-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GwaezAo1+T2t4+ZUbVVEMvoLLPBcjHVq55XKnWGRO3aHQU00yfkWR1GiFRBw2KzW lyr963eS7H3vm+2nkcc9bA== 0000950130-96-001442.txt : 19960501 0000950130-96-001442.hdr.sgml : 19960501 ACCESSION NUMBER: 0000950130-96-001442 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960430 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIRD CORP CENTRAL INDEX KEY: 0000012245 STANDARD INDUSTRIAL CLASSIFICATION: ASPHALT PAVING & ROOFING MATERIALS [2950] IRS NUMBER: 043082903 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-00828 FILM NUMBER: 96553857 BUSINESS ADDRESS: STREET 1: 1077 PLEASANT ST STREET 2: STE 120 CITY: NORWOOD STATE: MA ZIP: 02062 BUSINESS PHONE: 6174611414 MAIL ADDRESS: STREET 1: 980 WASHINGTON ST CITY: DEDHAM STATE: MA ZIP: 02026 FORMER COMPANY: FORMER CONFORMED NAME: BIRD INC DATE OF NAME CHANGE: 19900419 FORMER COMPANY: FORMER CONFORMED NAME: BIRD & SON INC DATE OF NAME CHANGE: 19830719 10-K/A 1 AMENDMENT TO FORM 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K/A (MARK ONE) [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 OR [_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 0-828 BIRD CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MASSACHUSETTS 04-3082903 (I.R.S. EMPLOYER IDENTIFICATION NO.) (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) 1077 PLEASANT STREET, NORWOOD, MA 02062 (ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE) OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 551-0656 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED NONE NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, PAR VALUE $1 PER SHARE (TITLE OF CLASS) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] The aggregate market value of common stock, par value $1 per share, held by non-affiliates as of March 1, 1996 was $23,150,000. As of March 1, 1996 there were 4,123,178 shares of Bird Corporation common stock, par value $1 per share, outstanding. ---------------- DOCUMENTS INCORPORATED BY REFERENCE NONE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. DESCRIPTION OF BUSINESS As a result of the sale of its vinyl building products business, window fabrication business and San Leon hydrocarbon waste recycling center (see "Recent Business Developments" below), Bird Corporation's current manufacturing operation consists of one primary business unit--roofing manufacturing and sales and marketing. Products currently manufactured at Bird Corporation's roofing facility include asphalt shingles and roll roofing for commercial and residential use. These products are marketed through independent wholesalers, including wholesalers whose primary customers are roofing contractors. All references herein to the "Company" or "Bird" refer to Bird Corporation and its subsidiaries unless otherwise indicated by the context. RECENT BUSINESS DEVELOPMENTS There have been a number of significant developments in the business of the Company since December 31, 1994, including the following: . The Company signed an Amended and Restated Agreement and Plan of Merger, dated as of April 8, 1996 (the "Merger Agreement"), among the Company, CertainTeed Corporation, a Delaware corporation ("CertainTeed"), and BI Expansion Corp., a Massachusetts corporation and a wholly owned subsidiary of CertainTeed ("Acquisition Sub"), pursuant to which Acquisition Sub will be merged with and into the Company (the "Merger"), with the Company surviving the Merger as a subsidiary of CertainTeed. In the Merger, each share of the Company's common stock, par value $1 per share ("Common Stock"), outstanding on the effective date of the Merger and each share of the Company's $1.85 Cumulative Convertible Preference Stock par value $1 per share ("Preference Stock"), outstanding on the effective date of the Merger (other than shares held by CertainTeed or Acquisition Sub, shares held in the Company's treasury and other than shares held by stockholders who perfect their appraisal rights under Massachusetts law) will be converted into the right to receive (in the case of Common Stock) $7.50 per share of Common Stock and (in the case of Preference Stock) $20 plus all accrued and unpaid dividends through the effective date of the Merger per share of Preference Stock, in each case in cash, without interest. All outstanding shares of the Company's 5% Cumulative Preferred Stock, par value $100 per share (the "5% Stock"), will remain issued and outstanding after the Merger and will be called for redemption and retirement as soon as practicable following the Merger at a price equal to $110 per share, plus all accrued and unpaid dividends through the date of redemption and retirement. The Merger is the second step in a two-part transaction, the purpose of which is the acquisition of the Company by CertainTeed. On April 12, 1996, Acquisition Sub commenced a tender offer (the "Offer") to purchase all outstanding shares of Common Stock and Preference Stock at a price of $7.50 per share of Common Stock and $20 plus all accrued and unpaid dividends through the expiration date of the Offer per share of Preference Stock. The Offer is conditioned upon, among other things, (i) there being validly tendered and not withdrawn prior to the expiration of the Offer at least 66 2/3% of all outstanding shares of Common Stock (determined on a fully diluted basis on the expiration of the Offer) and (ii) either (x) there being validly tendered and not withdrawn prior to the expiration of the Offer at least 66 2/3% of all outstanding shares of Preference Stock or (y) Acquisition Sub having elected to require the Company to redeem all outstanding shares of Preference Stock in accordance with the Merger Agreement. Pursuant to the Merger Agreement, upon the acquisition by Acquisition Sub of at least a majority of the outstanding shares of Common Stock pursuant to the Offer, Acquisition Sub shall be entitled to designate such number of directors to be appointed to the Company's Board of Directors as is required to constitute a majority of the members of the Company's Board of Directors. Completion of the transaction is subject to approval by Bird's shareholders, appropriate governmental approvals and other customary conditions. 2 . On November 29, 1995, the Company sold all of the outstanding capital stock of Bird Environmental Gulf Coast, Inc. ("BEGCI") which owned the Company's interest in the San Leon, Texas based hydrocarbon waste recycling center, to GTS Duratek, Inc. ("Purchaser") for a purchase price of $1.00. In addition, BETI agreed to pay the Purchaser the amount by which BEGCI's current liabilities exceeded its current assets at August 31, 1995, which was approximately $1.3 million. The sale of the recycling center completes the Company's withdrawal from the environmental remediation and recycling industry. The resulting loss of $11,252,000 is reflected as discontinued operations in the Company's consolidated statements of operations. . On September 26, 1994, the Company announced that it had signed a definitive agreement to sell the assets of its vinyl building products manufacturing operation located in Bardstown, Kentucky to Jannock, Inc. ("Jannock"). This transaction also included an option to purchase the Company's interest in Kensington Partners ("Kensington"), a window fabrication business. At a special meeting of the shareholders held in Dedham, Massachusetts on March 7, 1995, the shareholders of the Company voted to sell the assets of the Company's vinyl building products operation to Jannock essentially in accordance with the terms and conditions as outlined in the definitive agreement between the Company and Jannock dated September 23, 1994. On March 8, 1995, the sale was closed for a gross purchase price of $47.5 million which was reduced to approximately $42.5 million by post- closing working capital adjustments (the "Vinyl Sale"). The sale included the assumption by the purchaser of certain specified liabilities of the vinyl business. Proceeds from the sale were used to reduce bank debt. Net of adjustments, the Company's gain on this sale totaled $20,579,000 million and is reflected as discontinued business activity income in the consolidated statements of operations. . On June 2, 1995, the Company sold all of the outstanding capital stock of Bird-Kensington Holding Corp. ("Bird-Kensington"), which owned the Company's interest in Kensington to Jannock, Inc. The sale was consummated pursuant to the exercise by Jannock of an option granted under the Asset Purchase Agreement dated as of September 23, 1994 (as amended by amendments dated as of January 24, 1995, January 31, 1995, and April 27, 1995). The purchase price consisted of cash in the amount of $2,780,000 and the assumption of certain liabilities related to the Kensington business. Cash proceeds of $1 million were used to acquire the minority partner's interest in Kensington. In addition, $4,090,000 was invested by the Company in Bird-Kensington, as a condition of the sale, to enable Kensington to pay certain liabilities and to meet equity requirements as stipulated in the Asset Purchase Agreement. The sale resulted in a loss of $1,959,000 and is reflected as discontinued business activity expense in the Company's consolidated statements of operations. HOUSING GROUP Asphalt roofing products are manufactured and sold at the Company's facilities in Norwood, Massachusetts. Asphalt shingles and roll roofing are produced by coating a fiberglass mat with a mixture of hot asphalt and crushed rock filler and covering the coated mat with Company-manufactured roofing granules. The Company's facilities include a roofing manufacturing facility, a granule plant, a quarry, an asphalt plant and a private landfill for the Company's use. The Company's Housing Group produced vinyl siding products at its plant in Bardstown, Kentucky prior to the sale of such facility in March 1995. Additionally, the Company sold its interest in Kensington, its joint venture in the replacement window fabrication business in June 1995. The Housing Group also carried on a distribution business through wholesale building materials distributors based in New England, New York, Kentucky, Texas, Louisiana, and Arizona until such businesses were sold in August and November 1994. Net sales of the components of the Housing Group as a percentage of consolidated net sales of the Company were as follows: sales of asphalt roofing products, 80% in 1995, 31% in 1994 and 23% in 1993; sales of vinyl products, 20% in 1995, 24% in 1994 and 20% in 1993; and sales through building materials distribution centers (including roofing and vinyl products manufactured by the Company), 45% in 1994 and 57% in 1993. 