<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
GREENSTONE INDUSTRIES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) or
Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(1)(3).
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, Series E Preferred Stock
----------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
6,807,280 common stock equivalents
----------------------------------------------------------------------------------
(3) Per unit price or other underlying value of Transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated
and state how it was determined):
$5.25 per common stock equivalent share of registrant outstanding, based on
6,807,280 common stock equivalents.
(4) Proposed maximum aggregate value of transaction:
$35,738,220
----------------------------------------------------------------------------------
(5) Total fee paid:
$7,147.64
----------------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form of Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------------------
(4) Date Filed:
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</TABLE>
<PAGE>
GreenStone Industries, Inc.
6500 Rock Spring Drive, Suite 400
Bethesda, Maryland 20817
November 15, 1996
To the Stockholders of GREENSTONE INDUSTRIES, INC.:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of GreenStone Industries, Inc. (the "Company") to be held at
10:00 a.m. on December 20, 1996, at The Bethesda Marriott Suites, located at
6711 Democracy Blvd., Bethesda, Maryland 20817.
As described in the accompanying Proxy Statement, at the Special Meeting you
will be asked to consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Reorganization and Merger dated as of October 28, 1996
(the "Merger Agreement"), among Louisiana-Pacific Corporation ("L-P"), GSLP
Merger Corp., a wholly-owned subsidiary of L-P (the "Surviving Corp."), and the
Company, pursuant to which the Company will be merged with and into the
Surviving Corp. (the "Merger") and each outstanding share of common stock of the
Company ("Common Stock") will be converted into the right to receive $5.25 in
cash.
L-P and the Company have agreed that certain members of the Company's
management and other founding stockholders will receive restricted L-P common
stock rather than cash in the Merger, as described in detail in the accompanying
Proxy Statement. L-P and the Company have also agreed that certain members of
the Company's management will enter into non-compete and three year employment
agreements with L-P effective at the closing of the Merger.
Your Board of Directors and a special committee of two outside directors
appointed to represent the interests of the holders of the Common Stock (the
"Independent Committee") have determined that the Merger is in the best
interests of the Company and fair to those holders of its Common Stock who will
receive cash for their shares (which class of stockholders is defined as and
referred to throughout this letter and accompanying Proxy Statement as the
"Common Stockholders") and have approved the Merger Agreement and the Merger by
unanimous vote. Anchor Financial Group LLC, the Independent Committee's
financial advisor, has advised the Independent Committee and the Board of
Directors that, in its opinion, based on certain assumptions, the Merger is
fair, from a financial point of view, to the Common Stockholders. THE BOARD AND
THE INDEPENDENT COMMITTEE RECOMMEND THAT YOU VOTE "FOR" APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT.
Consummation of the Merger is subject to certain conditions, including
approval and adoption of the Merger Agreement by (i) the affirmative vote of the
holders of at least a majority of all outstanding shares of Common Stock and
(ii) the holders of at least a majority of the outstanding shares of Common
Stock held by the Common Stockholders, as defined above. Only holders of Common
Stock of record at the close of business on November 15, 1996, are entitled to
notice of and to vote at the Special Meeting or any adjournments or
postponements thereof. Subject to satisfaction or waiver of these conditions,
the Company expects the Merger to be completed in the first week of January
1997.
As of November 1, 1996, the directors and executive officers of the Company
beneficially owned, in the aggregate 2,283,461 shares of Common Stock,
representing approximately 30.4% of such shares outstanding. All directors
(other than members of the Independent Committee) and executive officers of the
Company have agreed to exchange such Common Stock for Series E Preferred Stock
("Series E Stock") immediately prior to the Merger in order to facilitate their
receipt of L-P Common Stock in lieu of cash upon closing of the Merger.
If the Merger is consummated, holders of Common Stock who properly demand
appraisal prior to the stockholder vote on the Merger Agreement, do not vote in
favor of approval of the Merger Agreement, and otherwise comply with the
requirements of Section 262 of the Delaware General Corporation Law, will be
entitled to statutory appraisal rights.
<PAGE>
You are urged to read the accompanying Proxy Statement, which provides you
with a description of the terms of the proposed Merger. A copy of the Merger
Agreement is included as Appendix A to the accompanying Proxy Statement.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR VOTE AT THE
SPECIAL MEETING WOULD HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER
AGREEMENT. EXECUTED PROXIES WITH NO INSTRUCTIONS INDICATED THEREON WILL BE VOTED
"FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Please do not send in your stock certificates at this time. In the event the
Merger is consummated, you will be sent a letter of transmittal for that purpose
promptly thereafter.
Sincerely,
ERIC M. OGANESOFF
Chairman of the Board and
Chief Executive Officer
<PAGE>
GREENSTONE INDUSTRIES, INC.
6500 ROCK SPRING DRIVE, SUITE 400
BETHESDA, MD 20817
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of GreenStone
Industries, Inc. (the "Special Meeting") will be held on December 20, 1996 at
10:00 a.m. at The Bethesda Marriott Suites, located at 6711 Democracy Blvd.,
Bethesda, Maryland 20817, for the following purposes:
(i) To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Reorganization and Merger, dated as of October 28,
1996 (the "Merger Agreement"), among Louisiana-Pacific Corporation, a
Delaware corporation ("L-P"), GSLP Merger Corp., a Delaware corporation and
a wholly-owned subsidiary of L-P (the "Surviving Corp."), and GreenStone
Industries, Inc., a Delaware corporation (the "Company"). A copy of the
Merger Agreement is attached to the accompanying Proxy Statement as Appendix
A. As more fully described in the Proxy Statement, the Merger Agreement
provides that: (A) the Company would be merged with and into the Surviving
Corp. (the "Merger"); (B) each outstanding share of common stock, par value
$.001 per share (the "Common Stock"), of the Company (except shares held by
stockholders who exercise their appraisal rights under Delaware law) would
be converted into the right to receive $5.25 in cash; and (C) each of
approximately 3,115,000 outstanding shares of Series E Preferred Stock
("Series E Stock") will be converted into restricted L-P common stock on the
basis of 0.1875 L-P shares for each share of Series E Stock, subject to
certain adjustments.
(ii) To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on November 15, 1996,
as the record date for the determination of stockholders entitled to notice of
and to vote at the Special Meeting. Only holders of Common Stock of record at
the close of business on that date will be entitled to notice of and to vote at
the Special Meeting or any adjournments or postponements thereof.
The accompanying Proxy Statement describes the Merger Agreement, the
proposed Merger and the actions to be taken in connection with the Merger. To
ensure that your vote will be counted, please complete, date and sign the
enclosed proxy card and return it promptly in the enclosed postage-paid
envelope, whether or not you plan to attend the Special Meeting. You may revoke
your proxy in the manner described in the accompanying Proxy Statement at any
time before it is voted at the Special Meeting.
In the event that there are not sufficient votes to approve and adopt the
Merger Agreement, it is expected that the Special Meeting will be postponed or
adjourned in order to permit further solicitation of proxies by the Company.
If the Merger is consummated, holders of Common Stock who properly demand
appraisal prior to the stockholder vote on the Merger Agreement, do not vote in
favor of approval of the Merger Agreement, and otherwise comply with the
requirements of Section 262 of the Delaware General Corporation Law will be
entitled to statutory appraisal rights.
By Order of the Board of Directors
ERIC M. OGANESOFF
Chairman of the Board
Bethesda, MD
November 15, 1996
<PAGE>
THE BOARD AND THE INDEPENDENT COMMITTEE RECOMMEND THAT COMMON STOCKHOLDERS
(AS HEREINAFTER DEFINED) VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
THE AFFIRMATIVE VOTE OF HOLDERS OF (I) A MAJORITY OF ALL OUTSTANDING SHARES
OF COMMON STOCK ENTITLED TO VOTE THEREON, AND (II) A MAJORITY OF THE OUTSTANDING
SHARES HELD BY PERSONS WHO WILL NOT EXCHANGE THEIR SHARES OF COMMON STOCK FOR
SERIES E STOCK (WHICH CLASS OF STOCKHOLDERS IS DEFINED AS AND REFERRED TO
THROUGHOUT THE PROXY STATEMENT AS THE "COMMON STOCKHOLDERS"), IS REQUIRED TO
APPROVE AND ADOPT THE MERGER AGREEMENT. ALL PROSPECTIVE HOLDERS OF SERIES E
STOCK HAVE AGREED TO VOTE THEIR SHARES FOR THE MERGER. WE URGE YOU TO SIGN AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING IN PERSON. YOU MAY REVOKE THE PROXY AT ANY TIME PRIOR TO
ITS EXERCISE IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. ANY
STOCKHOLDER PRESENT AT THE SPECIAL MEETING, INCLUDING ANY ADJOURNMENT OR
POSTPONEMENT THEREOF, MAY REVOKE SUCH HOLDER'S PROXY AND VOTE PERSONALLY ON THE
MERGER AGREEMENT AT THE SPECIAL MEETING. EXECUTED PROXIES WITH NO INSTRUCTIONS
INDICATED THEREON WILL BE VOTED "FOR" APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
PLEASE DO NOT SEND YOUR COMMON STOCK CERTIFICATES AT THIS TIME.
<PAGE>
GREENSTONE INDUSTRIES, INC.
6500 ROCK SPRING DRIVE, SUITE 400
BETHESDA, MD 20817
------------------------
PROXY STATEMENT
------------------------
SPECIAL MEETING OF STOCKHOLDERS
DECEMBER 20, 1996
------------------------
This Proxy Statement is being furnished to the holders of Common Stock, par
value $.001 per share (the "Common Stock") of GreenStone Industries, Inc., a
Delaware corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors of the Company (the "Board") for use at the
Special Meeting of Stockholders to be held on December 20, 1996, at 10:00 a.m.
at The Bethesda Marriott Suites, located at 6711 Democracy Blvd., Bethesda, MD
20817, and at any adjournments or postponements thereof (the "Special Meeting").
The Board has fixed the close of business on November 15, 1996, as the record
date (the "Record Date") for the determination of stockholders entitled to
notice of, and to vote at, the Special Meeting.
At the Special Meeting, the holders of Common Stock will (i) consider and
vote upon a proposal to approve and adopt an Agreement and Plan of
Reorganization and Merger dated as of October 28, 1996 (the "Merger Agreement"),
among Louisiana-Pacific Corporation, a Delaware corporation ("L-P"), GSLP Merger
Corp., a Delaware corporation and a wholly-owned subsidiary of L-P (the
"Surviving Corp."), and the Company; and (ii) transact such other business as
may properly come before the Special Meeting or any adjournments or
postponements thereof.
A copy of the Merger Agreement is attached to this Proxy Statement as
Appendix A. Pursuant to the Merger Agreement and subject to satisfaction of the
conditions set forth therein (i) the Company would be merged with and into
Surviving Corp. (the "Merger"), (ii) each outstanding share of Common Stock
(except shares held by stockholders who exercise their appraisal rights under
Delaware law) would be converted into the right to receive $5.25 in cash; and
(iii) each of approximately 3,115,000 outstanding shares of Series E Preferred
Stock ("Series E Stock") will be converted into restricted L-P common stock on
the basis of 0.1875 L-P shares for each share of Series E Stock, subject to
certain adjustments to be provided by L-P. All of the Company's executive
officers and directors (other than the two members of the Independent Committee)
along with several of the Company's founding stockholders, will exchange their
shares of the Company's Common Stock for an equal number of shares of the
Company's Series E Stock immediately prior to closing of the Merger.
An independent committee of two outside directors (the "Independent
Committee") and the Board of Directors of the Company have approved the Merger
Agreement and the Merger, having determined that the acquisition of the Company
pursuant to the Merger Agreement is in the best interests of the Company and
fair to its Common Stockholders.
THE BOARD AND THE INDEPENDENT COMMITTEE RECOMMEND THAT COMMON STOCKHOLDERS
(AS HEREINAFTER DEFINED) VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
THE AFFIRMATIVE VOTE OF HOLDERS OF (I) A MAJORITY OF ALL OUTSTANDING SHARES
OF COMMON STOCK ENTITLED TO VOTE THEREON, AND (II) A MAJORITY OF THE OUTSTANDING
SHARES HELD BY PERSONS WHO WILL NOT EXCHANGE THEIR SHARES OF COMMON STOCK FOR
SERIES E STOCK (WHICH CLASS OF STOCKHOLDERS IS DEFINED AS AND REFERRED TO
THROUGHOUT THIS PROXY STATEMENT AS THE "COMMON STOCKHOLDERS") IS REQUIRED TO
APPROVE AND ADOPT THE MERGER AGREEMENT. ALL PROSPECTIVE HOLDERS OF SERIES E
STOCK HAVE AGREED TO VOTE THEIR SHARES FOR THE MERGER. WE URGE YOU TO SIGN AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING IN PERSON. YOU MAY REVOKE THE PROXY AT ANY TIME PRIOR TO
ITS EXERCISE IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. ANY
<PAGE>
STOCKHOLDER PRESENT AT THE SPECIAL MEETING, INCLUDING ANY ADJOURNMENT OR
POSTPONEMENT THEREOF, MAY REVOKE SUCH HOLDER'S PROXY AND VOTE PERSONALLY ON THE
MERGER AGREEMENT AT THE SPECIAL MEETING. EXECUTED PROXIES WITH NO INSTRUCTIONS
INDICATED THEREON WILL BE VOTED "FOR" APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
PLEASE DO NOT SEND YOUR COMMON STOCK CERTIFICATES AT THIS TIME.
Stockholders are urged to read and consider carefully the information
contained in this Proxy Statement.
The Proxy Statement, the accompanying Notice of Special Meeting and the
accompanying proxy are first being mailed to stockholders on or about November
18, 1996.
------------------------
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
The date of this Proxy Statement is November 15, 1996.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION..................................................................................... 5
SUMMARY................................................................................................... 6
THE PARTIES............................................................................................. 6
THE SPECIAL MEETING..................................................................................... 6
APPRAISAL RIGHTS........................................................................................ 7
SOLICITATION OF PROXIES................................................................................. 7
RECOMMENDATION OF THE BOARD AND INDEPENDENT COMMITTEE................................................... 7
OPINION OF FINANCIAL ADVISOR............................................................................ 8
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION......................................................... 8
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................................................. 8
REGULATORY APPROVALS.................................................................................... 8
SOURCE AND AMOUNT OF FUNDS.............................................................................. 9
THE MERGER AGREEMENT.................................................................................... 9
TERMINATION............................................................................................. 11
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS.......................................... 11
MARKET PRICE AND DIVIDEND INFORMATION................................................................... 11
THE SPECIAL MEETING....................................................................................... 12
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING......................................................... 12
RECORD DATE AND VOTING.................................................................................. 12
VOTE REQUIRED; REVOCABILITY OF PROXIES.................................................................. 13
APPRAISAL RIGHTS........................................................................................ 13
SOLICITATION OF PROXIES................................................................................. 16
THE COMPANY............................................................................................... 16
LOUISIANA-PACIFIC CORPORATION............................................................................. 16
SPECIAL FACTORS........................................................................................... 17
BACKGROUND OF THE TRANSACTION........................................................................... 17
PURPOSE OF THE TRANSACTION.............................................................................. 19
REASONS FOR THE TRANSACTION............................................................................. 19
OPINION OF FINANCIAL ADVISOR............................................................................ 21
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION......................................................... 25
OFFICERS OF THE COMPANY............................................................................... 25
EMPLOYEE STOCK OPTIONS................................................................................ 25
EXCHANGE OF COMMON STOCK FOR SERIES E STOCK........................................................... 25
EMPLOYMENT AND COMPENSATION ARRANGEMENTS.............................................................. 25
RESTRICTED PERFORMANCE SHARES REQUIREMENTS............................................................ 27
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................................................. 27
COMMON STOCKHOLDERS................................................................................... 27
SERIES E STOCKHOLDERS................................................................................. 27
ANTICIPATED ACCOUNTING TREATMENT........................................................................ 28
REGULATORY APPROVALS.................................................................................... 28
SOURCE AND AMOUNT OF FUNDS.............................................................................. 29
THE MERGER AGREEMENT...................................................................................... 30
EFFECTIVE TIME.......................................................................................... 30
THE MERGER.............................................................................................. 30
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
REPRESENTATIONS AND WARRANTIES.......................................................................... 33
CONDUCT OF THE BUSINESS PENDING THE MERGER.............................................................. 34
OTHER AGREEMENTS OF THE COMPANY, L-P AND SURVIVING CORP................................................. 35
INDEMNIFICATION......................................................................................... 37
CONDITIONS TO THE MERGER................................................................................ 38
TERMINATION............................................................................................. 39
EXPENSES................................................................................................ 40
AMENDMENT; WAIVER....................................................................................... 40
BREAKUP FEES............................................................................................ 40
SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS.......................................... 42
MARKET PRICE AND DIVIDEND INFORMATION..................................................................... 43
CERTAIN EFFECTS OF THE MERGER; OPERATIONS OF THE COMPANY AFTER THE MERGER................................. 43
INDEPENDENT PUBLIC ACCOUNTANTS............................................................................ 43
STOCKHOLDER PROPOSALS..................................................................................... 44
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................................................... 44
APPENDICES
APPENDIX A-- AGREEMENT AND PLAN OF REORGANIZATION......................................................... A-1
APPENDIX B-- FORM OF FAIRNESS OPINION OF ANCHOR FINANCIAL GROUP, L.L.C.................................... B-1
APPENDIX C-- SECTION 262 OF DELAWARE GENERAL CORPORATION LAW.............................................. C-1
</TABLE>
4
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and the rules and regulations
thereunder, and in accordance therewith files reports, proxy statements and
other information with the Securities and Exchange Commission (the "SEC"). Such
reports, proxy statements and other information filed by the Company may be
inspected and copied at the public reference facilities maintained by the SEC at
Room 1024, 450 Fifth Street, N.W., Washington, DC 20549; 75 Park Place, New
York, New York 10007 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60604. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the SEC, 450 Fifth Street,
N.W., Washington, DC 20549. In addition, the Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding companies that file electronically with the
Commission through the Electronic Data Gathering, Analysis and Retrieval system.
See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
This Proxy Statement incorporates by reference documents that are not
presented herein or delivered herewith. Copies of such documents (other than
exhibits thereto which are not specifically incorporated by reference herein)
are available, without charge, to any person, including any beneficial owner of
Common Stock, to whom this Proxy Statement is delivered, upon oral or written
request to GreenStone Industries, Inc., 6500 Rock Spring Drive, Suite 400,
Bethesda, MD 20817, telephone (301) 564-5900. In order to ensure delivery of
documents prior to the Special Meeting, requests therefor should be made no
later than December 13, 1996.
All information contained in this Proxy Statement concerning L-P and its
subsidiaries, including Surviving Corp., has been supplied by L-P and has not
been independently verified by the Company. Except as otherwise indicated, all
other information contained in this Proxy Statement has been supplied by the
Company.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY STATEMENT
OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS INCORPORATED BY REFERENCE
HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THE DELIVERY OF THIS PROXY STATEMENT
SHALL NOT IMPLY THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR
L-P SINCE THE DATE HEREOF OR THAT THE INFORMATION IN THIS PROXY STATEMENT OR IN
THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN IS CURRENT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
5
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF MATERIAL INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT. THIS SUMMARY IS NOT INTENDED TO BE A COMPLETE DESCRIPTION
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION
CONTAINED IN THIS PROXY STATEMENT OR INCORPORATED BY REFERENCE INTO THIS PROXY
STATEMENT OR IN THE DOCUMENTS ATTACHED AS APPENDICES HERETO.
THE PARTIES
THE COMPANY.
The Company was established in 1993, under the laws of the state of
Delaware, to acquire companies that manufacture cellulose insulation and
specialty fibers from recycled paper and significantly expand the markets for
these products. Simultaneously with its initial public offering on July 28, 1994
(the "IPO"), the Company acquired the operations of United Fibers and Parco,
Inc., which provided production facilities in Norfolk, Nebraska, Phoenix,
Arizona and Portland, Oregon. During the fourth quarter of 1994, the Company
acquired American Environmental Products, Inc. of Elkwood, Virginia ("AEP") and
Southern Cellulose, Inc. of Atlanta, Georgia. In February of 1995, the Company
acquired All-Seal Insulation, Inc. ("All Seal") of Fort Wayne, Indiana and in
July of 1995, the Company acquired Steven A. Moore Enterprises, Inc. dba Pacific
Rim Recycling of Benicia, California ("Pacific Rim Recycling"), a recycling
business. In October of 1995, the Company purchased substantially all the assets
of Fiberwood Incorporated of Sacramento, California. Other than Pacific Rim
Recycling, each of the foregoing businesses is engaged in the manufacture of
cellulose fiber products.
The address and telephone number of the Company's principal executive
offices is 6500 Rock Spring Drive, Suite 400, Bethesda, MD 20817; (301)
564-5900.
L-P.
L-P is a major forest products company headquartered in Portland, Oregon,
with manufacturing facilities throughout the United States and in Canada, Mexico
and Ireland. It manufactures and distributes lumber, pulp, structural and other
panel products, hardwood veneers, windows and doors, and cellulose insulation.
L-P's Common Stock is traded on the New York Stock Exchange under the symbol
"LPX."
L-P is a Delaware corporation and the address and telephone number of its
principal executive offices are 111 S.W. Fifth Avenue, Portland, OR 97204; (503)
221-0800.
THE SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING. The Special Meeting is
scheduled to be held at 10:00 a.m. on December 20, 1996, at The Bethesda
Marriott Suites, located at 6711 Democracy Blvd., Bethesda, MD 20817. At the
Special Meeting, Stockholders will consider and vote upon (i) a proposal to
approve and adopt the Merger Agreement and (ii) such other matters as may
properly be brought before the Special Meeting. See "THE SPECIAL
MEETING--Matters to Be Considered at the Special Meeting."
RECORD DATE AND VOTING. The Record Date for the Special Meeting is the close
of business on November 15, 1996. At the close of business on the Record Date,
there were 6,807,280 shares of Common Stock and common stock equivalents
outstanding and entitled to vote, held by approximately 174 stockholders of
record. Each holder of Common Stock on the Record Date will be entitled to one
vote for each share held of record. The presence, either in person or by proxy,
of a majority of the outstanding shares of Common Stock entitled to be voted is
necessary to constitute a quorum at the Special Meeting. All prospective holders
of the Series E Stock have agreed to vote their shares of Common Stock in favor
of the Merger. See "THE SPECIAL MEETING--Record Date and Voting."
6
<PAGE>
VOTE REQUIRED; REVOCABILITY OF PROXIES. Approval and adoption of the Merger
Agreement will require the affirmative vote of (i) the holders of a majority of
the outstanding shares of Common Stock entitled to vote thereon which will not
be exchanged for Series E Stock immediately prior to closing of the Merger (the
"Common Stockholders") and (ii) the affirmative vote of the holders of a
majority of all outstanding shares of Common Stock entitled to vote thereon.
The required vote of the stockholders on the Merger Agreement is based upon
the total number of outstanding shares of the Common Stock and of the Common
Stock held by the Common Stockholders. The failure to submit a proxy card (or
vote in person at the Special Meeting) or the abstention from voting by a
stockholder (including broker non-votes) will have the same effect as a vote
against the Merger Agreement. Brokers who hold shares of Common Stock as
nominees will not have discretionary authority to vote such shares in the
absence of instructions from the beneficial owners thereof. See "THE SPECIAL
MEETING--Vote Required; Revocability of Proxies."
A stockholder may revoke a proxy at any time prior to its exercise by (i)
delivering to GreenStone Industries, Inc., 6500 Rock Spring Drive, Suite 400,
Bethesda, MD 20817, a written notice of revocation prior to the Special Meeting,
(ii) delivering prior to the Special Meeting a duly executed proxy bearing a
later date or (iii) attending the Special Meeting and voting in person. The
presence of a stockholder at the Special Meeting will not in and of itself
automatically revoke such stockholder's proxy.
APPRAISAL RIGHTS
Under the Delaware General Corporation Law ("DGCL"), stockholders who
properly demand appraisal rights prior to the stockholder vote on the Merger
Agreement, do not vote in favor of the Merger, and follow the procedures
described in DGCL Section 262 will be entitled to statutory appraisal rights.
See "THE SPECIAL MEETING--Appraisal Rights" and DGCL Section 262, which is
attached hereto as Appendix C.
SOLICITATION OF PROXIES
The Company will bear the costs of soliciting proxies from stockholders. In
addition to soliciting proxies by mail, directors, officers and employees of the
Company, without receiving additional compensation therefor, may solicit proxies
by telephone, by telegram or in person. Arrangements will also be made with
brokerage firms and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares held of record by such
persons, and the Company will reimburse such brokerage firms, custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them
in connection therewith. The Company has retained H.J. Meyers & Co., Inc. as its
Merger and Proxy Consultant to aid in the solicitation of proxies. See "THE
SPECIAL MEETING--Solicitation of Proxies."
RECOMMENDATION OF BOARD OF DIRECTORS AND INDEPENDENT COMMITTEE OF
OUTSIDE DIRECTORS
The Independent Committee, appointed to represent the interests of the
Common Stockholders and composed of two outside directors who are holders of
Common Stock which will not be exchanged for Series E Stock, has determined that
the Merger and the transactions related thereto are in the best interests of the
Company and fair to its Common Stockholders. The Independent Committee and the
Company's Board of Directors both have recommended that the Common Stockholders
of the Company vote "FOR" the approval and adoption of the Merger Agreement and
the Merger after careful consideration of numerous factors, including the
strategic advantage for the Company to be acquired by a compatible company which
has far greater financial resources, the difficulty of growing the Company's
business as an independent entity, and the substantial premium to market prices
offered by L-P to the Common Stockholders. See "SPECIAL FACTORS--Reasons for the
Transaction." Certain members of the Board of Directors had, and currently have,
certain interests that may present them with a potential
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conflict of interest in connection with the Merger. See "SPECIAL
FACTORS--Interests of Certain Persons in the Merger."
In determining whether to approve the Merger Agreement and the Merger and to
recommend that Common Stockholders approve the Merger Agreement, the Independent
Committee and the Board considered a number of factors, as more fully described
under "SPECIAL FACTORS--Background of the Transaction" and "SPECIAL
FACTORS--Reasons for the Transaction."
OPINION OF FINANCIAL ADVISOR
On October 28, 1996, Anchor Financial Group LLC ("Anchor"), financial
advisor to the Independent Committee, appointed to determine the fairness from a
financial point of view of the consideration to be paid to the Common
Stockholders in the Merger, delivered its opinion to the Independent Committee
and the Board that, as of the date of such opinion, the consideration to be
received by the Common Stockholders pursuant to the Merger Agreement is fair
from a financial point of view. The full text of the written opinion of Anchor
dated October 28, 1996, which sets forth the assumptions made, general
procedures followed, matters considered and limitations on the review undertaken
in connection with the opinion, is attached hereto as Appendix B.
Stockholders should read such opinion carefully and in its entirety. See
"SPECIAL FACTORS-- Opinion of Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
Certain directors and executive officers of the Company have interests in
the Merger that may be different from, or in addition to, those of stockholders
generally, including employment, performance based grants of restricted L-P
Common Stock and non-competition arrangements with L-P following completion of
the Merger. Further, the executive officers and certain directors will exchange
their shares of the Company's Common Stock for newly issued shares of the
Company's Series E Stock immediately prior to the Merger, each share of which
Series E Stock will be converted into the right to receive 0.1875 shares of
restricted L-P Common Stock (subject to certain adjustments) in the Merger in a
tax-free transaction. See "SPECIAL FACTORS--Interests of Certain Persons in the
Transaction" and "THE MERGER AGREEMENT--Conversion of Series E Stock."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger will be a taxable transaction to Common Stockholders. Common
Stockholders will recognize gain or loss in the Merger in an amount determined
by the difference between the consideration received in the Merger and their tax
basis in the Common Stock exchanged therefor. Management expects the Merger to
be a reorganization under Section 368(a) of the Internal Revenue Code (the
"Code") for federal income tax purposes, so that no gain or loss should be
recognized by L-P, the Company or the Series E Stockholders on the exchange of
the Series E Stock for the L-P Common Stock. For further information, see
"SPECIAL FACTORS--Certain Federal Income Tax Consequences."
REGULATORY APPROVALS
The Merger is subject to review by the Antitrust Division of the Department
of Justice (the "Antitrust Division") and the Federal Trade Commission (the
"FTC") pursuant to the Hart-Scott-Rodino Act. The required information has been
provided to those agencies and on October 30, 1996, the applicable waiting
period prescribed under the Hart-Scott-Rodino Act expired without objection by
either the Antitrust Division or the FTC. See "SPECIAL FACTORS--Certain
Regulatory Matters."
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SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by L-P to effect the Merger and to pay
fees of its legal counsel and advisors (the only expenses related to the Merger
that are expected to be paid by L-P) is approximately $21,000,000. Such funds
will be provided from L-P's general corporate funds and working capital. See
"SPECIAL FACTORS--Source and Amount of Funds."
THE MERGER AGREEMENT
Subject to the provisions of the Merger Agreement, at the Effective Time (as
defined under "THE MERGER AGREEMENT--Effective Time"): (i) each issued and
outstanding share of Common Stock will be converted into the right to receive
$5.25 per share in cash, without interest thereon, upon surrender of the
certificates representing shares of Common Stock, except for dissenting shares
pursuant to the DGCL and (ii) each share of Series E Stock will be converted
into the right to receive restricted L-P Common Stock on the basis of 0.1875 L-P
shares for each share of Series E Stock, subject to certain rights and possible
adjustments. See "THE MERGER AGREEMENT-Conversion of Series E Stock." At the
Effective Time, the number of shares of L-P Common Stock to be issued on
conversion of the Series E Stock will be adjusted upward (but not downward) to
account for changes in the market price of the L-P Common Stock prior to the
Effective Time. All such additional shares of L-P Common Stock will be held in
escrow (the "Escrow Shares") pending release to the holders or return to L-P as
described below. The receipt of an opinion addressed to the Series E
stockholders (the "Series E Stockholders") from Ernst & Young LLP and to L-P
from Price Waterhouse LLP that the Merger should qualify as a reorganization is
a condition to the closing of the Merger. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES." Following the Effective Time, in the event the average closing
price per share for L-P Common Stock on the New York Stock Exchange (or if not
traded on the New York Stock Exchange, on the principal exchange on which L-P
stock is so traded) as reported in THE WALL STREET JOURNAL for a period of five
consecutive trading days (the "Average Trading Price") is at least $28 per share
at any time after the Effective Time and prior to March 1, 1998, then there
shall be no adjustment in the number of shares into which each share of Series E
Stock shall be converted, and the Escrow Shares shall be canceled and returned
to L-P. In the event the highest Average Trading Price for all five consecutive
trading day periods after the Effective Time and prior to March 1, 1998, shall
be less than $28 per share, then the number of shares of L-P Common Stock to be
issued in exchange for each share of Series E Stock, shall be adjusted to be
equal to the quotient (rounded to four decimal places) obtained by dividing (i)
$5.25 by (ii) the greater of (x) $19 or (y) the Average Trading Price for the
five trading days immediately preceding March 1, 1998 and the appropriate number
of Escrow Shares to provide for such adjustment shall be released to the
respective holders thereof, with any remaining balance of Escrow Shares being
canceled and returned to L-P. In the event that the total number of Escrow
Shares are not sufficient to satisfy such adjustment, L-P shall as promptly as
practicable, issue to each former holder of shares of Series E Stock who has
theretofore duly surrendered their Series E Stock Certificates, a certificate
representing the additional whole number of shares of L-P Common Stock (and cash
in lieu of any fractional share) necessary to cause the total number of shares
of L-P Common Stock to be equal to the amount the holder would have received if
the adjusted exchange ratio had been known at the Effective Time. The right to
receive any such additional shares (and cash in lieu of fractional shares) is
not transferable, other than by operation of law (including transfer by will or
the laws of descent and distribution). Former holders of Series E Stock will not
be entitled to receive any dividend or distribution in respect of any additional
shares issued pursuant to this adjustment for which the record or payment date
is prior to March 1, 1998, or any interest or other amounts in respect of such
dividends and distributions. The holders of the Escrow Shares will waive their
right to receive any cash dividends payable on the Escrow Shares, and any stock
or other extraordinary dividends payable on the Escrow Shares will be placed in
escrow, subject to release or cancellation and return to L-P on the same terms
and conditions as the Escrow Shares. In addition, L-P has agreed to register the
shares of L-P Common Stock received by the holders of the Series E Stock for
resale, or, alternatively, to repurchase such shares at their then fair market
value upon demand. Each
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holder of Series E Stock will agree not to sell or demand repurchase of such
shares for a period of two years following closing of the Merger in the absence
of changed personal circumstances. In the event that the Average Trading Price
of L-P Common Stock shall decline by 15% or more and below $19 per share between
the Effective Time and March 1, 1998, the former holders of the Series E Stock
will be able to sell or require the repurchase of their shares of L-P Common
Stock while retaining the conversion price adjustment set forth above. In all
other circumstances, a Series E Stockholder who sells his L-P Common Stock prior
to March 1, 1998 will lose the benefit of the conversion price adjustment as to
such sold shares. See "THE MERGER AGREEMENT--Conversion of Series E Stock."
Consummation of the Merger is subject to various conditions, prior to the
Closing Date, including among others: (a) approval and adoption of the Merger
Agreement by the holders of at least a majority of the Company's Common Stock
and by the holders of at least a majority of the Company's outstanding shares
held by Common Stockholders; (b) the shares of L-P Common Stock to be issued to
the Series E Stockholders of the Company upon consummation of the Merger shall
have been authorized for listing on the New York Stock Exchange subject to
official notice of issuance; (c) all regulatory approvals required to consummate
the transactions contemplated by the Merger Agreement shall have been obtained
without the imposition of any conditions that are in L-P's reasonable judgment
unduly burdensome and shall remain in full force and effect and all statutory
waiting periods shall have expired, and all other material consents or approvals
of any third party required in connection with the consummation of the Merger
shall have been obtained; (d) no temporary restraining order, preliminary or
permanent injunction or decree issued by any court or agency of competent
jurisdiction, or other legal restraint or prohibition preventing the
consummation of the Merger or any of the other transactions contemplated in the
Merger Agreement shall be in effect, and no statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated, or enforced
by any applicable govenmental entity, which prohibits, restricts or makes
illegal consummation of the Merger; (e) the Series E Stockholders and L-P will
each receive satisfactory opinions, from Ernst & Young LLP and Price Waterhouse
LLP, respectively, to the effect that the Merger should qualify as a
reorganization under Section 368(a) of the Code; (f) specified stockholders,
including each member of the Company's senior management, shall have exchanged
all shares of the Company's capital stock held by such stockholder for an
equivalent number of shares of Series E Stock,
L-P, the Company and each such stockholder shall have executed a Series E
Preferred Stock Agreement with respect to certain restrictions, registration and
resale of such L-P Common Stock, such stockholders shall have completed a
questionnaire in form reasonably satisfactory to L-P, and no material default
shall exist under the Series E Preferred Stock Agreement; (g) Messrs. Oganesoff,
Tranmer, Collison, Bernardi and Gerber shall have executed the employment
agreements and covenants not to compete described under "INTERESTS OF CERTAIN
PERSONS IN THE TRANSACTION--Employment and Compensation Arrangements;" (h)
certain actions with respect to outstanding warrants and options of the Company
described under "THE MERGER AGREEMENT--Public Warrants", "--Other Warrants," and
"--Employee Stock Options" shall have been taken with respect to outstanding
warrants and options to purchase shares of the Company's Common Stock; (i) all
outstanding convertible debt of the Company shall have been prepaid in full
without penalty at or prior to closing; (j) the representations and warranties
of L-P and the Company shall be true and correct in all material respects, L-P
and the Company shall have received a certificate from the other with respect to
the foregoing and, with respect to the Company's representations and warranties,
L-P also shall have received a certificate from each holder of Series E Stock
who is an officer or director of the Company with respect to such individual's
knowledge of the accuracy of the Company's representations and warranties and
undertaking personal liability for known inaccuracies for a portion of the
consideration to be received by such individual; (k) L-P and the Company shall
have performed their respective obligations under the Merger Agreement in all
material respects, and each shall have received a certificate from the other to
such effect; and (l) L-P shall have received a satisfactory opinion from legal
counsel to the effect that the issuance of shares of L-P Common Stock in the
Merger does not require registration under the Securities Act. See "THE MERGER
AGREEMENT--Conditions to the Merger" and "--Amendment; Extension; Waiver."
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TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after the approval of the Merger Agreement by the Common
Stockholders and the Series E Stockholders: (a) by mutual consent of L-P and the
Company, if the Board of Directors of each so determines by a vote of a majority
of the members of its entire Board; (b) by either the Board of Directors of L-P
or the Board of Directors of the Company (i) if any governmental entity which
must grant a requisite regulatory approval has denied approval of the Merger and
such denial has become final and nonappealable or (ii) any governmental entity
of competent jurisdiction shall have issued a final nonappealable order
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by the Merger Agreement; (c) by any party if the Merger shall not
have been consummated on or before March 31, 1997, unless the failure of the
Closing to occur by such date shall be due to the breach by the party seeking to
terminate the Merger Agreement of any representation, warranty, covenant, or
other agreement of such party set forth in the Merger Agreement; (d) by either
the Board of Directors of L-P or the Board of Directors of the Company (provided
that the terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained in the Merger Agreement) if
there shall have been a material breach of any of the covenants or agreements or
any of the representations or warranties set forth in the Merger Agreement on
the part of the other party, which breach is not cured within forty-five (45)
days following written notice to the party committing such breach, or which
breach, by its nature, cannot be cured prior to the Closing; or (e) by either
L-P or the Company if approval of the Company's stockholders required for the
consummation of the Merger shall not have been obtained by reason of the failure
to obtain the required vote at a duly held meeting of stockholders or at any
adjournment or postponement thereof. The Company has also agreed to pay L-P a
"breakup fee" of up to $500,000 under certain circumstances. See "THE MERGER
AGREEMENT--TERMINATION" and "BREAKUP FEES."
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
As of November 1, 1996, the directors and executive officers of the Company
beneficially owned, in the aggregate, 2,283,461 shares of Common Stock,
representing approximately 30.4% of such shares outstanding. Substantially all
of such shares (other than those representing 112,500 shares issuable upon
exercise of options) will be exchanged for Series E Stock prior to the closing
of the Merger. To the knowledge of the Company, all directors and executive
officers of the Company intend to vote their beneficially owned shares of Common
Stock eligible to be voted for the approval and adoption of the Merger
Agreement. See "SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS."
MARKET PRICE AND DIVIDEND INFORMATION
The Common Stock is listed on the Nasdaq National Market under the symbol
"STON." On September 9, 1996, the last trading day before the public
announcement of the execution of a letter of intent to execute the Merger
Agreement, the reported closing sale price per share of the Common Stock was
$3 15/16. On November 13, 1996, the last full trading day prior to the printing
of this Proxy Statement, the reported closing sale price per share of the Common
Stock was $5 1/8. For additional information concerning historical market prices
of the Common Stock and the dividends paid thereon, see "MARKET PRICE AND
DIVIDEND INFORMATION."
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THE SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
Each copy of this Proxy Statement mailed to stockholders is accompanied by a
proxy card furnished in connection with the solicitation of proxies by the Board
for use at the Special Meeting. The Special Meeting is scheduled to be held at
10:00 a.m., on December 20, 1996, at The Bethesda Marriott Suites located at
6711 Democracy Blvd., Bethesda, MD 20817. At the Special Meeting, stockholders
will consider and vote upon (i) a proposal to approve and adopt the Merger
Agreement and (ii) such other matters as may properly be brought before the
Special Meeting.
The Board and the Independent Committee have each determined that the Merger
and the Merger Agreement are advisable and in the best interests of the Company
and fair to its Common Stockholders and have approved the Merger and the Merger
Agreement by unanimous vote. ACCORDINGLY, THE BOARD AND THE INDEPENDENT
COMMITTEE RECOMMENDS THAT COMMON STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT. See "SPECIAL FACTORS--Background of the Transaction"
and "--Reasons for the Transaction."
STOCKHOLDERS ARE REQUESTED PROMPTLY TO COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. FAILURE TO RETURN
A PROPERLY EXECUTED PROXY CARD OR FAILURE TO OTHERWISE VOTE AT THE SPECIAL
MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER AGREEMENT.
RECORD DATE AND VOTING
The Board has fixed the close of business on November 15, 1996, as the
Record Date for the determination of the holders of Common Stock entitled to
notice of and to vote at the Special Meeting. Only stockholders of record at the
close of business on that date will be entitled to receive notice of or to vote
at the Special Meeting. At the close of business on the Record Date, there were
6,807,280 shares of Common Stock and Common Stock voting equivalents outstanding
and entitled to vote at the Special Meeting, held by approximately 174
stockholders of record.
Each holder of Common Stock on the Record Date will be entitled to one vote
for each share of record. The presence, in person or by proxy, of a majority of
the outstanding shares of Common Stock entitled to be voted at the Special
Meeting is necessary to constitute a quorum for the transaction of business.
