<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
- ---
Act of 1934 For the quarterly period ended June 30, 1997 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 1-9822
BFX HOSPITALITY GROUP, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 75-1732794
- --------------------------------------- --------------------------------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
226 Bailey Avenue, Suite 101, Fort Worth, Texas 76107
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(Address and zip code of principal executive offices)
(817) 332-4761
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(Registrant's Telephone Number, Including Area Code)
Buffton Corporation
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(Former Name, Former Address and Former Fiscal Year, If Changed
Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of shares outstanding at:
Class August 2, 1997
-------------------------- --------------------------------
Common stock, $.05 par value 7,677,828
1
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BFX HOSPITALITY GROUP, INC.
Index
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Page
----
Part I - Financial Information............................................ 3
Item 1 - Financial Statements............................................. 3
Consolidated Condensed Balance Sheets June 30, 1997 (Unaudited)
and September 30, 1996.................................................. 3
Consolidated Condensed Statements of Operations (Unaudited)
Three Months Ended June 30, 1997 and 1996............................... 4
Consolidated Condensed Statements of Operations (Unaudited)
Nine Months Ended June 30, 1997 and 1996................................ 5
Consolidated Condensed Statements of Cash Flow (Unaudited)
Nine Months Ended June 30, 1997 and 1996................................ 6
Supplemental Disclosures of Cash Flow Information (Unaudited)............. 6
Notes to Consolidated Condensed Financial Statements (Unaudited).......... 7
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 12
Part II - Other Information............................................... 16
Signatures................................................................ 17
2
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BFX HOSPITALITY GROUP, INC.
Consolidated Condensed Balance Sheets
-------------------------------------
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
---------- -------------
(Unaudited)
(In thousands)
<S> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $25,581 $ 1,659
Receivables, net of allowance for
doubtful accounts of $35,000 at September 30, 1996............... 1,962 3,370
Inventories........................................................ 76 1,396
Prepaid and other current assets................................... 149 492
------- -------
Total current assets............................................. 27,768 6,917
------- -------
Property, plant and equipment, at cost:
Land, building and improvements.................................... 10,915 12,257
Less: Accumulated depreciation and amortization................... (2,648) (2,626)
------- -------
Net property, plant and equipment................................. 8,267 9,631
------- -------
Patents, net of accumulated amortization of
$1,529,000........................................................ - 1,451
Goodwill, net of amortization of $1,117,000 and
$845,000, respectively............................................ 3,849 4,120
Long-term notes receivable........................................... - 540
Other assets......................................................... 356 505
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$40,240 $23,164
======= =======
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term debt.................................. $ 187 $ 187
Accounts payable................................................... 400 1,152
Accrued liabilities................................................ 5,804 1,524
Income taxes....................................................... 4,827 311
------- -------
Total current liabilities......................................... 11,218 3,174
Long - term debt..................................................... 2,353 2,493
Deferred income taxes................................................ 4 4
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Total liabilities................................................. 13,575 5,671
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Stockholders' equity:
Preferred stock $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding..................... - -
Common stock $.05 par value; 30,000,000 shares authorized;
7,786,878 shares outstanding...................................... 390 337
Additional paid-in capital......................................... 16,328 14,354
Retained earnings.................................................. 10,206 3,158
Treasury stock, at cost, 109,050 and 183,350, shares respectively.. (259) (356)
------- -------
Total stockholders' equity........................................ 26,665 17,493
------- -------
$40,240 $23,164
======= =======
</TABLE>
See accompanying notes to unaudited Consolidated Condensed Financial Statements.
3
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BFX HOSPITALITY GROUP, INC.
Consolidated Condensed Statements of Operations (Unaudited)
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<TABLE>
<CAPTION>
Three Months
Ended June 30,
-------------------------
1997 1996
-------- --------
(In thousands, except per
share amounts)
<S> <C> <C>
Net revenues............................................. $ 2,646 $ 2,602
-------- --------
Cost of goods sold (exclusive of depreciation)........... 551 589
Selling, general and administrative...................... 12,065 2,099
Depreciation and amortization............................ 218 253
-------- --------
Total operating costs and expenses 12,834 2,941
-------- --------
Net loss from continuing operations before other income
and income taxes........................................ (10,188) (339)
-------- --------
Other income (expense):
Interest income........................................ 112 24
Interest expense....................................... (56) (59)
-------- --------
56 (35)
-------- --------
Loss from continuing operations before income taxes...... (10,132) (374)
Income tax benefit....................................... (3,026) (135)
-------- --------
Loss from continuing operations.......................... (7,106) (239)
-------- --------
Discontinued operations:
Income from operations, net of income tax expense
of $267,000 and $339,000 respectively.................. 437 577
Gain on disposal, net of income tax expense
of $7,252,000.......................................... 13,003 -
-------- --------
Income from discontinued operations...................... 13,440 577
-------- --------
Net income............................................... $ 6,334 $ 338
======== ========
Income (loss) per average common share:
Continuing operations.................................... $ (.93) $ (.04)
Discontinued operations.................................. 1.76 .09
-------- --------
Net income............................................... $ .83 $ .05
======== ========
Weighted average common shares outstanding............... 7,658 6,727
======== ========
</TABLE>
See accompanying notes to unaudited Consolidated Condensed Financial Statements.
4
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BFX HOSPITALITY GROUP, INC.
Consolidated Condensed Statements of Operations (Unaudited)
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<TABLE>
<CAPTION>
Nine Months
Ended June 30,
-------------------------
1997 1996
-------- -------
(In thousands, except per
share amounts)
<S> <C> <C>
Net revenues............................................. $ 7,993 $ 6,951
-------- -------
Cost of goods sold (exclusive of depreciation)........... 1,703 1,585
Selling, general and administrative...................... 16,251 5,537
Depreciation and amortization............................ 736 734
-------- -------
Total operating costs and expenses 18,690 7,856
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Net loss from continuing operations before other income
and income taxes....................................... (10,697) (905)
-------- -------
Other income (expense):
Interest income........................................ 181 60
Interest expense....................................... (164) (86)
-------- -------
17 (26)
-------- -------
Loss from continuing operations before income taxes...... (10,680) (931)
Income tax benefit....................................... (3,216) (406)
-------- -------
Loss from continuing operations.......................... (7,464) (525)
-------- -------
Discontinued operations:
Income from operations, net of income tax expense
of $933,000 and $815,000, respectively................. 1,509 1,389
Gain on disposal, net of income tax expense
of $7,252,000.......................................... 13,003 -
-------- -------
Income from discontinued operations...................... 14,512 1,389
-------- -------
Net income............................................... $ 7,048 $ 864
======== =======
Income (loss) per average common share:
Continuing operations.................................... $ (1.07) $ (.08)
Discontinued operations.................................. 2.08 .22
-------- -------
Net income............................................... $ 1.01 $ .14
======== =======
Weighted average common shares outstanding............... 6,976 6,360
======== =======
</TABLE>
See accompanying notes to unaudited Consolidated Condensed Financial Statements.