3 The principal geographic markets for the Company's manufactured roofing products, due to limitations imposed by freight costs, are the northeastern United States. The building materials business is seasonal to the extent that outside repair and remodeling and new construction decline during the winter months. To reduce the impact of this seasonal factor, the Company generally employs what it believes to be an industry-wide practice of "winter dating", pursuant to which extended or discounted payment terms are offered to creditworthy customers who order and accept delivery of roofing products during specified periods of time in the slow season. Raw Materials The principal raw materials used in the manufacture of asphalt roofing products are fiberglass mat, asphalt saturants and coatings and crushed granules. The Company's requirements for fiberglass mat are met primarily under a Glass Mat Supply Agreement with one vendor which expires on December 31, 1996. Fiberglass mat is also generally available in adequate quantities from a number of outside suppliers. Asphalt saturants and coatings were, until recently, purchased from a major oil refinery. These materials are also available from other sources at a higher delivered cost. After the refinery's discontinuation of its production of asphalt in April 1994, the Company relied on a number of alternative sources for this raw material. Since completion of construction of an asphalt plant in January 1995, the Company has been able to process asphalt at its roofing facility, thereby reducing its costs and decreasing the potential for temporary interruptions in its manufacturing operations. The Company believes that it can produce all of its current granule requirements at its granule plant and quarry. Backlog Order backlog is not a meaningful measure of the Company's building materials business because there are fewer sales during the last quarter of the fiscal year and the order-to-shipment cycle is relatively short. Additionally, it is very rare, at any time, to require more than 30 days from the receipt of a product order to delivery of the product. Competition The building materials business is, to a large degree, a commodities-type business and is highly competitive with respect to price, delivery terms and consistent product quality. Many of the Company's competitors are larger and financially stronger than the Company, but none is dominant in any of its markets. The strengths of the Company's asphalt roofing business arise, in part, from the unique marketing programs the Company directs toward its indirect customer base, professional roofing contractors, combined with an industry-wide reputation for providing quality products with a high level of service. The Company's comprehensive contractor marketing program is designed to support the position of the Company's contractors in the industry. Such marketing programs include a special system for in-home sales promotions. Pursuant to its exclusive certification program, the Company also certifies contractors who have recorded three (3) successful years in business, who provide the Company with names of customers for quality checks, sign a letter of ethics, have a good credit history, warrant their workmanship for two (2) years and attend annual training meetings. Contractors must be recertified every two years. Certified contractors are supplied with a wide array of marketing materials, including customized sample cases, special mailers and custom job site signs. Intellectual Property The Company owns a number of trademarks, as well as significant technology and know-how, which it utilizes in connection with its asphalt roofing business. The Company believes that its trademarks are strong and well recognized in the industry. COMPLIANCE WITH CERTAIN ENVIRONMENTAL LAWS The Company has expended, and expects to continue to expend, funds to comply with federal, state and local provisions and orders which relate to the environment. Based on the information available to the 4 Company at this time, the Company believes that the effect of compliance with these provisions on the capital expenditures, earnings and competitive position of the Company is not material. Litigation and other proceedings involving environmental matters are described under the heading "Environmental Matters" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in Item 3, "Legal Proceedings". FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS While the Company formerly operated in two major business segments, its housing segment and its environmental segment, the Company no longer operates its environmental segment. Financial information about the industrial segments in which the Company operates, for the three years ended December 31, 1995, appear in Note 12 of the Notes to Consolidated Financial Statements which are included herein. EMPLOYEES At December 31, 1995, the Company employed 174 people. ITEM 2. PROPERTIES The Company's executive offices are located at its plant in Norwood, Massachusetts. The Company believes that its plant and facilities, as described below, are suitable and adequate for its current and anticipated business. Operating capacity can be increased by additional man hours, changing product mix, and/or minimal capital investment should the need arise. The Company's facilities are well maintained, in sound operating condition, and in regular use. Roofing Manufacturing Facility The Company owns its asphalt roofing manufacturing facility in Norwood, Massachusetts. The Norwood plant includes the roofing manufacturing facility, a granule plant and an asphalt plant. The Company's quarry is located in Wrentham, Massachusetts, and its private landfill is located in Walpole, Massachusetts. The Company leases an industrial laminator and certain other equipment which were fabricated for use in its roofing plant. The laminator lease expires in 1998. The Company completed the construction of an asphalt oxidizer plant at the Norwood premises in January 1995 to ensure a continuous supply of asphalt. The Company also leases an asphalt storage tank and terminal facilities in Providence, Rhode Island. ITEM 3. LEGAL PROCEEDINGS On or about April 18, 1996 Bird Incorporated, a subsidiary of the Company, received a grand jury subpoena issued upon application of the United States Department of Justice, Antitrust Division, for the production of certain documents. In addition, an executive officer and a senior manager of the Company have received grand jury subpoenas requiring the production of certain documents as well as their providing testimony before the grand jury. The Company and such executive officer and senior manager are in the process of evaluating the subpoena and intend to cooperate fully with the Department of Justice. It appears that the subpoena relates to an investigation of the roofing materials industry. The Company monitors its compliance with environmental regulations on an ongoing basis. The Company's general counsel receives environmental site assessments from the operating managers responsible for site environmental compliance. Appropriate action is undertaken where needed. When environmental claims are asserted against the Company, the claims are evaluated by the Company's general counsel and operating management in conjunction with external legal counsel and environmental engineers as necessary, and action is taken with respect to all known sites, as appropriate. The Company is currently engaged in proceedings relating to or has received notice of the following environmental matters: 5 On March 15, 1994 the Company received a draft of an Administrative Consent Order and Notice of Noncompliance from the Massachusetts Department of Environmental Protection ("DEP") concerning operations at its Norwood, Massachusetts manufacturing facility and associated rock granule processing facility. The draft alleges that the Company was not in compliance with regulations of the DEP relating to air emissions, granule plant operation, and labeling, handling and storage of certain hazardous waste. The draft proposes certain corrective action on the part of the Company as well as payment of civil administrative penalties. On June 10, 1994, the Company's roofing division entered into an administrative consent order and notice of noncompliance with respect to the alleged violations. The consent order requires the Company to undertake certain modifications and corrective actions with respect to certain hazardous waste handling and storage facilities at the Norwood facility, to conduct an environmental audit of its operations at such facility and to undertake various modifications of air pollution control equipment. On May 13, 1994, the Company paid an administrative penalty of $30,000. The Company estimated that the cost of corrective action to be taken by it in accordance with the consent order would be approximately $100,000. The majority of the corrective actions were completed in 1995. On March 25, 1994, the Company received a notice from the United States Environmental Protection Agency (the "EPA") regarding