officer, Chief Financial Officer
and Acting Chief Executive
Officer of the Company from
November 1993 to January 1994;
Vice President and Chief
Financial Officer of the Company
from June 1993 to November 1993;
formerly Vice President and Chief
Financial Officer of Horizon
Cellular Telephone Company,
Malvern, PA and Executive Vice
President and Chief Financial
Officer of Educational Publishing
Corporation of Oak Lawn, IL
Loren R. Watts, 61.......... Director; Retired Managing 1991 1998
Partner, Management Consultant
Services, Coopers & Lybrand
(certified public accountants)
</TABLE>
- --------
(1) Includes business experience during past five years.
(2) At the 1990 annual meeting, the stockholders approved a reorganization
pursuant to which the then stockholders of Bird Incorporated became
stockholders of Bird Corporation, a newly organized Massachusetts
corporation, and Bird Incorporated became a wholly owned subsidiary of Bird
Corporation. This column indicates the date as of which a person was first
elected a director or appointed an officer of the Company or of Bird
Incorporated.
(3) Robert P. Bass, Jr. and Charles S. Bird, III are first cousins.
(4) Date first elected director.
COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who hold more than 10% of the Company's Common
Stock to file with the SEC reports of ownership and changes in ownership of the
Company's equity securities. Based on reports received by the Company and
representations of certain reporting persons that no Forms 5 were required, the
Company believes that all filing requirements applicable to its officers,
directors, and greater than 10% beneficial owners with respect to fiscal year
1995 were complied with.
20
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid
or accrued for services in all capacities to the Company during each of the
last three fiscal years to each person who served as chief executive officer
during 1995 and to each of the other four most highly compensated executive
officers of the Company who served as such during 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------
ANNUAL
COMPENSATION OTHER
------------------ ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND COMPEN- STOCK UNDERLYING STOCK LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION($) AWARDS OPTIONS/SARS(#) PAYOUTS(1) SATION($)
- ------------------ ---- --------- -------- --------- ---------- ---------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph D. Vecchiolla.... 1995 87,692 227,222 -- -- -- -- 663,781(2)
President and 1994 229,077 240,000 -- -- 50,000 37,449(3)
Chief Executive 1993 91,903 50,000 -- -- 100,000 39,912
Officer(4)
Richard C. Maloof....... 1995 195,962 46,416 -- -- 50,000 81,938 0
Vice President and 1994 180,223 45,450 17,992(5) -- 25,000 7,843(3)
Chief Operating 1993 161,629 11,300 8,873 -- -- 10,784
Officer(6)
William C. Kinsey....... 1995 29,600 36,919 -- -- -- 45,885 411,754(2)
Vice President; 1994 148,000 43,000 10,076(5) -- -- 9,986(3)
President, Bird 1993 138,792 10,000 5,460 -- -- 18,159
Vinyl Products(7)
Frank S. Anthony........ 1995 135,000 27,509 -- -- -- 49,163 150,000(2)
Vice President and 1994 141,750 30,000 10,795(5) -- -- 8,496(3)
General Counsel 1993 128,350 5,000 5,850 -- -- 11,381
Joseph M. Grigelevich,
Jr..................... 1995 46,069 31,476 -- -- -- -- 213,048(2)
Vice President Finance 1994 96,192 36,700 -- -- 20,000 5,943(3)
and Administration(8)
</TABLE>
- --------
(1) In 1995 restrictions on all stock held in escrow pursuant to the Company's
Long Term Incentive Plan ("LTIP") lapsed as a result of the Vinyl Sale and
shares were distributed to each of the persons named in the table except Mr.
Vecchiolla and Mr. Grigelevich.
(2) Represent severance payments received in connection with the "change in
control" which occurred pursuant to the Vinyl Sale. Also includes, in the
case of Mr. Vecchiola, $47,300 representing additional incentive
compensation related to the Vinyl Sale, the amount of which was deducted
from a severance payment which he received as a result of the Vinyl Sale.
(3) Represents contributions by the Company to the Savings Plan or in Mr.
Anthony's case to a separate trust established by the Company with a bank
trustee to which amounts in excess of those permitted to be contributed to
the Savings Plan under limits imposed by the Internal Revenue Code of
1986, as amended (the "Code") are contributed. Also includes, in the case
of Mr. Vecchiolla, $31,825 representing additional incentive compensation
related to asset sales, the amount of which was deducted from a severance
payment which Mr. Vecchiolla received as a result of the change in control
of the Company which was deemed to have occurred upon consummation of the
Vinyl Sale.
(4) Mr. Vecchiolla was hired as Vice President and Chief Financial Officer
effective June 1, 1993 and was elected President and Chief Operating
Officer in November 1993. He served as acting Chief Executive Officer
during November and December 1993 and was elected Chief Executive Officer
on January 25, 1994. He resigned as President on April 1, 1995 and on that
date was elected Chairman of the Board. He resigned his full-time
employment and his office as Chief Executive Officer on May 25, 1995.
(5) Represents reimbursement for withholding taxes arising from the lapse of
restrictions on restricted stock held by each officer in accordance with
provisions of the LTIP. Does not include perquisites and other personal
benefits, the cost of which to the Company was below the disclosure
thresholds established by the SEC.
(6) Mr. Maloof was elected Chief Operating Officer in April 1994 and President
in April, 1995. Prior to that time he served as Vice President and
President of the Company's Roofing and Distribution Groups.
(7) Mr. Kinsey's employment with the Company was terminated on March 8, 1995
as a result of the Vinyl Sale.
(8) Mr. Grigelevich first became an executive officer of the Company on March
21, 1994. Prior to that time he was treasurer of the Company. Mr.
Grigelevich's employment with the Company was terminated on May 31, 1995.
21
<PAGE>
The following tables provide information concerning grants during 1995 to,
and exercises of stock options and stock appreciation rights ("SARs") during
1995 by, the executive officers named in the Summary Compensation Table above
and the value of unexercised stock options and SARs held by them at December
31, 1995.
OPTION/SAR GRANTS IN LASTS FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------
NUMBER OF
SECURITIES
UNDERLYING PERCENT OF TOTAL EXERCISE GRANT DATE
OPTIONS OPTIONS GRANTED PRICE EXPIRATION PRESENT
NAME GRANTED(#) TO ALL EMPLOYEES ($/SHARE) DATE VALUE($)(1)
---- ---------- ---------------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Richard C. Maloof....... 50,000(2) 100% 8.125 Apr. 3, 2005 $272,000
</TABLE>
- --------
(1) This value was calculated using the Black-Scholes option pricing model and
the following assumptions, which were representative of conditions existing
when the options were granted: stock price volatility of 42.02%; risk free
rate of return of 7.32%; dividend yield of 0%; and time of exercise, ten
years. The actual value, if any, to be realized will depend on the excess of
the market price of the Company's Common Stock over the exercise price on the
date the option is exercised; there is no assurance that the value realized
will be at or near the value estimated by the Black-Scholes model.
(2) These options, which (when granted) were exercisable in five equal annual
installments commencing one year after the date of grant, will become
exercisable in full upon the consummation of the earlier of the Offer or the
Merger. The Company and Mr. Maloof have amended these options so that they
will be canceled upon the effective date of the Merger without payment of any
consideration.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT YEAR- IN-THE-MONEY OPTIONS/SARS
END(#) AT YEAR-END($)
-------------------------- -------------------------
SHARES VALUE
ACQUIRED ON REALIZED EXERCISABLE EXERCISABLE
NAME EXERCISE(#) ($)(1) (2) UNEXERCISABLE (2) UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph D. Vechiolla..... 0 0 150,000 0 0 N/A
Richard C. Maloof....... 0 0 67,500 50,000 0 0
William C. Kinsey....... 2,000 6,500 0(3) 0 0 N/A
Frank S. Anthony........ 0 0 31,000 0 0 0
Joseph M. Grigelevich,
Jr. ................... 0 0 0(3) 0 0 N/A
</TABLE>
- --------
(1) Based on the difference between the fair market value of the securities
underlying the options at date of exercise and the exercise price of the
options.
(2) Upon consummation of the Vinyl Sale on March 8, 1995, the vesting schedule
of all unvested options as of such date was accelerated and the holders
thereof became entitled to exercise such options in full or, in certain cases
in lieu of such exercise, cash out some or all of such options.
(3) Mr. Kinsey's and Mr. Grigelevich's employment with the Company terminated
as of March 8, 1995 and May 31, 1995, respectively. All options were
forfeited 90 days after termination of employment with the Company.
22
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists the stockholders known to management to be the
beneficial owners of more than 5% of the outstanding Common Stock as of April
1, 1996 (except as otherwise noted).
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OF
OF BENEFICIAL OWNER OWNERSHIP CLASS
- ------------------- -------------- -------
<S> <C> <C>
The Entwistle Company .. 546,139 shares(1) 13.2%
Bigelow Street
Hudson, MA 01749
S.M. Lorusso & Sons,
Inc. .................. 332,121 shares(2) 8.1%
Antonio J. Lorusso, Jr.
James B. Lorusso
Samuel A. Lorusso
331 West Street
Walpole, MA 02081
Quest Advisory Corp. ... 329,950 shares(3) 8.0%
Charles M. Royce
1414 Avenue of the
Americas
New York, NY 10019
Mellon Bank Corporation
and its Subsidiaries .. 309,000 shares(4)(5) 7.5%
One Mellon Bank Center
Pittsburgh, PA 15258
Charles S. Bird, III ... 305,458 shares(5) 7.4%
13 Proctor Street
Manchester, MA 01944
FMR Corp. .............. 266,753 shares(6) 6.2%
Edward C. Johnson 3d
Abigail P. Johnson
82 Devonshire Street
Boston, MA 02109
Dimensional Fund
Advisors Inc. ......... 232,400 shares(7) 5.6%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
R. Keith Long .......... 208,500 shares(8) 5.1%
Financial Institutions
Insurance Group, Ltd.
Joan Greco and John Fyfe
Otter Creek Partners I,
L.P.
400 Royal Palm Way
Suite 400
Palm Beach, Florida
33480
</TABLE>
- --------
(1) Based on information contained in an amended Schedule 13D filed with the
SEC on April 1, 1987. The Schedule 13D reports that The Entwistle Company
had sole voting and dispositive power with respect to all shares
beneficially owned, including 8,539 shares it had the right to acquire upon
conversion of shares of Preference Stock.
(2) Based on information contained in a Schedule 13D amended through January
23, 1996 filed with the SEC. The Schedule 13D reports that S.M. Lorusso &
Sons, Inc. ("Lorusso") had sole voting power and dispositive power with
respect to 230,121 shares. Antonio J. Lorusso, Jr., president, director and
a stockholder of Lorusso, had sole voting and dispositive power with
respect to 20,000 shares and had shared voting and dispositive power with
respect to 79,500 shares and James B. Lorusso, an officer,
23
<PAGE>
director and a stockholder of Lorusso, had sole voting and dispositive power
over 1,000 shares and Samuel A. Lorusso, an officer, director and stockholder
of Lorusso, has shared voting and dispositive power with respect to 1,500
shares.
(3) Based on information contained in a Schedule 13G amended through February
14, 1996 filed with the SEC. The Schedule 13G reports that Quest Advisory
Corp. ("Quest") had sole voting and dispositive power with respect to
329,950 shares and that Charles M. Royce may be deemed a controlling person
of Quest and as such may be deemed to beneficially own the shares although
he disclaims such beneficial ownership.
(4) Based on information contained in a Schedule 13G amended through January
31, 1996 filed with the SEC. The Schedule 13G reports that Mellon Bank
Corporation had sole voting power with respect to 20,000 shares and sole
dispositive power with respect to 20,000 shares and that Mellon Bank
Corporation together with its subsidiaries, including Boston Safe Deposit
and Trust Company, had shared voting power with respect to 293,629 shares,
and shared dispositive power with respect to 289,000 shares, including
274,929 shares referred to in footnote (5), below.
(5) Includes 274,929 shares held in a trust of which Boston Safe Deposit and
Trust Company and Charles S. Bird, III are co-trustees with shared voting
and dispositive power. See footnote (3) to the table below.
(6) Based on information contained in a Schedule 13G amended through February
14, 1996 filed with the SEC. The Schedule 13G reports as follows: FMR Corp.
and Edward C. Johnson 3d, chairman of FMR Corp. (who, with other family
members including Abigail P. Johnson, forms a controlling group with
respect to FMR Corp.), had sole voting power with respect to 8,900 shares,
and FMR Corp., Edward C. Johnson 3d and certain investment companies (the
"Fidelity Funds"), which are subsidiaries of FMR Corp. (including Fidelity
Convertible Securities Fund), each had sole dispositive power with respect
to 257,853 shares. The sole power to vote the 257,853 shares owned by the
Fidelity Funds resides with the Fidelity Funds' Boards of Trustees.
Fidelity Management and Research Company, a wholly owned subsidiary of FMR
Corp., acts as investment advisor to the Fidelity Funds and carries out the
voting of the shares under written guidelines established by the Fidelity
Funds' Boards of Trustees. Of the 266,753 shares reported as beneficially
owned by FMR Corp., as of December 31, 1995, 192,853 shares could be
acquired upon conversion of Preference Shares.
(7) Based on information contained in a Schedule 13G amended through February
7, 1996 filed with the SEC. The Schedule 13G reports that Dimensional Fund
Advisors Inc. ("Dimensional"), a registered investment advisor, is deemed
to have beneficial ownership of 232,400 shares of Bird Corporation stock as
of December 31, 1995, all of which shares are held in portfolios of DFA
Investment Dimensions Group Inc. (the "Fund"), or in series of the DFA
Investment Trust Company, a Delaware business trust (the "Trust"), each an
open-end management investment company registered under the Investment
Company Act of 1940, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, all of
which Dimensional serves as investment manager. The Schedule 13G reports
that Dimensional had sole voting power with respect to 154,900 shares
(persons who are officers of Dimensional also serve as officers of the Fund
and the Trust and in their capacities as officers of the Fund and the
Trust, these persons vote 21,700 additional shares which are owned by the
Fund and 55,800 shares which are owned by the Trust) and sole dispositive
power with respect to 232,400 shares. Dimensional disclaims beneficial
ownership of all such shares.
(8) Based on information contained in a Schedule 13D filed on March 8, 1996
jointly by Otter Creek Partners I, L.P. ("Otter Creek"), and R. Keith Long
on his own behalf and on behalf of Financial Institutions Insurance Group,
Ltd. ("FIIG"), and Joan Greco and John Fyfe, joint tenants with rights of
survivorship ("Fyfe") (together, the "Reporting Persons"). The Schedule 13D
reports that Otter Creek Management Inc. ("OCM") is the sole general
partner and investment advisor of Otter Creek. Mr. Long is the sole
executive officer, sole director and sole shareholder of OCM and currently
serves as chairman of the Board of Directors of FIIG. Mr. Long also manages
discretionary stock trading accounts for FIIG and Fyfe. Additionally, the
Schedule 13D reports that each of Otter Creek, Mr. Long, FIIG and Fyfe had
sole voting and sole dispositive power with respect to 92,200, 20,000,
39,000 and 57,300 shares, respectively. The Reporting Persons indicated in
their Schedule 13D that they may, through one or more designees, seek
representation on the Board of Directors of the Company.
24
<PAGE>
The tables below set forth information provided by the individuals named
therein as to the amount of the Company's Common Stock, Preference Stock and 5%
Stock beneficially owned by the directors and executive officers of the
Company, individually, and the directors and executive officers as a group, all
as of April 1, 1996 except as otherwise noted. Unless otherwise indicated in
the footnotes, each of the named persons and members of the group had sole
voting and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
COMMON
COMMON SHARES SHARES
BENEFICIALLY SUBJECT PERCENT
OWNED (EXCLUD- TO STOCK OF
NAME ING STOCK OPTIONS) OPTIONS(1) TOTAL CLASS
---- ------------------ ---------- ------- -------
<S> <C> <C> <C> <C>
Robert P. Bass, Jr............... 47,086(2) 17,500 64,586 1.6%
Charles S. Bird, III............. 292,858(3) 15,000 307,858 7.4%
Francis J. Dunleavy.............. 1,000(4) 22,500 23,500 *
John T. Dunlop................... 2,000(5) 20,000 22,000 *
Joseph D. Vecchiolla............. 0 150,000 150,000 3.5%
Guy W. Fiske..................... 6,000 22,500 28,500 *
Loren R. Watts................... 1,000 10,000 11,000 *
Frank S. Anthony................. 31,712(6) 31,000 62,712 1.5%
Joseph M. Grigelevich, Jr........ 6,726(7) 0 6,726 *
William C. Kinsey(8)............. 3,795 0 3,795 *
Richard C. Maloof................ 37,563(9) 77,500 115,063 2.7%
All directors and executive
officers as a group (11
persons)........................ 429,740(10) 366,000 795,740 19.1%
</TABLE>
- --------
* Less than 1% of the outstanding Common Stock.
(1) Represents shares which the individual has a right to acquire by exercise
of stock options exercisable on April 1, 1996 or within 60 days thereafter.
(2) Includes 16,000 shares as to which Mr. Bass shares voting and investment
power and 2,696 shares which may be acquired upon conversion of Preference
Stock.
(3) Includes 274,929 shares as to which Mr. Bird shares voting and investment
power (see table on page A-6) and 3,595 shares which may be acquired upon
conversion of Preference Stock. Does not include 100 shares owned by his
wife, as to which he disclaims beneficial ownership.
(4) Does not include ten shares owned by a child of Mr. Dunleavy, as to which
he disclaims beneficial ownership.
(5) Represents shares as to which Mr. Dunlop shares voting and investment
power.
(6) Includes 2,136 shares allocated to Mr. Anthony's account under the
Company's Employees Savings and Profit Sharing Plan (the "Savings Plan")
as of December 31, 1995.
(7) Includes 45 shares which may be acquired upon conversion of Preference
Stock and 6,481 shares allocated to his account under the Savings Plan as
of December 31, 1995. Mr. Grigelevich was an executive officer of the
Company until May 31, 1995, when his employment with the Company
terminated.
(8) Mr. Kinsey was an executive officer of the Company until March 8, 1995,
when his employment with the Company terminated.
(9) Includes 2,551 shares allocated to his account under the Savings Plan as
of December 31, 1995 and 625 shares held jointly with members of his
family.
(10) Includes 293,554 shares as to which persons included in the group have
shared voting and investment power, 6,336 shares which may be acquired
upon conversion of Preference Stock, and 11,168 shares allocated to the
accounts of officers under the Savings Plan as of December 31, 1995.
25
<PAGE>
<TABLE>
<CAPTION>
PREFERENCE
SHARES PERCENT
BENEFICIALLY OF
NAME OWNED CLASS
---- ------------ -------
<S> <C> <C>
Robert P. Bass, Jr................................... 3,000 *
Charles S. Bird, III................................. 4,000 *
All directors and executive officers as a group (2
persons)............................................ 7,000 *
</TABLE>
--------
* Less than 1% of the outstanding Preference Stock.
<TABLE>
<CAPTION>
SHARES OF
5% STOCK PERCENT
BENEFICIALLY OF
NAME OWNED CLASS
---- ------------ -------
<S> <C> <C>
Charles S. Bird, III................................. 1,815 31%
All directors and executive officers as a group (1
person)............................................. 1,815 31%
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) An Index of Financial Statements and Schedules is on page F1 of this
report. The Exhibit Index is on pages 27 through 29 of this report.
(b) Reports on Form 8-K--No reports on Form 8-K were filed during the last
quarter of the year ended December 31, 1995.
(d) Financial Statements of Kensington Partners are on Pages F-29 through F-
45 of this report.
ITEMS 14 (a)(3) AND (c)
EXHIBITS
BIRD CORPORATION
NORWOOD, MASSACHUSETTS
26
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. PAGE NO.
------- ----------
<C> <S> <C>
3(a) Articles of Organization (Filed as Appendix B to the
Company's Registration Statement on Form S-4,
Registration No 33-34440 and incorporated herein by
reference.)
3(b) By-laws of the Company as amended to date. (Filed as
Exhibit 3(b) to the Company's report on Form 10-K for
the year ended December 31, 1990 and incorporated herein
by reference.)
4(a)(1) Forbearance Agreement dated as of February 14, 1994 with
regard to the Revolving Credit Agreement dated as of
December 17, 1990, as amended. (Filed as Exhibit 4
(a)(3) to the Company's Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference.)
4(a)(2) Third Amended and Restated Revolving Credit and Term
Loan Agreement dated as of March 4, 1994 (Filed as
Exhibit 4(a)(1) to the Company's Form 8-K dated March
14, 1994 and incorporated herein by reference.)
4(a)(3) Loan and Security Agreement dated as of November 30,
1994 (the "Loan Agreement") between Barclays Business
Credit, Inc. (now known as Fleet Capital Corporation)
and Bird Incorporated. (Filed as Exhibit 4(a)(3) to the
Company's Form 10-K for the year ended December 31, 1994
and incorporated herein by reference.)
4(a)(4) First Amendment dated as of March 8, 1995 to the Loan
Agreement between Shawmut Capital Corporation (now known
as Fleet Capital Corporation) and Bird Incorporated.
(Filed as Exhibit 4(a)(4) to the Company's Form 10-K for
the year ended December 31, 1994 and incorporated herein
by reference.)
4(a)(5) Rights Agreement dated as of November 25, 1986 between
the Company and the First National Bank of Boston, as
Rights Agent. (Filed as Exhibit 1 to Registration
Statement on Form 8-A dated December 5, 1986 and
incorporated herein by reference.)
4(a)(6) First Amendment dated May 24, 1990 to Rights Agreement
dated as of November 25, 1986. (Filed as Exhibit 4(b)(2)
to the Company's report on Form 10-K for the year ended
December 31, 1990 and incorporated herein by reference.)
10(a)* Plan for Assistance to Key Employees in Financing
Purchases of Company Stock (Filed as Exhibit 10(b) to
the Company's report on Form 10-K for the year ended
December 31, 1980 and incorporated herein by reference.)
10(b)* Plan for Deferring Payment of Senior Officer's
Compensation (Adopted December 22, 1975). (Filed as
Exhibit 10(c) to the Company's report on Form 10-K for
the year ended December 31, 1980 and incorporated herein
by reference.)
10(c)* 1975 Plan for Deferring Payment of Director's
Compensation (Adopted June 23, 1975). (Filed as Exhibit
10(d) to the Company's report on Form 10-K for the year
ended December 31, 1980 and incorporated herein by
reference.)
10(d)* Settlement Agreement dated as of July 7, 1994 between
Bird Corporation and George J. Haufler. (Filed as
Exhibit 10(d) to the Company's Form 10-K for the year
ended December 31, 1994 and incorporated herein by
reference.)
10(e)* Management Incentive Compensation Program adopted
January 25, 1983. (Filed as Exhibit 10(m) to the
Company's report on Form 10-K for the year ended
December 31, 1982 and incorporated herein by reference.)
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. PAGE NO.
------- ----------
<C> <S> <C>
10(f)* Bird Corporation 1982 Stock Option Plan as amended
through January 29, 1992. (Filed as Exhibit 10(f) to
the Company's report on Form 10-K for the year ended
December 31, 1991 and incorporated herein by
reference.)
10(g)* Bird Corporation 1992 Stock Option Plan. (Filed as
Exhibit 10(g) to the Company's report on Form 10-K for
the year ended December 31, 1992 incorporated herein
by reference.)
10(h)* Bird Corporation Non-Employee Director Stock Option
Plan. (Filed as Exhibit 10(h) to the Company's report
on Form 10-K for the year ended December 31, 1992
incorporated herein by reference.)
10(i)(1)* Form of severance agreement with eight key executive
employees of the Company. (Filed as Exhibit 10(n) to
the Company's report on Form 10-K for the year ended
December 31, 1984 and incorporated herein by
reference.)
10(i)(2)* Form of Amendment dated May 24, 1990 to form of
severance agreement. (Filed as Exhibit 10(g)(2) to the
Company's report on Form 10-K for the year ended
December 31, 1990 and incorporated herein by
reference.)
10(k) Glass Mat Supply Agreement dated as of February 20,
1985 between the Company, The Flintkote Company and
Genstar Roofing Company, Inc. (Filed as Exhibit 10(s)
to Amendment No. 1 to the Company's report on Form 10-
K for the year ended December 31, 1984 and
incorporated herein by reference.)
10(l) Equipment Acquisition Agreement dated May 25, 1990
between BancBoston Leasing Inc. and Bird Incorporated.
(Filed as Exhibit 10(j) to the Company's report on
Form 10-K for the year ended December 31, 1990 and
incorporated herein by reference.)
10(m) Equipment Acquisition Agreement dated July 23, 1986
between BancBoston Leasing Inc. and Bird Incorporated.
(Filed as Exhibit 10(s) to the Company's report on
Form 10-K for the year ended December 31, 1986 and
incorporated herein by reference.)
10(n)(1)* Long Term Incentive Compensation Plan dated June 28,
1988. (Filed as Exhibit 10(v) to the Company's report
on Form 10-Q for the quarter ended September 30, 1988
and incorporated herein by reference.)
10(n)(2)* Amendment dated May 24, 1990 to Long Term Incentive
Compensation Plan. (Filed as Exhibit 10(o)(2) to the
Company's report on Form 10-K for the year ended
December 31, 1990 and incorporated herein by
reference.)
10(o) Amendment dated February 1, 1994 to the First Amended
and Restated Partnership Agreement between Bird Vinyl
Products, Inc. and Kensington Manufacturing Company.
(Filed as Exhibit 10(o)(2) to the Company's report on
Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference.)
10(p)* Employment Agreement dated as of December 1, 1993
between the Company and Joseph D. Vecchiolla. (Filed
as Exhibit 10(p) to the Company's report on Form 10-K
for the year ended December 31, 1993 and incorporated
herein by reference.)
10(q)* Severance Agreement dated as of December 21, 1993
between the Company and Joseph D. Vecchiolla. (Filed
as Exhibit 10(q) to the Company's report on Form 10-K
for the year ended December 31, 1993 and incorporated
herein by reference.)
10(r)* Settlement Agreement dated as of November 25, 1994
between Bird Corporation and William A. Krivsky.
(Filed as Exhibit 10(r) to the Company's Form 10-K for
the year ended December 31, 1994 and incorporated
herein by reference.)
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. PAGE NO.
------- ----------
<C> <S> <C>
10(s) Asset Purchase Agreement dated as of August 19, 1994
between Bird Incorporated, Atlantic Building Products
Corporation, Greater Louisville Aluminum, Inc., Southwest
Roofing Supply, Inc., Southwest Express, Inc., New York
Building Products, Inc., and Wm. Cameron & Co. (Filed as
Exhibit (1) to the Company's Form 8-K dated August 31,
1994 and incorporated herein by reference.)
10(t) Asset Purchase Agreement dated as of September 23, 1994
among Bird Corporation, Bird Incorporated, and Jannock,
Inc. (as amended by amendments dated as of January 27,
1995 and January 31, 1995). (Filed as Exhibit B to the
Company's proxy statement dated February 10, 1995 for the
special meeting of the stockholders to be held on March
7, 1995 and incorporated herein by reference.)
10(u)* Employment Agreement dated as of July 31, 1995 between
the Company and Frank S. Anthony. (Filed as Exhibit 10(u)
to the Company's Form 10-Q for the quarter ended
September 30, 1995 and incorporated herein by reference).
10(v)* Amended Employment Agreement dated August 21, 1995
between the Company and Richard C. Maloof. (Filed as
Exhibit 10(v) to the Company's Form 10-Q for the quarter
ended September 30, 1995 and incorporated herein by
reference).
10(w) Stock Purchase Agreement dated as of November 29, 1995 by
and among Bird Environmental Gulf Coast, Inc., Bird
Environmental Technologies, Inc., Bird Corporation, GTS
Duratek, Inc. and GTSD Sub II, Inc.
10(x) Amended Glass Mat Supply Agreement dated as of December
1, 1995 between the Company, Flintkote Company and
Genstar Roofing Company, Inc.
10(y) Amended and Restated Agreement and Plan of Merger by and
among CertainTeed Corporation, BI Expansion Corporation
and Bird Corporation dated as of April 8, 1996.
11 Statement regarding computation of per share earnings
(loss).
22 Significant subsidiaries.
23(a) Consent of Price Waterhouse LLP.
23(b) Consent of Alpern, Rosenthal and Company, independent
accountants for Kensington Partners.
24 Power of Attorney. (Immediately preceding the signature
page hereof.)
28 Annual report on Form 11-K of the Bird Employees' Savings
and Profit Sharing Plan for the fiscal year ended
December 31, 1995. (To be filed by amendment.)
</TABLE>
- --------
* Indicates management contract or compensatory plan or arrangement
29
<PAGE>
POWER OF ATTORNEY
We, the undersigned officers and Directors of Bird Corporation, hereby
severally constitute and appoint Richard C. Maloof and Frank S. Anthony, and
each of them severally, our true and lawful attorneys or attorney, with full
power to them and each of them to execute for us, and in our names in the
capacities indicated below, and to file with the Securities and Exchange
Commission the Annual Report on Form 10-K of Bird Corporation, for the fiscal
year ended December 31, 1995, and any and all amendments thereto.
IN WITNESS WHEREOF, we have signed this Power of Attorney in the capacities
indicated on March 21, 1996.
Principal Executive Officer:
/s/ Richard C. Maloof President, Director
- ------------------------------------- and Chief Operating
RICHARD C. MALOOF Officer
Principal Accounting Officer:
/s/ Donald L. Sloper, Jr. Corporate Controller
- -------------------------------------
DONALD L. SLOPER, JR.
Directors
/s/ Robert P. Bass, Jr. /s/ Francis J. Dunleavy
- ------------------------------------- -------------------------------------
ROBERT P. BASS, JR. FRANCIS J. DUNLEAVY
/s/ Charles S. Bird, Jr. /s/ John T. Dunlop
- ------------------------------------- -------------------------------------
CHARLES S. BIRD, JR. JOHN T. DUNLOP
/s/ Guy W. Fiske /s/ Joseph D. Vecchiolla
- ------------------------------------- -------------------------------------
GUY W. FISKE JOSEPH D. VECCHIOLLA
/s/ Loren R. Watts
- -------------------------------------
LOREN R. WATTS
30
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Bird Corporation (Registrant)
*
By __________________________________
RICHARD C. MALOOF PRESIDENT, COO
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
* President, Director, April 26, 1996
- ------------------------------------- and COO (Principal
RICHARD C. MALOOF Executive Officer)
* Corporate Controller April 26, 1996
- ------------------------------------- (Principal
DONALD L. SLOPER, JR. Accounting Officer)
* Director April 26, 1996
- -------------------------------------
JOSEPH D. VECCHIOLLA
* Director April 26, 1996
- -------------------------------------
ROBERT P. BASS, JR.
* Director April 26, 1996
- -------------------------------------
CHARLES S. BIRD, JR.
* Director April 26, 1996
- -------------------------------------
FRANCIS J. DUNLEAVY
* Director April 26, 1996
- -------------------------------------
JOHN T. DUNLOP
31
<PAGE>
SIGNATURE TITLE DATE
* Director April 26, 1996
- -------------------------------------
GUY W. FISKE
* Director April 26, 1996
- -------------------------------------
LOREN R. WATTS
/s/ Frank S. Anthony
* By ________________________________
FRANK S. ANTHONY AS ATTORNEY-IN-
FACT
32
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
FORM 10-K
ITEMS 14(A)(1) AND (2)
INDEX OF FINANCIAL STATEMENTS AND SCHEDULES
The following consolidated financial statements of the registrant and its
subsidiaries required to be included in Item 8 are listed below.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Financial Statements:
Reports of independent accountants.................................. F-2
Balance sheets at December 31, 1995 and 1994........................ F-4
Statements of operations for each of the three years in the period
ended December 31, 1995............................................ F-6
Statements of stockholders' equity for each of the three years in
the period ended December 31, 1995................................. F-7
Statements of cash flows for each of the three years in the period
ended December 31, 1995............................................ F-8
Notes to consolidated financial statements.......................... F-9
</TABLE>
The following consolidated financial statement schedules of Bird Corporation
and its subsidiaries are included in Item 14(a)(2) and should be read in
conjunction with the financial statements included herein:
<TABLE>
<S> <C>
Schedule II--Valuation and qualifying accounts..................... F-28
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted because
they are not applicable or the required information is shown in the financial
statements or the notes thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Bird Corporation
We have audited the consolidated balance sheets of Bird Corporation and its
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, of stockholders' equity and of cash flows for each of
the three years in the period ended December 31, 1995. 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 did not audit the financial statements of Kensington Partners,
which statements reflect total assets of $8.9 million at December 31, 1994, and
total net sales of $24.2 million and $21.2 million and net losses of $5.3
million and $5.2 million for the years ended December 31, 1994 and 1993,
respectively. Those statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the amounts
included for Kensington Partners, is based solely on the report of the other
auditors.
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 and the report of the other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements listed in the index appearing under Item
14(a)(1) and (2) on Page F-1 present fairly, in all material respects, the
financial position of Bird Corporation and its subsidiaries as of December 31,
1995 and 1994, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles.
As discussed in Note 4 to the consolidated financial statements, the Company
changed its method of accounting for income taxes in 1993 to comply with a new
pronouncement issued by the Financial Accounting Standards Board.
/s/ Price Waterhouse LLP
Boston, Massachusetts
March 15, 1996
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners Kensington Partners and Affiliate Leechburg, Pennsylvania
We have audited the accompanying combined balance sheet of Kensington
Partners and Affiliate (Joint Venture Partnerships) as of December 31, 1994 and
the related combined statements of operations and changes in partners' capital
(deficit), and cash flows for the years ended December 31, 1994 and 1993. These
financial statements are the responsibility of the Partnerships' 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of Kensington Partners
and Affiliate as of December 31, 1994, and the results of their operations and
their cash flows for the years ended December 31, 1994 and 1993, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Kensington Partners and Affiliate will continue as going concerns. As discussed
in Note 2 to the financial statements, the Companies have incurred significant
operating losses and current liabilities exceed current assets. Those
conditions, among others, raise substantial doubt about the Companies' ability
to continue as going concerns. Management's plans regarding those matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Alpern, Rosenthal & Company
Pittsburgh, Pennsylvania
February 10, 1995
F-3
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE, PAR VALUE, AND LIQUIDATION VALUE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1994
------- -------
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents......................................... $ 3,679 $ 321
Accounts and notes receivable, less allowances--$153 in 1995
and $3,137 in 1994.......................................... 5,461 19,644
Inventories.................................................. 4,701 8,371
Refundable income taxes...................................... 1,021 0
Prepaid expenses and other assets............................ 1,157 3,095
Deferred income taxes........................................ 435 6,836
------- -------
Total current assets....................................... 16,454 38,267
------- -------
Property, Plant and Equipment:
Land and land improvements................................... 2,810 3,145
Buildings.................................................... 7,184 11,742
Machinery and equipment...................................... 28,980 33,760
Construction in progress..................................... 672 5,705
------- -------
39,646 54,352
Less--Depreciation and amortization.......................... 16,127 24,323
------- -------
23,519 30,029
------- -------
Assets held for sale........................................... 0 7,500
Deferred income taxes.......................................... 3,631 8,662
Other assets................................................... 99 1,247
------- -------
$43,703 $85,705
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE, PAR VALUE, AND LIQUIDATION VALUE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1994
------- -------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 3,394 $ 6,632
Accrued expenses.......................................... 5,881 7,039
Long-term debt, portion due within one year............... 1,113 18,071
Retirement plan contributions payable..................... 88 302
Income taxes payable...................................... 0 596
------- -------
Total current liabilities............................... 10,476 32,640
------- -------
Long-term debt, portion due after one year.................. 4,869 12,504
------- -------
Other liabilities........................................... 3,942 2,715
------- -------
Deferred income taxes....................................... 0 128
------- -------
Total liabilities....................................... 19,287 47,987
------- -------
Stockholders' Equity:
5% cumulative preferred stock, par value $100. Authorized
15,000 shares; issued 5,820 shares in 1995 and 1994
(liquidating preference $110 per share, aggregating
$640,000).................................................. 582 582
Preference stock, par value $1. Authorized 1,500,000 shares;
issued 814,300 shares of $1.85 cumulative convertible
preference stock in 1995 and 1994 (liquidating value $20
per share, aggregating $16,286,000)........................ 814 814
Common stock, par value $1. Authorized 15,000,000 shares;
4,395,162 shares issued in 1995 and 4,375,179 shares issued
in 1994.................................................... 4,395 4,375
Other capital............................................... 27,362 27,235
Retained earnings (deficit)................................. (5,746) 7,860
------- -------
27,407 40,866
Less--
Treasury stock, at cost, Common stock: 275,100 shares in
1995 and 1994............................................ (2,991) (2,991)
Unearned compensation..................................... 0 (157)
------- -------
24,416 37,718
------- -------
Commitments and contingencies (Note 11)
$43,703 $85,705
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.................................. $ 54,180 $ 167,886 $ 187,745
---------- ---------- ----------
Costs and expenses:
Cost of sales............................ 48,007 136,878 151,664
Selling, general and administrative
expense................................. 11,817 28,786 32,716
Interest expense......................... 927 4,782 2,472
Discontinued business activities (income)
expense................................. (17,570) (1,313) 268
Equity losses from partnership........... 372 4,680 2,625
Other expense............................ 0 0 3,278
---------- ---------- ----------
Total costs and expenses............... 43,553 173,813 193,023
---------- ---------- ----------
Earnings (loss) from continuing operations
before income taxes....................... 10,627 (5,927) (5,278)
Provision (benefit) for income taxes....... 11,424 (7,010) (637)
---------- ---------- ----------
Earnings (loss) from continuing operations
before cumulative effect of accounting
change.................................... (797) 1,083 (4,641)
---------- ---------- ----------
Discontinued operations (Note 9):
Income (loss) from operations of
discontinued businesses, net of taxes... 0 1,245 (15,414)
Loss on disposal of environmental
business, 1993 includes a provision of
$5,200,000 for operating losses during
phase out period, net of taxes.......... (11,252) (6,011) (11,000)
---------- ---------- ----------
Net loss from discontinued operations.... (11,252) (4,766) (26,414)
---------- ---------- ----------
Cumulative effect of accounting change..... 0 0 2,733
---------- ---------- ----------
Net loss before dividends.................. (12,049) (3,683) (28,322)
Preferred and preference stock cumulative
dividends................................. 1,536 1,536 1,536
---------- ---------- ----------
Net loss applicable to common stockholders. $ (13,585) $ (5,219) $ (29,858)
========== ========== ==========
Primary earnings (loss) per common share:
Continuing operations.................... $ (0.57) $ (0.11) $ (1.51)
Discontinued operations.................. (2.74) (1.20) (6.45)
Cumulative effect of accounting change... 0.00 0.00 0.67
---------- ---------- ----------
Net loss after dividends................... $ (3.31) $ (1.31) $ (7.29)
========== ========== ==========
Fully diluted earnings (loss) per common
share:
Continuing operations.................... $ (0.57) $ (0.11) $ (1.51)
Discontinued operations.................. (2.74) (1.20) (6.45)
Cumulative effect of accounting change... 0.00 0.00 0.67
---------- ---------- ----------
Net loss after dividends................... $ (3.31) $ (1.31) $ (7.29)
========== ========== ==========
Average number of shares used in earnings
per share computations.................... 4,104,965 3,992,251 4,097,999
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
$1.85
5% CUMULATIVE
CUMULATIVE CONVERTIBLE RETAINED COMMON TOTAL
PREFERRED PREFERENCE COMMON OTHER EARNINGS STOCK IN UNEARNED STOCKHOLDERS'
STOCK STOCK STOCK CAPITAL (DEFICIT) TREASURY COMPENSATION EQUITY
---------- ----------- ------ ------- --------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 31,
1992................... $582 $814 $4,267 $25,401 $41,645 $(2,059) $(1,549) $69,101
Net loss................ (28,322) (28,322)
Cash dividends declared:
5% cumulative preferred
stock--$5 per share... (29) (29)
$1.85 cumulative
convertible preference
stock $1.85 per share. (1,130) (1,130)
Common stock $.15 per
share.................. (613) (613)
Common stock issued as
compensation--1,200
shares................. 1 13 14
Common stock issued for
contributions to
employees' saving
plan--19,119 shares.... 19 210 229
Common stock issued and
note repayment upon
exercise of stock
options--4,080 shares.. 4 210 214
Purchase of 10,119
shares of common stock. (120) (120)
Amortization of unearned
compensation........... 595 595
Cumulative effect of
accounting change...... 323 323
Tax effect of stock
options exercised...... 303 303
Cumulative foreign
currency translation... (4) (4)
---- ---- ------ ------- ------- ------- ------- -------
Balance December 31,
1993................... 582 814 4,291 26,456 11,551 (2,179) (954) 40,561
Net loss................ (3,683) (3,683)
Cash dividends declared:
5% cumulative preferred
stock--$1.25 per
share................. (8) (8)
Common stock issued as
compensation--1,426
shares................. 1 14 15
Common stock issued for
contributions to
employees' saving
plan--12,439 shares.... 13 110 123
Common stock issued upon
exercise of stock
options--69,750 shares
common and 15,000
shares treasury........ 70 609 109 788
Purchase of 248 shares
of common stock........ (3) (3)
L.T. Incentive
forfeitures--125,145
shares................. (910) 910 0
Common stock from
distribution business--
916 shares............. (6) (8) (14)
Amortization of unearned
compensation........... (113) (113)
Cumulative foreign
currency translation... 52 52
---- ---- ------ ------- ------- ------- ------- -------
Balance December 31,
1994................... 582 814 4,375 27,235 7,860 (2,991) (157) 37,718
Net loss................ (12,049) (12,049)
Cash dividends declared:
5% cumulative preferred
stock--$1.25 per
share................. (51) (51)
$1.85 cumulative
convertible preference
stock--$1.85 per
share................. (1,506) (1,506)
Common stock issued as
compensation--200
shares................. 1 1
Common stock issued for
contributions to
employees' saving
plan--17,783 shares.... 18 112 130
Common stock issued upon
exercise of stock
options--2,000 shares
common................. 2 14 16
Amortization of unearned
compensation........... 157 157
---- ---- ------ ------- ------- ------- ------- -------
Balance December 31,
1995................... $582 $814 $4,395 $27,362 $(5,746) $(2,991) $ 0 $24,416
==== ==== ====== ======= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1994 1993
---------- ---------- ------------
(BRACKETS DENOTE CASH OUTFLOWS)
<S> <C> <C> <C>
Cash flow provided (used) by operations:
Net loss................................. $ (12,049) $ (3,683) $ (28,322)
Adjustments to reconcile to net cash
provided by operations:
Writedown of assets to net realizable
value................................. 0 0 5,800
Depreciation and amortization.......... 2,861 4,317 8,714
Provision for losses on accounts
receivable............................ 26 905 2,162
Deferred income taxes.................. 11,304 (10,172) (1,044)
Cumulative effect of accounting change. 0 0 (2,733)
Gain on sale of vinyl business......... (20,579) 0 0
Loss on sale of window business........ 1,959 0 0
Gain on sale of distribution business.. 0 (1,466) 0
Loss (gain) on disposal of
environmental business................ 11,252 9,747 (858)
Changes in balance sheet items:
Accounts receivable.................... 3,120 (2,841) (8,199)
Inventories............................ (2,664) 1,423 4,538
Prepaid expenses....................... 712 203 (2,039)
Liabilities not related to financing
activities............................ (14,325) (6,867) 11,646
Liquidation reserve.................... 0 (5,398) 5,398
Other assets........................... 128 2,230 2,564
--------- ---------- ------------
Cash flow used by operations: (18,255) (11,602) (2,373)
--------- ---------- ------------
Cash flows from investing activities:
Acquisition of property, plant and
equipment, net........................ (1,590) (10,614) (16,251)
Proceeds from disposal of assets....... 50,680 31,296 9,141
Additional investments in discontinued
operations............................ (2,402) 0 0
Other investments...................... 651 (1,277) 159
--------- ---------- ------------
Net cash provided (used) in investing
activities.............................. 47,339 19,405 (6,951)
--------- ---------- ------------
Cash flows from financing activities:
Debt proceeds.......................... 16,627 159,139 1,286,500
Debt repayments........................ (40,942) (175,091) (1,270,987)
Dividends paid......................... (1,558) (8) (2,351)
Purchase of treasury stock............. 0 (11) (120)
Other equity changes................... 147 971 577
--------- ---------- ------------
Net cash provided (used) by financing
activities.............................. (25,726) (15,000) 13,619
--------- ---------- ------------
Net increase (decrease) in cash and
equivalents............................. 3,358 (7,197) 4,295
Cash and cash equivalents at beginning of
year.................................... 321 7,518 3,223
--------- ---------- ------------
Cash and cash equivalents at end of year. $ 3,679 $ 321 $ 7,518
========= ========== ============
Supplemental Disclosures:
Cash paid during the year for:
Interest............................... $ 1,501 $ 4,811 $ 2,160
Income taxes........................... $ 1,170 $ 363 $ 291
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Nature of Operations
Bird Corporation is a manufacturer of asphalt roofing products. Currently,
asphalt shingles and roll roofing are produced at the Company's plant in
Norwood, Massachusetts for commercial and residential use. These products are
marketed in the northeastern United States through independent wholesalers and
building material retailers whose primary customers are roofing contractors.
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of
Bird Corporation and its majority-owned subsidiaries (the "Company"). All
material intercompany activity has been eliminated from the financial
statements. Investments in less than majority-owned companies are accounted for
by the equity method. Certain prior year amounts have been reclassified to
conform with the 1995 presentation.
Pervasiveness 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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Concentration of Risk and Major Customers
The Company is dependent upon the economy in the northeastern United States
and sells its products primarily to independent wholesalers and building
material retailers for resale primarily to roofing contractors. One customer
accounted for slightly more than 10% of the Company's sales during 1995 and
accounts receivable at December 31, 1995.
The principal raw materials used in the manufacture of asphalt roofing
products are fiberglass mat, asphalt saturants and coatings and crushed
granules. The Company's requirements for fiberglass mat are met primarily under
a Glass Mat Supply Agreement with one vendor which expires on December 31,
1996. Fiberglass mat is also generally available in adequate quantities from a
number of outside suppliers.
Revenue Recognition
The Company recognizes revenue when products are shipped or services are
performed.