5
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BFX HOSPITALITY GROUP, INC.
---------------------------
Consolidated Condensed Statements of Cash Flow (Unaudited)
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<TABLE>
<CAPTION>
Nine Months
Ended June 30, 1997
-------------------
1997 1996
------- -------
(In thousands)
<S> <C> <C>
Net cash provided by operating activities......... $ 49 $ 1,347
------- -------
Cash flows from investing activities:
Additions to property, plant and equipment...... (566) (1,005)
Net proceeds from sale of operating assets...... 24,744 -
Additions to other assets....................... - (339)
Acquisitions, net of cash acquired.............. - (1,007)
------- -------
Net cash provided by investing activities......... 24,178 (2,351)
------- -------
Cash flows from financing activities:
Additions to long-term debt..................... - 1,200
Repayments of long-term debt.................... (140) (72)
Treasury stock purchases........................ (165) -
------- -------
Net cash provided by financing activities......... (305) 1,128
------- -------
Net increase in cash.............................. 23,922 124
Cash and cash equivalents at beginning of period.. 1,659 7
------- -------
Cash and cash equivalents at end of period........ $25,581 $ 131
======= =======
</TABLE>
Supplemental Disclosures of Cash Flow Information
-------------------------------------------------
Supplemental cash flow information (unaudited):
<TABLE>
<CAPTION>
Nine Months
Ended June 30,
------------------
1997 1996
----- -----------
(In thousands)
<S> <C> <C>
Cash paid for:
Interest................................... $ 164 $ 99
Income taxes............................... 324 52
Noncash investing and financing activities:
Fair value of assets acquired.............. $ 4,660
Liabilities assumed........................ 1,754
Stock issued............................... 1,804
-----------
Cash paid.................................. 1,102
Less: Cash acquired....................... 95
-----------
Net cash paid for acquisitions............. $ 1,007
===========
</TABLE>
See accompanying notes to unaudited Consolidated Condensed Financial Statements.
6
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BFX HOSPITALITY GROUP, INC.
Notes to Consolidated Condensed Financial Statements (Unaudited)
----------------------------------------------------------------
Note A
- ------
In May 1997, the Company's stockholders approved a proposal at the
Annual Meeting of Stockholders to change the name of the Company from Buffton
Corporation to BFX Hospitality Group, Inc. The change became effective on July
8, 1997 upon filing of Amended and Restated Certificate of Incorporation.
In the opinion of management, the accompanying consolidated condensed
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position of BFX
Hospitality Group, Inc. (the Company), as of June 30, 1997, the results of its
operations for the three and nine month periods ended June 30, 1997 and 1996 and
its cash flows for the nine month periods ended June 30, 1997 and 1996.
The accounting policies followed by the Company are set forth in Note
1 to the Company's financial statements in the 1996 Buffton Corporation Annual
Report on Form 10-K/A.
Note B
- ------
The results of operations for the three and nine month periods ended
June 30, 1997 are not necessarily indicative of the results to be expected for
the full year.
Note C
- ------
Net income per share has been computed on the basis of the weighted
average number of common shares outstanding.
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Financial Accounting Standard No. 128, Earnings per Share ("FAS 128"),
which is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods. Effective December 31, 1997, the
Company will adopt FAS 128, which establishes standards for computing and
presenting earnings per share ("EPS"). The statement requires dual presentations
of basic and diluted EPS on the face of the income statement for entities with
complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS calculation to the numerator and denominator of the
diluted EPS calculation. Basic EPS excludes the effect of potentially dilutive
securities while diluted EPS reflects the potential dilution that would have
occurred if securities or other contracts to issue common stock had been
exercised, converted or resulted in the issuance of common stock that would have
then shared in the earnings of the entity. Had the Company already adopted the
provision of this statement, there would have been no impact on the EPS amounts
presented.
7
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Note D
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In May 1997, the Company's shareholders approved the sale of the
Company's electrical product segment, Current Technology, Inc. (CTI), to Danaher
Corporation. The sale was completed on June 3, 1997. Danaher purchased the
assets of CTI for $25,500,000 in cash and assumed approximately $1,300,000 in
liabilities. Danaher also will pay the Company approximately $648,000 based on
a purchase price adjustment based on the Net Tangible Assets, as defined in the
sales agreement at the closing date. This amount is expected to be received
during the fourth quarter of fiscal 1997 and is recorded as a receivable in the
Company's Consolidated Condensed Balance Sheet. The Company also incurred
expenses of approximately $1,402,000 associated with the sale, including
payments to Walter D. Rogers, then president of CTI and a director of the
Company, of $500,000 pursuant to his employment contract, and $250,000 as
consideration for agreeing to include non-competition and non-disclosure
provisions in his employment agreement with Danaher. As a result of the above
transactions, the Company recognized a gain on disposal of $13,003,000, net of
taxes. The sale of CTI was accounted for as a discontinued operation.
Note E
- ------
In April 1997, the Company acquired all of the outstanding stock of
Hotels of Distinction (HOD), a hotel management company, from Alan Tremain,
O.B.E. and Jean-Claude Mathot in exchange for 300,000 shares of the Company's
common stock. In addition, Mr. Tremain became Chairman of the Board of the
Company and Mr. Mathot became President and Chief Operating Officer of the
Company. Because HOD has no assets or management contracts at the date of
purchase, the transaction, in substance, represents payment for employment
services. As a result, the Company expensed $825,000, the estimated fair market
value of the stock, during the quarter ending June 30, 1997. In connection with
the transaction, non-qualified stock option agreements were entered into with
Mr. Tremain and Mr. Mathot, each agreement granting options covering 250,000
shares of the Company's common stock at an exercise price of $3.00 per share,
approximately $.25 per share in excess of the fair market value at the date of
grant. The options are fully vested and must be exercised, if at all, within
five years of the date of grant. The options terminate upon termination of
employment by the employee or a termination by the Company for cause.