a site inspection prioritization report prepared by the DEP. The notice alleges a potential release of hazardous substances into the environment at the Company's former mill site in East Walpole, Massachusetts. The EPA has reserved the right to conduct further site tests on the location. A site assessment performed on the mill site for the Company by its environmental consultants, GZA GeoEnvironmental Inc. ("GZA"), showed no environmental cleanup was necessary. This report was submitted to the DEP in July 1995. In the opinion of management and based on management's and GZA's understanding that the alleged releases are in de minimis quantities, this matter should not have a material adverse effect on the Company's financial position or on the results of its operations. On June 21, 1994, the Arizona Department of Environmental Quality ("ADEQ") issued a notice of violation ("NV") to Southwest Roofing Supply, a previously owned division of the Company ("Southwest"), which directed Southwest to conduct a site investigation of property formerly leased by Southwest. A consent order between the ADEQ and the Company was issued on September 23, 1994. Pursuant to the consent order, the Company agreed to submit a work plan with a view to remediating the soil and groundwater that may have been contaminated by leaks from an underground storage tank previously removed by the Company. The Company's management believes that the remediation cost to the Company will be in the range of $200,000 to $700,000. As of December 31, 1995, the Company has provided a reserve of $450,000 for the estimated cost of cleanup. The Company anticipates that $200,000 will be reimbursed to the Company by the ADEQ in accordance with Arizona law and regulation. In 1986, the Company, along with numerous other companies, was named by the EPA and other governmental agencies responsible for regulation of the environment as a Potentially Responsible Person ("PRP") pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. Paragraph 9601, et seq. ("CERCLA") in connection with hazardous substances at a site known as the Fulton Terminal Superfund site located in Fulton, Oswego County, New York. On September 28, 1990, the Company and a number of other PRPs reached a negotiated settlement with the EPA pursuant to which the settling PRPs agreed to pay the costs of certain expenses in connection with the proceedings and to pay certain other expenses, including the costs and expenses of administering a trust fund to be established by the settling PRPs. The settlement agreement is embodied in a consent decree lodged with the United States District Court for the Western District of New York and fixed the Company's proportionate share of the total expenses. The ultimate cost to the Company of the remedial work and other expenses covered by the settlement agreement is estimated to be between $1 million to $2 million payable over a period of 3 to 15 years (depending upon the duration of remediation efforts). At December 31, 1995, the Company has provided a reserve of approximately $1 million to cover the estimated cost of the Company's remaining proportionate share (i.e., 17%) of the ultimate total cost of cleanup. Under a cost-sharing arrangement set forth in a consent decree with the EPA, the other PRPs have agreed to incur 83% of the aggregate cost of remediation of this site. 6 The Company has been named as a PRP with respect to certain other sites which are being investigated by federal or state agencies responsible for regulation of the environment. As a consequence of its status as a PRP, the Company may be jointly and severally liable for all of the potential monetary sanctions and remediation costs applicable to each site. In assessing the potential liability of the Company at each site, management has considered, among other things, the aggregate potential cleanup costs of each site; the apparent involvement of the Company at each site and its prospective share of the remediation costs attributable thereto; the number of PRPs identified with respect to each site and their financial ability to contribute their proportionate shares of the remediation costs for such site; the availability of insurance coverage for the Company's involvement at each site and the likelihood that such coverage may be contested; and whether and to what extent potential sources of contribution from other PRPs or indemnification by insurance companies constitute reliable sources of recovery for the Company. Similar consideration has been given in determining the exposure and potential liability of the Company in connection with other significant legal proceedings to which the Company is a party. On the basis of such consideration, management has determined that such environmental matters will not have a material adverse effect on the Company's financial position or results of operations. The Company has provided an aggregate reserve amounting to approximately $300,000 for its estimated share of the ultimate cost of clean-up for claims arising from other such sites (without taking into account any potential indemnification or recovery from third parties). The Company's roofing facility at Norwood, Massachusetts is one of 4,000 sites on the DEP List of Confirmed Disposal Sites. The DEP significantly revised the regulations that govern the reporting, assessment and remediation of hazardous waste sites in Massachusetts. The new Massachusetts Contingency Plan ("MCP") however, does not alter the ultimate liability for any remediation that may be necessary at the Norwood facility. Under the new MCP, the roofing facility was listed on the August 1993 "Transition List of Confirmed Disposal Sites and Locations to be Investigated." A site assessment of the Norwood facility was performed for the Company by its environmental consultants GZA GeoEnvironmental, Inc. because the Company was on the DEP List of Confirmed Disposal Sites. The Company was required to complete certain additional remedial activities described in the new MCP on or before August 2, 1996. The Phase I and Phase II plan was completed in 1995 and submitted to the DEP in January 1996. In the opinion of management, no additional material costs will be incurred. Since 1981 Bird has been named as a defendant in approximately 550 product liability cases throughout the United States by persons claiming to have suffered asbestos-related diseases as a result of alleged exposure to asbestos used in products manufactured and sold by Bird. Approximately 140 of these cases are currently pending and costs of approximately $2 million in the aggregate have been incurred in the defense of these claims since 1981. Employers Insurance of Wausau ("Wausau") has accepted the defense of these cases under an agreement for sharing of the costs of defense, settlements and judgments, if any. At December 31, 1995, the Company has recorded a reserve of $950,000 to cover the estimated cost of these claims. In light of the nature and merits of the claims alleged, in the opinion of management, the resolution of these remaining claims will not have a material adverse effect on the results of operations or financial condition of the Company. In 1992, a subsidiary of the Company, Bird Atlantic Corporation, formerly Atlantic Building Products Corporation ("ABPCO"), commenced an action against a former vendor, alleging violation of an exclusive distributorship without adequate and fair compensation to ABPCO. A jury trial was held in November 1995 in the Superior Court of Plymouth County, Massachusetts. The jury found in favor of ABPCO and judgement was entered on January 26, 1996 in the principal amount of approximately $1.8 million. The award, with interest accruing at 12% per annum, is expected to be in excess of $3 million and will not be reported as income until collected. The defendant has appealed the judgement. Insurance and Product Liability Claims On April 16, 1996 Paul Lindholm filed a class action suit in the Superior Court of the Commonwealth of Massachusetts for Norfolk County against Bird Incorporated. The complaint alleges that Bird 7 Incorporated has knowingly manufactured, distributed and falsely advertised defectively designed fiber glass based roofing shingles. The complaint lists claims of fraud, negligent misrepresentation, negligence and breach of express and implied warranty. The Company is currently in the process of evaluating the complaint. On June 1, 1993, Wausau commenced action in the Superior Court for Norfolk County, Massachusetts, against Bird seeking a declaratory judgment that certain built-up roofing and glass shingle claims made against Bird were not covered by liability insurance policies issued by Wausau. Bird asserts that the claims are covered and has answered the complaint. A trial is scheduled for 1997. In the opinion of management, the above matter will not have a material adverse effect on the Company's financial position or results of operations. The Company is also exposed to a number of other asserted and unasserted potential claims encountered in the normal course of business. In the opinion of management, the resolution of such claims will not have a material adverse effect on the Company's financial position or results of operations. The Company is a defendant in a number of suits alleging product defects, the outcome of which management believes will not in the aggregate have a material impact on the Company's financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the quarter ended December 31, 1995. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS COMMON STOCK INFORMATION The Company had 2,123 common shareholders of record at December 31, 1995. The common stock is quoted in the National Market System under the NASDAQ symbol BIRD. The range of high and low prices for the common stock as reported by NASDAQ for the periods indicated is set forth below.