Statement of Cash Flows
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined for
a large portion of the inventories by the last-in, first-out (LIFO) method
computed using the dollar value method for natural business unit pools. The
cost of the remaining inventories is determined generally on a first-in, first-
out (FIFO) basis.
F-9
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation has been
provided in the financial statements primarily on the straight-line method at
rates, based on reasonable estimates of useful lives, which fall within the
following ranges for major asset classifications:
<TABLE>
<S> <C>
Land improvements.......................................... 10 to 20 years
Buildings.................................................. 20 to 40 years
Machinery and equipment.................................... 5 to 20 years
</TABLE>
Depreciation expense for continuing operations for 1995, 1994 and 1993
amounted to $2,831,000, $3,644,000 and $3,757,000, respectively. Maintenance,
repairs and minor renewals are charged to earnings in the year in which the
expense is incurred. Additions, improvements and major renewals are
capitalized. The cost of assets retired or sold, together with the related
accumulated depreciation, are removed from the accounts, and any gain or loss
on disposition is credited or charged to earnings. The Company capitalizes
interest cost on construction projects while in progress. The capitalized
interest is recorded as part of the asset to which it is related and is
amortized over the asset's estimated useful life.
Retirement Plans
The Company has a defined contribution plan covering substantially all
eligible non-union salaried and non-union hourly employees. Annual
contributions are made to the plan based on rates identified in the plan
agreement.
Advertising
Advertising costs are charged to operations when incurred. The Company did
not incur any costs associated with direct response advertising in 1995, 1994
and 1993, and there were no capitalized advertising costs at December 31, 1995
and 1994. Advertising expense for 1995, 1994 and 1993 was $503,000, $1,023,000
and $1,230,000, respectively.
Earnings (Loss) per Common Share
Primary earnings (loss) per common share is determined after deducting the
dividend requirements of the preferred and preference shares and is based on
the weighted average number of common shares outstanding during each period
increased by the effect of dilutive stock options. Fully diluted earnings
(loss) per common share also give effect to the reduction in earnings per
share, if any, which would result from the conversion of the $1.85 cumulative
convertible preference stock at the beginning of each period if the effect is
dilutive.
Environmental Matters
The Company records a liability for environmental matters when it is probable
that a liability has been incurred and the amount of the liability can be
reasonably estimated based on the available evidence and site assessments. If
an amount is likely to fall within a range and no single amount within that
range can be determined to be a better estimate, the minimum amount of the
range is recorded. If there are other participants and the liability is joint
and several, the financial stability of the other participants is considered in
determining the Company's accrual. In addition, the liability excludes claims
for recoveries from insurance companies and other third parties until such
claims for recoveries are probable of realization at which point they would be
classified separately as a receivable.
F-10
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Warranty Costs
The Company warrants under certain circumstances that its building material
products meet certain manufacturing and material specifications. The warranty
policy is unique to each product, ranges from twenty to forty years, is
generally for the material cost and requires the owner to meet specific
criteria such as proof of purchase. The Company offers the original
manufacturer's warranty only as part of the original sale and at no additional
cost to the customer. In addition, for marketing considerations, the Company
makes elective settlements in response to customer complaints. The Company
records the liability for warranty claims and elective customer settlements
when it determines that a specific liability exists or a payment will be made.
2. INVENTORIES
The percentages of inventories valued on the LIFO method were 100% and 86% at
December 31, 1995 and 1994, respectively. It is not practical to separate LIFO
inventories by raw materials and finished goods components; however, the
following table (in thousands) presents these components on a current cost
basis with the LIFO reserve shown as a reduction.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1994
------ -------
<S> <C> <C>
Current Costs:
Raw materials............................................... $1,202 $ 3,554
Finished goods.............................................. 4,217 6,924
------ -------
5,419 10,478
Less LIFO reserve........................................... 718 2,107
------ -------
$4,701 $ 8,371
====== =======
</TABLE>
3. DEBT
At December 31, the Company's borrowings and debt obligations are summarized
as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------ -------
<S> <C> <C>
Long Term Debt:
Revolving Credit Agreement................................. $ 0 $13,937
Term Loans................................................. 5,000 15,000
Obligations under capital leases........................... 982 1,638
------ -------
5,982 30,575
Less--portion due within one year.......................... 1,113 18,071
------ -------
$4,869 $12,504
====== =======
</TABLE>
Prior to November 30, 1994, the Company's external financial needs were
satisfied by borrowing under the Second and Third Amended Credit Agreements
with The First National Bank of Boston, Philadelphia National Bank incorporated
as Corestates Bank, N.A. and The Bank of Tokyo Trust Company.
On November 30, 1994, Bird Incorporated entered into a three year $39 million
Loan Agreement with Fleet Capital Corporation ("Fleet Capital"), previously
Barclays Business Credit, Inc. and Shawmut Capital Corporation. At the end of
the three year period, the Loan Agreement will be automatically renewed for
F-11
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
successive one year periods unless terminated specifically in writing. The Loan
Agreement consisted of a $24 million revolving credit commitment and two equal
term loans (Term loan A and Term loan B, as defined in the Loan Agreement)
totaling $15 million. On March 8, 1995 the Company sold the assets of its vinyl
siding operation to Jannock, Inc. for $47.5 million which was reduced to
approximately $42.5 million by post- closing working capital adjustments (see
Note 7). The proceeds from the sale were used to reduce bank debt. Concurrent
with the sale, Fleet Capital executed the First Amendment to the Loan Agreement
amending the amount of the facility to $20 million consisting of a $15 million
revolving credit commitment and a $5 million term loan. On January 10, 1996,
the Company paid down the term loan so that the outstanding principal balance
equaled $2.5 million. Up to $5 million of the revolving credit facility can be
used for letters of credit. Letters of credit outstanding as of December 31,
1995 totaled $2,233,000 compared to $2,927,000 as of December 31, 1994.
Borrowings by Bird Incorporated under the Loan Agreement are guaranteed by
the Company and the Company's other subsidiaries and are secured by
substantially all of the assets of the Company and its subsidiaries. The
revolving credit line availability is determined with reference to a percentage
of accounts receivable and inventory which are pledged to the lender. During
the period January 1 through April 30, the Loan Agreement provides a $2 million
over advance on accounts receivable and inventories in order to assist the
Company in assuring adequate funding of any seasonal build up of accounts
receivable which may occur under sales programs offered during the winter
months. Currently, the availability calculation does not allow borrowings to
the full extent of the revolving credit commitment, due to the seasonality of
the building materials manufacturing business. As of March 15, 1996, an
aggregate of $7,683,000 was available to the Company under the terms of the
revolving credit facility under the Loan Agreement.
The Loan Agreement contains financial and operating covenants which, among
other things, (i) require the Company to maintain prescribed levels of tangible
net worth, net cash flow and working capital and (ii) place limits on the
Company's capital expenditures. The Loan Agreement also contains restrictions
on indebtedness, liens, investments, distributions (including payment of common
and preference dividends), mergers, acquisitions and disposition of assets. As
of September 30, 1995, the Company was in default under Section 8.3.3 of the
Loan Agreement as a result of failing to achieve a stated level of cash flow
for the third quarter of 1995. As a result of the weak remodeling market during
1995, sales volume and earnings were less than anticipated, negatively
impacting cash flow. At the request of the Company, Fleet Capital waived the
cash flow requirements for the third quarter without penalty and amended this
and other financial covenants for subsequent periods based on a review of the
Company's financial condition and future projections. As of December 31, 1995,
the Company was in compliance with all covenants.
Interest on the revolving credit commitment under the First Amended Loan
Agreement accrues at the Fleet Capital base rate (as specified in such
Agreement) or the London Interbank Offering Rate ("LIBOR") plus 2 3/4% at the
Company's election on all borrowings plus the greater of $25,000 per annum or
1/4% on any unused portion of the commitment payable monthly in arrears. The
interest on the term loan accrues at the base rate or the LIBOR rate plus 2
3/4% at the Company's election. The interest rate on outstanding borrowings at
December 31, 1995 was 8.69%. The repayment of the principal on the term loan is
at the rate of $62,500 per month through November 1996 and $71,417 per month
thereafter with a final principal payment of $3,455,800 due on November 30,
1997. Proceeds in excess of $100,000 from the sale of fixed assets may, at
Fleet Capital's discretion, be applied to the outstanding principal payments of
the term loan.
The weighted average interest rates on short term borrowings at December 31,
1995 and December 31, 1994 were 9.74% and 9.53%, respectively. The fair value
of the Company's total debt approximated the carrying value at December 31,
1995 and 1994, respectively. The fair value is based on management's estimate
of current rates available to the Company for similar debt with the same
remaining maturity.
F-12
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Maturities of long-term debt for each of the five years subsequent to
December 31, 1995 are as follows:
1996--$1,113,000; 1997--$4,614,000; 1998--$255,000; 1999--$0; 2000--$0. The
Company incurred net interest expense of $927,000 in 1995, $4,782,000 in 1994
(net of $257,000 capitalized interest), and $2,472,000 in 1993 (net of $345,000
capitalized interest).
4. INCOME TAXES
Earnings (loss) from continuing operations before income taxes and the
provision (benefit) for income taxes are shown below (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Earnings (loss) from continuing operations before
income taxes........................................ $10,627 $(5,927) $(5,278)
======= ======= =======
Provision (benefit) for continuing operations:
Currently payable.................................. $ 120 $ 200 $ 765
Deferred........................................... 11,304 (7,210) (1,402)
------- ------- -------
$11,424 $(7,010) $ (637)
======= ======= =======
</TABLE>
The provision (benefit) for income taxes on continuing operations varied from
the U.S. federal statutory rate for the following reasons:
<TABLE>
<CAPTION>
1995 1994 1993
----- ------ -----
<S> <C> <C> <C>
Continuing operations:
U.S. federal statutory rate............................. 34.0% (34.0)% (34.0)%
State income taxes...................................... 7.3 (6.5) 0.6
Corporate owned life insurance.......................... 2.5 (9.9) 0.0
Effect of valuation allowance........................... 63.7 (67.5) 22.3
Other................................................... 0.0 (0.4) (1.0)
----- ------ -----
107.5% (118.3)% (12.1)%
===== ====== =====
</TABLE>
The net provision (benefit) for income taxes related to discontinued
operations amounted to $(2,962,000) and $304,000 for 1994 and 1993,
respectively.
F-13
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The deferred income tax asset recorded in the consolidated balance sheet
results from differences between financial statement and tax reporting of
income and deductions. A summary of the composition of the deferred income tax
asset at December 31, 1995 and 1994 is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Deferred tax assets:
Bad debt reserves....................................... $ 66 $ 1,314
Compensation/pension accruals........................... 648 882
Investment in non-consolidated subsidiary............... 0 4,284
Net operating loss carryover............................ 14,810 9,129
Capital loss carryover.................................. 0 451
Investment tax credit carryover......................... 1,233 1,233
Minimum tax credit carryover............................ 1,091 1,091
Other reserves & accruals............................... 3,222 3,389
-------- -------
Total deferred tax assets............................. 21,070 21,773
Deferred tax liabilities:
Depreciation............................................ (1,942) (1,403)
-------- -------
Net deferred tax asset before valuation reserve........... 19,128 20,370
Less: Valuation reserve................................... (15,062) (5,000)
-------- -------
Net deferred tax asset.................................... $ 4,066 $15,370
======== =======
</TABLE>
The Company has available for federal income tax purposes unused net
operating loss and investment tax credit carryforwards, which may provide
future tax benefits, expiring as follows (in thousands):
<TABLE>
<CAPTION>
YEAR OF NET INVESTMENT
EXPIRATION OPERATING LOSS TAX CREDIT
---------- -------------- ----------
<S> <C> <C>
1996............................................ $ 0 $ 97
1997............................................ 0 317
1998............................................ 0 135
1999............................................ 0 212
2000............................................ 0 297
2001............................................ 0 175
2002............................................ 138 0
2008............................................ 9,898 0
2009............................................ 16,711 0
2010............................................ 16,229 0
------- ------
$42,976 $1,233
======= ======
</TABLE>
Additionally, for federal income tax purposes, at December 31, 1995 the
Company had available for carryforward minimum tax credits with no expiration
aggregating $1,091,000. If certain substantial changes in the Company's
ownership should occur, there would be an annual limitation on the amount of
the carryforwards, including certain unrealized built-in losses, which can be
utilized for regular and alternative minimum tax purposes. (See Note 14
regarding proposed merger with CertainTeed Corporation.)
The Company adopted FAS 109 in 1993 and recorded the cumulative effect of the
change in accounting principle of approximately $2.7 million as a benefit in
the results of operations for the first quarter of 1993. This accounting change
also requires the recognition of a valuation reserve if it is more likely than
not that
F-14
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the Company may not be able to realize the benefits of recorded deferred tax
assets. At December 31, 1995 the Company's net deferred tax asset is
approximately $19.1 million less a valuation reserve of $15.1 million. As
required under FAS 109, this valuation reserve was determined based upon the
Company's review of all available evidence including projections of future
taxable income. During 1995, the company disposed of Bird-Kensington Holding
Corporation and Bird Environmental Gulf Coast, Inc. (as disclosed in Notes 7
and 9, respectively) resulting in losses not anticipated at the end of the
previous year. In addition, the lower overall demand and price weakness in the
northeast caused by a mild 1994/1995 winter followed by a hot, dry summer
negatively impacted profits of the roofing operations. Based on the above
factors, the Company increased the valuation reserve by $10.1 million.
The Company expects to be profitable and with other tax planning strategies
expects to generate future taxable income. Realization of the $4,066,000 net
deferred tax asset is dependent on generating sufficient taxable income prior
to expiration of the loss carryforwards. Although realization is not assured,
management believes that it is more likely than not that the net deferred tax
asset will be realized. The amount of the net deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income during the carryforward period are reduced.
5. STOCKHOLDERS' EQUITY
The $1.85 cumulative convertible preference stock is redeemable, in whole or
in part, at the option of the Company, at a redemption price of $20.00 per
share on and after May 15, 1993. The convertible preference stock has a
liquidation value of $20.00 per share and is convertible at the option of the
holder into common stock of the Company at a conversion price of $22.25 per
share, subject to adjustment in certain events. Dividends are cumulative from
the date of issue and are payable quarterly. There are four preference
dividends in arrears. The Company has the option to redeem the convertible
preference stock. The Company's 5% cumulative preferred stock ranks senior to
the convertible preference stock as to dividends and upon liquidation.
On June 18, 1992 the Company announced that its Board of Directors authorized
it to buy back, on the open market or in privately negotiated transactions, up
to 400,000 of its outstanding shares of common stock at prices available from
time to time that the Company deems attractive. Since this announcement the
Company has repurchased 248 shares in 1994, 5,364 shares in 1993 and 92,007
shares in 1992.
The Company is prohibited from purchasing its common stock as long as
dividends on the convertible preference stock are in arrears. Under the 1992
Stock Option Plan described in Note 6, 931,325 shares of common stock are
reserved for issuance upon exercise of options and stock appreciation rights at
December 31, 1995.
Restrictions on the payment of dividends on common and preference stock are
imposed by the terms of the Loan Agreement dated November 30, 1994. Payment of
dividends on the preferred stock are permitted under the Loan Agreement. As of
December 31, 1995, all dividends current and in arrears on the preferred stock
in the amount of $29,000 and $22,000 respectively, have been declared and paid
in full. Dividends are in arrears on the preference stock in the aggregate
amount of $1,506,000 for the four quarterly periods ended February 15, 1995 and
must be paid in full before any dividends could be declared and paid on the
common stock. The quarterly dividends on the preference stock due May 15,
August 15, and November 15, 1995 in the aggregate amount of $1,130,000, along
with one dividend in arrears in the amount of $377,000, have with the consent
of Fleet Capital, been declared and paid in full.
The Company has a Rights Agreement which, as amended, entitles certain common
stockholders to purchase shares of common stock of the Company or securities of
an acquiring entity in the event of certain
F-15
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
efforts to acquire control of the Company. The proposed merger with CertainTeed
Corporation (Note 14) will not trigger the exercisability of these rights.
6. EMPLOYEE BENEFIT PLANS
Retirement Plans
The Company's "Bird Employees' Savings and Profit Sharing Plan" provides for
a defined base contribution and profit sharing and savings contributions.
Defined Base Contribution
The Company contributes annually 2-7% of plan participants' basic
compensation depending upon their age and employment status as of December 31,
1984. Vesting accrues at 20% per year of service. Contributions for continuing
operations for the years ended December 31, 1995, 1994, and 1993 amounted to
$72,000, $203,000, and $352,000, respectively.
Profit Sharing Contribution
Profit sharing contributions are made annually, if earned, based upon certain
defined levels of return on equity by the Company and its business units. The
distribution of the contribution to the plan's participants is based upon
annual basic compensation. Contributions for continuing operations for the year
ended December 31, 1993 amounted to $145,000. No profit sharing contributions
were earned for 1995 or 1994.
Savings Contribution
The Company's savings plan provides that eligible employees may contribute to
the plan any whole percentage of their basic compensation varying from 2 to
15%. The Company may make discretionary matching contributions not exceeding 6%
of the participant's basic compensation during the plan year. Such matching
Company contributions are invested in shares of the Company's common stock. The
Company's contributions for continuing operations for the years ended December
31, 1995, 1994, and 1993 amounted to $124,000, $142,000, and $155,000,
respectively.
Post Retirement Benefits
Certain health care and life insurance benefits are provided for
substantially all of the Company's retired employees, except those covered
under union plans. Benefits are provided by the payment of premiums for life
insurance benefits and the reimbursement for eligible employees of a portion of
their health care premiums. The Company's cost for the years 1995, 1994, and
1993 amounted to $66,000, $79,000, and $71,000, respectively.
Employee Incentive Plans
Under the 1982 Stock Option Plan, as amended, options to purchase up to
900,000 shares of the Company's common stock may be granted to officers,
directors and key employees upon terms and conditions determined by a committee
of the Board of Directors which administers the plan. In 1993, the Company
adopted a new stock option plan which allows the issuance of up to 450,000
stock options in addition to the unissued shares approved for issuance under
the 1982 plan. The new plan will expire in 2002 and no further options will be
granted under the former plan. A Non-Employee Directors' Stock Option Plan was
also adopted in 1993 which will automatically provide grants of options to each
non-employee director serving on the Board of Directors at the time of such
grant. Each annual grant will cover 2,500 shares of common stock
F-16
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
and any recipient may not receive option grants exceeding a total of 30,000
shares. An aggregate of 100,000 shares of common stock are available for grants
under the Non-Employee Directors' Stock Option Plan.
Options granted by the committee may be designated as either incentive stock
options, as defined under the current tax laws, or non-qualified options. The
committee may also grant stock appreciation rights, either singly or in tandem
with stock options. A right entitles the holder to benefit from market
appreciation in the Company's common stock subject to the right between the
date of the grant and the date of exercise without any payment on the part of
the holder. Upon exercise of a right, the holder surrenders the option and
receives an amount of common stock (or, at the election of the committee, cash)
equal in value to the amount of such appreciation.
The exercise price of options specified by the committee must be at least
100% of the fair market value of the Company's common stock as of the date of
grant. All options and rights granted become exercisable at the rate of 20 to
25% per year, on a cumulative basis, beginning with the first anniversary of
the date of grant for options granted under the Stock Option Plan and in full
one year after grant for option granted under the Non-Employee Directors' Stock
Option Plan. In case of termination of employment, options and grants vested,
but not yet exercised, are subject to forfeiture under the Stock Option Plan
and are exercisable up to 90 days after termination for the Non-Employee
Directors' Stock Option Plan.
Transactions involving the Stock Option Plan are summarized as follows for
the year ended December 31, 1995:
<TABLE>
<CAPTION>
STOCK OPTIONS
-------------
<S> <C>
Outstanding January 1, 1995 ($5.00 to $17.50 per share)........ 500,650
Granted ($6.625 to $8.125 per share)........................... 65,000
Exercised ($5.00 per share).................................... (2,000)
Canceled ($5.50 to $17.50 per share)........................... (125,550)
--------
Outstanding December 31, 1995 ($5.00 to $17.50 per share)...... 438,100
========
Exercisable December 31, 1995 ($5.00 to $17.50 per share)...... 186,300
Shares available for granting options:
January 1, 1995................................................ 432,675
December 31, 1995.............................................. 493,225
</TABLE>
In tandem with the stock options there are 9,500 stock appreciation rights at
December 31, 1995.
During 1995, the Financial Accounting Standards Board issued "Statement of
Financial Accounting Standards No. 123 Accounting for Stock Based Compensation"
("FAS 123"). The Company intends to adopt FAS 123 through disclosure only in
1996.
Long Term Incentive Compensation
Under the terms of a Long Term Incentive Compensation Plan, certain officers
and key management employees received common stock of the Company on a
restricted time lapse grant basis. These shares were to be released from escrow
and delivered to the plan's participants when the market price of the Company's
common stock achieved certain designated levels between $12 and $24 per share
for 30 consecutive days prior to June 28, 1994 or in any event if the
participant has remained in the continuous employ of the Company through June
2003. Certain market prices were achieved and maintained for the required 30-
day period during 1994 and 1993. Therefore, 40,670 and 45,630 shares of the
Company's common stock were released in June of 1994 and 1993, respectively, to
the plan's participants. Additionally, 30,000 shares were released
F-17
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
to the former Chief Executive Officer in 1994 as part of his Termination
Agreement. As a result of his termination and the termination of certain other
officer and key management personnel during 1994, 125,145 shares of restricted
stock valued at $910,000 were forfeited and returned to treasury stock. Upon
consummation of the vinyl sale, all restrictions on the remaining 23,560 shares
of common stock held under the plan automatically lapsed and such shares were
distributed to the intended recipients.
Amortization of unearned compensation under this agreement for the years 1995
and 1993 amounted to $157,000 and $595,000, respectively. In 1994 amortization
was reduced by $113,000 associated with the forfeiture of shares.
7. DISCONTINUED BUSINESS ACTIVITIES
The Company records income and expenses associated with former business
activities on the Consolidated Statement of Operations under the caption
"Discontinued Business Activities".
On March 8, 1995, the Company sold substantially all of the assets of its
vinyl business to Jannock, Inc. for $47.5 million in cash subject to certain
downward adjustments which totaled $4,962,000. Net of adjustments, the gain on
the sale of the vinyl business totaled $20,579,000. Sales of $6,365,000 were
recorded for the now discontinued vinyl business for the period ending March 7,
1995.
On June 2, 1995 the Company sold all of the outstanding capital stock of
Bird-Kensington Holding Corp., which owned the Company's interest in Kensington
Partners, to Jannock, Inc. The purchase price consisted of cash in the gross
amount of $2,780,000 and the assumption of certain liabilities related to the
Kensington window business. The sale resulted in a loss of $1,959,000. Sales of
$4,265,000 were recorded for this business for the period March 1, 1995 through
June 2, 1995.
On June 10, 1994, the Company's 40% interest in Mid-South Building Supply,
Inc. was redeemed for $1 million in cash resulting in a loss of $1,261,000.
On August 22, 1994, the Company sold the assets of substantially all of its
distribution businesses to Wm. Cameron & Co. for a purchase price consisting of
cash in the amount of $26,142,000, including $1 million held in escrow to pay
any indemnification claims arising under the purchase and sale agreement. The
sale resulted in a gain of $2,677,000. Sales of $67,089,000 were recorded for
these businesses for the period ending August, 22, 1994.
On November 28, 1994, the Company sold its last remaining building materials
distribution business, Southland Building Products, Inc., to Ashley Aluminum,
Inc. for a purchase price of $2,134,000. The sale resulted in a modest gain.
Sales of $9,092,000 were recorded for this business for the period ending
November 27, 1994.
The Company recorded other expenses related to discontinued business
activities of $1,050,000, $153,000, and $268,000, for the years 1995, 1994, and
1993, respectively. These charges against earnings include warranty claims and
other costs directly related to discontinued business activities. Expenses
incurred in 1995 also included $1.5 million in provisions relating to employee
benefit plans and product liability claims associated with former roofing
operations which were offset by a $602,000 crude oil refund from the Department
of Energy.
F-18
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. OTHER EXPENSE
Other expense was $3.3 million in 1993. A series of non-recurring items
developed at the end of 1993 that required a number of charges to results of
operations. The majority of these are outlined in the following paragraphs:
Accounting requirements associated with the responsible parties on an
environmental cleanup require the Company to maintain a reserve sufficient to
absorb the full cost of the Company's portion of the cleanup. Based on recent
site assessments, the Company increased the cleanup reserve by $500,000 based
on the Company's estimated share of the proportionate costs.
The Company had been considering the development of certain real property. As
a result of cash flow and bank covenant constraints, no further development was
possible. Based on the estimated net realizable value of the property, the
Company wrote-off its $1.3 million investment.
To satisfy the remaining portion of an outstanding receivable, the Company
previously accepted a $1.3 million note, collateralized by a secondary interest
in a mortgage portfolio. Because assessment of the portfolio and the bankruptcy
of the debtor indicated the note to be of no value it was written off.
The termination of the former Chief Executive Officer of the Company resulted
in a $850,000 reserve to cover a settlement under an employment agreement which
was paid in 1994.
The remainder of "Other Expense" is comprised of other miscellaneous
adjustments of a more typical nature and income of approximately $1.3 million
from a settlement with an insurance provider relating to product liability
claims.
9. DISCONTINUED OPERATIONS
Environmental Businesses
On June 18, 1994, the Company agreed to cause the sale of its 80% interest in
its "off-site" environmental business, Bird Environmental Gulf Coast, Inc.
("BEGCI") to the minority shareholders thereof, subject to financing, resulting
in the complete withdrawal from the environmental business. Accordingly, the
Company, as of June 30, 1994, recorded the operating results of BEGCI as a
discontinued operation for all years presented. In conjunction with this
decision, the Company recorded an aggregate charge of approximately $9 million,
to adjust its book value to approximate the net realizable value of $7.5
million at June 30, 1994. In June 1994, the Company estimated that the results
of operations from the "off-site" environmental business would be breakeven
through the disposal date and, accordingly, no liability for anticipated losses
from the measurement date to the disposal date was recorded. However, at
December 31, 1994, the Company had invested an additional $1,270,000 in BEGCI
which, based on the Company's assessment, would not be recoverable and was
accordingly written-off, thus maintaining the Company's investment at $7.5
million.
During 1995, the minority partner became unable to finance the purchase of
the facility and efforts to attract another purchaser were unsuccessful. In
July 1995, the Company's Board of Directors suspended further funding of the
facility. As a result of this action, during the second quarter of 1995, the
Company's remaining investment of $8.6 million was written off and a $3 million
reserve was established for additional expenses associated with the closure of
the facility. On November 29, 1995, the Company caused the sale of all of the
outstanding capital stock of BEGCI to GTS Duratek, Inc. for a purchase price of
$1.00. Of the $3 million reserve established in the second quarter of 1995,
$2,050,000 was utilized, while $650,000 remains at December 31, 1995 for future
claims against discontinued operations.
F-19
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In 1993 the Company decided to close the "on-site" environmental remediation
business. This business involved environmental remediation projects such as the
processing of oily waste sites at a refinery, operations and management of
waste processing sites and the removal and remediation of sludge. The contracts
with customers were generally fixed price and usually for periods less than one
year. As a result of the decision to exit this business, the Company recorded a
provision totaling approximately $11 million. Included in this provision was a
$5.8 million write-down of certain assets to net realizable value, $2.1 million
for certain contracts including any additional amounts due to stipulated
buyouts, $635,000 for severance-related payments, $740,000 for inventory and
other assets, $1 million for the write-off of intangible assets and $700,000
for other expenses due to lease buyouts, fees and other general expenses.
Included in the 1993 environmental results is a restructuring reserve of $2
million relating primarily to the environmental business. Included in this
provision is $300,000 for severance and benefit payments, $700,000 for lease
buyouts, $650,000 for expected losses on exiting certain contracts, and
$350,000 of other costs. This charge was offset by a $858,000 gain on the sale
of the municipal sludge business. These amounts, including the operating
results, are recorded as discontinued operations. Based upon the actual results
of the environmental "on-site" remediation operations and the sale of its
assets, excess costs of $3,861,000 charged in 1993 were reversed and recorded
as discontinued operations in the consolidated statement of operations for the
twelve months ended December 31, 1994.
Net sales relating to these environmental businesses amounted to $2,848,000,
$3,715,000 and $24,681,000 for 1995, 1994 and 1993, respectively.
10. ACQUISITIONS
On July 1, 1992 the Company entered into a 50% joint venture with Kensington
Manufacturing Company to manufacture vinyl replacement windows through
Kensington Partners ("Kensington"). In 1993, Kensington experienced serious
cash needs which hampered production requirements. As a result of continuing
losses and the inability of Kensington to properly finance its operation,
Kensington's independent accountants issued "going concern" opinions at
December 31, 1994 and December 31, 1993. After negotiating with its partner,
Bird Corporation agreed to invest additional cash in return for temporarily
increasing its ownership in Kensington to 90%. The terms of the new agreement
allowed Kensington to return to an equal partnership if, before the later of
December 31, 1994 or six months following the Company's last investment (made
in August, 1994), its partner matched the additional investment made by the
Company. As of February 28, 1995, the minority partner did not match the
additional investment made by the Company. As a result, the Company's ownership
in the joint venture was permanently fixed at 90%, resulting in a change in
financial reporting from the equity method to consolidation beginning March 1,
1995 through June 2, 1995 when the operation was sold (see Note 7).
The Company recorded 50% of the joint venture's loss from operations under
the equity method from inception through January 31, 1994 and 90% for the
period February 1, 1994 through February 28, 1995. Equity losses from
Kensington are shown separately on the consolidated statements of operations.
F-20
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table represents summarized financial information for
Kensington Partners for the year ended December 31, 1994 (in thousands):
<TABLE>
<S> <C>
Current Assets.................................................... $ 5,040
Property and Equipment............................................ 3,137
Other Assets...................................................... 677
-------
Total Assets.................................................. $ 8,854
=======
Current Liabilities............................................... $ 9,722
Other Liabilities................................................. 1,288
-------
Total Liabilities............................................. $11,010
=======
</TABLE>
The following table represents summarized financial information for the years
ended December 31, 1994 and December 31, 1993 and the two month period ended
February 28, 1995 (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------- -------
<S> <C> <C> <C>
Net Sales........................................ $1,774 $24,180 $21,169
Gross Profit (Loss).............................. $ (18) $ 1,317 $ 1,384
Net Loss......................................... $ (413) $(5,310) $(5,249)
</TABLE>
11. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases certain manufacturing, administrative, warehousing,
transportation equipment and other facilities. The leases generally provide
that the Company pay the taxes, insurance and maintenance expenses related to
the leased assets.
At December 31, 1995 minimum lease commitments under noncancelable operating
leases are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1996.............................................................. $ 986
1997.............................................................. 899
1998.............................................................. 740
1999.............................................................. 740
2000.............................................................. 740
Later years....................................................... 10,353
-------
$14,458
=======
</TABLE>
Total rental expense for continuing operations, exclusive of taxes, insurance
and other expenses paid by the lessee related to all operating leases
(including those with terms of less than one year) was as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1995............................................................... $1,059
1994............................................................... $2,883
1993............................................................... $3,202
</TABLE>
F-21
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following represents property under capital leases (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1994
------ ------
<S> <C> <C>
Machinery and equipment....................................... $2,456 $3,790
Less, accumulated depreciation................................ 903 1,495
------ ------
$1,553 $2,295
====== ======
</TABLE>
At December 31, 1995 minimum lease commitments under capital leases are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1996.............................................................. $ 412
1997.............................................................. 406
1998.............................................................. 262
1999.............................................................. 0
2000.............................................................. 0
------
Total minimum lease payments...................................... 1,080
Imputed interest (@ rates ranging from 3.4% to 7.2%).............. (98)
------
Total future principal payments of lease obligations.............. $ 982
======
</TABLE>
Litigation
Since 1981, the Company has been named as a defendant in approximately 550
product liability cases throughout the United States by persons claiming to
have suffered asbestos-related diseases as a result of alleged exposure to
asbestos in products manufactured and sold by the Company. Approximately 140 of
these cases are currently pending and costs of approximately $2 million in the
aggregate have been incurred in the defense of these claims since 1981. The
Company's insurance provider has accepted the defense of these cases under an
agreement for sharing of the costs of defense, settlements and judgements, if
any. The Company has provided a reserve amounting to $950,000 at December 31,
1995 for its estimated share of losses related to these claims. In light of the
nature and merits of the claims alleged, in the opinion of management, the
resolution of these remaining claims will not have a material adverse effect on
the results of operations or financial condition of the Company.
In 1986, the Company, along with numerous other companies, was named by the
United States Environmental Protection Agency ("EPA") as a Potentially
Responsible Party ("PRP") under the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, 42 U.S.C. Paragraph 9601, et seq.
("CERCLA"), in connection with the existence of hazardous substances at a site
known as the Fulton Terminal Superfund site located in Fulton, Oswego County,
New York. On September 28, 1990 the Company and a number of other PRPs reached
a negotiated settlement with the EPA pursuant to which the settling PRPs agreed
to pay the costs of certain expenses in connection with the proceedings, and to
pay certain other expenses including the costs and expenses of administering a
trust fund to be established by the settling PRPs. The settlement agreement is
embodied in a consent decree lodged with the United States District Court for
the Western District of New York. The ultimate cost to the Company of the
remedial work and other expenses covered by the settlement agreement is
estimated to be between $1 million to $2 million. This range is based, in part,
on an allocation of certain sites' costs which, due to the joint and several
nature of the liability, could increase if the other PRP's are unable to bear
their allocated share. The Company has provided a reserve of approximately $1
million at December 31, 1995 to cover the remaining proportionate share of the
estimated total remaining cost of cleanup, most of which will be paid in 1996.
F-22
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Based on information currently available to the Company, management believes
that it is probable that the major responsible parties will fully pay the cost
apportioned to them. Management believes that, based on its financial position
and the estimated accrual recorded, its remediation expense with respect to
this site is not likely to have a material adverse effect on its consolidated
financial position or results of operations of the Company.
The Company has been named as a PRP with respect to certain other sites which
are being investigated by federal or state agencies responsible for regulation
of the environment. Status as a PRP means that the Company may be jointly and
severally liable for all of the potential monetary sanctions and remediation
costs applicable to each site. In assessing the potential liability of the
Company at each site, management has considered, among other things, the
aggregate potential cleanup costs of each site; the apparent involvement of the
Company at each site and its prospective share of the remediation costs
attributable thereto; the number of the PRPs identified with respect to each
site and their financial ability to contribute their proportionate shares of
the remediation costs for such site; the availability of insurance coverage for
the Company's involvement at each site and the likelihood that such coverage
may be contested; and whether and to what extent potential sources of
contribution from other PRPs or indemnification by insurance companies
constitute reliable sources of recovery for the Company. On the basis of such
consideration, management has determined that such environmental matters will
not have a material affect on the Company's financial position or results of
operations. The Company has provided an aggregate reserve amounting to
approximately $300,000 at December 31, 1995 for its estimated share of the
ultimate cost of cleanup for such claims excluding any potential sources of
indemnification or recovery from third parties.
In 1992, a subsidiary of the Company, Bird Atlantic Corporation, formerly
Atlantic Building Products Corporation ("ABPCO"), commenced an action against a
former vendor, alleging violation of an exclusive distributorship without
adequate and fair compensation to ABPCO. A jury trial was held in November 1995
in the Superior Court of Plymouth County, Massachusetts. The jury found in
favor of ABPCO and judgement was entered on January 26, 1996 in the principal
amount of approximately $1.8 million. The award, with interest accruing at 12%
per annum, is expected to be in excess of $3 million and will not be reported
as income until collected. The defendant has appealed the judgement.
The Company is also exposed to a number of other asserted and unasserted
potential claims encountered in the normal course of business and unrelated to
environmental matters. In the opinion of management, the resolution of such
claims will not have a material adverse effect on the Company's financial
position or results of operations.
Warranty Obligations
The Company warrants under certain circumstances that its Housing Group's
products meet certain manufacturing and material specifications. In addition,
for marketing considerations, the Company makes elective settlements in
response to customer complaints. The Company records the liability for warranty
claims and elective customer settlements when it determines that a specific
liability exists or a payment will be made. During 1995, 1994 and 1993, the
Company recorded (exclusive of those claims included in discontinued business
activities) approximately $2,262,000, $2,687,000, and $3,196,000, respectively,
in warranty expenses and elective customer settlements. The warranty related
expense included in discontinued business activities for 1995, 1994 and 1993
amounted to approximately $94,000, $100,000 and $104,000, respectively. Based
upon analyses performed by the Company's management, a reasonably possible
range of potential liability from unasserted warranty obligations for all
products sold prior to December 31, 1995 is estimated to be between $3.5
million and $16.5 million. However, the Company has not recorded any liability
F-23
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
for these future unasserted claims or complaints because management has
concluded, based on such analyses, that no particular estimate within this
range is probable.
12. OPERATIONS IN DIFFERENT INDUSTRIES
The Company has had two business segments which it defined as the Housing
Group and the Environmental Group.
The Housing Group manufactures and markets residential and commercial roofing
products in the northeastern United States, including a full line of fiberglass
based asphalt shingles and roll roofing. The Group also manufactured vinyl
siding, window profiles, trim and accessories which were distributed
nationwide. In prior years, the Group operated distribution centers primarily
in the southeastern and southwestern markets for vinyl siding and in the
Arizona and northeastern markets for roofing and other building materials
products.
The Company's Environmental Group provided recycling, remediation, and
beneficial re-use services for applications as diverse as food processing waste
streams, oily waste recovery and the treatment of municipal wastes. Generally,
these on-site services recovered valuable constituents, removed wastes and
reduced the volume of materials which must be disposed of by other means. In
December 1993, the Company decided to close this portion of the environmental
segment and dedicate this group to operating BEGCI, the fixed site facility in
Texas. As discussed in Note 9, the Company sold its interest in BEGCI in
November 1995 to GTS Duratek, Inc.
Net sales represent sales to unaffiliated customers. Identifiable assets are
those that are used in the Company's operations in each industry segment.
Corporate assets are principally cash investments and equivalents and property
maintained for general corporate purposes. As discussed in Note 9, the results
of operations for the environmental group for the three years ended December
31, 1995 have been recorded as discontinued operations. Accordingly, net sales,
cost of sales and SG&A relating to this segment are not shown below.
F-24
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1994 1993
------- -------- --------
<S> <C> <C> <C>
HOUSING GROUP
Net Sales........................................ $54,180 $167,886 $187,745
======= ======== ========
Earnings (loss) from continuing operations before
income taxes:
Housing group operating income................. $ 189 $ 6,126 $ 7,121
Other non-recurring income..................... 17,722 1,466 877
Interest expense............................... (927) (4,782) (2,472)
Corporate office expenses...................... (6,357) (8,737) (6,970)
Other write offs............................... 0 0 (3,834)
------- -------- --------
$10,627 $ (5,927) $ (5,278)
======= ======== ========
Identifiable assets:
Housing group.................................. $34,111 $ 57,282 $ 95,663
Environmental group............................ 75 7,874 23,250
Corporate office............................... 9,517 20,549 4,316
------- -------- --------
$43,703 $ 85,705 $123,229
======= ======== ========
Depreciation:
Housing group.................................. $ 2,759 $ 3,573 $ 3,670
Environmental group............................ 0 500 1,686
Corporate office............................... 72 71 87
------- -------- --------
$ 2,831 $ 4,144 $ 5,443
======= ======== ========
Capital expenditures:
Housing group.................................. $ 1,924 $ 9,446 $ 4,505
Environmental group............................ 0 1,283 12,251
Corporate office............................... 0 37 56
------- -------- --------
$ 1,924 $ 10,766 $ 16,812
======= ======== ========
</TABLE>
F-25
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1995 and 1994 is shown below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
------------ ------------ ------------ -----------
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1995
Net Sales............... $ 16,623 $ 15,138 $ 12,170 $111110,249
Gross Profit............ $ 1,532 $ 2,621 $ 1,817 $ 203 (1)
Earnings (loss):
Continuing operations. $ 9,036 $ (4,066) $ (596) $ (5,171)
Discontinued
operations........... (236) (11,368) 0 352
----------- ------------ ----------- -----------
Net earnings (loss)..... $ 8,800 $ (15,434) $ (596) $ (4,819)
=========== ============ =========== ===========
Earnings per share data:
Primary earnings (loss)
per common share:
Continuing operations. $ 2.11 $ (1.08) $ (0.24) $ (1.35)
Discontinued
operations........... (0.06) (2.77) 0.00 0.09
----------- ------------ ----------- -----------
Net earnings (loss)... $ 2.05 $ (3.85) $ (0.24) $ (1.26)
=========== ============ =========== ===========
1994
Net sales............... $ 36,863 $ 58,486 $ 46,246 $222226,291
Gross profit............ $ 6,670 $ 10,943 $ 9,169 $ 4,226 (2)
Earnings (loss):
Continuing operations. $ (3,398) $ (1,480) $ 3,304 $ 2,657
Discontinued
operations........... (750) (5,708) (907) 2,599
----------- ------------ ----------- -----------
Net earnings (loss)..... $ (4,148) $ (7,188) $ 2,397 $ 5,256
=========== ============ =========== ===========
Earnings per share data:
Primary earnings (loss)
per common share:
Continuing operations. $ (0.92) $ (0.45) $ 0.76 $ 0.56
Discontinued
operations........... (0.18) (1.37) (0.24) 0.64
----------- ------------ ----------- -----------
Net earnings (loss)... $ (1.10) $ (1.82) $ 0.52 $ 1.20
=========== ============ =========== ===========
</TABLE>
- --------
(1) Decrease in gross profit in the fourth quarter compared to the previous
quarter is due to sales price weakness and the decline in sales volume
attributable to a weak re-roofing market caused by a dry, hot summer.
(2) Decrease in gross profit in the fourth quarter compared to the previous
quarter is due primarily to increased raw material costs that could not be
passed on via price increases.
14. MERGER WITH CERTAINTEED CORPORATION
On March 14, 1996, the Company signed a definitive agreement with CertainTeed
Corporation, a subsidiary of Saint-Gobain Corporation, providing for
CertainTeed to acquire in a merger transaction all of the Company's outstanding
common, preferred and preference shares.
Upon the effective date of the merger, each share of the Company's
outstanding common stock, par value $1 per share, will be converted into the
right to receive an amount in cash equal to $7.50. The Company's outstanding 5%
cumulative preferred stock, par value $100 per share, will remain issued and
outstanding
F-26
<PAGE>
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
upon the effective date of the merger and will be called for redemption and
retirement as soon as practicable thereafter at a price equal to $110, plus all
accrued and unpaid dividends thereon as of the date of redemption and
retirement. Each share of the Company's outstanding $1.85 cumulative
convertible preference stock, par value $1 per share, will be converted into
the right to receive $20 plus all accrued and unpaid dividends thereon as of
the effective date of the merger. All outstanding options to purchase common
stock under the 1982 Stock Option Plan, the 1992 Stock Option Plan, and the
1992 Non-Employee Directors' Stock Option Plan will be converted into the right
to receive an amount in cash equal to $7.50 per share less the exercise price
per share. Any option with an exercise price equal to or greater than $7.50
will be cancelled on the effective date of the merger without any payment to
the option holder.
Completion of the merger is subject to approval by the Company's shareholders
and appropriate governmental authorities. The merger is not subject to a
financing contingency. The Company's Board of Directors has received a fairness
opinion from its investment bankers regarding the merger. The closing of the
merger is anticipated at the end of the second quarter, following distribution
of proxy materials to the Company's shareholders and approval at a special
meeting.
F-27
<PAGE>
SCHEDULE II
BIRD CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
----------------------
BALANCE CHARGED TO CHARGED TO BALANCE
BEGINNING COST AND OTHER AT END
OF YEAR EXPENSES ACCOUNTS(A) DEDUCTIONS OF YEAR
--------- ---------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1995:
Allowance for doubtful
accounts.............. $3,137 $ 26 $ 56 $(3,066)(c) $ 153
Valuation allowance for
deferred tax assets... $5,000 $10,789 $ 0 $ (727) $15,062
Year Ended December 31,
1994:
Allowance for doubtful
accounts.............. $4,273 $ 905 $100 $(2,141)(b) $ 3,137
Valuation allowance for
deferred tax assets... $9,000 $ 0 $ 0 $(4,000) $ 5,000
Year Ended December 31,
1993:
Allowance for doubtful
accounts.............. $2,978 $ 2,162 $ 47 $ (914)(b) $ 4,273
Valuation allowance for
deferred tax assets... $ 0 $ 9,000 $ 0 $ 0 $ 9,000
</TABLE>
- --------
(a) Represents recovery of balances previously written off.
(b) Uncollectible accounts written off by a charge to reserve.
(c) Represents the allowance for doubtful accounts of vinyl business sold of
$517 and the uncollectible accounts written off by a charge to reserve of
$2,549.