Note F
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Effective January 1, 1996, the Company entered into an agreement to
purchase the assets of Cabo Tacobar One, Ltd., a Mexican restaurant concept with
Central and South American influences located in Houston, Texas, for $589,000 in
cash, 375,000 shares of the Company's common stock (with an estimated fair
market value of $656,000), and a one year option to purchase an additional
150,000 shares of the Company's common stock at a price of $2.00 per share.
Additionally, the Company issued 76,500 shares of its common stock for
commissions incurred in connection with the acquisition which resulted in
increased acquisition costs of $153,000. Excess of purchase price over fair
value of net tangible assets acquired, recorded as Goodwill, approximates
$1,300,000 and is being amortized on a straight line basis over 15 years.
Effective January 1, 1996, the Company also entered into an agreement to
purchase the assets and assume certain liabilities of the Stockyards Hotel,
located in Fort Worth, Texas, for $500,000 in cash, 450,000 shares of the
Company's common stock (with an estimated fair market value of
8
<PAGE>
$788,000) and the refinancing of a $1,600,000 bank term loan. Under this
agreement, the Company guaranteed, until March 15, 1997, a sales price of $2.05
per share for any of this stock that may be sold. No liability was incurred
under the guarantee agreement. These acquisitions were accounted for under
purchase accounting and are included in the Company's results of operations
beginning on the acquisitions' effective date of January 1, 1996.
Unaudited proforma results from continuing operations, as if the
acquisitions had occurred at the beginning of fiscal 1996 are as follows:
Nine Months Ended
June 30,
1996
-------
Revenues..................................... $ 7,749
Net loss from continuing operations.......... (482)
Primary income per average common share...... (.08)
Note G
- ------
During March 1992, the United States Environmental Protection Agency
(EPA), issued a Record of Decision (ROD) with respect to the Company's
Superfund Site in Vestal, New York. An Administrative Order for Remedial Design
and Remedial Action was issued on October 1, 1992. The ROD requires the Company
to construct a water treatment facility at the site and to pump contaminated
ground water from bedrock and overburden extraction wells for 15 to 30 years
until remediation goals were met. In December 1992, the Company's environmental
consultants prepared and submitted a Remedial Design Work Plan (RDWP) to the
EPA. The EPA issued comments on the RDWP on October 1, 1993, and a revised RDWP
was submitted to the EPA on October 21, 1993. During February 1994, the Company
received comments from the EPA with respect to the revised RDWP and the
Company's environmental consultants submitted a response. The EPA approved the
revised RDWP in October 1994. On November 14, 1994, engineering design and
related fieldwork was begun in order to meet the specifications of the revised
RDWP.
During the nine months ended June 30, 1997 and 1996, $199,000 and
$229,000, respectively, were incurred for work related to the engineering
design. These costs were capitalized when incurred because the remedy would
prevent further environmental contamination with respect to the contaminated
ground water being pumped from the extraction wells and improve the property
compared with its condition when acquired by the Company. Due to concerns about
the correctness of the remedy provided for in the ROD, additional fieldwork was
performed and in June 1995, an RDWP Addendum was prepared and submitted to the
EPA. The Company received comments from the EPA regarding this Addendum, and the
Company's environmental consultants submitted a response shortly thereafter.
On August 24, 1995, the Company and its legal and environmental
consultants met with officials of the EPA and agreed on additional fieldwork
deemed necessary by the EPA to support the Company's position regarding the RDWP
Addendum. At this meeting, officials of the EPA agreed the remedy needed to be
modified and that certain requirements under the existing ROD needed to be
eliminated or reduced in scope.
9
<PAGE>
Additional fieldwork provided for in the RDWP Addendum was conducted
at the site and resulted in the formulation of a revised remedy. On December
19, 1995, the Company and its legal and environmental consultants presented to
the EPA the RDWP Addendum and the recommended changes to the ROD in the form of
a revised remedy. On July 16, 1996, the Company and its legal and environmental
representatives met with the EPA to review the EPA's written response to this
revised remedy. The revised remedy would eliminate certain requirements of the
existing ROD and would primarily include removing and treating contaminated
soil, significantly reducing the time period for remediation.
In April 1997, the EPA issued a proposed plan setting forth the
expedited remedy discussed above which was finalized in July 1997. As a result,
during the quarter ending June 30, 1997, the Company expensed $3,000,000, the
estimated net present value of the future costs of implementing this alternative
remedy. Additionally, all prior costs incurred, approximating $870,000 through
April 30, 1997, associated with the implementation of the original ROD, were
expensed.
During the quarter ended June 30, 1997, the Company was told that the
EPA plans to seek reimbursement for monies spent by the EPA at the Company's
Vestal, New York property. The amount of the costs accrued by the EPA over
approximately ten years, from October 1987 through April 1997, is unclear at
this time. The EPA has continued to recalculate its costs and has revised its
estimate upward, as recently as July 11, 1997, when it indicated that its
adjusted past costs approximated $1,245,000. The EPA's amount does not include
interest, which the EPA has indicted that it will seek from the Company. The EPA
also has stated that it is prepared to conduct negotiations with the Company's
about these costs, including considering applying its Orphan Share Policy. That
policy may be used by the EPA to reduce the amount of costs required to be paid,
when parties liable are no longer in existence. Robintech, Inc., which owned and
operated the Vestal property until 1982, when it sold the property to the
Company, is no longer in existence. If EPA applies the Orphan Share Policy, the
costs EPA seeks from the Company could be reduced by approximately 70 percent.
The EPA has informed the Company that its Orphan Share Policy is applicable only
if the Company enters into a consent decree with EPA and the Justice Department.
Although the Company has not agreed to pay the EPA's costs and will vigorously
contest any such claim by the EPA, the Company has accrued $500,000 for future
EPA claims.
Note H
- ------
The Company is a party to various legal actions which are in the
aggregate immaterial, and due to the nature of the Company's business, it could
be a party in other legal or administrative proceedings arising in the ordinary
course of business. While occasional adverse settlements or resolutions may
occur and negatively impact earnings in the year of settlement, it is the
opinion of management that their ultimate resolution will not have a material
adverse effect on the Company's financial position.