1995 1994 ----------- ------------ QUARTER HIGH LOW HIGH LOW ------- ----- ----- ------ ----- First............................................. 9 7 3/4 12 1/4 8 Second............................................ 8 5/8 6 1/4 11 1/4 8 1/2 Third............................................. 8 1/2 5 7/8 10 1/2 7 Fourth............................................ 6 5/8 4 1/2 10 8
The Company paid no cash dividends on its common stock during 1995 or 1994. Under the terms of the Loan Agreement between the Company and Fleet Capital, the Company has agreed that it will refrain from paying cash dividends on its common stock or its $1.85 cumulative preference stock, without prior approval from the Bank. The Company is in arrears in the payment of four dividends on its preference stock. The Articles of Organization of the Company provide that as long as any arrearage on the payment of dividends on the Company's 5% preferred stock exists, no dividends may be declared or paid on any other class of stock of the Company and further provides that in the event that full cumulative dividends on the preference stock have not been declared and paid, the Company may not declare or pay any dividends or make any distributions on, or purchase, redeem, or otherwise acquire, its common stock until full cumulative dividends on the preference stock have been declared and paid or set aside for payment. 8 ITEM 6. SELECTED FINANCIAL DATA The following tables set forth certain financial data and are qualified in their entirety by the more detailed Consolidated Financial Statements and information included elsewhere herein: SELECTED CONSOLIDATED STATEMENT OF OPERATIONS DATA
YEAR ENDED DECEMBER 31, ------------------------------------------------ 1995 1994 1993 1992 1991 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales.................... $ 54,180 $167,886 $187,745 $164,202 $137,059 -------- -------- -------- -------- -------- Costs and expenses: Cost of sales.............. 48,007 136,878 151,664 128,371 107,226 Selling, general and administrative expenses... 11,817 28,786 32,716 27,811 23,023 Interest expense........... 927 4,782 2,472 1,506 1,026 Discontinued business activities (income)....... (17,570) (1,313) 268 178 189 Other (income) expense..... 372 4,680 5,903 (197) (331) -------- -------- -------- -------- -------- Earnings (loss) from continuing operations before income taxes................ 10,627 (5,927) (5,278) 6,533 5,926 Provision (benefit) for income taxes................ 11,424 (7,010) (637) 869 498 -------- -------- -------- -------- -------- Earnings (loss) from continuing operations before cumulative effect of accounting change........... (797) 1,083 (4,641) 5,664 5,428 -------- -------- -------- -------- -------- Discontinued operations: Gain (loss) from operations of discontinued businesses, net of taxes.. 0 1,245 (15,414) (2,573) (249) Loss on disposal of businesses, net of taxes.. (11,252) (6,011) (11,000) 0 0 -------- -------- -------- -------- -------- Net loss from discontinued operations.................. (11,252) (4,766) (26,414) (2,573) (249) -------- -------- -------- -------- -------- Cumulative effect of accounting change........... 0 0 2,733 0 0 -------- -------- -------- -------- -------- Net earnings (loss).......... $(12,049) $ (3,683) $(28,322) $ 3,091 $ 5,179 ======== ======== ======== ======== ======== Primary earnings (loss) per common share: Continuing operations...... $ (0.57) $ (0.11) $ (1.51) $ 1.00 $ 1.01 Discontinued operations.... (2.74) (1.20) (6.45) (0.62) (0.06) Cumulative effect of accounting change......... 0.00 0.00 0.67 0.00 0.00 -------- -------- -------- -------- -------- Net earnings (loss) per common share................ $ (3.31) $ (1.31) $ (7.29) $ 0.38 $ 0.95 ======== ======== ======== ======== ======== Cash dividend per common share....................... $ 0.00 $ 0.00 $ 0.15 $ 0.20 $ 0.20 ======== ======== ======== ======== ======== Book value per common share.. $ 1.45 $ 5.07 $ 5.75 $ 12.83 $ 12.61 ======== ======== ======== ======== ========
SELECTED CONSOLIDATED BALANCE SHEET DATA
DECEMBER 31, ----------------------------------------- 1995 1994 1993 1992 1991 ------- ------- -------- -------- ------- (IN THOUSANDS) Total assets......................... $43,703 $85,705 $123,229 $119,075 $99,904 Working capital...................... $ 5,978 $ 5,627 $ 30,090 $ 43,782 $34,179 Long-term debt, excluding current portion............................. $ 4,869 $12,504 $ 43,127 $ 30,374 $12,150 Stockholders' equity................. $24,416 $37,718 $ 40,561 $ 69,101 $68,602
9 BIRD CORPORATION AND SUBSIDIARIES ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS TENDER OFFER AND PROPOSED MERGER The Company signed an Amended and Restated Agreement and Plan of Merger, dated as of April 8, 1996 (the "Merger Agreement"), among the Company, CertainTeed Corporation, a Delaware corporation ("CertainTeed"), and BI Expansion Corp., a Massachusetts corporation and a wholly owned subsidiary of CertainTeed ("Acquisition Sub"), pursuant to which Acquisition Sub will be merged with and into the Company (the "Merger"), with the Company surviving the Merger as a subsidiary of CertainTeed. In the Merger, each share of the Company's common stock, par value $1 per share ("Common Stock"), outstanding on the effective date of the Merger and each share of the Company's $1.85 Cumulative Convertible Preference Stock par value $1 per share ("Preference Stock"), outstanding on the effective date of the Merger (other than shares held by CertainTeed or Acquisition Sub, shares held in the Company's treasury and other than shares held by stockholders who perfect their appraisal rights under Massachusetts law) will be converted into the right to receive (in the case of Common Stock) $7.50 per share of Common Stock and (in the case of Preference Stock) $20 plus all accrued and unpaid dividends through the effective date of the Merger per share of Preference Stock, in each case in cash, without interest. All outstanding shares of the Company's 5% Cumulative Preferred Stock, par value $100 per share (the "5% Stock"), will remain issued and outstanding after the Merger and will be called for redemption and retirement as soon as practicable following the Merger at a price equal to $110 per share, plus all accrued and unpaid dividends through the date of redemption and retirement. The Merger is the second step in a two-part transaction, the purpose of which is the acquisition of the Company by CertainTeed. On April 12, 1996, Acquisition Sub commenced a tender offer (the "Offer") to purchase all outstanding shares of Common Stock and Preference Stock at a price of $7.50 per share of Common Stock and $20 plus all accrued and unpaid dividends through the expiration date of the Offer per share of Preference Stock. The Offer is conditioned upon, among other things, (i) there being validly tendered and not withdrawn prior to the expiration of the Offer at least 66 2/3% of all outstanding shares of Common Stock (determined on a fully diluted basis on the expiration of the Offer) and (ii) either (x) there being validly tendered and not withdrawn prior to the expiration of the Offer at least 66 2/3% of all outstanding shares of Preference Stock or (y) Acquisition Sub having elected to require the Company to redeem all outstanding shares of Preference Stock in accordance with the Merger Agreement. Pursuant to the Merger Agreement, upon the acquisition by Acquisition Sub of at least a majority of the outstanding shares of Common Stock pursuant to the Offer, Acquisition Sub shall be entitled to designate such number of directors to be appointed to the Company's Board of Directors as is required to constitute a majority of the members of the Company's Board of Directors. Completion of the transaction is subject to approval by the Company's shareholders and appropriate governmental authorities. The Merger is not subject to a financing contingency. The Company's Board of Directors has received a fairness opinion from its investment bankers regarding the Merger. The closing of the Merger is anticipated at the end of the second quarter, following distribution of proxy materials to the Company's shareholders and approval at a special meeting. FINANCIAL CONDITION Prior to November 30, 1994, the Company's external financial needs were satisfied by borrowing under the Second and Third Amended Credit Agreements with The First National Bank of Boston, Philadelphia National Bank incorporated as Corestates Bank, N.A. and The Bank of Tokyo Trust Company. On November 30, 1994, Bird Incorporated entered into a three year $39 million Loan Agreement with Fleet Capital Corporation ("Fleet Capital"), previously Barclays Business Credit, Inc. and Shawmut Capital 10 Corporation. At the end of the three year period, the Loan Agreement will be automatically renewed for successive one year periods unless terminated specifically in writing. The Loan Agreement consisted of a $24 million revolving credit commitment and two equal term loans (Term loan A and Term loan B, as defined in the Loan Agreement) totaling $15 million. On March 8, 1995 the Company sold the assets of its vinyl siding operation to Jannock, Inc. for $47.5 million which was reduced to approximately $42.5 million by post-closing working capital adjustments. The proceeds from the sale were used to reduce bank debt. Concurrent with the sale, Fleet Capital executed the First Amendment to the Loan Agreement amending the amount of the facility to $20 million consisting of a $15 million revolving credit commitment and a $5 million term loan. At December 31, 1995, $5 million of debt was outstanding. On January 10, 1996, the Company paid down the term loan so that the outstanding principal balance equaled $2.5 million. Up to $5 million of the revolving credit facility can be used for letters of credit. Letters of credit outstanding as of December 31, 1995 totaled $2,233,000 compared to $2,927,000 as of December 31, 1994. Borrowings by Bird Incorporated under the Loan Agreement are guaranteed by the Company and the Company's other subsidiaries and are secured by substantially all of the assets of the Company and its subsidiaries. The revolving credit line availability is determined with reference to a percentage of accounts receivable and inventory which are pledged to the lender. During the period January 1 through April 30, the Loan Agreement provides a $2 million over advance on accounts receivable and inventories in order to assist the Company in assuring adequate funding of any seasonal build up of accounts receivable which may occur under sales programs offered during the winter months. Currently, the availability calculation does not allow borrowings to the full extent of the revolving credit commitment, due to the seasonality of the building materials manufacturing business. As of March 15, 1996, an aggregate of $7,683,000 was available to the Company under the terms of the revolving credit facility under the Loan Agreement. The Loan Agreement contains financial and operating covenants which, among other things, (i) require the Company to maintain prescribed levels of tangible net worth, net cash flow and working capital and (ii) place limits on the Company's capital expenditures. The Loan Agreement also contains restrictions on indebtedness, liens, investments, distributions (including payment of