Abstentions (including broker non-votes) will be included in the calculation of
the number of votes represented at the Special Meeting for purposes of
determining whether a quorum has been achieved.
If the enclosed proxy card is properly executed and received by the Company
in time to be voted at the Special Meeting, the shares represented thereby will
be voted in accordance with the instructions marked thereon. Executed proxies
with no instructions indicated thereon will be voted "FOR" approval and adoption
of the Merger Agreement.
The Board is not aware of any matter other than that set forth in the Notice
of Special Meeting of Stockholders that may be brought before the Special
Meeting. If any other matters properly come before the Special Meeting,
including a motion to adjourn the meeting for the purposes of soliciting
additional proxies, the persons named in the accompanying proxy will vote the
shares represented by all properly executed proxies on such matters in their
discretion, except that shares represented by proxies which have been voted
"against" the Merger Agreement will not be used to vote "for" adjournment of the
Special Meeting for the purpose of allowing additional time for soliciting
additional votes "for" the Merger Agreement. See "THE SPECIAL MEETING--Vote
Required; Revocability of Proxies."
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STOCKHOLDERS SHOULD NOT FORWARD ANY COMMON STOCK CERTIFICATES WITH THEIR
PROXY CARDS. IN THE EVENT THE MERGER IS CONSUMMATED, STOCK CERTIFICATES SHOULD
BE DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF
TRANSMITTAL, WHICH WILL BE SENT TO STOCKHOLDERS BY AMERICAN STOCK TRANSFER &
TRUST COMPANY, IN ITS CAPACITY AS THE EXCHANGE AGENT, PROMPTLY AFTER THE
EFFECTIVE TIME.
VOTE REQUIRED; REVOCABILITY OF PROXIES
The affirmative vote of each of (i) holders of a majority of the outstanding
shares of Common Stock entitled to vote thereon, and (ii) the affirmative vote
of holders of a majority of the outstanding shares of Common Stock held by
Common Stockholders (as defined on the cover page), is required to approve and
adopt the Merger Agreement. All prospective holders of Series E Stock have
agreed to vote in favor of the Merger Agreement.
Because the required vote on the Merger Agreement is based upon the total
number of outstanding shares of Common Stock, the failure to submit a proxy card
(or to vote in person at the Special Meeting) or the abstention from voting by a
stockholder will have the same effect as a vote against approval and adoption of
the Merger Agreement. Brokers who hold shares of Common Stock as nominees will
not have discretionary authority to vote such shares in the absence of
instructions from the beneficial owners thereof.
A stockholder may revoke a proxy at any time prior to its exercise by (i)
delivering to GreenStone Industries, Inc., 6500 Rock Spring Drive, Suite 400,
Bethesda, MD 20817, a written notice of revocation prior to the Special Meeting,
(ii) delivering prior to the Special Meeting a duly executed proxy bearing a
later date or (iii) attending the Special Meeting and voting in person. The
presence of a stockholder at the Special Meeting will not in and of itself
automatically revoke such stockholders's proxy.
If fewer shares of Common Stock (or of Common Stock held by the Common
Stockholders) are voted in favor of approval and adoption of the Merger
Agreement than the number required for approval, it is expected that the Special
Meeting will be adjourned for the purpose of allowing additional time for
soliciting and obtaining additional proxies or votes, and, at any subsequent
reconvening of the Special Meeting, all proxies will be voted in the same manner
as such proxies would have been voted at the original convening of the Special
Meeting, except for any proxies which have theretofore effectively been revoked
or withdrawn.
No vote of the stockholders of L-P is required in connection with the Merger
Agreement or the Merger. The obligations of the Company and L-P to consummate
the Merger are subject, among other things, to the condition that the Company's
stockholders and the Common Stockholders, separately, approve and adopt the
Merger Agreement. See "THE MERGER AGREEMENT--Conditions to the Merger."
APPRAISAL RIGHTS
Under the Delaware General Corporation Law ("DGCL"), record holders of
shares of Common Stock who follow the procedures set forth in Section 262 and
who have not voted in favor of the Merger Agreement will be entitled to have
their shares of Common Stock appraised by the Delaware Court of Chancery
("Court") and to receive payment of the "fair value" of such shares, exclusive
of any element of value arising from the accomplishment or expectation of the
Merger, together with a fair rate of interest, if any, as determined by the
Court. The following is a summary of certain of the provisions of Section 262 of
the DGCL and is qualified in its entirety by reference to the full text of such
Section, a copy of which is attached hereto as Appendix C.
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Under Section 262, where a merger agreement is to be submitted for approval
and adoption at a meeting of stockholders, as in the case of the Special
Meeting, not less than 20 calendar days prior to the meeting, the Company must
notify each of the holders of Common Stock at the close of business on the
Record Date that such appraisal rights are available and include in each such
notice a copy of Section 262. This Proxy Statement constitutes such notice. Any
stockholder who wishes to exercise appraisal rights should review the following
discussion and Appendix C carefully because failure to timely and properly
comply with the procedures specified in Section 262 will result in the loss of
appraisal rights under the DGCL.
A holder of shares of Common Stock wishing to exercise appraisal rights must
deliver to the Company, before the vote on the approval and adoption of the
Merger Agreement at the Special Meeting, a written demand for appraisal of such
holder's shares of Common Stock. Such demand will be sufficient if it reasonably
informs the Company of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of his shares. A proxy or vote against
the Merger Agreement will not constitute such a demand. In addition, a holder of
shares of Common Stock wishing to exercise appraisal rights must hold of record
such shares on the date the written demand for appraisal is made and must
continue to hold such shares through the Effective Time.
Only a holder of record of shares of Common Stock is entitled to assert
appraisal rights for the shares of Common Stock registered in that holder's
name. A demand for appraisal should be executed by or on behalf of the holder of
record fully and correctly, as the holder's name appears on the stock
certificates. Holders of Common Stock who hold their shares in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights are
urged to consult with their brokers to determine the appropriate procedures for
the making of a demand for appraisal by such nominee. All written demands for
appraisal of Common Stock should be sent or delivered to GreenStone Industries,
Inc., 6500 Rock Spring Drive, Suite 400, Bethesda, MD 20817, Attention: Chief
Financial Officer, so as to be received before the vote on the approval and
adoption of the Merger Agreement at the Special Meeting.
If the shares of Common Stock are owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, execution of the demand should be
made in that capacity, and if the shares of Common Stock are owned of record by
more than one person, as in a joint tenancy or tenancy in common, the demand
should be executed by or on behalf of all joint owners. An authorized agent,
including one or more joint owners, may execute a demand for appraisal on behalf
of a holder of record; however, the agent must identify the record owner or
owners and expressly disclose the fact that, in executing the demand, the agent
is agent for such owner or owners. A record holder such as a broker who holds
Common Stock as nominee for several beneficial owners may exercise appraisal
rights with respect to the Common Stock held for one or more beneficial owners
while not exercising such rights with respect to the Common Stock held for other
beneficial owners; in such case, the written demand should set forth the number
of shares as to which appraisal is sought and where no number of shares is
expressly mentioned the demand will be presumed to cover all Common Stock held
in the name of the record owner.
Within 10 calendar days after the Effective Time, Surviving Corp. must send
a notice as to the effectiveness of the Merger to each person who has satisfied
the appropriate provisions of Section 262 and who has not voted in favor of the
Merger Agreement. Within 120 calendar days after the Effective Time, Surviving
Corp., or any stockholder entitled to appraisal rights under Section 262 and who
has complied with the required procedures and is otherwise entitled to appraisal
rights, may file a petition in the Court demanding a determination of the fair
value of the shares of all such stockholders. Notwithstanding the foregoing, at
any time within 60 days after the Effective Time, any stockholder may withdraw
his demand for appraisal and accept the terms offered under the Merger
Agreement. Surviving Corp. is not under any obligation, and has no present
intention, to file a petition with respect to the appraisal of the fair value of
the shares of Common Stock. Accordingly, it is the obligation of the
stockholders to initiate all necessary action to perfect their appraisal rights
within the time prescribed in Section 262.
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Within 120 calendar days after the Effective Time, any stockholder of record
who has complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from Surviving Corp. a statement
setting forth the aggregate number of shares of Common Stock not voted in favor
of the Merger and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such statement must be
mailed within 10 calendar days after a written request therefor has been
received by Surviving Corp. or 10 calendar days after expiration of the period
for delivery of demands for appraisal described above, whichever is later.
If a stockholder properly files a petition for appraisal with the Court,
service must be made on Surviving Corp. Within 20 calendar days after such
service, Surviving Corp. must file in the office of the Register in Chancery in
which such petition was filed a verified list containing the names and addresses
of all stockholders who have demanded payment for their shares and with whom
agreements as to the value of their shares have not been reached by Surviving
Corp. The Court may order the Register in Chancery to give notice of a hearing
on such petition to Surviving Corp. and the stockholders on the list by mail and
through newspaper publication. Surviving Corp. is required to bear the costs of
such notices. At the hearing, the Court will determine the stockholders who have
complied with Section 262 and are entitled to appraisal rights. The Court may
require stockholders who have demanded an appraisal and who hold stock
represented by certificates to submit their certificates to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings. If
any stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
After determining the stockholders entitled to an appraisal, the Court will
appraise the "fair value" of the shares of Common Stock, exclusive of any
element of value arising from the accomplishment or expectation of the Merger,
together with a "fair rate of interest," if any, to be paid upon the amount
determined to be the fair value. In determining such fair value and fair rate of
interest, the Court will take into account all relevant factors, including, with
respect to the fair rate of interest, the rate of interest Surviving Corp. would
have had to pay to borrow money during the pendency of the appraisal proceeding.
Interest may be simple or compound, as the Court shall direct. Discovery and
other pretrial proceedings may be permitted by the Court, and the Court may
proceed to trial upon the appraisal prior to the final determination of the
stockholders entitled to an appraisal. Any stockholder whose name appears on the
list filed by Surviving Corp. referenced above, and who has submitted his stock
certificates to the Registry in Chancery, if required, may participate fully in
all proceedings until it is fully determined that he is not entitled to
appraisal rights under Section 262.
Holders considering seeking appraisal should be aware that the fair value of
their shares of Common Stock as determined under Section 262 could be more than,
the same as or less than the $5.25 per share that they would otherwise receive
if they did not seek appraisal of their shares of Common Stock. The Delaware
Supreme Court has stated that "proof of value by any techniques or methods which
are generally considered acceptable in the financial community and otherwise
admissible in court" should be considered in the appraisal proceedings. In
addition, Delaware courts have decided that the statutory appraisal remedy,
depending on factual circumstances, may or may not be a dissenter's exclusive
remedy.
Costs of the appraisal proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable. Upon application of a
stockholder, the Court may also order that all or a portion of the expenses
incurred by any holder of shares of Common Stock in connection with an
appraisal, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts utilized in the appraisal proceeding, be charged
pro rata against the value of all of the shares of Common Stock entitled to
appraisal.
From and after the Effective Time, no stockholder who has duly demanded an
appraisal in compliance with Section 262 and has not timely withdrawn such
demand will be entitled to vote the shares of Common Stock subject to such
demand for any purpose or be entitled to the payment of dividends or other
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distributions on those shares (except dividends or other distributions payable
to holders of record of shares of Common Stock as of a date prior to the
Effective Time).
If any stockholder who demands appraisal of shares under Section 262 fails
to perfect, or effectively withdraws or loses, the right to appraisal, as
provided in the DGCL, the shares of Common Stock of such holder will be
converted into the right to receive $5.25 per share in accordance with the
Merger Agreement, without interest. A stockholder will fail to perfect, or
effectively lose, the right to appraisal if no petition demanding appraisal is
filed within 120 calendar days after the Effective Time and other procedures and
requirements described above are not complied with. A stockholder may withdraw a
demand for appraisal by delivering to the Company a written withdrawal of the
demand for appraisal and acceptance of the Merger, except that any such attempt
to withdraw made more than 60 calendar days after the Effective Time will
require the written approval of Surviving Corp. However, an appraisal proceeding
may not be dismissed as to any stockholder without the approval of the Court,
and such approval may be conditioned upon such terms as the Court deems just.
SOLICITATION OF PROXIES
The Company will bear the costs of soliciting proxies from stockholders. In
addition to soliciting proxies by mail, directors, officers and employees of the
Company, without receiving additional compensation therefor, may solicit proxies
by telephone, by telegram or in person. Arrangements also will be made with
brokerage firms and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares held of record by such
persons, and the Company will reimburse such brokerage firms, custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them
in connection therewith. The Company has retained H.J. Meyers & Co., Inc. as
Merger and Proxy Consultant to aid in the solicitation of proxies. H.J. Meyers &
Co., Inc.'s fee for such services including solicitation of the proxies will be
$40,000.
THE COMPANY
The Company was established in 1993, under the laws of the state of
Delaware, to acquire companies that manufacture cellulose insulation and
specialty fibers from recycled paper and to significantly expand the markets for
these products. Simultaneous with its IPO on July 28, 1994, the Company acquired
the operations of United Fibers and Parco, Inc., which provided production
facilities in Norfolk, Nebraska, Phoenix, Arizona and Portland, Oregon. During
the fourth quarter of 1994, the Company acquired AEP of Elkwood, Virginia and
Southern Cellulose, Inc. of Atlanta, Georgia. In February of 1995, the Company
acquired All-Seal of Fort Wayne, Indiana and in July of 1995, the Company
acquired Pacific Rim Recycling, a recycling business. In October of 1995, the
Company purchased substantially all the assets of Fiberwood Incorporated of
Sacramento, California. Other than Pacific Rim Recycling, each of the foregoing
businesses is engaged in the manufacture of cellulose fiber products.
LOUISIANA-PACIFIC CORPORATION
L-P is a major forest products company headquartered in Portland, Oregon,
with manufacturing facilities throughout the United States and in Canada, Mexico
and Ireland. It manufactures and distributes lumber, pulp, structural and other
panel products, hardwood veneers, windows and doors, and cellulose insulation.
L-P's Common Stock is traded on the New York Stock Exchange under the symbol
"LPX."
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SPECIAL FACTORS
BACKGROUND OF THE TRANSACTION
The Company's strategy has focused upon acquiring (through purchase, joint
venture, or otherwise) additional cellulose insulation manufacturing capacity
and distribution capabilities. In early 1995, the Company initiated discussions
with L-P concerning a possible purchase of cellulose insulation plants owned by
L-P and/or a joint venture with L-P which would take advantage of L-P's
established distribution channels. The discussions were extremely preliminary
and were terminated without any agreement between the parties.
During most of 1995, prices for recycled paper (the primary commodity used
in the manufacture of cellulose insulation) continued to rise, which adversely
affected the Company's operating performance and consequently the market price
of its common stock. In light of these market developments, the Board of
Directors and management were concerned about the impact on stockholder value of
continuing the Company's growth plan, particularly if providing the capital for
such growth would require the issuance of additional shares of common stock at
low prices. Therefore, management believed that a joint venture or similar
transaction with a strong financial or marketing partner could be particularly
attractive. Given L-P's experience in the cellulose insulation industry, its
financial strength and distribution channels, management felt that L-P could be
an excellent candidate for such a venture. In April 1996, Mr. Oganesoff, the CEO
of the Company, sent a letter to Mr. Suwyn, the CEO of L-P, with the intention
of initiating discussion of strategic alternatives. As a result, Mr. Suwyn and
Mr. Oganesoff met on May 21, 1996, at the Company's office in Bethesda,
Maryland. They shared their views on the cellulose insulation business and
described their respective companies. Mr. Suwyn indicated that it was likely L-P
would be interested in growing its cellulose insulation business. They each
expressed an interest in having further discussions with the express possibility
that the discussions could include the acquisition of the Company by L-P. Over
the next several days Mr. Oganesoff updated each of the Board members on the
discussions with L-P.
In June 1996, Mr. Suwyn contacted Mr. Oganesoff and indicated that he would
like to further explore the possible acquisition of the Company by L-P. This
discussion was followed by a visit on June 27, 1996, from other executives of
L-P, wherein general discussions took place regarding the operations of the two
companies and how they could work together. This meeting was followed a few
weeks later by a visit from Bill Meyer of Capstan Partners, L-P's investment
banker.
During his visit, Mr. Meyer and Mr. Oganesoff discussed valuation of the
Company's business. The parties both recognized that there might be significant
business advantages from a combination of the Company's manufacturing capacity
and L-P's financial strength and distribution capabilities. Mr. Meyer indicated
that he felt that the Company's earnings history and the amount of capital that
would be required to significantly increase the Company's sales volumes were
consistent with a very modest acquisition premium, while the Company's
management expressed the view that the long-term potential of the Company
justified a more significant premium. The meeting concluded with an
acknowledgment that there was a material difference in price to overcome, but
that the combination of the companies made business sense. Over the few days
following the meeting, Mr. Oganesoff contacted each of the Company's Board
members and described the meeting. It was the general consensus of the Board
that Mr. Oganesoff should continue to pursue the discussions with L-P to see if
a value could be reached that was fair for the stockholders of the Company.
During the latter part of July, the parties attempted to find a mutually
agreeable value for the Company. As the parties could not agree on a value, it
was determined that a meeting with the senior executives of both companies
should take place to determine whether a mutually agreeable price could be
reached. Messrs. Oganesoff, Tranmer and Campbell met with Mr. Suwyn, other
executives of L-P, and
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Mr. Meyer in Portland on July 25, 1996. Mr. Suwyn explained the business
objectives of L-P and how the Company might fit in the L-P organization. Mr.
Suwyn and Mr. Meyer then presented their views on valuation of the Company which
included a historic cash flow analysis in conjunction with the capital needed to
grow the business. This analysis concluded that a price close to $4.00 per share
would be a fair price for the Company. Mr. Suwyn indicated that he preferred to
pay in cash rather than stock because he felt that L-P stock was presently
undervalued. He further said that he understood that, while providing a premium
to the then market price for the Company's stock, this price range was
nevertheless not acceptable to the Company. Mr. Oganesoff confirmed that a price
close to $4.00 would not be acceptable as it did not recognize the future
potential of the Company.
The Company expressed the view that the Company preferred to offer its
stockholders a choice of cash or stock, and that the founding stockholders,
consisting primarily of members of the Board of Directors and management, would
be particularly disadvantaged by an all cash transaction because of the low tax
basis in their shares of Common Stock and because of their desire to maintain a
continuing equity investment in the Company they are working to build. L-P
indicated a willingness to make its shares available in a tax-free transaction
to those individuals who would remain with the business, as it was also L-P's
desire to have key management of the Company own stock of L-P so as to have them
focused on building shareholder value. L-P further indicated that it was
unwilling to include L-P Common Stock as part of the consideration if the L-P
Common Stock were valued at its then current market price.
After further discussion, L-P indicated that the price could not be more
than $5.25. Mr. Suwyn also requested that Mr. Oganesoff confirm that the Company
management would stay with L-P to build the business following the acquisition.
Mr. Oganesoff indicated that once a price for the Company stockholders was
agreed to he would pursue assuring L-P that the management team would stay to
build the business.
On August 1, 1996, L-P indicated it would be willing to pay $5.25 in cash,
but that any L-P Common Stock to be issued in the transaction had to be priced
such that $5.25 of Company stock would be exchanged for L-P Common Stock at an
assumed value of $28 per share, equating at that time to an offer of
approximately $4.20 per share for Company stockholders who receive L-P Common
Stock, with some adjustment provisions in the event that the L-P Common Stock
did not trade at $28 per share by some future date to be negotiated.
Over the next several days, Mr. Oganesoff contacted each of the Board
members and senior management of the Company. All members of the Board and
management concluded that the offer appeared acceptable. See "REASONS FOR THE
TRANSACTION." Following these discussions, it was determined that the Company
should accept the offer, contingent on stockholder approval of the transaction.
Following this determination, the parties agreed that L-P Common Stock would
be available only to the core group of directors, executive officers, and
principal stockholders who would exchange their shares of Common Stock for
Series E Stock. That structure was based upon: L-P's insistence that the number
of shares of L-P Common Stock issuable in the transaction be strictly limited;
the Company's belief that shares of L-P Common Stock (particularly shares valued
at less than current market value) would likely not be attractive to Common
Stockholders, in part because the tax benefits of deferring a gain in a tax-free
transaction would not be as great to such stockholders; and L-P's stated desire
to avoid the burdens associated with registering an offering of L-P Common Stock
to the Company's stockholders generally.
Over the next few weeks Mr. Suwyn and Mr. Oganesoff concluded the principal
issues regarding management retention, which resulted in the arrangements
described in "INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION."
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During the week of September 3, 1996, L-P's legal and accounting advisors
began working with advisors of the Company on issues associated with the
structure of the transaction and on preparing a draft letter of intent.
A draft letter of intent was received by the Company from L-P on the evening
of Friday, September 6 and distributed to the Board of Directors of the Company
on Saturday, September 7, 1996. The Board of the Company conducted a telephonic
meeting on September 9, and determined that the terms were consistent with the
understanding that had developed between the parties and, consequently,
determined that the Company should move forward with the transaction. See
"REASONS FOR THE TRANSACTION." The Board further determined to establish a
committee of the two outside directors, Messrs. Phillips and Frueh (the
"Independent Committee"), to review the fairness of the transaction from the
perspective of the Common Stockholders and to provide the Independent Committee
with the financial resources to retain counsel and an investment banker. Formal
action to establish the Independent Committee was taken on September 10, 1996.
Prospective counsel were interviewed and the Independent Committee retained
Wilmer, Cutler & Pickering, Washington, DC, on or about September 12, 1996. The
Independent Committee then interviewed investment bankers and, on or about
September 19, 1996 retained Anchor Financial Group LLC, Washington, DC, as the
investment banker to evaluate the fairness of the transaction to the Common
Stockholders from a financial point of view. See "OPINION OF FINANCIAL ADVISOR."
PURPOSE OF THE TRANSACTION
The purpose of the Merger is to effect the acquisition of the Company by
L-P. L-P and the Company did not consider any alternative means to accomplish
this purpose, because the Merger is the most direct means for effecting the
complete acquisition of the Company.
REASONS FOR THE TRANSACTION
The Board and the Independent Committee have each determined that the Merger
Agreement and the Merger are in the best interests of the Company and fair to
the Common Stockholders, have approved the Merger Agreement and the Merger and
have recommended to the Common Stockholders that they vote for the approval and
adoption of the Merger Agreement. In taking these actions, the Board and the
Independent Committee considered many factors including, among others, the
factors described immediately below. Statements in this section, to the extent
they are not based on historical events, constitute forward-looking statements.
Forward-looking statements include, without limitation, statements regarding the
outlook for future operations, forecasts of future costs and expenditures,
evaluation of market conditions, the adequacy of reserves, and plans for
acquisitions. Stockholders are cautioned that forward-looking statements are
subject to a risk that actual events and results may vary materially from those
described or assumed herein.
(A) MANAGEMENT'S RECOMMENDATION. The Board and the Independent Committee
reviewed presentations from, and discussed the terms and conditions of the
Merger Agreement and the Merger with, senior executive officers of the
Company, representatives of its legal counsel and representatives of its
financial advisor. The Board and the Independent Committee considered the
view of management that the Company's businesses might realize certain
operational advantages if the Company were no longer an independent public
company (which advantages the Board and the Independent Committee took into
account in assessing the fairness of the $5.25 per share to be received in
the Merger). The Board and the Independent Committee also considered
favorably management's stated belief that the Merger would not have an
adverse effect on the Company's employees. The Board and the Independent
Committee also took into consideration the fact that senior management had
been promised employment agreements by L-P as a cautionary factor in
considering management's views,
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offset by the fact that all members of senior management who will exchange
Series E Stock for L-P Common Stock are personally indemnifying L-P against
any inaccuracies in the Company's representations and warranties contained
in the Merger Agreement.
(B) THE COMPANY'S BUSINESS, CONDITION AND PROSPECTS. In evaluating the
terms of the Merger, the Board and the Independent Committee considered,
among other things, information with respect to the financial condition,
results of operations and businesses of the Company, on both a historical
and a prospective basis, and current industry, economic and market
conditions. The Board and the Independent Committee considered that large
companies, such as L-P, if they chose to compete directly with the Company,
would have considerably more financial and marketing resources than the
Company. The Board and the Independent Committee concluded that if L-P or
another similarly large building-products company decided to enter the
Company's business, the competitive environment would change and the Company
could be adversely affected, given the limited resources of the Company
compared to larger potential competitors. The Board and the Independent
Committee noted that there are few financial or technical barriers to entry
into the Company's business. Accordingly, the Board and the Independent
Committee concluded that the Company's Common Stock was probably not being
significantly undervalued by the public markets on a stand-alone basis.
(C) HISTORICAL AND RECENT MARKET PRICES OF THE COMMON STOCK COMPARED TO
THE CONSIDERATION TO BE RECEIVED IN THE MERGER. The Board and the
Independent Committee reviewed the historical market prices and recent
trading activity of the Common Stock. The Board and the Independent
Committee considered as favorable to its determination the fact that the
$5.25 per share price to be paid in the Merger represents a premium of
approximately 33% over the $3 15/16 price at which the Common Stock closed
on September 9, the last trading day before the public announcement of the
proposed Merger. The Board and the Independent Committee also considered as
favorable the fact that $5.25 per share represents a premium of
approximately 56% over the average closing price of the Common Stock during
the month prior to public announcement of the Merger as determined by Anchor
as part of its analysis of the trading history of the Common Stock.
(D) NEED FOR ADDITIONAL CAPITAL. The Board and the Independent Committee
reviewed the Company's need for additional capital. In order to continue to
execute its growth plans, the Company would require additional capital.
Significant new equity capital would be highly dilutive to current
stockholders given the Company's recent (1995) financial performance and
stock price performance. There would be no assurance that any new financing
would be adequate to grow the Company to such a level or that additional
future funding would be less dilutive than that which might be presently
available.
(E) OPINION OF ANCHOR FINANCIAL GROUP LLC. The Board and the Independent
Committee considered the opinion of Anchor that the consideration to be
received by the Common Stockholders pursuant to the Merger Agreement is fair
to such holders from a financial point of view, as well as the presentation
made by Anchor to the Board and the Independent Committee, to support the
Board's and the Independent Committee's determination that the Merger is
fair to the Common Stockholders. Anchor's opinion and presentation are
described below under "OPINION OF FINANCIAL ADVISOR." As described therein,
Anchor performed certain valuation analyses on the Company in order to reach
its opinion.
(F) NO FINANCING CONDITION; STRONG ACQUIROR. The Board and the
Independent Committee regarded as favorable to its determination that the
Merger Agreement does not contain a financing condition, that L-P is a
financially strong enterprise and that accordingly the Merger has a low risk
of noncompletion due to any financial inability of L-P.
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(G) FINANCIAL MULTIPLES ANALYSIS. The Board and the Independent
Committee reviewed the financial multiples analysis produced by Anchor and
described below under "OPINION OF FINANCIAL ADVISOR." The Board and the
Independent Committee compared these multiples to the multiples at which
other comparable publicly-held building products producers were trading and
the multiples represented by the purchase price and determined that the
multiples represented by the consideration to be received in the Merger were
comparable or higher.
(H) STOCKHOLDER APPROVAL REQUIREMENTS. The Board and the Independent
Committee considered the fact that the Merger is conditioned on the approval
and adoption of the Merger Agreement by the affirmative vote of the Common
Stockholders as defined, as supporting its view that the Merger is fair
procedurally to the Common Stockholders.
(I) ALTERNATIVE TRANSACTIONS. The Board and the Independent Committee
determined that it was unlikely that a combination transaction with any
other corporation could be structured in a manner that would offer any
higher value to the Common Stockholders. In addition, no other candidates
presented themselves following public announcement of the Merger. Further,
given the extended period of negotiations with L-P, neither the Board nor
the Independent Committee believed that L-P would offer any higher price.
The Board and the Independent Committee also evaluated the possibility of
liquidating the Company and concluded that the Company's liquidation value
was likely to be substantially less than the $5.25 per share offered by L-P.
(J) TAXABLE TRANSACTION. The Board and the Independent Committee viewed
as a negative factor to its determination that, like all cash mergers, the
Merger would be a taxable transaction to the Common Stockholders. However,
the Board determined that this factor was offset by the favorable price to
be paid in the Merger as compared to the recent trading prices for the
Common Stock.
(K) SERIES E STOCK, MANAGEMENT COMPENSATION. The Board and the
Independent Committee considered the exchange of Series E Stock for
restricted L-P Common Stock to be a neutral factor. The potential gain to
such holders from remaining as L-P stockholders was considered to be offset
by the discount accepted by such holders, the potential loss to such
shareholders, and the relative lack of liquidity of such L-P shares. The
Board and the Independent Committee considered the proposed employment
contracts for senior management as a cautionary factor in evaluating
management's recommendation, but concluded that L-P was fully justified in
insisting that the Company's management continue to operate the business of
Surviving Corp. following the Merger, in order for L-P to be able to justify
the Merger from its perspective.
The foregoing description of the factors considered by the Board and the
Independent Committee is not all inclusive but covers the principal matters
discussed in detail by the Independent Committee and the Board. In view of the
wide variety of factors considered, the Independent Committee and the Board did
not consider it practical to, nor did it attempt to, quantify or attach any
particular weight to any of the factors it reviewed in reaching its conclusion
to recommend the Merger to the Common Stockholders as being in their best
interests.
OPINION OF FINANCIAL ADVISOR
Anchor delivered its written opinion to the Board and the Independent
Committee on October 28, 1996, that, as of such date, the consideration to be
received by the Common Stockholders in the Merger is fair to them from a
financial point of view. No limitations were imposed by the Company with respect
to the investigations made or the procedures followed by Anchor in rendering its
opinion.
The full text of the opinion of Anchor, which sets forth assumptions made,
matters considered and limitations on the review undertaken by Anchor, is
included as Appendix B to this Proxy Statement.
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Stockholders are urged to read the opinion in its entirety. The full text of the
report relating to its opinion is available for inspection and copying at the
principal executive offices of the Company (see "SUMMARY--The Parties") during
the Company's regular business hours by any Common Stockholder or such
stockholder's representative who has been so designated in writing. Anchor's
opinion is directed only to the consideration to be received by the Common
Stockholders in the Merger and does not constitute a recommendation to any
stockholder as to how such stockholder should vote at the Special Meeting.
Anchor does not express any opinion as to the likely tax consequences of the
Merger to any Common Stockholder, nor does it address the fairness of the
transaction to holders of the Series E Stock. The summary of the opinion of
Anchor set forth in this Proxy Statement is qualified in its entirely by
reference to the full text of such opinion.
In arriving at its opinion, Anchor (i) reviewed financial information of the
Company furnished to Anchor by management, including certain internal financial
analyses and forecasts; (ii) reviewed certain publicly available historical
business and financial information of the Company and L-P; (iii) held
discussions with the management of the Company concerning the business, past and
current business operations, financial condition, strategic objectives and
future prospects of the Company; (iv) reviewed the Merger Agreement; (v)
reviewed the stock price and stock trading history of the Company; (vi) reviewed
public information, including certain stock market data and financial
information relating to selected public companies which it deemed generally
comparable to the Company; (vii) compared the financial terms of the Merger with
other transactions it deemed generally comparable; (viii) reviewed a discounted
cash flow analysis of the Company; and (ix) made such other studies and
inquiries, and reviewed such other data, as Anchor deemed necessary or
appropriate for the purposes of the opinion expressed herein.
Anchor relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by it for
purposes of its opinion. Anchor has not made an independent valuation or
appraisal of the assets and liabilities of the Company or L-P or of potential or
contingent liabilities of the Company or L-P. With respect to the financial and
operating forecasts of the Company that it has reviewed, Anchor has assumed that
such forecasts were prepared in good faith on the basis of the best available
estimates and judgments of the management of the Company as to the future
financial performance of the Company. Anchor has further relied on the
assurances of management of the Company that they are not aware of any facts
that would make such information inaccurate or misleading. Anchor's opinion is
necessarily based on the economic, market and other conditions as in effect on,
and the information made available to it as of, the date of its opinion. In
arriving at its opinion Anchor was not authorized to solicit, nor did it solicit
indications of interest from any other party with respect to the acquisition of
the Company or any of its assets. Anchor expresses no opinion as to the future
value of the combined entity after the Merger or of the future value of L-P
Common Stock, or the fairness of the transaction to any party other than the
Common Stockholders.
Anchor is a Washington-based firm that has provided transactions advice,
opinions as to fairness, and valuation services to a number of publicly-held
companies, including companies to be acquired in merger transactions.
The Independent Committee selected Anchor. The Committee solicited bids from
five firms and received bids from three of them, including Anchor. The Committee
interviewed representatives of these three firms. The Committee selected Anchor
on the basis of its experience in advising on acquisition transactions,
assessing fairness, and valuing companies to be acquired and securities thereof;
the speed with which it gained a detailed understanding of the proposed merger
with L-P; and its willingness and ability to act both promptly and thoroughly in
advising the Committee and the Board. Neither Anchor nor any affiliate or
representative has or had any relationship with the Company or any affiliate.
Anchor proposed the arrangements with respect to its compensation. Anchor will
receive a fee totaling $150,000 upon closing of the Merger, of which fee the
Company has already paid $50,000. Anchor is also entitled to reimbursement of
its actual expenses incurred in the preparation of its opinion.
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In preparing its written opinion to the members of the Independent Committee
of the Board of Directors of the Company, Anchor performed a variety of
financial and comparative analyses, including those described below, and
provided the Independent Committee and the Board of Directors with an oral
presentation with respect to such analyses. The summary of such analyses does
not purport to be a complete description of the analyses underlying Anchor's
opinion. The preparation of a fairness opinion is a complex analytic process
involving various determinations as to the most appropriate and relevant methods
of financial analysis and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. In arriving at its opinion, Anchor did not attribute any
specific weight to any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, Anchor believes that its analyses must be considered as a
whole and that selecting portions of its analyses and factors, without
considering all analyses and factors, could create a misleading and incomplete
view of the process underlying such analyses and its opinion. In its analyses,
Anchor made numerous assumptions with respect to the Company, industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of the Company. The
estimates contained in such analyses are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable then those suggested by such analyses. In addition,
analyses relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold or prices at which any securities may trade at the present time or
at any time in the future. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty.
The following is a summary of the analyses Anchor utilized in arriving at
its opinion as to the fairness of the consideration to be received by the Common
Stockholders in the Merger and that Anchor discussed with the Independent
Committee on October 9, 1996 and the Board of Directors on October 28, 1996.
OVERVIEW OF ANALYSIS: Anchor presented an overview of the methodologies it
had used in conducting its analyses. In particular, Anchor's analysis was based
on an analysis of publicly traded comparable companies, an analysis of selected
acquisitions, and a discounted cash flow analysis based on projections prepared
by management.
TRANSACTION ANALYSIS: Assuming a value per share of the Common Stock equal
to the cash consideration of $5.25 to be paid to the holders of the Company's
Common Stock, pursuant to the Agreement and Plan of Reorganization and Merger,
between L-P and the Company, Anchor noted that the implied value of the
transaction (defined as the total value of equity computed as total current
common shares outstanding assuming Series A and Series C Preferred shares were
fully converted into common, plus the liquidation value of the Series B
Preferred shares, plus the debt less cash as of June 30, 1996) represented a
multiple of (i) trailing twelve month revenues of 1.05X, (ii) trailing twelve
month earnings before interest and taxes (EBIT) of 42.29X, (iii) trailing twelve
month earnings before interest, taxes, depreciation and amortization (EBITDA) of
14.07X, and (iv) trailing twelve month net operating profit after taxes (NOPAT)
of 65.06X. Anchor also noted that the per share consideration of $5.25 to be
paid to the holders of Common Stock represented a premium of 56.25% over the
average monthly closing price of the Company's Common Stock on the NASDAQ for
the period beginning August 9, 1996 to September 6, 1996.
SELECTED PUBLICLY TRADED COMPARABLE COMPANIES ANALYSIS: Using public
information, Anchor reviewed and compared the financial, operating, and market
performance of selected building products companies with that of the Company.
The selected building products companies (the "Comparable Group") included ABT
Building Products, American Woodmark, Congoleum Corporation, Falcon Building
Products, Fibreboard, Florida Rock Industries, Owens Corning, Republic Group,
Sherwin Williams, Triangle Pacific and USG Corporation. For the Comparable
Group, Anchor reviewed certain publicly
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available financial data including, among other things, revenues, operating
profit, EBIT, EBITDA, NOPAT, margins, book value, and market value. Anchor also
reviewed market data, including various trading multiples such as adjusted
market value (market price of common equity plus total debt less cash plus book
value of preferred stock) to trailing twelve month revenues (0.36X to 1.34X with
a median of 0.82X), trailing twelve month EBIT (6.20X to 12.78X with a median of
8.23X), trailing twelve month EBITDA (3.95X to 8.92X with a median of 6.21X),
trailing twelve month NOPAT (10.66X to 19.66X with a median of 12.73X).
In order to determine multiples of an adjusted private market value for the
Comparable Group, Anchor applied a theoretical 35% control acquisition premium
to the above mentioned trading multiples resulting in an adjusted private market
value to trailing twelve month revenues (0.49X to 1.81X with a median of 1.11X),
trailing twelve month EBIT (8.37X to 17.25X with a median of 11.11X), trailing
twelve month EBITDA (5.33X to 12.04X with a median of 8.38X), trailing twelve
month NOPAT (14.39X to 26.54X with a median of 17.19X).
No company or business used in the comparable company analyses summarized
above as a comparison is identical to the Company. Accordingly, an analysis of
the results of the foregoing involves complex considerations and judgments
concerning differences in financial and operating characteristics that could
affect the public trading value of the selected companies or the business
segment or company to which they are being compared.
COMPARABLE TRANSACTION ANALYSIS: Anchor also reviewed selected acquisitions
including the acquisitions of National Gypsum by Delcor, Hartco Flooring by
Triangle Pacific, Silver Furniture by Chromcraft Remington, Facelifters by AMRE,
Stone Products by Fibreboard, Thomasville Furniture by INTERCO, and VYTEC by
Fibreboard. For these transactions, Anchor analyzed the multiples of the
transaction value (calculated as the value of the equity plus assumption of debt
less cash) to twelve month trailing revenues (0.45X to 1.63X with a median of
0.82X), trailing twelve month EBIT (6.58X to 17.11X with a median of 12.36X),
trailing twelve month EBITDA (5.39X to 12.98X with a median of 9.61X), and
trailing twelve month NOPAT (10.12X to 28.60X with a median of 21.03X).
DISCOUNTED CASH FLOW ANALYSIS: Using projections prepared by management,
Anchor also performed a discounted cash flow analysis and estimated the present
value of the future cash flows the Company could be expected to produce from
current operations for the four year period from 1996 to 1999 and the present
value of the Company's terminal value in 1999. Anchor developed a range of
values on a per share basis by adding (i) the present value of the four year
cash flows (using discount rates ranging from 20% to 25%) and (ii) the present
value of the Company's terminal value in 1999 and adjusting the resulting values
by subtracting debt and the liquidation value of the Series B Preferred Stock,
and adding cash. The discount rates used by Anchor were selected based on
Anchor's view of factors such as the Company's cost of capital, growth
prospects, and risk profile. The Company's terminal values were determined by
applying the Company's final EBITDA by a range of multiples (ranging from 5.0X
to 7.0X EBITDA). The range of EBITDA multiples was selected by Anchor based on
the public company trading multiples of the Comparable Group of companies (as
defined above). The analysis resulted in a range of values per share of Common
Stock ranging from $3.18 to $5.86 per share.
24
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
In considering the recommendation of the Independent Committee and the Board
with respect to the Merger Agreement and the transactions contemplated thereby,
the Common Stockholders should be aware that certain members of the management
of the Company and of the Board have interests in the Merger that are different
from the interests of the Common Stockholders generally, as described in detail
in this section. In addition, the two members of the Independent Committee have
received special payments of $35,000 (Mr. Frueh) and $50,000 (Mr. Phillips, as
Chairman) in consideration of their extra services rendered, which fees are not
contingent upon completion of the Merger.
OFFICERS OF THE COMPANY. L-P and the Company have agreed that as a
condition to consummating the Merger, certain members of the Company's
management will receive L-P stock rather than cash in the transaction and
continue as employees of the Surviving Corp. following the Merger. Accordingly,
certain members of the Company's management will enter into employment and
non-competition agreements with L-P effective at the closing of the Merger. See
"Employment and Compensation Arrangements." In addition, such members of the
Company's management will receive Common Stock of L-P in exchange for the Series
E Stock which will be owned by them immediately prior to closing of the Merger.
Also as a condition of the Merger, members of management agreed to relinquish
existing stock options to purchase 261,600 shares of the Company's Common Stock
at a price of $5.00 per share, and to relinquish issued but unvested options to
purchase 79,000 shares, with an average exercise price of less than $3.25 per
share, without consideration. See "INTERESTS OF CERTAIN PERSONS IN THE
TRANSACTION--Employment and Compensation Arrangements" and "INTERESTS OF CERTAIN
PERSONS IN THE TRANSACTION--Employment and Compensation Arrangements--Restricted
Performance Shares Requirements."