10
<PAGE>
Note I
- ------
On March 21, 1997, Robert H. McLean, Chief Executive Officer and
Director of the Company, Robert Korman, Chief Financial Officer and Walter D.
Rogers, then President of CTI and a Director of the Company, exercised
outstanding options to purchase 500,000 shares at $774,000, 110,000 shares at
$169,400 and 150,000 shares at $247,000, respectively. The fair market value at
the date of exercise was $2.56 per share. Pursuant to the terms of their stock
option agreements, each paid the purchase price by executing a promissory note
in the principal amount of the respective purchase price payable one year from
date of exercise and bearing interest of 8% per annum, both principal and
interest payable at maturity. The notes are recorded as a receivable in the
Company's Consolidated Condensed Balance Sheet. For financial statement
purposes, there is no gain or loss incurred in this transaction; however, the
Company will receive a tax deduction of approximately $756,000.
11
<PAGE>
BFX HOSPITALITY GROUP, INC.
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL INFORMATION
At June 30, 1997, the Company consists of operations in the
hospitality industry. During the year ended September 30, 1996 and the nine
months ended June 30, 1997, the Company entered into the following acquisition
and disposition transactions.
Effective January 1, 1996, the Company entered into agreements to
purchase the assets of Cabo Tacobar One, Ltd. (Cabo), located in Houston, Texas
and to purchase the assets and assume certain liabilities related to the
Stockyards Hotel (SYH), located in Fort Worth, Texas. See Note E of Notes to
Consolidated Condensed Financial Statements for details of the acquisitions.
In April 1997, the Company entered into an agreement to acquire the
Stock of Hotels of Distinction, Inc. (HOD). See Note E of Notes to Consolidated
Condensed Financial Statements for details of the acquisition.
Effective June 1, 1997, the Company sold the operations of Current
Technology, Inc. (CTI), headquartered in Irving, Texas. See Note D of Notes to
Consolidated Condensed Financial Statements for details of the sale.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Certain matters discussed herein are forward-looking statements about
the business, financial condition and prospects of the Company. The actual
results could differ materially from those indicated by such forward-looking
statements because of various risks and uncertainties. Such risks and
uncertainties may include, but are not limited to regional and national economic
conditions, changes in customer demand for products offered by the Company, and
other matters that may adversely affect the availability of products and
pricing, state and federal regulatory environment, possible future acquisitions
or dispositions, amendments to the Record of Decision issued by the
Environmental Protection Agency (see Liquidity and Capital Resources) and other
risks indicated in the Company's previous filings with the Securities and
Exchange Commission. The Company cannot control these risks and uncertainties,
and in many cases, cannot predict the risks and uncertainties that could cause
its actual results to differ materially from those indicated by the forward-
looking statements.
RESULTS OF OPERATIONS
Revenues for the 1997 three month period increased 2% compared to
1996 due to increased revenues at Cat's Meow (primarily due to increased
tourists in New Orleans as well as a menu price increase of approximately 6%)
and Cabo (due to expansion in May 1996) offset by reduction in revenues by sale
of River Rat's in July 1996. Revenues for the 1997 nine month period increased
15%, due to the inclusion of the results of operations of Cabo and SYH effective
January 1, 1996.
12
<PAGE>
Consolidated costs of sales during the 1997 three and six month
periods versus 1996 decreased 6% and increased 7%. As a percent of related
revenue, these costs were 21% during both the 1997 three and six months periods
versus 23% a year earlier. The increase in absolute dollars was due to increased
sales and the decrease in costs as a percent of revenue is due to increased
operating efficiencies.
Consolidated selling, general and administrative expenses for the 1997
three and six month periods increased 475% and 194%, respectively, compared to
1996. The primary reason for the increase was the expense associated with
acquisition of Hotels of Distinction, the charge incurred as a result of the
amended Record of Discussion regarding the Company's Vestal, New York superfund
site, bonus to the Company's management as a result of the sale of CTI, the
reserve for collection of certain notes receivable and certain concept
development expenditures. See liquidity and capital resource for further
details.
The increase in interest income to $181,000 for the 1997 nine month
period from $60,000 in 1996 and to $112,000 for the 1997 three month period from
$24,000 in 1996 is due to the interest income earned on the proceeds of the CTI
sale.
The increase in interest expense to $164,000 for the 1997 nine month
period from $86,000 in 1996 is primarily due to the refinancing of a $1,600,000
bank term loan assumed in connection with the acquisition of SYH offset by the
reduction of debt outstanding under a line of credit with a bank. Interest
expense for the 1997 three month period approximated the 1996 amount.
During the three months ended June 30, 1997, the Company reported a
loss from continuing operations before income taxes of $10,132,000 versus a loss
of $374,000 in 1996. This increased loss is due to increased selling, general
and administrative losses discussed above. During the nine months ended June 30,
1997, the Company reported a loss from continuing operations before income taxes
of $10,680,000 versus $931,000 in 1996.
LIQUIDITY AND CAPITAL RESOURCES
During March 1992, the United States Environmental Protection Agency
(EPA), issued a Record of Decision (ROD) with respect to the Company's Superfund
Site in Vestal, New York. An Administrative Order for Remedial Design and
Remedial Action was issued on October 1, 1992. The ROD requires the Company to
construct a water treatment facility at the site and to pump contaminated ground
water from bedrock and overburden extraction wells for 15 to 30 years until
remediation goals were met. In December 1992, the Company's environmental
consultants prepared and submitted a Remedial Design Work Plan (RDWP) to the
EPA. The EPA issued comments on the RDWP on October 1, 1993, and a revised RDWP
was submitted to the EPA on October 21, 1993. During February 1994, the Company
received comments from the EPA with respect to the revised RDWP and the
Company's environmental consultants submitted a response. The EPA approved the
revised RDWP in October 1994. On November 14, 1994, engineering design and
related fieldwork was begun in order to meet the specifications of the revised
RDWP.
During the nine months ended June 30, 1997 and 1996, $199,000 and
$229,000, respectively, were incurred for work related to the engineering
design. These costs were capitalized when incurred because the remedy would
prevent further environmental contamination with respect to the contaminated
ground water being pumped from the extraction wells and improve the property
compared with its condition when acquired by the Company. Due to concerns about
the
13
<PAGE>
correctness of the remedy provided for in the ROD, additional fieldwork was
performed and in June 1995, an RDWP Addendum was prepared and submitted to the
EPA. The Company received comments from the EPA regarding this Addendum, and the
Company's environmental consultants submitted a response shortly thereafter.