common and preference dividends), mergers, acquisitions and disposition of assets. As of September 30, 1995, the Company was in default under Section 8.3.3 of the Loan Agreement as a result of failing to achieve a stated level of cash flow for the third quarter of 1995. As a result of the weak remodeling market during 1995, sales volume and earnings were less than anticipated, negatively impacting cash flow. At the request of the Company, Fleet Capital waived the cash flow requirements for the third quarter without penalty and amended this and other financial covenants for subsequent periods based on a review of the Company's financial condition and future projections. As of December 31, 1995, the Company was in compliance with all covenants. Interest on the revolving credit commitment under the First Amended Loan Agreement accrues at the Fleet Capital base rate (as specified in such Agreement) or the London Interbank Offering Rate ("LIBOR") plus 2 3/4% at the Company's election on all borrowings plus the greater of $25,000 per annum or 1/4% on any unused portion of the commitment payable monthly in arrears. The interest on the term loan accrues at the base rate or the LIBOR rate plus 2 3/4% at the Company's election. The interest rate on outstanding borrowings at December 31, 1995 was 8.69%. The repayment of the principal on the term loan is at the rate of $62,500 per month through November 1996 and $71,417 per month thereafter with a final principal payment of $3,455,800 due on November 30, 1997. Proceeds in excess of $100,000 from the sale of fixed assets may, at Fleet Capital's discretion, be applied to the outstanding principal payments of the term loan. In order to control its cost and supply of asphalt, the Company constructed an asphalt oxidizer plant at its roofing facility in Norwood, Massachusetts. Construction was completed during January 1995. The Company's decision to build the oxidizer was triggered by the decision of Exxon (the only remaining supplier of asphalt in New England) to exit the New England market. The cost of this plant expansion was approximately $5.5 million. On March 8, 1995, the Company sold substantially all of the assets of its vinyl siding operation to Jannock, Inc. for $47.5 million in cash subject to certain downward adjustments which totaled $4,962,000. Net of adjustments, the gain on the sale of the vinyl business totaled $20,579,000. 11 On June 2, 1995, the Company sold all of the outstanding capital stock of Bird-Kensington Holding Corp. ("Bird-Kensington"), which owned the Company's interest in Kensington Partners ("Kensington"), to Jannock, Inc. ("Jannock"). The sale was consummated pursuant to the exercise by Jannock of an option granted under an Asset Purchase Agreement related to the sale of the Company's vinyl business dated as of September 23, 1994 (as amended by amendments dated as of January 24, 1995, January 31, 1995, and April 27, 1995, the "Asset Purchase Agreement"). The purchase price consisted of cash in the amount of $2,780,000 and the assumption of certain liabilities related to the Kensington business. Cash proceeds of $1 million were used to acquire the minority partner's interest in Kensington. In addition, $3,692,000 was invested by the Company in Bird-Kensington, as a condition of the sale, to enable Kensington to pay certain liabilities and to assure that the equity of Kensington was not less than $1,150,000 at the time of closing as stipulated in the Asset Purchase Agreement. Following the closing date, Jannock presented to the Company financial statements of Kensington as of June 2, 1995, indicating that net equity was $471,000 less than the amount required by the Asset Purchase Agreement. The Company had established a reserve for the full amount of the shortfall at June 30, 1995 and subsequently paid to Jannock $398,000 in full settlement of the terms of the Asset Purchase Agreement. Net of certain purchase price adjustments, the loss on the sale of Kensington was $1,959,000. One June 18, 1994, the Company agreed to cause the sale of its 80% interest in Bird Environmental Gulf Coast, Inc. ("BEGCI") to the minority shareholders thereof, subject to financing, resulting in the complete withdrawal from the environmental business. During 1995, the minority partner became unable to finance the purchase of the facility and efforts to attract another purchaser were unsuccessful. In July 1995, the Company's Board of Directors suspended further funding of the facility. As a result of this action, during the second quarter of 1995, the Company's remaining investment of $8.6 million was written-off and a $3 million reserve was established for the costs associated with the closure of the facility. On November 29, 1995, the Company caused the sale all of the outstanding capital stock of BEGCI to GTS Duratek, Inc. for a purchase price of $1.00. In addition, the Company agreed to pay the purchaser the amount by which BEGCI's current liabilities exceeded its current assets at August 31, 1995 which was approximately $1.3 million. Of the $3 million reserve established in the second quarter of 1995, $2,050,000 was utilized, while $650,000 remains at December 31, 1995 for future claims against discontinued operations. Net cash and cash equivalents increased during fiscal 1995 by $3.4 million primarily due to cash received from the sale of the vinyl business. The cash used by continuing operations for the fiscal period ended December 31, 1995 increased $6.7 million, from $11.6 million to $18.3 million. In 1995, the Company recorded a gain of $20.6 million on the sale of its vinyl business. This gain was offset by charges of $11.3 million and $2 million related to the disposal of the environmental and window fabrication businesses, respectively. Cash used by operations in 1995 was also attributable to several significant changes in the balance sheet such as a reversal of future tax benefits of $11.3 million, a decrease of $3.1 million in trade accounts receivable, a decrease of $14.3 million in liabilities not relating to financing activities and an increase of $2.7 million relating to inventories. Additionally, the vinyl and window fabrication business activities which were discontinued in 1995 had a significant impact on the changes in the balance sheet accounts between December 31, 1994 and December 31, 1995. As a result of these sales, inventory decreased $6.3 million, accounts and notes receivable decreased $11 million, and current liabilities decreased $9 million. In addition, assets held for sale decreased $7.5 million due to the write-off of the Company's interest in Bird Environmental Gulf Coast, Inc. ("BEGCI"). The Company had approximately $47.3 million of net cash provided from investing activities for the period ended December 31, 1995 as compared to a total of approximately $19.4 million for the period ended December 31, 1994. The change is primarily the result of $50.7 million of cash receipts from the proceeds of the sale of certain of the Company's assets (primarily, the sale of the assets of the vinyl and window fabrication businesses to Jannock, Inc. in March and June 1995, respectively), offset by cash used for capital expenditures of the roofing business and additional investments in discontinued operations. In the prior comparable period, net cash provided by investing activities resulted primarily from the proceeds of the sale of the Company's distribution business to Wm. Cameron & Co., offset by cash used for capital expenditures. 12 The net cash resulting from financing activities changed by $11 million from the prior year. Cash used in financing activities during 1995 resulted from the net repayment of debt of $24 million and $1.6 million of dividend payments, as compared to 1994 when the Company had net repayments of debt of approximately $16 million and made minimal dividend payments. ENVIRONMENTAL MATTERS The Company monitors its compliance with environmental regulations on an ongoing basis. The Company's general counsel receives environmental site assessments from the operating managers responsible for site environmental compliance. Appropriate action is undertaken where needed. When environmental claims are asserted against the Company, the claims are evaluated by the Company's general counsel and operating management in conjunction with external legal counsel and environmental engineers as necessary, and action is taken with respect to all known sites, as appropriate. The Company is currently engaged in proceedings relating to or has received notice of the following environmental matters: On March 15, 1994 the Company received a draft of an Administrative Consent Order and Notice of Noncompliance from the Massachusetts Department of Environmental Protection ("DEP") concerning operations at its Norwood, Massachusetts manufacturing facility and associated rock granule processing facility. The draft alleges that the Company was not in compliance with regulations of the DEP relating to air emissions, granule plant operation, and labeling, handling and storage of certain hazardous waste. The draft proposes certain corrective action on the part of the Company as well as payment of civil administrative penalties. On June 10, 1994, the Company's roofing division entered into an administrative consent order and notice of noncompliance with respect to the alleged violations. The consent order requires the Company to undertake certain modifications and corrective actions with respect to certain hazardous waste handling and storage facilities at the Norwood facility, to conduct an environmental audit of its operations at such facility and to undertake various modifications of air pollution control equipment. On May 13, 1994, the Company paid an administrative penalty of $30,000. The Company estimated that the cost of corrective action to be taken by it in accordance with the consent order would be approximately $100,000. The majority of the corrective actions were completed in 1995. On March 25, 1994, the Company received a notice from the United States Environmental Protection Agency (the "EPA") regarding a site inspection prioritization report prepared by the DEP. The notice alleges a potential release of hazardous substances into the environment at the Company's former mill site in East Walpole, Massachusetts. The EPA has reserved the right to conduct further site tests on the location. A site assessment performed on the mill site in East Walpole for the Company by its environmental consultants, GZA, showed no environmental cleanup was necessary. This report was submitted to the DEP in July 1995. In the opinion of management and based on management's and GZA's understanding that the alleged releases are in de minimis quantities, this matter should not have a material adverse effect on the Company's financial position or on the results of its operations. On June 21, 1994, the Arizona Department of Environmental Quality ("ADEQ") issued a notice of violation ("NV") to Southwest Roofing Supply, a previously owned division of the Company ("Southwest"), which directed Southwest to conduct a site investigation of property formerly leased by Southwest. A consent order between the ADEQ and the Company was issued on September 23, 1994. Pursuant to the consent order, the Company agreed to submit a work plan with a view to remediating the soil and groundwater that may