EMPLOYEE STOCK OPTIONS. Upon vesting in accordance with their existing
terms, outstanding employee stock options to purchase approximately 224,032
shares of the Company's Common Stock held by middle management and plant
employees will be converted into the right to receive cash of $5.25 per share
upon exercise. A further 141,000 vested options held by members of senior
management and directors (including 45,000 options held by members of the
Independent Committee) will be treated the same, while 79,000 unvested options
held by such members of senior management and directors will be canceled.
EXCHANGE OF COMMON STOCK FOR SERIES E STOCK. Immediately prior to the
closing of the Merger, all members of senior management of the Company, together
with all directors (except members of the Independent Committee) and several of
the founding stockholders of the Company, holding in the aggregate approximately
3,115,000 shares of Common Stock, will exchange such shares for new shares of
Series E Stock on a one-for-one basis. The Series E Stock has no preferences
over the Common Stock other than the right to vote as a separate class. The
Series E Stock will not be converted into cash upon the Merger, but rather will
be converted into 0.1875 shares of L-P common stock, subject to certain
restrictions, rights and adjustments. See "THE MERGER AGREEMENT--Conversion of
Series E Stock." Such exchange will be conducted to allow the Merger to qualify
as a tax-free reorganization under Section 368(a) of the Internal Revenue Code.
EMPLOYMENT AND COMPENSATION ARRANGEMENTS. Upon closing of the Merger,
several of the most senior managers of the Company will become employees of L-P
with term employment contracts. A summary of the principal terms of these
agreements follows.
ERIC M. OGANESOFF. Mr. Oganesoff, currently the Chairman of the Board and
Chief Executive Officer of the Company, will be the chief executive officer of
the Surviving Corp. Upon Closing of the Merger he will execute a three year
employment agreement with a base salary of $250,000 per annum and a Non-Compete
Agreement pursuant to which he will receive $100,000 payable in a lump sum at
Closing. In addition, Mr. Oganesoff will receive seven thousand (7,000)
restricted performance shares of L-P common stock per year for three years,
which will be subject to performance restrictions described in "INTERESTS OF
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CERTAIN PERSONS IN THE TRANSACTION--Employment and Compensation Arrangements--
Restricted Performance Shares Requirements." Mr. Oganesoff also holds vested
options to purchase 12,500 shares of the Company's Common Stock, which will be
treated as set forth above under "Employee Stock Options." The Company has also
released Mr. Oganesoff from liability under a $75,000 note presently payable to
the Company.
JOEL TRANMER. Mr. Tranmer, currently President and a Director of the
Company, will be the president of the Surviving Corp. Upon Closing of the
Merger, he will execute a three year employment agreement, at a base salary of
$184,600 per annum, increasing at a minimum of approximately 8% per year in the
second and third years, and a Non-Compete Agreement pursuant to which he will
receive $100,000 payable in a lump sum at Closing. In addition, Mr. Tranmer will
receive seven thousand (7,000) restricted performance shares of L-P common stock
per year for three years, which will be subject to performance restrictions
described in "INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION--Employment and
Compensation Arrangements--Restricted Performance Shares Requirements." Mr.
Tranmer also holds vested options to purchase 7,500 shares of the Company's
Common Stock, which will be treated as set forth above under "Employee Stock
Options."
AL COLLISON. Mr. Collison, currently a vice president of the Company, will
become a vice president of the Surviving Corp. Upon Closing of the Merger he
will execute a three year employment agreement, at a base salary of $153,500 per
annum, increasing at a minimum of approximately 8% per year in the second and
third years, and a Non-Compete Agreement pursuant to which he will receive
$100,000 payable in a lump sum at Closing. In addition, Mr. Collison will
receive seven thousand (7,000) restricted performance shares of L-P common stock
per year for three years, which will be subject to performance restrictions
described in "INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION--Employment and
Compensation Arrangements--Restricted Performance Shares Requirements." Mr.
Collison also holds vested options to purchase 7,500 shares of Common Stock,
which will be treated as set forth above under "Employee Stock Options," and
11,000 Redeemable Common Stock Purchase Warrants, which will be eligible for a
temporary reduced exercise price of $4.95, together with all other such
warrants.
STEVE GERBER. Mr. Gerber, currently an executive vice president of the
Company, will become an executive vice president of the Surviving Corp. Upon
Closing of the Merger, he will execute a three year employment agreement, at a
base salary of $120,000 per annum, increasing by a minimum of 10% per year, and
a Non-Compete Agreement pursuant to which he will receive $50,000 payable in a
lump sum at Closing. In addition, Mr. Gerber will receive sixteen hundred and
sixty-seven (1,667) restricted performance shares of L-P common stock per year
for three years which will be subject to performance restrictions described in
"INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION--Employment and Compensation
Arrangements--Restricted Performance Shares Requirements." Mr. Gerber also holds
vested options to purchase 25,000 shares of Common Stock, which will be treated
as set forth above under "Employee Stock Options."
JOHN BERNARDI. Mr. Bernardi, currently the Chief Financial Officer of the
Company, will become the chief financial officer of the Surviving Corp. Upon
Closing of the Merger he will execute a three year employment agreement, at a
base salary of $125,000 per annum, and a Non-Compete Agreement pursuant to which
he will receive $50,000 payable in a lump sum at Closing. In addition, Mr.
Bernardi will receive sixteen hundred and sixty-seven (1,667) restricted
performance shares of L-P common stock per year for three years which will be
subject to performance restrictions described in "INTERESTS OF CERTAIN PERSONS
IN THE TRANSACTION--Employment and Compensation Arrangements--Restricted
Performance Shares Requirements." Mr. Bernardi also holds vested options to
purchase 7,500 shares of the Company's Common Stock, which will be treated as
set forth above under "Employee Stock Options."
RICHARD CAMPBELL. Mr. Campbell, currently a director and General Counsel to
the Company, will not become an employee of L-P following closing of the Merger,
but will receive $150,000 per year for two years as a consultant to L-P. In
addition, Mr. Campbell and Campbell & Fleming, P.C., a law firm to which
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Mr. Campbell is of counsel, will receive legal fees for services rendered in
connection with the Merger. Mr. Campbell also holds vested options to purchase
7,500 shares of the Company's Common Stock, which will be treated as set forth
above under "Employee Stock Options."
RESTRICTED PERFORMANCE SHARES REQUIREMENTS. The restricted performance
shares of L-P common stock discussed in "INTERESTS OF CERTAIN PERSONS IN THE
TRANSACTION--Employment and Compensation Arrangements" will be vested in the
recipients as follows: one-third of such shares shall be released upon the
achievement of specific earnings before interest, taxes, depreciation and
amortization ("EBITDA") targets for the business of the Company combined with
the existing cellulose operations of L-P of $10.0 million for fiscal 1997, $11.0
million for fiscal 1998 and $12.0 million for fiscal 1999, PLUS the achievement
of 2 of 12 action items for fiscal 1997, 5 of 12 action items for fiscal 1998,
and 8 of 12 action items for fiscal 1999. The action items relate to technical
product improvements, efficiency improvements in production and penetration of
new markets for the Company's products.
L-P may from time to time provide additional incentive programs consistent
with its business objectives for GreenStone.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
COMMON STOCKHOLDERS. The receipt of cash in exchange for Common Stock
pursuant to the Merger will be a taxable transaction to the Common Stockholders
for Federal income tax purposes. A Common Stockholder will generally recognize
gain or loss for Federal income tax purposes in an amount equal to the
difference between such Common Stockholder's adjusted tax basis in such Common
Stockholder's Common Stock and the $5.25 per share consideration received by
such stockholder in the Merger. Such gain or loss will be calculated separately
for each block of Common Stock exchanged by a Common Stockholder. Such gain or
loss will be a capital gain or loss if a block of Common Stock is held as a
capital asset and will be long-term capital gain or loss if, at the Effective
Time, such block of Common Stock has been held for more than one year.
The foregoing discussion may not apply to Common Stockholders who acquired
their Common Stock pursuant to the exercise of employee stock options or other
compensation arrangements with the Company, who are not citizens or residents of
the United States or who are otherwise subject to special tax treatment. EACH
STOCKHOLDER IS URGED TO CONSULT HIS, HER OR ITS TAX ADVISOR WITH RESPECT TO THE
TAX CONSEQUENCES OF THE MERGER, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL
OR OTHER LAWS.
SERIES E STOCKHOLDERS. Ernst & Young LLP, tax advisor to the Company, is
expected to render an opinion to the holders of the Series E Stock (the "Tax
Opinion") that the Merger should constitute a reorganization under Section
368(a) of the Code (a "Reorganization"). Such opinion will be based on certain
assumptions as well as representations received by Ernst & Young LLP from the
Series E Stockholders, the Company and L-P, which representations Ernst & Young
LLP has not independently verified, and is subject to certain limitations
discussed below. Moreover, such opinion is not binding on the Internal Revenue
Service (the "IRS") nor does it preclude the IRS from adopting a contrary
position. The discussion below assumes that the Merger will qualify as a
Reorganization, based upon such Tax Opinion.
Subject to the limitations and qualifications referred to herein, and as a
result of the Merger's qualifying as a Reorganization, the Tax Opinion will
address and be limited to the following federal income tax consequences:
(a) No gain or loss will be recognized by the holders of the Series E
Stock upon the receipt of L-P Common Stock solely in exchange for such
Series E Stock in the Merger (except to the extent of cash received in lieu
of fractional shares or as a result of exercising dissenters' or appraisal
rights).
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<PAGE>
(b) The aggregate tax basis of the L-P Common Stock so received by
holders of the Series E Stock in the Merger (including any fractional share
of L-P Common Stock not actually received) will be the same as the aggregate
tax basis of the Series E Stock surrendered in exchange therefor.
(c) No gain or loss will be recognized by the stockholders of the
Company who exchange their Company Common Stock solely for shares of Series
E Stock, and the tax basis of such holders in the Series E Stock will be the
same as such holder's basis in the Company's Common Stock.
ANTICIPATED ACCOUNTING TREATMENT
The Merger will be accounted for by L-P under the purchase method of
accounting in accordance with Accounting Principles Board Opinion No. 16,
"Business Combinations", as amended. Under this method of accounting, the
purchase price will be allocated to assets acquired and liabilities assumed
based on their estimated fair values at the Effective Time.
REGULATORY APPROVALS
Certain acquisition transactions such as the Merger are reviewed by the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and the Federal Trade Commission (the "FTC") to determine whether
such transactions comply with applicable antitrust laws. Under the provisions of
the Hart-Scott-Rodino Act, the Merger may not be consummated until certain
information has been furnished to the Antitrust Division and the FTC and a
thirty-day waiting period, subject to possible extension by the Antitrust
Division or the FTC, has been satisfied. The Company and L-P filed such
information with the Antitrust Division and the FTC on September 30, 1996, and
the applicable waiting period prescribed under the Hart-Scott-Rodino Act expired
on October 30, 1996. Neither the Antitrust Division nor the FTC raised any
objections or made any comments with respect to the Merger.
At any time before or after the consummation of the Merger, the Antitrust
Division or the FTC could take any action under the antitrust laws as either of
them deems necessary or desirable in the public interest, including seeking to
enjoin the consummation of the Merger or seeking divestiture of substantial
assets of the Company or L-P. At any time before or after the Effective Time,
and notwithstanding that the Hart-Scott-Rodino Act waiting period has expired,
any state could take any action under such state's antitrust laws as it deems
necessary or desirable. Such action could include seeking to enjoin the
consummation of the Merger or seeking divestiture of the Company by L-P or
businesses of the Company or L-P. Private parties may also seek to take legal
action under the antitrust laws under certain circumstances.
As discussed above, consummation of the Merger is conditioned upon, among
other things, the absence of any law, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) that is
then in effect and has the effect of making the Merger illegal or otherwise
preventing or prohibiting consummation of the Merger. In addition, consummation
of the Merger is conditioned upon the receipt of all required permits, consents,
authorizations, approvals, registrations, qualifications, designations and
declarations. See "THE MERGER AGREEMENT--Conditions to the Merger."
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<PAGE>
SOURCE AND AMOUNT OF FUNDS
The total amount of funds necessary for payment of the consideration to be
received by the Common Stockholders in the Merger and the fees and expenses of
L-P related to the Merger is approximately $21,000,000. Such funds will be
provided from L-P's general corporate funds and working capital.
The Merger Agreement provides that all costs and expenses incurred in
connection with the Merger Agreement will be paid by the party incurring the
expense. Estimated costs and fees to be incurred by the Company in connection
with the Merger, assuming completion of the Merger, are as follows:
<TABLE>
<S> <C>
Investment Banking Fairness Opinion Fees.......................... $ 150,000
Legal Fees........................................................ 400,000
SEC Filing Fees................................................... 7,150
Printing Costs.................................................... 50,000
Solicitation Costs................................................ 40,000
Miscellaneous..................................................... 100,000
---------
Total....................................................... $ 747,150
---------
---------
</TABLE>
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THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement, a
copy of which is attached hereto as Appendix A and incorporated by reference
herein. All references to and summaries of the Merger Agreement in this Proxy
Statement are qualified in their entirety by reference to the Merger Agreement.
Stockholders are urged to read the Merger Agreement carefully and in its
entirety.
EFFECTIVE TIME
After the satisfaction or waiver of all the conditions set forth in the
Merger Agreement, a certificate of merger (the "Certificate of Merger") will be
filed with the Secretary of State of the State of Delaware. The Effective Time
of the Merger will be at such date and time as is provided in the Certificate of
Merger. The Company currently expects the Effective Time to occur in the first
week of January 1997.
THE MERGER
The Merger Agreement provides that, subject to the approval and adoption of
the Merger Agreement by (i) a majority of the outstanding shares of Common Stock
and also (ii) a majority of the Common Stock held by the Common Stockholders (as
defined on the cover page), and compliance with certain other covenants and
conditions, the Company will be merged with and into the Surviving Corp., at
which time the separate corporate existence of the Company will terminate. As a
result of the Merger, all the property, rights, privileges, powers and
franchises of the Company will vest in the Surviving Corp., and all debts,
liabilities and duties of the Company will become the debts, liabilities and
duties of the Surviving Corp.
CONVERSION OF COMMON STOCK. At the Effective Time, each share of Common
Stock (other than shares held in the Company's treasury or held directly or
indirectly by the Company, L-P or their respective subsidiaries) will be
converted into the right to receive $5.25 per share in cash, without interest
thereon, upon surrender of the certificates representing shares of Common Stock,
except for dissenting shares pursuant to the DGCL.
CONVERSION OF SERIES E STOCK. At the Effective Time, each share of Series E
Stock (other than shares held in the Company's treasury or held directly or
indirectly by the Company, L-P or their respective subsidiaries) will be
converted into the right to receive restricted L-P Common Stock on the basis of
0.1875 L-P shares for each share of Series E Stock, subject to certain
restrictions, rights and possible adjustments. At the Effective Time, the number
of shares of L-P Common Stock to be issued on conversion of the Series E Stock
will be adjusted upward (but not downward) to account for changes in the market
price of the L-P Common Stock prior to the Effective Time. All such additional
shares of L-P Common Stock ("Escrow Shares") will be held in escrow pending
release to the holders or return to L-P as described below. The receipt of an
opinion by the Series E Stockholders from Ernst & Young LLP and by L-P from
Price Waterhouse LLP that the Merger should qualify as a reorganization under
Section 368(a) of the Code is a condition to the closing of the Merger. See
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES." Following the Effective Time, in the
event the average closing price per share for L-P Common Stock on the New York
Stock Exchange (or if not traded on the New York Stock Exchange, on the
principal exchange on which L-P stock is so traded) as reported in THE WALL
STREET JOURNAL for a period of five consecutive trading days (the "Average
Trading Price") is at least $28 per share at any time after the Effective Time
and prior to March 1, 1998, then there shall be no adjustment in the number of
shares into which each share of Series E Stock shall be converted, and the
Escrow Shares shall be canceled and returned to L-P. In the event the highest
Average Trading Price for all five consecutive trading day periods after the
Effective Time and prior to March 1, 1998, shall be less than $28 per share,
then the number of shares of L-P Common Stock to be issued in exchange for each
share of Series E Stock, shall be adjusted to be equal to the quotient (rounded
to four decimal places) obtained by dividing (i) $5.25 by (ii) the greater of
(x) $19 or (y) the Average Trading Price for the five trading days immediately
preceding
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March 1, 1998 and the appropriate number of Escrow Shares to provide for such
adjustment shall be released to the respective holders thereof, with any
remaining balance of Escrow Shares being canceled and returned to L-P. In the
event that the total number of Escrow Shares are not sufficient to satisfy such
adjustment, L-P shall as promptly as practicable, subject to the provisions of
the Merger Agreement requiring cash to be paid in lieu of fractional shares of
L-P Common Stock, issue to each former holder of shares of Series E Stock who
has theretofore duly surrendered their Series E Stock Certificates, a
certificate representing the additional whole number of shares of L-P Common
Stock (and cash in lieu of any fractional share) necessary to cause the total
number of shares of L-P Common Stock to be equal to the amount the holder would
have received if the adjusted exchange ratio had been known at the Effective
Time. The right to receive any such additional shares (and cash in lieu of
fractional shares) is not transferable, other than by operation of law
(including transfer by will, or the laws of descent and distribution). Former
holders of Series E Stock will not be entitled to receive any dividend or
distribution in respect of any additional shares issued pursuant to this
adjustment for which the record or payment date is prior to March 1, 1998, or
any interest or other amount in respect of such dividends and distributions. The
holders of the Escrow Shares will waive their right to receive any cash
dividends payable on the Escrow Shares, and any stock or other extraordinary
dividends payable on the Escrow Shares will be placed in escrow, subject to
release or cancellation and return to L-P on the same terms and conditions as
the Escrow Shares. In addition, L-P has agreed to register the shares of L-P
Common Stock received by the holders of the Series E Stock for resale, or,
alternatively, to repurchase such shares at their then fair market value upon
demand. Each holder of Series E Stock will agree not to sell or demand
repurchase of such shares for a period of two years following closing of the
Merger in the absence of changed personal circumstances. In the event that the
Average Trading Price of L-P Common Stock shall decline by 15% or more and below
$19 per share between the Effective Time and March 1, 1998, the former holders
of the Series E Stock will be able to sell or require the repurchase of their
shares of L-P Common Stock while retaining the conversion price adjustment set
forth above. In all other circumstances, a Series E Stockholder who sells his
L-P Common Stock prior to March 1, 1998 will lose the benefit of the conversion
price adjustment.
OTHER PREFERRED STOCK. If any shares of the Company's Series B Preferred
Stock, $0.01 par value ("Series B Stock"), remain issued and outstanding at the
Effective Time, each such share shall, in accordance with an agreement with the
sole holder of Series B Stock, be converted into the right to receive its
pro-rata share of the sum of $200,000, inclusive of all accrued but unpaid
dividends. In addition, if any shares of any series of the Company's preferred
stock, other than Series B Stock or Series E Stock remain issued and outstanding
at the Effective Time, each such share will be converted as if it were a share
of the Company's Common Stock as described above.
PUBLIC WARRANTS. At the Effective Time, each outstanding Redeemable Common
Stock Purchase Warrant of the Company will, in accordance with its terms, be
converted into the right to receive upon exercise of the warrant and payment of
the $6.50 per share exercise price specified therein, or for the 60-day period
immediately following the Effective Time, $4.95 per share, an amount of cash
equal to $5.25 multiplied by the number of shares of the Company's Common Stock
represented by such warrant.
OTHER WARRANTS. At or prior to the Effective Time: (a) Each outstanding
Representative's Warrant dated July 28, 1994, will be canceled without payment
of additional consideration to the holders thereof, (b) each outstanding warrant
issued to H. J. Meyers & Co., Inc., in January and February 1996, shall, in
accordance with its terms, be converted into a warrant to receive, upon exercise
thereof, and payment of the $3 per share exercise price, an amount equal to
$5.25 multiplied by the number of shares of Common Stock represented by the
warrant, and (c) all options (other than those described under "Employee Stock
Options") will be canceled and the holders thereof will be entitled to receive
an amount of cash equal to the product of: (i) the number of shares as to which
such option was exercisable immediately prior to the Effective Time, multiplied
by (ii) the difference between $5.25 and the per share exercise price of such
option.
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EMPLOYEE STOCK OPTIONS. Upon vesting in accordance with their existing
terms, at the Effective Time outstanding employee stock options to purchase
approximately 224,032 shares of the Company's Common Stock held by middle
management and plant employees will be converted into the right to receive, upon
exercise, a cash amount (net of required withholding) equal to the product of
the number of shares subject to such option and the difference between $5.25 and
the per share exercise price of the option, provided that the option would then
be exercisable if the Merger had not occurred. A further 141,000 vested options
held by members of senior management and directors will be treated the same,
while 79,000 unvested options held by such members of senior management and
directors will be canceled.
DIRECTORS AND OFFICERS; GOVERNING DOCUMENTS. From and after the Effective
Time, the directors of the Surviving Corp. will remain the directors of the
Surviving Corp. until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be. The
officers of the Company will become the equivalent officers of Surviving Corp.,
serving at the pleasure of its Board of Directors. At the Effective Time, the
Certificate of Incorporation and the Bylaws of the Surviving Corp., as in effect
immediately prior to the Effective Time, will be the Certificate of
Incorporation and the Bylaws of Surviving Corp. until thereafter changed or
amended as provided therein or by applicable law, except that the name of
Surviving Corp. shall be changed to "GreenStone Industries, Inc.".
SURRENDER OF STOCK CERTIFICATES; PAYMENT FOR SHARES.
COMMON STOCKHOLDERS. L-P has designated American Stock Transfer & Trust
Company to act as Exchange Agent for the payment of the consideration to be
received by Common Stockholders in the Merger upon surrender of certificates
representing shares of Common Stock, and at or prior to the Effective Time, L-P
will make available to the Exchange Agent certificates representing shares of
L-P Common Stock and cash in amounts and at the times necessary for the payment
of the consideration to be received by Common Stockholders in the Merger. As
soon as practicable after the Effective Time, and in no event later than ten
business days after receipt from the Company or its transfer agent of a list of
stockholders of record as of the Effective Time, the Exchange Agent will mail to
each holder of record (other than holders of dissenting shares) (i) a letter of
transmittal and (ii) instructions for the surrender of certificates representing
ownership of shares of Common Stock ("Certificates") in exchange for $5.25 per
share in cash. Upon proper surrender of a Certificate for exchange and
cancellation to the Exchange Agent, together with such properly completed letter
of transmittal, duly executed, the holder of such Certificate will be entitled
to receive in exchange therefor the amount of cash into which the shares
theretofore represented by such Certificate have been converted pursuant to the
Merger Agreement, and the Certificate so surrendered will forthwith be canceled.
No interest will be paid or accrued on any cash and unpaid dividends and
distributions payable to the holders of Certificates. If payment is to be made
to a person other than the person in whose name a surrendered Certificate is
registered, it will be a condition to such payment that the Certificate so
surrendered be properly endorsed or otherwise be in proper form for transfer,
and that the person requesting such payment pay any transfer or other taxes
which may be required by reason of such payment to a person other than the
registered holder of the surrendered Certificate, or establishes to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. After the Effective Time, each Certificate will represent only the
right to receive upon surrender to the Exchange Agent the amount of cash,
without interest, into which the shares theretofore represented by such
Certificate have been converted pursuant to the Merger Agreement, determined as
of the Effective Time. The right of any stockholder to receive $5.25 per share
in cash will be subject to and reduced by the amount of any required tax
withholding obligation.
SERIES E STOCKHOLDERS. As soon as practicable after the Effective Time, and
in no event later than ten business days after receipt from the Company or its
transfer agent of a list of holders of the Series E Stock as of the Effective
Time, L-P will mail to each holder of Series E Stock a letter of transmittal
with instructions for use in effecting the surrender of the certificates
representing shares of Series E Stock (the
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"Series E Stock Certificates") in exchange for certificates representing L-P
common stock and a cash payment in lieu of fractional shares. Upon proper
surrender of a Series E Stock Certificate for exchange and cancellation to the
Exchange Agent, together with such properly completed letter of transmittal,
duly executed, the holder of such Series E Stock Certificate shall be entitled
to receive in exchange therefor, a certificate representing that number of whole
shares of L-P Common Stock into which the shares of Series E Stock theretofore
represented by the Series E Stock Certificate so surrendered shall have been
converted excluding any Escrow Shares, and a check representing the amount of
cash in lieu of fractional shares, if any, that such holder has the right to
receive. No interest will be paid or accrued on any cash and unpaid dividends
and distributions payable to the holders of the Series E Stock Certificates. No
dividends or other distributions declared as of a record date after the
Effective Time with respect to L-P Common Stock shall be paid to the holder of
any unsurrendered Series E Stock Certificate until the holder thereof shall
surrender such Series E Stock Certificate. After proper surrender of a Series E
Stock Certificate, the record holder thereof shall be entitled to receive any
such dividends and other distributions, without any interest thereon, that
theretofore had become payable with respect to shares of L-P Common Stock
represented by such Series E Stock Certificate. If any certificate representing
shares of L-P Common Stock is to be issued in a name other than that in which
the Series E Stock Certificate surrendered in exchange therefor is registered,
it shall be a condition of the issuance thereof that the Series E Stock
Certificate so surrendered shall be properly endorsed (or accompanied by an
appropriate instrument of transfer) and otherwise in proper form for transfer
and that the person requesting such exchange shall pay to the Exchange Agent in
advance any transfer or other taxes required by reason of the issuance of a
certificate representing shares of L-P Common Stock in any name other than that
of the registered holder of the Series E Stock surrendered, or required for any
other reason, or shall establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable.
AFFILIATES. No certificate representing L-P Common Stock shall be delivered
to a person who is an affiliate of the Company, for purposes of Rule 145 of the
Securities Act, unless such affiliate has theretofore executed and delivered to
L-P a written affiliate's resale agreement, in a form approved by L-P.
UNCLAIMED EXCHANGE FUND. Any portion of the certificates representing
shares of L-P Common Stock and cash deposited with the Exchange Agent (the
"Exchange Fund") that remains unclaimed by the stockholders of the Company for
twelve months after the Effective Time shall be paid to Surviving Corp.
Thereafter, former stockholders of the Company shall look only to Surviving
Corp. for payment of the consideration that such stockholder is entitled to
receive pursuant to the Merger Agreement, without interest, and any such
unclaimed funds shall be subject to state escheat laws.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain representations and warranties of the
Company and certain limited representations and warranties made personally by
those executives and directors of the Company who will receive L-P Common Stock
in exchange for Series E Stock, including representations and warranties as to
the Company and its subsidiaries regarding among other matters: their due
organization and valid existence, authority to conduct business and own and
lease assets and properties; being duly licensed or qualified to do business;
the Company's subsidiaries; capitalization; the authority to execute and deliver
the Merger Agreement and, subject to receipt of the requisite stockholder
approval, to consummate the transactions contemplated therein; due and valid
execution of the Merger Agreement; enforceability of the Merger Agreement;
required governmental and third-party consents and approvals; the accuracy of
financial statements; the absence of brokers or finders; the status of accounts
receivable and inventories; the absence of certain changes in operations and
results since June 29, 1996; the absence of undisclosed material liabilities;
the absence of material litigation; material compliance with applicable laws
(including requirements regarding filing reports and returns, licenses and
similar permits and similar approvals and Hazardous Substances (as defined in
the Merger Agreement)); title to and condition of material assets; delivery of
copies of insurance policies; delivery of copies of lease agreements; the
absence
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of certain specified types of contracts, commitments and defaults; certain
matters relating to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and other employee benefit matters; disclosure of employment
compensation; intellectual property rights; status of significant customers and
suppliers; tax matters; bank information; disclosure of the name of each person
holding a power of attorney from the Company or its subsidiaries, and a summary
of the terms thereof; the absence of material adverse conditions; and material
completeness of all disclosure.
The Merger Agreement also includes certain representations and warranties by
L-P, including representations and warranties as to L-P and Surviving Corp.
regarding: due organization and valid existence; authority to conduct business
and own, lease and operate assets and properties; being duly licensed or
qualified to do business; capitalization; authority to execute and deliver the
Merger Agreement and consummate the transactions contemplated therein; due and
valid execution of the Merger Agreement and enforceability of the Merger
Agreement; the absence of certain specified types of violations, conflicts and
breaches in connection with the Merger Agreement; governmental and third party
consents and approvals; the accuracy of financial statements; the absence of
brokers or finders; L-P's financial ability to pay the merger consideration to
the Common Stockholders of the Company; and material completeness of all
disclosure.
CONDUCT OF THE BUSINESS PENDING THE MERGER
During the period from the date of the Merger Agreement, to the Effective
Time, the Company has agreed as to itself and its subsidiaries that, except as
expressly contemplated or permitted by the Merger Agreement or as consented to
in writing by L-P, the Company shall, and shall cause its subsidiaries to, (i)
conduct its business in all material respects in the usual, regular and ordinary
course consistent with past practice, (ii) use reasonable best efforts to
maintain and preserve intact its business organization, employees and
advantageous business relationships and retain the services of its officers and
key employees and (iii) take no action that would adversely affect or delay the
ability of the Company or L-P to obtain any necessary approvals of any
governmental entity required for the transactions contemplated by the Merger
Agreement, or to perform its covenants and agreements under the Merger
Agreement. Except as expressly contemplated or permitted by the Merger Agreement
or as consented to in writing by L-P, the Company also has agreed that during
such period it will not, nor will it permit any of its subsidiaries to: (a)
other than borrowings under its usual credit line in the ordinary course of
business consistent with past practice, incur any indebtedness for borrowed
money, assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other individual, corporation or other
entity, or make any loan or advance; (b) adjust, split, combine or reclassify
any capital stock; make, declare or pay any dividend or make any other
distribution on, or directly or indirectly redeem, purchase or otherwise
acquire, any shares of its capital stock or any securities or obligations,
convertible into or exchangeable for any shares of its capital stock, or grant
or issue any stock appreciation rights or grant or issue to any individual,
corporation or other entity any right to acquire any shares of its capital stock
except for dividends paid by any of its wholly owned subsidiaries or any of
their wholly owned subsidiaries; or issue any additional shares of capital stock
or securities or obligations except pursuant to (A) the exercise of stock
options or warrants outstanding as of the date of the Merger Agreement, (B) the
exercise of rights of conversion of outstanding shares of preferred stock, and
(C) the issuance of Series E Stock as contemplated by the Merger Agreement; (c)
sell, transfer, mortgage, encumber or otherwise dispose of any of its properties
or assets to any individual, corporation or other entity other than a direct or
indirect wholly owned subsidiary, except sales of inventory in the ordinary
course of business consistent with past practice or pursuant to contracts or
agreements in force at the date of the Merger Agreement (other than sales of
paper recycling bins) or cancel, release or assign any indebtedness to any such
person or any claims held by any such person; (d) except for transactions in the
ordinary course of business consistent with past practice, make any material
investment either by purchase of stock or securities, contributions to capital,
property transfers, or purchase of any property or assets of any other
individual, corporation or other entity other than a wholly owned subsidiary
thereof; (e) enter into any contract or agreement that involves
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an amount in excess of $50,000 or that will have a term in excess of 180 days or
terminate or materially modify any contract or agreement that involves an amount
in excess of $50,000 or that has a remaining term in excess of 180 days, or
commit to any capital expenditure, or make any capital expenditure not committed
to prior to the date of the Merger Agreement, in excess of $50,000; (f) increase
in any manner the compensation or fringe benefits of any of its employees other
than regularly scheduled increases for non-managerial employees in the ordinary
course of business consistent with past practice or pay any pension or
retirement allowance not required by any existing plan or agreement to any such
employees or become a party to, amend or commit itself to any pension,
retirement, profit-sharing or welfare benefit plan or agreement or employment
agreement with or for the benefit of any employee other than amendments required
to comply with applicable legal requirements or accelerate the vesting of any
stock options or other stock-based compensation; (g) solicit, encourage or
authorize any individual, corporation or other entity to solicit from any third
party any inquiries or proposals relating to the disposition of its business or
assets, or the acquisition of its voting securities, or the merger of it or any
of its subsidiaries with any corporation or other entity other than as provided
by the Merger Agreement (and the Company must notify L-P of the relevant details
of any inquiries or proposals it receives relating to such matters) or unless
the Company shall have determined based upon the written advice of counsel that
fiduciary duties under applicable law require otherwise, participate in any
negotiations concerning or otherwise facilitate any such transaction; (h) settle
any claim, action or proceeding involving material money damages, except in the
ordinary course of business consistent with past practice; (i) take any action
that would prevent or impede the Merger from qualifying as a reorganization
within the meaning of Section 368 of the Code; (j) amend its certificate of
incorporation or its bylaws; (k) take any action that is intended or may
reasonably be expected to result in any of its representations and warranties
set forth in the Merger Agreement being or becoming untrue in any material
respect at any time prior to the Effective Time, or in any of the conditions to
the Merger not being satisfied or in a violation of any provision of the Merger
Agreement, except, in every case, as may be required by applicable law; or (l)
agree to, or make any commitment to, take any of the actions prohibited in this
paragraph.
During the period from the date of the Merger Agreement, to the Effective
Time, except as expressly contemplated or permitted by the Merger Agreement, L-P
has agreed that without the prior written consent of the Company it will not:
(a) take any action that would prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code; (b) take any
action that is intended or may reasonably be expected to result in any of its
representations and warranties set forth in the Merger Agreement being or
becoming untrue in any material respect at any time prior to the Effective Time,
or in any of the conditions of the Merger not being satisfied or in a violation
of any provision of the Merger Agreement, except, in every case, as may be
required by applicable law; (c) take any action that would adversely affect or
delay its ability to obtain any necessary approvals of any governmental entity
or other governmental authority required for the transactions contemplated
hereby or to perform its covenants and agreements under the Merger Agreement; or
(d) agree to, or make any commitment to, take any of the actions prohibited in
this paragraph.
OTHER AGREEMENTS OF THE COMPANY, L-P AND SURVIVING CORP.
Pursuant to the Merger Agreement, the parties have agreed to the following
additional terms:
REGULATORY MATTERS.
(a) The Company shall promptly prepare and file this Proxy Statement with
the Securities and Exchange Commission after consultation and cooperation with
L-P. The parties shall take reasonable actions to obtain an exemption from
registration under the Securities Act of 1933, as amended ("Securities Act") for
the issuance of L-P Common Stock in the Merger. L-P shall also use all
reasonable efforts to obtain all necessary state securities law or "Blue Sky"
permits and approvals required to carry out the transactions contemplated by the
Merger Agreement, and the Company shall furnish all information
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concerning the Company and the holders of the Company's capital stock as may be
reasonably requested in connection with any such action.
(b) The parties shall cooperate with each other and use their reasonable
best efforts to promptly prepare and file all necessary documentation, to effect
all applications, notices, petitions and filings, to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties and governmental entities which are necessary or advisable to consummate
the transactions contemplated by the Merger Agreement (including, without
limitation, the Merger), and to comply with the terms and conditions of all such
permits, consents, approvals and authorizations of all such governmental
entities. The parties shall have the right to review in advance and, to the
extent practicable, each will consult the other on (in each case, subject to
applicable laws regarding the exchange of information) all information relating
to L-P or the Company, as applicable, and their respective subsidiaries, that
appears in regulatory and other third party filings and submissions in
connection with the Merger Agreement. In addition, the parties shall consult
with each other regarding obtaining permits, consents, approvals and
authorizations that are necessary or advisable and will keep each other apprised
of the status of the completion of transactions contemplated in the Merger
Agreement.
(c) The parties shall, upon request, furnish each other with all information
concerning themselves, their subsidiaries, directors, officers and stockholders
and such other matters as may be reasonably necessary or advisable in connection
with this Proxy Statement or any other statement, filing, notice or application.
(d) The parties shall promptly advise each other upon receiving any
communication from any governmental entity whose consent or approval is required
for consummation of the transactions contemplated by the Merger Agreement which
causes such party to believe that there is a reasonable likelihood that any
requisite regulatory approval will not be obtained or that the receipt of any
such approval will be materially delayed.
ACCESS TO INFORMATION.
(a) Upon reasonable notice and subject to applicable laws relating to the
exchange of information, each party shall, and shall cause each of its
subsidiaries to, afford to the officers, employees, accountants, counsel and
other representatives of the other, access, prior to the Effective Time, to all
its properties, books, contracts, commitments and records. In addition, during
such period, each party shall cause its respective subsidiaries to make
available to the other a copy of each report, schedule, registration statement
and other document filed or received by it during such period pursuant to the
requirements of federal securities laws and all other information concerning its
business, prospects and personnel as such party may reasonably request.
(b) Each party shall hold all information furnished by the other and its
subsidiaries in confidence.
STOCKHOLDER APPROVAL. The Company shall call a meeting of its stockholders
to be held as soon as practical for the purpose of voting on approval of the
Merger Agreement. Subject to applicable fiduciary requirements, the Company's
Board of Directors shall recommend such approval to its stockholders and shall
use reasonable efforts to solicit such approval.
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LEGAL CONDITIONS TO MERGER. L-P and the Company shall, and shall cause its
respective subsidiaries to, use reasonable best efforts (a) to comply with all
applicable legal requirements with respect to the Merger and, subject to the
conditions set forth in the Merger Agreement, to consummate the transactions
contemplated in the Merger Agreement, (b) to obtain, and cooperate with the
other in obtaining, required governmental and other third party consents,
approvals, orders, authorizations, and exemptions required in connection with
the Merger and the other transactions contemplated in the Merger Agreement, and
(c) to cause the conditions to the consummation of the Merger to be satisfied.
STOCK EXCHANGE LISTING OF SHARES. L-P shall use its best efforts to cause
the shares of L-P Common Stock to be issued in the Merger to be approved for
listing on the New York Stock Exchange, subject to official notice of issuance,
prior to the Effective Time.
INDEMNIFICATION
The Merger Agreement provides that in the event of any threatened or actual
claim, action, suit, proceeding or investigation, whether civil, criminal or
administrative, including without limitation, in which any person who at the
date of the Merger Agreement is, or at any prior time has been, or who becomes
prior to the Effective Time, a director or officer of the Company or any of its
subsidiaries (the "Indemnified Parties") is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was a director or officer of the
Company or its subsidiaries, or any of their respective predecessors or (ii) the
Merger Agreement or the transactions contemplated thereby, whether in any case
asserted or arising before or after the Effective Time, the parties will
cooperate and use their best efforts to defend against and respond thereto.
After the Effective Time, L-P shall cause Surviving Corp. to indemnify and hold
harmless, as and to the fullest extent permitted by law, each such Indemnified
Party against any losses, claims, damages, costs, expenses (including reasonable
attorney's fees and expenses in advance of the final disposition of any claim,
suit, proceeding or investigation to each Indemnified Party to the fullest
extent permitted by law upon receipt of any undertaking required by applicable
law), judgments, fines and amounts paid in settlement in connection with any
such threatened or actual claim, action, suit proceeding or investigation and in
the event of any such threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the Effective Time),
the Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with Surviving Corp.; provided, however, that (1) Surviving Corp.
shall have the right to assume the defense thereof and upon such assumption
Surviving Corp. shall not be liable to any Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by any
Indemnified Party in connection with the defense thereof, except that if
Surviving Corp. elects not to assume such defense or counsel for the Indemnified
Parties reasonably advises the Indemnified Parties that there are issues which
raise conflicts of interest between Surviving Corp. and the Indemnified Parties,
the Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with Surviving Corp., and Surviving Corp. shall pay the reasonable
fees and expenses of such counsel for the Indemnified Parties, (2) Surviving
Corp. shall be obligated to pay for only one firm of counsel for all Indemnified
Parties, unless an Indemnified Party shall have reasonably concluded, based on
the advice of counsel, that in order to be adequately represented, separate
counsel is necessary for such Indemnified Party, in which case, Surviving Corp.
shall be obligated to pay for such separate counsel, (3) Surviving Corp. shall
not be liable for any settlement effected without its prior written consent
(which consent shall not be unreasonably withheld) and (4) Surviving Corp. shall
have no obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final and nonappealable, that indemnification of such Indemnified
Party in the manner contemplated hereby is prohibited by applicable law. Any
Indemnified Party wishing to claim Indemnification, upon learning of any such
claim, action, suit, proceeding or investigation, shall notify Surviving Corp.
thereof, provided that the failure to notify shall not affect the obligations of
Surviving Corp. except to the extent such failure to notify materially
prejudices Surviving Corp. Surviving Corp.'s obligations will continue in full
force and effect for a period of six (6) years from the Effective
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Time; provided, however, that all rights to indemnification in respect of any
claim asserted or made within such period shall continue until the final
disposition of such claim and provided further that Surviving Corp. shall have
the right of set-off against any payments required to be made by Surviving Corp.
to an Indemnified Party to the extent that such Indemnified Party shall have
received the indemnification to which such Indemnified Party is entitled from an
insurer under a directors' and officers' liability insurance policy maintained
by the Company or Surviving Corp. or L-P.