F-28
<PAGE>
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
COMBINED FINANCIAL STATEMENTS
AND SUPPLEMENTAL INFORMATION
ITEM 14(d)
DECEMBER 31, 1994
F-29
<PAGE>
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements
Independent Auditors' Report............................................. F-31
Combined Balance Sheet................................................... F-32
Combined Statements of Operations and Partners' Capital (Deficit)........ F-33
Combined Statements of Cash Flows........................................ F-34
Notes to the Combined Financial Statements............................... F-35
Supplemental Information
Independent Auditors' Report on Financial Statement Schedule............. F-45
Financial Statement Schedule II.......................................... F-46
</TABLE>
F-30
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
Kensington Partners and Affiliate
Leechburg, Pennsylvania
We have audited the accompanying combined balance sheet of Kensington
Partners and Affiliate (Joint Venture Partnerships) as of December 31, 1994 and
the related combined statements of operations and changes in partners' capital
(deficit), and cash flows for the years ended December 31, 1994 and 1993. These
financial statements are the responsibility of the Partnerships' 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of Kensington Partners
and Affiliate as of December 31, 1994, and the results of their operations and
their cash flows for the years ended December 31, 1994 and 1993, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Kensington Partners and Affiliate will continue as going concerns. As discussed
in Note 2 to the financial statements, the Companies have incurred significant
operating losses and current liabilities exceed current assets. Those
conditions, among others, raise substantial doubt about the Companies' ability
to continue as going concerns. Management's plans regarding those matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Alpern, Rosenthal & Company
Pittsburgh, Pennsylvania
February 10, 1995
F-31
<PAGE>
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
COMBINED BALANCE SHEET
DECEMBER 31, 1994
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash............................................................ $ 55,655
Accounts receivable
Trade--net of allowance for doubtful accounts of $323,000--
Note 3....................................................... 1,742,715
Related parties--Note 13B..................................... 1,286,189
Inventories--Note 4............................................. 1,875,584
Prepaid expenses................................................ 79,862
-----------
TOTAL CURRENT ASSETS........................................ 5,040,005
-----------
PROPERTY AND EQUIPMENT--At cost--net of accumulated depreciation
of $1,139,398--Note 5.......................................... 3,136,639
-----------
OTHER ASSETS
Other receivables--related party--net of allowance--Note 13E.... 306,386
Other assets--Note 6............................................ 371,249
-----------
677,635
-----------
TOTAL ASSETS................................................ $ 8,854,279
===========
LIABILITIES AND PARTNERS' DEFICIT
CURRENT LIABILITIES
Demand notes payable--Note 7.................................... $ 1,628,302
Current maturities of capital lease obligations and long-term
debt--Note 8................................................... 312,023
Accounts payable
Trade......................................................... 2,485,977
Related parties--Note 13A..................................... 3,654,990
Accrued expenses--Note 9........................................ 1,640,238
-----------
TOTAL CURRENT LIABILITIES................................... 9,721,530
-----------
LONG-TERM LIABILITIES
Capital lease obligations and long-term debt--net of current
maturities--Note 8............................................. 807,012
Accounts payable--trade--long-term.............................. 354,636
Other long-term liabilities--related parties--Notes 13D and 13E. 126,314
-----------
TOTAL LONG-TERM LIABILITIES................................. 1,287,962
-----------
TOTAL LIABILITIES........................................... 11,009,492
PARTNERS' DEFICIT................................................. (2,155,213)
COMMITMENTS AND CONTINGENCIES--NOTE 12............................ --
-----------
TOTAL LIABILITIES AND PARTNERS' DEFICIT..................... $ 8,854,279
===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-32
<PAGE>
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
COMBINED STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
--------------------------------
1994 1993
--------------- ---------------
<S> <C> <C>
NET SALES (related parties--1994--26%, 1993--
34%)........................................ $24,180,093 $21,169,467
COST OF GOODS SOLD (purchased from related
parties--1994--28%,
1993--27%).................................. 22,863,159 19,785,555
--------------- ---------------
GROSS PROFIT............................. 1,316,934 1,383,912
OPERATING EXPENSES (related parties--1994--
11%, 1993--23%)............................. 5,346,966 6,012,508
--------------- ---------------
LOSS FROM OPERATIONS..................... (4,030,032) (4,628,596)
--------------- ---------------
OTHER INCOME (EXPENSE)
Interest expense........................... (289,638) (155,452)
Income (loss) from equity investment....... 3,468 (69,578)
Provision for doubtful accounts............ (595,417) (202,154)
Tax penalties.............................. (199,872) --
Other expense--net......................... (198,186) (193,647)
--------------- ---------------
TOTAL OTHER EXPENSE...................... (1,279,645) (620,831)
--------------- ---------------
NET LOSS................................. (5,309,677) (5,249,427)
PARTNERS' CAPITAL (DEFICIT)--Beginning of
year........................................ (195,526) 4,453,901
Capital Contributions...................... 3,349,990 600,000
--------------- ---------------
PARTNERS' DEFICIT--End of year............... $(2,155,213) $(195,526)
=============== ===============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-33
<PAGE>
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
--------------------------------
1994 1993
--------------- ---------------
<S> <C> <C>
CASH PROVIDED BY (USED FOR) OPERATING
ACTIVITIES
Net loss................................... $ (5,309,677) $ (5,249,427)
Adjustments for noncash items included in
net loss
Depreciation and amortization............ 763,183 540,921
(Income) loss from equity investment..... (3,468) 68,578
Working capital changes (below).......... 2,818,892 3,269,036
--------------- ---------------
NET CASH USED FOR OPERATING ACTIVITIES. (1,731,070) (1,370,892)
--------------- ---------------
CASH PROVIDED BY (USED FOR) INVESTING
ACTIVITIES
Purchase of property and equipment......... (38,222) (132,650)
Proceeds from sale of equipment............ 81,430 --
Other assets............................... (98,273) (280,508)
Other receivables--related parties......... 18,723 (100,000)
--------------- ---------------
NET CASH USED FOR INVESTING ACTIVITIES. (36,342) (513,158)
--------------- ---------------
CASH PROVIDED BY (USED FOR) FINANCING
ACTIVITIES
Cash contributed by the partners--Note 10.. 2,825,000 600,000
Demand notes payable....................... (617,278) 1,335,000
Proceeds from long-term debt............... 169,706 34,107
Payments on long-term debt................. (631,082) (399,543)
Other long-term liabilities--related
parties................................... 61,203 306,286
--------------- ---------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES............................ 1,807,549 1,875,850
--------------- ---------------
INCREASE (DECREASE) IN CASH.................. 40,137 (8,200)
CASH--Beginning of year...................... 15,518 23,718
--------------- ---------------
CASH--End of year............................ $ 55,655 $ 15,518
=============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest....... $ 255,304 $ 152,341
=============== ===============
NONCASH INVESTING AND FINANCING ACTIVITIES
Capital lease and debt obligations incurred
for acquisition of equipment................ $ 68,431 $ 1,502,028
=============== ===============
Partners' capital contribution of inventory.. $ 399,990 $ --
=============== ===============
Liability to related party contributed to
capital..................................... $ 125,000 $ --
=============== ===============
WORKING CAPITAL (INCREASES) DECREASES
Accounts receivable
Trade...................................... $ 1,020,492 $ (1,210,178)
Related parties............................ (280,204) (13,661)
Inventories.................................. 1,480,803 (921,219)
Other current assets and liabilities......... 940,601 520,199
Accounts payable
Trade...................................... (1,087,268) 2,825,082
Related parties............................ 744,468 2,068,813
--------------- ---------------
INCREASE IN WORKING CAPITAL............ $ 2,818,892 $ 3,269,036
=============== ===============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-34
<PAGE>
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PRINCIPLES OF COMBINATION
The accompanying combined financial statements include the accounts of
Kensington Partners (KP), combined with the accounts of North American
Installations Company (NAICO). NAICO is owned 100% by common owners of KP. All
significant intercompany balances and transactions have been eliminated in the
preparation of the combined financial statements. The combined group is herein
referred to as "the Companies".
KP is a joint venture partnership formed by ZES, Inc. (formerly Kensington
Manufacturing Company) (ZES) and Bird-Kensington Holding Corp., an indirect
subsidiary of Bird Corporation (Bird). NAICO was formed in May 1993, as a joint
venture partnership, and ceased operations in 1994.
B. NATURE OF BUSINESS
Kensington Partners operates in one principal industry segment: the
manufacture of vinyl replacement windows for wholesalers and home remodelers.
The Partnership grants credit to its customers, substantially all of which are
retail and wholesale resellers of windows located in the eastern half of the
United States.
NAICO was an exclusive installer of KP windows for a significant customer of
KP, a retail seller of windows to end users, which has sales throughout the
United States. The installation of the windows has been transferred to the
customer that purchases the windows.
C. CASH AND CASH EQUIVALENTS
Interest-bearing deposits and other investments with original maturities of
three months or less are considered cash equivalents.
D. ACCOUNTS RECEIVABLE
The Companies provide for estimated losses on uncollectible accounts
receivable based on historical data and management's evaluation of individual
accounts receivable balances at the end of the year.
E. INVENTORIES
The Companies value all of its inventories at the lower of cost or market.
Raw materials are determined on the last-in, first-out (LIFO) method. Work-in-
process and finished goods inventories are determined on a first-in, first-out
(FIFO) method.
F. DEPRECIATION
Depreciation is computed by the straight-line method at rates intended to
distribute the cost of the assets over their estimated useful lives. Property
under capital lease is being amortized over the life of the lease in accordance
with generally accepted accounting principles. Rates used by principal
classifications are as follows:
<TABLE>
<CAPTION>
RATE
(YEARS)
-------
<S> <C>
Warehouse and manufacturing equipment............................. 3-10
Furniture and fixtures............................................ 5-10
Leasehold improvements............................................ 3-15
Transportation equipment.......................................... 3-6
</TABLE>
F-35
<PAGE>
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Maintenance and repairs which are not considered to extend the useful lives
of assets are charged to operations as incurred. Upon sale or retirement, the
cost of assets and related allowances are removed from the accounts and any
resulting gains or losses are included in other income (expense) for the year.
G. INVESTMENT IN AFFILIATED COMPANY
The Companies' investment in a joint venture partnership is carried on the
equity basis, which approximates the Companies' equity in the underlying net
book value.
H. PRODUCT WARRANTIES
The Companies provide an accrual for future warranty costs based upon actual
claims experience. The warranties are limited and provide for parts and/or
labor based upon the type of window sold.
I. INCOME TAXES
The Companies are being treated as partnerships for Federal and state income
tax purposes. Under the Internal Revenue Code provisions for partnerships, the
partners reflect their proportionate share of the Companies' taxable income or
loss on their respective income tax returns, and the Companies are not liable
for income taxes.
J. RECLASSIFICATION
Certain reclassifications were made to the amounts previously reported for
December 31, 1993 to conform with the 1994 classifications.
NOTE 2--OPERATIONS AND LIQUIDITY
The Companies' combined financial statements have been presented on the basis
that they are going concerns, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. The Companies
incurred net losses of approximately $5,310,000 and negative cash flows from
operations of $1,731,000 for 1994. At December 31, 1994, the balance sheet
reflects an excess of current liabilities over current assets of $4,682,000,
and a net capital deficiency of $2,155,000.
In addition, a lease agreement (Note 12A) is in default as a result of late
payments being made and certain payroll and sales taxes are delinquent. (Note
9)
Management believes the above mentioned losses and the associated balance
sheet deficiencies are a result of adding new products in 1993 which required
different manufacturing processes and a significant increase in orders, which
put strain on the existing systems. The combination of the above resulted in
manufacturing inefficiencies, low asset performance, excessive delivery costs
and inadequate management information.
During 1993, the Companies embarked on a program to correct the problems
associated with operations. Management believes that the major components of
the plan have been achieved in 1994 and that the effect of addressing and
correcting these problems during 1994 will have a positive impact on 1995
operating results.
During the first quarter of 1995, KP has secured price increases from a
majority of its customers and negotiated a price reduction from a major vendor.
In addition, KP continues on a program to increase productivity, which
includes: simplifying product lines, improving plant layout, management
training and investing in labor saving equipment. KP has also begun a sales
program to broaden its customer base.
F-36
<PAGE>
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2--OPERATIONS AND LIQUIDITY (CONTINUED)
The outcome of the uncertainties discussed above cannot be predicted at this
time. The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should the Companies be unable to
continue in existence.
NOTE 3--ACCOUNTS RECEIVABLE
At December 31, 1994, accounts receivable--trade from three customers were
approximately 67% of trade receivables. Sales to these unrelated customers
comprised 67% of total sales for the years ended December 31, 1994. Sales to
these customers comprised 51% of total sales for the year ended December 31,
1993.
NOTE 4--INVENTORIES
Inventories at December 31, 1994 are as follows:
<TABLE>
<S> <C>
Raw materials................................................. $ 950,893
Allowance to state raw materials at LIFO cost................. (39,005)
----------
Raw materials at LIFO cost.................................... 911,888
Work-in-process............................................... 648,987
Finished goods................................................ 314,709
----------
Total Inventories......................................... $1,875,584
==========
</TABLE>
NOTE 5--PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1994 is as follows:
<TABLE>
<S> <C>
Equipment under capital leases--Note 8........................ $1,785,817
Warehouse and manufacturing equipment......................... 1,715,676
Furniture and fixtures........................................ 290,258
Leasehold improvements........................................ 419,791
Transportation equipment...................................... 64,495
----------
4,276,037
Less: Accumulated depreciation 1,139,398
----------
Total Property and Equipment.............................. $3,136,639
==========
</TABLE>
NOTE 6--OTHER ASSETS
Other assets at December 31, 1994 is as follows:
<TABLE>
<S> <C>
Deposits......................................................... $199,838
Sample windows................................................... 89,965
Other assets..................................................... 81,446
--------
$371,249
========
</TABLE>
F-37
<PAGE>
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--DEMAND NOTES
On June 15, 1994, KP entered into a financing/factoring agreement with a
lending institution to sell, on an ongoing basis, up to 80% or $2,500,000,
whichever is less, of acceptable trade accounts receivable. All accounts
receivable that remain unpaid after 90 days of the purchase by the lender are
subject to recourse at the lender's discretion. KP may, at any time, repurchase
the accounts receivable sold. The agreement, which expires on June 15, 1995, is
subject to automatic renewal for a six month period, unless notice of
nonrenewal is given by either party. The loan was funded with $1,000,000, at
which time the Companies' line of credit was paid in full (see below).
Under the terms of this agreement, fees ranging from 1% to 3 1/2% are based
on the number of days to collect the trade receivable, with a guaranteed
minimum monthly fee of $5,000. In addition, interest is charged on any amounts
advanced under the agreement, at the rate of prime (8 1/2% at December 31,
1994) plus 1 1/2%. Under the terms of this agreement, Bird has guaranteed
$1,250,000 of this debt.
The amount outstanding under this agreement, included in the accompanying
balance sheet at December 31, 1994, is net of a $150,000 cash reserve held by
the lending institution.
Prior to June 15, 1994, the Companies had a line-of-credit, with maximum
borrowings of $2,500,000. Interest was payable monthly at the bank's basic rate
plus 1% (see below). The borrowings on the line were collateralized by
substantially all the assets of the Companies. The line was guaranteed by the
partners of the Companies.
In early 1994, the bank cited defaults under the line of credit agreement and
made demand for payment. Based on agreements between the Companies and the bank
in February and April, 1994, the bank agreed to forebear collection and set a
final due date of August 31, 1994. In addition, the interest rate was changed
to the bank's basic rate plus 3%. Bird was required to put up $750,000 as
additional collateral, which was later applied to the line. Bird was also
required to make additional payments totaling $1,200,000. The payments by Bird
were recorded as capital contributions to the partnership.
NOTE 8--CAPITAL LEASE OBLIGATIONS AND LONG-TERM DEBT
The following is a schedule by years of future minimum lease payments under
capital leases and installment notes together with the present value of the net
minimum lease payments and note payments as of December 31, 1994:
<TABLE>
<S> <C>
1995.......................................................... $ 332,000
1996.......................................................... 287,000
1997.......................................................... 278,000
1998.......................................................... 334,000
---------
Net minimum lease payments.................................. 1,231,000
Less: Amount representing interest............................ 158,000
---------
Present value of net minimum lease payments................. 1,073,000
Long-term debt principal payments--all due within one year.... 46,000
---------
Net obligations under capital leases and notes payable...... 1,119,000
Less: Current portion......................................... 312,000
---------
Long-term obligations under capital leases and notes
payable.................................................... $ 807,000
=========
</TABLE>
F-38
<PAGE>
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--CAPITAL LEASE OBLIGATIONS AND LONG-TERM DEBT (CONTINUED)
The partners have guaranteed substantially all of the above lease
obligations.
Assets under capital lease are capitalized using interest rates appropriate
at the inception of each lease. The following is an analysis of the Companies'
assets under capital lease obligations, included in property and equipment
(Note 5), at December 31, 1994:
<TABLE>
<S> <C>
Warehouse and manufacturing equipment......................... $1,624,677
Transportation equipment...................................... 161,140
----------
1,785,817
Less: Accumulated amortization................................ 290,729
----------
Total..................................................... $1,495,088
==========
</TABLE>
NOTE 9--ACCRUED EXPENSES
Accrued expenses at December 31, 1994 are as follows:
<TABLE>
<S> <C>
Accrued and withheld payroll and payroll taxes (Note 2)....... $ 575,500
Accrued and collected sales taxes (Note 2).................... 502,415
Accrued tax penalties and interest............................ 239,219
Accrued vacation.............................................. 155,510
Accrued real estate taxes..................................... 105,932
Other accrued expenses........................................ 61,662
----------
Total Accrued Expenses.................................... $1,640,238
==========
</TABLE>
NOTE 10--PARTNERS' CAPITAL
Effective July 1, 1992, ZES entered into an agreement with Bird through one
of Bird's indirect subsidiaries to form a joint venture partnership, Kensington
Partners (KP), for the purpose of manufacturing and selling custom windows, a
business previously conducted by ZES. ZES' capital contribution to KP consisted
of all of its assets subject to certain of its liabilities, including
$2,800,000 owed to Jones and Brown, Inc. (J&B), a related party. Bird's capital
contribution consisted of $2,800,000, in cash, which was used to pay off the
amount owed by KP to J&B, subsequent to the inception of the Partnership. The
net assets contributed by ZES were $1,689,000.
During 1994, the partners entered into an agreement to restructure the
partnership agreement of KP and to make capital contributions. Each partner's
ownership percentage is to be adjusted plus or minus 2% for each $50,000 of
capital contributed or collateral provided on the bank loan, but in no event
should a partner be diluted below 10%. A diluted partner is entitled to cure
any shortfall between its capital account and the other partner's capital
account by contributing the capital necessary to equalize each partner's
capital account by the later of December 31, 1994 or six months from the date
of the last capital contribution (August 1994) made on or before December 31,
1994.
Pursuant to the agreement, Bird contributed $2,700,000 in cash, including
payments on debt (Note 7), and $150,000 of inventory. ZES has contributed
$250,000 in cash and $250,000 of inventory. Accordingly, the ownership
percentages for Bird and ZES at December 31, 1994 are 90% and 10%,
respectively.
In addition to the capital contributed, the partners have advanced various
amounts of working capital during 1994 (Note 13).
F-39
<PAGE>
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10--PARTNERS' CAPITAL (CONTINUED)
In September 1994, Bird entered into a sales agreement with Jannock, Inc. to
sell all of the assets of a wholly owned subsidiary, Bird Incorporated. The
sales agreement contains an option for Jannock to purchase Bird's interest in
Kensington Partners for $2,780,000. In addition to the purchase price, Jannock
would assume all of Bird's obligations under various security agreements. The
option, which expires on April 7, 1995, is subject to Bird fulfilling its
obligations under the partnership agreement.
Subsequent to December 31, 1994, Bird advanced KP approximately $524,000.
NOTE 11--RETIREMENT PLANS
KP participates in a multi-employer defined benefit pension plan for the
electrician's union employees. Plan contributions are determined by the union
labor agreement. Management has not expressed any intent to terminate its
participation in this plan. KP contributed approximately $191,000 and $163,000
to this plan during the years ended December 31, 1994 and 1993, respectively.
The Companies also sponsors an executive retirement plan. Under the
provisions of the plan certain key employees may elect, at their discretion, to
contribute to the plan. The Companies provide a matching contribution of one
half of all employee contributions up to a maximum of 3% of gross compensation.
Contributions are used to purchase variable rate annuities.
Additional benefits under this plan include proceeds from life insurance
policies owned by KP or the cash value upon termination of employment. The
Companies' contributions to this plan were not material for the years ended
December 31, 1994 and 1993.
NOTE 12--COMMITMENTS AND CONTINGENCIES
A. OPERATING LEASES
The Companies lease various operating facilities from related and
unrelated parties and transportation equipment from unrelated parties under
various operating leases. Rent expense for the years ended December 31,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Facilities leases--primarily related party................ $285,000 $263,000
Transportation equipment.................................. 133,000 67,000
-------- --------
$418,000 $330,000
======== ========
</TABLE>
The following are the approximate future minimum operating lease payments at
December 31, 1994, substantially all of which are due to a related party:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31 AMOUNT
----------- ----------
<S> <C>
1995........................................................ $ 239,000
1996........................................................ 227,000
1997........................................................ 215,000
1998........................................................ 215,000
1999........................................................ 215,000
Thereafter................................................... 1,280,000
----------
Total minimum lease payments.................................. $2,391,000
==========
</TABLE>
F-40
<PAGE>
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12--COMMITMENTS AND CONTINGENCIES (CONTINUED)
KP is currently in default on its lease for its primary operating facility as
a result of not making the required rent payments as they became due. Rent of
approximately $237,000, due a related party, has been accrued in the
accompanying balance sheets at December 31, 1994. Based upon the current
payment plan, approximately $61,000 of the accrued rent at December 31, 1994 is
included in other long-term liabilities--related parties.
B. PURCHASE COMMITMENTS
KP and Bird have entered into a supply agreement which requires KP to
purchase specified quantities of raw materials from Bird beginning in 1993 and
ending in the year 2002. Minimum purchases for the next five years are 1995,
$900,000; 1996, $1,100,000; 1997, $1,300,000; and 1998 and 1999, the greater of
$1,300,000 or actual amounts purchased in 1997. The agreement includes
penalties for shortfalls in purchases on a per year basis. Shortfalls can be
offset with credits from years when excess volume is purchased.
KP and Domken Plastics (Note 13A) have entered into a supply agreement which
requires KP to purchase $2,500,000 of raw materials, annually, through 1999.
The agreement includes penalties for shortfalls in total purchases over the
term of the agreement.
C. SUPPLY AGREEMENTS
KP has entered into a supply agreement with a customer that primarily
purchases through Quantum II Partners (Notes 12D and 13E). The agreement
requires KP to provide not less than 90% of the customer's total requirement of
Quantum II vinyl replacement windows (Note 12D).
D. LITIGATION
On September 13, 1994, a complaint was filed in Middlesex Superior Court by
the other 50% owner of Quantum II Partners (Note 13E) and others, including
Quantum II Partners (collectively, the plaintiffs), against Kensington Partners
and Quantum II Partners (collectively, the defendants). The plaintiffs allege
various breaches of contract on the part of the defendants including breach of
a partnership agreement, a supply agreement (Note 12C) and an employment
agreement along with other complaints under the Massachusetts Unfair Trade
Practices Act. The plaintiffs are seeking relief of actual damages in an
unspecified amount and a doubling or trebling of such damages as provided in
the Unfair Trade Practices Act. KP believes that the claims filed by the
plaintiffs have no merit and denies any liability.
On October 4, 1994, the defendants filed a complaint in Federal Court
alleging various breaches of contract by the plaintiffs and seeking collection
of outstanding balances due to the Company from the plaintiffs of approximately
$560,000, included in accounts receivable--trade.
No answers have been filed in these actions because the parties are involved
in settlement negotiations. With respect to the litigation filed by KP for the
collection of the 1994 balances receivable, management estimates that some loss
may occur and has recorded its estimate of possible loss as an allowance for
doubtful accounts.
The Company anticipates that a settlement agreement will be achieved, as
currently contemplated. If the matter is not settled, and goes to trial,
management believes that the ultimate loss, if any, will not exceed the amounts
recorded.
F-41
<PAGE>
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 13--RELATED PARTY TRANSACTIONS
The Companies have entered into various transactions with related parties
during the years ended December 31, 1994 and 1993. The transactions are as
follows:
A. PURCHASES AND PAYABLES
The Companies have purchases for raw materials, advertising services, and
commissions from the following related parties as of and for the years ended
December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Vinyl Division of Bird, Inc........................... $2,862,000 $2,053,000
Domken Plastics Limited (DPL)......................... $3,616,000 $2,964,000
Quantum II Partners (see below)....................... $ 200,000 $ 440,000
Design Matrix, Inc. (DMI)--Advertising................ $ -- $ 147,000
</TABLE>
Accounts payable to related parties at December 31,1994 is as follows:
<TABLE>
<S> <C>
Bird, Inc..................................................... $1,947,000
Domken Plastics Limited (DPL)................................. 1,436,000
Quantum II (Notes 12D and 13E)................................ 16,000
Other related parties......................................... 256,000
----------
$3,655,000
==========
</TABLE>
DMI and DPL are related through common ownership with ZES.
A stockholder of ZES was compensated approximately $143,000 during the year
ended December 31, 1993 for services rendered in assisting with the acquisition
of raw materials from DPL. In addition, J&B was also compensated $86,000 during
1993 for similar services.
Any compensation for services discussed above was reimbursed directly by DPL
to ZES for the year ended December 31, 1994.
Fees from J&B for computer software support of approximately $144,000 were
charged to operations for the year ended December 31, 1994.
B. SALES AND RECEIVABLES
The Companies had sales to Jones & Brown, Inc. (J&B), a related party through
common ownership with ZES, of approximately $5,890,000 and $7,255,000 for 1994
and 1993, respectively. In addition, the Companies had sales to other related
parties of approximately $471,000 for 1994. Accounts receivable from related
parties are as follows as of December 31, 1994:
<TABLE>
<S> <C>
J&B............................................................ $1,174,000
Other.......................................................... 112,000
----------
Total........................................................ $1,286,000
==========
</TABLE>
F-42
<PAGE>
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 13--RELATED PARTY TRANSACTIONS (CONTINUED)
C. RENTS
KP rents facilities from related parties (Note 12).
D. MANAGEMENT FEES
Management fees of approximately $488,000 were paid to J&B under a management
contract for the year ended December 31, 1993. The management agreement was
terminated effective December 31, 1993.
E. OTHER
Kensington Partners owns a 50% equity investment in Quantum II Partners (Note
12D). Quantum II was formed during 1993 to be the exclusive marketing
representative to sell Quantum II replacement windows manufactured by KP.
Quantum II Partners reported a net partnership deficit of approximately
$130,000 and $138,000 for 1994 and 1993, respectively. KP has reflected its
share of Quantum's excess of liabilities over assets in other long-term
liabilities.
At December 31, 1994, approximately $306,000 due from Quantum II is included
in other receivables--related parties. This amount is net of an allowance for
doubtful accounts of $65,000.
EVENT (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITORS' REPORT
In 1995, Jannock, Inc. exercised its option to purchase Bird's interest,
owned by its wholly-owned subsidiary Bird-Kensington Holding Corporation, in
KP. Immediately preceding the sale, Bird purchased ZES' interest in KP for
$1,000,000. In addition, Bird invested in KP $4,090,000 prior to the sale to
fulfill provisions in the asset purchase agreement.
On June 2, 1995, the stock of Bird-Kensington Holding Corporation, which
owned the assets and liabilities of KP was sold by Bird to Jannock, Inc. in
exchange for cash of $2,780,000 and assumption of certain liabilities.
In April 1996, the litigation (Note 12D) between the other 50% owner of
Quantum II Partners (Note 13E) and Bird, as successor in interest to certain of
Kensington Partners' rights and obligations under the Quantum II Partnership,
Supply and Sales Representative Agreements, was concluded as a result of the
parties entering into a settlement agreement. The agreement calls for Bird to
receive total payments of $410,000, cancellation of the Sales Representative
and Supply Agreements and termination of the partnership.
F-43
<PAGE>
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Partners
Kensington Partners and Affiliate
Leechburg, Pennsylvania
We have audited the combined financial statements of Kensington Partners and
Affiliate as of December 31, 1994 and for each of the two years in the period
then ended, and have issued our report thereon dated February 10, 1995. In
connection with our audits of these financial statements, we audited financial
statement schedule II. In our opinion, such a financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects, the information set forth therein.
/s/ Alpern, Rosenthal & Company
Pittsburgh, Pennsylvania
February 10, 1995
F-44
<PAGE>
SCHEDULE II
KENSINGTON PARTNERS AND AFFILIATE
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
ADDITIONS
---------------------
BALANCE CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
OF YEAR EXPENSES ACCOUNTS DEDUCTIONS(1) OF YEAR
--------- ---------- ---------- ------------- --------
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1994:
Allowance for doubtful
accounts............. $195,000 $595,000 $-- $402,000 $388,000
======== ======== ==== ======== ========
Year Ended December 31,
1993:
Allowance for doubtful
accounts............. $ 66,000 $202,000 $-- $ 73,000 $195,000
======== ======== ==== ======== ========
</TABLE>
- --------
(1) Uncollectible accounts written off.
F-45
<PAGE>
EXHIBIT 10(w)
STOCK PURCHASE AGREEMENT
BY AND AMONG
BIRD ENVIRONMENTAL GULF COAST, INC.;
BIRD ENVIRONMENTAL TECHNOLOGIES, INC.;
BIRD CORPORATION;
GTS DURATEK, INC.; AND
GTSD SUB II, INC.
DATED AS OF NOVEMBER 29, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I: DEFINITIONS.............................................................. 1
ARTICLE II: SALE AND PURCHASE OF STOCK.............................................. 4
Section 2.1 Purchase and Sale.................................................. 4
Section 2.2 Purchase Price..................................................... 4
Section 2.3 Closing............................................................ 5
ARTICLE III: REPRESENTATIONS AND WARRANTIES
OF BETI and BIRD..................................................................... 6
Section 3.1 Organization, Standing and Authority of BETI; Title to Stock....... 6
Section 3.2 Organization, Standing and Authority of Bird....................... 6
Section 3.3 Organization, Standing, Authority and Capitalization of Company.... 7
Section 3.4 No Conflicts....................................................... 8
Section 3.5 No Other Pending Transactions...................................... 9
Section 3.6 Company's Names, Business, and Location of Company Assets.......... 9
Section 3.7 Subsidiaries....................................................... 9
Section 3.8 Financial Statements............................................... 9
Section 3.9 No Undisclosed Liabilities......................................... 10
Section 3.10 Absence of Certain Changes, Events or Conditions.................. 10
Section 3.11 Litigation and Other Proceedings.................................. 10
Section 3.12 Licenses and Approvals............................................ 11
Section 3.13 Legal Compliance.................................................. 11
Section 3.14. Material Contracts And Agreements................................ 12
Section 3.15 Title Matters..................................................... 12
Section 3.16 Labor Matters..................................................... 13
Section 3.17 Employee Benefit Plans and Pension Plans.......................... 13
Section 3.18 Insurance......................................................... 13
Section 3.19 Condition of Company Assets....................................... 14
Section 3.20 Intellectual Property............................................. 14
Section 3.21 Environmental Matters............................................. 15
Section 3.22 Customers and Suppliers........................................... 17
Section 3.23 Brokers and Finders............................................... 17
Section 3.24 Accounts Receivable............................................... 18
Section 3.25 No Material Adverse Change........................................ 18
Section 3.26 Books and Records................................................. 18
Section 3.27 Disaster.......................................................... 18
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 3.28 Tax Returns and Audits............................................ 18
Section 3.29 Due Diligence Review.............................................. 19
Section 3.30 Disclosure........................................................ 19
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF
PURCHASER AND GTSD................................................................... 19
Section 4.1 Organizational Matters; Authority.................................. 19
Section 4.2 No Conflicts....................................................... 20
Section 4.3 Litigation......................................................... 20
Section 4.4 Brokers and Finders................................................ 20
ARTICLE V: COVENANTS AND AGREEMENTS................................................. 20
Section 5.1 Consents; Cause Conditions to be Satisfied......................... 20
Section 5.2 Best Efforts....................................................... 21
Section 5.3 Certain Notifications.............................................. 21
Section 5.4 Competition........................................................ 21
Section 5.5 Non-Interference Agreement......................................... 22
Section 5.6 Confidentiality.................................................... 23
Section 5.7 Tax Election....................................................... 23
Section 5.8 Notification of Certain Events..................................... 23
Section 5.9 Sharing of Expenses for RFI Work Plan.............................. 23
Section 5.10 Closure Trust Fund................................................ 24
Section 5.11 Knowledge of the Company.......................................... 24
Section 5.12 Vehicle Leases.................................................... 24
Section 5.13 Use of Company Logo............................................... 25
ARTICLE VI: CONDITIONS PRECEDENT TO PURCHASER'S
OBLIGATIONS.......................................................................... 25
Section 6.1 Receipt of Stock Certificates...................................... 25
Section 6.2 Minority Shareholders Agreements................................... 25
Section 6.3 Payments by Bird................................................... 25
Section 6.4 Release from Liability............................................. 25
Section 6.5 Required Approvals................................................. 26
Section 6.6 Filings............................................................ 26
Section 6.7 Actions or Events Interfering with Agreement....................... 26
Section 6.8 Representations and Warranties..................................... 26
Section 6.9 Compliance with Agreements......................................... 26
Section 6.10 Delivery of Certificates.......................................... 27
Section 6.11 Resignation of Officers and Directors............................. 27
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C>
Section 6.12 Termination of Certain Agreements................................. 27
ARTICLE VII: CONDITIONS PRECEDENT TO THE COMPANY'S,
BETI'S AND BIRD'S OBLIGATIONS........................................................ 28
Section 7.1 Compliance with Agreements......................................... 28
Section 7.2 Release of Liabilities............................................. 28
Section 7.3 Representations and Warranties..................................... 28
Section 7.4 Compliance with Agreements......................................... 28
Section 7.5 Delivery of Certificates........................................... 28
Section 7.6 Proceedings Taken.................................................. 29
ARTICLE VIII: INDEMNIFICATION....................................................... 29
Section 8.1 Indemnification by BETI and Bird................................... 29
Section 8.2 Indemnification by Purchaser and GTSD.............................. 30
Section 8.3 Procedures for Third Party Claims.................................. 30
Section 8.4 Limits for Recovery of Losses...................................... 31
Section 8.5 Waiver of Contribution............................................. 31
Section 8.6 Sole Remedy........................................................ 31
ARTICLE IX: SURVIVAL................................................................ 31
ARTICLE X: MISCELLANEOUS............................................................ 32
Section 10.1 No Assignment..................................................... 32
Section 10.2 Costs............................................................. 32
Section 10.3 Publicity......................................................... 32
Section 10.4 Confidentiality................................................... 32
Section 10.5 Parties in Interest............................................... 33
Section 10.6 Entire Agreement.................................................. 33
Section 10.7 Construction...................................................... 33
Section 10.8 Notices........................................................... 33
Section 10.9 Counterparts...................................................... 35
Section 10.10 Governing Law.................................................... 35
Section 10.11 Specific Performance............................................. 35
Section 10.12 Severability..................................................... 36
Section 10.13 Further Assurances............................................... 36
Section 10.14 No Drafting Presumption.......................................... 36
Section 10.15 Incorporation by Reference; Use of Certain Terms................. 36
Section 10.16 Amendment and Waiver............................................. 36
Section 10.17 Waiver of Jury Trial............................................. 36
</TABLE>
-3-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of this 29th
day of November, 1995 by and among Bird Environmental Gulf Coast, Inc., a Texas
corporation (the "Company"); Bird Environmental Technologies, Inc., a Delaware
corporation and the sole stockholder of the Company ("BETI"); Bird Corporation,
a Massachusetts corporation and the parent corporation of BETI ("Bird"); GTS
Duratek, Inc., a Delaware corporation ("GTSD"), and GTSD Sub II, Inc., a
Maryland corporation and a wholly-owned subsidiary of GTSD (the "Purchaser").
W I T N E S S E T H :
WHEREAS, BETI desires to sell to the Purchaser and the Purchaser
desires to purchase from BETI all of the capital stock of the Company held by
BETI, which constitutes 80% of the issued and outstanding stock of the Company,
upon the terms and provisions hereinafter set forth.
WHEREAS, contemporaneously with the execution and delivery of this
Agreement and effective as of the date hereof, (i) the Company, the Purchaser,
GTSD and James Hogan, Mark Hogan, Barry Hogan and Samuel Lucas III
(collectively, the "Minority Shareholders") will execute and deliver that
certain Shareholders Agreement (the "Shareholders Agreement") outlining certain
rights between the parties as stockholders of the Company, (ii) the Company will
have executed with each of Mark Hogan, Barry Hogan and Samuel Lucas III
employment agreements (the "Employment Agreements") and (iii) the Company, GTSD
and James Hogan will have executed and delivered that certain technology license
agreement (the "License Agreement") pursuant to which James Hogan will license
to the Company and GTSD the technologies specified therein. The Shareholders
Agreement, the Employment Agreements and the License Agreement shall be
collectively referred to herein as the "Minority Shareholders Agreements".
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I: DEFINITIONS
In addition to those terms defined elsewhere herein, when used herein,
the following capitalized terms shall have the meanings indicated:
"Affiliate" of a specified person means a person that (in the case of
Bird or BETI only, as of the date hereof) directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the person specified.
<PAGE>
"Applicable Authority" shall mean any foreign, federal, state or local
governmental or quasi-governmental instrumentality, agency, department, bureau,
board or commission having authority or purporting to have authority over the
Company, any of the Company Assets, or the operation of the Company's Business,
including any entity with licensing or regulatory authority concerning Company
and the operation of Company's Business.
"Applicable Laws" shall mean all foreign, federal, state and local
laws, regulations, rules, orders, decrees, ordinances or judgments applicable to
the Company, the Company Assets, or the operation of the Company's Business,
including all laws concerning the licensing and regulation of the Company and
the conduct of the Company's Business.
"Bird Instruments" shall mean the following documents to which the
Minority Shareholders, certain of their Affiliates and certain Affiliates of
Bird are parties: (a) that certain Pre-Incorporation Agreement dated August 9,
1991; (b) that certain Stock Option Agreement dated August 9, 1991; (c) that
certain Voting Agreement dated August 9, 1991; (d) that certain Stock Purchase
Agreement dated August 9, 1991; (e) that certain Amendment Agreement dated
August 9, 1991; and (f) that certain Agreement dated June 18, 1994, forms of
which documents are attached hereto as APPENDIX I.
"Bird Letter of Intent" shall mean the letter of intent dated as of
September 6, 1995 addressed to Mr. Frank S. Anthony, Vice President and General
Counsel of Bird, from GTSD.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations and interpretations thereunder.
"Company Assets" shall mean all of the properties and assets owned or
leased by the Company, including without limitation, all of the following: the
Property, the Tangible Operating Assets, the Intellectual Property, the Company
Contracts, the Leases, and the Licenses and Approvals (as each term is defined
below).
"Company's Business" shall mean developing and implementing waste
treatment technologies, as such activity was conducted prior to the shutdown or
suspension of its operations as contemplated by the Bird Letter of Intent.
"Company Contracts" shall mean, collectively, all contracts or
agreements to which the Company is a party or by which the Company or any of the
Company Assets is bound, including personal property leases, franchise,
manufacturer's representative, distributorship, service, supply, maintenance,
employee, leasing and management contracts and agreements affecting or involving
the Property or the Company's Business.
"GAAP" shall mean United States generally accepted accounting
principles, applied on a consistent basis.
-2-
<PAGE>
"Inventory" means all of Company's inventories as of the Closing Date
relating to the Products, including all ingredients, finished goods, work in
progress, raw materials, marketing materials and production, shipping and
packaging supplies.
"Leases" shall mean, collectively, all of the oral or written leases,
subleases, licenses, concession agreements or other use or occupancy agreements
pursuant to which the Company or any other party is entitled to occupy and use
any portion of the Property or pursuant to which Company leases to or from any
other party any real property, including all renewals, extensions, modifications
or supplements to any of the foregoing or substitutions for any of the
foregoing.
"Licenses and Approvals" shall mean all certificates, licenses, permits
or other approvals required or obtained by the Company in connection with the
use or ownership of the Company Assets, the operation of the Company's Business
or in connection with its use and occupancy of the Leased Facility or any of the
Property.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or other charge of any kind, including, without limitation, any conditional
sale or other title retention agreement, any lease in the nature thereof and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction and including any lien or charge arising by
statute or other law.
"Material Adverse Effect" shall mean any material and adverse effect on
the assets, properties, liabilities, business affairs, results of operations,
condition (financial or otherwise) or prospects of the Company, provided that an
effect resulting solely from the shutdown or suspension of the operations of and
funding of the Company as described in the Bird Letter of Intent shall not be
deemed to constitute a Material Adverse Effect.
"Minority Shareholders" shall mean Barry Hogan, Brad Hogan, Samuel
Lucas, III and James Hogan as shareholders holding in the aggregate 20% of the
issued and outstanding capital stock of the Company.
"Minority Shareholders' Letter of Intent" shall mean the letter of
intent dated as of September 7, 1995 addressed to Mr. Barry K. Hogan, Executive
Vice President of the Company from GTSD.
"Organizational Documents" shall mean a corporation's Articles or
Certificate of Incorporation and By-Laws, as amended or supplemented.
"Person" or "person" means an individual, corporation, partnership,
firm, association, joint venture, trust, unincorporated organization,
government, governmental body, agency, political subdivision or other entity.
"Products" means all of the products manufactured, distributed,
marketed, sold or packaged in connection with the operation of the Company's
Business.
-3-
<PAGE>
"Property" shall mean, collectively, all of the land and the
improvements thereon, together with any tangible property located thereon which
would constitute a "fixture" under the laws of the State of Maryland and all
personal property owned or leased by Company and used or useful in connection
with the operation of the Company's business (other than that personal property
included within the definition of "Tangible Operating Assets") and all of
Company's right, title and interest in and to all privileges, appurtenances, and
advantages belonging or in any way appertaining to any such land, including all
easements, rights-of-way, water and riparian rights, air rights above the land,
development rights, and all rights, title and interest in and to all adjoining
streets, roads or alleys (public or private, open or proposed).
"Restricted Agreement" shall refer to any of the Leases and Company
Contracts (as each is defined in this Article I), to the extent that any such
Lease or Company Contract contains any provision that, as a result of the
consummation of the transactions contemplated by this Agreement, causes one or
more of the following to occur: (i) Company is deemed to be in default under
such Lease or Company Contract (with or without the giving of notice and any
cure period); (ii) automatically voids such Lease or Company Contract or renders
voidable by any party other than Company, the Lease or Company Contract or
provides any party other than the Company with a right to terminate or rescind
such Lease or Company Contract; (iii) imposes any fine, penalty, charge or
increase in payments or other charges required to be made by the Company under
such Lease or Company Contract; or (iv) otherwise modifies any of the material
terms of such Lease or Company Contract.
"Stock" shall mean the Company's common stock, $0.01 par value per
share.
"Tangible Operating Assets" shall mean, collectively, all of the
tangible personal property owned or leased by the Company, wheresoever located,
including Inventory, trade fixtures, stock-in-trade, equipment, and supplies.
ARTICLE II: SALE AND PURCHASE OF STOCK
Section 2.1 Purchase and Sale.
Subject to the terms and conditions hereinafter set forth, at the
Closing, BETI will sell and transfer to Purchaser, and Purchaser will purchase
from BETI, 560 shares of Stock, which is all of the Stock owned by BETI and
which represents 80% of the issued and outstanding stock of the Company, free
and clear of any and all Liens.
Section 2.2 Purchase Price.
The purchase price for the purchase of the Stock shall be the sum of
$1.00 (the "Purchase Price") and no further payment from the Purchaser shall be
required for the Stock. BETI hereby acknowledges receipt of the Purchase Price
in full payment of the Stock.
-4-
<PAGE>
Section 2.3 Closing.
(a) Generally. Subject to the terms and conditions of this Agreement,
the sale and purchase of the Stock contemplated hereby (the "Closing") shall
take place at 10:00 a.m., local time, on November 29, 1995 (the "Closing Date")
at the offices of Piper & Marbury L.L.P., or at such other time, date or place
as BETI, Bird and Purchaser may mutually agree; provided, however, that prior to
the Closing, all of the conditions in Articles VI and VII of this Agreement
shall have been satisfied or waived, as the case may be.
(b) BETI's Obligations at Closing. At the Closing, BETI will pay any
costs required to be paid by it hereunder and will deliver to Purchaser the
following (collectively, the "BETI Closing Documents"):
(i) all original stock certificates in due and proper form
evidencing the Stock to be sold by BETI;
(ii) an endorsement on each original Stock certificate or separate
stock powers duly executed in blank, together with such other instruments of
conveyance as may be reasonably acceptable to Purchaser and its counsel and
sufficient to transfer full, marketable title to the Stock to Purchaser, free
and clear of any Liens;
(iii) duly-executed resignations of each of the directors and
officers of the Company;
(iv) a good standing certificate of Company, dated no earlier than
5 calendar days prior to the Closing Date, certifying that the Company is in
good standing in the State of Texas; and
(v) such other documents and instruments as may be required to
consummate the transactions contemplated hereunder.
(c) Purchaser's Obligations at Closing. At the Closing, Purchaser will
pay any costs required to be paid by it hereunder and will deliver the following
to BETI:
(i) the Purchase Price; and
(ii) such other documents and instruments as shall be required to
consummate the transactions contemplated hereunder.
(d) Bird's Obligations at or Prior to the Closing. To the extent that
the current liabilities of the Company exceed the current assets of the Company
as of August 31, 1995 (as determined by a nationally recognized independent
public accounting firm selected by mutual agreement of Purchaser and Bird and
set forth on Schedule 2.3(d) hereto), Bird will either (i) at or prior to the
Closing, make payments on behalf of the Company to reduce the Company's
outstanding accounts payable in the amount and to the extent that the Company's
current
-5-
<PAGE>
liabilities exceed its current assets at August 31, 1995 or (ii) at the Closing,
pay to the Company the amount by which the Company's current liabilities
exceeded current assets at August 31, 1995.
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF
BETI AND BIRD
BETI and Bird hereby jointly and severally represent and warrant to
Purchaser and GTSD as of the Closing Date as follows:
Section 3.1 Organization, Standing and Authority of BETI; Title to
Stock.
(a) BETI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) BETI has all requisite corporate power and authority to execute,
deliver and perform this Agreement and each of the instruments, documents, and
agreements contemplated herein to be executed and delivered by BETI pursuant to
this Agreement (collectively, the "BETI Instruments"). The execution, delivery
and performance of this Agreement and the BETI Instruments have been duly
authorized and approved by all necessary corporate action, and this Agreement
and the BETI Instruments, when duly executed and delivered by BETI will
constitute valid and legally binding obligations of BETI, enforceable against
BETI in accordance with their terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to the rights of
creditors generally.
(c) BETI owns 80% of the issued and outstanding capital stock of the
Company free and clear of any Liens, right of first refusal or restriction of
any kind other than to the Minority Shareholders. BETI is not a party to or
bound by any options, calls, contracts of commitments of any character relating
to any of the Stock or any other equity or debt security issued or to be issued
by the Company, including any agreement, instrument or understanding, order or
decree that would restrict the transfer by BETI of the Stock pursuant to this
Agreement, other than agreements with the Minority Shareholders (which
agreements will be terminated at or prior to the Closing).
Section 3.2 Organization, Standing and Authority of Bird.
(a) Bird is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts.