On August 24, 1995, the Company and its legal and environmental
consultants met with officials of the EPA and agreed on additional fieldwork
deemed necessary by the EPA to support the Company's position regarding the RDWP
Addendum. At this meeting, officials of the EPA agreed the remedy needed to be
modified and that certain requirements under the existing ROD needed to be
eliminated or reduced in scope.
Additional fieldwork provided for in the RDWP Addendum was conducted
at the site and resulted in the formulation of a revised remedy. On December 19,
1995, the Company and its legal and environmental consultants presented to the
EPA the RDWP Addendum and the recommended changes to the ROD in the form of a
revised remedy. On July 16, 1996, the Company and its legal and environmental
representatives met with the EPA to review the EPA's written response to this
revised remedy. The revised remedy would eliminate certain requirements of the
existing ROD and would primarily include removing and treating contaminated
soil, significantly reducing the time period for remediation.
In April 1997, the EPA issued a proposed plan setting forth the
expedited remedy discussed above which was finalized in July 1997. As a result,
during the quarter ending June 30, 1997, the Company expensed $3,000,000, the
estimated net present value of the future costs of implementing this alternative
remedy. Additionally, all prior costs incurred, approximating $870,000 through
April 30, 1997, associated with the implementation of the original ROD, were
expensed.
During the quarter ended June 30, 1997, the Company was told that
the EPA plans to seek reimbursement for monies spent by the EPA at the Company's
Vestal, New York property. The amount of the costs accrued by the EPA over
approximately ten years, from October 1987 through April 1997, is unclear at
this time. The EPA has continued to recalculate its costs and has revised its
estimate upward, as recently as July 11, 1997, when it indicated that its
adjusted past costs approximated $1,245,000. The EPA's amount does not include
interest, which the EPA has indicted that it will seek from the Company. The EPA
also has stated that it is prepared to conduct negotiations with the Company's
about these costs, including considering applying its Orphan Share Policy. That
policy may be used by the EPA to reduce the amount of costs required to be paid,
when parties liable are no longer in existence. Robintech, Inc., which owned and
operated the Vestal property until 1982, when it sold the property to the
Company, is no longer in existence. If EPA applies the Orphan Share Policy, the
costs EPA seeks from the Company could be reduced by approximately 70 percent.
The EPA has informed the Company that its Orphan Share Policy is applicable only
if the Company enters into a consent decree with EPA and the Justice Department.
Although the Company has not agreed to pay the EPA's costs and will vigorously
contest any such claim by the EPA, the Company has accrued $500,000 for future
EPA claims.
In April 1997, the Company acquired all of the outstanding stock of
Hotels of Distinction (HOD), a hotel management company, from Alan Tremain,
O.B.E. and Jean-Claude Mathot in exchange for 300,000 shares of the Company's
common stock. In addition, Mr. Tremain became Chairman of the Board of the
Company and Mr. Mathot became President and Chief Operating Officer of the
Company. Because HOD has no assets or management contracts at the date of
purchase, the transaction, in substance, represents payment for employment
services. As a result,
14
<PAGE>
the Company expensed $825,000, the estimated fair market value of the stock,
during the quarter ending June 30, 1997. In connection with the transaction,
non-qualified stock option agreements were entered into with Mr. Tremain and Mr.
Mathot, each agreement granting options covering 250,000 shares of the Company's
common stock at an exercise price of $3.00 per share, approximately $.25 per
share in excess of the fair market value at the date of grant. The options are
fully vested and must be exercised, if at all, within five years of the date of
grant. The options terminate upon termination of employment by the employee or a
termination by the Company for cause.
In May 1997, the Company's shareholders approved the sale of the
Company's electrical product segment, Current Technology, Inc. (CTI), to Danaher
Corporation. The sale was completed on June 3, 1997. Danaher purchased the
assets of CTI for $25,500,000 in cash and assumed approximately $1,300,000 in
liabilities. Danaher also will pay the Company approximately $648,000 based on a
purchase price adjustment based on the Net Tangible Assets, as defined in the
sales agreement at the closing date. This amount is expected to be received
during the fourth quarter of fiscal 1997 and is recorded as a receivable in the
Company's Consolidated Condensed Balance Sheet. The Company also incurred
expenses of approximately $1,402,000 associated with the sale, including
payments to Walter D. Rogers, then president of CTI and a director of the
Company, of $500,000 pursuant to his employment contract, and $250,000 as
consideration for agreeing to include non-competition and non-disclosure
provisions in his employment agreement with Danaher. As a result of the above
transactions, the Company recognized a gain on disposal of $13,003,000, net of
taxes. The sale of CTI was accounted for as a discontinued operation.
In February 1997, the Company began construction on a second Cabo
unit to be located in the historical district of downtown Houston, Texas. The
unit is expected to open during the fourth quarter of fiscal 1997. The Company
has signed a lease for its third Cabo location in Fort Worth, Texas and
anticipates this restaurant will be open in the first quarter of fiscal 1998.
Plans for a new restaurant are being finalized and it is expected to open during
the first quarter of fiscal 1998. Capital expenditures for these three projects
are expected to approximate $2,750,000 and are expected to be funded from
existing cash and operating cash flow.
Although the Company has $25,581,000 in cash at June 30, 1997, certain
commitments will reduce this amount significantly by December 31, 1997. The
principle commitments the Company will owe include, in September 1997,
approximately $5,000,000 in federal income taxes, approximately $2,750,000 in
capital commitments for the opening of three restaurants, and 3,500,000 for the
implementation of the remedy for its superfund site in Vestal, New York. The
cash balance, if all commitments are funded by December 31, 1997, would be
approximately $13,000,000.
15
<PAGE>
BFX HOSPITALITY GROUP, INC.
PART II - OTHER INFORMATION
- ---------------------------
Item 1. - Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security-Holders
---------------------------------------------------
On May 16, 1997, the 1997 Annual Meeting of Stockholders of the
Company was held. Following is a brief description of the matters
voted upon at the meeting and a tabulation of the voting therefor:
Election of Directors
---------------------
The following persons were elected directors of the Company based on
the number of votes set forth opposite their respective names:
<TABLE>
<CAPTION>
Number of Votes
-----------------------
Nominee For Not For
--------------------- --------- -------
<S> <C> <C>
Alan Tremain 6,441,178 207,094
Hampton Hodges 6,493,318 154.954
Walter D. Rogers, Jr. 6,497,078 155,194
</TABLE>
The remaining directors and their respective date their term expires
are as follows:
Bruno D'Agostino (1998), John M. Edgar (1998), H. T. Hunnewell
(1999), Robert H. McLean (1998), Jean-Claude Mathot (1999) and
Russell J. Sarno (1999).