CONDITIONS TO THE MERGER
ALL PARTIES. Pursuant to the Merger Agreement, the respective obligations
of each party to effect the Merger are subject to the satisfaction of the
following conditions prior to the Closing Date: (a) approval and adoption of the
Merger Agreement and the transactions contemplated therein by the holders of at
least a majority of the Company's Common Stock and by the holders of at least a
majority of the Company's outstanding shares held by the Common Stockholders;
(b) the shares of L-P Common Stock that shall be issued to the Series E
Stockholders of the Company upon consummation of the Merger shall have been
authorized for listing on the New York Stock Exchange subject to official notice
of issuance; (c) all regulatory approvals required to consummate the
transactions contemplated by the Merger Agreement shall have been obtained
without the imposition of any conditions that are in L-P's reasonable judgment
unduly burdensome and shall remain in full force and effect and all statutory
waiting periods shall have expired, and all other material consents or approvals
of any third party required in connection with the consummation of the Merger
shall have been obtained; (d) no order, injunction or decree issued by any court
or agency of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger or any of the other transactions
contemplated in the Merger Agreement being in effect and no statute, rule,
order, injunction, or decree shall be enacted, entered, promulgated or enforced
by any governmental entity which prohibits, restricts, or makes illegal the
consummation of the Merger; (e) each member of the Company's senior management
shall have exchanged all shares of the Company's capital stock held by such
stockholder for an equivalent number of shares of Series E Stock, the Company,
L-P and each such stockholder shall have executed a Series E Preferred Stock
Agreement respecting registration and resale of such L-P Common Stock; each such
stockholder shall have completed a required questionnaire and no material
default shall exist under the Series E Preferred Stock Agreement; (f) Messrs.
Oganesoff, Tranmer, Collison, Bernardi and Gerber shall have executed the
employment agreements and covenants not to compete described under "INTERESTS OF
CERTAIN PERSONS IN THE TRANSACTION--Employment and Compensation Arrangements;"
(g) each outstanding warrant to purchase shares of the Company's Common Stock
issued pursuant to a Warrant Agreement dated July 20, 1994, shall be converted
into a warrant to receive, upon exercise of the warrant and payment of the $6.50
per share price specified therein (or, for the 60 day period immediately
following the Effective Time, $4.95), an amount in cash equal to $5.25
multiplied by the number of shares of the Company's Common Stock represented by
such warrant; (h) each outstanding Representative's Warrant dated July 28, 1994,
shall be canceled without payment of additonal consideration to the holders
thereof; (i) each outstanding option to purchase shares of the Company's Common
Stock under the GreenStone 1993 Amended and Restated Stock Option Plan shall, in
accordance with the terms thereof, terminate, and the holders of such options
shall have no further right to receive shares of the Company's Common Stock or
any other security; provided, however, that after the Effective Time each holder
of such option identified on a list delivered by L-P to the Company shall be
entitled, upon giving notice to the Surviving Corp. of exercise of such option
to the extent it would then be exercisable in accordance with its terms if the
Merger had not occurred (employment by L-P and its subsidiaries after the
Effective Time being treated as employment by the Company for purposes of
determining eligiblity) and without other consideration, an amount in cash, net
of any required withholding, equal to the product of (x) the number of shares
for which such option would then be so exercisable, multiplied by (y) the
difference between $5.25 and the per share exercise price of such option; (j)
each outstanding option represented by a Performance Stock Option Certificate
shall be canceled without payment of addtional consideration to the holder
thereof; (k) all required action
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shall have been taken for each outstanding option referred to in clauses (i) and
(j) above, to be treated in the same manner as options under the 1993 Amended
and Restated Stock Option Plan; (l) each Warrant issued to H. J. Meyers & Co.,
Inc. in January and February 1996, shall, in accordance with its terms, be
converted into a warrant to receive upon the exercise thereof and payment of the
$3 per share exercise price, an amount of cash equal to $5.25 multiplied by the
number of shares of Common Stock represented by such warrant and (m) all
outstanding convertible debt shall have been prepaid in full in accordance with
its terms without premium.
L-P. Pursuant to the Merger Agreement, the obligations of L-P and Surviving
Corp. to effect the Merger are subject to the satisfaction or waiver of the
following conditions: (a) the representations and warranties of the Company set
forth in the Merger Agreement being true and correct in all material respects as
of the date of the Merger Agreement and (except as such representations and
warranties speak as of an earlier date) as of the Closing Date, as though made
on and as of the Closing Date, and L-P shall have received a certificate signed
on behalf of the Company by certain specified officers as to the foregoing
effect and a certificate signed by each holder of Series E Stock who is an
officer or director of the Company with respect to such individual's knowledge
of the accuracy of the Company's representations and warranties and undertaking
personal liability for known inaccuracies to the extent of 15% of the
consideration received by the individual; (b) the Company shall have performed
in all material respects all obligations required to be performed by it under
the Merger Agreement or prior to the Closing Date, and L-P shall have received a
certificate signed on behalf of the Company by specified officers to such
effect; (c) L-P shall have received an opinion of Miller, Nash, Wiener, Hager &
Carlsen LLP, counsel to L-P to the effect that issuance of shares of L-P Common
Stock in the Merger does not require registration under the Securities Act; and
(d) L-P shall have received an opinion from Price Waterhouse LLP, dated as of
the Effective Time, to the effect that the Merger should be treated as a
Reorganization under Section 368(a) of the Code.
THE COMPANY. Pursuant to the Merger Agreement, the obligations of the
Company to effect the Merger are subject to the satisfaction or waiver by the
Company of the following conditions: (a) the representations and warranties of
L-P set forth in the Merger Agreement being true and correct in all material
respects as of the date of the Merger Agreement and (except as such
representations and warranties speak as of an earlier date) as of the Closing
Date, as though made on and as of the Closing Date, and the Company shall have
received a certificate signed on behalf of L-P by an executive officer of L-P to
the foregoing effect; (b) L-P shall have performed in all material respects all
obligations required to be performed by it under the Merger Agreement or prior
to the Closing Date, and the Company shall have received a certificate signed on
behalf of L-P by an executive officer of L-P to the foregoing effect; and (c)
the holders of Series E Stock shall have received an opinion from Ernst & Young
LLP, dated as of the Effective Time, to the effect that the Merger should be
treated as a Reorganization under Section 368(a) of the Code.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after the approval of the Merger Agreement by the
stockholders: (a) by mutual consent of L-P and the Company, in a written
instrument if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board; (b) by either the Board of
Directors of L-P or the Board of Directors of the Company (i) if any
governmental entity which must grant a requisite regulatory approval has denied
approval of the Merger and such denial has become final and nonappealable or
(ii) any governmental entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the consummation of the
transactions contemplated by the Merger Agreement; (c) by any party if the
Merger shall not have been consummated on or before March 31, 1997, unless the
failure of the Closing to occur by such date shall be due to the breach by the
party seeking to terminate the Merger Agreement of any representation, warranty,
covenant, or other agreement of such party set forth in the
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Merger Agreement; (d) by either the Board of Directors of L-P or the Board of
Directors of the Company (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other agreement
contained in the Merger Agreement) if there shall have been a material breach of
any of the covenants or agreements or any of the representations or warranties
set forth in the Merger Agreement on the part of the other party, which breach
is not cured within forty-five (45) days following written notice to the party
committing such breach, or which breach, by its nature, cannot be cured prior to
the Closing; or (e) by either L-P or the Company if any approval of the
stockholders required for the consummation of the Merger shall not have been
obtained by reason of the failure to obtain the required vote at a duly held
meeting of stockholders or at any adjournment or postponement thereof.
EXPENSES
The Merger Agreement provides that whether or not the Merger is consummated
all costs and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby will be paid by the party incurring such
expenses. See "BREAKUP FEES" regarding termination fees payable by the Company
in certain circumstances.
AMENDMENT; EXTENSION; WAIVER
The Merger Agreement provides that subject to compliance with applicable
law, it may be amended by written instrument signed on behalf of each of the
Company, L-P and Surviving Corp. pursuant to action taken or authorized by their
respective Boards of Directors at any time before or after stockholder approval
of the Merger Agreement, but after any such approval, no amendment may be made
without further approval by such stockholders that reduces the amount or changes
the form of the consideration to be delivered to the Company's stockholders,
other than as contemplated by the Merger Agreement.
At any time prior to the Effective Time, L-P and the Company, by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, pursuant to a written document signed by the waiving party or
the extending party, (a) extend the time for the performance of any of the
obligations or other acts of the other parties to the Merger Agreement, (b)
waive any inaccuracies in the representations and warranties in the Merger
Agreement or any document delivered pursuant thereto and (c) waive compliance
with any of the agreements or conditions contained in the Merger Agreement;
provided, however, that after any approval of the Merger Agreement by the
Company's stockholders, no such extension or waiver may be made without the
further approval by such stockholders that reduces or changes the form of
consideration to be delivered to the Company's stockholders, other than as
contemplated by the Merger Agreement.
BREAKUP FEES
In order to induce L-P to enter into the Merger Agreement and take actions
in furtherance of the transactions contemplated thereby, pursuant to a separate
agreement ("Termination Fee Agreement"), the Company has agreed to pay L-P a
cash fee of $250,000 if (a) the Merger Agreement is terminated pursuant to
Article VIII thereof, and (b) a "First Trigger Event" (as defined in the
Termination Fee Agreement) has occurred prior to or concurrently with such
termination; provided that such fee is not payable if a "Nullifying Event" (as
defined in the Termination Fee Agreement) has occurred and is continuing at the
time the Merger Agreement is terminated. In addition, unless a Nullifying Event
has occurred and is continuing at the time the Merger Agreement is terminated,
the Company has agreed to pay L-P an additional cash fee of $500,000 less any
amount paid by the Company as described in the preceding sentence, in the event
that (i) the Merger Agreement has been terminated pursuant to Article VIII
thereof, (ii) prior to or concurrently with such termination a First Trigger
Event has occurred and (iii) prior to, concurrently with, or within 18 months,
after such termination an "Acquisition Event" (as defined in the Termination Fee
Agreement) has occurred.
40
<PAGE>
For purposes of the Termination Fee Agreement, a "Nullifying Event" will be
deemed to occur if (a) L-P is in breach of the Merger Agreement such that the
Company may elect to terminate the Merger Agreement pursuant to Section 8.1(d)
thereof (without reference to any grace period provided therein), or (b) L-P's
Board of Directors has withdrawn or modified its approval of the Merger
Agreement in a manner adverse to the Company (or has resolved or publicly
announced its intention to do so); provided, however, in either case, that the
Company is not in breach of the Merger Agreement at the time such event occurs.
In general, a "First Trigger Event" will be deemed to occur in conection with
specified types of publicly announced proposals, regulatory applications or
notices (whether in draft or final form), agreements or understandings,
disclosures of intent to make a proposal or amendment of any of the foregoing
made or filed on or after the date of the Merger Agreement related to specified
types of acquisition transactions with respect to the Company or any significant
subsidiary thereof (as defined in the Termination Fee Agreement) by a party
other than L-P or its subsidiaries (each an "Acquisition Proposal"), including
certain mergers and similar transactions, the purchase, lease or other
acquisition of all or substantially all the assets of the Company or a
significant subsidiary, or any acquisition of securities of the Company or a
significant subsidiary representing at least 20 percent of the voting power of
the Company or such subsidiary. A First Trigger Event will occur if (i)
following any Acquisition Proposal, the Company's Board of Directors shall have
failed to approve or recommend the Merger Agreement or the Merger, or shall have
withdrawn or modified in a manner adverse to L-P its approval or recommendation
thereof, or shall have resolved or publicly announced its intention to do either
of the foregoing; (ii) the Company or any significant subsidiary, or the Board
of Directors thereof, shall have recommended that the stockholders of the
Company approve any Acquisition Proposal or shall have entered into an agreement
with respect to, authorized, approved, proposed, or publicly announced their
intention to enter into, any Acquisition Proposal; (iii) the Merger Agreement
shall not have been approved by the Company's stockholders prior to termination
of the Merger Agreement, if prior thereto it shall have been publicly announced
that any person (other than L-P or any of its subsidiaries) shall have made, or
disclosed an intention to make, any Acquisition Proposal; (iv) any person
(together with its affiliates or associates) or group, (other than L-P and its
subsidiaries), shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 20 percent or more of the then outstanding shares of
stock then entitled to vote generally in the election of the directors of the
Company or any significant subsidiary; or (v) following the making of an
Acquisition Proposal, the Company shall have intentionally breached the Merger
Agreement such that L-P would be entitled to terminate the Merger Agreement
under Section 8.1(d) thereof (without regard to any grace period provided for
therein) unless such breach is promptly cured without jeopardizing the
consummation of the Merger. Finally, an "Acquisition Event" will be deemed to
occur upon the consummation of any event described in the definition of
Acquisition Proposal, except that the purchase or other acquisition of
securities representing 50 percent or more (instead of 20 percent or more) of
the voting power of the Company or any significant subsidiary thereof is
required for an Acquisition Event to occur.
The Termination Fee Agreement provides that nothing in such agreement shall
relieve the Company from liability for its breach of the Merger Agreement.
However, in the event of a breach by the Company, the aggregate amount that L-P
will be entitled to recover under the Termination Fee Agreement and the Merger
Agreement will not exceed the total of all damages allowable at law by reason of
such breach, plus (to the extent not otherwise included in such damages) the
amount of all expenses incurred by L-P in connection with transactions
contemplated by the Merger Agreement.
41
<PAGE>
SECURITIES OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of November 1, 1996 (unless otherwise
indicated), information concerning beneficial ownership of the Common Stock by
any person known to the Company to be the beneficial owner of more than 5% of
such stock, by each director, by each of the five most highly compensated
executive officers of the Company, individually, and by directors and executive
officers of the Company as group. Individuals have sole voting and investment
power over such stock unless otherwise indicated in the footnotes. Substantially
all of such shares (other than those held by James Kean and William Phillips)
will be exchanged for an equal number of shares of Series E Stock immediately
prior to closing of the Merger.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
OF THE COMPANY
BENEFICIALLY
OWNED PERCENTAGE OF
NAME AND ADDRESS AS OF NOVEMBER 1, OUTSTANDING
OF BENEFICIAL OFFICER 1996 COMMON STOCK
- -------------------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
Joel Tranmer (1)................................................................ 891,427 11.9%
Al Collison (2)................................................................. 673,569 9.0%
The Moore Family Trust (3)...................................................... 708,041 9.4%
James Kean (4).................................................................. 419,520 5.6%
390 E. Ray Road
Chandler, AZ 85225
Eric M. Oganesoff (5)........................................................... 279,973 3.7%
Richard L. Campbell (6)......................................................... 225,200 3.0%
William D. Phillips (7)......................................................... 104,064 1.4%
John R. Bernardi (8)............................................................ 55,231 0.7%
Steven A. Gerber (9)............................................................ 43,182 0.6%
Donald C. Frueh (10)............................................................ 10,815 0.1%
All officers and directors as a group (8 persons)............................... 2,283,461 30.4%
</TABLE>
- ------------------------
(1) Includes 7,500 shares issuable upon exercise of currently vested options.
(2) Includes 109,092 shares issuable upon conversion of 54,546 shares of Series
A Preferred Stock and 7,500 shares issuable upon exercise of currently
vested options.
(3) Includes 211,282 shares issuable upon conversion of a note in the current
principal amount of $1,373,333.
(4) Includes 114,470 shares issuable upon conversion of a note in the current
principal amount of $881,416.
(5) Includes 12,500 shares issuable upon exercise of currently vested options.
(6) Includes 7,500 shares issuable upon exercise of currently vested options.
The remaining shares are held by Mantis Partners IV, LP, over which Mr.
Campbell exercises voting control.
(7) Includes 35,000 shares issuable upon exercise of currently vested options.
(8) Includes 7,500 shares issuable upon exercise of currently vested options.
(9) Includes 25,000 shares issuable upon exercise of currently vested options.
(10) Includes 10,000 shares issuable upon exercise of currently vested options.
42
<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
The Common Stock is listed on the Nasdaq National Market under the symbol
"STON". The following table sets forth, for the fiscal quarters indicated, the
high and low sales price per share of the Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK
--------------------
<S> <C> <C>
PERIOD HIGH LOW
- -------------------------------------------------------------------------------- --------- ---------
July 28, 1994 through September 30, 1994........................................ 6.13 4.50
October 1, 1994 through December 31, 1994....................................... 6.00 4.00
January 1, 1995 through March 31, 1994.......................................... 4.63 3.75
April 1, 1995 through June 30, 1995............................................. 4.63 3.38
July 1, 1995 through September 30, 1995......................................... 4.13 3.13
October 1, 1995 through December 31, 1995....................................... 3.75 2.25
January 1, 1996 through March 31, 1996.......................................... 4.50 2.75
April 1, 1996 through June 30, 1996............................................. 3.87 3.06
July 1, 1996 through September 30, 1996......................................... 5.00 2.94
</TABLE>
The Company has not declared or paid any dividends prior to or since the IPO
and does not intend to pay dividends for the foreseeable future.
CERTAIN EFFECTS OF THE MERGER; OPERATIONS OF
THE COMPANY AFTER THE MERGER
If the proposed Merger is consummated, the Common Stockholders will no
longer have an equity interest in the Company and, therefore, will not share in
its future earnings and growth. Instead, each Common Stockholder will have
received $5.25 per share in cash.
The Company will, as a result of the Merger, become a wholly owned
subsidiary of L-P. The Common Stock will be de-listed from the Nasdaq National
Market, the registration of Common Stock under the Exchange Act will terminate
and the Company will be relieved of the obligation to comply with the proxy
rules of Regulation 14A under Section 14 of the Exchange Act and its officers,
directors and beneficial owners of more than 10% of the Common Stock will be
relieved of the reporting requirements and restrictions on "short-swing" trading
under Section 16 of the Exchange Act. Accordingly, less information will be
required to be made publicly available than presently is the case. Certain
information abut the Company will continue to be available through the public
reports of L-P.
Immediately after the Merger, all of the then outstanding Common Stock will
be beneficially owned by L-P. The directors of Surviving Corp. immediately prior
to the Effective Time (who will be designees of L-P) will be the directors of
the Company from and after the Effective Time (until their successors are duly
elected or appointed and qualified).
Except as otherwise described in this Proxy Statement, L-P expects that the
Company will be operated after the Merger in a manner substantially the same as
its current operations.
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP serves as the Company's independent certified public
accountants. A representative of Ernst & Young LLP will be at the Special
Meeting to answer questions by stockholders and will have the opportunity to
make a statement, if so desired.
43
<PAGE>
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Company's 1997 annual
meeting (which will only be held if the Merger has not been consummated prior
thereto), pursuant to Rule 14a-8(3)(i) promulgated by the SEC, must be received
by the Company at its principal office, 6500 Rock Spring Drive, Suite 400,
Bethesda, MD 20817, attention of John Bernardi, on or before January 15, 1997.
In addition, the Company's Bylaws provide that any stockholder wishing to
present a nomination for election of a director or wishing to bring a proposal
or other business before the annual meeting of stockholders for a vote must give
written notice to the Company at least 90 days in advance of the meeting and the
notice must meet certain other requirements. Any stockholder interested in
making such a nomination or proposal should request a copy of the Bylaws
provisions from the Secretary of the Company.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the SEC
pursuant to the Exchange Act (file number 0-24504) are incorporated herein by
reference:
1. The Company's Annual Report on Form 10-KSB for the year ended December
30, 1995, a copy of which is enclosed with this Proxy Statement;
2. The Company's quarterly Reports on Form 10-QSB for the quarters ended
March 30, 1996, June 29, 1996, and September 28, 1996, a copy of which September
28, 1996 report is enclosed with this Proxy Statement;
3. The Company's Current Reports on Form 8-K dated February 29, 1996, April
8, 1996, May 3, 1996, August 9, 1996, September 17, 1996, October 31, 1996 and
November 12, 1996; and
4. The Company's Proxy Statement in connection with the Annual Meeting of
Stockholders held May 15, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date hereof and prior to the date of
the Special Meeting shall be deemed to be incorporated by reference herein and
to be a part hereof from the date any such document is filed.
Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed to constitute a part hereof except as so modified
or superseded. All information appearing in this Proxy Statement is qualified in
its entirety by the information and financial statements (including notes
thereto) appearing in the documents incorporated herein by reference, except to
the extent set forth in the immediately preceding statement.
44
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
AND MERGER
BETWEEN AND AMONG
LOUISIANA-PACIFIC CORPORATION,
GREENSTONE INDUSTRIES, INC.,
AND
GSLP MERGER CORP.
------------------------------------------------------------
Dated: October 28, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER
<TABLE>
<C> <S> <C>
1.1 The Merger....................................................................... 1
1.2 Effective Time................................................................... 1
1.3 Effects of the Merger............................................................ 1
1.4 Conversion of GreenStone Capital Stock........................................... 1
1.5 Newco Common Stock............................................................... 2
1.6 Options and Warrants............................................................. 2
1.7 Convertible Debt................................................................. 3
1.8 Surviving Corporation............................................................ 3
</TABLE>
ARTICLE II
EXCHANGE OF SHARES
<TABLE>
<C> <S> <C>
2.1 L-P to Make Shares and Cash Available............................................ 4
2.2 Exchange of Shares............................................................... 4
2.3 Adjustment in Respect of Series E Stock.......................................... 5
</TABLE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GREENSTONE
<TABLE>
<C> <S> <C>
3.1 Corporate Organization........................................................... 7
3.2 Capitalization................................................................... 8
3.3 Authority; No Violation.......................................................... 9
3.4 Consents and Approvals........................................................... 9
3.5 Financial Statements............................................................. 9
3.6 Broker's Fees.................................................................... 10
3.7 Current Assets................................................................... 10
3.8 Absence of Certain Changes....................................................... 10
3.9 Absence of Undisclosed Liabilities............................................... 11
3.10 No Litigation.................................................................... 11
3.11 Compliance With Laws............................................................. 11
3.12 Title to and Condition of Properties............................................. 12
3.13 Insurance........................................................................ 12
3.14 Contracts and Commitments........................................................ 13
3.15 Employee Benefit Plans........................................................... 13
</TABLE>
A-i
<PAGE>
<TABLE>
<C> <S> <C>
3.16 Employment Compensation.......................................................... 14
3.17 Patents, Trademarks, Etc......................................................... 14
3.18 Customers and Suppliers.......................................................... 14
3.19 Tax Matters...................................................................... 14
3.20 Key Employees; Banks; Etc........................................................ 15
3.21 Adverse Conditions............................................................... 15
3.22 Disclosure....................................................................... 15
</TABLE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF L-P
<TABLE>
<C> <S> <C>
4.1 Corporate Organization........................................................... 15
4.2 Capitalization................................................................... 15
4.3 Authority; No Violation.......................................................... 16
4.4 Consents and Approvals........................................................... 16
4.5 Financial Statements............................................................. 16
4.6 Broker's Fees.................................................................... 17
4.7 Disclosure....................................................................... 17
4.8 Funding.......................................................................... 17
</TABLE>
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
<TABLE>
<C> <S> <C>
5.1 Conduct of GreenStone Businesses Prior to the Effective Time..................... 17
5.2 GreenStone Forbearances.......................................................... 17
5.3 L-P Forbearances................................................................. 19
</TABLE>
ARTICLE VI
ADDITIONAL AGREEMENTS
<TABLE>
<C> <S> <C>
6.1 Regulatory Matters............................................................... 19
6.2 Access to Information............................................................ 20
6.3 Shareholder Approval............................................................. 20
6.4 Legal Conditions to Merger....................................................... 20
6.5 Affiliates....................................................................... 20
6.6 Stock Exchange Listing of Shares................................................. 20
6.7 Indemnification; Directors and Officers Insurance................................ 20
6.8 Additional Agreements............................................................ 21
</TABLE>
A-ii
<PAGE>
ARTICLE VII
CONDITIONS PRECEDENT
<TABLE>
<C> <S> <C>
7.1 Conditions to Each Party s Obligation to Effect the Merger....................... 22
7.2 Conditions to Obligations of L-P and Newco....................................... 23
7.3 Conditions to Obligations of GreenStone.......................................... 23
</TABLE>
ARTICLE VIII
TERMINATION AND AMENDMENT
<TABLE>
<C> <S> <C>
8.1 Termination...................................................................... 24
8.2 Effect of Termination............................................................ 24
8.3 Amendment........................................................................ 25
8.4 Extension; Waiver................................................................ 25
</TABLE>
ARTICLE IX
GENERAL PROVISIONS
<TABLE>
<C> <S> <C>
9.1 Closing.......................................................................... 25
9.2 Nonsurvival of Representations, Warranties, and Agreements....................... 25
9.3 Expenses......................................................................... 25
9.4 Notices.......................................................................... 25
9.5 Interpretation................................................................... 26
9.6 Counterparts..................................................................... 26
9.7 Entire Agreement................................................................. 27
9.8 Governing Law.................................................................... 27
9.9 Severability..................................................................... 27
9.10 Publicity........................................................................ 27
9.11 Assignment....................................................................... 27
</TABLE>
A-iii
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
AND MERGER
This AGREEMENT AND PLAN OF REORGANIZATION AND MERGER dated as of October 28,
1996, between and among Louisiana-Pacific Corporation, a Delaware corporation
("L-P"), GreenStone Industries, Inc., a Delaware corporation ("GreenStone"), and
GSLP Merger Corp., a Delaware corporation wholly owned by L-P ("Newco").
W I T N E S S E T H:
WHEREAS, GreenStone manufactures and distributes cellulose insulation and
other cellulose products manufactured principally from recycled paper products
and L-P manufactures and distributes a broad range of building materials,
including cellulose insulation manufactured principally from recycled paper
products;
WHEREAS, the boards of directors of L-P and GreenStone have determined that
it is in the best interests of their respective companies and their shareholders
to consummate the merger provided for herein in which GreenStone will, subject
to the terms and conditions set forth herein, merge with and into Newco (the
"Merger");
WHEREAS, the parties intend that prior to the Merger, certain shareholders
will exchange the shares of GreenStone capital stock owned by them for shares of
Series E preferred stock of GreenStone ("Series E Stock") pursuant to a Series E
Preferred Stock Agreement ("Series E Agreement") and, at the Effective Time of
the Merger, the shares of Series E Stock will be converted into shares of common
stock, $1 par value, of L-P ("L-P Common Stock"), and the remaining shares of
GreenStone capital stock will be converted into the right to receive cash, all
on the terms and conditions provided for herein; and
WHEREAS, the parties intend that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties, and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this Agreement,
GreenStone shall merge with and into Newco at the Effective Time (as defined in
Section 1.2 hereof) in accordance with the Delaware General Corporation Law (the
"DGCL"). Newco shall be the surviving corporation (hereinafter sometimes called
the "Surviving Corporation") in the Merger, and shall continue its corporate
existence under the laws of the State of Delaware. Upon consummation of the
Merger, the separate corporate existence of GreenStone shall terminate.
1.2 EFFECTIVE TIME. The Merger shall become effective as set forth in a
certificate of merger (the "Certificate of Merger") which shall be filed with
the Secretary of State of the state of Delaware (the "Delaware Secretary"), on
the Closing Date (as defined in Section 9.1 hereof). The date and time when the
Merger becomes effective, as set forth in the Certificate of Merger, is herein
referred to as the "Effective Time."
1.3 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
shall have the effects set forth in Sections 259 and 261 of the DGCL.
1.4 CONVERSION OF GREENSTONE CAPITAL STOCK.
(a) At the Effective Time, by virtue of the Merger, and without any
action on the part of L-P, GreenStone, Newco, or the holder of any share of
GreenStone capital stock, each share of capital
A-1
<PAGE>
stock of GreenStone, other than shares held in GreenStone's treasury or held
directly or indirectly by L-P or GreenStone or any of their respective
Subsidiaries (as defined below), shall be converted as follows (except as
provided in Section 262 of the DGCL):
(i) Each share of common stock, $.001 par value ("GreenStone Common
Stock"), shall be converted into the right to receive $5.25 in cash.
(ii) Each share of Series B Preferred Stock, $.01 par value ("Series B
Stock"), shall be converted into the right to receive an amount equal to the
quotient of $200,000 divided by the number of shares of Series B Stock then
outstanding, including accrued but unpaid dividends, if any.
(iii) Each share of Series E Stock shall be converted, subject to
Section 2.2(e), into .1875 share of L-P Common Stock, subject to adjustment
as provided in Section 2.3.
(iv) As provided in Section 7.1(e), each share of preferred stock of any
series other than Series B Stock or Series E Stock is to have been exchanged
prior to the Effective Time for shares of Series E Stock; provided, however,
that any shares of such preferred stock of any other series remaining issued
and outstanding at the Effective Time shall each be converted as if it were
a share of GreenStone Common Stock.
(b) Each share of GreenStone capital stock converted pursuant to this
Agreement shall automatically be canceled and cease to exist as of the Effective
Time, and each Certificate (each a "GreenStone Certificate") previously
representing any shares of GreenStone capital stock shall thereafter represent
solely the right to receive the consideration provided herein. GreenStone
Certificates shall be exchanged for cash or certificates representing whole
shares of L-P Common Stock and cash in lieu of fractional shares in accordance
with Section 2.2 hereof, in each case without any interest thereon. If prior to
the Effective Time, or as of a record date prior to the Effective Time, the
outstanding shares of GreenStone capital stock or L-P Common Stock shall have
been increased, decreased, changed into, or exchanged for a different number or
kind of shares or securities as a result of a reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or other
similar change in capitalization, then the exchange ratios specified above shall
be appropriately adjusted to preserve the benefits of the expectations of the
parties hereto and of the holders of GreenStone capital stock.
(c) At the Effective Time, all shares of GreenStone capital stock that are
owned by GreenStone as treasury stock and all shares of GreenStone capital stock
that are owned directly or indirectly by L-P or GreenStone or any of their
respective Subsidiaries shall be canceled and shall cease to exist and no stock
of L-P or other consideration shall be delivered in exchange therefor.
1.5 NEWCO COMMON STOCK. At and after the Effective Time, each share of
common stock of Newco issued and outstanding immediately prior to the Effective
Time shall remain an issued and outstanding share of common stock of the
Surviving Corporation and shall not be affected by the Merger.
1.6 OPTIONS AND WARRANTS.
(a) At the Effective Time, each outstanding warrant to purchase shares of
GreenStone Common Stock issued pursuant to the Warrant Agreement dated July 20,
1994 ("Purchase Warrant"), shall, in accordance with the terms thereof, be
converted into a warrant to receive, upon exercise of the warrant and payment of
the $6.50 per share exercise price specified therein, an amount of cash equal to
$5.25 multiplied by the number of shares of GreenStone Common Stock represented
by such Purchase Warrant, and the holders of such Purchase Warrants shall have
no further right to receive, upon exercise thereof, any shares of GreenStone
Common Stock or any other security; provided, however, that during the 60 days
immediately following the Effective Time (and at no other time) the exercise
price of each such Purchase Warrant shall be $4.95 per share of GreenStone
Common Stock originally represented thereby so that the holder thereof shall be
entitled to receive upon exercise thereof and payment of such exercise price an
amount of cash equal to $5.25 multiplied by the number of shares of GreenStone
Common Stock
A-2
<PAGE>
represented by such Purchase Warrant (resulting in the net receipt of $.30 per
share of GreenStone
Common Stock formerly represented by such Purchase Warrant).
(b) Prior to the Effective Time, GreenStone shall take and cause to be taken
all action necessary to cause each outstanding Representative's Warrant dated
July 28, 1994, to be canceled at or prior to the Effective Time without payment
of additional consideration to the holders thereof. At the Effective Time, each
outstanding warrant issued to H.J. Meyers & Co., Inc. in connection with the
Company's placement of Series D Preferred Stock shall, in accordance with the
terms hereof, be converted into a warrant to receive upon exercise thereof and
payment of the $3 per share exercise price, an amount of cash equal to $5.25
multiplied by the number of shares of GreenStone Common Stock represented by
such warrant and the holders thereof shall have no further right to receive upon
exercise any shares of GreenStone Common Stock or any other security.
(c) At the Effective Time, each outstanding option to purchase shares of
GreenStone Common Stock under the GreenStone 1993 Amended and Restated Stock
Option Plan shall, in accordance with the terms thereof, thereupon terminate,
and the holders of such options shall have no further right to receive, upon
exercise, shares of GreenStone Common Stock or any other security; provided,
however, that at the Effective Time each holder of such an option shall be
entitled to receive an amount of cash equal to the product of (i) the number of
shares as to which such option was exercisable immediately prior to the
Effective Time, multiplied by (ii) the difference between $5.25 and the per
share exercise price of such option; and after the Effective Time each holder of
such an option who is employed by GreenStone or its Subsidiaries at the Closing
Date, other than officers or directors of GreenStone, shall be entitled, upon
giving notice to the Surviving Corporation of exercise of such option to the
extent it would then be exercisable in accordance with its terms if the Merger
had not occurred (employment by L-P and its Subsidiaries after the Effective
Time being treated as employment by GreenStone for purposes of determining
exercisability) and without other consideration, to receive an amount in cash,
net of any required withholding, equal to the product of (i) the number of
shares for which such option would then be so exercisable, multiplied by (ii)
the difference between $5.25 and the per share exercise price of such option.
(d) Prior to the Effective Time, GreenStone shall take and cause to be taken
all action necessary to cause each outstanding option represented by a
Performance Stock Option Certificate to be canceled at or prior to the Effective
Time without payment of additional consideration to the holders thereof.
(e) Prior to the Effective Time, GreenStone shall take and cause to be taken
all action necessary to cause each outstanding option to purchase GreenStone
Common Stock other than options referred to in paragraphs (c) and (d) above to
be canceled at the Effective Time, with the holders thereof being entitled to
receive an amount of cash equal to the product of (i) the number of shares as to
which such option was exercisable immediately prior to the Effective Time,
multiplied by (ii) the difference between $5.25 and the per share exercise price
of such option.
1.7 CONVERTIBLE DEBT. At or prior to the Effective Time, GreenStone shall
cause all outstanding convertible debt to be prepaid in full in accordance with
its terms without premium.
1.8 SURVIVING CORPORATION. From and after the Effective Time, the
certificate of incorporation and bylaws of the Surviving Corporation shall be
the certificate of incorporation and bylaws of Newco as theretofore in effect
until the same shall be further amended, except that the name of the Surviving
Corporation shall be changed to GreenStone Industries, Inc. From and after the
Effective Time, the directors of the Surviving Corporation shall be the
directors of Newco as in office immediately prior to the Effective Time and the
officers of the Surviving Corporation shall be the officers of GreenStone as in
office immediately prior to the Effective Time to serve at the pleasure of its
board of directors.
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ARTICLE II
EXCHANGE OF SHARES
2.1 L-P TO MAKE SHARES AND CASH AVAILABLE. At or prior to the Effective
Time, L-P shall deposit, or shall cause to be deposited, with a bank or trust
company selected by L-P and reasonably acceptable to GreenStone (the "Exchange
Agent"), for the benefit of the holders of GreenStone Certificates, for exchange
in accordance with this Article II, certificates representing the shares of L-P
Common Stock and cash (such cash and certificates for shares of L-P Common
Stock, together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") to be issued pursuant to Section
1.4 and paid pursuant to Section 2.2(a) in exchange for outstanding shares of
GreenStone capital stock.
2.2 EXCHANGE OF SHARES.
(a) As soon as practicable after the Effective Time, and in no event later
than ten business days after receipt from GreenStone or its transfer agent of a
list of shareholders of record of GreenStone as of the Effective Time, the
Exchange Agent shall mail to each holder of record of a GreenStone Certificate
or Certificates a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the GreenStone Certificates
shall pass, only upon delivery of GreenStone Certificates to the Exchange Agent)
and instructions for use in effecting the surrender of GreenStone Certificates
in exchange for certificates representing the shares of L-P Common Stock and/or
cash into which the shares of GreenStone capital stock represented by such
GreenStone Certificate or Certificates shall have been converted pursuant to
this Agreement. Upon proper surrender of a GreenStone Certificate for exchange
and cancellation to the Exchange Agent, together with such properly completed
letter of transmittal, duly executed, the holder of such GreenStone Certificate
shall be entitled to receive in exchange therefor, as applicable, (i) a
certificate representing that number of whole shares of L-P Common Stock into
which the shares of Series E Stock theretofore represented by the GreenStone
Certificate so surrendered shall have been converted pursuant to the provisions
of Article I hereof (excluding any Provisional Shares, as defined in Section
2.3) and a check representing the amount of cash in lieu of fractional shares,
if any, that such holder has the right to receive pursuant to the provisions of
this Article II, or (ii) the cash which the holder of shares of any other class
or series of GreenStone capital stock shall be entitled to receive; and the
GreenStone Certificate so surrendered shall forthwith be canceled. No interest
will be paid or accrued on any cash and unpaid dividends and distributions
payable to holders of GreenStone Certificates.
(b) No dividends or other distributions declared as of a record date after
the Effective Time with respect to L-P Common Stock shall be paid to the holder
of any unsurrendered GreenStone Certificate until the holder thereof shall
surrender such GreenStone Certificate in accordance with this Article II. After
the surrender of a GreenStone Certificate in accordance with this Article II,
the record holder thereof shall be entitled to receive any such dividends or
other distributions, without any interest thereon, that theretofore had become
payable with respect to shares of L-P Common Stock represented by such
GreenStone Certificate.
(c) If any certificate representing shares of L-P Common Stock is to be
issued in a name other than that in which the GreenStone Certificate surrendered
in exchange therefor is registered, it shall be a condition of the issuance
thereof that the GreenStone Certificate so surrendered shall be properly
endorsed (or accompanied by an appropriate instrument of transfer) and otherwise
in proper form for transfer and that the person requesting such exchange shall
pay to the Exchange Agent in advance any transfer or other taxes required by
reason of the issuance of a certificate representing shares of L-P Common Stock
in any name other than that of the registered holder of the GreenStone
Certificate surrendered, or required for any other reason, or shall establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
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(d) After the Effective Time, there shall be no transfers on the stock
transfer books of GreenStone of the shares of GreenStone capital stock that were
issued and outstanding immediately prior to the Effective Time.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of L-P Common Stock shall
be issued in respect of Series E Stock, no dividend or distribution with respect
to L-P Common Stock shall be payable on or with respect to any fractional share,
and such fractional share interests shall not entitle the owner thereof to vote
or to any other rights of a shareholder. In lieu of the issuance of any such
fractional share, a former holder of Series E Stock who otherwise would be
entitled to receive such fractional share shall be entitled to receive an amount
in cash determined by multiplying (i) the average of the closing prices of L-P
Common Stock on the New York Stock Exchange as reported by THE WALL STREET
JOURNAL for the five trading days immediately preceding the date of the
Effective Time by (ii) the fraction of a share of L-P Common Stock which such
holder would otherwise be entitled to receive pursuant to Section 1.4.
(f) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of GreenStone for twelve months after the Effective Time shall be
paid to Newco. Any shareholders of GreenStone who have not theretofore complied
with this Article II shall thereafter look only to Newco for payment of the
consideration that such shareholder is entitled to receive pursuant to this
Agreement, without any interest thereon. Notwithstanding the foregoing, none of
L-P, GreenStone, Newco, the Exchange Agent or any other person shall be liable
to any former holder of shares of GreenStone Stock for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(g) In the event any GreenStone Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such GreenStone Certificate to be lost, stolen or destroyed and, if required by
L-P, the posting by such person of a bond in such amount as L-P may determine is
reasonably necessary as indemnity against any claim that may be made against it
with respect to such GreenStone Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed GreenStone Certificate the shares of
L-P Common Stock and/or cash, as the case may be, deliverable in respect thereof
pursuant to this Agreement.
2.3 ADJUSTMENT IN RESPECT OF SERIES E STOCK. (a) The number of shares of
L-P Common Stock to be issued in respect of each share of Series E Stock shall
be increased above .1875, but not decreased below
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.1875 (subject to further adjustment as provided in Section 2.3(b) and (c)) if
and to the extent necessary to satisfy the following formula:
<TABLE>
<S> <C> <C>
Series E Shares x Exchange Ratio x Pre-Closing Price
-------------------------------------------------------------------------- = 40%
(Series E Shares x Exchange Ratio x Pre-Closing Price) +
(Cash Shares x $5.25) + Series B Price
</TABLE>
Where:
<TABLE>
<S> <C> <C>
Series E = Number of shares of Series E Stock to be converted into
Shares shares of L-P Common Stock.
Exchange Ratio = The adjusted number of shares of L-P Common Stock to
be issued in respect of each share of Series E Stock to
satisfy the above equation.
Cash Shares = Number of shares of GreenStone Common Stock to be
converted into the right to receive cash in the Merger.
Series B Price = The aggregate amount payable pursuant to
Section 1.4(a)(ii) of the Merger Agreement.
Pre-Closing = The closing price per share of L-P Common Stock on the
Price New York Stock Exchange on the trading day
immediately prior to the Closing Date (or, if greater, on
the date of the meeting of GreenStone shareholders to
approve the Merger).