have been contaminated by leaks from an underground storage tank previously removed by the Company. The Company's management believes that the remediation cost to the Company will be in the range of $200,000 to $700,000. As of December 31, 1995, the Company has provided a reserve of $450,000 for the estimated cost of cleanup. The Company anticipates that $200,000 will be reimbursed to the Company by the ADEQ in accordance with Arizona law and regulation. In 1986, the Company, along with numerous other companies, was named by the EPA and other governmental agencies responsible for regulation of the environment as a Potentially Responsible Person ("PRP") pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, as 13 amended, 42 U.S.C. Paragraph 9601, et seq. ("CERCLA") in connection with hazardous substances at a site known as the Fulton Terminal Superfund site located in Fulton, Oswego County, New York. On September 28, 1990, the Company and a number of other PRPs reached a negotiated settlement with the EPA pursuant to which the settling PRPs agreed to pay the costs of certain expenses in connection with the proceedings and to pay certain other expenses, including the costs and expenses of administering a trust fund to be established by the settling PRPs. The settlement agreement is embodied in a consent decree lodged with the United States District Court for the Western District of New York and fixed the Company's proportionate share of the total expenses. The ultimate cost to the Company of the remedial work and other expenses covered by the settlement agreement is estimated to be between $1 million to $2 million payable over a period of 3 to 15 years (depending upon the duration of remediation efforts). At December 31, 1995, the Company has provided a reserve of approximately $1 million to cover the estimated cost of the Company's remaining proportionate share (i.e., 17%) of the ultimate total cost of cleanup. Under a cost-sharing arrangement set forth in a consent decree with the EPA, the other PRPs have agreed to incur 83% of the aggregate cost of remediation of this site. The Company has been named as a PRP with respect to certain other sites which are being investigated by federal or state agencies responsible for regulation of the environment. As a consequence of its status as a PRP, the Company may be jointly and severally liable for all of the potential monetary sanctions and remediation costs applicable to each site. In assessing the potential liability of the Company at each site, management has considered, among other things, the aggregate potential cleanup costs of each site; the apparent involvement of the Company at each site and its prospective share of the remediation costs attributable thereto; the number of PRPs identified with respect to each site and their financial ability to contribute their proportionate shares of the remediation costs for such site; the availability of insurance coverage for the Company's involvement at each site and the likelihood that such coverage may be contested; and whether and to what extent potential sources of contribution from other PRPs or indemnification by insurance companies constitute reliable sources of recovery for the Company. Similar consideration has been given in determining the exposure and potential liability of the Company in connection with other significant legal proceedings to which the Company is a party. On the basis of such consideration, management has determined that such environmental matters will not have a material adverse effect on the Company's financial position or results of operations. The Company has provided an aggregate reserve amounting to approximately $300,000 for its estimated share of the ultimate cost of clean-up for claims arising from other such sites (without taking into account any potential indemnification or recovery from third parties). The Company's roofing facility at Norwood, Massachusetts is one of 4,000 sites on the DEP List of Confirmed Disposal Sites. The DEP significantly revised the regulations that govern the reporting, assessment and remediation of hazardous waste sites in Massachusetts. The new Massachusetts Contingency Plan ("MCP") however, does not alter the ultimate liability for any remediation that may be necessary at the Norwood facility. Under the new MCP, the roofing facility was listed on the August 1993 "Transition List of Confirmed Disposal Sites and Locations to be Investigated." A site assessment of the Norwood facility was performed for the Company by its environmental consultants GZA GeoEnvironmental, Inc. because the Company was on the DEP List of Confirmed Disposal Sites. The Company must complete certain additional remedial activities described in the new MCP on or before August 2, 1996. The Phase I and Phase II plan was completed and submitted to the DEP in January 1996. In the opinion of management, no additional material costs will be incurred. Since 1981 Bird has been named as a defendant in approximately 550 product liability cases throughout the United States by persons claiming to have suffered asbestos-related diseases as a result of alleged exposure to asbestos used in products manufactured and sold by Bird. Approximately 140 of these cases are currently pending and costs of approximately $2 million in the aggregate have been incurred in the defense of these claims since 1981. Employers Insurance of Wausau ("Wausau") has accepted the defense of these cases under an agreement for sharing of the costs of defense, settlements and judgments, if any. At December 31, 1995, the Company has recorded a reserve of $950,000 to cover the estimated cost of these claims. In light of the 14 nature and merits of the claims alleged, in the opinion of management, the resolution of these remaining claims will not have a material adverse effect on the results of operations or financial condition of the Company. INSURANCE AND PRODUCT LIABILITY CLAIMS On April 16, 1996 Paul Lindholm filed a class action suit in the Superior Court of the Commonwealth of Massachusetts for Norfolk County against Bird Incorporated. The complaint alleges that Bird Incorporated has knowingly manufactured, distributed and falsely advertised defectively designed fiber glass based roofing shingles. The complaint lists claims of fraud, negligent misrepresentation, negligence and breach of express and implied warranty. The Company is currently in the process of evaluating the complaint. On June 1, 1993, Wausau commenced action in the Superior Court for Norfolk County, Massachusetts, against Bird seeking a declaratory judgment that certain built-up roofing and glass shingle claims made against Bird were not covered by liability insurance policies issued by Wausau. Bird asserts that the claims are covered and has answered the complaint. A trial is scheduled for 1997. In the opinion of management, the above matter will not have a material adverse effect on the Company's financial position or results of operations. The Company is also exposed to a number of other asserted and unasserted potential claims encountered in the normal course of business. In the opinion of management, the resolution of such claims will not have a material adverse effect on the Company's financial position or results of operations. The Company is a defendant in a number of suits alleging product defects, the outcome of which management believes will not in the aggregate have a material impact on the Company's financial position or results of operations. LEGAL MATTERS On or about April 18, 1996 Bird Incorporated received a grand jury subpoena issued upon application of the United States Department of Justice, Antitrust Division, for the production of certain documents. In addition, an executive officer and a senior manager of the Company have received grand jury subpoenas requiring the production of certain documents as well as their providing testimony before the grand jury. The Company and such executive officer and senior manager are in the process of evaluating the subpoena and intend to cooperate fully with the Department of Justice. It appears that the subpoena relates to an investigation of the roofing materials industry. In 1992, a subsidiary of the company, Bird Atlantic Corporation, formerly Atlantic Building Products Corporation ("ABPCO"), commenced an action against a former vendor, alleging violation of an exclusive distributorship without adequate and fair compensation to ABPCO. A jury trial was held in November 1995 in the Superior Court of Plymouth County, Massachusetts. The jury found in favor of ABPCO and judgement was entered on January 26, 1996 in the principal amount of approximately $1.8 million. The award, with interest accruing at 12% per annum, is expected to be in excess of $3 million and will not be reported as income until collected. The defendant has appealed the judgement. RESULTS OF OPERATIONS The Company's future prospects and sales are tied solely to one line of business (roofing manufacturing) which is dependent upon the economy in the northeastern United States. The Company produces all of its output at a single plant which relies on one major supplier for glass mat, a critical raw material. Nevertheless, the Company believes it has significant competitive advantages in this business. These advantages stem from, and are expected to continue in light of the Company's leading market share, its low cost production abilities resulting from a state-of-the-art plant, its internal supply of granules from its own quarry and granule plant and its asphalt oxidizing plant. 1995 Compared With 1994 Earnings from continuing operations before income taxes in fiscal 1995 were $10,627,000 compared to losses of $5,927,000 in fiscal 1994. Net sales from continuing operations decreased 67.7% from $167,886,000 15 to $54,180,000 as compared to 1994, primarily due to the sale of the Company's distribution and vinyl products business units. Sales from the roofing manufacturing business decreased $10,857,000 or 19.9% due to price weakness and a decline in volume. The decreased volume was attributable to a weak re-roofing market in the northeast caused by a mild 1994/1995 winter followed by a hot, dry summer. The Company is expanding its sales territories to include areas bordering the northeastern United States in an effort to replace lost volume. Cost of sales in 1995 was $48,007,000 as compared to $136,878,000 in 1994, constituting a decrease of 64.9%. The decline was primarily a result of the sale of the Company's distribution and vinyl products business units. Cost of sales for the roofing business decreased 18.4% or $8,662,000 due primarily to decreased manufacturing costs related to a decrease in sales volume. Although the Company experienced raw material price increases in glass mat and dry felt, the cost of asphalt, along with related freight, was reduced significantly as a result of the newly constructed asphalt oxidizer, which produces asphalt saturant and coatings. The oxidizer became operational in February 1995. From November 1995 through mid-February 1996, the oxidizer was temporarily shut down for repairs as a result of a fire within the tank farm area of the plant. Cost of sales, stated as a percentage of net sales, was 88.6% in fiscal 1995 as compared to 81.5% in fiscal 1994. Roofing manufacturing cost of sales, as a percentage of