Authorization of sale of CTI
----------------------------
A proposal to authorize the sale of CTI to Danaher Corporation was
approved with 4,940,945 votes cast for, 26,653 votes cast against and
10,247 votes abstained.
Proposed name change of Company
-------------------------------
A proposal that an Amended and Restated Certificate of Incorporation
of the Company to (a) effect a change of the name of the Company to
"BFX Hospitality Group, Inc." and (b) restate the Company's existing
Certificate of Incorporation was approved with 4,889,503 votes cast
for, 73,370 votes cast against and 13,272 votes abstained.
16
<PAGE>
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
Amended and Restated Certificate of Incorporation of Buffton
Corporation.
(b) Reports on Form 8-K
Report dated April 7, 1997 reporting amendment to the Bylaws
of the Company.
Report dated June 3, 1997 reporting completion of Sale of
Current Technology, Inc.
17
<PAGE>
BFX HOSPITALITY GROUP, INC.
SIGNATURES
----------
Pursuant to 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.
BFX HOSPITALITY GROUP, INC.
(Registrant)
By: /s/ Robert H. McLean
----------------------------
Chief Executive Officer
August 11, 1997
- ---------------
By: /s/ Robert Korman
----------------------------
Vice President and
Chief Financial Officer
August 11, 1997
- ---------------
18
<PAGE>
EXHIBIT 99.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
BUFFTON CORPORATION
Buffton Corporation, a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation is Buffton Corporation. Buffton
Corporation was originally incorporated under the name Buffton Oil & Gas, Inc.
The original Certificate of Incorporation of the Corporation was filed on
December 17, 1980.
2. Amendments to the original Certificate of Incorporation of the
Corporation were filed on February 18, 1983, October 2, 1985, February 11, 1987
and February 22, 1989.
3. To restate the Certificate of Incorporation of the Corporation to
include the referenced amendments, and to further amend the Certificate of
Incorporation to change the name of the Corporation to "BFX Hospitality Group,
Inc.," pursuant to Sections 242 and 245 of the General Corporation Law of
Delaware, this Amended and Restated Certificate of Incorporation restates,
integrates and further amends the provisions of the Certificate of Incorporation
of the Corporation.
4. The text of the Amended and Restated Certificate of Incorporation, as
amended or supplemented, is hereby restated and further amended to read in its
entirety as follows:
ARTICLE I
The name of the Corporation is BFX Hospitality Group, Inc.
ARTICLE II
The registered office of the Corporation in the state of Delaware is
located at No. 100 West 10th Street, in the city of Wilmington, county of New
Castle. The name of the Corporation's registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
<PAGE>
ARTICLE IV
The total number of shares of stock which the Corporation shall have
authority to issue is 35,000,000, of which 30,000,000 shares shall be Common
Stock having a par value of $.05 each, and 5,000,000 shares shall be Preferred
Stock having a par value of $.01 each.
The 5,000,000 shares of Preferred Stock may be issued from time to time, in
one or more series with such designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, as may be designated by the Board of Directors prior to
the issuance of such series, and the Board of Directors is hereby expressly
authorized to fix by resolution or resolutions prior to such issuance such
designations, preferences and relative, participating, optional or other special
rights, or qualifications, limitations or restrictions, including, without
limiting the generality of the foregoing, the following:
1. the date and times at which, and the rate or rates at which, dividends
on such series of Preferred Stock shall be paid;
2. the right, if any, of the holders of such series of the Preferred Stock
to vote and the manner of voting, except as may otherwise be provided by
the General Corporation Law of Delaware;
3. the right, if any, of the holder of shares of such series of Preferred
Stock to convert the same into, or exchange the same for, other classes of
stock of the Corporation, and the terms and conditions for such conversion
or exchange;
4. the redemption price or prices and the time at which, and the terms and
conditions on which, the shares of such series of Preferred Stock may be
redeemed;
5. the rights of the holders of shares of such series of Preferred Stock
upon the voluntary or involuntary liquidation, distribution or sale of
assets, dissolution or winding up of the Corporation; and
6. the terms of the sinking fund or redemption or purchase account, if
any, to be provided for such series of Preferred Stock.
The designations, preferences and relative, participating, optional or
other special rights, the qualifications, limitations or restrictions thereof,
of each additional series, if any, may differ from those of any and all other
series already outstanding.
ARTICLE V
The amount of authorized stock of the Corporation of any class or classes
may be increased or decreased by the affirmative vote or written consent of the
holders of a majority of the stock of the Corporation entitled to vote.
-2-
<PAGE>
ARTICLE VI
SECTION 1. The business and property of the Corporation shall be managed
and controlled by its Board of Directors. The number of directors shall not be
less than three. The number of Directors shall be fixed from time to time
exclusively by a vote of a majority of the Board of Directors, except as
otherwise fixed by or pursuant to the provisions of Article IV of this
Certificate of Incorporation relating to the rights of the holders of the
Preferred Stock. The Board of Directors shall be divided into three classes,
Class I, Class II and Class III, which shall be as nearly equal in number as
possible. At the annual meeting of stockholders to be held in 1989, Class I
directors shall be elected for a term expiring at the annual meeting of
stockholders to be held in 1990, Class II directors shall be elected for a term
expiring at the annual meeting of stockholders to be held in 1991, and Class III
directors shall be elected for a term expiring at the annual meeting of
stockholders to be held in 1992, with each director to hold office until his
successor is elected and qualified. At each annual meeting of stockholders
subsequent to 1989, the successors of the class of directors whose terms expire
at that annual meeting shall be elected to hold office for a term expiring at
the annual meeting of stockholders to be held in the third year following the
year of their election. The election of directors need not be by written ballot
unless so provided by the By-laws. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director. Any newly created or eliminated directorship resulting from an
increase or decrease in the Board of Directors shall be apportioned by the Board
of Directors among the three classes of directors so as to maintain such classes
as nearly equal as possible.