</TABLE>
In the event of any such adjustment, the additional shares of L-P Common
Stock issued to each holder of Series E Stock in excess of the number that would
have been issued had the Exchange Ratio been equal to .1875 shall constitute
"Provisional Shares." Notwithstanding the provisions of Section 2.2, each
certificate representing Provisional Shares shall be delivered and held pursuant
to the terms of the Escrow Agreement entered into pursuant to the Series E
Agreement (it being a condition to the issuance of any Provisional Shares that
each holder of Series E Stock shall have executed and delivered said Escrow
Agreement).
(b) In the event the average closing price per share for L-P Common Stock on
the New York Stock Exchange (or if not traded on the New York Stock Exchange, on
the principal exchange on which L-P stock is so traded) as reported in THE WALL
STREET JOURNAL for a period of five consecutive trading days (the "Average
Trading Price") is at least $28 per share at any time after the Effective Time
and prior to March 1, 1998, then there shall be no adjustment pursuant to
Section 2.3(a) or (b) in the number of shares into which each share of Series E
Stock shall be converted pursuant to Section 1.4(a)(iii) without any adjustment
pursuant to Section 2.3 (i.e., each share of Series E Stock shall be converted
into .1875 shares of L-P Common Stock) and each Provisional Share (if any) shall
be canceled and the certificate therefore shall be returned to L-P for
cancellation pursuant to the Escrow Agreement. In the event the highest Average
Trading Price for all five consecutive trading day periods after the Effective
Time and prior to March 1, 1998, shall be less than $28 per share, then the
total number of shares of L-P Common Stock to be issued in exchange for each
share of Series E Stock shall be adjusted to be equal to the quotient (rounded
to four decimal places) obtained by dividing (i) $5.25 by (ii) the greater of
(x) $19 or (y) the Average Trading Price for the five trading days immediately
preceding March 1, 1998. The right to receive any such additional shares of L-P
Common Stock (and cash in lieu of fractional shares) is not transferable, other
than by operation of law, including without limitation, transfer by will or by
the laws of descent and distribution. In no event will any former holder of
Series E Stock be entitled to receive any dividend or distribution in respect of
any additional shares issued pursuant to this Section 2.3(b) for which the
record or payment date is prior to March 1, 1998, or any interest or other
amount in respect of such dividends or
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<PAGE>
distributions. Notwithstanding the foregoing, no adjustment shall be made in the
number of shares of L-P Common Stock to be received in respect of any shares of
Series E Stock to the extent that the holder thereof shall, prior to March 1,
1998, have sold or disposed of any of the shares of L-P Common Stock originally
issued for such shares of Series E Stock (except by operation of law, including
without limitation, transfer by will or by the laws of descent and distribution,
or in the circumstances described pursuant to Section 1.6(b)(ii) of the Series E
Agreement) and such holder shall be entitled to receive only a number of shares
of L-P Common Stock equal to .1875 multiplied by the number of shares of
GreenStone Common Stock formerly held by such holder, but such holder shall
continue to be entitled to the adjustment, if any, in respect of shares not sold
or disposed of. In the event of any change in L-P Common Stock of the nature
described in the last sentence of Section 1.4(b) after the date of this
Agreement and prior to March 1, 1998, then there will be an appropriate
adjustment in the computations pursuant to this Section 2.3(b). If L-P shall as
of a record date after the Closing Date and prior to March 1, 1998, make any
extraordinary dividend of cash or property or distribution of property or
securities, then there shall be such adjustment, if any, in the terms of this
Section 2.3(b) as the Board of Directors of L-P determines in good faith to be
necessary to give effect to the intention of this Section 2.3(b) taking into
account the value of the cash, securities, or other property received by a
former holder of Series E Stock and any reduction in the market price of L-P
Common Stock as a result of such dividend or distribution.
(c) In the event of any adjustment pursuant to Section 2.3(b) (any such
adjustment being the difference between the total number of shares of L-P Common
Stock issuable based on the exchange ratio computed pursuant to Section 2.3(b)
and the number of shares that would have been issued based on the .1875 exchange
ratio), L-P shall as promptly as practicable, subject to the provisions of
Section 2.2(e), (i) issue to each former holder of shares of Series E Stock who
has duly surrendered the certificate(s) formerly representing such shares of
Series E Stock, a certificate representing an additional whole number of shares
of L-P Common Stock (and cash in lieu of any fractional share), or (ii) if
Provisional Shares were issued in an amount less than the adjustment required by
Section 2.3(b) cause certificates for the Provisional Shares to be delivered
free of the Escrow Agreement to the registered holders thereof, together with a
certificate for additional shares of L-P Common Stock, or (iii) if Provisional
Shares were issued in an amount greater than the amount of the adjustment
required by Section 2.3(b), cause the cancellation of a number of Provisional
Shares and the delivery of certificate(s) representing the uncanceled balance of
the Provisional Shares free of the restrictions of the Escrow Agreement to the
registered owner thereof; in each case so that each former holder of Series E
Stock shall have received in the aggregate a whole number of shares (including,
without limitation, uncanceled Provisional Shares) (and cash in lieu of
fractional shares) equal to the number of shares (and cash in lieu of fractional
shares) the holder would have received if the adjusted exchange ratio computed
pursuant to Section 2.3(b) had been known at the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GREENSTONE
Except as set forth in the disclosure schedule of GreenStone delivered to
L-P concurrently herewith (the "GreenStone Disclosure Schedule"), GreenStone
represents and warrants to L-P as follows:
3.1 CORPORATE ORGANIZATION.
(a) GreenStone is a corporation duly organized and validly existing under
the laws of the state of Delaware. GreenStone has the corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as it is now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary, except where the failure to
be so licensed or qualified would not have a material adverse effect (as defined
below) on GreenStone. As used in this Agreement, the term "material" means, with
respect to GreenStone, an effect on or condition affecting the business, assets,
results of operations, prospects, or financial condition
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<PAGE>
of GreenStone or its Subsidiaries which a buyer of the entire business of
GreenStone and its Subsidiaries would reasonably consider to be material. As
used in this Agreement, the word "Subsidiary" when used with respect to any
party means any corporation, partnership or other organization, whether
incorporated or unincorporated, that is consolidated with such party for
financial reporting purposes. The Certificate of Incorporation and Bylaws of
GreenStone, copies of which have previously been made available to L-P, are
true, complete and correct copies of such documents as in effect as of the date
of this Agreement.
(b) GreenStone has previously delivered to L-P a schedule listing each
GreenStone Subsidiary and setting forth for each such GreenStone Subsidiary the
(i) jurisdiction in which it is organized, (ii) jurisdictions in which it is
qualified to do business, and (iii) office or agency having primary regulatory
authority over its business and operations. Each GreenStone Subsidiary (i) is
duly organized and validly existing under the laws of its jurisdiction of
organization, (ii) is duly qualified to do business and in good standing in all
jurisdictions (whether federal, state, local or foreign) where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and in which the failure to be so qualified would have a material
adverse effect on GreenStone, and (iii) has all requisite power and authority to
own or lease its properties and assets and to carry on its business as now
conducted.
(c) The minute books of GreenStone accurately reflect all corporate actions
since its date of incorporation of its shareholders and Board of Directors
(including committees of the Board of Directors of GreenStone).
3.2 CAPITALIZATION.
(a) The authorized capital stock of GreenStone consists of 20 million shares
of GreenStone Common Stock and 5 million shares of preferred stock, $.01 par
value. At the close of business on the date of this Agreement, the outstanding
shares of GreenStone capital stock were as follows: 6,201,429 shares of
GreenStone Common Stock, 54,546 shares of Series A Preferred Stock (all of which
are to be exchanged for Series E Stock), 16,000 shares of Series B Preferred
Stock, 496,759 shares of Series C Preferred Stock (all of which are to be
exchanged for Series E Stock), no shares of Series D Preferred Stock, and no
shares of Series E Stock. At the close of business on the date of this
Agreement, GreenStone had outstanding 1,063,750 redeemable common stock Purchase
Warrants, 92,500 Representative's Warrants, warrants to purchase 69,250 shares
of GreenStone Common Stock issued to H.J. Meyers and Co., Inc., notes payable
totaling $2.5 million, convertible into an aggregate of 330,752 shares of
GreenStone Common Stock, 300,000 performance options, and options granted to
employees and directors to purchase 444,032 shares of GreenStone Common Stock, a
complete and accurate list of which has heretofore been delivered to L-P,
together with copies of all instruments governing the terms of such securities.
All of the issued and outstanding shares of GreenStone capital stock have been
duly authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights with no personal liability attaching to the ownership thereof.
Except as stated above, GreenStone does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of
GreenStone Common Stock or GreenStone preferred stock or any other equity
securities of GreenStone or any securities representing the right to purchase or
otherwise receive any shares of GreenStone Common Stock or GreenStone preferred
stock.
(b) GreenStone owns directly all of the issued and outstanding shares of
capital stock of each of the incorporated GreenStone Subsidiaries, free and
clear of any liens, charges, encumbrances and security interests whatsoever, and
all of such shares are duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. No incorporated GreenStone Subsidiary has or
is bound by any outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the purchase or issuance of any
shares of capital stock or any other equity security of such Subsidiary or any
securities representing the right to purchase or otherwise receive any shares of
capital stock or any other equity security of such Subsidiary.
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<PAGE>
3.3 AUTHORITY; NO VIOLATION.
(a) GreenStone has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of GreenStone. The Board of Directors of GreenStone has
directed that this Agreement, and the transactions contemplated hereby, be
submitted to GreenStone s shareholders for approval at a meeting of such
shareholders and, except for the adoption of this Agreement by the shareholders
of GreenStone as provided in Section 6.3, no other corporate proceedings on the
part of GreenStone are necessary to approve this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by GreenStone and (assuming due authorization, execution,
and delivery by L-P and Newco) constitutes a valid and binding obligation of
GreenStone, enforceable against GreenStone in accordance with its terms, except
as enforcement may be limited by general principles of equity whether applied in
a court of law or a court of equity and by bankruptcy, insolvency and similar
laws affecting creditors rights and remedies generally.
(b) Neither the execution and delivery of this Agreement by GreenStone nor
the consummation by GreenStone of the transactions contemplated hereby, nor
compliance by GreenStone with any of the terms or provisions hereof, will (i)
violate any provision of the Certificate of Incorporation or Bylaws of
GreenStone or (ii) assuming that the consents and approvals referred to in
Sections 3.4 and 4.4 are duly obtained, (x) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to GreenStone or any of its Subsidiaries or any of their respective
properties or assets, or (y) to the best knowledge of GreenStone violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event that, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of GreenStone or any
of its Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which GreenStone or any of its Subsidiaries is
a party, or by which they or any of their respective properties or assets may be
bound or affected, except (in the case of clause (y) above) for such violations,
conflicts, breaches or defaults that, either individually or in the aggregate,
will not have or be reasonably likely to have a material adverse effect on
GreenStone.
3.4 CONSENTS AND APPROVALS. Except for (i) the expiration of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act ("HSR Act"), (ii)
the filing with the SEC of a proxy statement in definitive form relating to the
meeting of GreenStone s shareholders to be held in connection with the
transactions contemplated hereby (the "Proxy Statement") and compliance with the
requirements of SEC Rule 13e-3, (iii) the filing of the Certificate of Merger
with the Delaware Secretary pursuant to the DGCL, (iv) such filings and
approvals as are required to be made or obtained under the securities or "Blue
Sky" laws of various states in connection with the issuance of the shares of L-P
Common Stock pursuant to this Agreement, (v) the approval of this Agreement by
the requisite vote of the shareholders of GreenStone, and (vi) the consents and
approvals set forth in GreenStone Disclosure Schedule, no consents or approvals
of or filings or registrations with any court, administrative agency or
commission or other governmental authority or instrumentality (each a
"Governmental Entity") or to the best knowledge of GreenStone with any third
party are necessary in connection with (A) the execution and delivery by
GreenStone of this Agreement and (B) the consummation by GreenStone of the
Merger and the other transactions contemplated hereby.
3.5 FINANCIAL STATEMENTS. GreenStone has previously delivered to L-P
copies of (a) the consolidated balance sheets of GreenStone and its Subsidiaries
as of December 31, 1994, and December 30, 1995, and the related consolidated
statements of income, changes in stockholders equity and cash flows for the
fiscal years 1994 and 1995, as reported in GreenStone's Annual Report on Form
10-KSB for the fiscal year
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<PAGE>
ended December 31, 1995, filed with the SEC under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), in each case accompanied by the audit
report of Ernst & Young LLP, independent public accountants with respect to
GreenStone and (b) the unaudited consolidated balance sheets of GreenStone as of
June 29, 1996, and July 1, 1995, and the related unaudited consolidated
statements of income, cash flows, and changes in stockholders equity for the six
months then ended as reported in GreenStone s Quarterly Report on Form 10-QSB
for the period ended June 29, 1996, filed with the SEC under the Exchange Act.
The financial statements referred to in this Section 3.5 including the related
notes (the "GreenStone Financial Statements") fairly present (subject, in the
case of the unaudited statements, to recurring audit adjustments normal in
nature and amount) in all material respects, the results of the consolidated
operations and changes in stockholders equity and consolidated financial
position of GreenStone and its Subsidiaries for the respective fiscal periods or
as of the respective dates therein set forth; each of such GreenStone Financial
Statements comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto and each of such GreenStone Financial Statements has been
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except in each case as
indicated in such statements or in the notes thereto or, in the case of
unaudited quarterly statements, as permitted by Form 10-QSB. The books and
records of GreenStone and its Subsidiaries have been, and are being, maintained
in all material respects in accordance with GAAP and any other applicable legal
and accounting requirements and reflect only actual transactions.
3.6 BROKER'S FEES. Neither GreenStone nor any GreenStone Subsidiary nor
any of their respective officers or directors has employed any broker or finder
or incurred any liability for any broker's fees, commissions or finder's fees in
connection with any of the transactions contemplated by this Agreement.
3.7 CURRENT ASSETS. All accounts receivable of GreenStone and its
Subsidiaries represent arm's length sales actually made in the ordinary course
of business; are reasonably expected to be collectible (net of the reserves
shown on the books of GreenStone and its Subsidiaries) in the ordinary course of
business; except to the extent reserved, are subject to no counterclaim or
setoff and are not in dispute. In all material respects, the inventories of
GreenStone and its Subsidiaries meet GreenStone s quality control standards, are
usable and salable in the ordinary course of business, have a commercial value
at least equal to the value shown on the books of GreenStone and its
Subsidiaries, are valued in accordance with GAAP at the lower of cost (on an
FIFO basis) or market, and no material write-down in inventory has been made or
should have been made pursuant to GAAP during the past two years.
3.8 ABSENCE OF CERTAIN CHANGES. Since June 29, 1996, there has not been:
(a) Any material adverse change in the financial condition, assets,
liabilities, business, prospects or operations of GreenStone and its
Subsidiaries;
(b) Any material loss, damage or destruction, whether covered by
insurance or not, affecting the business or properties of GreenStone or its
Subsidiaries;
(c) Any increase (other than increases in the ordinary course of
business for non-executive employees) in the compensation, salaries or wages
payable or to become payable to any employee or agent of GreenStone or its
Subsidiaries (including, without limitation, any increase or change pursuant
to any bonus, pension, profit sharing, retirement or other plan or
commitment), or any bonus or other employee benefit granted, made or
accrued;
(d) Any labor dispute or disturbance, other than routine individual
grievances which are not material to the business, financial condition or
results of operations of GreenStone and its Subsidiaries;
(e) Any material commitment or transaction by GreenStone or its
Subsidiaries (including, without limitation, any capital expenditure) other
than in the ordinary course of business consistent with past practice;
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(f) Except as expressly contemplated by this Agreement, any declaration,
setting aside, or payment of any dividend or any other distribution in
respect of capital stock of GreenStone; any redemption, purchase or other
acquisition by GreenStone of any capital stock of GreenStone, or any
security relating thereto; or any other payment to any shareholder of
GreenStone as such a shareholder;
(g) Any sale, lease, or other transfer or disposition of any material
properties or assets of GreenStone or its Subsidiaries, except for sales of
inventory in the ordinary course of business;
(h) Any indebtedness for borrowed money incurred, assumed, or guaranteed
by GreenStone or its Subsidiaries other than changes in the line of credit
of GreenStone or its Subsidiaries in the ordinary course of business;
(i) Any entering into, amendment, or termination by GreenStone or its
Subsidiaries of any material contract, or any waiver of material rights
thereunder, other than in the ordinary course of business;
(j) Any loan or advance or any grant of credit by GreenStone or its
Subsidiaries other than trade credit in the ordinary course of business or
immaterial loans or advances to employees not to exceed $2,000 to any one
employee;
(k) Any other event or condition specifically related to GreenStone or
its Subsidiaries not in the ordinary course of business which would have a
material adverse effect on the assets or the business of GreenStone and its
Subsidiaries taken as a whole.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
specifically disclosed in the most recent balance sheet included in the
GreenStone Financial Statements, GreenStone and its Subsidiaries do not have any
liabilities, accrued, absolute, contingent, or otherwise, other than commercial
liabilities and obligations incurred since the date of such balance sheet in the
ordinary course of business consistent with past practice none of which has or
will have a material adverse effect on the business, financial condition or
results of operations of GreenStone and its Subsidiaries taken as a whole.
3.10 NO LITIGATION. There is no material action, claim, demand, citation,
summons, subpoena, suit, arbitration proceeding, investigation, or inquiry
pending or to the best knowledge of GreenStone threatened against GreenStone and
its Subsidiaries, its directors (in such capacity), its business,or any of its
assets. The Disclosure Schedule identifies all material actions, suits,
proceedings, investigations and inquiries to which GreenStone and its
Subsidiaries has been a party since January 1, 1991. Neither GreenStone and its
Subsidiaries nor its business or assets is subject to any judgment, order, writ
or injunction of any court, arbitrator or federal, state, foreign, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality.
3.11 COMPLIANCE WITH LAWS.
(a) GreenStone and its Subsidiaries (including each and all of their
operations, practices, properties and assets) are in compliance with all
applicable federal, state, local and foreign laws, ordinances, orders, rules and
regulations (collectively, "Laws"), including, without limitation, those
applicable to discrimination in employment, occupational safety and health,
trade practices, environmental protection, competition and pricing, product
warranties, zoning, building and sanitation, employment, retirement and labor
relations, and product advertising except to the extent any noncompliance would
not have a material adverse effect upon the assets or the business of GreenStone
and its Subsidiaries taken as a whole. GreenStone and its Subsidiaries have not
received notice of any violation or alleged violation of, and none of them is
subject to liability for past or continuing violation of, any Laws. All reports
and returns required to be filed by GreenStone and its Subsidiaries with any
governmental authority have been filed, and to the best knowledge of GreenStone
were accurate and complete when filed.
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(b) GreenStone and its Subsidiaries have all material licenses, permits,
approvals, authorizations and consents of all governmental and regulatory
authorities and all certification organizations required for the conduct of the
business (as presently conducted) of GreenStone and its Subsidiaries. All such
licenses, permits, approvals, authorizations and consents are in full force and
effect. GreenStone and its Subsidiaries are and have been in compliance in all
material respects with all such permits and licenses, approvals, authorizations,
and consents.
(c) No material amount of any Hazardous Substance (as defined below) has
been discharged, released, used, or emitted into the air, water, surface water,
ground water, land surface or sub-surface strata from or upon any facility of
GreenStone or its Subsidiaries or under the direction or control of any employee
or agent of GreenStone or its Subsidiaries, except in accordance with applicable
Environmental Law (as defined below) in all material respects. For the purposes
of this Agreement, "Hazardous Substance" means any substance, whether liquid,
solid or gas listed, identified or designated as hazardous or toxic under any
applicable Environmental Law, (i) which, applying criteria specified by any
applicable Environmental Law, is hazardous or toxic, or (ii) the use or disposal
of which is regulated under any applicable Environmental Law. For the purposes
of this Agreement, "Environmental Law" means any federal, state, provincial or
local statute, law, ordinance, rule, regulation, order, consent, decree,
judicial or administrative decision or directive of the United States or other
jurisdiction now existing relating to (A) pollution or protection of the
environment, including natural resources, (B) exposure of persons, including
employees, to hazardous substances or other products, materials or chemicals,
(C) protection of the public health or welfare from the effects of products,
by-products, waste, emissions, discharges or releases of chemical or other
substances from industrial or commercial activities, or (D) regulation of the
manufacture, use or introduction into commerce of substances, including without
limitation formulation, packaging, labeling, distribution, transportation,
handling, storage and disposal.
(d) GreenStone and its Subsidiaries have not transported (directly or
indirectly) any Hazardous Substances to any location that is listed or proposed
for listing under CERCLA or on any similar state list, or is the subject of
federal, state, or local enforcement actions or investigations or remedial
actions.
(e) GreenStone and its Subsidiaries have provided to L-P all information
including without limitation, all studies, analyses, and test results in the
possession, custody, or control of GreenStone or any of its Subsidiaries
relating to properties owned or leased by GreenStone or any of its Subsidiaries
which describe: (i) environmental conditions on under or about such properties;
and (ii) Hazardous Substances used, managed, handled, transported, treated,
generated, stored, or released by any person at any time of any such properties.
3.12 TITLE TO AND CONDITION OF PROPERTIES. GreenStone and each of its
Subsidiaries has good and marketable title to all its material assets, free and
clear of all mortgages, liens (statutory or otherwise), security interests,
claims, pledges, equities, options, conditional sales contracts, assessments,
levies, easements, covenants, reservations, restrictions, exceptions,
limitations, charges or encumbrances of any nature whatsoever (collectively,
"Liens"). All tangible assets of GreenStone and its Subsidiaries are located at
facilities owned or leased by GreenStone and its Subsidiaries and all tangible
assets located at such facilities are owned by GreenStone and its Subsidiaries.
All tangible assets of GreenStone and its Subsidiaries are, taken as a whole, in
good operating condition and repair, ordinary wear and tear excepted.
3.13 INSURANCE. GreenStone has heretofore delivered to L-P complete and
accurate copies of all policies of fire, liability, product liability, workers
compensation, health and other forms of insurance presently in effect with
respect to the business and properties of GreenStone and its Subsidiaries and
has delivered copies of all policies of insurance with respect to the business
and properties of entities acquired by GreenStone or its Subsidiaries which are
within GreenStone's or its Subsidiaries possession, custody, or control.
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3.14 CONTRACTS AND COMMITMENTS.
(a) GreenStone has heretofore delivered to L-P a list of all real and
personal property leases to which GreenStone or its Subsidiaries is a party.
Complete and correct copies of each lease listed on the schedule, and all
amendments thereto, have heretofore been delivered by GreenStone and its
Subsidiaries to L-P.
(b) Neither GreenStone nor any of its Subsidiaries has any agreement,
understanding, contract, or commitment (written or oral) with any relative or
any director, officer, employee or agent, of GreenStone and its Subsidiaries or
any of their relatives.
(c) Neither GreenStone nor any of its Subsidiaries is a party to any
collective bargaining agreement with any union.
(d) Neither GreenStone nor any of its Subsidiaries is obligated under any
loan agreement, promissory note, letter of credit, or other evidence of
indebtedness as a signatory, guarantor, or otherwise.
(e) Neither GreenStone nor any of its Subsidiaries has guaranteed the
payment or performance of any person, firm or corporation, agreed to indemnify
any person (except as provided herein and except for indemnification of officers
and directors in their capacities as such) or act as a surety, or otherwise
agreed to be contingently or secondarily liable for the obligations of any
person other than a Subsidiary.
(f) Neither GreenStone nor any of its Subsidiaries is a party to nor is it
bound by any agreement requiring GreenStone or its Subsidiaries to assign any
interest in any trade secret or proprietary information, or prohibiting or
restricting GreenStone or its Subsidiaries from competing in any business or
geographical area or soliciting customers or otherwise restricting it from
carrying on its business anywhere in the world.
(g) Neither GreenStone nor any of its Subsidiaries has any lease, license,
contract or commitment of any nature involving consideration or other
expenditure in excess of $50,000, or involving performance over a period of more
than 180 days, or which is otherwise individually material to the operations of
GreenStone and its Subsidiaries.
(h) Neither GreenStone nor any of its Subsidiaries is in material default
under any lease, agreement, contract or commitment, nor has any event or
omission occurred which through the passage of time or the giving of notice, or
both, would constitute a material default thereunder or cause the acceleration
of any of the obligations of GreenStone or its Subsidiaries or result in the
creation of any Lien on any of the assets owned, used or occupied by GreenStone
or its Subsidiaries. To the best knowledge of GreenStone, no third party is in
default under any material lease, agreement, contract or commitment to which
GreenStone or its Subsidiaries are a party, nor has any event or omission
occurred which, through the passage of time or the giving of notice, or both,
would constitute a default thereunder or give rise to an automatic termination,
or the right of discretionary termination thereof.
3.15 EMPLOYEE BENEFIT PLANS. GreenStone has heretofore delivered to L-P a
document describing all pension, profit sharing, retirement, bonus, executive or
deferred compensation, hospitalization and other fringe or employee benefit
plans, programs and arrangements, and any employment or consulting contracts,
"golden parachutes," severance agreements or plans, vacation and sick leave
plans including, without limitation, all "employee benefit plans" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), all employee manuals, and all written or binding oral statements of
policies, practices or understandings relating to employment, which are provided
to, for the benefit of, or relate to, any persons employed or formerly employed
by GreenStone and its Subsidiaries. The items described in the foregoing
sentence are hereinafter sometimes referred to collectively as "Employee
Plans/Agreements." True and correct copies of all written Employee
Plans/Agreements, including all amendments thereto, have heretofore been
provided to L-P. GreenStone and its Subsidiaries are in material compliance with
and have made all payments due under all Employee Plans/Agreements and with
respect thereto GreenStone and its Subsidiaries are in compliance with all
applicable federal and state laws and regulations.
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3.16 EMPLOYMENT COMPENSATION. GreenStone has heretofore delivered to L-P a
true and correct list of all salaried employees and all hourly employees to whom
GreenStone and its Subsidiaries are paying more than $35,000 annual
compensation; and in the case of salaried employees such list identifies the
current annual rate of compensation for each employee and in the case of hourly
or commission employees identifies certain reasonable ranges of rates and the
number of employees falling within each such range.
3.17 PATENTS, TRADEMARKS, ETC. GreenStone has heretofore delivered to L-P a
list of all United States and foreign trademarks, service marks, trade names,
brand names, copyrights, including registrations and application, patent and
patent applications, and employee covenants and agreements respecting
intellectual property ("Trade Rights") in which GreenStone or its Subsidiaries
now have any interest, specifying whether such Trade Rights are owned,
controlled, used or held (under license or otherwise) by GreenStone and its
Subsidiaries, and also indicating which of such Trade Rights are registered. All
Trade Rights registrations and all pending registrations and applications have
been properly made and filed and all annuity, maintenance, renewal and other
fees relating to registrations or applications are current. In order to conduct
the businesses of GreenStone and its Subsidiaries, as such are currently being
conducted, GreenStone and its Subsidiaries do not require any Trade Rights that
they do not already have. GreenStone and its Subsidiaries are not infringing and
have not infringed on any Trade Rights of another in the operation of their
businesses, nor to the best knowledge of GreenStone is any other person
infringing on the Trade Rights of GreenStone and its Subsidiaries. GreenStone
and its Subsidiaries have not granted any license or made any assignment of any
Trade Right and no other person has any right to use any Trade Right owned or
held by GreenStone and its Subsidiaries. GreenStone and its Subsidiaries do not
pay any royalties or other consideration for the right to use any Trade Rights
of others. To the best knowledge of GreenStone, there are no inquiries,
investigations or claims or litigation challenging or threatening to challenge
the right, title and interest of GreenStone and its Subsidiaries with respect to
their continued use and right to preclude others from using any Trade Rights of
GreenStone and its Subsidiaries. To the best knowledge of GreenStone, all Trade
Rights of GreenStone and its Subsidiaries are valid, enforceable and in good
standing, and there are no equitable defenses to enforcement based on any act or
omission of GreenStone or its Subsidiaries.
3.18 CUSTOMERS AND SUPPLIERS.
(a) GreenStone has heretofore delivered to L-P a list of the ten largest
customers (including distributors) of GreenStone and its Subsidiaries for 1995
and the first six months of 1996, and the dollar volume of business done with
each listed party during such periods. GreenStone has no knowledge or
information of any facts indicating, nor any other reason to believe, that any
of the customers listed will not continue to be customers of the businesses of
GreenStone and its Subsidiaries after the Closing Date at substantially the same
level of purchases as heretofore.
(b) GreenStone has heretofore delivered to L-P a list of the material
suppliers to GreenStone and its Subsidiaries for 1995 and the first six months
of 1996. GreenStone has no knowledge or information of any facts indicating, nor
any other reason to believe, that any of the suppliers will not continue to be
suppliers to GreenStone and its Subsidiaries after the Closing Date and will not
continue to supply substantially the same quantity and quality of goods at
competitive prices.
(c) GreenStone has heretofore delivered to L-P true, correct, and complete
copies of the standard warranties of GreenStone and its Subsidiaries for sales
of their products.
3.19 TAX MATTERS. GreenStone and its Subsidiaries have properly completed
and filed in all material respects all federal, state, and other tax returns
(including informational returns) of every nature required to be filed by them
and have paid all taxes (whether or not requiring the filing of returns)
including all deficiencies, assessments, additions to tax, penalties and
interest of which notice has been received to the extent such amounts have
become due. All tax liabilities have been fully and properly reflected in the
GreenStone Financial Statements. The income tax returns of GreenStone and its
Subsidiaries have not been examined by the Internal Revenue Service. There are
no outstanding agreements or waivers
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extending the statutory period of limitation for any federal or state tax return
of GreenStone or its Subsidiaries for any period. GreenStone and its
Subsidiaries have made all required deductions and payments and have properly
prepared and delivered all required documents in connection with the withholding
of taxes from the wages and other compensation of their employees. GreenStone
and its Subsidiaries have filed and paid all sales/use tax returns for all
states in which they have obligation to do so.
3.20 KEY EMPLOYEES; BANKS; ETC. GreenStone has heretofore delivered to L-P a
list showing:
(a) The names of all officers and directors of GreenStone and its
Subsidiaries;
(b) The name of each bank at which GreenStone or its Subsidiaries have
(i) an account and the numbers of all accounts, (ii) a line of credit, or
(iii) a safe deposit box and the name of each person authorized to draw
thereon or have access thereto; and
(c) The name of each person holding a power of attorney from GreenStone
or its Subsidiaries and a summary of the terms thereof.
3.21 ADVERSE CONDITIONS. There are no conditions known to GreenStone with
respect to the markets, products, facilities, or personnel of GreenStone and its
Subsidiaries which might materially adversely affect their business or prospects
other than such conditions as may affect the industry in which GreenStone and
its Subsidiaries participate as a whole.
3.22 DISCLOSURE. To the knowledge of GreenStone, no representation or
warranty by GreenStone in this Agreement, nor any statement, certificate,
schedule or exhibit hereto furnished or to be furnished by or on behalf of
GreenStone and its Subsidiaries pursuant to this Agreement, nor any document or
certificate delivered to L-P pursuant to this Agreement or in connection with
transactions contemplated hereby, contains or shall contain any untrue statement
of material fact or omits or shall omit a material fact necessary to make the
statements contained therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF L-P
Except as set forth in the disclosure schedule of L-P delivered to
GreenStone concurrently herewith (the "L-P Disclosure Schedule"), L-P hereby
represents and warrants to GreenStone as follows:
4.1 CORPORATE ORGANIZATION. L-P and Newco each is a corporation duly
organized and validly existing under the laws of the state of Delaware. L-P and
Newco each has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not have a material adverse effect (as defined below) on it. As used in
this Agreement, the term "material" means, with respect to L-P, an effect on or
condition affecting the business, assets, results of operations, prospects, or
financial condition of L-P or its Subsidiaries which a buyer of shares of L-P
Common Stock would reasonably consider to be material taking into account the
business of L-P and its Subsidiaries taken as a whole. The Certificate of
Incorporation and Bylaws of L-P, copies of which have previously been made
available to GreenStone, are true, complete and correct copies of such documents
as in effect as of the date of this Agreement.
4.2 CAPITALIZATION. The authorized capital stock of L-P consists of 200
million shares of L-P Common Stock and 15 million shares of preferred stock, $1
par value. At the close of business on June 30, 1996, the outstanding shares of
L-P capital stock were as follows: 108,639,650 shares of L-P Common Stock and no
shares of preferred stock. At the close of business on June 30, 1996, L-P had
outstanding rights to acquire shares of Series A Preferred Stock attached to
shares of L-P Common Stock, rights to acquire L-P Common Stock under various
employee benefit plans and agreements, and no other rights to
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acquire shares of its capital stock. All of the issued and outstanding shares of
L-P capital stock have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights with no personal liability
attaching to the ownership thereof. At the date of this Agreement, L-P has no
intention of engaging in any recapitalization, stock split, reverse stock split,
or similar transaction.
4.3 AUTHORITY; NO VIOLATION.
(a) L-P and Newco each has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of Newco. L-P has approved this Agreement in its capacity as
sole shareholder of Newco and, except for approval by the Board of Directors of
L-P, no other corporate proceedings on the part of L-P or Newco are necessary to
approve this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by L-P and Newco
and (assuming due authorization, execution, and delivery by GreenStone)
constitutes valid and binding obligations of L-P and Newco, enforceable against
L-P and Newco in accordance with its terms, except as enforcement may be limited
by general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting creditors rights
and remedies generally.
(b) Neither the execution and delivery of this Agreement by L-P and Newco
nor the consummation by L-P and Newco of the transactions contemplated hereby,
nor compliance by L-P and Newco with any of the terms or provisions hereof, will
(i) violate any provision of the Certificate of Incorporation or Bylaws of L-P
or Newco or (ii) assuming that the consents and approvals referred to in
Sections 3.4 and 4.4 are duly obtained, (x) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to L-P or any of its Subsidiaries or any of their respective
properties or assets, or (y) violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an event
that, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any lien,
pledge, security interest, charge or other encumbrance upon any of the
respective properties or assets of L-P or Newco under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which L-P or
Newco is a party, or by which they or any of their respective properties or
assets may be bound or affected, except (in the case of clause (y) above) for
such violations, conflicts, breaches or defaults that, either individually or in
the aggregate, will not have or be reasonably likely to have a material adverse
effect on L-P.
4.4 CONSENTS AND APPROVALS. Except for (i) the expiration of the waiting
period under the HSR Act, (ii) the filing of the Certificate of Merger with the
Delaware Secretary pursuant to the DGCL, (iii) such filings and approvals as are
required to be made or obtained under the securities or "Blue Sky" laws of
various states in connection with the issuance of the shares of L-P Common Stock
pursuant to this Agreement and the taking of actions necessary to comply with
the Securities Act, and (iv) the consents and approvals set forth in L-P
Disclosure Schedule, no consents or approvals of or filings or registrations
with any Governmental Entity or with any third party are necessary in connection
with (A) the execution and delivery by L-P or Newco of this Agreement and (B)
the consummation by L-P or Newco of the Merger and the other transactions
contemplated hereby.
4.5 FINANCIAL STATEMENTS. L-P has previously delivered to GreenStone
copies of (a) the consolidated balance sheets of L-P and its Subsidiaries as of
December 31, for the fiscal years 1994 and 1995, and the related consolidated
statements of income, changes in stockholders equity and cash flows for the
fiscal years 1993, 1994, and 1995, as reported in L-P' s Annual Report on Form
10-K for the fiscal year ended December 31, 1995, filed with the SEC under the
Exchange Act, in each case accompanied by the audit
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report of Arthur Andersen LLP, independent public accountants, with respect to
L-P and (b) the unaudited consolidated balance sheets of L-P as of June 30,
1996, and June 30, 1995, and the related unaudited consolidated statements of
income, cash flows, and changes in stockholders equity for the six months then
ended as reported in L-P's Quarterly Report on Form 10-Q for the period ended
June 30, 1996, filed with the SEC under the Exchange Act. The financial
statements referred to in this Section 4.5 including the related notes (the "L-P
Financial Statements") fairly present (subject, in the case of the unaudited
statements, to recurring audit adjustments normal in nature and amount), in all
material respects, the results of the consolidated operations and changes in
stockholders equity and consolidated financial position of L-P and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth; each of such L-P Financial Statements comply in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto and each of such L-P Financial
Statements has been prepared in accordance with GAAP consistently applied during
the periods involved, except in each case as indicated in such statements or in
the notes thereto or, in the case of unaudited quarterly statements, as
permitted by Form 10-Q.
4.6 BROKER'S FEES. Neither L-P nor Newco nor any of their respective
officers or directors has employed any broker or finder or incurred any
liability for any broker' s fees, commissions or finder' s fees in connection
with any of the transactions contemplated by this Agreement.
4.7 DISCLOSURE. No representation or warranty by L-P in this Agreement,
nor any statement, certificate, schedule or exhibit hereto furnished or to be
furnished by or on behalf of L-P or Newco pursuant to this Agreement, nor any
document or certificate delivered to GreenStone pursuant to this Agreement or in
connection with transactions contemplated hereby, contains or shall contain any
untrue statement of material fact or omits or shall omit a material fact
necessary to make the statements contained therein not misleading in light of
the circumstances under which they are made.
4.8 FUNDING. L-P has adequate sources of liquidity to fund the cash
payments to the holders of GreenStone Common Stock hereunder.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 CONDUCT OF GREENSTONE BUSINESSES PRIOR TO THE EFFECTIVE TIME. During
the period from the date of this Agreement to the Effective Time, except as
expressly contemplated or permitted by this Agreement, GreenStone shall, and
shall cause its Subsidiaries to, (i) conduct its business in all material
respects in the usual, regular and ordinary course consistent with past
practice, (ii) use reasonable best efforts to maintain and preserve intact its
business organization, employees and advantageous business relationships and
retain the services of its officers and key employees and (iii) take no action
that would adversely affect or delay the ability of GreenStone or L-P to obtain
any necessary approvals of any Governmental Entity required for the transactions
contemplated hereby or to perform its covenants and agreements under this
Agreement.
5.2 GREENSTONE FORBEARANCES. During the period from the date of this
Agreement to the Effective Time, except as expressly contemplated or permitted
by this Agreement, GreenStone shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of L-P:
(a) other than borrowings under its usual credit line in the ordinary
course of business consistent with past practice, incur any indebtedness for
borrowed money, assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other individual, corporation
or other entity, or make any loan or advance;
(b) adjust, split, combine, or reclassify any capital stock; make,
declare or pay any dividend or make any other distribution on, or directly
or indirectly redeem, purchase or otherwise acquire, any shares of its
capital stock or any securities or obligations, convertible into or
exchangeable for any
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shares of its capital stock, or grant or issue any stock appreciation rights
or grant or issue to any individual, corporation or other entity any right
to acquire any shares of its capital stock except for dividends paid by any
of its wholly owned Subsidiaries or any of their wholly owned Subsidiaries;
or issue any additional shares of capital stock or securities or obligations
convertible into or exchangeable for shares of its capital stock except
pursuant to (A) the exercise of stock options or warrants outstanding as of
the date hereof, (B) the exercise of rights of conversion of outstanding
shares of preferred stock, and (C) the issuance of Series E Stock as
contemplated by Section 7.1(e);
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets to any individual, corporation or other entity
other than a direct or indirect wholly owned Subsidiary, except sales of
inventory in the ordinary course of business consistent with past practice
or pursuant to contracts or agreements in force at the date of this
Agreement (and except for sales of recycling paper bins) or cancel, release
or assign any indebtedness to any such person or any claims held by any such
person;
(d) except for transactions in the ordinary course of business
consistent with past practice, make any material investment either by
purchase of stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of any other individual,
corporation or other entity other than a wholly owned Subsidiary thereof;
(e) enter into any contract or agreement that involves an amount in
excess of $50,000 (except sales of inventory in the ordinary course of
business) or that will have a term in excess of 180 days or terminate or
materially modify any contract or agreement that involves an amount in
excess of $50,000 or that has a remaining term in excess of 180 days, or
commit to any capital expenditure, or make any capital expenditure not
committed to prior to the date of this Agreement, in excess of $50,000;
(f) increase in any manner the compensation or fringe benefits of any of
its employees other than regularly scheduled increases for non-managerial
employees in the ordinary course of business consistent with past practice
or pay any pension or retirement allowance not required by any existing plan
or agreement to any such employees or become a party to, amend or commit
itself to any pension, retirement, profit-sharing or welfare benefit plan or
agreement or employment agreement with or for the benefit of any employee,
other than amendments required to comply with applicable legal requirements,
or accelerate the vesting of any stock options or other stock-based
compensation;
(g) solicit, encourage or authorize any individual, corporation or other
entity to solicit from any third party any inquiries or proposals relating
to the disposition of its business or assets, or the acquisition of its
voting securities, or the merger of it or any of its Subsidiaries with any
corporation or other entity other than as provided by this Agreement (and
GreenStone shall promptly notify L-P of all of the relevant details relating
to all inquiries and proposals which it may receive relating to any of such
matters) or unless GreenStone shall have determined based upon the written
advice of counsel that fiduciary duties under applicable law require
otherwise, participate in any negotiations concerning or otherwise
facilitate any such transaction;
(h) settle any claim, action or proceeding involving material money
damages, except in the ordinary course of business consistent with past
practice;
(i) take any action that would prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the
Code;
(j) amend its certificate of incorporation or its bylaws;
(k) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time prior
to the Effective Time, or in any of the conditions to the Merger set forth
in
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Article VII not being satisfied or in a violation of any provision of this
Agreement, except, in every case, as may be required by applicable law; or
(l) agree to, or make any commitment to, take any of the actions
prohibited by this Section 5.2.