(b) Bird has all requisite corporate power and authority to execute,
deliver and perform this Agreement and each of the instruments, documents, and
agreements contemplated herein to be executed and delivered by Bird pursuant to
this Agreement (collectively, the "Bird Instruments"). The execution, delivery
and performance of this Agreement and of the Bird
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Instruments have been duly authorized and approved by all necessary corporate
action, and this Agreement and the Bird Instruments, when duly executed and
delivered by Bird, will constitute valid and legally binding obligations of
Bird, enforceable against Bird in accordance with their terms.
Section 3.3 Organization, Standing, Authority and Capitalization of
Company.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas and has all requisite
corporate power and authority to carry on the Company's Business as it is now
being conducted and to own or lease the Company Assets. True, complete and
correct copies of the Organizational Documents of the Company have been
delivered to GTSD and the Organizational Documents are in full force and effect.
The Company is not in violation, breach or default of any of the provisions of
its Organizational Documents. The Company is duly qualified to do business in
the jurisdictions set forth in Schedule 3.3(a) attached hereto, which
jurisdictions represent all of the jurisdictions where the Company is required
to be qualified as the result of the location of its assets or the conduct of
the Company's Business, other than where the failure to qualify would not have a
Material Adverse Effect.
(b) Company has all requisite corporate power and authority to execute,
deliver and perform this Agreement and each of the instruments, documents, and
agreements contemplated herein to be executed and delivered by Company pursuant
to this Agreement (collectively, the "Company Instruments"). The execution,
delivery and performance of this Agreement and of the Company Instruments have
been duly authorized and approved by all necessary corporate action, and this
Agreement and the Company Instruments, when duly executed and delivered by the
Company, will constitute valid and legally binding obligations of Company,
enforceable against the Company in accordance with their terms.
(c) The authorized capital stock of Company consists entirely of 3,000
shares of common stock, $0.01 par value, of which 700 shares are issued and
outstanding. Three hundred (300) shares of common stock of Company are held in
the Company's treasury and no shares of capital stock are reserved for issuance.
All outstanding shares of capital stock of the Company have been duly authorized
and are validly issued and are fully paid and non-assessable with no personal
liability attaching to the ownership thereof. The Company is not a party to or
bound by any options, warrants, rights, calls or other preemptive rights or
other agreements or plans under which the Company may become obligated to issue,
sell or transfer shares of its capital stock or other securities other than
agreements with the Minority Shareholders (which agreements will be terminated
at or prior to the Closing).
(d) The designations, powers, preferences, rights, qualifications,
limitations and restrictions in respect of each class and series of authorized
capital stock of the Company are as set forth in the Organizational Documents of
the Company, copies of which have been furnished to GTSD.
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(e) There are no outstanding registration rights with respect to any
capital stock of the Company other than as set forth in agreements with the
Minority Shareholders (which agreements will be terminated at or prior to
Closing).
(f) The Company has no obligation (contingent or other) to purchase,
redeem or otherwise acquire any of its capital stock or any interest therein or
to pay any dividend or make any other distribution in respect thereof other than
as set forth in agreements with the Minority Shareholders (which agreements will
be terminated at or prior to Closing).
(g) The Company has no knowledge of any voting agreements, voting
trusts, stockholders' agreements, proxies or other agreements or understandings
that are currently in effect or that are currently contemplated with respect to
the voting of any capital stock of the Company other than as set forth in
agreements with the Minority Shareholders (which agreements will be terminated
at or prior to Closing).
(h) All of the outstanding securities of the Company were issued in
compliance with all applicable federal and state securities laws.
(i) There are no outstanding contractual obligations (contingent or
otherwise) of the Company that would prohibit or restrict the Company's ability
to declare or pay dividends or to repurchase or redeem the Company's capital
stock other than as set forth in agreements with the Minority Shareholders
(which agreements will be terminated at or prior to Closing).
(j) Since December 31, 1994, the Company has not (i) issued any capital
stock, (ii) redeemed any capital stock, (iii) made any distributions on its
capital stock or (iv) changed the tax basis of any of the Company Assets.
Section 3.4 No Conflicts.
Neither the execution and delivery of this Agreement nor the carrying
out of the transactions contemplated hereby or under any of the Company
Instruments, BETI Instruments or Bird Instruments will: (a) with or without
notice or the passage of time or both, result in any violation, termination or
modification of, or be in conflict with, (i) the Organizational Documents of the
Company, BETI or Bird, (ii) any License and Approval, Lease or Company Contract,
or any other instrument or agreement to which the Company, BETI or Bird is a
party or by which the Company, BETI or Bird is bound other than agreements with
the Minority Shareholders (which agreements will be terminated at or prior to
Closing)., or (iii) any law, rule, regulation, ordinance, writ, injunction,
judgment, decree or order applicable to the Company, BETI or Bird, (b) result in
the creation of any Lien upon the Property or any of the other Company Assets or
in the acceleration of any indebtedness or other obligation of the Company; or
(c) require the filing, declaration or registration with, or permit, consent or
approval of, or the giving of any notice to, any Applicable Authority,
excluding, those that have already been obtained prior to the Closing.
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Section 3.5 No Other Pending Transactions.
Except for the transactions contemplated by this Agreement: (i) neither
BETI nor Bird is a party to or bound by or the subject of any agreement,
commitment or undertaking with respect to the sale of all or any part of the
Stock of the Company; and (ii) the Company is not a party to or bound by or the
subject of any agreement, undertaking or commitment to merge or consolidate
with, or acquire all or substantially all of the property and assets of, any
other person, corporation, or entity, or to sell, lease or exchange all or
substantially all of the Company Assets to any other person, corporation, or
entity.
Section 3.6 Company's Names, Business, and Location of Company Assets.
The Company has conducted business under the name "Bird Environmental
Gulf Coast, Inc." and the "San Leon Recycling Center" and no other names. The
Company is in the business of developing and implementing waste treatment
technologies. The Company has not engaged in and does not currently engage in
any other business other than as described in the preceding sentence. The
Company's chief executive office and principal place of business is located at
2700 Avenue S, San Leon, Texas 77539. Substantially all of the Company Assets
are located at same address as its chief executive office and the Company does
not currently have any places of business other than at such address. Set forth
on Schedule 3.6 attached hereto is a complete and accurate listing of all
locations at which the Company has conducted business, as owner, operator,
lessor or otherwise over the last ten (10) years.
Section 3.7 Subsidiaries.
The Company does not own, or have any contract or other right to
acquire, directly or indirectly, any capital stock or other equity securities of
any Person, nor does the Company have any direct or indirect equity or ownership
interest in any business other than the Company's Business.
Section 3.8 Financial Statements.
(a) The Company, BETI or Bird has delivered to GTSD copies of: (i) the
unaudited balance sheet of the Company as of December 31, 1994 and the unaudited
balance sheet of the Company as of August 31, 1995, and (ii) the related
consolidated statements of income for the related annual and eight month periods
ended December 31, 1994 and August 31, 1995, respectively (collectively, the
"Financial Statements").
(b) The Financial Statements: (i) were prepared in accordance with GAAP
consistently applied throughout the periods covered thereby; (ii) present fairly
the financial condition and the results of operations of the Company as at the
respective dates of and for the periods referred to in such financial
statements; and (iii) are true, complete and correct in all material respects.
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Section 3.9 No Undisclosed Liabilities.
Except as set forth on Schedule 3.9 attached hereto, the Company does
not have any liabilities or obligations of any nature (whether known or unknown,
matured or unmatured, disputed or undisputed, liquidated or unliquidated, fixed
or contingent, secured or unsecured) except for liabilities or obligations
reflected or reserved against in the Financial Statements and current
liabilities incurred in the ordinary course of business since the respective
dates thereof and provided such liabilities do not exceed $200,000 at Closing,
which liabilities will be paid by Bird to Purchaser pursuant to Section 6.3
hereof at or prior to the Closing.
Section 3.10 Absence of Certain Changes, Events or Conditions.
Except as set forth in Schedule 3.10 attached hereto, since August 31,
1995:
(a) the Company has not incurred any debt, obligation or liability
except for normal debt incurred in the ordinary course of business and the
Company Assets have not been subjected to any Liens other than those liens
described on Schedule 3.10(a) attached hereto (the "Permitted Liens");
(b) the Company Assets have not been sold or transferred;
(c) there has not been any change in the Company's authorized or issued
capital stock; grant of any stock option or right to purchase shares of capital
stock of the Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement or
other acquisition by Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(d) there has not been any payment or increase by the Company of any
bonuses, salaries, or other compensation to any stockholder, director, officer,
or employee (except in the ordinary course of business) or entry into any
employment, severance, or similar contract or agreement with any director,
officer or employee;
(e) there has not been any damage to or destruction or loss of any
asset or property of Company, whether or not covered by insurance, materially
and adversely affecting the properties, assets, business, financial condition or
prospects of the Company taken as a whole; and
(f) no agreements have been entered into, whether in writing or
otherwise, to take any of the actions set forth in this Section 3.10.
Section 3.11 Litigation and Other Proceedings.
(a) Except as set forth on Schedule 3.11 attached hereto, there is no
litigation, arbitration, mediation, or other investigation or proceeding pending
nor, to the best of BETI's and Bird's
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knowledge, threatened or in prospect, against or relating to the Company, the
Company Assets, the Company's Business, or the transactions contemplated by this
Agreement; nor, is there any valid basis for any such litigation, arbitration,
mediation, or other investigation or proceeding relating to the transactions
contemplated by this Agreement. Except as disclosed on Schedule 3.11 attached
hereto, Company is not subject to, or bound by, any order of any court or
Applicable Authority entered in any judicial, administrative or other proceeding
to which it is or was a party. Except as set forth on Schedule 3.11 attached
hereto, no matter set forth on Schedule 3.11 attached hereto would, if adversely
decided, have a Material Adverse Effect on the business, operations, condition
(financial or otherwise), liabilities, assets, earnings, working capital or
prospects of the Company.
(b) There is no litigation, arbitration, mediation, or other
investigation or proceeding pending nor, to the best of Bird's or BETI's
knowledge, threatened or in prospect, against or relating to Bird or BETI which
seeks to prohibit, restrict or delay consummation of the transactions
contemplated under this Agreement and there is no judgment, decree, injunction,
ruling or order of any Court, Applicable Authority or arbitrator outstanding
against Bird or BETI having any such effect.
Section 3.12 Licenses and Approvals.
Attached hereto as Schedule 3.12 is a complete and accurate list of all
of the Licenses and Approvals held by Company. Company has provided GTSD with
true, correct and complete copies of all of the Licenses and Approvals. To
Bird's and BETI's actual or constructive knowledge, the Company owns or
possesses and holds free from restrictions or conflicts with the rights of
others all franchises, licenses, permits, consents, approvals and other
authority (governmental or otherwise), and all rights and privileges with
respect to the foregoing, as are necessary for the conduct of its business as
now being conducted, and as proposed to be conducted, except where the failure
to own or possess and hold such franchises, licenses, permits, consents,
approvals and other authority (governmental or otherwise) would not have a
Material Adverse Effect. All of the Licenses and Approvals are in full force and
effect and Company is not in violation with respect to any of them. No
proceedings are pending or, to the best of BETI's and Bird's knowledge,
threatened by any Applicable Authority to revoke or limit the scope of any of
the Licenses and Approvals. Except as noted on Schedule 3.12 attached hereto,
none of the Licenses and Approvals would be rendered ineffective or be required
to be reissued as a result of the consummation of the transactions contemplated
hereby.
Section 3.13 Legal Compliance.
Except as set forth on Schedule 3.13 attached hereto and except for
matters covered by Sections 3.16, 3.17 and 3.21 (which matters are addressed
exclusively in such respective sections), to Bird's and BETI's actual or
constructive knowledge, the Company's Business and the operations of the Company
are being conducted in compliance with all Applicable Laws and neither the
Company, BETI nor Bird has received notice from any Applicable Authority that
the
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Company, the Company's Business or the Company Assets is not in compliance with
any Applicable Laws.
Section 3.14. Material Contracts And Agreements.
Listed on Schedule 3.14 is a listing of all material contracts,
agreements, leases, indentures or instruments of the Company. With respect to
such material contracts, agreements, leases, indentures or instruments of the
Company, the Company and, to the best of BETI's and Bird's knowledge, each other
party thereto have in all material respects performed all the obligations
required to be performed by them to date, have received no notice of default and
are not in default, in any material respect, (with due notice or lapse of time
or both) under any material contract, agreement, indenture or other instrument
now in effect to which the Company is a party or by which it or its property may
be bound. Bird and BETI have no knowledge of any breach and have received no
written notice of any anticipated breach by the other party to any material
contract or commitment to which the Company is a party. Except as noted on
Schedule 3.14 attached hereto, none of the Company's material contracts or
agreements constitute a Restricted Agreement or would require the consent or
approval of any party thereto, other than Company, or the consent or approval of
any third party in connection with the consummation of the transactions
contemplated hereby. Except as disclosed on Schedule 3.14, the Company is not a
party to, or bound by, any material contract or agreement, any term of which
materially adversely affects, or which the Company expects in the future to have
a Material Adverse Effect. The Company is not a party to any contract or
agreement with any Affiliate of the Company other than the Minority Shareholders
(which agreements will be terminated at or prior to the Closing).
Section 3.15 Title Matters.
The Company has good and marketable title to the Company Assets owned
by it, free and clear of all Liens except for (i) certain mechanics' liens or
other similar statutory liens arising by operation of law in respect of
obligations that are adequately reflected in the Company's balance sheet as of
August 31, 1995, (ii) certain subsurface rights to the Company's real property
(iii) certain exceptions to title listed on the title report effective October
11, 1995 and attached hereto as Schedule 3.15 and (iv) other encumbrances of
record as of the date that title insurance was obtained on the real property
(collectively Items (i) through (iv) shall be referred to as the
"Encumbrances"). The Encumbrances that exist on the Company's real property will
not in any material way adversely affect the Company's use or enjoyment of its
real property and will not in any material way adversely affect the Company's
operations. The Company does not lease any real property. None of the properties
owned by the Company is subject to any Liens which could reasonably be expected
to materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company.
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Section 3.16 Labor Matters.
To Bird's and BETI's actual or constructive knowledge, the Company has
complied in all material respects with all applicable federal and state laws
relating to the employment of labor including the provisions thereof relating to
wages, hours, collective bargaining and the payment of social security and taxes
and is not liable for any arrears of wages or any tax or any penalty for failure
to comply with any of the foregoing. No labor dispute, strike, work stoppage,
employee action or labor relations problem of any kind which has affected or may
affect Company has occurred since the inception of Company or, to BETI's and
Bird's knowledge, is currently pending or threatened.
Section 3.17 Employee Benefit Plans and Pension Plans.
Copies of all of the Company's employee policy manuals have been
provided to GTSD, which policy manuals contain a description of all material
employee benefit plans and pension plans of the Company. The Company's employee
benefit plans and pension plans comply in all material respects with applicable
laws relating thereto and have been maintained in accordance with their plan
documents. The Company has no liability (whether actual, contingent, with
respect to any of its assets or otherwise) with respect to any of its employee
benefit plans and other pension plans other than as adequately reflected in the
Financial Statements. The Company, GTSD or any of GTSD's Affiliates will have no
liability with respect to any benefit plans or pension plans of BETI or BETI's
control group as defined in Section 414(b), (c), (m) or (o) of the Code. None of
the Company's employee benefit plans and other pension plans contains any
provisions which would prohibit the transactions contemplated by this Agreement
or which would give rise to any severance, termination or other payments or
liabilities as a result of the transactions contemplated by this Agreement.
Schedule 3.17 attached hereto contains the most recent quarterly listing of
workers' compensation claims and a schedule of workers' compensation claims of
the Company for the last three fiscal years.
Section 3.18 Insurance.
The Company maintains and has maintained all such general liability,
pollution liability, product liability, fire, casualty and motor vehicle
insurance set forth on Schedule 3.18. All such insurance policies continue to be
in full force and effect, and the Company is in compliance with all requirements
and provisions thereof. True and correct copies of all insurance policies
relating to such coverage have been provided by the Company to GTSD. No notice
of cancellation has been given to or received by the Company with respect to any
of its insurance policies, and no such policies are subject to any retroactive
rate or audit adjustments or coinsurance arrangements. The Company, BETI and
Bird have no reason to believe that the pollution liability insurance coverage
will not be renewed upon expiration thereof at premiums substantially equivalent
to those currently being paid by the Company. The Company is not currently
involved in any projects and, accordingly, the Company is not currently required
to post any completion performance and other bonds and indemnities. The Company,
BETI or Bird
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has provided GTSD with a list of all property damage, personal injury claims and
workers' compensation claims asserted against the Company with respect to the
Company's Business during the past five (5) years involving any claim in excess
of $10,000. The Company has not received any notice from any insurance company
or insurance board of underwriters of the existence of any default or unsafe
condition with respect to the Property that remains unsatisfied or uncured or
that will remain unsatisfied or uncured as of the Closing Date.
Section 3.19 Condition of Company Assets.
(a) The Company Assets include all assets, properties, licenses and
other agreements necessary for the continued conduct of Company's Business after
the Closing in substantially the same manner as conducted prior to the Closing.
(b) Attached as Schedule 3.19(b) is a complete and accurate summary of
all of the Tangible Operating Assets of Company.
Section 3.20 Intellectual Property.
(a) Schedule 3.20 hereto contains a complete and accurate list of all
patents, trademarks, servicemarks and copyrights (registered or unregistered),
trade names, assumed names, brand names and all applications therefor, owned,
used or filed by the Company and the Company has sufficient trademarks, trade
names, service marks, patent rights, copyrights, manufacturing processes,
formulae, applications, trade secrets, know how, licenses, approvals and
governmental authorizations (or rights thereto) (collectively, the "Intellectual
Property") to conduct its business as conducted prior to the Closing Date except
where the absence of such Intellectual Property would not have a Material
Adverse Effect. Except as set forth in Schedule 3.20 attached hereto, the
patents, trademarks and the copyrights that constitute Intellectual Property are
valid, subsisting and enforceable, and the patents, registered trademarks and
registered copyrights are duly recorded in the name of Company.
(b) The Company has the right, free from any Liens, to use the
Intellectual Property and the consummation of the transactions contemplated
hereby will not alter or impair any such rights. Except as set forth in Schedule
3.20 attached hereto, within the last five years, no claims have been asserted
by any entity or person with respect to, or challenging or questioning, the
ownership, validity, enforceability or use of the Intellectual Property by the
Company, nor, to the knowledge of BETI and Bird, is there a valid basis for any
such claim. The use or other exploitation of such Intellectual Property by the
Company prior to the Closing has not infringed the rights of any other entity or
person. To the best of BETI's and Bird's knowledge, no entity or person is
infringing the rights of the Company with respect to such Intellectual Property
and the Company has no reasonable basis to claim such infringement. Schedule
3.20 attached hereto sets forth a complete and accurate list of all license
agreements between Company and third-parties with respect to the use of the
Intellectual Property.
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Section 3.21 Environmental Matters.
(a) As used in this Environmental Matters Section, the following terms
shall have the definitions indicated:
(i) "Company's Properties" means any real property or facility
currently owned, leased or operated by the Company or previously owned, leased
or operated by the Company.
(ii) "Environmental Law" means any statute, regulation, rule,
code, common law, order or judgment of any applicable federal, state, local or
foreign jurisdiction relating to pollution, hazardous substances, hazardous
wastes, petroleum or otherwise relating to protection of the environment,
natural resources or human health, including, by way of example and not by way
of limitation, the Clean Air Act ("CAA"); Clean Water Act ("CWA"); Resource
Conservation and Recovery Act ("RCRA"); Comprehensive Environmental Response
Compensation, and Liability Act ("CERCLA"); Emergency Planning and Community
Right-to-Know Act ("EPCRA"); Federal Insecticide, Fungicide and Rodenticide Act;
Safe Drinking Water Act ("SDWA"); Toxic Substances Control Act ("TSCA");
Hazardous Materials Transportation Act ("HMTA"); Occupational Safety and Health
Act ("OSHA"); and Endangered Species Act of 1973, each as currently amended;
(ii) "Regulated Substances" means any substance regulated under
Environmental Laws, including but not limited to: asbestos and
asbestos-containing materials ("ACMs"), polychlorinated biphenyls ("PCBs");
urea-formaldehyde in any of its forms; petroleum and its fractions; radioactive
materials; and any substances defined as "hazardous waste," "hazardous
substances," "pollutants or contaminants," "toxic substances," "hazardous
chemicals," "hazardous air pollutants," "toxic chemicals" or "hazardous
materials" under the CAA, CWA, RCRA, CERCLA, EPCRA, SDWA, TSCA, HMTA or OSHA.
(iii) "Environmental Condition" means
(a) the Release of any Regulated Substances into the
environment in an amount and under circumstances that would require notice,
removal or remediation, or constitute a basis for a claim or cause of action;
(b) the environmental, health or safety aspects of the
transportation, storage, treatment, handling, use or disposal of materials in
connection with the operations or past operations of the Company's business; or
(c) the violation, or alleged violation, of any Environmental
Law, order, permit or license of or from any governmental authority, agency or
court relating to environmental, health or safety matters; and
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(iv) "Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment of any Regulated Substance.
(b) Except as set forth in Schedule 3.21, there has been no Release at,
on, under or from any of the Company's Properties.
(c) Except as set forth in Schedule 3.21, there has been no Release at,
on, under or from any nearby properties that has migrated or threatened to
migrate onto or under the Company's Properties or that would or could otherwise
affect the Company's Properties, and, to the best knowledge of BETI and Bird,
there is currently no threat of a Release at, on, under or from any nearby
properties that would or could migrate onto or under the Company's Properties or
that would or could otherwise affect the Company's Properties.
(d) No PCBs, asbestos or ACMs, urea-formaldehyde or radioactive
materials are located on the Company's Properties.
(e) Except as set forth in Schedule 3.21, no storage tanks, underground
or otherwise, are or have been located on any of the Company's Properties. To
the knowledge of BETI and Bird, none of the storage tanks set forth in Schedule
3.21 is leaking or has ever leaked.
(f) Except as set forth in Schedule 3.21, the Company has complied with
all Environmental Laws with respect to any operations now or previously
conducted by the Company. Except as set forth in Schedule 3.21, the Company has
no existing or potential liability under any Environmental Laws.
(g) Except as set forth in Schedule 3.21, the Company has not received
any notice, letter, citation, order, warning, complaint, inquiry, information
request or demand that: (i) it has violated or is in violation of any
Environmental Law; (ii) there has been a Release at or from the Company's
Properties, or any property where the company's wastes or products have been
sent; or (iii) it may be or is liable, in whole or in part, for the costs of
cleaning up, remediating, removing or responding to a Release.
(h) To the best knowledge of the Company, BETI or Bird, no other party
has received any notice, demand, suit, inquiry or information request pursuant
to CERCLA or any comparable state law relating to the Company, the Company's
Properties or any property where the Company's wastes or products have been
sent.
(i) None of the Company's Properties is listed on any regulatory list
of contaminated properties, including but not limited to the National Priorities
List promulgated pursuant to CERCLA, the CERCLIS or any federal, state or local
counterpart.
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(j) Except as set forth in Schedule 3.21, no environmental approvals,
clearances or consents are required under applicable law from any governmental
entity or authority in order for the parties to this Agreement to consummate the
transactions contemplated herein or for the Company to conduct its business as
presently conducted or proposed to be conducted.
(k) The Company has disclosed, prior to the date of this Agreement, its
waste practices, its use of Regulated Substances and all potentially material
environmental matters, and has disclosed all reports, audits assessments,
studies, inspections, evaluations, surveys, remedial action plans or other
similar documents relating to any Environmental Condition, whether or not
material, of the Company's Properties or operations.
(l) Except as set forth in Schedule 3.21, to the knowledge of BETI and
Bird, no location to which the Company transported or caused to be transported
any Regulated Substances for storage, recycling, treatment or disposal is or has
been the subject of any cleanup or remediation of such location pursuant to any
Environmental Law.
(m) The Company's Properties are not subject to any Lien in favor of
any governmental entity or other party for any liability, costs, or damages
incurred by such governmental entity or other party in response to a Release.
Section 3.22 Customers and Suppliers.
The Company, BETI or Bird has delivered to GTSD a complete and accurate
list of the Company's ten largest customers and suppliers (measured by dollar
volume of purchases and sales, as applicable) and the dollar amount of the
Company's Business which each customer and supplier represented during the
fiscal year ended 1994 and the eight months ended August 31, 1995. Neither the
Company, BETI nor Bird has received any oral or written notice that any such
supplier or any customer of Company does not plan to continue to do business
with Company, or plans to reduce its supplies to or volume of orders from the
Company or will not do business on substantially the same terms and conditions
with Purchaser subsequent to the Closing Date as such supplier or customer did
with Company before such date, except for those suppliers that may discontinue
doing business with the Company or modify the terms upon which they do business
with the Company due to the fact that the Company is delinquent in the payment
for goods or services provided by such supplier.
Section 3.23 Brokers and Finders.
Neither the Company, BETI, Bird nor any of their officers, directors or
employees has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated by this Agreement.
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Section 3.24 Accounts Receivable.
All accounts receivable of the Company that are reflected in the
Financial Statements (the "Accounts Receivable") represent valid obligations
arising from sales actually made or services actually performed in the ordinary
course of business. All Accounts Receivable have been collected in full.
Section 3.25 No Material Adverse Change.
Since August 31, 1995, there has not been any material adverse change
in the Company Assets or the Company's financial condition, customer or business
prospects other than a change resulting from the shutdown or suspension of
operations or of funding of the Company as described in the Bird Letter of
Intent.
Section 3.26 Books and Records.
The minute books, stock record books, and other records of the Company,
all of which have been made available to GTSD, are complete and correct and have
been maintained in accordance with sound business practices. The minute books of
the Company contain accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, the Boards of Directors, and
committees of the Boards of Directors of the Company, and no meeting of any such
stockholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of such books and records will be in the possession of the Company.
Section 3.27 Disaster.
Neither the business nor the Property of the Company is currently
affected (or has been affected at any time since December 31, 1994) by any fire,
explosion, accident, strike, lockout or other labor dispute, drought, storm,
hail, earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance), of a kind which (individually or in the
aggregate) has, or could have, a Material Adverse Effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company.
Section 3.28 Tax Returns and Audits.
The Company has duly filed all income, franchise and other federal,
state and local tax returns, notices and reports that it has been or is required
to file. Except as may be otherwise disclosed in writing to the Purchaser or
GTSD, the Company is not delinquent in the payment of any taxes nor has it
requested any extension of time within which to file any tax return which return
has not since been or will not be timely filed. No deficiency for any tax has
been asserted or assessed against the Company other than as reflected in the
Financial Statements. The
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Company has withheld or otherwise collected all taxes or amounts it was required
to withhold or collect under any applicable federal, state or local law,
including, without limitation, any amounts required to be withheld or collected
with respect to employee state and federal income tax withholding, social
security, unemployment compensation, sales or use taxes or workmen's
compensation, and all such amounts have been timely remitted to the proper
authorities.
Section 3.29 Due Diligence Review.
The Company, BETI or Bird has made available for GTSD's review all
information reasonably requested by the Purchaser in connection with GTSD's due
diligence examination.
Section 3.30 Disclosure.
All schedules, exhibits, documents, certificates, reports or written
statements furnished or to be furnished to GTSD by or on behalf of the Company,
BETI or Bird with this Agreement or the transactions contemplated hereby and
delivered at Closing are true, complete and accurate in all material respects,
and no representation or warranty made in this Agreement or information
furnished pursuant hereto to GTSD (including information contained in the
schedules or documents referred to herein) contains any untrue statement of a
material fact or fails to include a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which they are made, not misleading. To Bird's and BETI's knowledge, neither
Bird, BETI nor the Company has failed to disclose to GTSD any facts material to
the business, operations, condition (financial or otherwise), liabilities,
assets, earnings or working capital of the Company.
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF PURCHASER AND GTSD
Purchaser and GTSD hereby jointly and severally represent and warrant
to BETI and Bird as of the Closing Date as follows:
Section 4.1 Organizational Matters; Authority.
(a) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland. GTSD is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
(b) Purchaser and GTSD have all requisite corporate power and authority
to execute, deliver and perform this Agreement and each of the instruments,
documents, and agreements contemplated herein to be executed and delivered by
Purchaser pursuant to this Agreement to which each is a party (collectively, the
"GTSD Instruments"). The execution, delivery and performance of this Agreement
and of the GTSD Instruments have been duly authorized and
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approved by all necessary corporate action and this Agreement and the GTSD
Instruments, when duly executed and delivered by Purchaser and GTSD, as
applicable, will constitute valid and legally binding obligations of Purchaser
and GTSD, as applicable, enforceable against each that is a party thereto in
accordance with their terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to the rights of creditors generally.
(c) Purchaser is purchasing the Stock for its own account, and the
Stock is being purchased by it for investment and not with a present view to any
distribution thereof in violation of applicable securities laws.
Section 4.2 No Conflicts.
Neither the execution and delivery of this Agreement nor the carrying
out of the transactions contemplated hereby or under any of the GTSD Instruments
will: (a) with or without notice or the passage of time or both, result in any
violation, termination or modification of, or be in conflict with, (i) the
Organizational Documents of the Purchaser or GTSD, or (ii) any law, rule,
regulation, ordinance, writ, injunction, judgment, decree or order applicable to
the Purchaser or GTSD, (b) result in the creation of any Lien upon the property
or assets of the Purchaser or GTSD or in the acceleration of any indebtedness or
other obligation of the Purchaser or GTSD; or (c) require the filing,
declaration or registration with, or permit, consent or approval of, or the
giving of any notice to, any Applicable Authority, excluding, those that have
already been obtained prior to the Closing.
Section 4.3 Litigation.
There is no litigation, arbitration, mediation, or other investigation
or proceeding pending or, to Purchaser's and GTSD's knowledge, threatened or in
prospect, against Purchaser or GTSD with respect to the transactions
contemplated by this Agreement.
Section 4.4 Brokers and Finders.
Neither Purchaser, GTSD nor any of their officers, directors or
employees have employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated by this Agreement.
ARTICLE V: COVENANTS AND AGREEMENTS
Section 5.1 Consents; Cause Conditions to be Satisfied.
The Company, BETI and Bird agree to take all necessary corporate or
other action, and will use their reasonable best efforts to complete all filings
and obtain, or assist Purchaser or GTSD in obtaining, such licenses, permits,
consents, waivers, approvals, and authorizations of
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third parties and Applicable Authorities as may be necessary or appropriate in
connection with: (i) the execution and delivery of this Agreement; (ii) the
consummation of the transactions contemplated hereby or (iii) the ownership or
use of the Company Assets or the operation of the Company's Business.
Section 5.2 Best Efforts.
(a) Each of the Company, BETI and Bird shall use their reasonable best
efforts to cause all of the conditions contained in Article VI of this Agreement
to be satisfied.
(b) Purchaser and GTSD shall use their reasonable best efforts to cause
all of the conditions contained in Article VII of this Agreement to be
satisfied.
Section 5.3 Certain Notifications.
At all times prior to the Closing, each party hereto shall as promptly
as reasonably practicable notify the other in writing of the occurrence of any
event as to which it obtains knowledge that would make the representations,
warranties and disclosures made herein untrue or misleading or which is
reasonably likely to result in the failure of a condition specified in Article
VII or Article VIII hereof.
Section 5.4 Competition.
(a) The following terms when used in this Section 5.4 shall have the
following meanings:
"Competition" means (i) the treatment and disposal of hazardous and
other wastes, and (ii) any business which is competitive with the Company's
Business as it is now operated.
"Directly or Indirectly" means either for one's own account or as a
partner, shareholder, director, officer, principal, agent or employee of another
person.
"Person" means an individual, corporation, partnership, joint venture,
trust or other entity.
"Restricted Territory" means the United States, Canada and all other
jurisdictions worldwide in which the Company is conducting or has conducted the
Company's Business at or prior to the Closing.
(b) BETI and Bird shall not, for a period of five years after the date
hereof, Directly or Indirectly, engage in any Competition in the Restricted
Territory; provided, that BETI or Bird may, without violating this covenant (i)
own as a passive investment not in excess of 5% of the outstanding capital stock
of a corporation which engages in Competition if such capital stock is a
security which is actively traded on an established national securities
exchange; and (ii) have an ownership interest otherwise proscribed by this
Section 5.4 if such interest arises as a result of
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the acquisition of a business entity not principally engaged in a business in
Competition with that of the Company.
(c) Neither BETI nor Bird shall, directly or indirectly, for itself or
on behalf of any other Person, induce or attempt to induce any employee of the
Company to leave his or her employment with the Company at any time within three
years from the Closing Date.
(d) BETI and Bird each acknowledges that in view of the nature of the
Company's Business and the business objectives of Purchaser in acquiring it, the
foregoing territorial and time limitations are reasonable and properly required
for the adequate protection of Purchaser and that in the event that any such
territorial or time limitation is deemed to be unreasonable and is then reduced
by a court of competent jurisdiction, then, as reduced, the territorial and/or
time limitation shall be enforced.
(e) BETI and Bird further acknowledge that the remedy at law for any
breach by it of the agreements contained in this Section 5.4 will be inadequate
and that Purchaser will be entitled to seek injunctive relief without being
required to prove actual damages or post bond. This Section 5.4 constitutes an
independent and severable covenant and if any or all of the provisions of this
Section 5.4 are held to be unenforceable for any reason whatsoever, it will not
in any way invalidate or affect the remainder of this Agreement which will
remain in full force and effect.
Section 5.5 Non-Interference Agreement.
BETI and Bird covenant and agree that neither they nor any Affiliate of
either of them will, at any time after the Closing, directly or indirectly, for
whatever reason, whether for their own account or for the account of any other
person, firm, corporation or other organization: (i) solicit, deal with or
otherwise interfere with any of the Company's Business or Company's existing or
potential contracts or relationships with any affiliate, employee, officer,
director or any independent contractor whether or not the person is employed by
or associated with the Company on the Closing Date or at any time thereafter;
(ii) solicit, accept, deal with or otherwise interfere with the continuance of
supplies to Company (or the terms relating to such supplies), from any suppliers
who have been supplying goods, materials or services to Company at any time
during the last five years prior to the date of this Agreement; (iii) solicit,
accept, deal with or otherwise interfere with the Company's Business or
Company's existing or potential contracts or relationships with any independent
contractor, customer, client or consultant of the Company, or any person who is
a bona fide or prospective independent contractor, customer, client or
consultant thereof; or (iv) solicit or otherwise interfere with any existing or
proposed contract between the Company and any other party whatsoever.
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Section 5.6 Confidentiality.
BETI and Bird agree that they may possess certain data and knowledge of
the operations of the Company which are proprietary in nature and confidential.
BETI and Bird covenant and agree that they will not, for a period of three years
after the Closing, reveal, divulge or make known to any person (other than
Purchaser, GTSD or the Minority Shareholders) or use for its own account or for
the account of any person, firm, corporation or other organization, any
confidential or proprietary information, method, record, data, trade secret,
pricing policy, bid amount, bid strategy, rate structure, personnel policy,
method or practice of soliciting or obtaining or doing business by the Company,
or any other confidential or proprietary information whatsoever relating to the
Company or its Affiliates, whether or not obtained with the knowledge and
permission of Purchaser or its Affiliates. BETI and Bird further covenant and
agree that for a period of three years from the Closing Date, they shall not
divulge any such confidential or proprietary information which it may acquire
during any transition period in which it assists or consults with Purchaser or
its Affiliates to facilitate the transfer and the continued success of the
Company, respecting such confidential and proprietary information in trust for
the sole benefit of Purchaser and its Affiliates and their successors and
assigns. The foregoing provisions shall not be applicable to any disclosure or
use of confidential information or knowledge that can be demonstrated to have
(i) been publicly known prior to the date of this Agreement, (ii) become well
known by publication or otherwise not due to the unauthorized act or omission on
the part of BETI or Bird or their Affiliates, or (iii) been supplied to BETI or
Bird by a third party without violation of the rights of the Company or the
Purchaser or any other party.
Section 5.7 Tax Election.
The Company, Bird or BETI will not make any elections which changes the
tax basis of the Company's assets or liabilities for any date subsequent to
December 31, 1994 other than (i) depreciation of fixed assets through methods
established in the 1994 federal income tax returns of the Company or (ii)
changes in the normal course of business.
Section 5.8 Notification of Certain Events.
Bird covenants and agrees that it shall provide written notice to GTSD
within 15 days of execution of an agreement providing for: (i) the merger or
consolidation of Bird with or into any other entity, (ii) the sale of all or
substantially all of the assets of Bird to another entity, (iii) the
liquidation, dissolution or any other similar fundamental corporate transaction.
Section 5.9 Sharing of Expenses for RFI Work Plan.
The Company and Bird covenant and agree that they shall share equally
all costs and expenses for Phase I of the RFI Work Plan which has been submitted
to the Texas Natural Resource Conservation Commission ("TNRCC"). In connection
therewith, the Company covenants and agrees that it shall use all reasonable
efforts to minimize the costs and expenses of
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such work and to use the Company's personnel to perform such work wherever
reasonably possible.
Section 5.10 Closure Trust Fund.
The parties hereto covenant and agree that all contributions by, or on
behalf of, the Company to the date hereof to the closure trust fund pursuant to
that certain Trust Agreement between the Company, as grantor, and Texas Commerce
Bank, N.A., as trustee, dated December 8, 1992 as required by the Texas Water
Commission, the predecessor to the TNRCC, shall remain an asset of the Company
following the Closing, and Bird, BETI or its Affiliates shall have no right or
claim to such contributions. The parties further covenant and agree that the
closure trust fund shall not be deemed to be a current asset for purposes of
Bird's obligations pursuant to Section 2.3(d). GTSD and GTSD Sub covenant and
agree that they will use their reasonable efforts to cause the Company to
self-insure for any of the plant closure obligations mandated by the TNRCC and,
in the event the Company is able to do so within two (2) years from the date of
Closing hereunder, without any additional direct or indirect cost to the
Company, effect on the Company's credit, or credit enhancement by GTSD or its
Affiliates, it will distribute any funds contributed by the Company, BETI or
Bird prior to the Closing and received from the termination of the trust fund,
less any reasonable out of pocket expenses incurred by GTSD, the Company or
their Affiliates in connection therewith, promptly to Bird. In the event the
Company is able to reduce the plant closure obligations mandated by the TNRCC
within two (2) years from the date of Closing hereunder, it will distribute to
Bird a portion of the funds contributed by the Company, BETI or Bird prior to
the Closing, and such portion shall equal the product of the aggregate amount of
funds contributed prior to the Closing and the percentage reduction in the
aggregate funding obligation of $2 million. The distributions to Bird required
by the previous sentence will be made either (i) when funds are released from
the trust fund, (ii) as the annual payments to the trust fund are reduced to the
extent of such reduction or (iii) when the trust fund is terminated earlier than
when it would have terminated otherwise but for the reduction.
Section 5.11 Knowledge of the Company.
For purposes of Article III hereof, the knowledge of the Company or the
Minority Shareholders shall not be imputed to the knowledge of Bird or BETI
whenever a representation or warranty contained therein is made to the knowledge
of Bird or BETI.
Section 5.12 Vehicle Leases.
The Company agrees to assume the current leases for the Company's
automobiles that are reflected on Schedule 5.12 hereto pursuant to the terms
that are reflected on such schedule.
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Section 5.13 Use of Company Logo.
If and to the extent that the logo used by the Company prior to the
date hereof is owned by BETI, Bird or an Affiliate thereof, then such party
hereby assigns to the Company the right to use such logo for a period of two (2)
years from the date hereof and such party agrees to execute any and all
documents or instruments that may be reasonably necessary, as determined by
counsel to the Company, to evidence such assignment.
ARTICLE VI: CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Unless waived in writing by Purchaser in its sole discretion, the
obligations of Purchaser hereunder shall be subject to the fulfillment, prior to
or at the Closing, of each of the following conditions precedent:
Section 6.1 Receipt of Stock Certificates.
The Purchaser shall concurrently receive the certificates for the Stock
contemplated by Article II, Section 2.1 hereof.
Section 6.2 Minority Shareholders Agreements.
The Purchaser, GTSD and the Minority Shareholders shall have entered
into the Minority Shareholders Agreements, including the Shareholders Agreement,
the Employment Agreements and the License Agreement in forms acceptable to the
Purchaser and GTSD.
Section 6.3 Payments by Bird.
Bird shall have paid (i) any amount required pursuant to Article II,
Section 2.3(d) of this Agreement and (ii) any costs incurred by the Company in
connection with putting the Bird Gulf Coast Recycling Center in a state of
suspension during the period of August 31, 1995 until the Closing Date, which
includes putting the desorber and other processing equipment in a safe shutdown
condition, removing substantially all processed and unprocessed inventory and
residuals from the site, emptying tanks that were being used by the Company and
continuing the employment of the employees listed on Schedule 6.3 and providing
the necessary support from the Company to complete GTSD's due diligence effort,
provided that Bird will be limited to a maximum payment amount of $200,000 for
such costs pursuant to this clause (ii) of this Section 6.3.
Section 6.4 Release from Liability.
The Minority Shareholders shall have released Purchaser, its Affiliates
and their officers, directors, stockholders, employees, agents, successors and
assigns from any and all obligations,
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liabilities, claims, causes of action and damages whether past or present, real
or contingent, in tort or contract or otherwise, in law or equity, including but
not limited to, obligations in connection with the payment of severance benefits
to any Minority Shareholders, whether arising under such individual's current
employment agreements and arrangements with Bird, BETI, or any other subsidiary
of Bird, or otherwise and such release shall be in form and substance reasonably
acceptable to Purchaser and its counsel.
Section 6.5 Required Approvals.
All approvals, consents, waivers, actions or consents from any
Applicable Authority or any other Person required for the consummation of the
transactions contemplated hereby and necessary for the Company to engage in the
Company's Business following the Closing shall have been obtained and shall be
effective and in form and substance satisfactory to the Purchaser.
Section 6.6 Filings.
The Company, BETI and Bird shall make all filings and take all other
actions necessary to cause the transaction contemplated hereby to become
effective under applicable law.
Section 6.7 Actions or Events Interfering with Agreement.
No investigation, suit, action or other proceeding shall be threatened
or pending before any court or governmental agency which seeks to restrain,
prohibit or delay, or seeks damages or other relief in connection with, this
Agreement or the transactions contemplated hereby, or which could have a
Material Adverse Effect upon the financial condition, Company's Business,
Company Assets or prospects of the Company. The Company shall not have been
adversely affected in any material way by any act of God, fire, flood, war,
labor disturbance, legislation (proposed or enacted) or other event or
occurrence, and there shall have been no change in the Company Assets, financial
condition, customer or business prospects since August 31, 1995 other than a
change resulting from the shutdown or suspension of operations of the Gulf Coast
Recycling Center.
Section 6.8 Representations and Warranties.
The representations and warranties set forth in Article III shall be
true and accurate at and as of the Closing Date as though such representations
and warranties were made at and as of such time.
Section 6.9 Compliance with Agreements.
The Company, BETI and Bird shall have performed and complied in all
respects with all of the agreements, covenants and conditions required by this
Agreement to be performed or complied with by them prior to or at the Closing
Date.
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Section 6.10 Delivery of Certificates.
(a) Each of the Company, BETI and Bird shall have delivered to
Purchaser a certificate of its president or any vice president certifying (i)
the fulfillment of the conditions set forth in this Article VI, (ii) that
attached as exhibits thereto are certified, true, correct and complete copies of
resolutions of the Board of Directors of such corporation authorizing the
execution and delivery of this Agreement, the performance of that party's
obligations hereunder and appointing one or more specific individuals to execute
and deliver all of the instruments and documents required to be executed and
delivered by such party pursuant to the terms and conditions hereof and (iii)
the names and signatures of the officers authorized to execute and deliver this
Agreement and the other documents and instruments required hereby and that all
such officers still hold the office or position set forth in such certificate.
(b) The Company shall have delivered a certificate, dated as of the
Closing Date, executed by the President and the Secretary of the Company, that:
(i) certifies that attached as exhibits thereto are certified true, correct and
complete copies of the Company's Organizational Documents and (ii) certifies
that as of the Closing Date, the Company's Organizational Documents have not
been revoked, rescinded or amended and remain in full force and effect.
(c) The Company shall have furnished to Purchaser certificates of valid
existence and good standing from the jurisdictions in which the Company is
organized and certificates of qualification to do business as a foreign company
in each of the jurisdictions in which such qualification is necessary.
Section 6.11 Resignation of Officers and Directors.
If and to the extent requested by the Purchaser, the existing officers
and directors of the Company shall have submitted resignations to be effective
upon the Closing.
Section 6.12 Termination of Certain Agreements.
The Bird Instruments, the License Agreement between Jim Hogan and the
Company dated April 1, 1993, the Employment Letter between the Company and Brad
Hogan dated August 9, 1991 and the Employment Letter between the Company and
Barry Hogan dated July 1, 1994 shall have been terminated at or prior to the
Closing and the Company, GTSD and its Affiliates shall have been released from
any and all obligations and liabilities under such agreements.
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ARTICLE VII: CONDITIONS PRECEDENT TO THE COMPANY'S, BETI'S AND
BIRD'S OBLIGATIONS
Unless waived in writing by the Company, BETI or Bird, the obligations
of the Company, BETI or Bird hereunder shall all be subject to the fulfillment,
prior to or at the Closing, of each of the following conditions precedent:
Section 7.1 Compliance with Agreements.
Purchaser and GTSD shall have performed and complied in all material
respects with all of its agreements, covenants and conditions required by this
Agreement to be performed or complied with by Purchaser and GTSD prior to or at
the Closing Date.
Section 7.2 Release of Liabilities.
The Minority Shareholders shall have released the Company, BETI, Bird,
any of their Affiliates and any of their officers, directors, stockholders,
employees, agents, successors and assigns from any and all obligations,
liabilities, claims, causes of action and damages, whether past or present, real
or contingent, in tort or contract or otherwise, in law or equity, including but
not limited to, obligations in connection with the payment of severance benefits
to any Minority Shareholders, whether arising under such individual's current
employment agreements and arrangements with Bird, BETI, or any other subsidiary
of Bird, or otherwise, and such release shall be in form and substance
reasonably acceptable to the Company, BETI and Bird and their counsel.
Section 7.3 Representations and Warranties.
The representations and warranties set forth in Article IV shall be
true and accurate at and as of the Closing Date as though such representations
and warranties were made at and as of such time.
Section 7.4 Compliance with Agreements.