SECTION 2. Except as otherwise provided for or fixed by or pursuant to the
provisions of Article IV of this Certificate of Incorporation relating to the
rights of the holders of the Preferred Stock, newly created directorships
resulting from any increase in the number of directors and any vacancies of the
Board of Directors resulting from death, resignation, removal or other cause
shall be filled only by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of the Board of
Directors, or by a sole remaining director. Any director elected in accordance
with the preceding sentence of this Section 2 shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified.
SECTION 3. Except as otherwise provided for or fixed by or pursuant to the
provisions of Article IV of this Certificate of Incorporation relating to the
rights of the holders of the Preferred Stock, any director may be removed from
office only for cause and only by the affirmative vote of the holders of 80% of
the then outstanding shares of each class of stock of the Corporation having
voting power for the election of directors.
SECTION 4. Notwithstanding any other provision of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, the affirmative vote of the holders of at least 80% of the then
outstanding shares of each class of stock of the Corporation having voting power
for the election of directors shall be required to alter, amend or repeal this
Article VI, except as otherwise provided for or fixed by or pursuant to the
provisions of Article IV of this Certificate of Incorporation relating to the
rights of the holders of the Preferred Stock.
-3-
<PAGE>
ARTICLE VII
In furtherance and not in limitation of the power conferred upon the Board
of Directors by law, the Board of Directors shall have power to make, adopt,
alter, amend and repeal from time to time By-laws of the Corporation, subject to
the right of the stockholders entitled to vote with respect thereto to alter and
repeal By-laws made by the Board of Directors.
ARTICLE VIII
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of
Delaware, or (iv) for any transaction for which the director derived an improper
personal benefit.
ARTICLE IX
Special meetings of the stockholders of the Corporation may be called only
by the Chairman of the Board of Directors or the President of the Board of
Directors pursuant to a resolution adopted by the entire Board of Directors.
Notwithstanding any other provision of this Certificate of Incorporation or any
provision of law which might otherwise permit a lesser vote or no vote, the
affirmative vote of the holders of at least 80% of the then outstanding shares
of each class of stock of the Corporation having voting power for the election
of directors shall be required to alter, amend or repeal this Article IX.
ARTICLE X
Notwithstanding any other provision of this Certificate of Incorporation or
any provision of law, (a) in the event (i) the merger or consolidation of the
Corporation, (ii) the dissolution of the Corporation, or (iii) the sale, lease
or exchange of all or substantially all of the assets of the Corporation,
involves a corporation, person or other entity which is (or is controlled by or
is under common control with) the "beneficial owner," directly or indirectly, of
shares possessing 15% or more of the votes of the outstanding shares of stock of
the Corporation entitled to vote in the election of directors (hereinafter
referred to as an "Interested Stockholder"), or (b) in the event of any
reclassification of securities, recapitalization or other transaction which has
the effect, directly or indirectly, of increasing an Interested Stockholder's
proportionate share of the outstanding stock of any class of the Corporation
(any such transaction set forth in (a) and (b) is hereinafter referred to as a
"Business Combination"), then in addition to any other vote required under
applicable law, the affirmative vote of the holders of at least 80% of the
voting power of all of the then outstanding shares of each class of stock of the
Corporation entitled to vote generally in the election of directors (excluding
those shares beneficially owned by the Interested Stockholder) shall be
necessary, except that the 80% stockholder vote required in this Article X shall
not be necessary if (y) such Business Combination has been approved by a
majority of the Continuing Directors (as defined below), or (z) all of the
following requirements have been met:
-4-
<PAGE>
(A) The aggregate amount of cash, and the Fair Market Value (as defined
below) as of the date of the consummation of the Business Combination (the
"Consummation Date") of consideration other than cash, to be received per share
by holders of the outstanding Common Stock of the Corporation in such Business
Combination shall be at least equal to the highest amount determined under
clauses (1), (2), and (3) below:
(1) the highest per share price (including any brokerage commissions,
transfer taxes and solicitation dealers' fees) paid by the Interested
Stockholder for any shares of Common Stock acquired by it (a) within the
two year period immediately prior to the first public announcement of the
proposal of the Business Combination (the "Announcement Date") or (b) in
the transaction in which it became an Interested Stockholder (the date of
such transaction being referred to herein as the "Determination Date"),
whichever is higher, plus interest compounded annually from the
Determination Date through the Consummation Date at the prime rate of
interest of First National Bank of Boston (or any other major bank
headquartered in New York, New York selected by a majority of the
Continuing Directors) from time to time in effect less the aggregate amount
of any cash dividends paid, and the Fair Market Value of any dividend paid
other than in cash, per share of Common Stock from the Determination Date
through the Consummation Date in an amount up to but not exceeding the
amount of such interest payable per share of Common Stock;
(2) the Fair Market Value per share of Common Stock on the
Announcement Date or on the Determination Date, whichever is higher; and
(3) (if applicable) the price per share equal to the Fair Market Value
per share of Common Stock determined pursuant to clause (2) above,
multiplied by the ratio of (a) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by
the Interested Stockholder for any shares of Common Stock acquired by it
within the two-year period immediately prior to the Announcement Date to
(b) the Fair Market Value per share of Common Stock on the first day in
such two-year period on which the Interested Stockholder acquired any
shares of Common Stock.
(B) The aggregate amount of cash, and the Fair Market Value as of the
Consummation Date of consideration other than cash, to be received per share by
holders of shares of any class of outstanding Preferred Stock of the Corporation
in such Business Combination shall be at least equal to the highest amount
determined under clauses (1), (2), (3) and (4) below:
(1) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by
the Interested Stockholder for any shares of such class of Preferred Stock
acquired by it (a) within the two-year period immediately prior to the
Announcement Date or (b) on the Determination Date, whichever is higher,
plus interest compounded annually from the Determination Date through the
Consummation Date at the prime rate of interest of First National Bank of
Boston (or any other major bank headquartered in New York, New York
selected by a majority of the Continuing Directors) from time to time in
effect less the aggregate amount of any cash dividends paid, and the Fair
Market Value of any dividends paid other than in cash, per share of such
class of Preferred Stock from the Determination Date through the
Consummation
-5-
<PAGE>
Date in an amount up to but not exceeding the amount of such interest
payable per share of such class of Preferred Stock;
(2) the highest preferential amount per share to which the holders of
shares of such class of Preferred Stock would be entitled in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation regardless of whether the Business Combination
to be consummated constitutes such an event;
(3) the Fair Market Value per share of such class of Preferred Stock
on the Announcement Date or on the Determination Date, whichever is higher;
and
(4) (if applicable) the price per share equal to the Fair Market Value
per share of such class of Preferred Stock determined pursuant to clause
(3) above, multiplied by the ratio of (a) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Interested Stockholder for any shares of such
class of Preferred Stock acquired by it within the two-year period
immediately prior to the Announcement Date to (b) the Fair Market Value per
share of such class of Preferred Stock on the first day in such two-year
period upon which the Interested Stockholder acquired any shares of such
class of Preferred Stock.