5.3 L-P FORBEARANCES. During the period from the date of this Agreement to
the Effective Time, except as expressly contemplated or permitted by this
Agreement, L-P shall not, without the prior written consent of GreenStone:
(a) take any action that would prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the
Code;
(b) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time prior
to the Effective Time, or in any of the conditions of the Merger set forth
in Article VII not being satisfied or in a violation of any provision of
this Agreement, except, in every case, as may be required by applicable law;
(c) take any action that would adversely affect or delay its ability to
obtain any necessary approvals of any Governmental Entity or other
governmental authority required for the transactions contemplated hereby or
to perform its covenants and agreements under this Agreement; or
(d) agree to, or make any commitment to, take any of the actions
prohibited by this Section 5.3.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 REGULATORY MATTERS.
(a) GreenStone shall promptly prepare and file a proxy statement relating to
the transaction contemplated hereby (the "Proxy Statement") with the SEC after
consultation and cooperation with L-P. The parties shall take reasonable actions
to obtain an exemption from registration under the Securities Act of 1933, as
amended ("Securities Act") for the issuance of L-P Common Stock in the Merger.
L-P shall also use all reasonable efforts to obtain all necessary state
securities law or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement, and GreenStone shall furnish all
information concerning GreenStone and the holders of GreenStone capital stock as
may be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including, without limitation, the Merger), and to comply with the
terms and conditions of all such permits, consents, approvals and authorizations
of all such Governmental Entities. L-P and GreenStone shall have the right to
review in advance, and to the extent practicable each will consult the other on,
in each case subject to applicable laws relating to the exchange of information,
all the information relating to GreenStone or L-P, as the case may be, and any
of their respective Subsidiaries, which appear in any filing made with, or
written materials submitted to, any third party or any Governmental Entity in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, each of the parties hereto shall act reasonably and as
promptly as practicable. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
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(c) L-P and GreenStone shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers and
shareholders and such other matters as may be reasonably necessary or advisable
in connection with the Proxy Statement or any other statement, filing, notice or
application made by or on behalf of L-P, GreenStone or any of their respective
Subsidiaries to any Governmental Entity in connection with the Merger and the
other transactions contemplated by this Agreement.
(d) L-P and GreenStone shall promptly advise each other upon receiving any
communication from any Governmental Entity whose consent or approval is required
for consummation of the transactions contemplated by this Agreement which causes
such party to believe that there is a reasonable likelihood that any Requisite
Regulatory Approval will not be obtained or that the receipt of any such
approval will be materially delayed.
6.2 ACCESS TO INFORMATION.
(a) Upon reasonable notice and subject to applicable laws relating to the
exchange of information, each party shall, and shall cause each of its
Subsidiaries to, afford to the officers, employees, accountants, counsel and
other representatives of the other, access, during normal business hours during
the period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, each party shall, and shall
cause each of its Subsidiaries to, make available to the other a copy of each
report, schedule, registration statement and other document filed or received by
it during such period pursuant to the requirements of federal securities laws
and all other information concerning its business, properties and personnel as
such party may reasonably request.
(b) Each party shall hold all information furnished by the other pursuant to
Section 6.2(a) in confidence to the extent required by, and in accordance with,
the provisions of the confidentiality agreement, dated June 25, 1996 (the
"Confidentiality Agreement").
(c) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
6.3 SHAREHOLDER APPROVAL. GreenStone shall call a meeting of its
shareholders to be held as soon as practicable, consistent with applicable
fiduciary and other requirements under applicable law, for the purpose of voting
upon the requisite shareholder approval required in connection with this
Agreement and the Merger. Subject to fiduciary requirements under applicable
law, the board of directors of GreenStone shall recommend such approval to its
shareholders and shall use reasonable efforts to solicit such approval.
6.4 LEGAL CONDITIONS TO MERGER. Each of L-P and GreenStone shall, and
shall cause its Subsidiaries to, use their reasonable best efforts (a) to take,
or cause to be taken, all actions necessary, proper, or advisable to comply
promptly with all legal requirements which may be imposed on such party or its
Subsidiaries with respect to the Merger and, subject to the conditions set forth
in Article VII hereof, to consummate the transactions contemplated by this
Agreement, (b) to obtain (and to cooperate with the other party to obtain) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity and any other third party which is required to be obtained
by GreenStone or L-P or any of their respective Subsidiaries in connection with
the Merger and the other transactions contemplated by this Agreement, and (c) to
cause the conditions to the consummation of the Merger to be satisfied.
6.5 AFFILIATES. Intentionally omitted.
6.6 STOCK EXCHANGE LISTING OF SHARES. L-P shall use its best efforts to
cause the shares of L-P Common Stock to be issued in the Merger to be approved
for listing on the New York Stock Exchange, subject to official notice of
issuance, prior to the Effective Time.
6.7 INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE. In the event of any
threatened or actual claim, action, suit, proceeding or investigation, whether
civil, criminal or administrative, including, without limitation, any such
claim, action, suit, proceeding or investigation in which any person who is now,
or has
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been at any time prior to the date of this Agreement, or who becomes prior to
the Effective Time, a director or officer of GreenStone or any of its
Subsidiaries (the "Indemnified Parties") is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was a director or officer of
GreenStone, any of the GreenStone Subsidiaries or any of their respective
predecessors or (ii) this Agreement or any of the transactions contemplated
hereby, whether in any case asserted or arising before or after the Effective
Time, the parties hereto agree to cooperate and use their best efforts to defend
against and respond thereto. It is understood and agreed that after the
Effective Time, L-P shall cause the Surviving Corporation to indemnify and hold
harmless, as and to the fullest extent permitted by law, each such Indemnified
Party against any losses, claims, damages, liabilities, costs, expenses
(including reasonable attorney s fees and expenses in advance of the final
disposition of any claim, suit, proceeding or investigation to each Indemnified
Party to the fullest extent permitted by law upon receipt of any undertaking
required by applicable law), judgments, fines and amounts paid in settlement in
connection with any such threatened or actual claim, action, suit, proceeding or
investigation and in the event of any such threatened or actual claim, action,
suit, proceeding, or investigation (whether asserted or arising before or after
the Effective Time), the Indemnified Parties may retain counsel reasonably
satisfactory to them after consultation with the Surviving Corporation;
provided, however, that (1) the Surviving Corporation shall have the right to
assume the defense thereof and upon such assumption L-P shall not be liable to
any Indemnified Party for any legal expenses of other counsel or any other
expenses subsequently incurred by any Indemnified Party in connection with the
defense thereof, except that if the Surviving Corporation elects not to assume
such defense or counsel for the Indemnified Parties reasonably advises the
Indemnified Parties that there are issues which raise conflicts of interest
between L-P and the Indemnified Parties, the Indemnified Parties may retain
counsel reasonably satisfactory to them after consultation with the Surviving
Corporation, and the Surviving Corporation shall pay the reasonable fees and
expenses of such counsel for the Indemnified Parties, (2) L-P shall be obligated
pursuant to this paragraph to pay for only one firm of counsel for all
Indemnified Parties, unless an Indemnified Party shall have reasonably
concluded, based on the advice of counsel, that in order to be adequately
represented, separate counsel is necessary for such Indemnified Party, in which
case, the Surviving Corporation shall be obligated to pay for such separate
counsel, (3) the Surviving Corporation shall not be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld) and (4) the Surviving Corporation shall have no
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and nonappealable, that indemnification of such Indemnified Party
in the manner contemplated hereby is prohibited by applicable law. Any
Indemnified Party wishing to claim Indemnification under this Section 6.7, upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify the Surviving Corporation thereof, provided that the failure to so notify
shall not affect the obligations of the Surviving Corporation under this Section
6.7 except to the extent such failure to notify materially prejudices the
Surviving Corporation. The Surviving Corporation's obligations under this
Section 6.7 continue in full force and effect for a period of six (6) years from
the Effective Time; provided, however, that all rights to indemnification in
respect of any claim (a "Claim") asserted or made within such period shall
continue until the final disposition of such Claim and provided further that the
Surviving Corporation shall have the right of set-off against any payments
required to be made by the Surviving Corporation to an Indemnified Party
pursuant to this Section 6.7 to the extent that such Indemnified Party shall
have received the indemnification to which such Indemnified Party is entitled
from an insurer under a directors and officers liability insurance policy
maintained by GreenStone, the Surviving Corporation, or L-P. The provisions of
this Section 6.7 are intended to be for the benefit of, and shall be enforceable
by, each Indemnified Party and his or her heirs and representatives.
6.8 ADDITIONAL AGREEMENTS. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement and their respective
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Subsidiaries shall take all such necessary action as may be reasonably requested
by, and at the sole expense of, L-P. Pending the Effective Time, L-P and
GreenStone shall consult with one another and cooperate as reasonably requested
by L-P to facilitate the integration of their respective operations as promptly
as practicable after the Effective Time. Such cooperation shall include (without
limitation), if requested, communicating with employees, consulting regarding
material contracts, renewals, and capital commitments to be entered into by
GreenStone and its Subsidiaries, making arrangements for employee training prior
to the Effective Time and taking action to facilitate an orderly conversion of
accounting and data processing operations to occur promptly following the
Effective Time.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been approved and adopted by the Board of Directors of L-P and by the
requisite affirmative vote of the holders of GreenStone capital stock
entitled to vote thereon and shall have been approved and adopted by the
holders of at least a majority of the outstanding shares of GreenStone
Common Stock other than shares held by persons who will exchange shares of
GreenStone Common Stock for shares of Series E Stock.
(b) The shares of L-P Common Stock that shall be issued to the holders
of Series E Stock upon consummation of the Merger shall have been authorized
for listing on the New York Stock Exchange subject to official notice of
issuance.
(c) All regulatory approvals required to consummate the transactions
contemplated hereby shall have been obtained without the imposition of any
conditions that are in L-P's reasonable judgment unduly burdensome and shall
remain in full force and effect and all statutory waiting periods shall have
expired (all such approvals and the expiration of all such waiting periods
being referred to herein as the "Requisite Regulatory Approvals"), and all
other material consents or approvals of any third party required in
connection with the consummation of the Merger as set forth in the
GreenStone Disclosure Schedule or L-P Disclosure Schedule shall have been
obtained.
(d) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger or any of the other
transactions contemplated by this Agreement shall be in effect. No statute,
rule, regulation, order, injunction or decree shall have been enacted,
entered, promulgated or enforced by any Governmental Entity which prohibits,
restricts or makes illegal consummation of the Merger.
(e) Each shareholder identified on a list heretofore delivered to L-P
shall have exchanged all shares of GreenStone capital stock held by such
shareholder as identified on such list for an equivalent number of shares of
Series E Stock. L-P, GreenStone, and each such shareholder as identified on
such list shall have executed and delivered a Series E Agreement
substantially in the form heretofore delivered by L-P to GreenStone; each
shareholder shall have completed a questionnaire in a form reasonably
satisfactory to L-P; and no material default shall exist under the terms of
the Series E Agreement.
(f) Newco and each of the individuals identified on a list heretofore
delivered by L-P to GreenStone shall have entered into employment agreements
and covenants not to compete substantially in the form heretofore agreed
upon by L-P and GreenStone.
(g) The actions contemplated by Sections 1.6 and 1.7 shall have been
taken.
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7.2 CONDITIONS TO OBLIGATIONS OF L-P AND NEWCO. The obligation of L-P and
Newco to effect the Merger is also subject to the satisfaction or waiver by L-P
at or prior to the Effective Time of the following conditions:
(a) The representations and warranties of GreenStone set forth in this
Agreement shall be true and correct in all material respects as of the date
of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date. L-P shall have received a certificate
signed on behalf of GreenStone by the Chief Executive Officer and the Chief
Financial Officer of GreenStone to the foregoing effect and shall have
received a certificate in the form heretofore agreed upon signed by each
holder of Series E Stock who is an officer or director of GreenStone.
(b) GreenStone shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and L-P shall have received a certificate signed on
behalf of GreenStone by the Chief Executive Officer and the Chief Financial
Officer of GreenStone to such effect.
(c) L-P shall have received an opinion of its counsel, Miller, Nash,
Wiener, Hager & Carlsen LLP, in form and substance reasonably satisfactory
to L-P, to the effect that the issuance of shares of L-P Common Stock in the
Merger does not require registration under the Securities Act. Such counsel
may rely upon certificates of the parties and upon the representations and
warranties of the parties in this Agreement and any document or agreement
referred to in this Agreement or delivered in connection with the
transactions contemplated hereby.
(d) L-P shall have received an opinion of Price-Waterhouse LLP, in form
and substance reasonably satisfactory to L-P, dated as of the Effective
Time, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time, the
Merger will be treated for Federal income tax purposes as part of one or
more reorganizations within the meaning of Section 368 of the Code and that
accordingly: no gain or loss will be recognized by L-P, Newco, or GreenStone
as a result of the Merger. In rendering such opinions, Price-Waterhouse LLP
may require and rely upon representations contained in certificates of
officers of L-P, GreenStone, and others. The opinion of Price-Waterhouse LLP
will not be provided to, or be relied upon by, parties other than L-P,
Newco, and the Surviving Corporation.
7.3 CONDITIONS TO OBLIGATIONS OF GREENSTONE. The obligation of GreenStone
to effect the Merger is also subject to the satisfaction or waiver by GreenStone
at or prior to the Effective Time of the following conditions:
(a) The representations and warranties of L-P set forth in this
Agreement shall be true and correct in all material respects as of the date
of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date. GreenStone shall have received a
certificate signed on behalf of L-P by an executive officer of L-P to the
foregoing effect.
(b) L-P shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the
Closing Date, and GreenStone shall have received a certificate signed on
behalf of L-P by an executive officer of L-P to such effect.
(c) The Shareholders referred to in Section 7.1(e) shall have received
an opinion of Ernst & Young LLP, in form and substance reasonably
satisfactory to them, dated as of the Effective Time, substantially to the
effect that, on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing
at the Effective Time, the Merger will be treated for Federal income tax
purposes as part of one or more reorganizations within the meaning of
Section 368 of the Code and that accordingly:
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(i) No gain or loss will be recognized by the shareholders of
GreenStone who exchange their Series E Stock solely for L-P Common Stock
pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in L-P Common Stock);
(ii) The tax basis of the L-P Common Stock received by shareholders
who exchange all of their Series E Stock solely for L-P Common Stock in
the Merger will be the same as the tax basis of the Series E Stock
surrendered in exchange therefor (reduced by any amount allocable to a
fractional share interest for which cash is received); and
(iii) No gain or loss will be recognized by the shareholders of
GreenStone who exchange their Common Stock solely for shares of Series E
Stock, and the tax basis of such holders in the Series E Stock will be
the same as such holder s basis in the GreenStone Common Stock.
In rendering such opinions, the accountants may require and rely upon
representations contained in certificates of officers of L-P, GreenStone, and
others. The opinion of Ernst & Young LLP will not be provided to, or be relied
upon by, parties other than the holders of Series E Stock.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the shareholders of GreenStone:
(a) by mutual consent of L-P and GreenStone in a written instrument, if
the Board of Directors of each so determines by a vote of a majority of the
members of its entire Board;
(b) by either the Board of Directors of L-P or the Board of Directors of
GreenStone (i) if any Governmental Entity which must grant a Requisite
Regulatory Approval has denied approval of the Merger and such denial has
become final and nonappealable or (ii) any Governmental Entity of competent
jurisdiction shall have issued a final nonappealable order enjoining or
otherwise prohibiting the consummation of the transactions contemplated by
this Agreement;
(c) by any party if the Merger shall not have been consummated on or
before March 31, 1997, unless the failure of the Closing to occur by such
date shall be due to the breach by the party seeking to terminate this
Agreement of any representation, warranty, covenant, or other agreement of
such party set forth herein;
(d) by either the Board of Directors of L-P or the Board of Directors of
GreenStone (provided that the terminating party is not then in material
breach of any representation, warranty, covenant or other agreement
contained herein) if there shall have been a material breach of any of the
covenants or agreements or any of the representations or warranties set
forth in this Agreement on the part of the other party, which breach is not
cured within forty-five (45) days following written notice to the party
committing such breach, or which breach, by its nature, cannot be cured
prior to the Closing; or
(e) by either L-P or GreenStone if approval of the shareholders of
GreenStone shall not have been obtained in accordance with Section 7.1(a) by
reason of the failure to obtain such approval at a duly held meeting of
shareholders or at any adjournment or postponement thereof, or if approval
of this Agreement by the Board of Directors of L-P (or the executive
committee thereof) shall not have been obtained by October 30, 1996.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 8.1, this Agreement shall forthwith become void and have
no effect, and none of L-P, GreenStone, any of their respective Subsidiaries,
any of the shareholders of any of them shall have any liability of any nature
whatsoever hereunder, or in connection with the transactions contemplated
hereby, except (i) Sections
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6.2(b), 8.2, 9.2, and 9.3, shall survive any termination of this Agreement, and
(ii) notwithstanding anything to the contrary contained in this Agreement, no
party shall be relieved or released from any liabilities or damages arising out
of its intentional or willful breach of any provision of this Agreement. The
Confidentiality Agreement referred to in Section 6.2 shall also remain in
effect.
8.3 AMENDMENT. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors in the case of corporations, at any time before
or after approval of the matters presented in connection with the Merger by the
shareholders of GreenStone; provided, however, that after any approval of the
transactions contemplated by this Agreement by GreenStone's shareholders, there
may not be, without further approval of such shareholders, any amendment of this
Agreement that reduces the amount or changes the form of the consideration to be
delivered to the GreenStone shareholders hereunder other than as contemplated by
this Agreement. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time, L-P and
GreenStone, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, and (c) waive compliance
with any of the agreements or conditions contained herein; provided, however,
that after any approval of the transactions contemplated by this Agreement by
GreenStone's shareholders, there may not be, without further approval of such
shareholders, any extension or waiver of this Agreement or any portion thereof
which reduces the amount or changes the form of the consideration to be
delivered to the GreenStone shareholders hereunder other than as contemplated by
this Agreement. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party, but such extension or waiver or failure to
insist on strict compliance with an obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 CLOSING. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 10 a.m. on a date to be
specified by the parties, which shall be no later than five business days after
the satisfaction or waiver (subject to applicable law) of the latest to occur of
the conditions set forth in Article VII hereof or such later day as may be
agreed to by the parties (the "Closing Date").
9.2 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS. None of
the representations, warranties, covenants, and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement, including any rights
arising out of any breach of such representations, warranties, covenants, and
agreements, shall survive the Effective Time, except for those covenants and
agreements contained herein and therein that by their terms apply in whole or in
part after the Effective Time; provided, however, that this Section 9.2 shall
not affect the liability of any person delivering an undertaking pursuant to
Section 7.2(a).
9.3 EXPENSES. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense.
9.4 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt
requested), or delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
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If to L-P, Newco, or the Surviving Corporation, to:
Louisiana-Pacific Corporation
4200 U. S. Bancorp Tower
111 S.W. Fifth Avenue
Portland, Oregon 97204
Facsimile: (503) 796-0105
Attention: General Counsel
with copies to:
Miller, Nash, Wiener, Hager & Carlsen LLP
3500 U. S. Bancorp Tower
111 S.W. Fifth Avenue
Portland, Oregon 97204
Facsimile: (503) 224-0155
Attention: John J. DeMott, P.C.
If to GreenStone before the Closing Date, to:
GreenStone Industries, Inc.
6500 Rock Spring Drive, Suite 400
Bethesda, Maryland 20817
Facsimile: (301) 564-0004
Attention: Eric M. Oganesoff
with copies to:
Campbell & Fleming, P.C.
Epstein Becker & Green, P.C.
250 Park Avenue--12th Floor
New York, New York 10177
Facsimile: (212) 351-4928
Attention: Joseph A. Smith
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Facsimile: (212) 704-6288
Attention: Melvin Weinberg
9.5 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits, or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes," and "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." No provision of this Agreement shall be construed to require any
person to take any action that would violate any applicable law, rule, or
regulation. Any exception to the representations and warranties of GreenStone or
L-P, respectively, contained in the GreenStone Disclosure Schedule or L-P
Disclosure Schedule, as the case may be, shall be effective only as to the
particular sections of this Agreement specifically referenced in such exception.
Except as the context otherwise requires, representations and warranties
concerning a party or its Subsidiaries shall be deemed to include a reference to
the predecessors of such persons.
9.6 COUNTERPARTS. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
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9.7 ENTIRE AGREEMENT. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof other than the agreements
specifically referred to herein.
9.8 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without regard to any
applicable conflicts of law rules thereof.
9.9 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provision of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
9.10 PUBLICITY. Except as otherwise required by applicable law or the
rules of the New York Stock Exchange, neither L-P nor GreenStone shall issue or
cause the publication of any press release or other public announcement with
respect to, or otherwise make any public statement concerning, the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld.
9.11 ASSIGNMENT. Neither this Agreement nor any of the rights, interests,
or obligations shall be assigned by any of the parties hereto without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by
the parties and their respective successors and assigns. Except for the rights
of shareholders under Articles I and II and Section 6.7 hereof, this Agreement
(including the documents and instruments referred to herein) is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
LOUISIANA-PACIFIC CORPORATION
<TABLE>
<S> <C> <C>
Attest: /s/ ANTON C. KIRCHHOF By /s/ MARK A. SUWYN
Secretary Title Chairman and C.E.O.
GREENSTONE INDUSTRIES, INC.
Attest: /s/ JOHN R. BERNARDI By /s/ ERIC M. OGANESOFF
Secretary Title Chairman and C.E.O.
GSLP MERGER CORP.
Attest: /s/ ANTON C. KIRCHHOF By /s/ MARK A. SUWYN
SECRETARY Title Chairman and C.E.O.
</TABLE>
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APPENDIX B
October 28, 1996
Independent Committee of the Board of Directors
GreenStone Industries, Inc.
6500 Rock Spring Drive, Suite 400
Bethesda, MD 20817
Gentlemen:
You have asked our opinion with respect to the fairness, from a financial
point of view, to the public holders of Common Stock, $.001 par value, of
GreenStone Industries, Inc. ("GreenStone"), of the consideration, in the amount
of $5.25 per share in cash, to be received by them pursuant to the Agreement and
Plan of Reorganization and Merger, dated as of October 28, 1996 (the
"Agreement"), between and among GreenStone, Louisiana-Pacific Corporation
("L-P") and GSLP Merger Corp.
Under the terms of the Agreement, L-P will acquire GreenStone by means of a
merger (the "Merger") of GreenStone into a newly organized wholly-owned
subsidiary of L-P. In anticipation of the Merger, certain shareholders of
GreenStone Common Stock will exchange their shares for GreenStone Series E
Preferred Stock (the "Preferred Stock"). Upon consummation of the Merger, each
share of Preferred Stock will be converted into the right to receive 0.1875 of a
share of L-P common stock, subject to certain adjustments, and each share of
Common Stock, other than those shares exchanged for Preferred Stock, will be
converted into the right to receive $5.25 in cash (the "Consideration"). The
terms and conditions of the Merger are set out more fully in the Agreement.
For the purposes of this opinion we have: (i) reviewed financial information
of GreenStone furnished to us by management, including certain internal
financial analyses and forecasts; (ii) reviewed certain publicly available
historical business and financial information of GreenStone and L-P; (iii) held
discussions with the management of GreenStone concerning the business, past and
current business operations, financial condition, strategic objectives and
future prospects of GreenStone; (iv) reviewed the Agreement; (v) reviewed the
stock price and stock trading history of GreenStone; (vi) reviewed public
information, including certain stock market data and financial information
relating to selected public companies which we deemed generally comparable to
GreenStone; (vii) compared the financial terms of the Merger with other
transactions we deemed generally comparable; (viii) reviewed a discounted cash
flow analysis of GreenStone; and (ix) made such other studies and inquiries, and
reviewed such other data, as we deemed necessary or appropriate for the purposes
of the opinion expressed herein.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. We have not made an independent valuation or appraisal
of the assets and liabilities of GreenStone or L-P or of potential or contingent
liabilities of GreenStone or L-P. With respect to the financial and operating
forecasts of GreenStone that we have reviewed, we have assumed that such
forecasts were prepared in good faith on the basis of the best available
estimates and judgments of the management of GreenStone as to the future
financial performance of GreenStone. We have further relied on the assurances of
management of GreenStone that they are not aware of any facts that would make
such information inaccurate or misleading. Our opinion is necessarily based on
the economic, market and other conditions as in effect on, and the information
made available to us as of, the date hereof. In arriving at our opinion we were
not authorized to solicit, nor did we solicit indications of interest from any
other party with respect to the acquisition of GreenStone or any of its assets.
We express no opinion as to the future value of the combined entity after the
Merger or of the future value of L-P common stock, or the fairness of the
transaction to any party other than the holders of Common Stock.
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<PAGE>
Our opinion is provided solely for your use and the use of the Board of
Directors of GreenStone. We recognize that our opinion may be provided to
holders of GreenStone Common Stock in connection with the solicitation of
proxies for use at a special meeting to consider the Merger. Our opinion is not
intended to be and does not constitute a recommendation to any stockholder of
GreenStone as to how such stockholder should vote on the proposed Merger. Our
opinion is not to be used for any other purpose without our prior written
consent.
On the basis of our analyses and review and in reliance on the accuracy and
completeness of the information furnished to us, and subject to the foregoing as
well as other matters as we considered relevant, it is our opinion that, as of
the date hereof, the Consideration is fair from a financial point of view to the
public holders of GreenStone Common Stock.
Very truly yours,
ANCHOR FINANCIAL GROUP LLC
<TABLE>
<S> <C> <C>
/s/ STUART J. YARBROUGH
-------------------------------------------
Stuart J. Yarbrough
By: MANAGING DIRECTOR
</TABLE>
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<PAGE>
APPENDIX C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
APPRAISAL RIGHTS.--(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has othewise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section the word "stockholder" means a holder of record of stock in a
corporation and also a member of record of a nonstock corporation; the words
"stock" and "share" mean and include what is ordinarily meant by those words and
also membership or membership interest of a member of a nonstock corporation;
and the words "depository receipt" mean a receipt or other instrument issued by
a depository representing an interest in one or more shares, or fractions
thereof, solely of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
subsection (g) of Section 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to Sections 251, 252, 254, 257,
258, 263 and 264 of this title to accept for such stock anything except:
(a) Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
(b) Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc., or held of record by more than 2,000 holders;
(c) Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
(d) Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts described in
the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under Section 253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available
for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the
assets of the corporation. If the certificate of incorporation contains such
a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to Section 228 or
Section 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within twenty days after the date
of mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given; provided that, if the notice is given on or after the
effective date of the merger or
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consolidation, the record date shall be such effective date. If no record date
is fixed and the notice is given prior to the effective date, the record date
shall be the close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
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(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
GREENSTONE INDUSTRIES, INC.
We have audited the accompanying consolidated balance sheets of GreenStone
Industries, Inc. as of December 30, 1995 and December 31, 1994 and the related
consolidated or combined statements of operations, stockholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of GreenStone
Industries, Inc. at December 30, 1995 and December 31, 1994, and the
consolidated or combined results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Washington, DC
February 26, 1996
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 30, 1995
Commission File No. 0-24504
GREENSTONE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 52-1827142
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
6500 Rock Spring Drive, Suite 400, Bethesda, Maryland 20817
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (301) 564-5900
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: []Yes [ ] 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 the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB [ ].
The Registrant's revenues for it's most recent fiscal year were $41,076,803
The aggregate market value of the Registrant's voting stock held by
non-affiliates was approximately $12,438,000 on March 22, 1996 based on the
closing price of the Registrant's common stock, $.001 par value (the "Common
Stock"), as reported on the NASDAQ National Market.
The number of shares of the Registrant's Common Stock outstanding as of March
22, 1996 was 5,484,615 shares.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated herein by reference:
Part III, Items 10, 11 and 12 are incorporated by reference to the definitive
Proxy Statement to be filed with the Securities and Exchange Commission, prior
to April 30, 1996, in connection with the 1996 Annual Meeting of Stockholders.
Transitional Small Business Disclosure Format (Check One): [ ]Yes [] No.
1
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PART I
ITEM 1. BUSINESS
GreenStone Industries, Inc. ("GreenStone" or "the Company") was
established in 1993, under the laws of the state of Delaware, to acquire
companies that manufacture cellulose insulation and specialty fibers from
wastepaper and to expand the markets for these products. Coincident with its
initial public offering in July of 1994 ("the Offering"), the Company
acquired the operations of United Fibers and Parco, Inc., which provided
production facilities in Norfolk, Nebraska, Phoenix, Arizona and Portland,
Oregon. During the fourth quarter of 1994, GreenStone acquired American
Environmental Products, Inc. of Elkwood, Virginia and Southern Cellulose,
Inc. of Atlanta, Georgia. During 1995, the Company acquired All-Seal
Insulation, Inc. of Fort Wayne, Indiana, Steven A. Moore Enterprises, Inc.
d.b.a. Pacific Rim Recycling, Inc. of Benicia, California and certain
operating assets of Fiberwood Inc. of Sacramento, California.
Management believes that the attributes of the Company's products,
along with the fragmented nature of the industry in which it operates,
provide an opportunity for significant growth. As compared with many
competing products including fiber glass, cellulose insulation has higher
thermal resistance (i.e. the ability to resist heat flow), lowers air
infiltration which reduces energy costs, does not cause skin irritation, is
sold at a lower cost for many applications and is environmentally beneficial
because it uses old newspaper and other recycled fibers as its primary raw
material. In addition, the Occupational Safety and Health Administration
("OSHA") requires fiber glass insulation products to carry a carcinogen
warning label while cellulose insulation requires no such label, and the
National Toxicology Program, under the Department of Health and Human
Services, added fiberglass to its list of suspected carcinogens. Although
wastepaper is used as raw material in the Company's insulation products, it
is chemically treated during the manufacturing process in order to comply
with all federal and state governmental requirements regarding fire
retardance. Cellulose specialty fibers, often less expensive or more
environmentally acceptable than competitive products, are used as thickeners,
reinforcements and absorbents in paving, roof coatings, caulk and other
products as well as in hydro-seed mulch. The cellulose insulation and
specialty fibers industry is fragmented and characterized by owner/operators
which Management believes have generally lacked the funds and marketing
sophistication to capitalize on growth and consolidation opportunities within
the industry. At present, the U.S. market is comprised of approximately 60
manufacturers.
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INDUSTRY BACKGROUND
Insulation
According to industry publications, the size of the United States
insulation market is over $2.5 billion annually and is dominated by a few
major corporations that manufacture fiber glass insulation - Owens Corning,
Schuller International (Manville) and CertainTeed. The cellulose component
currently represents a small portion of the total market. The cellulose
insulation industry primarily consists of small owner/operators, generally
with revenues under $10 million, who primarily focus on blown-in attic
applications. There are approximately 60 manufacturers operating an estimated
75 plants throughout the United States.
Primary customers of cellulose insulation include professional
contractors, home building centers for resale to their customers and
manufactured housing companies. Several leading manufactured housing companies
now use cellulose insulation for loose-fill attic applications. A significant
percentage of all new homes are built in a manufactured home plant, and this
segment of the residential construction market is growing.
Specialty Fibers
Specialty fibers include industrial fibers, hydro-seed mulch,
acoustical products and other products. The present size of the cellulose
specialty fibers market in the United States is estimated by the Company to
be approximately $20 to $25 million; however, Management believes that the
overall market for specialty fibers could develop into a substantially larger
market.
Industrial fibers made from cellulose are used in various
applications as fillers, thickeners and reinforcements. The present size of
the cellulose industrial fibers industry is small in comparison to what the
Company believes is the potential market for cellulose fibers. Management
believes there are currently three manufacturers of cellulose industrial
fibers in the United States, including the Company.
The existing and potential markets for hydro-seed mulch, acoustical
products, animal bedding and other products vary widely. The market for fiber
mulch is large, but the profit margins associated with sales of fiber mulch
have historically tended to be small. The markets for the other products are
less developed, and the Company presently has no significant sales of such
other products.
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COMPANY PRODUCTS
Insulation
Cellulose insulation products represented approximately 80 percent of
the Company's revenues for the years ended December 30, 1995 and December 31,
1994. The Company's cellulose insulation products are made primarily from
post-consumer and post-commercial old corrugated cardboard (OCC) and old
newspapers (ONP) using a combination of proprietary processes and
manufacturing technologies. The Company's products offer a higher thermal
resistance ("R-value") and lower air permeability than many competing
insulation products.
Management believes that the increasing demand for its insulation
products is in large part due to improved product quality and consistency
over recent years. One product which has contributed to this growth is a
proprietary product that incorporates chemical additives, and an application
process that significantly improves the ease of installation and helps to
insure that the product "stabilizes" (i.e., does not settle) after
application. These improvements are, in part, a result of manufacturing
equipment and processing advancements which are used in conjunction with
proprietary formulations and application processes to produce low density
cellulose insulation products. Low density contributes to broader coverage
per pound of material allowing the Company pricing and/or profitability
advantages. There are a variety of processing technologies which the Company
may use in its manufacturing processes. There can be no assurance that other
products or technologies will not be developed which would substantially
reduce the viability of cellulose insulation as a competitive product.
The Company's insulation products are sold under various brand names
and under certain private label agreements. The Company does not presently
consider brand names to be a material factor in its business.
Specialty Fibers
Specialty fibers include industrial fibers, hydro-seed mulch, acoustical
products and other products.
Industrial Fibers. Industrial fibers are cellulose fibers made
primarily from ONP, that may be chemically treated, based on customer needs,
and are finely reduced and mechanically separated to provide maximum
performance. These fibers offer viscosity control, sag resistance, dispersion
and fiber reinforcement. Industrial fibers are used as a replacement for
kevlar, nylon and polyester in certain applications. Industrial fibers are
often less expensive than competing products and are used by customers as
fillers, thickeners and reinforcements in products such as asphalt paving,
artificial slate
4
<PAGE>
products, roof coatings, extruded concrete pipes, floor tile cements,
sealants, epoxies, caulks, and tennis court coatings. The Company markets
these fibers through an agreement with CF Fibers. Sales of industrial fibers
represented approximately 8 percent of the Company's revenues for the years
ended December 30, 1995 and December 31, 1994.
The Company believes that industrial fibers, made from ONP, have the
potential to become a material segment of the specialty fibers market; however,
the total current sales of industrial fibers in the United States is estimated
by Management to be less than $10 million.
Hydro-Seed Mulch. The Company's hydro-seed mulch products are
made from ONP and OCC and are used by customers as a medium for the
application of seed and fertilizer in hydraulic seeding. These products
provide an insulated and protected environment through water retention which
aids seed germination, the establishment of early root systems and protects
slopes and other problem areas from wind and rain erosion.
Acoustical Products. The Company's products are also used in
acoustical applications, providing a seal within a wall cavity which reduces
sound transmission. These products compete with other sound reduction
products such as fiber glass.
Other Specialty Fiber Products. The Company intends to continue
the development of new applications for cellulose fibers. Sales of products
other than insulation and specialty fibers represented less than 10 percent of
the Company's revenues for the years ended December 30, 1995 and December 31,
1994.
RECYCLING OPERATIONS
As part of a strategy to control the cost of its primary raw material,
recycled newspaper, the Company acquired Steven A. Moore Enterprises d.b.a.
Pacific Rim Recycling ("Pacific Rim") in July of 1995. Pacific Rim provides
curbside collection of recyclable materials including paper, plastic, cans and
bottles to both municipal and commercial accounts in the greater San Francisco
Bay area. Pacific Rim processes and separates these materials at its facility
located in Benicia, California for resale to end users of these materials.
Historically, Pacific Rim operated a hazardous materials hauling and disposal
business but discontinued this business in July of 1995 following its
acquisition by the Company (See Item 3, Legal Proceedings).
5
<PAGE>
INSULATION PRODUCT PERFORMANCE
Tests performed in 1991 by researchers at Oak Ridge Laboratories
demonstrated that loose-fill cellulose insulation maintained or improved its
R-value (measure of thermal resistance or the ability to resist air flow) in
colder temperatures while tested samples of loose-fill fiber glass insulation
suffered performance degradation of up to 50 percent loss of insulating value at
temperatures below zero degrees Fahrenheit. In 1990, a University of Colorado
study sponsored by the cellulose industry concluded that "cellulose insulation
alone tightened (a building) 38 percent more than fiber glass insulation."
In 1991 OSHA required all manufacturers of glass-fiber products
(including fiber glass insulation) to carry a carcinogen warning label due to a
federal government review of several medical studies that showed a statistically
significant increase in respiratory-tract cancer among fiber glass production
workers. In addition, as a result of the State of California's listing of
glasswool fibers in its Proposition 65 Hazardous Materials List in 1990,
manufacturers of fiber glass are required to label their product with a cancer
warning. In 1994, the National Toxicology Program, under the United States
Department of Health and Human Services, added fiber glass to its list of
suspected carcinogens. To the knowledge of Management, there are no similar
proposals relating to cellulose fiber products. Management of the Company
believes the overall environmental acceptability of cellulose, the fiber glass
health issue and the economics and performance of the Company's products are
factors which support the Company's strategy of pursuing a greater share of the
insulation market; however, there can be no assurance that the Company will be
successful in increasing its share of the overall insulation market.
COMPANY STRATEGY
The Company's plan for expanding its business is to: (1) continue to
make strategic acquisitions in the cellulose insulation and fibers manufacturing
industry; (2) capitalize on the savings the Company expects to realize from
synergies in the areas of manufacturing, marketing, distribution and raw
materials on a national basis; (3) enhance product quality in certain regions
using manufacturing processes and technology currently employed by the Company
in other regions; and (4) expand on a national basis the production and sale of
new products currently limited to specific regions. The consolidation focus of
the Company is on strategically located manufacturers. Management believes that
standardization of products among manufacturing plants should facilitate bulk
buying of raw materials and national account selling of insulation products to
home centers, professional contractors, distributors, builders and manufacturers
which are seeking assurance of quality and supply on a national level. In
addition, the Company expects to continue to pursue growth through expansion of
existing plant capacity and opening of new plants, as well as through
introduction of new products.
6
<PAGE>
The Company's acquisition and plant expansion strategy gives priority to
cellulose insulation manufacturers in targeted market areas that can expand the
Company's customer base, provide profitability and/or adequate facilities, and
good plant management. Given the significance of transportation costs, the
Company presently intends to focus on acquisition candidates located near the
principal customer markets. The Company believes that there are manufacturers in
the industry that meet some or all of these criteria and which would be
interested in selling to the Company. Additionally, the Company may pursue
acquisition candidates which do not possess all of the above attributes, but
which are located in strategic geographic regions. The Company intends to build
new facilities in those regions where Management believes the Company should be
located and where there are no acquisition candidates which Management wishes
to, or can, acquire at prices satisfactory to Management; however, there can be
no assurance that the Company will have the financial or managerial resources to
successfully expand through the opening of new plants.
Management believes that there is opportunity for growth in the
international markets for cellulose insulation due to increasing
industrialization in developing countries which is stimulating increased energy
conservation, the need to reduce waste and an increasing demand for housing. The
cost of transportation will often make it most economical to expand into many
overseas markets through the establishment of plants in or near the markets
where the products are to be sold. Management believes that cellulose insulation
plants can be constructed and operated at a cost substantially less than the
cost of a new fiber glass insulation plant. Management's plans are to begin
focusing on the international market for insulation in the future.
The Company's growth strategy depends, in large part, on the Company's
ability to acquire and successfully operate additional cellulose insulation and
specialty fibers manufacturers. There can be no assurance that suitable
additional acquisitions can be concluded or successfully integrated into the
Company's operations. In addition, increased competition from other purchasers
may increase purchase prices for acquisitions to levels beyond those which
Management of the Company believes are appropriate, in which case the Company
would be required to rely primarily on growth through opening new plants and
internal growth through increased sales rather than on growth by acquisition of
existing businesses. The Company expects that growth exclusively through the
opening of new plants would be slower than the growth through both opening of
new plants and acquisitions.
RAW MATERIALS
The Company's principal raw material is recycled paper, primarily old
newspapers (ONP). The Company obtains ONP from a variety of sources that include
paper brokers, recycling companies and direct collection programs with charity
and civic groups. The cost of the raw material varies on a
7
<PAGE>
regional basis, depending on the demand and has been subject to significant
fluctuation. The Company also uses old corrugated cardboard (OCC) for various
products.