The Purchaser and GTSD shall have performed and complied in all
respects with all of its agreements, covenants and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing
Date.
Section 7.5 Delivery of Certificates.
The Purchaser and GTSD shall have delivered to the Company, BETI and
Bird a certificate of their president or any vice president certifying (i) the
fulfillment of the conditions set forth in this Article VII, (ii) that attached
as exhibits thereto are certified, true, correct and complete copies of
resolutions of the Board of Directors of such corporation authorizing the
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execution and delivery of this Agreement, the performance of the Purchaser's and
GTSD's obligations hereunder and appointing one or more specific individuals to
execute and deliver all of the instruments and documents required to be executed
and delivered by the Purchaser and GTSD pursuant to the terms and conditions
hereof and (iii) the names and signatures of the officers authorized to execute
and deliver this Agreement and the other documents and instruments required
hereby and that all such officers still hold the office or position set forth in
such certificate.
Section 7.6 Proceedings Taken.
All proceedings, corporate or other, to be taken by the Purchaser and
GTSD, in connection with the transactions contemplated by this Agreement, shall
have been taken.
ARTICLE VIII: INDEMNIFICATION
Section 8.1 Indemnification by BETI and Bird.
(a) BETI and Bird hereby jointly and severally covenant and agree to
indemnify the Purchaser, GTSD and their officers, directors, employees, agents,
Affiliates, successors and assigns and hold each of them harmless against and
with respect to any and all liabilities, losses, damages, claims, deficiencies,
costs and expenses, interest, awards, judgments and penalties (including,
without limitation, reasonable legal costs and expenses) actually suffered or
incurred by it, (hereinafter, a "Loss"), arising out of or resulting from:
(i) the breach of any representation or warranty by the BETI or
Bird contained herein or in any document delivered hereunder at the Closing;
(ii) the breach of any covenant or agreement by the Company, BETI
or Bird contained herein or in any document delivered hereunder at the Closing;
or
(iii) any investigation, suit, action, demands, assessments,
judgments or other proceeding by or before any court or governmental or
regulatory agency which seeks to restrain, modify, prohibit or revoke, or seeks
damages or other relief in connection with the consummation of this transaction.
Notwithstanding anything herein to the contrary, the fact
that an item may be disclosed on a schedule to this Agreement in response to a
representation or warranty contained in Article III hereto, shall not in any way
limit any rights that an indemnified party referred to in this Section 8.1(a)
shall have to indemnification for any Losses resulting therefrom, except to the
extent a statement in such schedule expressly limits or excludes any right to
indemnity in respect thereof. The inclusion of an item on a schedule attached
hereto is merely for purposes of disclosure and not to release Bird or BETI from
any liability therefor, except as may be otherwise expressly provided on the
schedule.
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(b) In addition to any other indemnification provided herein, BETI and
Bird hereby jointly and severally covenant and agree to indemnify the Company,
Purchaser, GTSD and their officers, directors, employees, agents, Affiliates,
successors and assigns and hold each of them harmless against and with respect
to any and all Losses arising out of or resulting from:
(i) the litigation between Universal Process Equipment, Inc. and
Universal Industrial Refrigeration, Inc. and the Company and an Affiliate of
Bird and the litigation between BAC Holdings Inc. and the Company;
(ii) any additional assessment against the Company for taxes of
any kind due and payable for the period up to and including the Closing Date;
and
(iii) items II, III, IV and VI reflected on Schedule 3.9 hereto.
Section 8.2 Indemnification by Purchaser and GTSD.
Purchaser and GTSD (but not their officers, directors, stockholders,
employees, agents or Affiliates) hereby jointly and severally covenant and agree
to indemnify BETI and Bird and their officers, directors, employees, agents,
Affiliates, successors and assigns and holds each of them harmless against and
with respect to any and all Losses, arising out of or resulting from:
(a) the breach of any representation or warranty by Purchaser or GTSD
contained herein or in any document delivered hereunder at the Closing;
(b) the breach of any covenant or agreement by Purchaser or GTSD
contained herein or in any document delivered hereunder at the Closing;
(c) payment claims by any of the Company's vendors or suppliers to the
extent such claims are fully reflected as payables on the August 31, 1995
balance sheet of the Company; or
(d) payment claims that arise pursuant to the leasing of the Company's
automobiles, which leases are assumed by the Company pursuant to Section 5.12
hereto, to the extent of the payment obligations reflected on Schedule 5.12
hereto.
Section 8.3 Procedures for Third Party Claims.
Promptly after the assertion by any third party of any claim against
any party entitled to be indemnified under this Article VIII (the "Indemnitee")
that, in the judgment of such Indemnitee, may result in the incurrence by such
Indemnitee of Losses for which such Indemnitee would be entitled to
indemnification pursuant to this Agreement, such Indemnitee shall deliver to the
other party or parties who has indemnified such Losses hereunder ("Indemnitor")
a written notice describing such claim. Such Indemnitor may participate in and,
at its option upon acknowledgment of Indemnitee's right to indemnification for
such matter, assume the defense of the Indemnitee against such claim, including
the employment of counsel,
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who shall be reasonably satisfactory to such Indemnitee. In such case, any
Indemnitee shall have the right to employ separate counsel in any such action or
claim and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the Indemnitor unless (i) the
Indemnitor shall have failed, within a reasonable time after having been
notified by the Indemnitee of the existence of such claim as provided in the
preceding sentence, to assume the defense of the such claim, (ii) the employment
of such counsel has been specifically authorized in writing by the Indemnitor or
(iii) the named parties to any such action (including impleaded parties) include
both such Indemnitee and the Indemnitor and such Indemnitee shall have been
advised in writing by such counsel that there may be conflicting interests
between Indemnitee and the Indemnitor in the legal defense thereof. No
Indemnitor shall be liable to indemnify any Indemnitee for any compromise or
settlement of any such action or claim effected without the consent of the
Indemnitor.
Section 8.4 Limits for Recovery of Losses.
Notwithstanding anything herein to the contrary, BETI and Bird shall
not be liable as Indemnitors for any Losses of Purchaser under this Article VIII
unless and until the aggregate amount of all Losses hereunder by Purchaser
equals or exceeds $50,000, in which case BETI and Bird shall be jointly and
severally liable for all Losses pursuant to Section 8.1(a) of the indemnified
parties identified in Section 8.1 up to a maximum aggregate amount of $500,000
(in excess of the $50,000 referred to above) and BETI and Bird shall be jointly
and severally liable for all Losses pursuant to Section 8.1(b)(ii) of the
indemnified parties identified in Section 8.1 up to a maximum aggregate amount
of $125,000.
Section 8.5 Waiver of Contribution.
Neither BETI nor Bird shall have any right to seek contribution from
the Company in the event that BETI and/or Bird is required to make any payments
under this Article VIII.
Section 8.6 Sole Remedy.
Recourse under this Article VIII shall be Purchaser's, GTSD's and their
officers, directors, employees, agents, Affiliates, successors and assigns sole
remedy against BETI or Bird.
ARTICLE IX: SURVIVAL
Except for actions based upon a claim of fraud (which shall survive
without limitation), all representations and warranties made pursuant to or in
connection with this Agreement shall survive the Closing, but shall terminate
two (2) years after the Closing Date; provided, that there shall be no such
termination with respect to any representation or warranty as to which a bona
fide claim has been asserted prior to such date.
-31-
<PAGE>
ARTICLE X: MISCELLANEOUS
Section 10.1 No Assignment.
No assignment by any of the parties of their respective rights nor
delegation by any of the parties of their respective duties shall be permitted
hereunder without the prior written consent of all other parties hereto.
Section 10.2 Costs.
Each party hereto shall pay all fees and expenses incurred by it in
connection with the negotiation, preparation, and performance of this Agreement,
including fees and disbursements of their respective counsel, accountants and
financial advisors.
Section 10.3 Publicity.
Prior to Closing, Purchaser, GTSD, the Company, BETI and Bird agree not
to issue any statement or communication to the public or the press regarding the
transactions contemplated by this Agreement without the prior written consent of
the other parties; provided, however, that each party shall be permitted, upon
notice to the other, to make such disclosures to the public or such governmental
entities as its counsel reasonably should deem necessary to maintain compliance
with applicable law.
Section 10.4 Confidentiality.
Purchaser, GTSD, the Company, BETI and Bird will hold, and will cause
their employees, representatives, agents and affiliated persons to hold in
strict confidence, and not disclose to any other party, and not use in any way
except in connection with the transactions contemplated hereby, without the
prior written consent of the other party, all confidential information obtained
from the other party in connection with the transactions contemplated by this
Agreement (including the existence of this Agreement, any of the terms hereof,
and the negotiations between the parties hereto), except such information may be
disclosed: (a) to Applicable Authorities and, where necessary, to any other
person in connection with the obtaining of the Licenses and Approvals and the
consents or waivers contemplated or required by the terms of this Agreement; (b)
if required by court order or decree or any Applicable Law; (c) if it is
publicly available through no act or failure to act of such party; (d) was
already known to such party on a confidential basis on the date of receipt; (e)
during the course of or in connection with any litigation, governmental
investigation, arbitration or other proceedings based upon or in connection with
the subject matter of this Agreement, including the failure of the transactions
contemplated hereby to be consummated; or (f) if it is otherwise expressly
provided for herein.
-32-
<PAGE>
Section 10.5 Parties in Interest.
This Agreement shall be binding upon, inure to the benefit of, and be
enforceable by the respective successors, heirs, personal representatives, and
assigns permitted under the terms of this Agreement.
Section 10.6 Entire Agreement.
This Agreement, any Exhibits, Schedules and any other writings
delivered pursuant hereto which form a part hereof and all other documents
delivered contemporaneous with the execution hereof contain the entire
understanding of the parties with respect to its subject matter and supersede
all prior oral and written agreements and understandings between the parties
with respect to its subject matter. In this regard, although the Bird Letter of
Intent and the Minority Shareholders' Letter of Intent shall be merged into and
superseded by this Agreement, certain descriptive language contained therein is
expressly referred to herein and shall be interpreted as if expressly set forth
herein.
Section 10.7 Construction.
The Article and Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The masculine pronoun shall include the
feminine and neuter, and vice versa, where the context so requires.
Section 10.8 Notices.
Except as otherwise expressly stated, all notices, claims,
certificates, requests, demands and other communications hereunder shall be in
writing and shall be deemed given upon the earlier of (i) when it is personally
delivered, (ii) three (3) days after having been mailed by certified mail,
postage prepaid, return receipt requested, (iii) two (2) days after having been
sent by recognized overnight delivery service or (iv) one (1) day after having
been sent by facsimile transmission, addressed as follows:
If to GTSD:
GTS Duratek, Inc.
8955 Guilford Road, Suite 200
Columbia, Maryland 21046
Attention: Robert E. Prince, President and Chief
Executive Officer
Telecopy No.: (301) 621-8211
-33-
<PAGE>
with a copy to:
Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201-3010
Attention: Henry D. Kahn, Esquire
Telecopy No.: (410) 576-1700
If to Purchaser:
GTSD Sub II, Inc.
8955 Guilford Road, Suite 200
Columbia, Maryland 21046
Attention: Robert E. Prince, President
Telecopy No: (301) 621-8211
with a copy to:
Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201-3010
Attention: Henry D. Kahn, Esquire
Telecopy No.: (410) 576-1700
If to Company:
Bird Environmental Gulf Coast, Inc.
2700 Avenue S
San Leon, Texas 77539
Attention: Bob Hensel, President
Telecopier No.: (713) 559-1364
with a copy to:
Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201-3010
Attention: Henry D. Kahn, Esquire
Telecopy No.: (410) 576-1700
-34-
<PAGE>
If to BETI:
Bird Environmental Technologies, Inc.
1077 Pleasant Street
Norwood, Massachusetts 02062
Attention: Frank S. Anthony, Vice President and General Counsel
Telecopy No.: (617) 551-9507
If to Bird:
Bird Corporation
1077 Pleasant Street
Norwood, Massachusetts 02062
Attention: Frank S. Anthony, Vice President and General Counsel
Telecopy No.: (617) 551-9507
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.
Section 10.9 Counterparts.
This Agreement may be executed simultaneously in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
Section 10.10 Governing Law.
This Agreement is governed by and construed and enforced in accordance
with the laws of the State of Maryland, excluding any laws thereof which would
direct the application of the law of another jurisdiction, and exclusive venue
for filing any lawsuit shall be in the federal courts in Maryland.
Section 10.11 Specific Performance.
The parties acknowledge and agree that the breach of the provisions of
this Agreement could not be adequately compensated with monetary damages, and
the parties hereto agree, accordingly, that injunctive relief and specific
performance shall be appropriate remedies to enforce provisions of this
Agreement and waive any claim or defense that there is an adequate remedy at law
for such breach; provided, however, that nothing herein shall limit the remedies
herein, legal or equitable, otherwise available and all remedies herein are in
addition to any remedies available at law or otherwise.
-35-
<PAGE>
Section 10.12 Severability.
If any provision of this Agreement shall be held to be illegal, invalid
or unenforceable under any applicable law, then such contravention or invalidity
shall not invalidate the entire Agreement. Such provision shall be deemed
modified to the extent necessary to render it legal, valid and enforceable, and
if no such modification shall render it legal, valid and enforceable, then this
Agreement shall be construed as if not containing the provision held to be
invalid, and the rights and obligations of the parties shall be construed and
enforced accordingly.
Section 10.13 Further Assurances.
From time to time, at Purchaser's request and without further
consideration, BETI and Bird shall execute and deliver to Purchaser such
documents and take such other action as Purchaser may reasonably request in
order to consummate more effectively the transactions contemplated hereby.
Section 10.14 No Drafting Presumption.
Each of the parties hereto shall be deemed to have participated equally
in the drafting and preparation of this Agreement and, accordingly, no
presumption shall arise concerning the interpretation of any of the provisions
hereof with respect to the party or parties responsible for its preparation.
Section 10.15 Incorporation by Reference; Use of Certain Terms.
All Exhibits and Schedules attached to this Agreement shall be deemed
incorporated herein by reference as if fully set forth herein. When the context
requires, the gender of all words used herein shall include the masculine,
feminine and neuter and the number of all words shall include the singular and
plural.
Section 10.16 Amendment and Waiver.
This Agreement may not be amended or modified except by a written
instrument signed by the parties hereto. The waiver by any party of such party's
rights under this Agreement in any particular instance or instances, whether
intentional or otherwise, shall not be considered as a continuing waiver which
would prevent subsequent enforcement of such rights or of any other rights.
Section 10.17 Waiver of Jury Trial.
THE COMPANY, BETI, BIRD, PURCHASER AND GTSD HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, THE STOCK, OR ANY
-36-
<PAGE>
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE COMPANY,
BETI, BIRD, PURCHASER AND GTSD FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT OR THE STOCK.
IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO
A TRIAL (WITHOUT A JURY) BY THE COURT.
-37-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties hereto on the date first above written.
WITNESS/ATTEST: BIRD ENVIRONMENTAL GULF COAST, INC.
By:_______________________________ By: _________________________(SEAL)
Frank A. Anthony
Vice President
BIRD ENVIRONMENTAL TECHNOLOGIES, INC.
By:_______________________________ By: _________________________(SEAL)
Frank A. Anthony
Vice President
BIRD CORPORATION
By:_______________________________ By: _________________________(SEAL)
Frank A. Anthony
Vice President
GTS DURATEK, INC.
By:_______________________________ By: _________________________(SEAL)
Diane R. Brown, Secretary Robert F. Shawver
Executive Vice President
GTSD SUB II, INC.
By:_______________________________ By: _________________________(SEAL)
Diane R. Brown, Secretary Robert F. Shawver
Vice President
-38-
<PAGE>
EXHIBIT 10(X)
SALES AGREEMENT
DATE: December 1, 1995
1. PARTIES
SELLER: GS ROOFING PRODUCTS CO., INC.
5525 MacArthur Blvd., Suite 900
Irving, Texas 75038
BUYER: BIRD INC.
1077 Pleasant Street
Norwood, MA 02062
2. PRODUCT 2.0# CSF & 2.2# CSF GLASS MAT per attached Specifications and
Agreement, in widths of 59-7/8, 61-7/8 and 36 inches
ANNUAL QTY: Sixty percent (60%) of Buyers annual requirements,
estimated to be approximately 3.9 mm squares
FOB POINT: Seller's plant, Charleston, SC
SHIPMENT: Rail car loads as arranged by Seller
PRICE: 2.0# csf $1.34/csf Freight delivered & prepaid
2.2# csf $1.40/csf Freight delivered & prepaid
Through March 31, 1996
Subject to a maximum 5% increase April 1, 1996 or
thereafter if prices are increased by alternate
competitive supplier
TERMS: 1% 10th Prox Net 30th prox. on shipments prior to the
25th of the month for determination of due dates.
Discount applies to material only and does not apply
to freight costs.
3. PERIOD. The period of this Agreement will begin on January 1, 1996 and
end on December 31, 1996.
4. QUANTITY. During this Agreement period, Buyer will purchase the specified
Annual Quantity in approximately equal monthly quantities. Orders will be faxed
to Seller's facility in Charleston, SC by the 15th of each month for the
following month's requirements.
5. SHIPMENTS. Seller shall arrange for the carrier and shall be entitled to
utilize the Buyer's contract rates from the CSXT Railroad of $1795/car (50' &
60'). Buyer will unload each shipment at its own risk and expense, including any
demurrage or detention charges at destination. Shipper will be responsible for
all risk and expense, including demurrage at the loading facility. If Seller is
unable, after normal and reasonable efforts, to secure wide door cars, and Buyer
is unable to reasonably delay shipment until such cars are available, then
Seller will be required to provide delivery by truck, at the Sellers expense.
<PAGE>
6. WARRANTIES. Seller warrant that Product will meet the "PURCHASE SPECIFICATION
FOR GLASS MAT," as clarified by the summary of understanding titled "1996 BIRD
ROOFING MAT SUPPLY PROGRAM,' copy attached. Seller MAKES NO OTHER REPRESENTATION
OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, IN FACT OR IN LAW, INCLUDING
WITHOUT LIMITATION THE WARRANTY OF MERCHANT ABILITY OR THE WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, OTHER THAN THE LIMITED WARRANTY SET FORTH ABOVE.
7. REMEDIES. If buyer fails to pay any indebtedness to Seller, Seller may, in
addition to any other remedies, suspend shipments, change terms of payment or
terminate this Agreement by notice to the Buyer. Buyer's obligation to perform
will not be limited by any previous waiver by Seller. Product which fails to
meet specifications will be returned to the Seller at the Sellers expense.
8. NOTICES. Notice by either Seller or Buyer will be made only by letter or
facsimile addressed to the other part at this address in Article 1 and will be
considered given as of the time it is deposited with the U.S. Postal Service or
acknowledged as received by the other Party's facsimile machine.
9. GOVERNING LAW. This Agreement will be interpreted and the rights,
obligations, and liabilities of the Parties determined in accordance with the
laws of the State of New York.
10. PRICE AND PAYMENT TERMS. Price shall be in accordance with Article 2 above.
If Seller is prevented by law, regulation or governmental action from continuing
any price in effect under this Agreement, Seller may terminate this Agreement on
thirty (30) days' notice. Buyer will be obligated to provide immediate written
notice to Seller if and when the suppler or suppliers of Buyer's balance of
requirements increase prices to Buyer. Seller will be permitted to increase
prices at a comparable level, effective on the date of such other competitor's
increase. The 1% 10th prox Net 30th prox Terms under this Agreement are the
result of meeting competitive conditions outlined by the Buyer. Buyer shall keep
in full force and effect a $300,000 letter of credit in favor of the Seller.
Seller shall review with reasonableness the financial condition of the Buyer on
or before July 1, 1996 to determine the need to continue such letter of credit.
11. EXCUSES FOR NO PERFORMANCE. Either Seller or Buyer will be excused from the
obligations of this Agreement to the extent that performance is delayed or
prevented by any circumstance (except financial) reasonably beyond its control
or by fire, explosion, mechanical breakdown, strikes or other labor trouble,
plant shutdown, unavailability of or interference with the usual means of
transporting the Product or compliance with any law, regulation, order,
recommendation or request of any governmental authority. In addition, Seller
will be so excused in the event it is unable to acquire from its usual source
and on terms it deems to be reasonable, any material necessary for manufacturing
the Product. If, because of such circumstances, there should be a shortage of
Product from the Seller, Seller will not be obligated to purchase products in
order to perform this Agreement and may apportion its available Product among it
internal needs and the Buyer's needs based upon the prior year sales, upon a
prorated share of available Product. Quantities of Product
<PAGE>
consequently not shipped will be deducted from the applicable remaining quantity
obligation unless the Parties agree otherwise.
12. SAFETY AND HEALTH COMMUNICATIONS. Seller will furnish to Buy Material Safety
Data Sheets which include health, safety and other hazard communication
information on Product consistent with the Occupational Safety and Health
administration's hazard Communications Standard. Seller will also furnish other
health or safety information as available. Buyer will disseminate appropriate
health and safety information to all persons Buyer foresees may be exposed to
Product (including but not limited to Buyer's employees, contractors and
customers).
13. LIABILITIES-CLAIMS-INDEMNIFICATION. Buyer shall indemnify and hold the
Seller harmless for any claim, loss or expense on account of any injury, disease
or death of persons or damage to property arising directly out of use of the
Product. These indemnity obligations of Buyer will survive termination of this
Contract. Neither Seller nor Buyer will have any liability to the other for any
claim (except for Indebtedness of Buyer to Seller) arising out of or in
connection with this Agreement unless claimant gives the other Party notice of
the claim, setting forth fully the facts on which it is based, within sixty (60)
days of the date such facts were discovered or reasonably should have been
discovered. Except as elsewhere herein provided, Seller's liability for
defective or nonconforming Product will not exceed the purchase price and
inbound freight costs of the Product involved in the claim and NEITHER PARTY
WILL BE LIABLE FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES.
14. ENTIRETY AND RELEASE. This Agreement, as of the beginning date of it Period,
contains the complete and exclusive agreement of Seller and Buyer concerning the
Product identified in Article 2, merges and supersedes all prior understandings
and representations (oral or written) and terminates all prior contracts between
Seller and Buyer concerning the same product. Except for any indebtedness or
indemnity obligation of Buyer to Seller, each releases the other from all claims
arising in connection with any such prior contract, except as herein provided.
Neither this Agreement nor any agreement supplementing or amending this
Agreement (including any purchase order or other document issued by Buyer) will
be binding unless signed by the Parties, and performance prior to such execution
will not constitute a waiver of this requirement.
15. FURTHER LIMITATIONS. No action by the Buyer arising out of the Agreement
shall commence later than sixty (60) days after the cause of action has
occurred.
16. CONSIDERATIONS. Section deleted.
<PAGE>
17. AMENDMENTS. No alteration, modification or change of this Agreement shall be
valid except by an agreement in writing executed by the parties hereto.
18. OTHER PROVISIONS. (Attach additional page(s) Exhibits etc).
GS ROOFING PRODUCTS COMPANY, INC.
BY:______________________________
Thomas Gruss
Date 3/15/96
BIRD ROOFING DIVISION
BY:______________________________
R.C. Maloof
Date 12/5/95
<PAGE>
EXHIBIT 10(Y)
EXECUTION COPY
===============================================================================
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
by and among
CERTAINTEED CORPORATION,
BI EXPANSION CORP.
and
BIRD CORPORATION
Dated as of April 8, 1996
===============================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
The Offer and the Merger
------------------------
SECTION 1.01. The Offer............................................. 1
SECTION 1.02. Company Actions....................................... 3
SECTION 1.03. Surviving Corporation................................. 5
SECTION 1.04. Articles of Organization.............................. 5
SECTION 1.05. By-Laws............................................... 5
SECTION 1.06. Directors............................................. 5
SECTION 1.07. Officers.............................................. 5
SECTION 1.08. Effective Date........................................ 5
SECTION 1.09. Additional Actions.................................... 6
SECTION 1.10. Company Common Stock, Preferred Stock and Preference
Stock............................................... 6
SECTION 1.11. Conversion of Acquisition Sub Common Stock............ 7
SECTION 1.12. Dissenting Shares..................................... 7
SECTION 1.13. Surrender of Shares................................... 8
SECTION 1.14. Certain Benefit Plans................................. 9
ARTICLE II
Representations and Warranties of the Company
---------------------------------------------
SECTION 2.01. Corporate Organization................................ 10
SECTION 2.02. Capitalization of the Company......................... 11
SECTION 2.03. Subsidiaries.......................................... 12
SECTION 2.04. Authorization......................................... 12
SECTION 2.05. Absence of Conflicts; Consents........................ 13
SECTION 2.06. Compliance with Laws.................................. 14
SECTION 2.07. Financial Statements.................................. 15
SECTION 2.08. Absence of Material Changes........................... 16
SECTION 2.09. Litigation............................................ 16
SECTION 2.10. Patents and Trademarks................................ 16
SECTION 2.11. Material Contracts; Permits........................... 17
SECTION 2.12. Title to Properties and Related Matters............... 19
SECTION 2.13. Taxes................................................. 20
SECTION 2.14. Labor Agreements...................................... 23
SECTION 2.15. Benefit Plans......................................... 23
SECTION 2.16. Labor Disputes; Unfair Labor Practices................ 27
<PAGE>
Contents, p. 2
Page
----
SECTION 2.17. Product Warranties.................................... 27
SECTION 2.18. Environmental Matters................................. 28
SECTION 2.19. Insurance............................................. 30
SECTION 2.20. SEC Filings........................................... 30
SECTION 2.21. Brokers and Finders................................... 31
SECTION 2.22. Rights Agreement; Antitakeover........................ 31
SECTION 2.23. Opinion of Financial Advisor.......................... 31
SECTION 2.24. Asbestos Claims....................................... 32
ARTICLE III
Representations and Warranties of Parent
----------------------------------------
SECTION 3.01. Corporate Organization................................ 32
SECTION 3.02. Authorization......................................... 32
SECTION 3.03. Absence of Conflicts; Consents........................ 32
SECTION 3.04. Litigation............................................ 33
SECTION 3.05. Brokers and Finders................................... 34
ARTICLE IV
Representations and Warranties of Acquisition Sub
-------------------------------------------------
SECTION 4.01. Corporate Organization................................ 34
SECTION 4.02. Authorization......................................... 34
SECTION 4.03. Absence of Conflicts; Consents........................ 35
SECTION 4.04. Litigation............................................ 36
SECTION 4.05. Capitalization........................................ 36
SECTION 4.06. Brokers and Finders................................... 36
<PAGE>
Contents, p. 3
Page
----
ARTICLE V
Covenants
---------
SECTION 5.01. Access and Information................................ 36
SECTION 5.02. Proxy Statement....................................... 37
SECTION 5.03. Stockholders' Meeting................................. 38
SECTION 5.04. Supplemental Information.............................. 38
SECTION 5.05. Further Assurances.................................... 38
SECTION 5.06. Conduct of Company Business Prior to the Effective
Date................................................ 38
SECTION 5.07. Consents.............................................. 41
SECTION 5.08. Filings............................................... 41
SECTION 5.09. Filing of Articles of Merger.......................... 42
SECTION 5.10. Interim Financial Statements.......................... 42
SECTION 5.11. Public Announcements.................................. 42
SECTION 5.12. No Solicitation....................................... 43
SECTION 5.13. Validity of Representations........................... 44
SECTION 5.14. Employees; Benefits................................... 45
SECTION 5.15. Indemnification and Insurance......................... 45
SECTION 5.16. Redemption of 5% Stock and Preference Stock........... 46
SECTION 5.17. Material Contracts.................................... 47
SECTION 5.18. Tax Matters........................................... 47
SECTION 5.19. Dividend Payments..................................... 47
SECTION 5.20. Satisfaction of Conditions............................ 47
SECTION 5.21. Directors............................................. 47
ARTICLE VI
Conditions to the Obligations of Parent
---------------------------------------
and Acquisition Sub
-------------------
SECTION 6.01. Representations and Warranties True................... 49
SECTION 6.02. Company's Performance................................. 49
SECTION 6.03. Authorization of Merger............................... 49
SECTION 6.04. Absence of Litigation................................. 49
SECTION 6.05. Directors............................................. 50
SECTION 6.06. Dissenting Shares..................................... 50
SECTION 6.07. Options............................................... 50
SECTION 6.08. Certificates.......................................... 50
<PAGE>
Contents, p. 4
Page
----
ARTICLE VII
Conditions to the Obligations of the Company
--------------------------------------------
SECTION 7.01. Representations and Warranties True................... 51
SECTION 7.02. Parent's and Acquisition Sub's Performance............ 51
SECTION 7.03. Authorization of Merger............................... 51
SECTION 7.04. Absence of Litigation................................. 51
SECTION 7.05. Certificates.......................................... 52
ARTICLE VIII
Closing
-------
SECTION 8.01. Time and Place........................................ 52
SECTION 8.02. Deliveries at the Closing............................. 52
ARTICLE IX
Termination and Abandonment of the Merger
-----------------------------------------
SECTION 9.01. Termination........................................... 53
SECTION 9.02. Effect of Termination................................. 54
SECTION 9.03. Procedure for Termination and Amendment............... 55
ARTICLE X
Miscellaneous
-------------
SECTION 10.01. Expenses; Alternate Transaction Fee................. 55
SECTION 10.02. Non-Survival of Representations and Warranties...... 57
SECTION 10.03. Headings............................................ 57
SECTION 10.04. Notices............................................. 58
SECTION 10.05. Assignment.......................................... 59
SECTION 10.06. Complete Agreement.................................. 59
SECTION 10.07. Amendments and Waivers.............................. 59
SECTION 10.08. Counterparts........................................ 60
SECTION 10.09. Governing Law....................................... 60
SECTION 10.10. Accounting Terms.................................... 60
<PAGE>
Contents, p. 5
Page
----
SECTION 10.11. Parties............................................. 60
Exhibits
- --------
EXHIBIT A Conditions to the Offer
EXHIBIT B Articles of Merger
<PAGE>
Contents, p. 5
Schedules
- ---------
SCHEDULE 2.01 Foreign Jurisdictions
SCHEDULE 2.02 Capitalization
SCHEDULE 2.03 Subsidiaries
SCHEDULE 2.05 Conflicts, Consents, Approvals and Authorizations
SCHEDULE 2.07 Company Financial Statements
SCHEDULE 2.08 Absence of Material Changes
SCHEDULE 2.09 Litigation
SCHEDULE 2.10 Patents and Trademarks
SCHEDULE 2.11 Material Contracts
SCHEDULE 2.12 Real Property
SCHEDULE 2.13 Taxes
SCHEDULE 2.14 Labor Agreements
SCHEDULE 2.15 Benefit Plans
SCHEDULE 2.17 Product Warranties
SCHEDULE 2.18 Environmental Matters
SCHEDULE 2.19 Insurance
SCHEDULE 2.20 SEC Filings
SCHEDULE 5.06 Conduct of Business
<PAGE>
INDEX OF DEFINITIONS
Definition Section
---------- -------
"Acquisition Sub" .......................... Introduction
"Acquisition Sub Common Stock".............. Section 1.11
"Alternate Transaction Fee"................. Section 10.01(b)
"Antitrust Division"........................ Section 2.05(e)
"Applicable Laws"........................... Section 2.05(d)
"Articles of Merger"........................ Section 1.08
"Balance Sheet"............................. Section 2.07(a)
"Balance Sheet Date"........................ Section 2.07(a)
"Benefit Plans"............................. Section 2.15(i)
"CERCLA".................................... Section 2.18
"Certificates".............................. Section 1.13(b)
"Closing"................................... Section 8.01
"Closing Date".............................. Section 8.01
"Code"...................................... Section 2.13
"Commonly Controlled Entity"................ Section 2.15(i)
"Company"................................... Introduction
"Common Stock Offer Price".................. Introduction
"Company Common Stock"...................... Section 1.10(a)(i)
"Company Estimates"......................... Section 2.18(g)
"Company Financial Statements".............. Section 2.07(a)
"Company Pension Plan"...................... Section 2.15(iii)
"Company Property".......................... Section 2.12(a)
"Company Willful Misrepresentation"......... Section 9.02(b)
"Confidentiality Agreement"................. Section 5.01(b)
"Consummation of the Offer"................. Section 5.02
"Continuing Directors"...................... Section 5.21
"Conversion Rights"......................... Section 2.02(c)
"Covered Taxes"............................. Section 2.13(c)
"Defined Benefit Plan"...................... Section 2.15(vi)
"Defined Benefit Pension Plan".............. Section 2.15(vi)
"Designated Director"....................... Section 5.21
"Director Option Plan"...................... Section 1.14(a)(i)
"Dissenting Consideration".................. Section 1.12
"Dissenting Shares"......................... Section 1.12
"D&O Insurance"............................. Section 5.15(a)
"Effective Date"............................ Section 1.08
"Effective Time"............................ Section 1.08
"Eligible Option"........................... Section 1.14(a)(i)
"Environmental Laws"........................ Section 2.18
<PAGE>
Definitions, p. 2
Definition Section
---------- -------
"ERISA".................................... Section 2.15(i)
"Exchange Act"............................. Section 1.01(b)
"Exchange Agent"........................... Section 1.13(a)
"Expenses"................................. Section 10.01(b)
"5% Stock"................................. Section 1.10(b)
"5% Stock Consideration"................... Section 1.10(b)
"French parcel"............................ Section 2.04(d)
"FTC"...................................... Section 2.05(e)
"GAAP"..................................... Section 2.07(a)
"Governmental Authority"................... Section 2.05(d)
"Hazardous Materials"...................... Section 2.18
"HSR Act".................................. Section 2.05(e)
"Inactive Subsidiary"...................... Section 2.03(a)
"Indemnified Parties"...................... Section 5.15(a)
"Ineligible Option"........................ Section 1.14(a)(ii)
"Information Statement".................... Section 2.20(b)
"Interim Financial Statements"............. Section 2.07(b)
"Judgment"................................. Section 2.05(d)
"Leased Real Property"..................... Section 2.12(a)
"Legal Action"............................. Section 2.09
"Lien"..................................... Section 2.05(b)
"LTIP"..................................... Section 1.14(b)
"Material Adverse Effect".................. Section 2.01
"Material Contracts"....................... Section 2.11
"Maximum Premium".......................... Section 5.15(a)
"MBCL"..................................... Section 1.03
"Merger"................................... Introduction
"Minimum Condition"........................ Exhibit A
"1982 Stock Option Plan"................... Section 1.12(a)(i)
"1992 Stock Option Plan"................... Section 1.12(a)(i)
"Notice of Qualified Takeover Proposal".... Section 5.12(b)
"Offer".................................... Introduction
"Offer Document"........................... Section 1.01(b)
"Options".................................. Section 1.14a)(i)
"Owned Real Property"...................... Section 2.12(a)
"Parent"................................... Introduction
"Parent Willful Misrepresentation"......... Section 9.02(c)
"Paying Agent"............................. Section 1.13
"PBGC"..................................... Section 2.15(i)
"Pension Plan"............................. Section 2.15(i)
"Permits".................................. Section 2.06
"Permitted Liens".......................... Section 2.12(b)
"Person"................................... Section 2.05(c)
<PAGE>
Definitions, p. 3
Definition Section
---------- -------
"Preference Stock"......................... Section 1.10(c)
"Preference Stock Consideration"........... Section 1.10(c)
"Preference Stock Offer Price"............. Introduction
"Proxy Statement".......................... Section 5.02(a)
"Qualified Takeover Proposal".............. Section 5.12(a)
"Release".................................. Section 2.18
"Rights"................................... Section 2.02(a)
"Rights Agent"............................. Section 2.02(a)
"Rights Agreement"......................... Section 2.02(a)
"Return"................................... Section 2.13(a)
"Savings Plan"............................. Section 1.14(c)
"Schedule 14D-9"........................... Section 1.02(b)
"SEC"...................................... Section 1.01(a)
"SEC Documents"............................ Section 2.20(a)
"Securities Act"........................... Section 2.20(a)
"Special Meeting".......................... Section 5.03(a)
"Subsidiary"............................... Section 2.01
"Surviving Corporation".................... Section 1.03
"Surviving Corporation Common Stock"....... Section 1.11
"Takeover Proposal"........................ Section 5.12(a)
"Tax"...................................... Section 2.13(a)
"Taxing Authority"......................... Section 2.13(a)
"Total Merger Consideration"............... Section 1.10(a)(i)
"Transmittal Letter"....................... Section 1.13(b)
<PAGE>
EXECUTION COPY
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
dated as of April 8, 1996, is entered into by and among
CERTAINTEED CORPORATION, a Delaware corporation ("Parent"), BI
EXPANSION CORP., a Massachusetts corporation ("Acquisition
Sub"), and BIRD CORPORATION, a Massachusetts corporation (the
"Company"), and amends and restates in its entirety the
Agreement and Plan of Merger among Parent, Acquisition Sub and
the Company dated as of March 14, 1996 (the "Prior
Agreement").
WHEREAS the respective Boards of Directors of Parent, Acquisition
Sub and the Company approved the Prior Agreement and have approved the making
by Acquisition Sub of a tender offer from time to time (the "Offer") to
purchase all outstanding shares of Company Common Stock (as defined below) at a
price per share equal to the Total Merger Consideration (as defined below) (the
"Common Stock Offer Price") and all outstanding shares of Preference Stock (as
defined below) at a price per share equal to $20 plus all accrued and unpaid
dividends thereon as of the date of the expiration of the Offer (the
"Preference Stock Offer Price") along with the merger of Acquisition Sub with
and into the Company (the "Merger"), upon the terms and subject to the
conditions set forth herein, as a result of which the Company will become a
wholly owned subsidiary of Parent and the stockholders of the Company (other
than stockholders who perfect appraisal rights) will be entitled to receive the
consideration provided in this Agreement.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement and of the representations, warranties, covenants
and agreements hereinafter contained, Parent, Acquisition Sub and the Company
agree as follows:
ARTICLE I
The Offer and the Merger
------------------------
SECTION 1.01. The Offer. (a) Subject to the provisions of
----------
this Agreement, as promptly as practicable, but in no event later than five
business days after the public announcement of the Offer, Acquisition Sub shall
commence the Offer. The obligation of Acquisition Sub to commence the Offer
and accept for payment, and pay for, any shares of Company Common Stock
tendered pursuant to the Offer shall be
<PAGE>
2
subject to the conditions set forth in Exhibit A (any of which may be waived in
whole or in part by Acquisition Sub in its sole discretion) and to the
terms and conditions of this Agreement; provided, however, that
-------- -------
Acquisition Sub shall not, without the Company's consent, waive the Minimum
Condition if Parent shall have requested that the Company redeem the
Preference Stock in accordance with Section 5.16). Acquisition Sub expressly
reserves the right to modify the terms of the Offer, except that, without the
consent of the Company, Acquisition Sub shall not (i) reduce the number of
shares of Company Common Stock or Preference Stock (unless, with respect to the
Preference Stock, Parent shall have requested that the Company redeem the
Preference Stock in accordance with Section 5.16) to be purchased in the Offer,
(ii) reduce the Common Stock Offer Price or the Preference Stock Offer Price,
(iii) modify or add to the conditions set forth in Exhibit A, (iv) except as
provided in the next sentence, extend the Offer, (v) change the form of
consideration payable in the Offer or (vi) amend any other term of the Offer in
a manner adverse in any material respect to the holders of Company Common Stock
or Preference Stock. Notwithstanding the foregoing, Acquisition Sub may,
without the consent of the Company, (i) extend the Offer beyond any scheduled
expiration date (the initial scheduled expiration date being 20 business days
following commencement of the Offer) for a period not to exceed 20 business
days, if at any scheduled expiration date of the Offer, any of the conditions
to Acquisition Sub's obligation to accept for payment, and pay for, shares of
Company Common Stock or Preference Stock shall not be satisfied or waived,
until such time as such conditions are satisfied or waived, (ii) extend the
Offer for any period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer and (iii) terminate the Offer without prejudice
to any of its and Parent's rights under this Agreement, including to proceed
with the Merger in accordance with, and subject to the terms and conditions of,
this Agreement. Subject to the terms and conditions of the Offer and this
Agreement, Acquisition Sub shall accept for payment, and pay for, all shares of
Company Common Stock and Preference Stock validly tendered and not withdrawn
pursuant to the Offer that Acquisition Sub becomes obligated to accept for
payment, and pay for, pursuant to the Offer as soon as practicable after
expiration of the Offer, subject to compliance with Rule 14e-1(c) under the
Exchange Act (as defined below).
(b) On the date of commencement of the Offer, Parent and
Acquisition Sub shall file with the SEC a Tender Offer Statement on Schedule
14D-1 with respect to the Offer, which shall contain an offer to purchase and a
related letter of transmittal and summary advertisement (such Schedule 14D-1
and the documents included therein pursuant to which the Offer will be made,
together with any supplements or
<PAGE>
3
amendments thereto, the "Offer Documents"). Parent and Acquisition Sub agree
that the Offer Documents shall comply as to form in all material respects with
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act") and, on the date first published,
sent or given to the Company's stockholders, shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading, except that no
representation is made by Parent or Acquisition Sub with respect to information
regarding the Company or its subsidiaries or provided by the Company for
inclusion or incorporation by reference in the Offer Documents. Each of
Parent, Acquisition Sub and the Company agrees promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect, and each of Parent and Acquisition Sub further agrees to take all
steps necessary to amend or supplement the Offer Documents and to cause the
Offer Documents as so amended or supplemented to be filed with the SEC and to
be disseminated to the Company's stockholders, in each case as and to the
extent required by applicable Federal securities laws. The Company and its
counsel shall be given a reasonable opportunity to review and comment upon the
Offer Documents and all amendments and supplements thereto prior to their
filing with the SEC or dissemination to stockholders of the Company. Parent
and Acquisition Sub agree to provide the Company and its counsel any comments
or requests for additional information Parent, Acquisition Sub or their counsel
may receive from the SEC or its staff with respect to the Offer Documents
promptly after the receipt of such comments and shall provide the Company and
its counsel an opportunity to participate, including by way of discussion with
the SEC or its staff, in the response of Parent and/or Acquisition Sub to such
comments.
(c) Parent shall provide or cause to be provided to Acquisition
Sub on a timely basis the funds necessary to accept for payment, and pay for,
any shares of Company Common Stock and Preference Stock that Acquisition Sub
accepts for payment, and becomes obligated to pay for, pursuant to the Offer.
SECTION 1.02. Company Actions. (a) The Company hereby
----------------
approves of and consents to the Offer and represents that the Board of
Directors of the Company, at a meeting duly called and held, adopted
resolutions approving this Agreement (as amended), the Offer, the Merger and
the transactions contemplated hereby, determining that the terms of the Offer
and the Merger are fair to, and in the best interests of, the Company's
stockholders and recommending that the Company's stockholders approve and adopt
this Agreement, accept the Offer and tender their shares pursuant to the Offer
and/or vote their shares of Company Common Stock and Preference Stock in favor
of the Merger. The Company has been advised by each of its directors and by
each executive officer who as of the date hereof is aware of the
<PAGE>
4
transactions contemplated hereby, that each such person either intends to tender
pursuant to the Offer all shares of Company Common Stock and Preference Stock
owned by such person or vote all shares of Company Common Stock and Preference
Stock owned by such person in favor of the Merger.
(b) Not later than the date the Offer Documents are filed with the
SEC, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (which shall include the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder with
respect to the persons to be named directors of the Company pursuant to Section
5.21) with respect to the Offer (such Schedule 14D-9, as amended from time to
time, the "Schedule 14D-9") containing the recommendation described in Section
1.02(a) and shall mail the Schedule 14D-9 to the stockholders of the Company.
The Schedule 14D-9 shall comply as to form in all material respects with the
Exchange Act and the rules and regulations promulgated thereunder and, on the
date filed with the SEC and on the date first published, sent or given to the
Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information provided by
Parent or Acquisition Sub for inclusion or incorporation by reference in the
Schedule 14D-9. Each of the Company, Parent and Acquisition Sub agrees
promptly to correct any information provided by it for use in the Schedule
14D-9 if and to the extent that such information shall have become false or
misleading in any material respect, and the Company further agrees to take all
steps necessary to amend or supplement the Schedule 14D-9 and to cause the
Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the Company's stockholders, in each case as and to the extent
required by applicable Federal securities laws. Parent and its counsel shall
be given a reasonable opportunity to review and comment upon the Schedule 14D-9
and all amendments and supplements thereto prior to their filing with the SEC
or dissemination to stockholders of the Company. The Company agrees to provide
Parent and its counsel in writing with any comments or requests for additional
information the Company or its counsel may receive from the SEC or its staff
with respect to the Schedule 14D-9 promptly after the receipt of such comments
and shall provide Parent and its counsel an opportunity to participate,
including by way of discussions with the SEC or its staff, in the response of
the Company to such comments.
(c) In connection with the Offer, the Company shall cause its
transfer agent to furnish Acquisition Sub promptly with mailing labels
containing the names and addresses of the record holders of Company Common
Stock and of the record holders of Preference Stock as of a recent date and of
those persons becoming record holders
<PAGE>
5
subsequent to such date, together with copies of all lists of stockholders,
security position listings and computer files and all other information in the
Company's possession or control regarding the beneficial owners of Company
Common Stock and the beneficial owners of Preference Stock, and shall furnish to
Acquisition Sub such information and assistance (including updated lists of
stockholders, security position listings and computer files) as Parent may
request in communicating the Offer to holders of Company Common Stock and
Preference Stock.
SECTION 1.03. Surviving Corporation. In accordance with the
----------------------
provisions of this Agreement and the Massachusetts Business Corporation Law, as
amended (the "MBCL"), at the Effective Date (as defined in Section 1.08),
Acquisition Sub shall be merged with and into the Company, and the Company
shall be the surviving corporation in the Merger (hereinafter sometimes called
the "Surviving Corporation"). At the Effective Date, the separate existence of
Acquisition Sub shall cease.
SECTION 1.04. Articles of Organization. (a) The Articles of
-------------------------
Organization of the Company as amended pursuant to the Articles of Merger (as
defined in Section 1.08), shall be the Articles of Organization of the
Surviving Corporation.
(b) The purposes of the Surviving Corporation shall be as set
forth in the Articles of Organization of Acquisition Sub as in effect on the
date hereof until such time as such purposes may be amended as provided in the
Articles of Organization of the Surviving Corporation and by applicable law.