The provisions of this Subsection (B) shall be required to be met with
respect to every class of outstanding Preferred Stock of the Corporation,
whether or not the Interested Stockholder has previously acquired any shares of
a particular class of Preferred Stock.
(C) The consideration to be received by holders of a particular class of
outstanding Common Stock or Preferred Stock of the Corporation (together
hereinafter referred to as the "Stock") shall be in cash or in the same form as
the Interested Stockholder has previously paid for shares of such class of Stock
with equitable adjustments made for any stock splits or stock dividends. If the
Interested Stockholder has paid for shares of any class of Stock with varying
forms of consideration, the form of consideration for such class of Stock shall
be either cash or in the form used to acquire the largest number of shares of
such class of Stock previously acquired by it.
(D) After such Interested Stockholder has become an Interested Stockholder
and prior to the consummation of such Business Combination: (1) except as
approved by a majority of the Continuing Directors, there shall have been no
failure to declare and pay at the regular date therefor any full quarterly
dividends (whether or not cumulative) on the outstanding Preferred Stock of the
Corporation; (2) there shall have been (a) no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to reflect any
subdivision of the Common Stock), except as approved by a majority of the
Continuing Directors, and (b) an increase in such annual rate of dividends as
necessary to reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which has the effect
of reducing the number of outstanding shares of the Common Stock, unless the
failure so to increase such annual rate is approved by a majority of the
Continuing Directors; and (3) such Interested Stockholder shall have not become
the beneficial owner of any additional shares of stock of the Corporation
entitled to vote in the election of directors, except as part of the transaction
which results in such Interested Stockholder becoming an Interested Stockholder.
-6-
<PAGE>
(E) After such Interested Stockholder has become an Interested Stockholder,
such Interested Stockholder shall not have received the benefit, directly or
indirectly (except proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or other
tax advantages provided by the corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
(F) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange Act
of 1934 (the "Act"), and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations) shall be mailed to public
stockholders of the Corporation at least 30 days prior to the consummation of
such Business Combination (whether or not such proxy or information statement is
required to be mailed pursuant to the Act).
(G) For the purposes of this Article X:
(1) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Act, as in effect on January 1, 1989.
(2) A person shall be a "beneficial owner" of any Stock:
(a) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly;
(b) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement of understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
or (ii) the right to vote pursuant to any agreement, arrangement or
understanding; or
(c) which are beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
Stock.
(3) "Continuing Director" means any member of the Board of Directors
of the Corporation who is unaffiliated with, and not a nominee or
representative of, the Interested Stockholder and was a member of the Board
prior to the time that the Interested Stockholder became an Interested
Stockholder, and any successor of a Continuing Director who is unaffiliated
with, and not a nominee or representative of, the Interested Stockholder
and is recommended to succeed a Continuing Director by a majority of
Continuing Directors then serving as members of the Board.
(4) The term "Fair Market Value" means: (a) in the case of stock, the
highest closing sale price during the 30-day period immediately preceding
the date in question of a share of such stock on the Composite Tape for the
American Stock Exchange-Listed Stocks,
-7-
<PAGE>
or, if such stock is not quoted on the Composite Tape, on the American
Stock Exchange, or, if such stock is not listed on the American Stock
Exchange, on the principal United States securities exchange registered
under the Act on which such stock is listed, or, if such stock is not
listed on any such exchange but is listed as a National Market System stock
in the National Association of Securities Dealers, Inc. Automated Quotation
System, as reported in that National Market System, or, if such stock is
not listed on any such exchange or reported in such system, the highest
closing bid quotation with respect to a share of such stock during the 30-
day period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotation System or any system then in
use, or if no such quotations are available, the fair market value on the
date in question of a share of such stock as determined by the Continuing
Directors in good faith; and (b) in the case of property other than cash or
stock, the fair market value of such property on the date in question as
determined in good faith by a majority of the Continuing Directors.
(5) For the purposes of determining whether a person is an Interested
Stockholder pursuant to this Article X, the number of shares of Stock
deemed to be outstanding shall include shares deemed owned through
application of Subsection (z)(G)(2) but shall not include any other shares
of Stock which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options,
or otherwise.
(6) Whenever the approval or a determination by a majority of the
Continuing Directors is required or permitted by this Article X, such
approval shall be effective only if obtained at a meeting at which a quorum
of Continuing Directors is present.
(7) In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash" as used in Subsections
(z)(A) and (z)(B) above shall include the shares of Common Stock and/or the
shares of any other class of Stock retained by the holders of such shares.
(H) The directors of the Corporation shall have the power and duty to
determine for the purpose of this Article X, on the basis of information known
to them after reasonable inquiry, all facts necessary to determine compliance
with this Article X, including without limitation, (1) whether the person is an
Interested Stockholder, (2) the number of shares of Stock beneficially owned by
any person, (3) whether a person is an Affiliate or Associate of another, and
(4) whether the applicable conditions set forth in Subsection (2) above have
been met with respect to any Business Combination.
(I) Nothing contained in this Article X shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.
(J) Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or not vote and except as otherwise provided for or fixed by or pursuant to the
provisions of Article IV of this Certificate of Incorporation relating to the
rights of the holders of Preferred Stock, the affirmative vote of the holders of
at least 80% of the then outstanding shares of each class of stock of the
Corporation
-8-
<PAGE>
having voting power for the election of directors (excluding those shares
beneficially owned by the Interested Stockholder) shall be required to alter,
amend or repeal this Article X.
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been signed by Robert H. McLean, the Corporation's
authorized officer, this 7th day of July, 1997.
/s/ Robert H. McLean
---------------------------------
Robert H. McLean
-9-
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