Beginning in the last half of 1994, the cost of ONP and OCC increased
dramatically, reaching all time highs in the middle of 1995 and then declined
dramatically in the latter half of 1995. The Company believes the increased cost
was primarily the result of (a) significantly higher demand from new domestic
and foreign paper mills which use recycled pulp, rather than virgin pulp, as
feedstock, (b) the shift of some existing paper mills from virgin to recycled
pulp, and (c) the inability of suppliers of recycled paper to respond quickly to
increased demand. Greater demand for recycled paper is driven in part by
consumer preference and government mandates and incentives to increase the use
of recycled paper. The Company has developed a comprehensive strategy to offset
the higher cost of this raw material including product price increases, testing
and use of alternative, lower cost fibers, long term raw material supply
contracts, and vertical integration through the acquisition of a business
involved in paper recycling and direct collection programs involving various
charity, civic and school groups. There can be no assurance that this strategy
will be successful in offsetting future increases in raw material costs.
The Company's principal raw material for the fire retardant used in the
manufacture of its insulation is borax, which comes from California where the
only borax mines in North America are located. Management believes that the
Company is one of the two major manufacturers of crude boric acid serving the
cellulose insulation industry. This raw material is processed in the Company's
facility in Chandler, Arizona providing the Company with a cost advantage over
most other cellulose manufacturers in terms of raw material shipment and cost.
PRODUCTION
The Company currently operates cellulose insulation and specialty fiber
manufacturing facilities in Chandler, Arizona; Portland, Oregon; Norfolk,
Nebraska; Elkwood, Virginia; Atlanta, Georgia; Fort Wayne, Indiana; and
Sacramento, California.
The Company's production processes take baled or loose ONP and OCC and
various chemicals through a system of mills, screens, feed bins, control
equipment, air flow and filtration equipment, decontamination systems and
packaging equipment coupled with proprietary chemical treatment systems that are
used to reduce the cellulose into a fine fiber blend that can achieve the
desired product performance characteristics. The production processes were
designed by Management to maximize manufacturing throughput and product quality
in a continuous manufacturing process. The Company frequently pursues
manufacturing equipment improvements and processing advances in order to produce
8
<PAGE>
cost competitive low density cellulose insulation products. Low density
contributes to broader coverage per pound of material.
GOVERNMENT REGULATION AND QUALITY CONTROL
The Company is subject to federal, state and local government
requirements regarding its operations and products. The Company does not
generate, store, transport or dispose of any material amounts of hazardous
waste. Most permits required in the operations of the Company relate to fire
codes and other local ordinances. In addition, the Company is required to file
reports under the Federal Resource Conservation and Recovery Act in connection
with its processing of chemical fire retardants used principally in the
manufacture of insulation. Management of the Company believes that it is in
compliance with all material regulations relating to the operation of its
business. None of the Company's products is regarded as a hazardous material by
the applicable regulations.
The Company's insulation products are subject to federal and state
governmental performance standards. In addition, the Company has voluntarily
entered into routine testing and labeling programs with independent third party
testing laboratories such as Underwriters Laboratories (UL). The Consumer
Products Safety Commission (CPSC) requires minimum adherence to four product
standards: (1) critical radiant flux, which tests the product's ability to
resist facilitating combustion in a hot attic, (2) smoldering combustion, which
tests the ability of a material to propagate smoldering combustion, (3)
corrosiveness and (4) settled density, which tests the material for settling
over time. Coupled with extensive in-house testing, the Company uses UL and
United States Testing Company (USTC) on a routine and random basis to insure
compliance with the CPSC requirements. Additionally, the Company's products are
classified as Class One building materials (the highest rating a building
material can receive for fire retardancy) in accordance with standards developed
by the American Society for Testing and Materials (ASTM). ASTM provides material
quality standards and test procedures for numerous materials including cellulose
insulation.
The Company's specialty fiber and chemical products are subject to
extensive in-house testing to insure conformity to product specifications.
COMPETITION
Competition in the insulation market comes primarily from fiber glass
and mineral wool insulation manufacturers (e.g. Owens Corning, Schuller
International and CertainTeed). The fiber glass manufacturers currently have a
significant market share and are substantially better capitalized than the
9
<PAGE>
Company. To a lesser degree, the Company competes with other cellulose
manufacturers throughout the United States, of which there are approximately 60.
Competition in the domestic specialty fibers market comes from a few small
companies that offer similar products and from alternative products such as
kevlar, nylon, polyester, granulated rubber and cotton.
MARKETING AND SALES
The Company's insulation products are either sold directly to building
material products distributors, professional contractors and manufactured home
companies, or through home centers. The Company's single largest customer
accounted for less than 10 percent of total sales in 1995 and 1994,
respectively.
The Company's industrial fibers are generally sold directly to building
material product manufacturers, professional contractors and several other major
corporations. The Company's experience indicates that the sale and marketing of
industrial fibers is technical in nature and often requires the involvement of a
polymer chemist. As a result of the technical nature of the sale, it often takes
a long lead time to develop a customer for industrial fibers.
The Company's hydro-seed mulch product is generally sold directly to
professional landscape contractors and to a national lawn and garden products
company under a private label agreement.
The regional and local markets for some of the company's products are
seasonal due to regional weather conditions. While the impact of this
seasonality may be mitigated by the Company's geographic diversification and by
future acquisitions, the Company's historical profitability on a quarterly basis
has been significantly affected by seasonality. Accordingly, the Company has
historically experienced its lowest levels of revenues and earnings in the first
and second quarters of the fiscal year.
The Company's marketing strategy is centered around a direct sales
approach wherein Company sales personnel make presentations to customers with
demonstrations of product attributes coupled with after-the-sale product
installation and application support. This direct sales approach is supported
with product literature, seminars, attendance at industry trade shows and
presentations to persons who influence insulation buying decisions, including
architects, engineers, building code officials, government procurement
officials, utilities and industry associations. The Company is not currently
using mass advertising or extensive direct mail or telemarketing to market its
products. Management believes the direct sale strategy the Company has adopted
is currently the most effective strategy to market the Company's products. In
addition, the Company provides training and follow-up services to
10
<PAGE>
customers regarding the use of the Company's products and sells or loans
equipment needed for installation of various products.
National accounts are generally not handled on a regional basis but are
assigned to a specific senior sales person for account servicing. In addition,
members of the Company's senior management are actively involved in sales and
marketing efforts, particularly with the Company's key accounts.
LICENSING AGREEMENTS AND PROPRIETARY PROCESSES
The Company holds several licenses for technology and processing
equipment that are used in the production of the Company's insulation and the
production and marketing of its industrial fibers. While Management of the
Company believes there may be some benefit to continuing under certain of the
license agreements to which it is a party, which benefits include exclusivity of
the use of such technologies in territories where the Company currently
operates, there are alternative technologies and marketing tools either
currently used by the Company or available to the Company which are acceptable
alternatives to the licensed rights and technologies. Consequently, Management
believes that none of the technologies it licenses is critical to the operations
or success of the Company.
The Company relies primarily upon trade secrets to protect its
proprietary processes and know-how. The Company does not hold any material
patents but intends in the future to pursue patent protection in those cases
where Management deems it appropriate.
RESEARCH AND DEVELOPMENT
The Company operates a research and development facility in Ft. Wayne,
Indiana, through which it conducts research and development to improve its
products and to expand its product lines and its manufacturing capacity. The
Company's goal is to accelerate developments in proprietary process
enhancements, chemical additives and formulations, and product enhancements by
drawing upon the experience of its network of manufacturing facilities.
EMPLOYEES
As of December 30, 1995, the Company employed approximately 400 persons,
of whom approximately 60 employees are in management, sales and administration
and the balance of whom are
11
<PAGE>
involved in the manufacturing process. None of the Company employees are
covered by a collective bargaining agreement. The Company believes it has a
good relationship with its employees.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's east coast executive offices and corporate headquarters
are located in approximately 4,000 square feet in Bethesda, Maryland and its
west coast executive offices are located in approximately 2,500 square feet in
Benicia, California, at market rates pursuant to short-term lease arrangements.
The Company also leases manufacturing facilities in Atlanta, Georgia;
Chandler, Arizona; Elkwood, Virginia; Norfolk, Nebraska; Portland, Oregon; Ft.
Wayne, Indiana; Benicia, California; and Sacramento, California. These leases
are at markets rates and in some cases are leased from related parties. The
Company also owns a manufacturing facility in Elkwood, Virginia, which is
secured under the terms of a mortgage loan, and a warehouse in Norfolk,
Nebraska, also secured under the terms of a mortgage. The Company also leases
space in Ft. Wayne, Indiana, where it operates a research & development
facility.
ITEM 3. LEGAL PROCEEDINGS
As a result of its acquisition of Steven A. Moore Enterprises, Inc. in
the third quarter of 1995, the Company's Pacific Rim subsidiary has succeeded to
the case of John J. Lee v. Pacific Rim Recycling, San Francisco, California
Superior Court No. 965657. This case, which requests class action status,
results from a spill of asbestos-containing materials on the San
Francisco-Oakland Bay Bridge by Pacific Rim in 1993. The case requests
unspecified damages on behalf of all persons allegedly affected by such spill.
All regulatory actions arising out of this occurrence have been finally settled.
The case is being defended by the Company's insurer and is in the early stages
of discovery. Management does not believe, at the present time, that it will
have any uninsured liability under this case. Pacific Rim no longer transports
asbestos materials.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report, no
matter was submitted to a vote of security holders of the Company
12
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S SECURITIES
The Company's Common Stock and Redeemable Common Stock Purchase Warrants
(the "Warrants") have traded on the NASDAQ National Market under the symbols
"STON" and "STONW", respectively, since the Company's initial public offering
("the Offering") on July 28, 1994. Prior to the Offering, no public market
existed for the Company's equity securities. The following table sets forth the
high and low sale prices of the Common Stock and Warrants for the fiscal
quarters, or portions thereof, since the Offering, as quoted on NASDAQ. The
quotations as reported reflect inter-dealer quotations without markup, markdown
or commission and do not necessarily represent actual transactions:
<TABLE>
<CAPTION>
Common Stock Warrants
--------------------------------------------
Period High Low High Low
- ------------------------------------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
July 28, 1994 through September 30, 1994 6.13 4.50 2.13 0.75
October 1, 1994 through December 31, 1994 6.00 4.00 2.06 1.00
January 1, 1995 through March 31, 1995 4.63 3.75 1.38 0.88
April 1, 1995 through June 30, 1995 4.63 3.38 1.38 0.88
July 1, 1995 through September 30, 1995 4.13 3.13 1.25 0.81
October 1, 1995 through December 31, 1995 3.75 2.25 1.06 0.50
</TABLE>
The last sale price of the Common Stock and Warrants on March 22,
1996 was $4.00 and $0.88, respectively. There were approximately 180 holders of
the Common Stock of record as of March 22, 1996.
GreenStone Industries has not declared or paid any dividends prior to or
since the Offering and does not intend to pay dividends for the foreseeable
future. The Company's predecessors have paid dividends or partner distributions
during the periods reported but prior to their combination with GreenStone (see
the Consolidated Financial Statements). The Company is currently restricted from
paying cash dividends under the terms of the credit agreement with its senior
lender and expects to maintain these or similar terms for the foreseeable
future.
13
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Year Ended December 30, 1995 Compared with the Year Ended December 31, 1994
Net sales increased $17.9 million or 77 percent to $41.1 million for the year
ended December 30, 1995 from $23.2 million for the year ended December 31, 1994.
The increase results from sales by businesses acquired during the current year
and late in the prior year, price increases and growth of existing operations.
Gross profit increased $3.3 million or 37 percent to $12.2 million for the year
ended December 30, 1995 from $8.9 million for the year ended December 31, 1994,
primarily due to acquisitions and price increases which were partially offset by
increased paper costs. As a percentage of net sales, gross profit declined to 30
percent for the year ended December 30, 1995 from 38 percent for the year ended
December 31, 1994. The reduction is due largely to significantly higher recycled
paper cost, the Company's primary raw material.
As a result of the negative impact on earnings caused by the increased cost of
recycled paper, management implemented a comprehensive plan to help offset
future price increases. This plan included (1) raising prices on the Company's
products, (2) searching for lower cost alternative fibers, (3) vertical
integration by acquisition of recyclers or through direct collection activities
with various community groups in areas surrounding the Company's facilities and
(4) entering into long term supply contracts with floor and ceiling prices (See
Note 13, Purchase Commitments, in the notes to the financial statements herein).
To date the Company has been able to secure more than 60 percent of its current
requirements through either long-term commitments or direct collection programs.
Selling and distribution expenses increased by $2.4 million to $6.7 million for
the year ended December 30, 1995 from $4.3 million for the same period of 1994.
This increase is due primarily to the acquisitions and higher sales volume.
General and administrative expenses increased $3.0 million to $6.0 million for
the year ended December 30, 1995 from $3.0 million for the year ended December
31, 1994. The increase results from acquisitions, costs associated with
operating as a public entity for the entire year and increased expenses related
to the Company's acquisition and growth strategy.
Interest expense increased $346,000 to $579,000 for the year ended December 30,
1995 from $233,000 for the year ended December 31, 1994 as a result of
additional debt related to the Combination and capital expenditures. Other
income decreased $131,000 to $15,000 in 1995 from $146,000 in 1994 as a result
of a decrease in interest income earned on temporary investments.
14
<PAGE>
Income taxes decreased resulting in a benefit of $353,000 for the year ended
December 30, 1995 as compared to income tax expense of $389,000 for the year
ended December 31, 1994. This decrease is due to the net loss experienced for
the year ended December 30, 1995. As a result of the current year loss, the
Company has a net operating loss carryforward of approximately $750,000 at
December 30, 1995. This benefit has been recognized as a deferred tax asset at
December 30, 1995, because management believes future taxable income will be
sufficient to utilize the net operating loss carryforward (See Note 11, Income
Taxes, in the notes to the financial statements herein).
As a result of the factors discussed above, net income decreased $1.8 million to
a loss of $(687,000) for the year ended December 30, 1995 from net income of
$1.1 million for the year ended December 31, 1994.
Liquidity and Capital Resources
During 1995, the Company acquired All Seal Insulation ("All Seal") and certain
operating assets of Fiberwood, Inc. ("Fiberwood"), both manufacturers of
cellulose insulation and specialty fibers. The Company also acquired Steven A.
Moore Enterprises, Inc. d.b.a. Pacific Rim Recycling ("Pacific Rim"), which is
engaged in the collection and resale of recycled material. Consideration paid to
acquire All Seal amounted to $350,000 in cash and 110,810 shares of Common
Stock. Consideration paid to acquire certain operating assets of Fiberwood
totaled 350,000 shares of Common Stock. Consideration paid to acquire Pacific
Rim totaled 496,759 shares of Series C Convertible Preferred Stock and a
convertible note for $1,450,000.
The Company's working capital decreased $2.4 million to $1.1 million at December
30, 1995, from $3.5 million at December 31, 1994. The decrease was attributable
to the Company's use of cash during 1995 for acquisitions and capital
expenditures and an increase in current debt related to recent acquisitions.
Net cash provided by operations decreased 73 percent or $1.1 million to $445,000
for the year ended December 30, 1995 from $1.5 million for the same period of
1994. This decrease in net cash flow was primarily due to the operating losses
incurred during 1995.
Capital expenditures increased $200,000 to $2.5 million for the year ended
December 30, 1995 from $2.3 million for the year ended December 31, 1994. This
increase was primarily due to the Company's expansion of plant capacity in
several facilities.
In January of 1996, the Company raised $1.89 million in a private placement of
its Series D Convertible Preferred Stock. The Company expects to use the
proceeds to partially fund future acquisitions and for
15
<PAGE>
general corporate purposes (See Note 15, Subsequent Events, in the notes to
the financial statements herein).
In March of 1996, the Company amended its senior credit facility with a
commercial bank, extending the revolving line of credit through December of
1997.
Historically, the Company and its predecessors have financed their operations
with internally generated funds and with working capital lines of credit for
short-term financing needs. To date, the Company has been able to obtain
additional financing for the operation of its business. Management believes that
the funds on hand, including capital raised in January of 1996, together with
expected operating cash flows in 1996, will provide the Company with adequate
liquidity to operate its business for at least the next twelve months. In the
longer term, the Company may seek to finance business expansion, including
potential acquisitions, with additional borrowing arrangements or equity
financing.
16
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors...................................18
Consolidated Financial Statements:
Consolidated Balance Sheets, December 30, 1995
and December 31, 1994............................................................19-20
Consolidated Statements of Operations,
Years ended December 30, 1995 and December 31, 1994.................................21
Consolidated Statements of Stockholders' Equity,
Years ended December 30, 1995 and December 31, 1994.................................22
Consolidated Statements of Cash Flows,
Years ended December 30, 1995 and December 31, 1994.................................23
Notes to Consolidated Financial Statements.......................................24-38
</TABLE>
17
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
GreenStone Industries, Inc.
We have audited the accompanying consolidated balance sheets of GreenStone
Industries, Inc. as of December 30, 1995 and December 31, 1994 and the related
consolidated or combined statements of operations, stockholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of GreenStone
Industries, Inc. at December 30, 1995 and December 31, 1994, and the
consolidated or combined results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
Ernst & Young LLP
Washington, D.C.
February 26, 1996
18
<PAGE>
GREENSTONE INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
-------------- ---------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 275,697 $ 1,823,311
Accounts receivable
Trade, net of allowance of $243,900 and $208,700 at
December 30, 1995 and December 31, 1994, respectively 5,203,174 3,420,538
Other 72,078 74,415
-------------- ---------------
Total accounts receivable 5,275,252 3,494,953
Notes receivable (Note 6) 105,280 170,784
Deferred income taxes (Note 11) 750,500 -
Inventories (Note 7) 1,452,924 803,158
Prepaid expenses and other assets 688,487 494,447
-------------- ---------------
Total current assets 8,548,140 6,786,653
Property, plant and equipment
Property, plant and equipment at cost (Note 8) 14,885,015 9,410,531
Accumulated depreciation (4,016,827) (2,564,002)
-------------- ---------------
Net property, plant and equipment 10,868,188 6,846,529
Intangible assets, net 4,179,650 70,422
Deferred income taxes (Note 11) 381,576 1,153,779
Deposits 519,547 491,273
Other noncurrent assets, net 169,537 111,432
-------------- ---------------
Total assets $24,666,638 $15,460,088
============== ===============
</TABLE>
Accompanying notes are an integral part of these financial statements
19
<PAGE>
GREENSTONE INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
-------------- ---------------
<S> <C> <C>
Current liabilities
Accounts payable
Trade $ 2,490,965 $ 2,020,708
Other 1,400,121 638,411
-------------- ---------------
Total accounts payable 3,891,086 2,659,119
Accrued liabilities 1,115,896 402,488
Deferred revenue 257,479 -
Line of credit 594,500 -
Current maturities of notes to related parties (Note 4) 1,034,417 33,104
Current maturities of long-term debt (Note 5) 468,835 177,267
-------------- ---------------
Total current liabilities 7,362,213 3,271,978
Notes to related parties, less current maturities
(Note 4) 2,561,043 1,515,000
Long-term debt, less current maturities (Note 5) 5,474,280 3,244,800
Excess of acquired net assets over cost - 974,621
-------------- ---------------
Total liabilities 15,397,536 9,006,399
Commitments and contingencies (Notes 5,9,13,14) - -
Stockholders' equity (Note 10)
Preferred stock, $.01 par value, 5,000,000 shares
authorized,
Series A - 54,546 shares issued and outstanding at
December 30, 1995 and December 31, 1994 545 545
Series B - 16,000 shares issued and outstanding at
December 30, 1995 and December 31, 1994 160 160
Series C - 496,759 and 0 shares issued and
outstanding at December 30, 1995 and December 4,968 -
31, 1994, respectively
Common Stock $.001 par value, 20,000,000 shares authorized,
5,482,000 and 5,031,000 shares issued and outstanding
at December 30, 1995 and December 31, 1994, respectively 5,482 5,031
Additional paid in capital 9,238,772 5,741,827
Retained earnings 19,175 706,126
-------------- ---------------
Total stockholders' equity 9,269,102 6,453,689
============== ===============
Total liabilities and stockholders' equity $24,666,638 $15,460,088
============== ===============
</TABLE>
Accompanying notes are an integral part of these financial statements
20
<PAGE>
GREENSTONE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
December 30, December 31,
1995 1994
--------------- ---------------
<C> <C> <C>
Net sales $41,076,803 $23,159,829
Cost of sales 28,875,846 14,254,147
--------------- ---------------
Gross profit 12,200,957 8,905,682
Operating expenses
Selling and distribution 6,673,762 4,340,326
General and administrative 6,003,395 2,971,242
--------------- ---------------
Income (loss) from operations (476,200) 1,594,114
Interest expense 578,544 233,343
Other income (15,249) (146,350)
--------------- ---------------
Income (loss) before income taxes (1,039,495) 1,507,121
Income tax expense (benefit) (352,544) 389,485
--------------- ---------------
Net income (loss) $ (686,951) $ 1,117,636
=============== ===============
Pro forma (unaudited) (Note 16):
Historical income before income taxes $ 1,507,121
Pro forma adjustments:
Elimination of amortization, depreciation and interest 256,453
Reduction in compensation expense 345,000
Interest on new debt (183,962)
Amortization of excess of acquired net assets over cost 37,333
---------------
Pro forma income before taxes 1,961,945
Pro forma income taxes 749,688
---------------
Pro forma net income $ 1,212,257
===============
Net income (loss) per share (pro forma for 1994) $(0.12) $0.30
=============== ===============
Weighted average common equivalent shares outstanding 5,522,285 4,021,683
=============== ===============
</TABLE>
Accompanying notes are an integral part of these financial statements
21
<PAGE>
GREENSTONE INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Series A Series B Series C Additional
Preferred Preferred Preferred Common Partners Paid in Retained
Stock Stock Stock Stock Capital Capital Earnings Total
- -------------------- --------- --------- --------- ----------- ----------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1993 $ - $ - $ - $20,129 $2,136,241 $ 35,257 $ 690,343 $ 2,881,970
Net income 224,291 893,345 1,117,636
Dividends and
distributions
to owners and
partners prior
to the (3,569) (1,021,130) (500,000) (1,524,699)
Combination
Reallocation of
owners' equity
accounts at
the Combination 545 (17,284) (2,356,963) 2,751,264 (377,562)
Consideration to
former owners
at the (6,355,589) (6,355,589)
Combination
Proceeds from the
issuance of 2,128 9,936,243 9,938,371
stock
Shares issued in
acquisitions 160 58 395,782 396,000
-------- -------- -------- ---------- ---------- ----------- -------- -----------
Balance at
December 31, 545 160 - 5,031 - 5,741,827 706,126 6,453,689
1994
Net loss (686,951) (686,951)
Shares issued in
acquisitions 4,968 451 3,496,945 3,502,364
-------- -------- -------- ---------- ---------- ----------- -------- -----------
Balance at December
30, 1995 $545 $160 $4,968 $ 5,482 $ - $ 9,238,772 $ 19,175 $ 9,269,102
-------- -------- -------- ---------- ---------- ----------- -------- -----------
-------- -------- -------- ---------- ---------- ----------- -------- -----------
</TABLE>
Accompanying notes are an integral part of these financial statements
22
<PAGE>
GREENSTONE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
December December
30, 1995 31, 1994
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income (loss) $ (686,951) $1,117,636
Adjustments to reconcile net income to net cash provided
by operations
Depreciation and amortization 1,659,978 749,342
Provision for deferred income taxes (150,500) 230,047
Provision for bad debts 35,200 2,755
Gain on the sale of property, plant and equipment (29,109) (6,858)
Change in operating assets and liabilities
Receivables (396,098) (934,096)
Inventories (492,665) (358,434)
Prepaid expenses and other assets (4,382) (355,515)
Deferred revenue (5,742) -
Accounts payable 310,502 1,117,833
Accrued liabilities 204,428 (37,661)
-------------- --------------
Net cash provided by operating activities 444,661 1,525,049
INVESTING ACTIVITIES
Payment to owners at the Combination - (5,752,000)
Payments for businesses acquired, net of cash received (769,195) (1,968,707)
Expenditures for property, plant and equipment (2,465,664) (2,303,503)
Proceeds from the sale of assets 292,161 157,077
Combination costs - (349,831)
-------------- --------------
Net cash used in operating activities (2,942,698) (10,216,964)
FINANCING ACTIVITIES
Advances under short term borrowings 1,861,060 550,000
Repayment of short term borrowings (2,399,555) (550,000)
Borrowing under long-term debt 3,120,000 3,500,000
Repayment of long-term and related party debt (1,495,229) (1,503,254)
Debt issuance cost (135,853) (110,505)
Dividends and distributions paid prior to the Combination - (1,524,699)
Proceeds from capital contributions - 1,000,000
Proceeds from initial public offering - 9,478,013
Deferred offering costs - (539,642)
-------------- --------------
Net cash provided by financing activities 950,423 10,299,913
-------------- --------------
Net (decrease) increase in cash and cash equivalents (1,547,614) 1,607,998
Cash and cash equivalents at beginning of year 1,823,311 215,313
-------------- --------------
Cash and cash equivalents at end of year $ 275,697 $1,823,311
============== ==============
</TABLE>
Accompanying notes are an integral part of these financial statements
23
<PAGE>
GREENSTONE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
GreenStone Industries, Inc. ("GreenStone" or "the Company") manufactures and
distributes secondary cellulose fiber products, primarily cellulose insulation,
hydro-seeding mulch and industrial fibers. These products are manufactured
principally from recycled newspaper. The Company also operates a recycling
business in northern California, however, the Company substantially operates in
the specialty fiber and cellulose insulation industry.
Reorganization
Coincident with its initial public offering in July 1994 ("Offering"), the
Company acquired the operations of United Fibers ("United") and Parco, Inc.
("Parco"), which provided production facilities in Phoenix, Arizona, Portland,
Oregon and Norfolk, Nebraska (the "Combination"). United was a partnership owned
by two corporate partners, Joel Tranmer Enterprises, Inc. ("JTE") and Fibers,
Inc. ("Fibers"). GreenStone acquired by merger all outstanding shares of JTE and
the 50% partnership interest in United owned by Fibers. Parco was a S
corporation owned by one individual. GreenStone acquired by merger all
outstanding shares of Parco.
Acquisitions
During the fourth quarter of 1994, GreenStone acquired American Environmental
Products, Inc. ("AEP") of Elkwood, Virginia and Southern Cellulose, Inc.
("SCI") of Atlanta, Georgia. These facilities are engaged in the manufacture
and distribution of secondary cellulose fiber products.
During 1995, GreenStone acquired All-Seal Insulation, Inc. ("ASI") of Fort
Wayne, Indiana, Steven A. Moore Enterprises, Inc. d.b.a. Pacific Rim
Recycling ("Pacific Rim") of Benicia, California and certain operating assets
of Fiberwood, Inc. ("Fiberwood") of Sacramento, California. ASI and
Fiberwood are engaged in the manufacture and distribution of secondary
cellulose fiber products. Pacific Rim is engaged in the collection and resale
of recycled materials, including old newspaper, glass and plastic.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The combination of GreenStone, JTE, Parco and United has been accounted for as
if the combined companies had all been member of the same operating group. This
accounting is based on (a) the fact that the operations of GreenStone subsequent
to the reorganization described in Note 1 above were substantially identical to
the combined operations of Parco and United and (b) the significance of
GreenStone's equity interest held by Fibers and the former shareholders of JTE
and Parco. Accordingly, historical financial statements of GreenStone, JTE,
Parco and United have been combined for the periods prior to the Offering.
24
<PAGE>
For the periods subsequent to the Offering, the financial statements reflect the
consolidation of GreenStone and its wholly owned subsidiaries. All intercompany
balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles require management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments purchased with original
maturities of three months or less.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
value.
Property, Plant and Equipment
Property, plant and equipment are stated at historical cost. Property, plant and
equipment under capital leases are stated at the lower of the present value of
minimum lease payments at the inception of the lease or the fair value of the
leased equipment. The cost of additions and improvements is capitalized, while
maintenance and repairs are charged to expense as incurred. Depreciation is
provided using the straight line method over the following estimated useful
lives:
Machinery and equipment........................................7 to 15 years
Buildings...........................................................20 years
Vehicles.......................................................5 to 10 years
Office equipment................................................3 to 7 years
Property and equipment held under capital leases are amortized over the shorter
of the lease term or estimated useful life of the asset. Such amortization is
included in depreciation expense.
Excess of Acquired Net Assets Over Cost
The excess of acquired assets over cost is amortized on the straight line method
over the period of expected benefit, not in excess of 25 years.
Intangible Assets
Intangible assets consist primarily of goodwill representing the excess of cost
over net assets of businesses acquired. Goodwill is amortized on the straight
line method over the period of expected benefit, not in excess of 25 years.
25
<PAGE>
Net Income Per Share
Net income per share is calculated using the weighted average common equivalent
shares outstanding. Fully diluted net income per share is not reported for all
periods presented, because it is not materially different from primary income
per share.
Income Taxes
The provision for income taxes is determined based on pretax accounting income
utilizing the liability method. Under this method, deferred tax assets and
liabilities are determined based on differences between the financial reporting
and tax basis of assets and liabilities and are measured using the enacted tax
rates and laws expected to be in effect when these differences reverse.
For all acquired or combined companies, the federal and state income taxes were
the responsibility of the respective shareholders or partners for all periods
prior to the acquisition or combination. Subsequent to the acquisition or
combination, all operations are included in a consolidated federal income tax
return.
Stock Compensation
The Company follows the provisions of Accounting Principles Board Opinion No. 25
and accordingly records no compensation expense for stock options if the
exercise price is greater than or equal to the estimated fair value of the
Company's Common Stock at the measurement date (the date of grant under the
existing stock option plan).
Fair Value of Financial Instruments
The Company considers the recorded value of its financial assets and
liabilities, consisting primarily of cash and cash equivalents, accounts
receivable, accounts payable and long term debt, to approximate the fair value
of the respective assets and liabilities at December 30, 1995.
Accounting Standards Not Adopted
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of,"
was issued by the Financial Accounting Standards Board in March of 1995. The
standard, which establishes criteria for recognizing, measuring and disclosing
impairment of long-lived assets, is effective for fiscal years beginning after
December 15, 1995. The Company plans to adopt this standard on January 1, 1996
but does not anticipate a material impact on its financial position or
operations at the date of adoption.
3. ACQUISITIONS
On July 28, 1994, coincident with the closing of the Offering, GreenStone
acquired by merger all outstanding shares of Parco and JTE and 50 percent
partnership interest in United owned by Fibers (the "Combination"). The
consideration paid by the Company consisted of a combination of GreenStone
Common Stock, GreenStone Preferred Stock, notes and cash as described below.
26
<PAGE>
Parco
The Company acquired all of the common stock of Parco for $1,500,000 in cash,
546,000 shares of Common Stock and 54,546 shares of Series A Preferred Stock.
The principal stockholder of Parco has been retained as an officer of the
Company.
JTE
The Company paid $1,500,000 in cash, $237,500 in notes and issued 883,900 shares
of Common Stock to the former owner of JTE for all of JTE's common stock. JTE's
principal asset was its 50 percent share of United. The former owner of JTE
currently serves as an officer and director of the Company.
Fibers
The Company paid $2,752,000 in cash, $1,237,500 in notes and issued 359,000
shares of Common Stock to Fibers or its shareholders for its 50 percent share of
United. The Company entered into a two year consulting agreement with one of the
former owners of Fibers.
Since the Combination the Company has acquired the following companies or
manufacturing plants:
<TABLE>
<CAPTION>
Method of
Company Date Consideration Accounting
--------------------- ------------------ --------------------------- --------------
<S> <C> <C> <C>
American October 1994 $2,000,000 cash, Purchase
Environmental $500,000 note payable,
Products, Inc. 16,000 shares of Series
(AEP) B, Preferred Stock
Southern Cellulose, November 1994 $280,000 cash, Purchase
Inc. $50,000 note payable,
(SCI) 57,800 shares of Common
Stock
All Seal February 1995 $350,000 cash, Purchase
Insulation, Inc. 100,810 shares of Common
("ASI") Stock
Pacific Rim July 1995 $1,450,000 note payable, Purchase
Recycling, Inc. 496,759 shares of Series
("Pacific Rim") C Preferred Stock
Fiberwood, Inc. October 1995 350,000 shares of Common Purchase
("Fiberwood") Stock
</TABLE>
The financial statements include the operations of these companies from the date
acquired. The purchase price has been tentatively allocated to assets acquired
and liabilities assumed.
27
<PAGE>
The following unaudited pro forma information adjusts the operating results as
shown in the Consolidated Statements of Operations to give effect to the
acquisitions described above, as if these transactions had occurred at the
beginning of 1994. The unaudited information below is not necessarily indicative
of the results which would have occurred had the acquired companies or
operations actually been owned during the periods presented or the future
results of operations.
<TABLE>
<CAPTION>
Year Ended Year Ended
December 30, 1995 December 31, 1994
----------------- ----------------
<S> <C> <C>
Net sales $47,491,000 $40,494,000
Pro forma net income (loss) (174,000) 1,545,500
Pro forma net income (loss) per share $(0.03) $0.31
</TABLE>
28
<PAGE>
4. NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties as of December 30, 1995 and December 31, 1994,
consist of the following:
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
--------------- ---------------
<S> <C> <C>
Notepayable to the former owner of
Pacific Rim, convertible into Common Stock
at a conversion price of $6.50 per share
until July 19, 1997 and $7.50 per share
thereafter. The note matures on June 30,
2000, and bears interest at prime rate
(8.75% at December 30, 1995). $1,450,000 $ -
Notepayable to Fibers, convertible
into 130,000 shares of Common Stock,
interest at 6% payable quarterly.
Principal payments begin October 1, 1996
and continue for eight quarters. 1,000,000 1,000,000
Note payable to former owner of Pacific Rim, settled in
January, 1996. 536,000 -
Notes payable to Fibers and the
former shareholder of JTE, maturing
December 31, 2000, interest at 7% payable
quarterly, secured by the assets
of the Portland facility. Beginning
January 1, 1996, principal payments will
be based upon the cash flows of the
Portland facility. 475,000 475,000
Notepayable to a former owner of Fiberwood,
maturing November 1, 1997, bearing interest
at 8% payable
monthly. 94,400 -
Note payable to the former owner of SCI, convertible
into Common Stock at a conversion price of
$8.00 per share. The note matures on December 31,
1999, and accrues interest at 5%, with interest and 40,000 50,000
principal paid annually.
Other - 23,100
--------------- ---------------
3,595,400 1,548,100
Less: current portion 1,034,400 33,100
=============== ===============
$2,561,000 $1,515,000
=============== ===============
</TABLE>
29
<PAGE>
5. LONG-TERM DEBT
Long-term debt as of December 30, 1995 and December 31, 1994 consists of the
following:
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
---------------- ----------------
<S> <C> <C>
Revolving credit agreement with a commercial
bank, bearing interest at prime
(8.75% at December 30,
1995), payable monthly. $4,594,500 $2,000,000
Conventional mortgage, interest at 9.3%,
payable monthly, maturing May 1, 2010,
secured by land and building at the
Elkwood facility. 763,000 -
Variable rate Industrial Bond, settled in 1995. - 770,000
Note payable to the former shareholder of AEP,
maturing September 30, 1997, interest at 6%
payable quarterly, unsecured. 500,000 500,000
Conventional mortgage, interest at prime (8.75% at December 30, 1995), payable
monthly, maturing August 30, 2001, secured by land and building at
the Norfolk facility. 343,000 -
Notepayable to the State of Indiana, payable in quarterly installments through
April 1, 2002, interest at 5.75% payable quarterly, secured
certain assets at the Fort Wayne facility. 246,000 -
Miscellaneous notes and equipment leases. 91,100 152,100
---------------- ----------------
6,537,600 3,422,100
Less: current portion 1,063,300 177,300
================ ================
$5,474,300 $3,244,800
================ ================
</TABLE>
The Company maintains a $5,500,000 senior credit facility with a commercial
bank (the Credit Agreement). As of December 31, 1995, the Company had
borrowed $4,594,500 against the Credit Agreement. Outstanding principal
amounts bear interest at prime, and the Company is required to pay commitment
fees of .5% on the unused facility. As of December 31, 1995, the Company had
$905,500 available under the Credit Agreement. The Credit Agreement is
secured by the assets of the Company, excluding the assets of the Portland
facility. Unless secured by other borrowings, the assets of companies
acquired also are secured by the Credit Agreement.
In March of 1996, Company amended the agreement, extending the maturity
through December 1997, and amended certain other provisions including the
financial covenants. The Company is required to maintain certain financial
covenants pertaining to net worth, leverage, current ratio and interest
coverage
30
<PAGE>
and currently is restricted from paying cash dividends. The Company has
classified $4,000,000 under the Amended Credit Agreement as a long term
liability, because it expects this amount to remain outstanding through
December 31, 1996.
Maturities of long-term debt, including notes payable to related parties, are
as follows:
1996 $ 2,097,700
1997 5,265,700
1998 809,800
1999 605,800
2000 632,200
Thereafter 721,900
-----------------
$10,133,100
=================
Interest paid during 1995 and 1994 was $548,600 and $219,200, respectively.
6. NOTES RECEIVABLE
Notes receivable as of December 30, 1995 and December 31, 1994 consist of the
following:
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
------------------ -----------------
<S> <C> <C>
Notes receivable from an Officer and
Director of the Company, due on
demand, unsecured. $ 50,000 $ -
Notes receivable from a customer, with a
coupon rate of 8.5%, due June 1996,
unsecured. - 131,400
Other 55,300 39,400
------------------ -----------------
$105,300 $170,800
================== =================
7. INVENTORIES
Inventories as of December 30, 1995 and December 31, 1994 consist of the
following:
December 30, December 31,
1995 1994
------------------ ----------------
Raw materials $1,022,700 $509,700
Finished goods 329,200 216,400
Insulation equipment 101,100 77,100
------------------ ----------------
$1,453,000 $803,200
================== ================
</TABLE>
31
<PAGE>
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 30, 1995 and December 31, 1994
consist of the following:
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
----------------- ---------------
<S> <C> <C>
Machinery and equipment $ 9,809,000 $6,114,700
Buildings 1,312,900 1,303,600
Vehicles 2,521,600 1,139,400
Office furniture and equipment 647,300 380,800
Leasehold improvements 239,800 297,400
Land 174,600 174,600
Construction in progress 179,800 -
----------------- ---------------
14,885,000 9,410,500
Accumulated depreciation (4,016,800) (2,564,000)
----------------- ---------------
$10,868,200 $6,846,500
================= ===============
</TABLE>
9.LEASES
The Company leases certain manufacturing and office facilities under operating
leases. Total rent expense under all operating leases, including leases with
related parties (see Note 12), for the fiscal years ended December 30, 1995 and
December 31, 1994 was $1,121,000 and $275,000, respectively.
Minimum future lease payments on operating lease commitments, including leases
with related parties (see Note 12) are as follows:
Year ending December 31,
1996 $ 753,400
1997 629,000
1998 394,000
1999 232,400
2000 12,000
==================
$2,020,800
==================
10. STOCKHOLDERS' EQUITY
Common Stock
On July 28, 1994, the Company completed an initial public offering of 925,000
Units, each Unit consisting of two shares of Common Stock and one Redeemable
Common Stock Purchase Warrant, at a price of $10.125 per Unit. The net proceeds
of the Offering were used, in part, to fund acquisitions and for consideration
to the former owners of JTE, Fibers and Parco. On August 23, 1994, the Company
32
<PAGE>
completed the sale of an additional 138,750 Units under the terms of the
over-allotment agreement with the underwriter.
Each Redeemable Common Stock Purchase Warrant (the "Warrants") entitles the
holder thereof to purchase one share of GreenStone Common Stock at an exercise
price of $6.50 until July 20, 1997, and at an exercise price of $7.50 from July
21, 1997 through July 20, 1999, the expiration date of the Warrants. The Company
may redeem the Warrants at $.05 per warrant subject to the Common Stock trading
at $10.00 or greater for 20 of 30 consecutive trading days.
Coincident with the Offering, the Company issued an aggregate of 1,789,800
shares of Common Stock to the former shareholders of JTE, Fibers and Parco.
Under the terms of the agreement with its underwriters, the Company issued
warrants to purchase 92,500 Units at an exercise price of $16.71 per Unit (the
"Underwriters' Warrants"). The exercise price of the Warrant included in each
Unit is $8.25. The Underwriters' Warrants expire on July 20, 1999.
Prior to the Offering, the Company issued to certain individuals options to
purchase 300,000 shares of Common Stock at a price of $5.00 per share,
exercisable upon the Company meeting certain earnings or stock price targets
(the "Performance Options"). The Performance Options vest upon attaining
profitability targets through 1997 as defined in the options or if the Company's
Common Stock trades at an average of $12.50 per share for any consecutive 20 day
trading period ending on or before August 1, 1999, the expiration date of the
Performance Options. None of the options are vested at December 31, 1995.