SECTION 1.05. By-Laws. The By-Laws of Acquisition Sub as in
--------
effect at the Effective Date shall be the By-Laws of the Surviving Corporation,
until thereafter amended or repealed as provided by law.
SECTION 1.06. Directors. The directors of Acquisition Sub at
----------
the Effective Date shall, from and after the Effective Date, be the directors
of the Surviving Corporation and shall hold office from the Effective Date
until their respective successors are duly elected or appointed and qualified
in the manner provided in the Articles of Organization and By-Laws of the
Surviving Corporation, or as otherwise provided by law.
SECTION 1.07. Officers. The officers of Acquisition Sub at
---------
the Effective Date shall, from and after the Effective Date, be the officers of
the Surviving Corporation and shall hold office from the Effective Date until
their respective successors are duly elected or appointed and qualified in the
manner provided in the
<PAGE>
6
Articles of Organization and By-Laws of the Surviving Corporation, or as
otherwise provided by law.
SECTION 1.08. Effective Date. The Merger shall become
---------------
effective at the time of filing of articles of merger (substantially in the
form set forth in Exhibit B annexed hereto) with the Secretary of State of the
Commonwealth of Massachusetts in accordance with the provisions of Section 78
of the MBCL (the "Articles of Merger"). The Articles of Merger shall be filed
with the Secretary of State of the Commonwealth of Massachusetts on the Closing
Date. The date and time when the Merger becomes effective shall be herein
referred to as the "Effective Date" and the "Effective Time", respectively.
SECTION 1.09. Additional Actions. If, at any time after the
-------------------
Effective Date, the Surviving Corporation determines that any deeds, bills of
sale, assignments, assurances or any other acts or things are necessary or
desirable (a) to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation, its right, title or interest in, to or under any of the
rights, properties or assets of the Company or its Subsidiaries acquired or to
be acquired by reason of, or as a result of, the Merger, or (b) otherwise to
carry out the purposes of this Agreement, the Surviving Corporation and its
proper officers and directors shall be authorized to execute and deliver, in
the name and on behalf of the Company and its Subsidiaries, all such deeds,
bills of sale, assignments and assurances and to do, in the name and on behalf
of the Company and its Subsidiaries, all such other acts and things necessary
or desirable to vest, perfect or confirm any and all right, title or interest
in, to or under such rights, properties or assets in the Surviving Corporation
or otherwise to carry out the purposes of this Agreement.
SECTION 1.10. Company Common Stock, Preferred Stock and
------------------------------------------
Preference Stock. (a) Company Common Stock. (i) Each share of Common
---------------------
Stock of the Company, par value $1 per share (including Rights as defined in
Section 2.02(a)) (the "Company Common Stock") actually issued and outstanding
at the Effective Date (except for Dissenting Shares, as defined in Section
1.12) shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive $7.50 (the "Total Merger
Consideration").
(ii) Each share of Company Common Stock held by Parent or
Acquisition Sub or in the Company's treasury at the Effective Date shall, by
virtue of the Merger, be canceled without payment of any consideration therefor
and without any conversion thereof.
(b) 5% Cumulative Preferred Stock. Each share of the
------------------------------
Company's 5% Cumulative Preferred Stock, par value $100 per share (the "5%
Stock"), actually
<PAGE>
7
issued and outstanding at the Effective Date, shall remain issued and
outstanding after the Merger and shall be called for redemption and retirement
as soon as practicable following the Merger (except for Dissenting Shares, as
defined in Section 1.12), in accordance with the terms of Section 5.16(a), at a
price equal to $110, plus all accrued and unpaid dividends thereon as of the
date of redemption and retirement (the "5% Stock Consideration"), in accordance
with the terms of the 5% Stock.
(c) $1.85 Cumulative Convertible Preference Stock. (i)
----------------------------------------------
Unless called for redemption prior to the Closing pursuant to Section 5.16, each
share of the Company's $1.85 Cumulative Convertible Preference Stock, par value
$1 per share (the "Preference Stock"), actually issued and outstanding at the
Effective Date (except for Dissenting Shares, as defined in Section 1.12) shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive $20 plus all accrued and unpaid
dividends thereon as of the Effective Date (whether redeemed or converted, the
"Preference Stock Consideration").
(ii) Each share of Preference Stock held by Parent or Acquisition
Sub or in the Company's treasury at the Effective Date shall, by virtue of the
Merger, be cancelled without payment of any consideration therefor and without
any conversion thereof.
SECTION 1.11. Conversion of Acquisition Sub Common Stock. All
-------------------------------------------
issued and outstanding shares of Common Stock, par value $1 per share, of
Acquisition Sub (the "Acquisition Sub Common Stock") at the Effective Date
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and exchangeable for, in the aggregate, 4,123,178
fully paid and nonassessable shares of Common Stock, par value $1 per share, of
the Surviving Corporation (the "Surviving Corporation Common Stock"). From and
after the Effective Date, each outstanding certificate theretofore representing
shares of Acquisition Sub Common Stock shall be deemed for all purposes to
evidence ownership of, and to represent the number of shares of, Surviving
Corporation Common Stock into which such shares of Acquisition Sub Common Stock
shall have been converted.
SECTION 1.12. Dissenting Shares. Notwithstanding anything in
------------------
this Agreement to the contrary, shares of Company Common Stock, 5% Stock and
Preference Stock issued and outstanding on the Effective Date (other than any
called for redemption pursuant to Section 5.16) which are held of record by
stockholders who shall not have voted such shares in favor of the Merger, if
applicable, and who shall have properly exercised rights to demand payment of
the fair value of such shares in accordance with Sections 86 through 98,
inclusive, of the MBCL ("Dissenting Shares") shall not be converted into the
right to receive the consideration specified in Section 1.10(a), 1.10(b), or
1.10(c), respectively, but the holders thereof instead shall
<PAGE>
8
be entitled to payment of the fair value of such shares in accordance with the
provisions of Sections 86 to 92, inclusive, of the MBCL (the "Dissenting
Consideration"); provided, however, that (i) if such a holder fails to file a
-------- -------
notice of election to dissent in accordance with Section 86 of the MBCL or,
after filing such notice of election, subsequently delivers an effective written
withdrawal of such notice or fails to establish his entitlement to appraisal
rights as provided in Sections 87 through 98, inclusive, of the MBCL, if he or
she be so required, or (ii) if a court shall determine that such holder is not
entitled to receive payment for his shares or such holder shall otherwise lose
his or her appraisal rights, then in either of such cases, each share of Company
Common Stock, 5% Stock or Preference Stock, respectively, held of record by such
holder or holders shall automatically be converted into and represent only the
right to receive the Total Merger Consideration, the 5% Stock Consideration or
the Preference Stock Consideration, respectively, upon the surrender of the
certificate or certificates representing such Dissenting Shares. The Company
shall give Parent prompt notice of any demands received by the Company for
payment of the fair value of such shares, and Parent shall have the right to
participate in all the negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of Parent,
make any payment (except to the extent that any such payment is made pursuant to
a court order) with respect to, or settle or offer to settle, any such demands.
SECTION 1.13. Surrender of Shares. (a) At and after the
--------------------
Effective Date, Parent shall make available on a timely basis, by transferring
to Chemical Mellon Shareholder Services, Inc. (the "Paying Agent") for the
benefit of former stockholders of the Company, such funds as and when necessary
to make the payments provided for in Section 1.10 herein with respect to the
outstanding shares of Company Common Stock and Preference Stock (other than any
called for redemption pursuant to Section 5.16). The Paying Agent shall agree
to hold such funds in trust for the benefit of the former stockholders of the
Company and deliver such funds in accordance with the terms hereof and the
terms of a Paying Agency Agreement to be entered into by and between the Paying
Agent and Parent.
(b) Prior to or at the Effective Date, the Paying Agent shall mail
or cause to be mailed to each record holder of an outstanding certificate or
certificates which, immediately prior to the Effective Date, represented shares
of Company Common Stock or Preference Stock (other than any called for
redemption pursuant to Section 5.16) (the "Certificates"), a form letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent) (the "Transmittal Letter") and instructions
for use in effecting the surrender of the Certificates for payment therefor.
Upon surrender to the Paying Agent of a Certificate, together with such
Transmittal Letter duly executed, the holder of such Certificate shall be
entitled to
<PAGE>
9
receive in exchange for each share of Company Common Stock or
Preference Stock (other than any called for redemption pursuant to Section
5.16) represented by such Certificate, the Total Merger Consideration or
Preference Stock Consideration, respectively, and such Certificate shall
forthwith be canceled upon receipt by the holder of such Certificate of the
Total Merger Consideration or Preference Stock Consideration, respectively. No
interest will be paid or accrued on the Total Merger Consideration or
Preference Stock Consideration payable upon the surrender of such Certificates.
(c) If payment is to be made to a person other than the person in
whose name the Certificate surrendered in exchange therefor is registered, it
shall be a condition of payment of the Total Merger Consideration or Preference
Stock Consideration, as the case may be, that the Certificate so surrendered be
properly endorsed or accompanied by appropriate stock powers, in either case
signed exactly as the name of the record holder appears on such Certificate, and
is otherwise in proper form for transfer, and that the Person requesting such
payment shall pay any transfer or other taxes required by law as a result of
such payment to a Person other than the record holder of the Certificate
surrendered, or shall establish to Parent's satisfaction that such tax has been
paid or is not applicable.
(d) After the Effective Date, there shall be no further transfers
on the stock transfer books of the Surviving Corporation of the shares of
Company Common Stock or Preference Stock which are outstanding at the Effective
Date. If, after the Effective Date, Certificates are presented to the
Surviving Corporation or the Paying Agent for transfer, they shall be canceled
and there shall be issued to the transferee in exchange for each share of
Company Common Stock the Total Merger Consideration and in exchange for each
share of Preference Stock the Preference Stock Consideration in accordance with
Section 1.10 hereof.
(e) The consideration payable upon the surrender for exchange of
Certificates in accordance with the terms of this Article I shall be deemed to
have been paid in full satisfaction of all rights pertaining to the shares of
Company Common Stock or Preference Stock theretofore represented by such
Certificates, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Company
Common Stock or Preference Stock which were outstanding immediately prior to
the Effective Date.
(f) None of Parent, Acquisition Sub, the Company or the Paying
Agent shall be liable to any person in respect of any cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates shall not have been surrendered prior to
seven years after the Effective Date (or immediately prior to such earlier date
on which any payment pursuant to this
<PAGE>
10
Article I would otherwise escheat to or become the property of any Governmental
Authority), the payment in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims or interest of any person previously entitled
thereto.
SECTION 1.14. Certain Benefit Plans. (a) (i) With respect to
----------------------
unexpired options ("Options"), whether or not exercisable at the Effective Date,
including stock appreciation rights relating thereto, outstanding on the
Effective Date which have been issued pursuant to the Company's 1982 Stock
Option Plan, as amended (the "1982 Stock Option Plan"), the Company's 1992 Stock
Option Plan, as amended (the "1992 Stock Option Plan"), or the Company's 1992
Non-Employee Directors Stock Option Plan, as amended (the "Director Option
Plan"), each such Option with an exercise price less than the Total Merger
Consideration (an "Eligible Option") shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into the right to
receive, for each share of Company Common Stock subject thereto, a cash payment
without interest equal to the Total Merger Consideration, less the per share
exercise price of each such Option. Such Options shall be canceled upon such
cash payment following the Merger.
(ii) Any Option with an exercise price equal to or greater than
the Total Merger Consideration (an "Ineligible Option") shall be canceled upon
the Effective Date without payment of any consideration.
(iii) The Company shall use its best efforts to amend each
outstanding Option issued under the 1982 Stock Option Plan, the 1992 Stock
Option Plan and the Director Option Plan to effect the transactions
contemplated by this Agreement, including the cancellation of the Options in
connection with the Merger in accordance with this Section 1.14.
(b) There are no shares of Company Common Stock held in escrow
pursuant to the Company's Long Term Incentive Compensation Plan (the "LTIP").
(c) Each share of Company Common Stock issued by the Company but
not yet vested pursuant to the Company's Employees' Savings and Profit Sharing
Plan (the "Savings Plan") shall, in connection with the Merger, become vested
in the Person to whose account such share of Company Common Stock was issued
and converted into the right to receive the Total Merger Consideration as
provided in Section 1.10(a).
(d) Immediately following the Effective Date, the Company's 1982
Stock Option Plan, 1992 Stock Option Plan, Director Option Plan, LTIP and
Savings Plan shall be terminated and no further stock awards or stock options
shall be granted thereunder from and after the date of this Agreement.
<PAGE>
11
ARTICLE II
Representations and Warranties of the Company
---------------------------------------------
The Company hereby represents and warrants to Parent and
Acquisition Sub as follows with respect to the Company and its Subsidiaries:
SECTION 2.01. Corporate Organization. The Company is a
-----------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts with all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business
as now being conducted. The Company is qualified to do business and is in good
standing in each jurisdiction set forth in Schedule 2.01, which are the only
jurisdictions in which such qualification is necessary except where failure to
be qualified could not reasonably be expected to have a Material Adverse Effect.
For purposes of this Agreement, a "Material Adverse Effect" is (a) a material
adverse effect on the business, assets, properties, condition (financial or
other) or results of operations of the Company and its Subsidiaries taken as a
whole or the Surviving Corporation and its Subsidiaries taken as a whole or (b)
a material adverse effect on the ability of the Company to carry out the
transactions contemplated by this Agreement without significant unanticipated
delay or expense. For purposes of this Agreement, a "Subsidiary" of any Person
is any corporation of which a majority of all outstanding shares of capital
stock (the holders of which are ordinarily and generally entitled to vote in the
election of a majority of the members of the board of directors thereof) is
owned, directly or indirectly, by such Person and/or other Subsidiaries of such
Person. The Company has delivered to Parent complete and correct copies of its
Articles of Organization and By-Laws, as amended to the date hereof.
SECTION 2.02. Capitalization of the Company. (a) The
------------------------------
authorized capital stock of the Company consists of 15,000,000 shares of
Company Common Stock, 15,000 shares of 5% Stock and 1,500,000 shares of
Preference Stock. As of February 29, 1996, 4,123,178 shares of Company Common
Stock, 5,820 shares of 5% Stock and 814,300 shares of Preference Stock were
issued and are outstanding, 275,100 shares of Company Common Stock were held in
the Company's treasury and 687,197 shares of Company Common Stock were reserved
for issuance in connection with the rights (the "Rights") to purchase shares of
Company Common Stock issued pursuant to the Rights Agreement dated as of
November 25, 1986 (as amended from time to time, the "Rights Agreement")
between the Company and The First National Bank of Boston (the "Rights Agent").
The Company has delivered to Parent a complete and correct copy of the Rights
Agreement as amended and supplemented to the date hereof. All issued and
outstanding shares of Company Common Stock, 5%
<PAGE>
12
Stock and Preference Stock are duly and validly issued and outstanding, fully
paid and nonassessable. The aggregate amount of accrued and unpaid dividends on
the 5% Stock is zero and on the Preference Stock is $1,506,455.
(b) As of the date hereof, there are outstanding unexercised,
unexpired Options to purchase 288,100 shares of Company Common Stock, in each
case with the exercise or "strike" price and other terms as set forth on
Schedule 2.02 hereto.
(c) Except as set forth in this Section 2.02 or on Schedule 2.02
hereto, there are no other shares of capital stock of the Company, or
securities convertible into or exchangeable or exercisable for shares of
capital stock of the Company or any of its Subsidiaries, outstanding, and there
are no outstanding options, warrants, rights, contracts, commitments,
understandings, arrangements or claims of any character by which the Company or
any Subsidiary is or may become bound to issue, transfer, sell, repurchase or
otherwise acquire or retire any shares of capital stock or other ownership
interest of the Company or any Subsidiary, or any securities convertible into
or exchangeable or exercisable for any such shares or other ownership interest
(all of the foregoing being called "Conversion Rights") and, except as set
forth in Section 2.02(a) and as reserved for issuance upon exercise of the
Options described in Section 2.02(b) or the other Conversion Rights described
in Schedule 2.02, no shares of capital stock of the Company are reserved for
issuance. There are no voting trusts or other agreements or understandings to
which the Company is a party with respect to the voting of the capital stock of
the Company or any Subsidiary. Following consummation of the Merger no holder
or beneficiary of any Conversion Rights shall be entitled to receive any
securities of the Surviving Corporation or any other consideration not
expressly contemplated by this Agreement.
SECTION 2.03. Subsidiaries. (a) Schedule 2.03 hereto sets
-------------
forth each Subsidiary and the jurisdiction of incorporation of such Subsidiary.
Schedule 2.03 also sets forth each inactive Subsidiary (an "Inactive
Subsidiary") of the Company. No Inactive Subsidiary has any assets or
liabilities valued in excess of $5,000 or any business operations or real
property nor has any Inactive Subsidiary conducted any business during the
two-year period prior to the date of this Agreement. Except as disclosed on
Schedule 2.03 hereto, all of the outstanding shares of capital stock and other
ownership interest of the Company's Subsidiaries are owned, directly or
indirectly, by the Company. Except as disclosed on Schedule 2.03, none of the
shares or other ownership interests of the Subsidiaries owned or held by the
Company, directly or indirectly, is subject to any pledge, Lien (as defined
below) or claim of any kind.
(b) Each Subsidiary (excluding each Inactive Subsidiary) is duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of
<PAGE>
13
incorporation of each such Subsidiary, with all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business
as now being conducted. Each Subsidiary (excluding each Inactive Subsidiary) is
also qualified to do business and is in good standing in each jurisdiction in
which such qualification is necessary, except where failure to be so qualified
would not have a Material Adverse Effect. The Company has delivered to Parent
complete and correct copies of the respective articles or certificates of
incorporation or organization or By-Laws, as amended to the date hereof, of each
of its Subsidiaries.
(c) Except for its Subsidiaries, the Company does not directly or
indirectly own any capital stock of or other equity interest in any
corporation, partnership or other person and neither the Company nor any of its
Subsidiaries is a member of or participant in any partnership, joint venture or
similar person.
SECTION 2.04. Authorization. (a) The Company has requisite
--------------
corporate power and authority to execute and deliver this Agreement, and
subject to the approval by the stockholders of the Company, to execute, deliver
and file the Articles of Merger and, subject to the satisfaction of the
conditions set forth herein and therein, to consummate the transactions
contemplated hereby and thereby.
(b) This Agreement, the Offer, the Merger and the other
transactions contemplated hereby have been approved by the Board of Directors
of the Company and, except for the approval of the Merger by the stockholders
of the Company, no other corporate proceeding on the part of the Company is
necessary to authorize this Agreement, the Offer, the Merger or the other
transactions contemplated hereby or to consummate the Offer, the Merger and the
other transactions contemplated hereby. The affirmative vote of the holders of
(i) two-thirds of the outstanding shares of Company Common Stock and (ii)
unless called for redemption pursuant to Section 5.16, two-thirds of the
outstanding shares of the Preference Stock, approving the Merger are the only
votes of the holders of any class or series of the Company's capital stock
necessary to approve any of the transactions contemplated by this Agreement.
(c) This Agreement has been duly and validly executed and
delivered by the Company and is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, and the Articles
of Merger when executed and delivered pursuant hereto will be a valid and
binding agreement of the Company enforceable against the Company in accordance
with its terms, except in each case as such enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
similar laws in effect now or hereafter in effect relating to creditors' rights
generally, and by equitable principles (whether considered in a proceeding at
law or in equity).
<PAGE>
14
(d) The transfer of the Company's granule crushing equipment to
the Company's Wrentham and Franklin, MA quarry (at least with respect to the
"French parcel" of such quarry) and its operation at such location will not
conflict with, constitute a default under, result in the termination or in a
right of termination of, or violate or be in conflict with, provide a basis for
increased rights under, or result in a breach of any term or provision of, any
term or provision of any Material Contract.
SECTION 2.05. Absence of Conflicts; Consents. Except as set
-------------------------------
forth in Schedule 2.05, neither the execution and delivery by Company of this
Agreement and the Articles of Merger nor the consummation by the Company of
the transactions contemplated hereby and thereby will:
(a) assuming the approvals set forth in Section 2.04(b) have been
obtained, conflict with or result in a breach of any provision of the
respective articles or certificate of incorporation or organization or
By-Laws of the Company or any Subsidiary;
(b) to the knowledge of the Company, result in the creation of any
lien, mortgage, agreement, right of way, charge, option, security
interest, claim, restriction, easement, covenant, lease or encumbrance
("Lien") upon any of the properties of the Company or any of its
Subsidiaries;
(c) with or without giving of notice or the passage of time, or
both, violate, or conflict with, or constitute a default under, or result
in the termination or in a right of termination of, violate or be in
conflict with, result in a breach of any term or provision of, or
constitute a default under, or accelerate or permit the acceleration of
the performance required by, or give any other natural person,
corporation, trust, association, company, partnership, joint venture or
other entity or any government, governmental agency, instrumentality or
political subdivision ("Person") a basis for increased rights or
termination or nonperformance under, or require any consent,
authorization or approval under, any term or provision of any material
Lien or any Material Contract to which the Company or any Subsidiary is a
party or by which any of them are or their respective properties are
subject or bound;
(d) subject to the approval of the Merger by the Company's
stockholders, to the knowledge of the Company, violate any provision of,
or, except as set forth in Section 2.05(e), require any consent,
authorization or approval under, any statute, law, ordinance, or
administrative rule or regulation, Permit, order or license
(collectively, but excluding Environmental Laws, "Applicable Laws") of
any governmental agency, body or instrumentality (whether Federal, state,
local or foreign) ("Governmental Authority"), or any
<PAGE>
15
judicial, administrative or arbitration order, award, judgment, writ,
injunction or decree (collectively, "Judgment") in each case applicable to
the Company or any Subsidiary; or
(e) require any consent, approval or authorization of, or
declaration, filing or registration with, any Governmental Authority, to
be made or obtained by or on behalf of the Company except (i) as required
by the Exchange Act, (ii) the filing of the Articles of Merger and other
appropriate merger documents, if any, as required by the MBCL, or in
connection with the maintenance of qualification to do business in other
jurisdictions, such other jurisdictions, and (iii) filings with the
Federal Trade Commission ("FTC") and with the Antitrust Division of the
U.S. Department of Justice (the "Antitrust Division") pursuant to Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the
rules and regulations thereunder (the "HSR Act").
SECTION 2.06. Compliance with Laws. Neither the Company nor
---------------------
any Subsidiary has been or is presently in violation of any provision of their
respective certificates or articles of organization or incorporation or
By-Laws, or of any Applicable Law or Judgment that would have a Material
Adverse Effect. Except where the failure thereof would not cause a Material
Adverse Effect, the Company and its Subsidiaries possess, and are in compliance
in all material respects with the terms and provisions of all licenses,
permits, certificates, authorizations, rights and other approvals of
Governmental Authorities ("Permits") necessary for the operation
of the business of the Company and its Subsidiaries. Except as set forth in
Schedule 2.09 or 2.18, neither the Company nor any Subsidiary has been given
written notice by any Governmental Authority of, or to the knowledge of
Company, is under investigation by any Governmental Authority with respect to,
any violation of any Applicable Law, Judgment or Permit. This Section 2.06
does not relate to environmental representations and warranties, which matters
are exclusively the subject of Section 2.18.
SECTION 2.07. Financial Statements. (a) Set forth on
---------------------
Schedule 2.07 are the consolidated balance sheets of Company and its
Subsidiaries as at December 31, 1994, and December 31, 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for the
respective years then ended, including the notes thereto, and the report
thereon of Price Waterhouse, independent certified public accountants (the
"Company Financial Statements"). The Company Financial Statements present
fairly in all material respects the consolidated financial position and the
results of operations of the Company and its Subsidiaries as of the dates and
for the periods indicated on the Company Financial Statements, in each case in
conformity with generally accepted accounting principles ("GAAP"), consistently
applied during such periods. Except as expressly contemplated or permitted by
this Agreement or
<PAGE>
16
disclosed in the Schedules hereto, to the knowledge of the Company, the Company
and its Subsidiaries do not have any material liabilities of any nature (whether
accrued, absolute, contingent, unasserted or otherwise) except (1) as disclosed,
reflected or reserved against in the balance sheet (the "Balance Sheet") dated
December 31, 1995 (the "Balance Sheet Date"), included in the Company Financial
Statements and the notes thereto, and (2) as incurred in the ordinary course of
business consistent with past practice and not in violation of this Agreement.
(b) The inventory of the Company and its Subsidiaries, whether
reflected on the Balance Sheet or subsequently acquired, is, and will be as of
the Effective Date, generally of a quality and quantity usable and saleable
consistent in all material respects with past practice, in the ordinary course
of business. The inventory of the Company and its Subsidiaries is reflected on
the Balance Sheet and in their respective books and records in accordance with
GAAP applied on a basis consistent with past practice.
(c) All accounts receivable of the Company and its Subsidiaries,
whether reflected on the Balance Sheet or subsequently created, have arisen
from bona fide transactions in the ordinary course of business. To the
knowledge of the Company, all accounts receivable reflected on the Balance
Sheet are good and collectible at the aggregate recorded amounts thereof, net
of any applicable reserves for doubtful accounts reflected on the Balance Sheet
and all customer accounts receivable created since the Balance Sheet Date are
and will be as of the Effective Date good and collectible at the aggregate
recorded amounts thereof, net of any applicable reserves for doubtful accounts
reflected on the Balance Sheet or subsequently created consistent with past
practice and experience.
SECTION 2.08. Absence of Material Changes. Except as set
----------------------------
forth in Schedule 2.08 or as permitted by Section 5.06 or set forth in Schedule
5.06 or as expressly contemplated or permitted by this Agreement, since the
Balance Sheet Date, each of the Company and its Subsidiaries has conducted its
business in the ordinary course, and there has not been (and it is not
reasonably expected there will be) (i) any event, change or circumstance
causing, or reasonably anticipated to cause in the future, any Material Adverse
Effect, except as otherwise disclosed to Parent in writing prior to the date of
this Agreement, (ii) any declaration, setting aside or payment of any dividend
(whether in cash, stock or property) with respect to any of the Company's
capital stock, other than the minimum required dividends declared on the 5%
Stock or the Preference Stock, (iii) (x) any granting by the Company or any of
its Subsidiaries to any executive officer or director of the Company or any of
its Subsidiaries of any increase in compensation, except as was required under
employment agreements in effect as of the Balance Sheet Date, (y) any granting
by the Company or any of its Subsidiaries to any such executive officer or
director of any increase in severance or
<PAGE>
17
termination pay, except as was required under employment, severance or
termination agreements in effect as of the Balance Sheet Date or (z) any entry
by the Company or any of its Subsidiaries into any employment, severance or
termination agreement with any such executive officer or director, (iv) any
damage, destruction or loss, whether or not covered by insurance, that has or
could have a Material Adverse Effect, (v) any change in accounting methods,
principles or practices by the Company materially affecting its assets,
liabilities or business, except insofar as may have been required by a change in
GAAP or (vi) any other action that would be prohibited by Section 5.06 on and
after the date of this Agreement.
SECTION 2.09. Litigation. Except as set forth in Schedule
-----------
2.09 and other than routine warranty claims against the Company that do not in
the aggregate exceed in any material respect the level of such claims
experienced historically by the Company in the ordinary course, neither the
Company nor any Subsidiary is engaged in, and there is not to the knowledge of
the Company pending, nor has the Company or any Subsidiary received written
notice of, any legal action, suit, investigation, inquiry or proceeding by any
Governmental Authority or other Person ("Legal Action").
SECTION 2.10. Patents and Trademarks. To the knowledge of the
-----------------------
Company, the Company and its Subsidiaries own all patents, trademarks, service
marks, trade names, copyrights, trade secrets, information, proprietary rights
and processes necessary for their business as now conducted without any conflict
with or infringement of the rights of others. Except as set forth in Schedule
2.10, there are no outstanding options, licenses or agreements of any kind
relating to the foregoing, nor is the Company nor any Subsidiary bound by or a
party to any material options, licenses or agreements of any kind with respect
to the patents, trademarks, service marks, trade names, copyrights, trade
secrets, information, proprietary rights and processes of any other Person.
Except as set forth in Schedule 2.10 or relating to any matter that has been
resolved or that the Company reasonably believes has been abandoned, none of the
Company nor any Subsidiary has received any written communications alleging that
the Company or any Subsidiary has violated any of the patents, trademarks,
service marks, trade names, copyrights or trade secrets or other proprietary
rights of any other Person.
SECTION 2.11. Material Contracts; Permits. Schedule 2.11(a)
----------------------------
sets forth a complete and accurate list of any of the following to which the
Company or any Subsidiary is a party or by which Company or any Subsidiary is
bound (collectively, "Material Contracts"):
(a) all deeds, indentures, leases, subleases or other instruments
by which an ownership, leasehold or other interest in real property is
held by the Company or any Subsidiary;
<PAGE>
18
(b) all contracts, commitments or agreements, including contracts
or licenses pertaining to the payment of royalties (but excluding
customer purchase orders, purchase orders for raw materials and
warranties), to the extent such agreements include provisions that do or
could involve payments or commitments (whether fixed or contingent) to or
from the Company or any Subsidiary (i) for an amount (or potential
amount) in excess of $200,000 or (ii) have a term longer than twelve (12)
months in duration (except for such contracts, commitments or agreements
terminable by the Company or the appropriate Subsidiary of the Company
without penalty upon notice of 90 days or less);
(c) all written management, compensation or employment contracts or
contracts entered into with any executive officer or director of the
Company or any Subsidiary;
(d) all contracts or agreements under which the Company or any
Subsidiary has any outstanding indebtedness, obligation or liability for
borrowed money or the deferred purchase price of property or has the
right or obligation to incur any such indebtedness, obligation or
liability, in each case in an amount greater than $200,000;
(e) all bonds or agreements of guarantee or indemnification in
which the Company or any Subsidiary acts as surety, guarantor or
indemnitor with respect to any obligation (fixed or contingent) in an
amount or potential amount greater than $200,000;
(f) all secrecy, noncompete or other agreements which (i) restrict
the right of the Company or any Subsidiary to engage in any business
reasonably related to its present activities or (ii) would restrict the
right of Parent to engage in any business after the consummation of the
transactions contemplated by this Agreement;
(g) all current bank accounts that contain balances and safe
deposit arrangements;
(h) all agreements relating to preemptive or other preferential
rights relating to capital stock, restrictions on the disposition of
capital stock and registration rights;
(i) all partnership and joint venture agreements;
<PAGE>
19
(j) all agreements relating to material business acquisitions or
dispositions during the last five years, including any separate tax or
indemnification agreements; and
(k) all material customer and supply agreements and all material
sales representative, marketing, agency or distributorship agreements, to
the extent such agreements include provisions that do or could involve
payments or commitments (whether fixed or contingent) to or from the
Company or any Subsidiary (i) for an amount in excess of $200,000 or (ii)
have a term (including renewals that do not require the Company's or a
Subsidiary's consent) longer than twelve months in duration (except for
such contracts, commitments or agreements terminable by the Company or
the appropriate Subsidiary of the Company without penalty upon notice of
90 days or less).
Except as set forth on Schedule 2.11(a), (i) neither the Company
nor any Subsidiary is in default under the terms of any Material Contract,
which default permits the other party to adversely alter or terminate any
rights of the Company or any Subsidiary or accelerate the obligations of the
Company or any Subsidiary under such Material Contract or to collect damages,
(ii) to the knowledge of the Company, no other party thereto is in default
under the terms of any Material Contract and (iii) each Material Contract is in
full force and effect.
In order for the Company or any Subsidiary to perform its payment
obligations noted under each of the Material Contracts set forth on Schedule
2.11(b), the only required payment will be the payment of the outstanding
principal amount (and accrued interest thereon) owed by the Company under each
such Material Contract which as of the date of this Agreement is set forth on
Schedule 2.11(b) for each such Material Contract, without the payment of any
premium or penalty, other than accrued interest or default interest. Upon the
making of such payment under each such Material Contract, the Company will have
no further obligation or liability under any such Material Contract, except for
immaterial expenses relating to the termination of such Material Contracts.
SECTION 2.12. Title to Properties and Related Matters. (a)
----------------------------------------
Schedule 2.12(a) sets forth all of the real property owned by the Company and
each Subsidiary (the "Owned Real Property"). Schedule 2.12(b) sets forth all
of the real property and interests in real property leased by the Company and
each Subsidiary (the "Leased Real Property", and together with the Owned Real
Property, the "Company Property"). Each of the Company or its Subsidiaries, as
the case may be, has good and marketable fee title to the Owned Real Property,
subject only to Permitted Liens (as defined in Section 2.12(b) below). Each of
the Company or its Subsidiaries, as the case may be, has a valid and existing
leasehold interest in all
<PAGE>
20
Leased Real Property, subject only to Permitted Liens (as defined in Section
2.12(b) below).
(b) All Company Property and personal properties owned by the
Company or any Subsidiary are owned free and clear of all Liens (other than
mortgages securing the Company's existing credit facility described in Schedule
2.11(b)) or leased free and clear of all Liens, except for (A) Liens for taxes
and assessments or governmental charges or levies which are not at the time of
Closing due or payable, (B) Liens in respect of pledges or deposits under
workers' compensation laws or similar legislation, carriers', warehousemen's,
mechanics', laborers' and materialmen's and similar Liens, which have been
incurred in the ordinary course of business, so long as the obligations secured
by such Liens are not then delinquent, (C) Liens incidental to the conduct of
the business of the Company and its Subsidiaries (other than arising out of
claims of infringement) which were not incurred in connection with the
borrowing of money or the obtaining of advances or credits and which do not
individually or in the aggregate materially detract from the value or
materially impair the use and operation of the Company Property to which it
relates or the value and operation of the business of the Company as presently
conducted, (D) covenants, conditions, restrictions, easements and other similar
matters of record existing as of the Effective Date which do not, individually
or in the aggregate, impair the use and operation of the Company Property to
which it relates in the business of the Company as presently conducted and (E)
Liens set forth on Schedule 2.18 arising pursuant to Environmental Laws (the
liens described in the foregoing clauses (A), (B), (C), (D) and (E) being
"Permitted Liens") and (ii) the Owned Real Property and personal properties
owned by the Company or any Subsidiary are not subject to any Liens, building
or use restrictions, exceptions, variances, reservations or limitations of any
nature whatsoever which interfere with or are violated by the existence of the
improvements thereon or the current use and operation of each such Owned Real
Property or personal properties, respectively, to which it relates in the
business of the Company as currently conducted.
SECTION 2.13. Taxes. (a) For purposes of this Agreement, (A)
------
"Tax" or "Taxes" shall mean all Federal, state, provincial, county,
-----
local, municipal, foreign and other taxes, assessments, duties or similar
charges of any kind whatsoever, including all corporate franchise, income,
sales (including bulk sales), use, ad valorem, intangibles, receipts, value
added, profits, license, withholding, payroll, employment, excise, premium,
real property, personal property, customs, net worth, estimated, capital,
gains, transfer, stamp, documentary, social security, alternative minimum,
accumulated earnings, goods and services, recapture, recording, severance,
environmental (including but not limited to, taxes under Section 59A of the
Code), occupation and other taxes, and including any interest, penalties and
additions imposed with respect to such amounts; (B) "Code" shall mean the
----
Internal Revenue Code of 1986, as amended, and reference to any Section of the
Code shall refer to that Section
<PAGE>
21
in effect at the date hereof; (C) "Taxing Authority" shall mean any domestic,
----------------
foreign, federal, national, state, provincial, county or municipal or other
local government, any subdivision, agency, commission or authority thereof, or
any quasi-governmental body exercising any taxing authority or any other
authority exercising Taxregulatory authority; and (D) "Return" or "Returns"
------ -------
shall mean all returns, declarations of estimated tax payments, reports,
estimates, information returns and statements, including any related or
supporting information filed with respect to any of the foregoing, maintained,
filed or to be filed with any Taxing Authority in connection with the
determination, assessment, collection or administration of any Taxes.
(b) Except as set forth on Schedule 2.13, the Company and each of
the Subsidiaries has timely filed or will timely file, as the case may be, with
the appropriate Taxing Authority all Returns required to be filed on or prior
to the date hereof or the Closing Date, as the case may be, and each such
Return was or will be, as the case may be, complete and correct in all material
respects at the time of filing.
(c) Except as set forth on Schedule 2.13, all Taxes (including
Taxes for which no Returns are required to be filed and including payroll and
wage withholding Taxes) of the Company and any of the Subsidiaries or for which
the Company or any of the Subsidiaries is or could otherwise be held liable, or
which are or could otherwise become chargeable as an encumbrance upon any
property or assets of the Company or any of the Subsidiaries ("Covered Taxes"),
have been duly and timely paid. The amount of "accrued Taxes" shown on the
Balance Sheet adequately reflects the liability for unpaid Taxes (including
deferred Taxes) of Company and the Subsidiaries as of the Balance Sheet Date.
(d) Except as set forth on Schedule 2.13, the Company has made
available for inspection by Parent (A) complete and correct copies of all
Returns of the Company and each of the Subsidiaries, with respect to Federal,
state, provincial, county, local, municipal, foreign and other income, profits,
corporate franchise, receipts, sales, excise, property, net worth and all other
material Taxes, that are or have been required to be filed (except as noted in
(b) above) for taxable periods ending with or within the last five calendar
years and for such longer period as Parent has requested not to exceed the
period of the relevant statute of limitations and (B) complete and correct
copies of all ruling requests, private letter rulings, revenue agent reports,
information document requests and responses thereto, notices of proposed
deficiencies, deficiency notices, applications for changes in method of
accounting, protests, petitions, closing agreements, settlement agreements, and
any similar documents submitted by, received by or agreed to by or on behalf of
the Company or any of the Subsidiaries and relating to material Covered Taxes.
<PAGE>
22
(e) Except as set forth on Schedule 2.13, no liens for Taxes exist
with respect to any of the assets or properties of any of the Subsidiaries or
Company. The Returns of the Company and each of the Subsidiaries with respect
to Federal income Taxes have been examined by the Internal Revenue Service, or
the statute of limitations with respect to the relevant Tax liability has
expired, for all taxable periods through and including the year ended December
31, 1982. All Returns with respect to state, county, local, municipal,
provincial, foreign and other income, profits, corporate franchise, receipts,
sales, excise, property, net worth, and capital Taxes, and with respect to all
other material Taxes, have been examined by the appropriate Taxing Authority,
or the statute of limitations with respect to the relevant Tax liability has
expired, for all taxable periods through and including the taxable period
listed with respect to each such jurisdiction. Except as set forth on Schedule
2.13, each deficiency resulting from any audit or examination relating to
Covered Taxes by any Taxing Authority has been paid and no material issues were
raised in writing by the relevant Taxing Authority during any such audit or
examination that might apply to taxable periods other than the taxable period
to which such audit or examination related. Except as set forth on Schedule
2.13, (A) no Returns with respect to Federal income Taxes are currently under
audit or examination by the Internal Revenue Service and any other Taxing
Authority, (B) no audit or examination relating to Covered Taxes is currently
being conducted by the Internal Revenue Service or any other Taxing Authority
and (C) neither the Internal Revenue Service nor any other Taxing Authority has
given notice in writing that it will commence any such audit or examination.
(f) Except as set forth in Schedule 2.13, no Taxing Authority is
now asserting (in writing), or, to the knowledge of the Company or any of the
Subsidiaries, threatening to assert (in writing), any deficiency or claim for
Covered Taxes or any adjustment to any item of income, gain, deduction, loss,
credit, or tax basis entering into the computation of Covered Taxes and there
is no reasonable basis for any such assertion.
(g) Except as set forth in Schedule 2.13, (A) no person has made
with respect to the Company or any of the Subsidiaries, or with respect to any
property held by the Company or any of the Subsidiaries, any consent under
Section 341 of the Code, (B) no property of Company or any of the Subsidiaries
constitutes "tax-exempt use property" (as defined in Section 168(h) of the
Code), (C) neither the Company nor any of the Subsidiaries is a party to any
lease made pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954,
as amended and in effect prior to the date of enactment of the Tax Equity and
Fiscal Responsibility Act of 1982 and (D) none of the assets of Company or any
of the Subsidiaries is subject to a lease under Section 7701(h) of the Code or
under any predecessor.
<PAGE>
23
(h) There is no agreement or other document extending, or having
the effect of extending, the period of assessment or collection of any Covered
Taxes and no unrevoked power of attorney with respect to any Covered Taxes has
been executed or filed with the Internal Revenue Service or any other Taxing
Authority.
(i) The Company has never been a member of any affiliated,
consolidated, combined, unitary or aggregate group for purposes of filing
Returns or paying Taxes at any time.
(j) Except as set forth in Schedule 2.13, none of the Company or
any of the Subsidiaries is a party to or is bound by any Tax sharing agreements
(whether formal or informal) with any of its affiliates, or with any Taxing
Authority.
(k) None of the Company or any of the Subsidiaries will be
required to include in a taxable period on or after the Closing Date taxable
income attributable to income that economically accrued in a taxable period
ending on or before the Closing Date, including, without limitation, as a
result of the installment method of accounting, the completed contract method
of accounting or the cash method of accounting.
(l) Except as set forth on Schedule 2.13, none of the Company or
any of the Subsidiaries will be required in a taxable period beginning on or
after the Closing Date to include any amount in income pursuant to Section 481
of the Code (or any comparable provisions of state, local or foreign law), by
reason of a change in accounting methods or otherwise, as a result of actions
taken prior to the Closing Date.
(m) Schedule 2.13 lists each state, county, local, municipal or
foreign jurisdiction in which Company or any of the Subsidiaries files, has
filed, is required to file or has been required to file a Return or is or has
been liable for Tax on a "nexus" basis for the current and preceding five
years.
(n) The Company is not, and has not been during the five-year
period ending on the date hereof or the Closing Date, as the case may be, a
"United States real property holding corporation" within the meaning of Section
897 of the Code.
(o) Schedule 2.13 provides true and correct descriptions of the
following: items for which amounts for taxes have been reserved on the Balance
Sheet in excess of reserves necessary to currently pay its operating tax
liabilities. The Company has a consolidated net operating loss carryover for
regular Federal income tax purposes as of December 31, 1995, of approximately
$44 million. The Company has no material net operating loss carryovers in
states other than New York (in which it has a net operating loss carryover of
$198,000 as of December 31, 1995). The Company has tax credit carryforwards as
of December 31, 1995, of approximately
<PAGE>
24
$1.2 million for regular Federal income tax purposes, and no tax credit
carryforwards for state tax purposes. In addition, the Company had approximately
$1.1 million of minimum tax carryovers.
(p) Schedule 2.13 sets forth the Company's best estimates, made in
good faith, of the excess loss accounts for the Company and its Subsidiaries as
of December 31, 1995. The Company estimates in good faith that neither it nor
its Subsidiaries had positive balances in any deferred intercompany gain
accounts as of December 31, 1995.
(q) The schedules of the Company's best estimates, made in good
faith, of the temporary and permanent differences as of December 31, 1995,
previously submitted to the Company are true, correct and complete in all
materials respects.
(r) None of the Company, any of the Subsidiaries or any other
affiliate of the Company has made any election under Section 13261(g)(2) or
Section 13261(g)(3) of the Revenue Reconciliation Act of 1993.
(s) None of the Company, any of the Subsidiaries or any other
affiliate of the Company has available any foreign tax credits.
SECTION 2.14. Labor Agreements. Except as identified on
-----------------
Schedule 2.14, neither the Company nor any Subsidiary is a party to any union,
collective bargaining, works council or similar agreement or arrangement.
SECTION 2.15. Benefit Plans. (i) Schedule 2.15 is a list of
--------------
each "employee pension benefit plan" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(hereinafter a "Pension Plan"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA, hereinafter a "Welfare Plan"), and each other plan,
arrangement or policy relating to stock options, stock purchases, compensation,
deferred compensation, severance, fringe benefits or other employee benefits,
in each case maintained or contributed to, or required to be maintained or
contributed to, by the Company and its Subsidiaries or any other person or
entity that, together with the Company, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code (each a "Commonly Controlled
Entity") for the benefit of any present or former employees of the Company or
any of its Subsidiaries (all the foregoing being herein called "Benefit Plans").
The Company has made available to Parent true, complete and correct copies of
(1) each Benefit Plan, (2) the most recent annual report on Form 5500 as filed
with the Internal Revenue Service with respect to each applicable Benefit Plan,
(3) the most recent summary plan description (or similar document) with respect
to each applicable
<PAGE>
25
Benefit Plan and (4) each trust agreement and insurance or annuity contract
relating to any Benefit Plan.
(ii) Except as disclosed in Schedule 2.15, to the knowledge of the
Company, each Benefit Plan has been administered in all material respects in
accordance with its terms. Except as disclosed in Schedule 2.15, to the
knowledge of the Company, the Company, its Subsidiaries and all the Benefit
Plans are in compliance in all material respects with the applicable provisions
of ERISA, the Code, and all other Applicable Laws. Except as disclosed in
Schedule 2.15, to the knowledge of the Company, there are no investigations by
any governmental agency, termination proceedings or other claims (except claims
for benefits payable in the normal operation of the Benefit Plans), suits or
proceedings against or involving any Benefit Plan or asserting any rights to or
claims for benefits under any Benefit Plan that could give rise to a Material
Adverse Effect, and to the knowledge of the Company, there are not any facts
that could give rise to a Material Adverse Effect in the event of any such
investigation, claim, suit or proceeding.
(iii) Except as disclosed on Schedule 2.15, to the knowledge of
the Company: (1) all contributions to the Benefit Plans required to be made by
the Company or any of its Subsidiaries in accordance with the terms of the
Benefit Plans, any applicable collective bargaining agreement and, when
applicable, Section 302 of ERISA or Section 412 of the Code, have been timely
made, (2) there has been no application for or waiver of the minimum funding
standards imposed by Section 412 of the Code with respect to any Benefit Plan
that is a Pension Plan, excluding any Pension Plan which is a multiemployer
pension plan as defined in Section 4001(a)(3) of ERISA (hereinafter a "Company
Pension Plan") and (3) no Company Pension Plan had an "accumulated funding
deficiency" within the meaning of Section 412(a) of the Code as of the end of
the most recently completed plan year. All such contributions to the Benefit
Plans for any period ending before the Balance Sheet Date are properly accrued
and reflected in the Balance Sheet and such contributions since such Balance
Sheet Date will be reflected on subsequent balance sheets.