sales, increased 1.6% from 86.2% to 87.8% in 1995. Increases in raw material costs and decreases in sales prices contributed to the percentage increase. Selling, general and administrative ("SG&A") expenses for fiscal 1995 decreased 59% from $28,786,000 to $11,817,000. The decrease was primarily attributable to the sale of the Company's distribution and vinyl products business units. However, SG&A expenses, as a percentage of sales, increased approximately 5% from year-to-year. The increase was due primarily to the amortized refinancing costs associated with the 1994 refinancing of an earlier credit agreement, additional charges related to environmental remediation and costs associated with closing the Company's corporate office. The decrease in sales in the roofing business without a corresponding decline in certain fixed costs also contributed to the increase as a percentage of sales. Interest expense was $927,000 in 1995 as compared to $4,782,000 in 1994, an 80.6% decrease. The decrease resulted from the reduction of debt which occurred through the use of proceeds from the sale of the vinyl products and distribution business units. Discontinued business activities income in 1995 reflects primarily the gain of $20,579,000 on the sale of the vinyl manufacturing business, the loss of $1,959,000 on the sale of the window fabrication business and a charge of $1,500,000 for costs associated with the Company's employee benefit plans and future product liability claims, both related to former roofing operations. Fiscal 1994 discontinued business activities income reflects primarily the gain of $2,727,000 on the sale of all of the Company's building materials distribution businesses reduced by the loss of $1,261,000 on the sale of the Company's 40% interest in Mid-South Building Supply, Inc. Equity losses from the Company's partnership in the Kensington window fabrication business amounted to $372,000 for the period January 1, through February 28, 1995 as compared to $4,680,000 for the twelve month period ended December 31, 1994. A provision for income taxes from continuing operations amounting to $11,424,000 was recorded in 1995 compared to a benefit of $7,010,000 in 1994. The Company's decision to reverse $4 million of the valuation reserve in 1994 and subsequent decision to increase the reserve to $15.1 million in 1995 is the primary reason the effective tax rates differ from the statutory rate. At December 31, 1995 the Company's net deferred tax asset is approximately $19.1 million less a valuation reserve of $15.1 million. As required under FAS 109, this valuation reserve was determined based upon the Company's review of all available evidence including projections of future taxable income. During 1995, the Company disposed of Bird-Kensington Holding Corporation and Bird Environmental Gulf Coast, Inc. resulting in losses not anticipated at the end of the previous year. In addition, the lower overall demand and price weakness in the northeast caused by a mild 1994/1995 winter followed by a hot, dry summer negatively impacted profits of the roofing operations. 16 During the second quarter of 1995, the Company's remaining investment in BEGCI of $8.6 million was written-off to discontinued operations and a $3 million reserve was established for additional costs associated with the closure and disposition of the facility (see Note 9 to Consolidated Financial Statements). In November 1995, the Company caused the sale of all the outstanding capital stock of BEGCI to GTS Duratek, Inc. for a purchase price of $1.00. Of the $3 million reserve established in the second quarter of 1995, $2,050,000 was utilized, while $650,000 remains at December 31, 1995 for future claims against discontinued operations. In connection with the Board of Director's 1994 decision to withdraw from the off-site environmental business and the Company's agreement on June 18, 1994 to cause the sale of its shares in BEGCI to the minority stockholders on or before February 28, 1995, subject to financing, the Company reclassified the environmental business results as discontinued operations as of June 30, 1994 and adjusted the book value associated with BEGCI, resulting in an aggregate charge for the twelve months ended December 31, 1994 of $11,586,000. In 1993, in connection with its decision to withdraw from the "on-site" environmental remediation business, the Company charged the results of operations for the write-down of assets, the expected loss from operations and general expenses related to closing of such "on-site" remediation business (see notes to Consolidated Financial Statements). Based upon the actual outcome of the sale of assets and results of operations, excess costs of $3,861,000 charged in 1993 were reversed and recorded as discontinued operations in the consolidated statement of operations for the year ending December 31, 1994. 1994 Compared With 1993 Losses from continuing operations before income taxes in 1994 were approximately $5.9 million compared to losses of approximately $5.3 million in 1993. Net sales from continuing operations decreased 10.6% from $187,745,000 in 1993 to $167,886,000 in 1994. Sales from the Company's roofing manufacturing business and its vinyl business increased 14.9% and 5.9%, respectively. Improved weather conditions and renewed strength in the remodeling market caused by low interest rates and a generally favorable economy contributed to the improvement in these businesses. However, a decrease in sales volume due to the sale of substantially all of the Company's building materials distribution businesses in August and November of 1994 significantly offset the improvement attained by the roofing and vinyl businesses. The Company's cost of sales from continuing operations in 1994 as compared to 1993 decreased 9.7% from $151,664,000 to $136,878,000. Cost of sales from continuing operations in the roofing and vinyl manufacturing businesses increased 15.4% and 7.9%, respectively, due to increased manufacturing costs related to volume, higher raw material costs related to the increase in resin prices for the vinyl business and higher asphalt prices for the roofing manufacturing business. The increase was more than offset by the decline in cost of sales due to the August and November 1994 sales of the Company's building materials distribution businesses. Cost of sales stated as a percentage of net sales was 81.5% in 1994 as compared to 80.8% in 1993. The roofing manufacturing business cost of sales as a percentage of sales increased .3% from 85.9% to 86.2% in 1994. The vinyl business cost of sales as a percentage of sales for fiscal 1994 increased from 76.0% to 77.5% or 1.5% over fiscal 1993. The major factor in such percentage increase was the increased cost of raw materials. Selling, general and administrative ("SG&A") expenses for fiscal 1994 decreased 12.0% from $32,716,000 in 1993 to $28,786,000 in 1994. The decrease was primarily attributable to the sale of the Company's building materials distribution businesses. The SG&A expenses of the Company's roofing and vinyl manufacturing businesses, on a combined basis, decreased 7.2% from year-to- year. However, SG&A expenses, as a percentage of sales remained relatively constant at approximately 17%. Interest expense was $4,782,000 in 1994 as compared to $2,472,000 in 1993, constituting a 93% increase. The increased interest expense reflects the nearly $10 million increased debt level and higher overall interest costs in 1994. Between April 11, 1994 and November 30, 1994 the Company was required to pay a default 17 interest rate of 4% above the rate otherwise applicable to the revolving credit and term loans, compared to an approximate rate of 4.5% to 5% for 1993. Default interest expense totaled $1,032,000 during fiscal 1994. Discontinued business activities income in 1994 reflects primarily the gain of $2,727,000 on the sale of all of the Company's building materials distribution businesses reduced by the loss of $1,261,000 on the sale of the Company's 40% interest in Mid-South Building Supply, Inc. Other non-recurring expenses totalled $4,680,000 in 1994 as compared to $5,903,000 in 1993. Kensington continued to experience operations problems and incurred losses of $4,680,000 and $2,625,000 in 1994 and 1993, respectively. A higher tax benefit from continuing operations was recorded in 1994 compared to the benefit booked in 1993. The Company's decision to record a $9 million valuation reserve in 1993 and subsequent decision to reverse $4 million in 1994 is the primary reason the effective tax rates differ from the statutory rate. In connection with the Board of Director's decision to withdraw from the environmental business and the Company's agreement on June 18, 1994 to cause the sale of its shares in BEGCI to the minority stockholders on or before February 28, 1995, subject to financing, the Company reclassified BEGCI results as a discontinued operation as of June 30, 1994 and adjusted its book value, resulting in an aggregate charge for the twelve months ended December 31, 1994 of $11,586,000. The Company intended to operate the San Leon Facility until the sale of its interest in BEGCI was consummated. Due to the Company's decision to exit the off-site environmental business by selling its interest in the San Leon Facility as described above, the Company completely withdrew from the environmental business. As a result, historical results of operations for all of the environmental businesses have been classified as discontinued operations. In 1993, in connection with its decision to withdraw from the "on-site" environmental remediation business, the Company recorded a charge for the write-down of assets, the expected loss from operations and general expenses related to the closing of such "on-site" remediation business (see notes to Consolidated Financial Statements). Based upon the outcome of the sales of assets and results of operations, excess costs of $3,861,000 charged in 1993 were reversed and recorded as discontinued operations in the consolidated statement of operations for the year ending December 31, 1994. INFLATION The Company is continually seeking ways to deal with raw material cost increases by productivity improvements and cost reduction programs. In recent years, the Company has not always been able to pass on increased raw material costs to customers by increasing selling prices because of intense competitive pressures. The Company has an ongoing program of updating productive capacity to take advantage of improved technology, and although the cumulative impact of inflation has resulted in higher costs for replacement of plant and equipment, these costs have been offset, in part, by productivity savings. NEW ACCOUNTING PRONOUNCEMENTS During 1995, the Financial Accounting Standards Board issued "Statement of Financial Accounting Standards No. 123 Accounting For Stock Based Compensation" ("FAS 123"). The Company intends to adopt FAS 123 through disclosure only in 1996. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements and schedules of the Company are included in a separate section of this report and are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 18 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The table below sets forth certain information with respect to the current Board of Directors and executive officers of the Company.