Preferred Stock
In July of 1994, the Company issued 54,546 shares of Series A Convertible
Preferred Stock to the former owner of Parco. The Series A Convertible Preferred
Stock pays no dividend and entitles the holder to one vote per share on all
matters requiring stockholder vote or approval. The Series A Convertible
Preferred Stock is convertible into Common Stock of GreenStone in increments of
18,182 per year for each of the three years ending December 31, 1996, subject to
the Company meeting certain earnings before interest and taxes from retail
sales. The conversion ratio is adjustable based on the level of earnings, with a
maximum conversion of two shares of Common Stock for each share of Series A
Convertible Preferred Stock. As of December 31, 1995, earnings from retail sales
were sufficient to allow conversion of 36,364 shares of the Series A Convertible
Preferred into 72,728 shares of Common Stock. The Series A Convertible Preferred
Stock has no preference over the Common Stock in the event of liquidation of the
Company.
In October of 1994, the Company issued 16,000 shares of Series B Convertible
Preferred Stock to the former shareholder of AEP. The Series B Convertible
Preferred has no voting rights and is entitled to receive annual dividends of
$.469 per share. Accruing dividends are cumulative and are payable (i) if, as
and when declared by the Board of Directors of the Company (ii) upon the
liquidation, dissolution or winding up of the Company or (iii) upon redemption
of the Series B Convertible Preferred Stock by the Company. The Series B shares
are convertible by the holder into an equal number of Common shares. The Company
has the right, at any time, to redeem the Series B Convertible Preferred Stock
at a rate of $15.625 per share plus all accrued but unpaid dividends. The Series
B Convertible Preferred Stock has preference over Common Stock in liquidation or
winding up of the Company of $15.625 per share plus accrued but unpaid
dividends.
33
<PAGE>
In July of 1995, the Company issued 496,759 shares of Series C Convertible
Preferred Stock to the former owners of Pacific Rim. The Series C Preferred
Stock is initially convertible to 496,759 shares of Common Stock. On March 31,
1997, all Series C Convertible Preferred Stock will be converted automatically,
and the conversion ratio of the Series C Preferred Stock will be adjusted to
allow the conversion value of the Common Stock to equal $2,050,000, if the
average closing price of the Company's Common Stock is less than $4.125 or
greater than $8.50 during the first quarter of 1997. The Series C Preferred
Stock has voting rights equal to those of Common shares. The Company has the
right to redeem all or a portion of the Series C Preferred Stock at a price of
$4.12675 per share if the price of the Common Stock exceeds $8.50 per share for
any consecutive 90-day period.
Stock Option Plan
In 1993, GreenStone adopted a stock option plan for the benefit of certain
directors, officers and employees, under which 500,000 shares of Common Stock
have been reserved. The exercise price must be at least equal to the fair market
value at the time of grant. As of December 30, 1995, options to purchase 205,433
shares have been granted at exercise prices ranging from $2.50 to $4.38 per
share, and options to acquire 27,000 shares were exercisable.
Common Stock Reserved
The Company has reserved 2,826,611 shares for the exercise of warrants and
options outstanding as well as conversion of debt and preferred stock.
11. INCOME TAXES
The provision for federal and state income taxes for the years ended December
30, 1995 and December 31, 1994 consist of the following:
Year ended
December 30, December 31,
1995 1994
----------------- ----------------
Current:
Federal $(180,400) $125,800
State (21,600) 33,700
----------------- ----------------
(202,000) 159,500
Deferred:
Federal (123,600) 198,000
State (26,900) 32,000
----------------- ----------------
(150,500) 230,000
----------------- ----------------
$(352,500) $ 389,500
================= ================
34
<PAGE>
The following is a reconciliation of the provision for income taxes to the
provision calculated at the federal statutory rate:
Year Ended
December 30, December 31,
1995 1994
----------------- ------------------
Provision for income
taxes at federal $(353,400) $512,400
statutory rate
State taxes, net of
federal income tax (30,000) 43,400
benefit
Partnership and S corp.
earnings - (181,400)
Other 30,900 15,100
----------------- ------------------
$(352,500) $389,500
================= ==================
During the years ended December 30, 1995 and December 31, 1994 income taxes paid
totaled $59,000 and $205,000, respectively.
Deferred tax assets and liabilities are comprised of the following at December
30, 1995 and December 31, 1994:
December 30, December 31,
1995 1994
--------------- -----------------
Deferred tax assets:
Net operating loss
carryforward $ 750,500 $ -
Excess of tax over book
basis - property, plant
and equipment 845,300 1,423,700
--------------- -----------------
Total deferred tax assets 1,595,800 1,423,700
Deferred tax liabilities:
Excess of book over tax
basis - property, plant
and equipment 463,700 269,900
--------------- -----------------
Net deferred tax asset $1,132,100 $1,153,800
=============== =================
Management believes that future taxable income will be sufficient to utilize the
net operating loss carryforward and deductible differences as they reverse.
Accordingly, no valuation allowance is recorded. The tax benefit recorded in
1995 included $150,000 related to 1995 taxable losses that will be carried
forward. The remaining net operating loss carryforward benefit relates to the
reversal of temporary differences. The net operating loss carryforward will
expire in 2010.
35
<PAGE>
12. RELATED PARTY TRANSACTIONS
The Company leases manufacturing and office facilities in Nebraska from a
company affiliated with the former owner of Parco, now a shareholder and officer
of the Company, under an operating lease which expires August 31, 1999. The
lease requires annual rentals of $70,000. Rent expense on this lease during 1995
and 1994 was $70,000 and $57,200, respectively.
The Company subleases its manufacturing facility in Arizona from a corporation
affiliated with one of the former partners of United, now a shareholder of the
Company. The lease expires July 28, 1999 and requires GreenStone to pay related
property taxes and utilities. Rent expense under this agreement was
approximately $133,400 during both 1995 and 1994.
The Company paid $236,000 and $234,200 in 1995 and 1994, respectively, for legal
and investment services to a director and shareholder of the Company and to a
firm in which the director is a partner.
The Company has an agreement that requires it to purchase through 1999 a minimum
of certain raw materials used for products manufactured at its Arizona facility
from a corporation affiliated with one of the former partners of United, now a
stockholder of the Company. The aggregate annual commitments based upon then
current market prices were $2,471,000 and $1,890,000 during 1995 and 1994,
respectively. Purchases of raw materials under this agreement were approximately
$3,397,000 and $2,289,000 during 1995 and 1994, respectively.
13. PURCHASE COMMITMENTS
The Company has paper purchase agreements with suppliers ranging in term from
one to two years. Under these agreements during 1996, the Company is obligated
to purchase approximately 1,100 tons per month at fixed prices ranging from $40
to $70 per ton, 1,600 tons per month at variable prices ranging from $30 to $95
per ton and 500 tons per month at variable prices ranging from $30 to $115 per
ton (see also Note 12).
14. CONTINGENCIES
The Company is involved in litigation primarily arising in the normal course of
business. Certain matters involving personal injuries involving acquired
subsidiaries of the Company are covered by insurance in force at the time of the
related incidents. In the opinion of Management, the Company's liability, if
any, under any pending litigation would not materially affect its financial
condition or results of operations.
15. SUBSEQUENT EVENT
In January of 1996, the Company sold 188,500 shares of Series D Convertible
Preferred Stock for $10 per share through a private placement. The Series D
Convertible Preferred Stock has no voting rights and accrues dividends of $0.70
per share, with no dividend accrued in the first year. Each share is convertible
into the number of shares of Common Stock equal to the $10 face value per share
divided by
36
<PAGE>
80 percent of the market price of the Common Stock for the 15 days prior to
the notice of conversion. No more than one third of the shares may be
converted in the first 90 days following closing, and no more than one third
may be converted in any 30 day period thereafter.
16. 1994 PRO FORMA NET INCOME PER SHARE (UNAUDITED)
Prior to consummation of the Offering and Combination, 3,262,700 shares were
used in computing pro forma net income per share for all periods. Such shares
represented shares outstanding prior to the Offering, shares issued in
connection with the Combination, the number of shares from the offering
necessary to fund the cash portion of the amounts paid to the owners of JTE,
Fibers and Parco not funded by the bank and private equity financing, and shares
considered outstanding as a result of applying the treasury stock method to
outstanding options. After consummation of the Offering and Combination, net
income per share is computed based upon the weighted average number of shares
outstanding plus common stock equivalents related to preferred stock, stock
options and warrants and convertible debt.
Pro Forma Statement of Operations Adjustments
The pro forma statement of operations information presents the pro forma effects
on the historical combined operating results as if the Combination and Offering
were consummated as of January 1, 1994. The pro forma adjustments give effect to
the following:
(1) the exclusion of costs associated with certain assets and liabilities of
United;
(2) reduced payments to certain individuals consistent with contractual
commitments of GreenStone going forward;
(3) increased interest expense associated with net borrowings; (4) amortization
of excess of acquired net assets over cost; and
(5) income taxes to eliminate the benefit of S corporation and partnership
status for income tax purposes.
Exclusion of costs associated with certain assets and liabilities of United -
Under the agreements between GreenStone and the former owners of United, certain
assets and related liabilities of United were transferred to the former owners
at Combination. The assets consist primarily of intangible assets related to a
previously acquired entity, and the liabilities consist of the remaining debt
related to this acquisition. Pro forma adjustments have been made to eliminate
amortization and depreciation of these assets and interest expense on the debt
in the amount of $256,500 for the year ended December 31, 1994. The debt related
to this acquisition was not assumed by GreenStone in the Combination.
Contractual payments - An adjustment has been made for payments in excess of the
annual amount authorized under employment contracts effective upon closing of
the Offering in the amount of $345,000 for the year ended December 31, 1994.
Interest expense - In connection with the Combination, the Company incurred
additional indebtedness. Pro forma earnings include an adjustment for interest
expense amounting to $184,000 for the year ended December 31, 1994.
37
<PAGE>
Excess of acquired net assets over cost - Consummation of the Combination
resulted in the establishment of excess of acquired net assets over cost which
will be amortized over 25 years. The adjustment related to the amortization at
December 31, 1994 was $37,300.
Income taxes - Effective with the closing of the Combination, Parco terminated
its S corporation status. The earnings of United previously allocated to Fibers
also became taxable income of GreenStone after consummation of the acquisition
of Fiber's 50 percent interest in United. The pro forma adjustments reflect full
taxation of profits throughout the periods presented.
ITEM 8. DISAGREEMENT WITH ACCOUNTANTS
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company's Board of Directors consists of six persons, four of whom are not
employed by the Company. The following tables and accompanying text set forth
certain information with respect to the directors, executive officers and key
employees of the Company:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Eric M. Oganesoff 46 Chairman of the Board and Chief Executive Officer
Joel Tranmer 51 President and Chief Operating Officer, Director
Al Collison 47 Vice President
Steven A. Gerber 42 Executive Vice President
John R. Bernardi 38 Chief Financial Officer and Secretary
Richard L. Campbell 40 General Counsel, Director
Fred L. Prins 56 Director
William D. Phillips 42 Director
Donald C. Frueh 48 Director
</TABLE>
Eric M. Oganesoff was elected chairman of the board and chief executive officer
of the Company in May 1993. From 1989 to 1993, he was president of Washington
Resources Group (WRG), a diversified company with several operating subsidiaries
and venture investments. WRG is a subsidiary of the Washington Gas Company. From
1987 to 1993, Mr. Oganesoff was initially a vice president, then president and
managing director of American Environmental Products, one of WRG's subsidiaries,
a manufacturer of cellulose insulation, specialty fibers and various consumer
products made from cellulose. During this time, Mr. Oganesoff was also president
of several other subsidiary companies of WRG and responsible for its venture
capital investment activities. In the early 1980's, Mr. Oganesoff served,
pursuant to an executive appointment from the White House, as special assistant
to the associate administrator of NASA. Mr. Oganesoff holds a Bachelor of
Science degree in Electrical Engineering from the University of Maryland and a
Masters in Business Administration from Southern Illinois University. He is also
a registered professional engineer in the District of Columbia.
38
<PAGE>
Joel Tranmer became a director of the Company in April 1994 and became president
and chief operating officer in July 1994. From 1987 to 1994, he was the
president and chief operating and executive officer of United Fibers, one of the
companies acquired by the Company. In 1976, Mr. Tranmer founded Weathercheck
Wood Fiber Products and was its president until its combination with Fibers,
Inc. to form United Fibers in 1987. Prior to 1977, he held various management
and technical positions at Technicon Medical Information Systems. Mr. Tranmer
holds a Bachelor of Science degree in Mathematics from the University of
California. He is also a member of the World Presidents' Organization.
Al Collison became vice president-retail of the Company in July 1994. Mr.
Collison also serves as president of GreenStone Industries - Norfolk, Inc.
(formerly Parco, Inc), a wholly-owned subsidiary of the Company. Mr.
Collison was the founder of Parco, Inc. and has served as president of that
company since 1976. Parco is one of the companies acquired by the Company.
He also founded Northeast Nebraska Insulation, Inc. in 1975 and JVK, Inc., a
real estate company, in 1978.
Steven A. Gerber was elected vice president of the Company on March 31, 1994 and
executive vice president in June 1995. Mr. Gerber has over 20 years experience
in the manufacture and sale of cellulose insulation and specialty fibers. From
1992 to 1993, he was vice president of American Environmental Products, a
leading provider in the east of cellulose insulation, mulch and other specialty
fibers. From 1989 to 1992, he was plant manager of a cellulose insulation
manufacturing plant in Ohio for Fiber Chem, which was purchased by Louisiana
Pacific Corporation in 1990. From 1985 to 1989, he was manager of production
planning for Magnavox Industrial and Electronics Company. Prior to 1985, Mr.
Gerber held various positions at Thermtron Products, a family owned manufacturer
of cellulose based products. Mr. Gerber received a Bachelor of Arts degree in
Business Management from St. Francis College.
John R. Bernardi was elected controller and secretary of the Company in July
1993 and chief financial officer in April 1994. From 1992 to 1993, he was
controller of American Environmental Products. From 1990 to 1992, he was
controller of Standard Supplies, Inc., a privately held industrial supplier and
steel fabricator. From 1984 to 1990, he held various positions at Lydall, Inc.
and related companies, including division controller and financial analyst in
its mergers and acquisitions department. Mr. Bernardi holds a Bachelor of
Science degree in Business Administration from the University of Rhode Island
and a Masters in Business Administration from the University of Connecticut.
Richard L. Campbell has been general counsel and director of the Company since
July 1993. Mr. Campbell has been the sole proprietor of Richard L. Campbell
Associates, a law firm, since June 1995. He has been a principal in Mantis
Holdings, Inc., a private environmental investment holdings company since June
1992, and was a partner in the law firm Of Campbell & Fleming, P.C. from June
1992 until June 1995, when he became of Counsel to such firm. Prior to June
1992, Mr. Campbell was a principal at the law firm of Fink Weinberger P.C. Mr.
Campbell received his undergraduate degree from the University of Michigan, a
Juris Doctorate from Wayne State University, and a Masters in Corporation Law
from New York University.
Fred L. Prins, a director of the Company, is the founder of Prins Recycling
Corp., a publicly traded secondary fibers recycler which he founded in January
1990. Mr. Prins co-founded Harmon Associates Corporation, a waste-management and
recovery business in 1965. Mr. Prins served as sales and marketing manager from
1965 to 1973, vice president from 1973 to 1975, and president from 1975 to 1980,
when Harmon was sold to Fort Howard Paper Company. Mr. Prins served as president
of the Fort Howard Harmon Associates division from 1980 until 1985. Mr. Prins
also acted as a consultant to
39
<PAGE>
Webcraft Technologies in printing and material handling technologies from
1985 to 1987. In 1987, he joined Perry H. Koplik & Sons, a full service
forest products company, as director of environmental affairs and also served
as consultant to Browning Ferris Industries, a leading national waste
disposal firm. Mr. Prins attended City College of New York and the University
of Richmond in Business Administration.
William D. Phillips, a director of the Company, is a founding shareholder and
chairman of the board of Supreme Alaska Seafoods, Inc., a privately held
commercial seafood company which he co-founded in 1990. Mr. Phillips is a
partner in the law firm of Oldaker, Ryan, Phillips & Utrecht where he
specializes in international trade and legislative law issues. From 1986 to
1995, Mr. Phillips was of counsel to, or a partner in, the law firm of Hopkins
and Sutter in its Washington, D.C. office. Mr. Phillips served as Chief of Staff
to U.S. Senator Ted Stevens from 1982 to 1986. During this period, he also
served as an advisor to the United States negotiating team for several bilateral
and multilateral trade negotiations. Mr. Phillips received his Juris Doctorate
from Georgetown University Law Center, completed graduate work at New College,
Oxford in the United Kingdom, and received his bachelors degree in Economics
from the University of Evansville.
Donald C. Frueh was elected as a director of the Company on March 5, 1996. Mr.
Frueh is senior vice president and senior consultant for banking and corporate
finance with The Ardmore Alliance, a financial advisory organization. From 1990
to 1995, Mr. Frueh was a senior vice president and senior credit officer for
regional and national middle market groups of CoreStates Bank N.A. From 1970 to
1990 Mr. Frueh held various positions with First Pennsylvania Bank N.A.
including senior vice president of both commercial credit and consumer credit
areas. Mr. Frueh holds a Bachelor of Arts degree in Government and Law from
Lafayette College and a diploma from the ABA Stonier Graduate School of Banking
at Rutgers University. Mr. Frueh is an adjunct professor of finance at the
Philadelphia College of Textiles and Sciences.
The Company's Certificate of Incorporation provides for a classified Board of
Directors consisting of two classes as nearly equal in size as possible, with
staggered two-year terms. Messrs. Oganesoff, Tranmer and Phillips serve two-year
terms until the 1996 Annual Meeting of Shareholders, while Messrs. Campbell and
Prins serve two-year terms until the 1997 Annual Meeting of Shareholders. Mr.
Frueh will also serve until the 1997 Annual Shareholders Meeting. The
classification of the Board of Directors could have the effect of making it more
difficult for a third party to acquire, or discouraging a third party from
acquiring, control of the Company. The Company's Certificate of Incorporation
and Bylaws provide broadly for indemnification of the officers and directors of
the Company. In addition, the Certificate of Incorporation provides that, to the
fullest extent permitted by Delaware law, no director shall be personally liable
to the Company or its stockholders for monetary damages for any breach of
fiduciary duty by such director in his or her capacity as a director. There are
no family relationships among any member of Management or the Board of
Directors. For a period of 36 months from the closing of the Offering, if
permitted by the Company, H.J. Meyers & Co., Inc. (FKA Thomas James Associates,
Inc.) may designate an observer to attend the meetings of the Board of
Directors.
The Company has established audit and compensation committees. Messrs.
Campbell, Prins, and Phillips are the current members of each of these
committees. The Company has also established a stock option committee and
appointed Messrs. Campbell, Oganesoff and Tranmer as members.
40
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
Information contained in the Company's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held May 15, 1996, is incorporated herein by
reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information contained in the Company's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held May 15, 1996, is incorporated herein by
reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information contained in the Company's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held May 15, 1996, is incorporated herein by
reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Number Description of Exhibit
<TABLE>
<S> <C>
3.1 Restated Certificate of Incorporation of GreenStone Industries, Inc. (1)
3.2 Form and Designation of Rights and Preferences of the Series A Preferred
Stock. (1)
3.3 Bylaws of GreenStone Industries, Inc. (2)
3.4 Designation of Rights and Preferences of the Series B Preferred Stock. (1)
3.5 Certificate of Designations of Series C Convertible Preferred Stock. (3)
3.6 Certificate of Designations of Series D Convertible Preferred Stock. (4)
4.1 Form of Representative's Warrant Agreement. (1)
4.2 Amended and Restated 1993 Stock Option Plan, including form of Stock Option
Agreement. (1)
4.3 Form of Warrant Agreement (Public Warrants). (1)
4.4 Form of Performance Options. (1)
10.1 Employment Agreement between the Registrant and Eric Oganesoff. (1)
10.2 Employment Agreement between the Registrant and Joel Tranmer. (1)
10.3 Employment Agreement between the Registrant and Al Collison. (1)
10.4 Employment Agreement between the Registrant and Steve Gerber. (1)
10.5 Consulting Agreement between the Registrant and James Kean. (1)
10.6 Non-Competition Agreements between the Registrant and James Kean. (1)
10.7 Paper Supply Agreement between the Registrant and Valley Recycling, Inc. (2)
10.8 Registration Rights Agreement. (1)
10.9 Lease between the Registrant and JVK, Inc. (1)
10.10 Lease between the Registrant and Superior Products Corporation. (1)
10.11 Form of Loan and Security Agreement by and between CoreStates Bank, N.A. and
the Registrant. (1)
10.11a Amendment to Loan and Security Agreement between CoreStates Bank, N.A. and the
Registrant. (1)
10.12 Real Property Purchase Agreement between the Registrant and JVK, Inc. (1)
10.13 Form of Convertible Promissory Note in favor of James Kean (Purchase). (1)
10.14 Secured Promissory Note in favor of Fibers, Inc. (Portland Facility). (1)
</TABLE>
41
<PAGE>
<TABLE>
<S> <C>
10.15 Secured Promissory Note in favor of Joel Tranmer (Portland Facility). (1)
10.16 Portland Note Pledge. (1)
10.17 Portland Operating Agreement. (1)
10.18 Subordinate Note dated October 3, 1994 from the Registrant to Washington
Resources Group, Inc. (1)
10.19 Elkwood facility mortgage agreement with CoreStates.
10.20 Subordinated Convertible Note in favor of Steven A. Moore. (3)
10.21 Employment agreement with Steven A. Moore. (3)
10.22 Employment agreement with Julie Moore. (3)
23.10 Consent of Ernst & Young LLP, independent auditors.
</TABLE>
<TABLE>
<S> <C> <C>
(1) Incorporated by reference to the Registrant's Registration Statement on
Form SB-2, File No. 33 78654.
(2) Incorporated by reference to the Registrant's Annual Report on Form 10-KSB, for the year
ended December 31, 1994, File No. 24504
(3) Incorporated by reference to the Registrant's Form 8-k dated July 21, 1995, File No. 24504
(4) Incorporated by reference to the Registrant's Form S-3 dated March 12, 1996, File No.
33-32282
</TABLE>
(b) The following reports on Form 8-K were filed during the last quarter of
1995:
Date of Report Description of Report
-------------- ---------------------
October 3, Form 8-K filed with respect to Amendment No. 1 of
1995 form 8-K filed regarding the acquisition of Pacific Rim. The
following financial statements were filed with the amendment.
FINANCIAL STATEMENTS OF STEVEN A. MOORE ENTERPRISES, INC.
Report of Independent Auditors
Balance Sheet as of December 31, 1994.
Statements of Income and Retained Earnings for the years
ended December 31, 1994 and 1993.
Statements of Cash Flow for the years ended December
31, 1994 and 1993.
Notes to the Financial Statements.
PRO FORMA STATEMENTS OF GREENSTONE INDUSTRIES, INC. AND
STEVEN A. MOORE ENTERPRISES, INC.
Pro forma Balance Sheet as of July 1, 1995.
Pro forma Statement of Operations for the six months ended
July 1, 1995.
Pro forma Statement of Operations for the year
ended December 31, 1994.
Notes to the Pro forma Financial Statements.
42
<PAGE>
October 24, Form 8-K filed with respect two press releases, one
1995 regarding the Company's receiving the Fleetwood Circle of
Excellence 1994-1995 Customer Satisfaction award and the
other announcing the Company's Fort Wayne recycling program.
November 14, 1995 Form 8-K filed with respect to a press release
regarding the Company's third quarter earnings.
43
<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.
GREENSTONE INDUSTRIES, INC.
By: /s/ Eric Oganesoff March 29, 1996
----------------------------------------- ------------------
Eric M. Oganesoff Date
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated:
<TABLE>
<CAPTION>
Signature Capacity Date
<S> <C> <C>
Chairman of the Board,
Chief Executive Officer
/s/ Eric M. Oganesoff (Principal Executive Officer) March 29, 1996
--------------------------------- ---------------------
Eric M. Oganesoff
President, Chief Operating
/s/ Joel Tranmer Officer, Director March 29, 1996
--------------------------------- ---------------------
Joel Tranmer
Chief Financial Officer,
Secretary (Principal Financial
/s/ John R. Bernardi and Accounting Officer) March 29, 1996
--------------------------------- ---------------------
John R. Bernardi
/s/ Richard L. Campbell General Counsel, Director March 29, 1996
--------------------------------- ---------------------
Richard L. Campbell
/s/ William D. Phillips Director March 29, 1996
--------------------------------- ---------------------
William D. Phillips
/s/ Fred L. Prins Director March 29, 1996
--------------------------------- ---------------------
Fred L. Prins
/s/ Donald C. Frueh March 29, 1996
--------------------------------- ---------------------
Donald C. Frueh Director
</TABLE>
44
<PAGE>
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 1996
Commission File No. 0-24504
GREENSTONE INDUSTRIES, INC.
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 52-1827142
- -------------------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
</TABLE>
6500 Rock Spring Drive, Suite 400, Bethesda, Maryland, 20817
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(301) 564-5900
- -------------------------------------------------------------------------------
(Registrant's telephone number)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $.001 par value, outstanding as of October 30, 1996:
6,201,429 shares
1
<PAGE>
GREENSTONE INDUSTRIES, INC.
INDEX
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets:
September 28, 1996 (unaudited) and December 30, 1995 (audited) 3
Consolidated Statements of Operations (unaudited): Three
months ended September 28, 1996 and September 30, 1995
Nine months ended September 28, 1996 and September 30,
1995 5
Consolidated Statements of Cash Flows (unaudited):
Nine months ended September 28, 1996 and September 30, 1995 6
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
</TABLE>
2
<PAGE>
GREENSTONE INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 28, December 30,
1996 1995
-------------- ---------------
(Unaudited)
<S> <C> <C>>
Current assets
Cash and cash equivalents $1,271,431 $ 275,697
Accounts receivable net of allowance of $293,569 and
$243,900 at September 28, 1996 and December 30, 1995,
respectively 4,715,245 5,275,252
Notes receivable 171,573 105,280
Deferred income taxes 587,980 750,500
Inventories (Note 2) 1,663,517 1,452,924
Prepaid expenses and other assets 1,047,348 688,487
-------------- ---------------
Total current assets 9,457,094 8,548,140
Property, plant and equipment
Property, plant and equipment at cost 16,543,629 14,885,015
Accumulated depreciation (5,453,626) (4,016,827)
-------------- ---------------
Net property, plant and equipment 11,090,003 10,868,188
Intangible assets, net 4,024,875 4,179,650
Deferred income taxes 381,576 381,576
Deposits 378,265 519,547
Other noncurrent assets 162,870 169,537
-------------- ---------------
Total assets $25,494,683 $24,666,638
============== ===============
</TABLE>
Accompanying notes are an integral part of these financial statements
3
<PAGE>
GREENSTONE INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>>
September 28, December 30,
1996 1995
-------------- ---------------
(Unaudited)
<S> <C> <C>
Current liabilities
Accounts payable $ 3,290,783 $ 3,891,086
Accrued liabilities 1,002,559 1,115,896
Deferred revenue 187,290 257,479
Line of credit 1,080,000 594,500
Current maturities of notes to related parties 907,726 1,034,417
Current maturities of long-term debt 438,308 468,835
-------------- ---------------
Total current liabilities 6,906,666 7,362,213
Notes to related parties, less current maturities 1,833,984 2,561,043
Long-term debt, less current maturities 5,336,082 5,474,280
-------------- ---------------
Total liabilities 14,076,732 15,397,536
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000,000 shares
authorized,
Series A - 54,546 shares issued and outstanding at
September 28, 1996 and December 30, 1995 545 545
Series B - 16,000 shares issued and outstanding at
September 28, 1996 and December 30, 1995 160 160
Series C - 496,759 issued and outstanding at
September 28, 1996 and December 30, 1995 4,968 4,968
Series D - 6,667 and 0 shares issued and
outstanding at September 28, 1996 and December 67 -
30, 1995, respectively
Common Stock $.001 par value, 20,000,000 shares
authorized, 6,173,438 and 5,481,561 issued and
outstanding at September 28, 1996 and December 6,173 5,482
30, 1995, respectively
Additional paid in capital 10,906,735 9,238,772
Retained earnings 499,303 19,175
-------------- ---------------
Total stockholders' equity 11,417,951 9,269,102
============== ===============
Total liabilities and stockholders' equity $25,494,683 $24,666,638
============== ===============
</TABLE>
Accompanying notes are an integral part of these financial statements
4
<PAGE>
GREENSTONE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 28, September September 28, September 30,
1996 30, 1995 1996 1995
-------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
Net sales $10,791,562 $10,961,963 $30,233,385 $28,935,847
Cost of sales 6,668,332 8,257,417 18,704,150 21,309,193
-------------- ------------- -------------- ---------------
Gross profit 4,123,230 2,704,546 11,529,235 7,626,654
Operating expenses
Selling and distribution 1,865,897 1,718,876 5,005,152 4,790,352
General and 1,668,973 1,614,271 5,132,126 4,173,361
administrative
-------------- ------------- -------------- ---------------
Income (loss) from operations 588,360 (628,601) 1,391,957 (1,337,059)
Interest expense 207,381 198,073 621,779 392,996
Other (income) expense (19,143) (6,919) (23,421) (8,981)
-------------- ------------- -------------- ---------------
Income (loss) before income 400,122 (819,755) 793,599 (1,721,074)
taxes
Income tax expense (benefit) 158,048 - 313,471 (352,554)
-------------- ------------- -------------- ---------------
Net income (loss) $ 242,074 $ (819,755) $ 480,128 $ (1,368,520)
============== ============= ============== ===============
Net income (loss) per share $ 0.04 $ (0.14) $ 0.07 $ (0.25)
============== ============= ============== ===============
Weighted average common
equivalent shares outstanding 6,892,452 5,705,860 6,832,331 5,368,968
============== ============= ============== ===============
</TABLE>
Accompanying notes are an integral part of these financial statements
5
<PAGE>
GREENSTONE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 28, September 30,
1996 1995
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 480,128 $(1,368,520)
Adjustments to reconcile net income to net cash provided
by operations
Depreciation and amortization 1,620,811 1,222,141
Provision for deferred income taxes 162,520 (193,656)
Provision for bad debts 49,669 74,151
Loss on the sale of property, plant and equipment 52,211 37,317
Change in operating assets and liabilities
Receivables 444,045 (295,423)
Inventories (210,593) (662,100)
Prepaid expenses and other assets (210,912) (20,274)
Deferred revenue (70,189) -
Accounts payable (600,303) 89,462
Accrued liabilities (113,337) 596,123
------------- -------------
Net cash provided (used) by operating activities 1,604,050 (520,779)
INVESTING ACTIVITIES
Payments for businesses acquired, net of cash received (83,539) (323,247)
Expenditures for property, plant and equipment (1,671,623) (2,049,335)
Proceeds from the sale of assets 15,100 164,963
------------- -------------
Net cash used by investing activities (1,740,062) (2,207,619)
FINANCING ACTIVITIES
Advances under short-term borrowings 8,326,299 1,600,000
Repayment of short-term borrowings (8,655,732) -
Borrowing under long-term debt 113,568 350,000
Repayment of long-term and related party debt (321,110) (975,665)
Deferred debt issuance costs - (69,248)
Net proceeds from the sale of Preferred Stock 1,668,721 -
------------- -------------
Net cash provided by financing activities 1,131,746 905,087
------------- -------------
Net increase (decrease) in cash and cash equivalents 995,734 (1,823,311)
Cash and cash equivalents at beginning of the period 275,697 1,823,311
------------- -------------
Cash and cash equivalents at end of the period $1,271,431 $ -
============= =============
</TABLE>
Accompanying notes are an integral part of these financial statements
6
<PAGE>
GREENSTONE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine month period ended September 28,
1996 are not necessarily indicative of the results that may be expected for the
year ended December 28, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in GreenStone's annual
report on Form 10-KSB for the year ended December 30, 1995.
Principles of Consolidation
The consolidated financial statements include the accounts of GreenStone
Industries, Inc. and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
2. INVENTORIES
The components of inventory consist of the following:
September 18, December 30,
1995 1995
--------------- --------------
Raw materials $1,116,800 $1,022,700
Finished goods 418,100 329,200
Insulation equipment 128,600 101,100
--------------- --------------
$1,663,500 $1,453,000
=============== ==============
3. LONG-TERM DEBT
In March of 1996, the Company amended its $5,500,000 senior credit agreement,
extending the maturity through December 1997, and amended certain other
provisions including the financial covenants. The Company is required to
maintain certain financial covenants pertaining to net worth, leverage, current
ratio and interest coverage and currently is restricted from paying cash
dividends. The Company has classified $4,000,000 under the amended credit
agreement as a long-term liability, because it expects this amount to remain
outstanding through September 28, 1997.
7
<PAGE>
GREENSTONE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
4. STOCKHOLDERS' EQUITY
In January of 1996, the Company sold 188,500 shares of Series D Convertible
Preferred Stock for $10 per share through a private placement. The Series D
Convertible Preferred Stock has no voting rights and accrues dividends of $0.70
per share, with no dividend accrued in the first year. Each share is convertible
into the number of shares of Common Stock equal to the $10 face value per share
divided by 80% of the average closing bid price of the Common Stock for the 15
days prior to the notice of conversion. As of September 28, 1996, 181,833 shares
of the Series D Preferred Stock have been converted into 590,759 shares of
Common Stock.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(UNAUDITED)
Three months ended September 28, 1996 compared with the three months ended
September 30, 1995.
Net sales decreased $170,000, or 2%, to $10.8 million for the three months ended
September 28, 1996 from $11.0 million for the three months ended September 30,
1995. The decrease results from lower sales from existing facilities and the
recycling operation, which were offset by sales from insulation manufacturing
companies acquired in 1995.
Gross profit increased $1.4 million, or 52%, to $4.1 million for the three
months ended September 28, 1996 from $2.7 million for the three months ended
September 30, 1995. As a percentage of net sales, gross profit increased to 38%
for the three months ended September 28, 1996 from 25% for the three months
ended September 30, 1995. The increase is due primarily to lower paper costs.
Selling and distribution expenses increased $147,000 or 9% to $1.9 million for
the three months ended September 28, 1996 from $1.7 million for the three months
ended September 30, 1995. The increase is due to higher costs associated with an
increased marketing effort which were offset by lower transportation costs at
existing facilities.
General and administrative expenses increased $55,000, to $1.7 million for the
three months ended September 28, 1996 from $1.6 million for the three months
ended September 30, 1995.
Interest expense increased $9,000, or 5%, to $207,000 for the three months ended
September 28, 1996 from $198,000 for the three months ended September 30, 1995
as a result of additional debt related to capital expenditures and debt issued
or assumed in connection with the 1995 acquisitions.
Income tax expense was $158,000 for the three months ended September 28, 1996.
No tax provision was made for the same period of 1995 due to operating losses
incurred.
As a result of the factors discussed above, net income increased approximately
$1.0 million to $242,000 for the three months ended September 28, 1996 from a
net loss of $820,000 for the three months ended September 30, 1995.
Nine months ended September 28, 1996 compared with the nine months ended
September 30, 1995.
Net sales increased $1.3 million, or 4%, to $30.2 million for the nine months
ended September 28, 1996 from $28.9 million for the nine months ended September
30, 1995. The increase results from sales contributed by companies acquired in
1995, which was partially offset by lower sales from existing facilities.
Gross profit increased $3.9 million, or 51%, to $11.5 million for the nine
months ended September 28, 1996 from $7.6 million for the nine months ended
September 30, 1995. As a percentage of net sales, gross profit increased to 38%
for the nine months ended September 28, 1996 from 26% for the nine months ended
September 30, 1995. The increase is due primarily to lower paper costs.
Selling and distribution expense increased $215,000, or 4%, to $5.0 million for
the nine months ended September 28, 1996 from $4.8 million for the nine months
ended September 30, 1995. Higher costs related to companies acquired in 1995
were partially offset by lower transportation costs at existing facilities.
General and administrative expenses increased $959,000, or 23%, to $5.1 million
for the nine months ended September 28, 1996 from $4.2 million for the nine
months ended September 30, 1995. The increase results from costs contributed by
companies acquired during 1995 and expenses related to the Company's acquisition
and growth strategy.
9
<PAGE>
Interest expense increased $229,000, or 58%, to $622,000 for the nine months
ended September 28, 1996 from $393,000 for the nine months ended September 30,
1995 as a result of additional debt related to capital expenditures and debt
issued or assumed in connection with the 1995 acquisitions.
Income tax expense increased $666,000 to $313,000 for the nine months ended
September 28, 1996 as compared to a benefit of $353,000 for the same period of
1995. The increase is attributable to higher income from operations.
As a result of the factors discussed above, net income increased $1.8 million to
$480,000 for the nine months ended September 30, 1996 as compared to a net loss
of $1.4 million for the nine months ended September 30, 1995.
Liquidity and Capital Resources
In January of 1996, the Company raised $1.7 million, net of related expenses, in
a private placement of its Series D Convertible Preferred Stock. The Company
will use the proceeds to partially fund future acquisitions and for general
corporate purposes.
In March of 1996, the Company amended its senior credit facility with a
commercial bank, extending the revolving line of credit through December of
1997.
The Company's working capital totaled $2.6 million as of September 28, 1996 and
$1.2 million as of December 30, 1995. The increase in working capital results
primarily from proceeds of the sale of Series D Convertible Preferred Stock.
Net cash provided by operations increased $1.1 million to $1.6 million for the
nine months ended September 28, 1996 as compared to cash used of $521,000 for
the same period of 1995. The increase is the result of higher earnings and
changes in working capital during the second quarter of 1996.
Historically, the Company has financed its operations with internally generated
funds, equity, and with working capital lines of credit for short-term financing
needs. To date, the Company has been able to obtain additional financing for the
operation of its business. Management believes that the funds on hand, including
capital raised in January of 1996, together with expected operating cash flows,
will provide the Company with adequate liquidity to operate its business for at
least the next twelve months. However, the Company may seek to finance business
expansion, including potential acquisitions, with additional borrowing
arrangements or equity financing.
Material Agreements
The Company announced on September 10, 1996 that it has signed a non-binding
letter of intent to be acquired by Louisiana-Pacific Corporation. Subsequently,
on October 28, 1996, the Company signed a definitive merger agreement with
Louisiana-Pacific Corporation. Under the terms of the agreement public
shareholders of GreenStone will receive $5.25 per share in cash, while
management and certain non-public shareholders will receive restricted
securities of Louisiana-Pacific of the equivalent value. Closing of the
acquisition is subject to regulatory filings and approval by the Company's
shareholders, among other things.
10
<PAGE>
GREENSTONE INDUSTRIES, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
From 8-K
September 17, 1996 - Form 8-K filed with respect to a press release
regarding the signing of a letter of intent to be acquired by
Louisiana-Pacific Corporation.
October 31, 1996 - Form 8-K filed with respect to a press release
regarding the signing of a definitive merger agreement with
Louisiana-Pacific Corporation.
11
<PAGE>
GREENSTONE INDUSTRIES, INC.
SIGNATURE
Pursuant to the requirements 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.
GREENSTONE INDUSTRIES, INC.
------------------------------------
(Registrant)
November 8, 1996 /s/ John R. Bernardi
- ------------------------------------- ------------------------------------
Date John R. Bernardi
Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
12
<PAGE>
GREENSTONE INDUSTRIES, INC.
PROXY--SPECIAL MEETING OF STOCKHOLDERS--DECEMBER 20, 1996
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, a stockholder of GreenStone Industries, Inc. (the
"Company"), hereby revoking any proxy heretofore given, does hereby appoint
Messrs. Eric M. Oganesoff and John R. Bernardi, and each of them, proxies with
full power of substitution, for and in the name of the undersigned to attend the
Special Meeting of Stockholders of the Company to be held at the Bethesda
Marriott Suites, 6711 Democracy Boulevard, Bethesda, Maryland 20817, on December
20, 1996 and any adjournment thereof and there to vote upon all matters
specified in the notice of said meeting, as set forth on the reverse hereof, and
upon such other business as may properly and lawfully come before the meeting,
all shares of stock of said Company which the undersigned would be entitled to
vote if personally present at said meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED FOR ALL
PROPOSALS.
1. For the proposed Merger of GreenStone Industries, Inc. with Louisiana-Pacific
Corporation
/ / For / / Against / / Abstain
(Continued and to be signed on the other side)
<PAGE>
All as described in the Proxy Statement dated November 15, 1996 receipt of which
is hereby acknowledged.
SIGNATURE ___________________________
DATED ________________,1996
SIGNATURE IF HELD JOINTLY ___________
DATED ________________, 1996
PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS HEREON. IF SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, INDICATE SUCH
CAPACITY. ALL JOINT TENANTS MUST
SIGN. IF A PARTNERSHIP, PLEASE SIGN
IN PARTNERSHIP NAME BY AUTHORIZED
PERSON.
THE BOARD OF DIRECTORS REQUESTS THAT
YOU FILL IN, DATE AND SIGN THE PROXY
AND RETURN IT IN THE ENCLOSED
POSTPAID ENVELOPE.