(iv) Except as disclosed on Schedule 2.15, to the knowledge of the
Company, (1) each Company Pension Plan that is intended to be a tax-qualified
plan has been the subject of a determination letter from the Internal Revenue
Service to the effect that such Company Pension Plan and each related trust is
qualified and exempt from Federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, (2) no such determination letter has been revoked,
and revocation has not been threatened, (3) no event has occurred and no
circumstances exist that would adversely affect the tax-qualification of such
Company Pension Plan and (4) such Company Pension Plan has not been amended
since the effective date of its most recent determination letter in any respect
that might adversely affect its qualification,
<PAGE>
26
materially increase its cost or require security under Section
307 of ERISA. The Company has made available to Parent a copy of the most
recent determination letter received with respect to each Company Pension Plan
for which such a letter has been issued, as well as a copy of any pending
application for a determination letter. The Company has also provided to
Parent a list of all Company Pension Plan amendments as to which a favorable
determination letter has not yet been received.
(v) Schedule 2.15 discloses whether: (1) to the knowledge of the
Company, any non-exempt "prohibited transaction" (as defined in Section 4975 of
the Code or Section 406 of ERISA) has occurred that involves the assets of any
Benefit Plan; (2) to the knowledge of the Company, any Company Pension Plan has
been terminated or has been the subject of a "reportable event" (as defined in
Section 4043 of ERISA and the regulations thereunder) for which the 30-day
notice requirement has not been waived by the Pension Benefit Guaranty
Corporation ("PBGC"); and (3) to the knowledge of the Company, the Company, any
of its Subsidiaries or any trustee, administrator or other fiduciary of any
Benefit Plan has engaged in any transaction or acted in a manner that could, or
has failed to act so as to, subject the Company, any such Subsidiary or any
trustee, administrator or other fiduciary to any material liability for breach
of fiduciary duty under ERISA or any other applicable law.
(vi) Except as disclosed on Schedule 2.15, to the knowledge of the
Company, as of the most recent valuation date for each Company Pension Plan
that is a "defined benefit pension plan" (as defined in Section 3(35) of ERISA
(hereinafter a "Defined Benefit Plan")), there was not any amount of "unfunded
benefit liabilities" (as defined in Section 4001(a)(18) of ERISA) under such
Defined Benefit Plan, and the Company is not aware of any facts or
circumstances that would materially change the funded status of any such
Defined Benefit Plan. The Company has made available to Parent the most recent
actuarial report or valuation with respect to each Defined Benefit Plan.
(vii) Except as disclosed on Schedule 2.15, to the knowledge of
the Company, no Commonly Controlled Entity has incurred any liability to a
Pension Plan (other than for contributions not yet due) or to the PBGC (other
than for the payment of premiums not yet due) that, when aggregated with other
such liabilities, would result in a Material Adverse Effect to the Company,
which liability has not been fully paid as of the date hereof if due and
payable.
(viii) No Commonly Controlled Entity has (a) engaged in a
transaction described in Section 4069 of ERISA that could subject the Company
to a material liability at any time after the date hereof or (b) acted in a
manner that could, or failed to act so as to, result in material fines,
penalties, taxes or related charges under (x)
<PAGE>
27
Section 502(c), (i) or (l) of ERISA, (y) Section 4071 of ERISA or (z) Chapter
43 of the Code.
(ix) Except as disclosed in Schedule 2.15, to the knowledge of the
Company, no Commonly Controlled Entity has announced an intention to withdraw,
but has not yet completed withdrawal, from a "multiemployer pension plan" (as
defined in Section 4001(a)(3) of ERISA). Except as disclosed on Schedule 2.15,
to the knowledge of the Company, no action has been taken, and no circumstances
exist, that could result in either a partial or complete withdrawal from such a
multiemployer pension plan by any Commonly Controlled Entity. Schedule 2.15
also lists for each Benefit Plan that is a multiemployer pension plan
(excluding the multiemployer pension plan in respect of the Company's former
New York Building Products, Inc. operations) the Company's best estimate, based
upon the information supplied to it by each multiemployer pension plan, of the
amount of withdrawal liability that would be incurred if each Commonly
Controlled Entity were to make a complete withdrawal from each such plan as of
the dates specified in Schedule 2.15. Schedule 2.15 also lists for each
Benefit Plan that is a multiemployer pension plan (excluding the multiemployer
pension plans in respect of the Company's former New York Building Products,
Inc., and Bardstown operations) the Company's best estimate, based upon the
information supplied to it by each multiemployer pension plan, of the amount of
"unfunded vested benefits" (within the meaning of Section 4211 of ERISA) as of
the dates specified in Schedule 2.15. As of the most recent valuation date for
the multiemployer pension plan in respect of the Company's former New York
Building Products Inc. operations, to the knowledge of the Company, based upon
the information supplied to it by such multiemployer pension plan, there was
not any amount of "unfunded vested benefits" under such plan.
(x) The list of Welfare Plans in Schedule 2.15 discloses whether
each Welfare Plan is (i) unfunded, (ii) funded through a "welfare benefit
fund", as such term is defined in Section 419(e) of the Code, or other funding
mechanism or (iii) insured. Except as disclosed on Schedule 2.15, to the
knowledge of the Company, apart from the written provisions of the Welfare
Plans disclosed to Parent, there are no understandings, agreements or
undertakings, written or oral, that would prevent any such Welfare Plan from
being amended or terminated at any time after the Closing Date. The Company
and its Subsidiaries comply with the applicable requirements of Section
4980B(f) of the Code with respect to each Benefit Plan that is a group health
plan, as such term is defined in Section 5000(b)(1) of the Code.
(xi) Except as provided in Section 1.14 with respect to the 1982
Stock Option Plan, the 1992 Stock Option Plan, the Director Option Plan, the
LTIP and the Savings Plan, and as provided in the employment and severance
agreements listed in Schedules 2.11(a) and 2.15, no employee of the Company or
any of its Subsidiaries
<PAGE>
28
will be entitled to any additional material benefits or any acceleration of the
time of payment or vesting of any material benefits under any Benefit Plan as a
result of the transactions contemplated by this Agreement.
(xii) During the period beginning on January 1, 1995, and ending
on the date of this Agreement, there has been no change (a) in any actuarial or
other assumption used to calculate funding obligations with respect to any
Company Pension Plan or (b) in the manner in which contributions to any Company
Pension Plan are made or the basis on which such contributions are determined.
(xiii) Except as disclosed on Schedule 2.15, to the knowledge of
the Company and based upon its best estimate, any amount that could be received
(whether in cash or property or the vesting of property) as a result of any of
the transactions contemplated by this Agreement by any employee, officer or
director of the Company or any of its affiliates who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any employment, severance or termination agreement, other
compensation arrangement or Benefit Plan currently in effect would not be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G(B)(1) of the Code). Schedule 2.15 sets forth (i) the Company's
best estimate of the maximum amount that could be paid to each executive
officer of Company as a result of the transactions contemplated by this
Agreement under all employment, severance and termination agreements, other
compensation arrangements and Benefit Plans currently in effect and (ii) the
Company's best estimate of the "base amount" (as such term is defined in
Section 280(b)(3) of the Code) for each such executive officer calculated as of
the date of this Agreement.
SECTION 2.16. Labor Disputes; Unfair Labor Practices. (a)
---------------------------------------
There is neither pending nor, to the knowledge of the Company, threatened any
labor dispute which could materially adversely affect the facility that is the
subject of such dispute, or any strike or work stoppage involving the Company
or any Subsidiary.
(b) There is not now pending or, to the knowledge of the Company,
threatened any charge or complaint against the Company or any Subsidiary by the
National Labor Relations Board, any state or local labor or employment agency
or any representative thereof.
SECTION 2.17. Product Warranties. (a) The standard forms of
-------------------
product warranties and guarantees used by the Company and each Subsidiary
during the past five (5) years are attached as Schedule 2.17 hereto. Neither
the Company nor any Subsidiary has authorized any product warranty or guaranty
during such period of time other than pursuant to such forms.
<PAGE>
29
(b) Other than as set forth on Schedule 2.17 or relating to any
matter that has been resolved or that the Company reasonably believes has been
abandoned, as of date of this Agreement, the Company has not received written
notice of any product warranty or similar claims with an actual or alleged
liability to the Company or any Subsidiary other than routine warranty claims
against the Company that do not in the aggregate exceed in any material respect
the level of such claims historically experienced by the Company in the ordinary
course. The Company does not believe that the Assurance of Discontinuance dated
November 1995 between the Commonwealth of Massachusetts and Bird, Inc. will
result in an increase in liability for claims under product warranties over the
level historically experienced by the Company in the ordinary course.
SECTION 2.18. Environmental Matters. Except as disclosed in
----------------------
Schedule 2.18, with respect to the business and operations of the Company and
its Subsidiaries and to the Owned Real Property and Leased Real Property:
(a) No Hazardous Material has been used, possessed, Released,
generated, manufactured or treated, on or under such Owned Real Property or
Leased Real Property, as the case may be, by the Company or any Subsidiary in
material violation of any Environmental Law.
(b) The Company and each Subsidiary, as the case may be, has
through the date hereof (i) secured and maintained compliance with all permits,
certificates, licenses, approvals, registrations or authorizations required for
the conduct of their respective businesses under Environmental Laws and (ii)
maintained such Owned Real Property or Leased Real Property and conducted their
respective business thereon in accordance in all material respects with all
Environmental Laws.
(c) No written notice, written request for information pursuant to
common law, law or regulation, citation, summons, complaint or order has been
received by the Company or any Subsidiary, and no penalty has been assessed
and, to the knowledge of the Company, no investigation or review is pending or
threatened by any Governmental Authority or other Person, with respect to the
business and operations of the Company and its Subsidiaries or to such Owned
Real Property or Leased Real Property, as the case may be, other than relating
to any matter that has been resolved or that the Company reasonably believes
has been abandoned, regarding (i) any alleged violation by the Company or any
Subsidiary of any Environmental Laws, (ii) any alleged failure by the Company
or any Subsidiary to have any environmental permit, certificate, license,
approval, registration or authorization required under any Environmental Law,
or (iii) any use, possession, spill, Release, threatened Release, storage,
generation, manufacture, treatment, deposit, discharge, transportation
<PAGE>
30
or disposal by or on behalf of the Company or any Subsidiary of any Hazardous
Material.
(d) Neither the Company nor any Subsidiary has entered into or
agreed to any court decree or order nor are any of them subject to any judgment,
decree or order relating to compliance with any Environmental Law or to
investigation or cleanup under any Environmental Law.
(e) There are no aboveground or underground storage tanks on any
such Owned Real Property or Leased Real Property.
(f) Neither the Company nor any Subsidiary has received any
written notice of non-compliance with any applicable statutes, laws,
ordinances, rules, orders and regulations of any Governmental Authority that
relate to occupational health and safety, other than relating to any matter
that has been resolved or that the Company reasonably believes has been
abandoned.
(g) The investigation, remediation, cleanup and other costs of the
Company relating to compliance with any Environmental Law will not exceed an
amount equal to 205% of the Company's estimates of such amounts (the "Company
Estimates") provided to Parent by the Company in a letter dated January 30,
1996. The Company has used its best efforts in preparing the Company Estimates
consistent with all recognized best engineering practices.
As used in this Agreement, the term "Environmental Laws" means any
and all applicable treaties, laws, regulations, enforceable requirements,
binding determinations, orders, decrees, judgments, injunctions, permits,
approvals, authorizations, licenses or variances, promulgated or entered into
by any Governmental Authority, relating to the environment, conservation,
preservation or reclamation of natural resources, or to the management, Release
or threatened Release of Hazardous Materials, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. Section Section 9601 et seq. ("CERCLA"), the Federal Water Pollution
-- ---
Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. Section
Section 1251 et seq., Clean Air Act of 1970, as amended, 42 U.S.C. Section
-- ---
Section 7401 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C.
-- ---
Section Section 2601 et seq., the Occupational Safety and Health Act of 1970,
-- ---
as amended, 29 U.S.C. Section Section 651 et seq., the Emergency Planning and
-- ---
Community Right-to-Know Act of 1986, 42 U.S.C. Section Section 11001 et seq.,
-- ---
the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. Section Section
300(f) et seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section
-- ---
Section 1801 et seq., and any similar or implementing state or local law, and
-- ---
all amendments or regulations promulgated thereunder.
<PAGE>
31
As used in this Agreement, the term "Hazardous Materials" means all
explosive or regulated radioactive materials or substances, hazardous or toxic
substances, wastes or chemicals, petroleum (including crude oil or any faction
thereof) or petroleum distillates, asbestos or asbestos containing materials,
including materials listed in 49 C.F.R. Section 172.101 and materials defined
as hazardous substances pursuant to Section 101(14) of the CERCLA.
As used in this Agreement, the term "Release" means any spilling,
emitting, leaking, pumping, pouring, emptying, injecting, depositing,
disposing, discharging, dispersing, leaching, emanating or migrating of any
Hazardous Materials in, into, onto, or though the environment (including
ambient air, surface water, groundwater, soils, land surface, subsurface
strata, workplace or structure).
SECTION 2.19. Insurance. The Company and each Subsidiary has
----------
been and is insured by financially sound and reputable insurers unaffiliated
with the Company with respect to its and their properties and the conduct of
its and their business in such amounts and against such risks as are consistent
with industry practice. The insurance coverage provided by such policies of
insurance will be continued through the Effective Date and will not terminate
or lapse by reason of the transactions contemplated by this Agreement. The
Company has provided to Parent copies of such policies of insurance. Except as
set forth in Schedule 2.19, neither the Company nor any Subsidiary has been
denied insurance coverage by any carrier in the last three years.
SECTION 2.20. SEC Filings. (a) Schedule 2.20 sets forth all
------------
of the documents filed since January 1, 1994 through the date of this Agreement
by the Company with the Securities and Exchange Commission (the "SEC") under
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act"), or the Exchange Act. The
documents listed in Schedule 2.20 (the "SEC Documents") are all the documents
the Company was required to file under the Securities Act or the Exchange Act
since January 1, 1994, and at the time they were filed and when supplemented or
amended, the SEC Documents complied with the requirements of the Securities Act
and the Exchange Act, as applicable, and at such time, none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein, in light of the circumstances
under which they were made, not misleading. The financial statements of the
Company included in the SEC Documents, at the time they were filed and when
supplemented or amended, complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except as may
be
<PAGE>
32
indicated in the notes thereto) and fairly present in all material respects
the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods therein indicated (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
(b) None of the information supplied or to be supplied by the
Company for inclusion or incorporation by reference in (i) the Offer Documents
or (ii) the information to be filed by the Company in connection with the Offer
pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder (the "Information Statement"), will, at the respective times the
Offer Documents and the Information Statement are filed with the SEC and first
published, sent or given to holders of shares of Company Common Stock or
Preference Stock, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Information Statement will comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder.
SECTION 2.21. Brokers and Finders. The Company has not
--------------------
employed any broker or finder or incurred any liability for any brokerage fees,
commissions, finders' fees or similar fees or expenses in connection with this
Agreement or the Merger contemplated herein except for Dillon, Read & Co. Inc.
The Company has delivered to Parent a copy of its engagement letter with
Dillon, Read & Co. Inc. The estimated investment banking and legal fees and
expenses incurred and to be incurred by the Company in connection with this
Agreement and the Merger contemplated by this Agreement have been disclosed to
Parent in writing on the date hereof.
SECTION 2.22. Rights Agreement; Antitakeover. (a) The
-------------------------------
Company has taken all necessary action to (i) amend the Rights Agreement to
render the Rights inapplicable to the Offer and the Merger and the other
transactions contemplated by this Agreement and (ii) ensure that (y) neither
Parent nor any of its affiliates is an Acquiring Person (as defined in the
Rights Agreement) and (z) a Stock Acquisition Date, a Distribution Date or a
Triggering Event (as such terms are defined in the Rights Agreement) does not
occur by reason of the announcement or consummation of the Offer and the Merger
or any of the other transactions contemplated by this Agreement.
(b) The Company has taken or will take prior to Closing all action
necessary to approve the Offer and the Merger such that the approval (along
with the stockholder approval required pursuant to Section 6.03) is sufficient
to render entirely inapplicable to the Offer and the Merger or Parent or
Acquisition Sub the provisions of
<PAGE>
33
Chapter 110C, 110D, 110E and 110F of the Massachusetts General Laws. No other
antitakeover or similar statute or regulation applies or purports to apply to
the transactions contemplated by this Agreement.
SECTION 2.23. Opinion of Financial Advisor. The Company
-----------------------------
has received the opinion of Dillon, Read & Co. Inc. to the effect that the
consideration to be received in the Offer and the Merger by the Company's
stockholders is fair to the Company's stockholders from a financial point of
view, a copy of which opinion has been delivered to Parent.
SECTION 2.24. Asbestos Claims. The Agreement of Settlement
----------------
dated March 8, 1993, between Employers Insurance of Wausau and the Company with
respect to insurance coverage for the Company's exposure for future asbestos
expenses and liabilities is in full force and effect.
ARTICLE III
Representations and Warranties of Parent
----------------------------------------
Parent hereby represents and warrants to the Company as follows:
SECTION 3.01. Corporate Organization. Parent is a corporation
-----------------------
duly incorporated, validly existing and in good standing under the laws of
Delaware with all requisite power and authority to own, operate and lease its
properties and to carry on its business as now being conducted. Parent is
qualified to do business and is in good standing in each jurisdiction in which
such qualification is necessary, except where failure to be qualified would not
reasonably be expected to have a material adverse effect on the ability of
Parent to carry out the transactions contemplated hereby without significant
unanticipated delay.
SECTION 3.02. Authorization. (a) Parent has requisite
--------------
corporate power and authority to execute and deliver this Agreement and,
subject to the satisfaction of the conditions set forth herein and therein, to
consummate the transactions contemplated hereby and thereby.
(b) This Agreement has been approved by the Board of Directors of
Parent and upon such approval no other corporate proceeding on the part of
Parent is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby.
<PAGE>
34
(c) This Agreement has been duly and validly executed and
delivered by Parent and is a valid and binding agreement of Parent, enforceable
against Parent in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws in effect now or hereafter in effect relating to
creditors' rights generally and by equitable principles (whether considered in
a proceeding at law or in equity).
SECTION 3.03. Absence of Conflicts; Consents. Neither the
-------------------------------
execution and delivery by Parent of this Agreement nor the consummation by
Parent of the transactions contemplated hereby will:
(a) conflict with or result in a breach of any provision of the
certificate of incorporation or By-Laws of Parent which would have a
material adverse effect on the ability of Parent to carry out the
transactions contemplated hereby without significant unanticipated delay;
(b) result in the creation of any Lien upon any of the properties
of Parent which would have a material adverse effect on the ability of
Parent to carry out the transactions contemplated hereby without
significant unanticipated delay;
(c) with or without giving of notice or the passage of time, or
both, violate, or conflict with, or constitute a default under, or result
in the termination or in a right of termination of, violate or be in
conflict with, result in a breach of any term or provision of, or
constitute a default under, or accelerate or permit the acceleration of
the performance required by, or give any other Person a basis for
accelerated or increased rights or termination or nonperformance under,
or require any consent, authorization or approval under, any term or
provision of any Lien, lease, license or other agreement or instrument to
which Parent or any of its Subsidiaries is a party or by which it or they
are bound, except to the extent that such circumstance would not have a
material adverse effect on the ability of Parent to carry out the
transactions contemplated hereby without significant unanticipated delay;
(d) subject to the approval of the Merger by the Company's
stockholders, to the knowledge of Parent, violate any provision of, or
require any consent, authorization or approval under, any Applicable Laws
of any Governmental Authority, or any Judgment applicable to Parent or
any of its Subsidiaries, except to the extent that such circumstance
would not have a material adverse effect on the ability of Parent to
carry out the transactions contemplated hereby without significant
unanticipated delay; or
<PAGE>
35
(e) require any consent, approval or authorization of, or
declaration, filing or registration with, any Governmental Authority, to
be made or obtained by or on behalf of Parent except (i) as required by
the Exchange Act, (ii) the filing of the Articles of Merger and other
appropriate merger documents, if any, as required by the laws of the
Commonwealth of Massachusetts or, in connection with the maintenance of
qualification to do business in other jurisdictions, such other
jurisdictions and (iii) filings with the FTC and with the Antitrust
Division under the HSR Act.
SECTION 3.04. Litigation. Neither Parent nor any of its
-----------
Subsidiaries is engaged in, and there is not, to the knowledge of Parent,
pending, nor has Parent or any of its Subsidiaries received any written notice
of, any Legal Action which would prevent Parent from consummating the
transactions contemplated hereby.
SECTION 3.05. Brokers and Finders. Parent has not employed
--------------------
any broker or finder or incurred any liability for any brokerage fees,
commissions, finders' fees or similar fees or expenses in connection with this
Agreement or the transactions contemplated hereby except for McFarland Dewey &
Co. In the event that the Company shall be obligated to pay Parent's Expenses
pursuant to Article X, Parent will deliver to the Company a copy of its
engagement letter with McFarland Dewey & Co.
ARTICLE IV
Representations and Warranties of Acquisition Sub
-------------------------------------------------
Acquisition Sub hereby represents and warrants to the Company as
follows:
SECTION 4.01. Corporate Organization. Acquisition Sub is a
-----------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts and has not engaged in any operations
or incurred any obligations other than incident to its organization and the
performance of this Agreement.
SECTION 4.02. Authorization. (a) Acquisition Sub has all
--------------
requisite corporate power and authority, if necessary, to execute, deliver and
file the Articles of Merger and to execute and deliver this Agreement and,
subject to the satisfaction of the conditions set forth herein, to consummate
the transactions contemplated hereby. This Agreement has been approved by the
Board of Directors of Acquisition Sub, and no other corporate proceeding on the
part of Acquisition Sub is necessary to authorize this
<PAGE>
36
Agreement or to consummate the transactions contemplated hereby without
significant unanticipated delay.
(b) The Agreement has been duly and validly executed and delivered
by Acquisition Sub and is a valid and binding agreement of Acquisition Sub,
enforceable against Acquisition Sub in accordance with its terms, enforceable
against Acquisition Sub in accordance with its terms, except in each case as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or similar laws in effect now or hereafter in
effect relating to creditors' rights generally and by equitable principles
(whether considered in a proceeding at law or in equity).
SECTION 4.03. Absence of Conflicts; Consents. Neither the
-------------------------------
execution and delivery by Acquisition Sub of this Agreement nor the
consummation by Acquisition Sub of the transactions contemplated hereby will:
(a) conflict with or result in a breach of any provision of the
Articles of Organization or By-Laws of Acquisition Sub which would have a
material adverse effect on the ability of Acquisition Sub to carry out
the transactions contemplated hereby without significant unanticipated
delay;
(b) result in the creation of any Lien upon any of the properties
of Acquisition Sub which would have a material adverse effect on the
ability of Acquisition Sub to carry out the transactions contemplated
hereby without significant unanticipated delay;
(c) with or without giving of notice or the passage of time, or
both, violate, or conflict with, or constitute a default under, or result
in the termination or in a right of termination of, violate or be in
conflict with, result in a breach of any term or provision of, or
constitute a default under, or accelerate or permit the acceleration of
the performance required by, or give any other Person a basis for
accelerated or increased rights or termination or nonperformance under,
or require any consent, authorization or approval under, any term or
provision of any Lien, lease, license or other agreement or instrument to
which Acquisition Sub or any of its Subsidiaries is a party or by which
it or they are bound, unless such circumstance would not have a material
adverse effect on the ability of Acquisition Sub to carry out the
transactions contemplated hereby without significant unanticipated delay;
(d) subject to the approval of the Merger by the Company's
stockholders, to the knowledge of Acquisition Sub, violate any provision
of, or require any consent, authorization or approval under, any
Applicable Laws of any Governmental Authority, or any Judgment applicable
to Acquisition Sub or
<PAGE>
37
any of its Subsidiaries, except to the extent that such circumstance would
not have a material adverse effect on the ability of Acquisition Sub to
carry out the transactions contemplated hereby without significant
unanticipated delay; or
(e) require any consent, approval or authorization of, or
declaration, filing or registration with, any Governmental Authority, to
be made or obtained by or on behalf of Acquisition Sub except (i) as
required by the Exchange Act, (ii) the filing of the Articles of Merger
and other appropriate merger documents, if any, as required by the laws
of the Commonwealth of Massachusetts or, in connection with the
maintenance of qualification to do business in other jurisdictions, such
other jurisdictions and (iii) filings with the FTC and with the Antitrust
Division under the HSR Act.
SECTION 4.04. Litigation. Neither Acquisition Sub nor any of
-----------
its Subsidiaries is engaged in, and there is not, to the knowledge of
Acquisition Sub, pending, nor has Acquisition Sub received any written notice
of, any Legal Action which would prevent Acquisition Sub from consummating the
transactions contemplated hereby.
SECTION 4.05. Capitalization. The authorized capital stock of
---------------
Acquisition Sub consists of 200,000 shares of Common Stock, $1 par value, of
which 100 shares are issued and outstanding. All issued and outstanding shares
of Acquisition Sub Common Stock have been validly issued and are fully paid,
nonassessable and free of preemptive rights and all of such shares are owned,
beneficially and of record, by Parent. There are no outstanding securities
convertible into or exchangeable or exercisable for shares of capital stock of
Acquisition Sub.
SECTION 4.06. Brokers and Finders. Acquisition Sub has not
--------------------
employed any broker or finder or incurred any liability for any brokerage fees,
commissions, finders' fees or similar fees or expenses in connection with this
Agreement or the transactions contemplated hereby.
ARTICLE V
Covenants
---------
SECTION 5.01. Access and Information. (a) From the date
-----------------------
hereof until the Effective Date or, if earlier, the date of termination of this
Agreement pursuant to Section 9.01, the Company shall, and shall cause its
Subsidiaries to, afford to Parent and to Parent's officers, employees,
accountants, counsel and other authorized representatives full access, upon
reasonable notice to the Company, to their
<PAGE>
38
plants, properties, books and records during normal business hours for the
purpose of making such investigations as Parent shall reasonably desire in
connection with the transactions contemplated hereby, at its expense (except as
otherwise contemplated by Section 10.01), and the Company shall use its
reasonable efforts to cause its and its Subsidiaries' representatives to furnish
promptly to Parent such additional financial and operating data and other
information regarding the business and properties of the Company and its
Subsidiaries as Parent may from time to time reasonably request for such
purpose. In addition, the Company shall afford to Parent and to Parent's
officers, employees, accountants, counsel and other authorized representatives
the right to speak directly with the lenders of the Company and its Subsidiaries
in the presence of representatives of the Company selected by the Chief
Executive Officer of the Company, including without limitation, Fleet Capital
Corporation.
(b) The provisions of the confidentiality agreement dated April 13,
1994 (the "Confidentiality Agreement"), between the Company and Saint-Gobain
Corporation in connection with the transactions contemplated hereby shall be
incorporated herein and made a part hereof except that the termination of such
Agreement shall be extended to December 31, 1996.
SECTION 5.02. Proxy Statement. (a) The Company shall prepare
----------------
and file with the SEC, as soon as reasonably practicable, the proxy statement
to be distributed to the Company's stockholders in connection with the Special
Meeting referred to in Section 5.03 (the "Proxy Statement"), and the Company
shall use all reasonable efforts to have such Proxy Statement cleared by the
SEC. The Proxy Statement shall comply as to form in all material respects with
the requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied or
required to be supplied by Parent or Acquisition Sub for inclusion or
incorporation by reference in the Proxy Statement.
(b) Parent shall cooperate with the Company in preparing the Proxy
Statement and making any filings required to be made pursuant to this Section
5.02, and the Company shall consult with Parent in that regard and keep Parent
fully informed of its progress with respect thereto and provide to Parent
copies of the Proxy Statement and all such filings for review and approval
prior to the finalization thereof.
(c) Parent and the Company shall furnish to each other, and each
other's counsel, all such information as may be required and requested in
connection with the preparation of the Proxy Statement and the filing of the
Proxy Statement with the SEC, and each represents and warrants to the other
that no written information furnished as provided for in this Section 5.02(c)
which has been prepared by the responsible party will contain any untrue
statement of a material fact or omit to state a material fact
<PAGE>
39
required to be stated in order to make any information so furnished, in light
of the circumstances under which it is so furnished, not misleading.
(d) Parent and the Company shall each promptly notify the other if
at any time before the Effective Date it becomes aware that the Proxy Statement
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
contained therein, in light of the circumstances under which they were made,
not misleading. In such event, the Company shall prepare a supplement or
amendment to the Proxy Statement which corrects such misstatements or omissions
and shall cause the same to be filed with the SEC and distributed to the
stockholders of the Company in accordance with the Exchange Act.
(e) Upon the acceptance of any shares of Company Common Stock and
Preference Stock (if any) by Acquisition Sub pursuant to the Offer (the
"Consummation of the Offer"), Parent shall cause Acquisition Sub to vote all
its shares of Company Common Stock and Preference Stock in favor of the Merger.
SECTION 5.03. Stockholders' Meeting. (a) The Company shall
----------------------
call a special meeting of its stockholders ("Special Meeting") to consider and
vote upon the matters necessary for the consummation of the transactions
contemplated by this Agreement and shall recommend to its stockholders a vote
"FOR" the Merger; provided, however, that nothing contained in this
-------- -------
Section 5.03(a) or any other provision of this Agreement shall prohibit the
Company or its Board of Directors, or the representatives of either of them,
from recommending to the stockholders of the Company against, or withdrawing,
modifying or changing its recommendation to the stockholders with respect to,
the Merger, if permitted by Section 5.12 hereof.
(b) The date of the Special Meeting shall be determined jointly by
Parent and the Company, but shall occur as soon as practicable following the
SEC's approval of the Proxy Statement and related proxy materials.
SECTION 5.04. Supplemental Information. From time to time
-------------------------
prior to the Effective Date, the Company shall promptly advise Parent of any
inaccuracy of which it has knowledge in any Schedules which it has delivered
pursuant to this Agreement if any matter arises hereafter which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in any such Schedule. Such updating shall not cure any
breach or misrepresentation or failure of any closing condition that may exist
based on the Schedules originally delivered with this Agreement.
<PAGE>
40
SECTION 5.05. Further Assurances. Consistent with the terms
-------------------
and conditions hereof, each party hereto shall execute and deliver such
instruments and take such other action as the other parties hereto may
reasonably require in order to carry out this Agreement and the transactions
contemplated hereby.
SECTION 5.06. Conduct of Company Business Prior to the Effective
---------------------------------------------------
Date. (a) Except as set forth on Schedule 5.06 or any other Schedule hereto
- -----
with reference to this Section 5.06 or otherwise consented to or approved by an
authorized officer of Parent or as expressly contemplated or permitted by this
Agreement, the Company agrees that prior to the Effective Date (or, if earlier,
when a majority of the members of the Board of Directors of the Company are
designees of Acquisition Sub in accordance with Section 5.21) the business of
the Company and its Subsidiaries shall be conducted in the ordinary course
consistent with past practice and:
(i) no change shall be made in the respective articles or
certificate of organization or incorporation or By-Laws of the Company or
any of its Subsidiaries;
(ii) no change shall be made in the number of shares of the
Company's authorized, issued or outstanding capital stock; nor shall any
Conversion Rights be granted, made, redeemed or amended; nor shall the
Company or any Subsidiary issue, deliver, pledge or sell any such shares,
securities or obligations (except deliveries or pledges in favor of the
Company's senior lenders); provided, however, that the Company
-------- -------
shall be permitted to issue shares or other securities as contemplated by
the Savings Plan as in effect on the date hereof and shall be permitted
to issue shares of Common Stock in connection with the due exercise of
Options under the 1982 Stock Option Plan, the 1992 Stock Option Plan, the
Director Option Plan or any other right or convertible security
outstanding as of the date of this Agreement in accordance with the
existing terms thereof;
(iii) except as required with respect to the 5% Stock (including
the obligations set forth in Section 5.19) or with respect to the
Preference Stock as permitted in Section 5.19, (x) no dividend shall be
declared or paid or other distribution (whether in cash, stock, property
or any combination thereof) or payment declared or made in respect of the
Company Common Stock or any other outstanding capital stock of the
Company, nor shall the Company or any Subsidiary (y) purchase, acquire or
redeem any shares of Company Common Stock, 5% Stock or Preference Stock
or (z) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock;
<PAGE>
41
(iv) neither the Company nor any Subsidiary shall enter into any
Material Contract, or except in the ordinary course of business
consistent with past practice any other agreement, commitment or
instrument;
(v) the Company shall use and shall cause each Subsidiary to use
its and their respective reasonable efforts to preserve its and their
business organization intact, to keep available the services of its and
their officers and present key employees and to preserve its and their
properties and the goodwill of its and their suppliers, customers and
others with whom business relationships exist;
(vi) the Company shall not take, agree to take or permit any
Subsidiary to take any action or do or permit to be done anything in the
conduct of its business or that of any Subsidiary which would be contrary
to or in breach of any of the terms or provisions of this Agreement or
which would cause any of the representations of the Company contained
herein to be or become untrue in any material respect;
(vii) neither the Company nor any of its Subsidiaries shall adopt
or amend in any material respect or terminate any Benefit Plan, except as
required by law, or change any actuarial or other assumption used to
calculate funding obligations with respect to any Company Pension Plan
(except to the extent that failure to make such change would result in
noncompliance with GAAP, ERISA or the Code), or change the manner in
which contributions to any Company Pension Plan are made or the basis on
which such contributions are determined, except as required by Applicable
Law;
(viii) the Company shall not acquire or agree to acquire (x) by
merging or consolidating with, or by purchasing a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization or
division thereof or (y) any assets that are material, individually or in
the aggregate, to the Company and its Subsidiaries taken as a whole,
except purchases of inventory, raw materials, supplies and similar
materials in the ordinary course of business consistent with past
practice and capital expenditures complying with clause (xi);
(ix) the Company shall not sell, lease, license, mortgage or
otherwise encumber or subject to any Lien (except in favor of the
Company's senior lenders or Permitted Liens) or otherwise dispose of any
of its material properties or assets, except bona fide sales of inventory
in the ordinary course of business consistent with past practice;
<PAGE>
42
(x) the Company shall not (x) incur any indebtedness for borrowed
money or guarantee any such indebtedness of another person, issue or sell
any debt securities or warrants or other rights to acquire any debt
securities of the Company or any of its Subsidiaries, guarantee any debt
securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another person
or enter into any arrangement having the economic effect of any of the
foregoing, except for short-term borrowings incurred in the ordinary
course of business consistent with past practice and routine endorsements
in the process of collection, or (y) make any loans, advances or capital
contributions to, or investments in, any other person, other than to the
Company or any direct or indirect wholly owned Subsidiary of the Company
or routine travel and similar advances to employees;
(xi) the Company shall not make or agree to make any new capital
expenditure or expenditures which, individually, is in excess of $100,000
or, in the aggregate, are in excess of $250,000;
(xii) the Company shall not make any tax election or settle or
compromise any income tax liability; provided that Parent shall not
--------
unreasonably withhold any consent or approval of any such tax election,
settlement or compromise; and provided further that the filing of the
----------------
Company's 1995 Federal income tax return and 1995 state and local income
tax returns shall not constitute the settling or compromising of any
income tax liability for purposes of this paragraph;
(xiii) the Company shall not pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge
or satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities that are
reflected or reserved against in, the Balance Sheet or incurred since the
date of the Balance Sheet in the ordinary course of business consistent
with past practice, or waive the benefits of, or agree to modify in any
manner, any confidentiality, standstill or similar agreement to which the
Company or any of its Subsidiaries is a party, except as permitted by
Section 5.12; and
(xiv) the Company shall not authorize any of, or commit or agree to
take any of, the foregoing actions.
(b) Parent shall respond within a reasonable period of time to any
request for consent or approval required under Section 5.06.
<PAGE>
43
(c) Advice of Changes. The Company shall promptly advise
------------------
Parent orally and in writing of any change or event of which the Company has
knowledge having, or which, insofar as can reasonably be foreseen, would have,
a Material Adverse Effect.
SECTION 5.07. Consents. Each of the Company, Parent and
---------
Acquisition Sub shall, and shall cause each of their Subsidiaries to, use its
and their reasonable efforts to obtain prior to the Effective Date all
approvals, authorizations and consents of all third Persons identified on
Schedule 2.05 and all Permits which are necessary for (i) the consummation of
the Offer, the Merger and the other transactions contemplated hereby, (ii) the
ownership or leasing and operation by the Surviving Corporation and each of its
Subsidiaries of all the properties and assets of the Company and its
Subsidiaries and (iii) the conduct by the Surviving Corporation and each of its
Subsidiaries of the business of the Company and its Subsidiaries as conducted
by such entities on the date hereof.
SECTION 5.08. Filings. The Company, Parent and Acquisition
--------
Sub shall use their reasonable efforts to respond as promptly as practicable to
all inquiries received from the FTC or the Antitrust Division for additional
information or documentation in connection with all notices, reports or other
documentation filed by Parent and the Company under the HSR Act. The Company,
Parent and Acquisition Sub shall take such reasonable action as may be necessary
under state and Federal securities laws applicable to or necessary for, and will
file all documents and notifications with the SEC and other Governmental
Authorities reasonably necessary for, the consummation of the Offer, the Merger
and the transactions contemplated hereby. Each party shall furnish the other and
the other's counsel with all information reasonably requested by such other
party pertaining to it and its subsidiaries and affiliates as may be required in
order to enable such other party to take all such actions as required by this
Section 5.08. Nothing in this Agreement shall require Parent to dispose of, or
make any change in, any portion of its or the Company's assets or business or to
pay any material amount or incur any other material burden in order to obtain
any consent, approval or authorization or satisfy any condition in connection
with the Closing.
SECTION 5.09. Filing of Articles of Merger. Subject to the
-----------------------------
terms and conditions of this Agreement, as soon as practicable following the
approval of the Merger by the stockholders of the Company contemplated by
Section 5.03 hereof, the Company, Parent and Acquisition Sub will cause the
Articles of Merger to be filed with the Secretary of State of the Commonwealth
of Massachusetts.
SECTION 5.10. Interim Financial Statements. Until the
-----------------------------
Effective Date or, if earlier, the date of termination of this Agreement
pursuant to Section 9.01, as
<PAGE>
44
soon as practicable but in no event later than 30 days after the end of each
month beginning with February 1996, the Company shall deliver to Parent
unaudited consolidated financial information for such month and the
corresponding month of the preceding year as prepared by the Company's
management for its own internal purposes, such information to be held in
confidence in accordance with Section 5.01(b) hereof. Until the Effective Date
or, if earlier, the date of termination of this Agreement pursuant to Section
9.01, the Company shall deliver to Parent its Form 10-Q for each quarter within
45 days after the end of such quarter after the date of this Agreement (but not
later than the business day prior to the date of filing of such Form 10-Q with
the SEC). The financial statements contained therein shall present fairly in all
material respects the Company's consolidated financial condition, results of
operations and changes in financial position (on a consolidated basis) as at the
date or for the periods indicated in accordance with GAAP consistently applied,
except as otherwise indicated in such statements and except as to format and
footnote disclosure shall be prepared in conformity with the requirements of
Rule 10-01 of Regulation S-X under the Exchange Act and Item 303 of Regulation
S-K.
SECTION 5.11. Public Announcements. (a) The parties agree
---------------------
that the initial press release to be issued with respect to the transactions
contemplated by this Agreement shall be in the form heretofore agreed to by the
parties. Thereafter, unless required by Applicable Law or by the rules of any
applicable self-regulatory organizations, the Company, Parent and Acquisition
Sub shall not, and shall each cause their respective officers, employees and
other authorized representatives not to, prior to the Effective Date, issue any
press release or make any other public disclosure or announcement or otherwise
make any disclosure to any third Person (other than by way of the Offer
Documents, the Schedule 14D-9 and the Proxy Statement referred to in Section
5.02) concerning the transactions contemplated by this Agreement or the terms
and provisions hereof.
(b) Should any press release or other public disclosure be
required to be made, then the party required to make such release or disclosure
shall not make such release or disclosure without first using its reasonable
efforts to obtain the prior written consent of the other parties hereto as to
both the timing and content of such press release or public disclosure, which
consent shall not be unreasonably withheld.
SECTION 5.12. No Solicitation. (a) The Company shall not,
----------------
nor shall it permit any of its Subsidiaries or affiliates to, nor shall it
authorize or permit any officer, director or employee of, or any investment
banker, attorney or other advisor or representative of, the Company or any of
its Subsidiaries to, (i) solicit or initiate, or knowingly encourage the
submission of, any takeover proposal, (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to any takeover proposal (except for (1) non-confidential information, or
<PAGE>
45
(2) filings with the SEC); provided, however, that prior to the earlier of
-------- -------
(x) the Consummation of the Offer or (y) the Special Meeting, to the extent
required by the fiduciary obligations of the Board of Directors of the Company,
as determined in good faith by the Board of Directors based on the advice of
counsel, the Company may, (A) in response to an unsolicited request therefor,
furnish information with respect to the Company (pursuant to a confidentiality
agreement at least as restrictive as the Confidentiality Agreement (as
determined by the Company's counsel)) to any person who has indicated to the
Company that it is interested in pursuing a qualified takeover proposal and
discuss such information (but not the terms of any possible takeover proposal)
with such person and (B) upon receipt by the Company of a qualified takeover
proposal, following the delivery to Parent of the notice required pursuant to
Section 5.12(c), participate in discussions or negotiations regarding such
qualified takeover proposal. Without limiting the foregoing, it is understood
that any violation of the restrictions set forth in the preceding sentence by
any officer of the Company or any of its Subsidiaries or any investment banker,
attorney or other advisor or representative of the Company or any of its
Subsidiaries, shall be deemed to be a breach of this Section 5.12 by the
Company. For purposes of this Agreement, "takeover proposal" means any
proposal for a merger or other business combination (regardless of legal form)
involving the Company or any Subsidiary or any proposal or offer to acquire in
any manner, directly or indirectly, a substantial portion of the assets or
business of the Company or a substantial equity interest in, or any substantial
amount of voting securities of, the Company or any Subsidiary, or any other
transaction outside the ordinary course of business and not otherwise
specifically permitted by the terms of this Agreement the consummation of which
would impede or prevent the consummation of the Merger pursuant to the terms of
this Agreement; and "qualified takeover proposal" means a takeover proposal
having terms which the Board of Directors of the Company determines (based on,
among other things, the advice of a financial advisor of nationally recognized
reputation) in its good faith reasonable judgment to be more favorable to the
holders of Company Common Stock than the Total Merger Consideration and holders
of Preference Stock than the Preference Stock Consideration and likely to be
fully financed and consummated.
(b) Neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or Acquisition Sub, the approval or
recommendation by such Board of Directors or any such committee of this
Agreement, the Offer or the Merger, (ii) approve or recommend, or propose to
approve or recommend, any takeover proposal or (iii) enter into any agreement
with respect to any takeover proposal. Notwithstanding the foregoing, in the
event the Board of Directors of the Company receives a qualified takeover
proposal, the Board of Directors or any committee thereof or the Company may
(subject to the limitations contained in this Section) withdraw or modify its
approval or recommendation of this Agreement, the Offer or the Merger at
<PAGE>
46
any time after 48 hours following Parent's receipt of written notice (a "Notice
of Qualified Takeover Proposal") advising Parent that the Board of Directors has
received a qualified takeover proposal, specifying the material terms and
conditions of such qualified takeover proposal and identifying the person making
such qualified takeover proposal. The Company may take any of the foregoing
actions pursuant to the preceding sentence only until the earlier of (x) the
Consummation of the Offer or (y) the approval of the Merger at the Special
Meeting. Nothing contained herein shall prohibit the Company from taking and
disclosing to its stockholders a position contemplated by Rule 14e-2(a)
following Parent's receipt of a Notice of Qualified Takeover Proposal provided
that the Company does not withdraw or modify its position with respect to the
Merger or approve or recommend a takeover proposal.
(c) In addition to the obligations of the Company set forth in
paragraph (b) of this Section, the Company shall promptly advise Parent orally
and in writing of any request for information or of any takeover proposal, or
any inquiry with respect to any takeover proposal, the material terms and
conditions of such request, takeover proposal or inquiry, and the identity of
the person making any such takeover proposal or inquiry. The Company shall
keep Parent fully informed of the status and details of any such request,
takeover proposal or inquiry.
SECTION 5.13. Validity of Representations. Parent,
----------------------------
Acquisition Sub and the Company shall each take such action as is reasonably
necessary to render their respective representations and warranties accurate on
and as of the Effective Date. Without limiting the foregoing, the Company
shall take any action required by Parent to ensure the accuracy of Section 2.22
including redemption of the Rights if Parent determines that would be
desirable.
SECTION 5.14. Employees; Benefits. Parent and Acquisition Sub
--------------------
shall honor (i) all employment, severance or similar contractual arrangements
in accordance with their terms in existence on the date of this Agreement and
disclosed prior to the date of this Agreement to Parent and (ii) all legally
imposed obligations relating to employment matters. After the Closing Date,
Parent and Acquisition Sub shall comply with enforceable Applicable Law,
including without limitation the Workers Adjustment Retraining Notification
Act, 29 U.S.C. Section 2101 et seq. It is the current intention of Parent
-- ---
and Acquisition Sub to cause the Surviving Corporation to provide benefits to
employees of the Company and its Subsidiaries that are no less favorable in the
aggregate to such employees than those in effect on the date of this Agreement;
provided, however, that the foregoing shall not limit or restrict the
- -------- -------
right of the Surviving Corporation or its Subsidiaries to terminate the
employment of such employees or subsequently to modify the benefits or other
terms of employment of such employees, to the extent permitted by enforceable
Applicable Law.
<PAGE>
47
SECTION 5.15. Indemnification and Insurance. (a) Parent and
------------------------------
Acquisition Sub hereby agree that all rights to indemnification now existing in
favor of the directors or officers of the Company and its Subsidiaries (the
"Indemnified Parties") as currently provided in their respective certificates
or articles of incorporation or organization and By-Laws or in any agreements,
contracts or arrangements with the Company or any of its Subsidiaries in effect
on the date hereof and previously furnished to Parent and to the extent not in
violation of applicable state law, shall survive the Merger and shall continue
in full force and effect for a period of five years from the Effective Date;
provided that, in the event any claim or claims are asserted or made within
- --------
such five year period, all rights to indemnification in respect of any such
claim or claims shall continue until the disposition of any and all such
claims. Without limiting the foregoing, to the extent currently provided in
the certificates or articles of incorporation or organization and By-Laws of
the Company and its Subsidiaries and Massachusetts law, or agreements,
contracts or arrangements disclosed to Parent with the Company or any of the
Subsidiaries, in the event that any Indemnified Party becomes involved in any
capacity in any action, proceeding or investigation in connection with any
matter, including the transaction contemplated by this Agreement, occurring
prior to, and including, the Effective Date, or otherwise relating to or
arising out of such matters, Parent or the Surviving Corporation shall
periodically advance to such Indemnified Party his or her legal and other
expenses (including the costs of any investigation and preparation incurred in
connection therewith). Parent shall use all reasonable efforts to maintain in
effect, or shall cause the Surviving Corporation to use all reasonable efforts
to maintain in effect, for two years after the Effective Date, directors' and
officers' liability insurance ("D&O Insurance") covering those persons covered
by the Company's directors' and officers' liability insurance on the date of
this Agreement or the Effective Date and which is substantially equivalent in
terms of coverage and amount as the Company has in effect on the Effective Date
so long as such insurance is available and the annual premium therefor would
not be in excess of 200% of the last annual premium paid prior to the
date of this Agreement (the "Maximum Premium"). If the existing D&O Insurance
expires, is terminated or cancelled during such two-year period, Parent will
use all reasonable efforts to cause to be obtained as much D&O Insurance as can
be obtained for the remainder of such period for an annualized premium not in
excess of the Maximum Premium, on terms and conditions no less advantageous
than the existing D&O Insurance. The Company represents to Parent that the
Maximum Premium is $179,000.
(b) Any Indemnified Party wishing to claim indemnification
hereunder, upon learning of any such Legal Action, shall promptly notify Parent
and the Surviving Corporation with respect thereto, but the failure to so
notify shall not relieve Parent or the Surviving Corporation of any liability
it may have to such Indemnified Party
<PAGE>
48
hereunder except to the extent that Parent and the Surviving Corporation are
materially prejudiced thereby.
(c) Parent and the Surviving Corporation shall periodically, as
requested, advance to such Indemnified Party his, her or its legal and other
expenses (including the cost of investigation and preparation incurred in
connection therewith) to the extent such Indemnified Party is indemnified
pursuant to the terms of this Section 5.15, unless it is ultimately determined
by a court of competent jurisdiction that such Indemnified Party is not
entitled to indemnification hereunder.
(d) Parent and the Surviving Corporation shall be subrogated to
any rights any Indemnified Party may have with respect to any amounts paid to
or on behalf of such Indemnified Party by Parent and the Surviving Corporation
hereunder.
SECTION 5.16. Redemption of 5% Stock and Preference Stock.
--------------------------------------------
(a) In connection with the Merger, the Company, Parent and Acquisition Sub
hereby agree that the 5% Stock shall be redeemed and retired, as soon as
practicable following the Effective Date for the 5% Stock Consideration in
accordance with the Surviving Corporation's Articles of Organization.
(b) Prior to the date specified in the call notice for the
redemption and retirement of the 5% Stock, the Surviving Corporation shall
cause to be deposited with an appropriate trust company or bank, for the credit
of the holders of the 5% Stock, sufficient funds to be paid to such holders for
redemption and retirement of all of such shares of 5% Stock as provided for
herein and in the Surviving Corporation's Articles of Organization.
(c) If requested by Parent or Acquisition Sub, the Company shall
as soon as practicable thereafter and prior to the Effective Time deliver a
notice of redemption fixing a date of redemption at the earliest permitted date
and cause to be deposited with an appropriate trust company or bank, for the
credit of the holders of the Preference Stock, sufficient funds to be paid to
such holders for redemption and retirement of all outstanding shares of
Preference Stock as provided for herein, in the Certificate of Vote of Directors
that established the Preference Stock and in the Company's Articles of
Organization. In such case Parent shall transfer to the Company immediately
prior to such deposit the amount thereof in exchange for the issuance to it by
the Company of that number of shares of Company Common Stock equal to the amount
of such deposit divided by the Total Merger Consideration. Parent may decide
whether to deliver any request under this Section 5.16(c) in its sole
discretion, and, notwithstanding any other provision of this Agreement
(including Section 5.20) shall not be obligated to do so even if redemption of
the Preference Stock would cause satisfaction of a condition set forth in
Article VI or Article VII that otherwise would not be satisfied.
<PAGE>
49
SECTION 5.17. Material Contracts. The Company shall not enter
-------------------
into any material modification or amendment concerning any Material Contract
listed on Schedule 2.11(a) or 2.11(b) without the consent of Parent, which
consent shall not be unreasonably withheld. Immediately after the Closing,
Parent shall cause the Surviving Corporation to pay the outstanding principal
amount (and accrued interest thereon) owed by the Company under each Material
Contract set forth on Schedule 2.11(b).
SECTION 5.18. Tax Matters. Promptly after the request of
------------
Parent and in any event no later than three months from the date of such
request, the Company shall provide to Parent true, complete and correct (in all
material respects) copies of (a) a schedule setting forth the deferred
intercompany gain account, and the excess loss account of each of its
Subsidiaries, and (b) a schedule setting forth the Federal income tax basis for
the stock of each of the Subsidiaries except those Subsidiaries for which such
information cannot be obtained after due inquiry.
SECTION 5.19. Dividend Payments. The Company shall declare
------------------
and pay or set apart for payment accumulated dividends on the 5% Stock to the
extent required such that the holders of 5% Stock shall not at any time be
entitled to vote pursuant to paragraph (d) of Article IV of the Company's
Articles of Organization. The Company shall not declare or pay or set apart
for payment any accumulated dividends on the Preference Stock, except that
after the Consummation of the Offer the Company may declare and make such
payment to the extent required to prevent holders of Preference Stock from at
any time being entitled to vote pursuant to subparagraph (8) of the Company's
Certificate of Vote of Directors Establishing a Series of a Class of Stock with
respect to the Preference Stock.
SECTION 5.20. Satisfaction of Conditions. The Company, Parent
---------------------------
and Acquisition Sub shall each take all reasonable actions that may be required
to satisfy the conditions set forth in Article VI and Article VII hereof,
respectively.
SECTION 5.21. Directors. Subject to compliance with
----------
applicable law (including Section 14(f) of the Exchange Act), upon the
acquisition by Acquisition Sub of at least a majority of the outstanding Common
Stock pursuant to the Offer, Acquisition Sub shall be entitled to designate at
least a majority of the members of the Board of Directors of the Company, and
the Company and its Board of Directors shall, at such time, take any and all
such action (including to increase the size of the Board of Directors or to use
its best efforts to cause directors to resign) needed to cause a sufficient
number of Acquisition Sub's designees to be appointed to the Company's Board of
Directors that such designees shall constitute such majority (any director so
designated by Acquisition Sub, a "Designated Director"). It is understood that
immediately after the acquisition by Acquisition Sub of at least a majority of
the outstanding Common Stock pursuant to the Offer (x) the Company's Board of
Directors
<PAGE>
50
shall consist of seven members, (y) the initial designees of Acquisition Sub to
the Company's Board of Directors are expected to be Michel L. Besson, Peter R.
Dachowski, Thomas A. Decker and James E. Hilyard and (z) the remaining members
of the Company's Board of Directors are expected to be Robert P. Bass, Jr.,
Richard C. Maloof and Joseph D. Vecchiolla. In the event that, after the
acquisition by Acquisition Sub of at least a majority of the outstanding Common
Stock pursuant to the Offer and prior to the Effective Time, the number of
members of the Board of Directors increases (including pursuant to the
provisions of the Preference Stock and the 5% Stock), the Company and its Board
of Directors shall, at such time, take any and all such additional action
(including to increase the size of the Board of Directors, to use its best
efforts to cause additional directors to resign and to appoint additional
designees of Acquisition Sub) needed to cause a sufficient number of Acquisition
Sub's designees to be appointed to the Board of Directors that such designees
shall then constitute at least a majority of the members of the Board of
Directors. The parties hereto shall use their respective best efforts to cause
at least three members of the Company's Board of Directors at all times prior to
the Effective Time to be Continuing Directors. "Continuing Director" means (a)
any member of the Company's Board of Directors on the date of this Agreement,
(b) any member of the Company's Board of Directors who is not an employee or
director or affiliate of, and not a Designated Director or other nominee of,
Acquisition Sub or Parent or their respective Subsidiaries, and (c) any
successor of a Continuing Director who is (i) not an employee or director or
affiliate of, and not a Designated Director of other nominee of, Acquisition Sub
or Parent or their respective Subsidiaries and (ii) recommended to succeed such
Continuing Director by at least a majority of the then Continuing Directors.
ARTICLE VI
Conditions to the Obligations of Parent
---------------------------------------
and Acquisition Sub
-------------------
Each and every obligation of Parent and Acquisition Sub under this
Agreement shall be subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions, each of which may be waived by
Parent and Acquisition Sub except as otherwise provided by law, provided that,
--------
upon the Consummation of the Offer, each of the following conditions (other
than the conditions set forth in Section 6.03(b) and (d) and 6.04(b)) shall
be deemed waived by Parent and Acquisition Sub:
SECTION 6.01. Representations and Warranties True. The
------------------------------------
representations and warranties of the Company contained in this Agreement
(without
<PAGE>
51
regard to any information provided under Section 5.04) that are
qualified as to materiality shall be true and correct, and the representations
that are not so qualified shall be true and correct in all material respects,
in each case on and as of the date hereof and on and as of the Effective Date,
and between the date hereof and the Effective Date there shall not have been
any event or change in circumstance causing or reasonably anticipated to cause
in the future any Material Adverse Effect.
SECTION 6.02. Company's Performance. Each of the obligations
----------------------
of the Company to be performed by it on or before the Closing Date pursuant to
the terms of this Agreement shall have been duly performed or complied with in
all material respects by the Closing.
SECTION 6.03. Authorization of Merger. (a) All corporate
------------------------
action necessary by the Company to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby (including the Offer and the Merger) shall have been duly
and validly taken, and the Company and Acquisition Sub shall have full right
and power to merge on the terms provided herein.
(b) The holders of the Company Common Stock and of the Preference
Stock shall have duly approved the Merger at the Special Meeting called for
that purpose (other than if such approval shall not have occurred solely due to
the breach by Parent or Acquisition Sub of Section 5.02(e)).
(c) All consents, approvals and authorizations from third Persons
and Governmental Authorities identified on Schedule 2.05 and Schedule 2.11(b)
required to consummate the transactions contemplated by this Agreement shall
have been obtained.
(d) All applicable waiting periods under the HSR Act shall have
expired or been terminated.
SECTION 6.04. Absence of Litigation. (a) There shall not be
----------------------
pending or threatened any suit, action or proceeding by any Governmental
Authority (i) challenging the acquisition by Parent or Acquisition Sub of any
shares of Company Common Stock or Preference Stock, seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement or seeking to obtain from the Company, Parent or
Acquisition Sub any damages related to the Merger or the other transactions
contemplated hereby that are material in relation to the Company and its
Subsidiaries taken as a whole, (ii) seeking to prohibit or limit the ownership
or operation by the Company, Parent or any of their respective Subsidiaries of
any material portion of the business or assets of the Company, Parent or any of
their respective Subsidiaries, or to compel the Company, Parent or any of their
respective
<PAGE>
52
Subsidiaries to dispose of or hold separate any material portion of the business
or assets of the Company, Parent or any of their respective Subsidiaries, as a
result of the Merger or any of the other transactions contemplated by this
Agreement, (iii) seeking to impose limitations on the ability of Parent or
Acquisition Sub to acquire or hold, or exercise full rights of ownership of, any
shares of Surviving Corporation Common Stock, (iv) seeking to prohibit Parent or
any of its Subsidiaries from effectively controlling in any material respect the
business or operations of the Company or its Subsidiaries or of Parent and its
Subsidiaries or (v) which otherwise is reasonably likely to have a Material
Adverse Effect.
(b) No statute, rule, regulation, executive order, decree,
temporary restraining order, preliminary or permanent injunction or other order
or legal restraint or prohibition enacted, entered, promulgated, enforced,
issued or deemed applicable to the Merger or the transactions contemplated
thereby, or any other action shall be taken by any Governmental Authority or
court, in each case preventing the consummation of the Merger or the
transactions contemplated thereby, shall be in effect.
SECTION 6.05. Directors. All directors of the Company whose
----------
resignation is requested by Parent at least five days before the Closing Date
will have submitted their resignations as directors effective as of the Closing
Date.
SECTION 6.06. Dissenting Shares. No more than ten percent of
------------------
the issued and outstanding shares of any class of equity securities of the
Company entitled to dissenters rights as of the Closing Date shall be
Dissenting Shares entitled to receive the Dissenting Consideration as provided
in Section 1.12 hereof.
SECTION 6.07. Options. Each outstanding Option issued under
--------
the 1982 Stock Option Plan, the 1992 Stock Option Plan and the Director Option
Plan shall have been amended as contemplated by Section 1.14.
SECTION 6.08. Certificates. The Company shall have furnished
-------------
Parent with such certificates of its officers and others to evidence compliance
with the conditions set forth in this Article VI as may be reasonably requested
by Parent. The form and substance of all opinions, certificates and other
documents hereunder shall be satisfactory in all reasonable respects to Parent
and its counsel.
<PAGE>
53
ARTICLE VII
Conditions to the Obligations of the Company
--------------------------------------------
Each and every obligation of Company under this Agreement shall be
subject to the satisfaction, on or prior to the Closing Date, of each of the
following conditions, each of which may be waived by the Company except as
otherwise provided by law, provided that, upon the Consummation of the
--------
Offer, each of the following conditions (other than the conditions set forth in
Sections 7.03 and 7.04) shall be deemed waived by the Company:
SECTION 7.01. Representations and Warranties True. The
------------------------------------
representations and warranties of Parent and Acquisition Sub contained in this
Agreement that are qualified as to materiality shall be true and correct, and
the representations that are not so qualified shall be true and correct in all
material respects, in each case on and as of the date hereof and on and as of
the Effective Date.
SECTION 7.02. Parent's and Acquisition Sub's Performance.
-------------------------------------------
Each of the obligations of Parent and Acquisition Sub to be performed by them
on or before the Closing Date pursuant to the terms hereof shall have been duly
performed and complied with in all material respects by the Closing.
SECTION 7.03. Authorization of Merger. (a) All corporate
------------------------
action necessary by Acquisition Sub and Parent to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby shall have been duly and validly taken, and
Acquisition Sub shall have full right and power to merge on the terms provided
herein. The Company's stockholders shall have approved the Merger at the
Special Meeting called for that purpose.
(b) All consents, approvals and authorizations from third Persons
and Governmental Authorities identified on Schedule 2.05 required to consummate
the transactions contemplated by this Agreement shall have been obtained.
(c) All applicable waiting periods under the HSR Act shall have
expired or been terminated.
SECTION 7.04. Absence of Litigation. No Judgment shall have
----------------------
been entered by a Governmental Authority with proper jurisdiction and not
revised prohibiting the Merger, and no Legal Action shall have been instituted
by any Governmental Authority challenging the Merger which if successful would
prohibit the consummation of the Merger.
<PAGE>
54
SECTION 7.05. Certificates. Parent and Acquisition Sub shall
-------------
have furnished Company with such certificates of their respective officers and
others to evidence compliance with the conditions set forth in this Article VII
as may be reasonably requested by Company. The form and substance of all
certificates and other documents hereunder shall be satisfactory in all
reasonable respects to Company and its counsel.
ARTICLE VIII
Closing
-------
SECTION 8.01. Time and Place. Subject to the provisions of
---------------
Articles VI, VII and IX hereof, the closing (the "Closing") of the Merger shall
take place at the offices of Cravath, Swaine & Moore, 825 Eighth Avenue, New
York, New York 10019 at 9:30 a.m., local time, on a date (the "Closing Date")
which is to be:
(a) as soon as practicable after the latest to occur of the date by
which the stockholders of the Company shall have approved the Merger
pursuant to Section 5.03, the date of expiration or termination of any
waiting period, including any extensions thereof, which may be applicable
to the Merger under the provisions of the HSR Act, or the date of
satisfaction of all other conditions to the Closing set forth herein the
satisfaction of which is not waived other than conditions that, by their
terms, are to be satisfied on the Closing Date; or
(b) such other place, at such other time, or on such other date as
Parent, Acquisition Sub and the Company may mutually agree upon for the
Closing to take place.
The Closing Date shall be the Effective Date.
SECTION 8.02. Deliveries at the Closing. Subject to the
--------------------------
provisions of Articles VI, VII and IX hereof, at the Closing:
(a) If the Consummation of the Offer shall not have occurred, there
shall be delivered to Parent, Acquisition Sub and the Company the
certificates and other documents and instruments required to be delivered
under Articles VI and VII hereof.
(b) Parent, Acquisition Sub and Company shall cause the Articles
of Merger to be filed in accordance with the provisions of the MBCL and
shall
<PAGE>
55
take any and all other lawful actions and do any and all other lawful
things necessary to effect the Merger and to cause the Merger to become
effective.
ARTICLE IX
Termination and Abandonment of the Merger
-----------------------------------------
SECTION 9.01. Termination. (a) Unless the Consummation of
------------
the Offer shall have occurred and Designated Directors shall constitute at
least a majority of the members of the Board of Directors of the Company, this
Agreement shall be terminated, and the Merger abandoned, if the stockholders of
the Company fail to approve the Merger as contemplated by Section 5.03 hereof.
(b) Notwithstanding approval of this Agreement and the
transactions contemplated hereby by the stockholders of the Company or by the
sole stockholder of Acquisition Sub, this Agreement may be terminated, and the
Offer and the Merger abandoned, at any time prior to the Effective Date:
(i) by the mutual consent of Parent, Acquisition Sub and the
Company; or
(ii) unless the Consummation of the Offer shall have occurred and
Designated Directors shall constitute at least a majority of the members
of the Board of Directors of the Company, by Parent, Acquisition Sub or
the Company at any time after September 30, 1996; or
(iii) by Parent or Acquisition Sub, (A) if the Offer terminates
without any shares being accepted for payment due to (x) failure of the
Minimum Condition or (y) any of the other conditions set forth in Exhibit
A hereto (other than solely paragraph (c) thereto) shall have become
impossible to fulfill and shall not have been waived, (B) if any of the
conditions set forth in Article VI hereof shall become impossible to
fulfill and shall not have been waived or deemed waived in accordance
with the terms of this Agreement (it being understood that with respect
to Section 6.04(b) any condition therein relating to an order, injunction
or judicial decree shall be deemed not to have become impossible to
fulfill until such order, injunction or decree shall have become final
and non-appealable) or (C) if the Board of Directors pursuant to Section
5.12(b) withdraws or modifies its approval or recommendation of this
Agreement, the Offer or the Merger; or
<PAGE>
56
(iv) by the Company, if any of the conditions set forth in Article
VII hereof shall become impossible to fulfill, and shall not have been
waived in accordance with the terms of this Agreement; or
(v) unless the Consummation of the Offer shall have occurred and
Designated Directors shall constitute at least a majority of the members
of the Board of Directors of the Company, by Parent or Acquisition Sub if
the Company fails to perform in any material respect any of its
obligations hereunder or breaches in any material respect any provision
hereof, and the Company has failed to perform such obligation or cure
such breach, within 10 days of its receipt of written notice thereof from
Parent or Acquisition Sub, and such failure to perform shall not have
been waived in accordance with the terms of this Agreement;
(vi) by the Company if Parent or Acquisition Sub fails to perform
in any material respect any of its obligations hereunder or breaches in
any material respect any provision hereof, and Parent and Acquisition Sub
have failed to perform such obligation or cure such breach, within 10
days of its receipt of written notice thereof from the Company, and such
failure to perform shall not have been waived in accordance with the
terms of this Agreement;
(vii) by the Company if (A) the Board of Directors pursuant to
Section 5.12(b) withdraws or modifies its approval or recommendation of
this Agreement, the Offer or the Merger and (B) the Company pays Parent
all Expenses and the Alternate Transaction Fee in cash, in each case as
provided in Section 10.01(b); or
(viii) by the Company if Acquisition Sub (A) shall have failed to
commence the Offer within the time required under the Exchange Act or (B)
shall have failed to pay for any Company Common Stock or Preference Stock
accepted for payment pursuant to the Offer and, in the case of clause
(B), Acquisition Sub shall have failed to make such payment within three
business days of receipt of written notice thereof from the Company.
SECTION 9.02. Effect of Termination. (a) In the event of the
----------------------
termination and abandonment of this Agreement and the Merger:
(i) this Agreement shall become void and have no effect, without
any liability on the part of any party or its directors, officers or
stockholders, except Section 5.01(b) shall survive and except as provided
in Article X hereof; provided that, except as provided in
-------- ----
Sections 9.02(b) and 9.02(c), each party
<PAGE>
57
shall have the right to bring suit against any other party for any breach
of this Agreement; and except that if the Company has called the
Preference Stock for redemption pursuant to a request by the Purchaser
pursuant to Section 5.16, Parent's obligation to purchase, and the
Company's obligation to sell, shares of Common Stock pursuant to such
Section on the terms set forth therein shall survive; and
(ii) each party will redeliver all documents, work papers and other
material and all copies thereof of any other party relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same and, at the request of
any other party, will destroy any analyses, compilations, studies or other
documents prepared using such furnished information.
(b) Notwithstanding any provisions to the contrary herein, the
sole remedy of Parent or Acquisition Sub for a breach by the Company of any
representation or warranty set forth in Article II of this Agreement shall be
the termination of this Agreement (if permitted by Section 9.01) unless such
breach was made with the actual knowledge of the President and Chief Executive
Officer of the Company, the Vice President of Finance and Administration of the
Company or the General Counsel of the Company, after due inquiry of other
managerial employees of the Company who would be reasonably expected to have
knowledge as to the matter represented (a "Company Willful Misrepresentation").
(c) Notwithstanding any provisions to the contrary herein, the
sole remedy of the Company for a breach by Parent or Acquisition Sub of any
representation or warranty set forth in Article III or IV, respectively, of
this Agreement shall be the termination of this Agreement (if permitted by
Section 9.01) unless such breach was made with the actual knowledge of the
President, Executive Vice President or Senior Vice President of Parent, after
due inquiry of other managerial employees of Parent who would be reasonably
expected to have knowledge as to the matter represented (a "Parent Willful
Misrepresentation").
SECTION 9.03. Procedure for Termination and Amendment. A
----------------------------------------
termination of this Agreement pursuant to Section 9.01 or an amendment of this
Agreement in accordance with Section 10.07 shall, in order to be effective,
require in the case of the Company action by its Board of Directors or the duly
authorized designee of its Board of Directors. In the event that Acquisition
Sub's designees are appointed or elected to the Board of Directors of the
Company as provided in Section 5.21, after the Consummation of the Offer and
prior to the Effective Time, the affirmative vote of at least a majority of the
Continuing Directors shall be required for the Company to agree to amend, waive
compliance with or terminate this Agreement.
<PAGE>
58
ARTICLE X
Miscellaneous
-------------
SECTION 10.01. Expenses; Alternate Transaction Fee. (a)
------------------------------------
Except as provided by Section 10.01(b), (c) or (d) each of the parties hereto
shall bear its own costs, fees and expenses in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the Prior
Agreement and the consummation of the transactions contemplated hereby,
including, without limitation, fees, commissions and expenses (including,
without limitation, all filing, printing, copying, mailing, telephone,
transportation and delivery charges) payable to brokers, finders, investment
bankers, consultants, exchange or transfer agents, attorneys, accountants and
other professionals, whether or not the Consummation of the Offer occurs or the
Merger is consummated.
(b) If the Board of Directors of the Company pursuant to Section
5.12(b) wishes to withdraw or adversely modify its approval or recommendation
of this Agreement, the Offer or the Merger, prior to exercising its rights
under Section 5.12(b), the Company shall pay in same day funds to Parent: (i)
its Expenses incurred to date and thereafter shall pay in same day funds to
Parent within one business day after demand therefor all subsequently incurred
Expenses, provided, that the Company shall not be obligated hereunder to
--------
pay any such Expenses to the extent they exceed an aggregate of $1 million and
(ii) an alternative transaction fee of $1.5 million (the "Alternate Transaction
Fee"). For purposes of Sections 10.01(b) and (c), "Expenses" shall mean all
out-of-pocket fees and expenses (including without limitation all travel
expenses and all fees and expenses of counsel, investment banking firms,
accountants, experts and consultants to Parent or Acquisition Sub) incurred or
paid by or on behalf of Parent or Acquisition Sub during or after 1994 in
connection with or leading to this Agreement, the transactions contemplated
hereby, and performing or securing the performance of the obligations of the
parties hereunder, including, without limitation, such fees and expenses
related to preparation and negotiation of documentation and conducting due
diligence. Parent shall within 36 hours after request therefor advise the
Company of an estimate of its Expenses if the Company wishes to exercise its
rights under Section 5.12(b).
(c) In the event a takeover proposal from a party other than
Parent or one of its affiliates is received by the Company or publicly
disclosed prior to the expiration of the Offer (or in the case of clauses (B)
and (C), prior to the Special Meeting) or, if earlier, termination of this
Agreement, and (A) at the scheduled expiration date of the Offer a sufficient
number of shares of Company Common Stock and Preference Stock shall not
<PAGE>
59
have been tendered or redeemed to satisfy the Minimum Condition, (B) at the
Special Meeting the required approval of the Merger by the Company's
stockholders is not obtained, or (C) this Agreement is terminated (other than by
the Company pursuant to Section 9.01(vi)) prior to a vote on the Merger at the
Special Meeting, unless the Consummation of the Offer shall have occurred the
Company shall pay in same day funds to Parent within two business days after the
earlier of such expiration date, Special Meeting or termination of this
Agreement (i) all Expenses incurred to date and thereafter will pay in same day
funds to Parent within one business day after demand therefor all subsequently
incurred Expenses, provided, that the Company shall not be obligated hereunder
--------
to pay any such Expenses to the extent they exceed an aggregate of $1 million,
and (ii) the Alternate Transaction Fee.
(d) In the event this Agreement is terminated, the Offer is
terminated or the Merger does not occur (i) solely due to a breach by Parent or
Acquisition Sub of any of its covenants or obligations hereunder or due to a
Parent Willful Misrepresentation or (ii) solely due to a breach by the Company
of any of its covenants or obligations hereunder or due to a Company Willful
Misrepresentation, then in the case of a termination pursuant to clause (i)
above, Parent and Acquisition Sub shall promptly pay to the Company, and in the
case of termination pursuant to clause (ii) above, the Company shall promptly
pay to Parent and Acquisition Sub, in same day funds all Expenses incurred to
date (after giving credit for any reimbursement already made under Section
10.01(b) or (c)) and thereafter shall pay in same day funds within one business
day after demand therefor all subsequently incurred Expenses. For purposes of
this paragraph 10.01(d) "Expenses" shall mean all out-of-pocket fees and
expenses (including without limitation all travel expenses and all fees and
expenses of counsel, investment banking firms, accountants, experts and
consultants to Parent or the Company, as the case may be) incurred or paid by
or on behalf of Parent, Acquisition Sub or the Company, as the case may be,
during or after 1994 in connection with or leading to this Agreement, the
transactions contemplated hereby, and performing or securing performance of the
obligations of the parties hereunder, including, without limitation, such fees
and expenses related to preparation and negotiation of documentation and
conducting due diligence. This Section shall not limit damages that would
otherwise be recoverable for breaches hereunder.
SECTION 10.02. Non-Survival of Representations and Warranties.
-----------------------------------------------
The respective representations and warranties, obligations, covenants and
agreements of the Company, Parent and Acquisition Sub contained herein or in
any Schedule, certificate or letter delivered pursuant hereto (other than those
contained in Section 10.01 hereof and those which by their terms extend beyond
the Effective Date or termination of this Agreement) shall expire with, and be
terminated and extinguished by the effectiveness of the Merger and shall not
survive the Effective Date or, if earlier, the date of termination of this
Agreement pursuant to Article IX hereof.
<PAGE>
60
SECTION 10.03. Headings. The descriptive headings of the
---------
several Articles and Sections of this Agreement are inserted for convenience
only and do not constitute a part of this Agreement and shall not in any manner
affect the meaning or interpretation of the terms of this Agreement.
SECTION 10.04. Notices. (a) Any notices or other
--------
communications required or permitted hereunder shall be addressed as follows:
If to Parent or Acquisition Sub to:
CertainTeed Corporation
750 E. Swedesford Road
Valley Forge, Pennsylvania 19482
Attn: Thomas A. Decker, Esq.
Executive Vice President and
General Counsel
Tel: (610) 341-7424
Fax: (610) 341-7087
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attn: Philip A. Gelston
Tel: (212) 474-1548
Fax: (212) 474-3700
If to the Company to:
Bird Corporation
1077 Pleasant Street
Norwood, Massachusetts 02062-6714
Attn: President
Tel: (617) 461-1414
Fax: (617) 461-1619
<PAGE>
61
Copy to:
Bart Friedman, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Tel: (212) 701-3000
Fax: (212) 269-5420
or such other address as shall be furnished in writing by either party in
accordance with this Section 10.04, and any such notice or communication shall
be deemed to have been given as of the date so mailed.
(b) Notices or other communications shall be deemed given (i) if
delivered personally, upon delivery, (ii) if delivered by registered or
certified mail (return receipt requested), upon the earlier of actual delivery
or three business days after being mailed, (iii) if delivered by overnight
courier or similar service, upon delivery, or (iv) if given by fax, upon
confirmation of transmission by fax; provided that if such notice or other
communications would be otherwise deemed given on a day which is not a business
day, the delivery shall be deemed given the first business day following such
day.
SECTION 10.05. Assignment. This Agreement and all of the
-----------
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned by any of the parties hereto, either in whole or in part, without the
prior written consent of the other parties hereto.
SECTION 10.06. Complete Agreement. This Agreement, including
-------------------
the Schedules, exhibits and other writings referred to herein or delivered
pursuant hereto, contains the entire understanding among the parties with
respect to the Offer, the Merger and the related transactions and supersedes
all prior arrangements or understandings with respect thereto, including the
Prior Agreement, except for the Confidentiality Agreement. There are no
restrictions, agreements, promises, warranties, covenants or undertakings other
than those expressly set forth herein.
SECTION 10.07. Amendments and Waivers. (a) Subject to the
-----------------------
provisions contained in Articles VI and VII hereof and subject to Section 9.03,
at any time prior to the Effective Date if authorized by their respective
Boards of Directors and to the extent permitted by law, the parties hereto may,
by written agreement, modify, amend, or supplement any term or provision of
this Agreement. Any written
<PAGE>
62
instrument or agreement referred to in this paragraph shall be validly and
sufficiently authorized for the purposes of this Agreement if signed on behalf
of the Company, Parent and Acquisition Sub by a person authorized to sign this
Agreement on their behalf.
(b) This Agreement may be amended at any time only by a written
instrument executed by the Company, Parent and Acquisition Sub. No delay on
the part of any party hereto in exercising any right hereunder shall operate as
a waiver of such right, nor shall any waiver, express or implied, by any party
hereto of any right hereunder or of any failure to provide and perform
hereunder or breach hereof by either party hereto constitute or be deemed to
constitute a waiver of any other failure to provide and perform hereunder or
breach hereof by any party hereto whether of a similar or dissimilar nature
thereto.
SECTION 10.08. Counterparts. This Agreement may be executed
-------------
in two or more counterparts, all of which shall be considered one and the same
agreement and each of which shall be deemed an original.
SECTION 10.09. Governing Law. EXCEPT AS TO THE PROVISIONS OF
--------------
SECTIONS 1.03 THROUGH 1.14 (WHICH SHALL BE GOVERNED BY THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS), THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ITS CONFLICT OF LAWS RULES) AS
TO ALL MATTERS, INCLUDING, BUT NOT LIMITED TO, MATTERS OF VALIDITY,
CONSTRUCTION, EFFECT AND PERFORMANCE.
SECTION 10.10. Accounting Terms. All accounting terms used
-----------------
herein that are not expressly defined in this Agreement shall have the meanings
given to them in accordance with GAAP.
SECTION 10.11. Parties. Nothing in this Agreement is intended
--------
to confer any rights or remedies under or by reason of this Agreement on any
persons or entities other than the parties hereto and their respective
successors and permitted assigns in accordance with Section 10.05 hereof,
except for the provisions of Section 5.15. Without limiting the foregoing, no
third Person shall be a beneficiary of any provision of this Agreement, except
for the provisions of Section 5.15.
<PAGE>
63
IN WITNESS WHEREOF, each of Parent, Acquisition Sub and the Company
has executed this Agreement, or has caused this Agreement to be executed on its
behalf by a representative duly authorized, all as of the day and year first
above written.
BIRD CORPORATION,
by
---------------------------
Name: Joseph D. Vecchiolla
[Seal] Title: Chairman
by
---------------------------
Name: Frank Anthony
Title: Vice President
by
---------------------------
Name: Elizabeth Arcieri
Title: Treasurer
CERTAINTEED CORPORATION,
by
---------------------------
Name: James E. Hilyard
Title: Vice President
<PAGE>
64
BI EXPANSION CORP.,
by
---------------------------
Name: James E. Hilyard
[Seal] Title: Vice President
by
---------------------------
Name: John R. Mesher
Title: Assistant Treasurer
<PAGE>
EXHIBIT A
Conditions to the Offer
-----------------------
Notwithstanding any other term of the Offer or this Agreement,
Acquisition Sub shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, to pay for any shares of Company
Common Stock or Preference Stock tendered pursuant to the Offer unless, (i)
there shall have been validly tendered and not withdrawn prior to the expiration
of the Offer such number of shares of Company Common Stock that would constitute
at least 66-2/3% of the outstanding shares (determined on a fully diluted basis)
of Company Common Stock, (ii) either (x) there shall have been validly tendered
and not withdrawn prior to the expiration of the Offer such number of shares of
Preference Stock that would constitute at least 66-2/3% of the outstanding
shares of Preference Stock or (y) the Purchaser shall have elected to cause the
Company to call for redemption the Preference Stock pursuant to Section 5.16
(clauses (i) and (ii) together being the "Minimum Condition"), (iii) any waiting
period under the HSR Act applicable to the purchase of shares of Company Common
Stock and Preference Stock pursuant to the Offer shall have expired or been
terminated and (iv) all consents, approvals, orders or authorizations of, or
registrations, declarations or filings with, any Governmental Authority required
or necessary in connection with the Offer, the Merger and this Agreement and the
transactions contemplated by this Agreement shall have been obtained and shall
be in full force and effect. Furthermore, notwithstanding any other term of the
Offer or this Agreement, Acquisition Sub shall not be required to accept for
payment or, subject as aforesaid, to pay for any shares of Company Common Stock
or Preference Stock not theretofore accepted for payment or paid for, and may
terminate the Offer if, at any time on or after the date of this Agreement and
before the Consummation of the Offer, any of the following conditions exist:
(a) The representations and warranties of the Company contained in
this Agreement (without regard to any information provided under Section 5.04)
that are qualified as to materiality shall not be true and correct, and the
representations that are not so qualified shall not be true and correct in all
material respects, in each case on and as of the date hereof and on and as of
the date of the scheduled expiration of the Offer.
(b) Any of the obligations of the Company to be performed by it on
or before the date of the scheduled expiration of the Offer pursuant to the
terms of this Agreement shall not have been duly performed or complied with in
all material respects by that date.
(c) Since the Balance Sheet Date, there shall have occurred (or it
shall be reasonably expected that there will be) any event, change or
circumstance causing, or reasonably anticipated to cause in the future, any
Material Adverse Effect.
<PAGE>
(d) Any consents, approvals and authorizations from third Persons
and Governmental Authorities identified on Schedule 2.05 and Schedule 2.11(b)
required to consummate the transactions contemplated by this Agreement shall
not have been obtained.
(e) There shall be pending or threatened any suit, action or
proceeding by any Governmental Authority (i) challenging the acquisition by
Parent or Acquisition Sub of any shares of Company Common Stock or Preference
Stock, seeking to restrain or prohibit the consummation of the Offer, the
Merger or any of the other transactions contemplated by this Agreement or
seeking to obtain from the Company, Parent or Acquisition Sub any damages
related to the Offer, the Merger or the other transactions contemplated hereby
that are material in relation to the Company and its Subsidiaries taken as a
whole, (ii) seeking to prohibit or limit the ownership or operation by the
Company, Parent or any of their respective Subsidiaries of any material portion
of the business or assets of the Company, Parent or any of their respective
Subsidiaries, or to compel the Company, Parent or any of their respective
Subsidiaries to dispose of or hold separate any material portion of the
business or assets of the Company, Parent or any of their respective
Subsidiaries, as a result of the Offer, the Merger or any of the other
transactions contemplated by this Agreement, (iii) seeking to impose
limitations on the ability of Parent or Acquisition Sub to acquire or hold, or
exercise full rights of ownership of, any shares of Surviving Corporation
Common Stock, (iv) seeking to prohibit Parent or any of its Subsidiaries from
effectively controlling in any material respect the business or operations of
the Company or its Subsidiaries or of Parent and its Subsidiaries or (v) which
otherwise is reasonably likely to have a Material Adverse Effect.
(f) There shall be any statute, rule, regulation, judgment, order
or injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, or any other action shall be taken by any Governmental
Authority or court, other than the application to the Offer or the Merger of
applicable waiting periods under the HSR Act, that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (v) of paragraph (e) above.
(g) The Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent its approval or
recommendation of the Offer, the Merger or this Agreement or resolved to take
any of such actions.
(h) The Agreement shall have been terminated in accordance with
its terms.
<PAGE>
The foregoing conditions are for the sole benefit of Acquisition
Sub and Parent and may, subject to the terms of the Agreement, be waived by
Acquisition Sub and Parent in whole or in part at any time and from time to time
in their sole discretion. The failure by Parent or Acquisition Sub at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances, and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
<PAGE>
EXHIBIT B
FEDERAL IDENTIFICATION FEDERAL IDENTIFICATION
NO. Applied For NO. 04-3082903
------------------ ------------------
BI Expansion Bird Corporation
THE COMMONWEALTH OF MASSACHUSETTS
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF MERGER
(General Laws, Chapter 156B, Section 78)
Merger of BI Expansion Corp. and
---------------------------------------
Bird Corporation
---------------------------------------
---------------------------------------
---------------------------------------
the constituent corporations, into
Bird Corporation
---------------------------------------
one of the constituent corporations.
The undersigned officers of each of the constituent corporations certify under
the penalties of perjury as follows:
1. An agreement of merger has been duly adopted in compliance with the
requirements of General Laws, Chapter 156B, Section 78, and will be kept as
provided by Subsection (d) thereof. The surviving corporation will furnish a
copy of said agreement to any of its stockholders, or to any person who was a
stockholder of any constituent corporation, upon written request and without
charge.
2. The effective date of the merger determined pursuant to the agreement of
merger shall be the date approved and filed by the Secretary of the
Commonwealth. If a later effective date is desired, specify such date which
shall not be more than thirty days after the date of filing:
3. (For a merger)
The following amendments to the Articles of Organization of the surviving
corporation have been effected pursuant to the agreement of merger:
Article II of the Articles of Organization of Bird Corporation has been replaced
in its entirety by the following amendment:
The purpose of the corporation is to engage in the following business
activities:
To acquire, hold for investment, or sell securities of corporations
and any other type of real or personal property and to engage in and
carry on any other business or activity permitted to be conducted by
a corporation organized under Chapter 156B of Massachusetts General
Laws.
<PAGE>
(For a consolidation)
(a) the purpose of the resulting corporation is to engage in the following
business activities:
Not Applicable.
(b) State the total number of shares and the par value, if any, of each class of
stock which the resulting corporation is authorized to issue.
Not Applicable.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE WITH PAR VALUE
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common: Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
**(c) If more than one class of stock is authorized, state a distinguishing
designation for each class and provide a description of the preferences, voting
powers, qualifications, and special or relative rights or privileges of each
class and of each series then established.
Not Applicable.
**(d) The restrictions, if any, on the transfer of stock contained in the
agreement of consolidation are:
Not Applicable.
**(e) Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
Not Applicable.
**If there are no provisions state "None".
<PAGE>
4. The information contained in Item 4 is not a permanent part of the Articles
of Organization of the *surviving corporation.
(a) The street address of the *surviving corporation in Massachusetts is: (post
office boxes are not acceptable)
c/o CT Corporation System,
2 Oliver Street, Boston, MA 02109
(b) The name, residential address, and post office address of each director and
officer of the *surviving corporation is:
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
President: Peter R. Dachowski 321 Woodmont Circle Same
Berwyn, PA 19312
Treasurer: James F. Harkins, Jr. 27 Meadow Creek Lane Same
Glenmoore, PA 19343
Clerk: John R. Mesher 128 Aspen Drive Same
Downington, PA 19335
Directors: Peter R. Dachowski See Above See Above
Thomas A. Decker 319 Chester Road Same
Devon, PA 19333
(c) The fiscal year (i.e. tax year) of the *surviving corporation shall end on
the last day of the month of: December
(d) The name and business address of the resident agent, if any, of the
*surviving corporation is:
CT Corporation System
2 Oliver Street, Boston,
MA 02109
The undersigned officers of the several constituent corporations listed above
further state under the penalties of perjury as to their respective corporations
that the agreement of *merger has been duly executed on behalf of such
corporation and duly approved by the stockholders of such corporation in the
manner required by General Laws, Chapter 156B, Section 78.
Frank S. Anthony
- ---------------------------------------------------, *Vice President
Frank S. Anthony
- ---------------------------------------------------, *Clerk
of Bird Corporation
- --------------------------------------------------------------------------------
(Name of constituent corporation)
John R. Mesher
- ---------------------------------------------------, *Vice President
John R. Mesher
- ---------------------------------------------------, *Clerk
of BI Expansion Corp.
- --------------------------------------------------------------------------------
(Name of constituent corporation)
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF *CONSOLIDATION / *MERGER
(General Laws, Chapter 156B, Section 78)
===========================================
I hereby approve the within Articles of *Consolidation / *Merger and
the filing fee in the amount of $_________________, having been paid
said articles are deemed to have been filed with me this ___________
day of ____________________ , 19___.
Effective date: _____________________________________
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Cynthia A. Nastanski, Esq.
----------------------------------
Cravath, Swaine & Moore
825 Eighth Avenue
----------------------------------
New York, NY 10019
----------------------------------
Telephone: (212) 474-1762
-----------------------
<PAGE>
EXHIBIT 11
BIRD CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (1)
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Primary earnings per share
Earnings (loss) from continuing operations ($797) $1,083 ($1,908)
Deduct dividend requirements:
Preferred stock (30) (30) (30)
Convertible preference stock (1,506) (1,506) (1,506)
-------------- -------------- --------------
Net loss from continuing operations (2,333) (453) (3,444)
Net loss from discontinued operations (11,252) (4,766) (26,414)
-------------- -------------- --------------
Net loss applicable to common stock ($13,585) ($5,219) ($29,858)
============== ============== ==============
Weighted average number of common
shares outstanding (1) 4,104,965 3,992,251 4,097,999
Assuming exercise of options reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options (3) 0 0 0
-------------- -------------- --------------
Weighted average number of common
shares outstanding as adjusted 4,104,965 3,992,251 4,097,999
============== ============== ==============
Primary earnings (loss) per common share:
Continuing operations ($0.57) ($0.11) ($1.51)
Discontinued operations (2.74) (1.20) (6.45)
Cumulative effect of accounting change 0.00 0.00 0.67
-------------- -------------- --------------
Applicable to common stock ($3.31) ($1.31) ($7.29)
============== ============== ==============
</TABLE>
<PAGE>
EXHIBIT 11
BIRD CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (1)
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Fully diluted earnings per share (2)
Earnings from (loss) continuing operations ($797) $1,083 ($1,908)
Deduct dividend requirements of
preferred stock (30) (30) (30)
-------------- -------------- --------------
Net earnings (loss) from continuing
operations (827) 1,053 (1,938)
Net loss from discontinued operations (11,252) (4,766) (26,414)
-------------- -------------- --------------
Net loss applicable to common stock ($12,079) ($3,713) ($28,352)
============== ============== ==============
Weighted average number of common
shares outstanding (1) 4,104,965 3,992,251 4,097,999
Assuming exercise of options reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options 0 0 0
Assuming conversion of convertible
preference stock 731,955 731,955 731,955
-------------- -------------- --------------
Weighted average number of common
shares outstanding as adjusted 4,836,920 4,724,206 4,829,954
============== ============== ==============
Fully diluted earnings (loss) per common
share:
Continuing operations ($0.17) $0.22 ($0.97)
Discontinued operations (2.33) (1.01) (5.57)
Cumulative effect of accounting change 0.00 0.00 0.67
-------------- -------------- --------------
Applicable to common stock ($2.50) ($0.79) ($5.87)
============== ============== ==============
</TABLE>
(1) See Note 1 of Notes to Consolidated Financial Statements.
(2) These calculations are submitted in accordance with Securities Exchange
Act of 1934, Release No. 9083, although in certain instances, it is
contrary to paragraph 40 of APB Opinion No. 15 because it produces an
anti-dilutive result.
(3) APB 15 paragraph 30 indicates computation of primary earnings per share
should not give effect to common stock equivalents if their inclusion
has the effect of decreasing the loss per share amount otherwise
computed or is anti-dilutive.
<PAGE>
EXHIBIT 22
BIRD CORPORATION
Significant Subsidiaries:
All subsidiaries are majority owned and are included in the
Consolidated Financial Statements.
State in Which
Incorporated or Organized
Bird Incorporated Massachusetts
<PAGE>
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (No. 33-44475);
Form S-4 (No. 33-44403) and Forms S-8 (Nos. 33-36304, 33-67826, 33-67828 and
33-36305) of our report dated March 16, 1996 appearing on Page F-2 of Bird
Corporation's Annual Report on Form 10-K/A for the year ended December 31, 1995.
/s/ Price Waterhouse LLP
Boston, Massachusetts
April 26, 1996
<PAGE>
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (No. 33-44475);
Form S-4 (No. 33-44403) and Forms S-8 (Nos. 33-36304, 33-67826, 33-67828 and
33-36305) of our report dated February 10, 1995; appearing on Page F-3 of Bird
Corporation's Form 10-K/A for the year ended December 31, 1995.
/s/ Alpern, Rosenthal & Company
Pittsburgh, Pennsylvania
April 26, 1996