EXPIRATION POSITION WITH THE COMPANY; FIRST OF PRESENT PRINCIPAL OCCUPATION AND ELECTED OR TERM OF NAME AND AGE OTHER BUSINESS AFFILIATIONS(1) APPOINTED(2) OFFICE ------------ --------------------------------- ------------ ---------- Frank S. Anthony, 49........ Vice President, General Counsel 1984 N/A and Corporate Secretary of the Company since May 1984; Attorney; formerly served in the law department of Westinghouse Electric Corporation from 1976 to 1983 Robert P. Bass, Jr., 72(3).. Director; Attorney, Counsel to 1961 1997 Cleveland, Waters and Bass, P.A., Concord, NH; Director of Bank of New Hampshire Corp., Manchester, NH Charles S. Bird, III, 71(3). Director; Trustee of family 1962 1998 trusts Francis J. Dunleavy, 81..... Director; Retired Vice Chairman 1982 1997 of ITT Corporation; formerly President, Chief Operating Officer and Member of Executive Committee of ITT Corporation; Director of AEL Industries, Inc., Crown Cork & Seal Company, Inc., Quaker Chemical Corporation, Scan-Graphics, Inc., and Selas Corp. of America John T. Dunlop, 80.......... Director; The Lamont University 1984 1996 Professor, Emeritus of Harvard University, Cambridge, MA; Harvard Community Health Plan Chair; Commission on the Future of Worker/Manager Relations; formerly Secretary of the U.S. Department of Labor Guy W. Fiske, 70............ Director; Chairman of the Board 1984 1996 of Directors of the Company from May 1994 to April 1995; Chairman and President, Fiske Associates, Inc., Hobe Sound, FL, (private investment firm); formerly Executive Vice President and Director of General Dynamics Corporation, Undersecretary of the U.S. Department of Energy, and Deputy Secretary of the U.S. Department of Commerce; Director, Graphic Controls Corporation, Buffalo, NY; Director, Gunther International and Vice Chairman and Director, Educational Publishing Corporation of Oak Lawn, IL
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EXPIRATION POSITION WITH THE COMPANY; FIRST OF PRESENT PRINCIPAL OCCUPATION AND ELECTED OR TERM OF NAME AND AGE OTHER BUSINESS AFFILIATIONS(1) APPOINTED(2) OFFICE ------------ --------------------------------- ------------ ---------- Richard C. Maloof, 51....... Director; President and Chief 1995(4) 1998 Operating Officer of the Company since April 1995; Vice President and Chief Operating Officer of the Company from April 1994 to April 1995; Vice President of the Company and President, Roofing and Distribution Groups of the Company for more than five years prior thereto Joseph D. Vecchiolla, 40.... Director; Executive Vice 1993 1997 President--Corporate Finance of S. N. Phelps & Company and affiliates since May 1995; Chairman of the Board of Directors of the Company since April 1995; President and Chief Executive Officer of the Company from January 1994 to May 1995; President, Chief Operating Officer, Chief Financial Officer and Acting Chief Executive Officer of the Company from November 1993 to January 1994; Vice President and Chief Financial Officer of the Company from June 1993 to November 1993; formerly Vice President and Chief Financial Officer of Horizon Cellular Telephone Company, Malvern, PA and Executive Vice President and Chief Financial Officer of Educational Publishing Corporation of Oak Lawn, IL Loren R. Watts, 61.......... Director; Retired Managing 1991 1998 Partner, Management Consultant Services, Coopers & Lybrand (certified public accountants)
- -------- (1) Includes business experience during past five years. (2) At the 1990 annual meeting, the stockholders approved a reorganization pursuant to which the then stockholders of Bird Incorporated became stockholders of Bird Corporation, a newly organized Massachusetts corporation, and Bird Incorporated became a wholly owned subsidiary of Bird Corporation. This column indicates the date as of which a person was first elected a director or appointed an officer of the Company or of Bird Incorporated. (3) Robert P. Bass, Jr. and Charles S. Bird, III are first cousins. (4) Date first elected director. COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT Section 16(a) of the Exchange Act requires the Company's directors and executive officers and persons who hold more than 10% of the Company's Common Stock to file with the SEC reports of ownership and changes in ownership of the Company's equity securities. Based on reports received by the Company and representations of certain reporting persons that no Forms 5 were required, the Company believes that all filing requirements applicable to its officers, directors, and greater than 10% beneficial owners with respect to fiscal year 1995 were complied with. 20 ITEM 11. EXECUTIVE COMPENSATION The following table sets forth information concerning the compensation paid or accrued for services in all capacities to the Company during each of the last three fiscal years to each person who served as chief executive officer during 1995 and to each of the other four most highly compensated executive officers of the Company who served as such during 1995. SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION ------------------------ ANNUAL COMPENSATION OTHER ------------------ ANNUAL RESTRICTED SECURITIES ALL OTHER NAME AND COMPEN- STOCK UNDERLYING STOCK LTIP COMPEN- PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION($) AWARDS OPTIONS/SARS(#) PAYOUTS(1) SATION($) - ------------------ ---- --------- -------- --------- ---------- ---------------- ---------- --------- Joseph D. Vecchiolla.... 1995 87,692 227,222 -- -- -- -- 663,781(2) President and 1994 229,077 240,000 -- -- 50,000 37,449(3) Chief Executive 1993 91,903 50,000 -- -- 100,000 39,912 Officer(4) Richard C. Maloof....... 1995 195,962 46,416 -- -- 50,000 81,938 0 Vice President and 1994 180,223 45,450 17,992(5) -- 25,000 7,843(3) Chief Operating 1993 161,629 11,300 8,873 -- -- 10,784 Officer(6) William C. Kinsey....... 1995 29,600 36,919 -- -- -- 45,885 411,754(2) Vice President; 1994 148,000 43,000 10,076(5) -- -- 9,986(3) President, Bird 1993 138,792 10,000 5,460 -- -- 18,159 Vinyl Products(7) Frank S. Anthony........ 1995 135,000 27,509 -- -- -- 49,163 150,000(2) Vice President and 1994 141,750 30,000 10,795(5) -- -- 8,496(3) General Counsel 1993 128,350 5,000 5,850 -- -- 11,381 Joseph M. Grigelevich, Jr..................... 1995 46,069 31,476 -- -- -- -- 213,048(2) Vice President Finance 1994 96,192 36,700 -- -- 20,000 5,943(3) and Administration(8)
- -------- (1) In 1995 restrictions on all stock held in escrow pursuant to the Company's Long Term Incentive Plan ("LTIP") lapsed as a result of the Vinyl Sale and shares were distributed to each of the persons named in the table except Mr. Vecchiolla and Mr. Grigelevich. (2) Represent severance payments received in connection with the "change in control" which occurred pursuant to the Vinyl Sale. Also includes, in the case of Mr. Vecchiola, $47,300 representing additional incentive compensation related to the Vinyl Sale, the amount of which was deducted from a severance payment which he received as a result of the Vinyl Sale. (3) Represents contributions by the Company to the Savings Plan or in Mr. Anthony's case to a separate trust established by the Company with a bank trustee to which amounts in excess of those permitted to be contributed to the Savings Plan under limits imposed by the Internal Revenue Code of 1986, as amended (the "Code") are contributed. Also includes, in the case of Mr. Vecchiolla, $31,825 representing additional incentive compensation related to asset sales, the amount of which was deducted from a severance payment which Mr. Vecchiolla received as a result of the change in control of the Company which was deemed to have occurred upon consummation of the Vinyl Sale. (4) Mr. Vecchiolla was hired as Vice President and Chief Financial Officer effective June 1, 1993 and was elected President and Chief Operating Officer in November 1993. He served as acting Chief Executive Officer during November and December 1993 and was elected Chief Executive Officer on January 25, 1994. He resigned as President on April 1, 1995 and on that date was elected Chairman of the Board. He resigned his full-time employment and his office as Chief Executive Officer on May 25, 1995. (5) Represents reimbursement for withholding taxes arising from the lapse of restrictions on restricted stock held by each officer in accordance with provisions of the LTIP. Does not include perquisites and other personal benefits, the cost of which to the Company was below the disclosure thresholds established by the SEC. (6) Mr. Maloof was elected Chief Operating Officer in April 1994 and President in April, 1995. Prior to that time he served as Vice President and President of the Company's Roofing and Distribution Groups. (7) Mr. Kinsey's employment with the Company was terminated on March 8, 1995 as a result of the Vinyl Sale. (8) Mr. Grigelevich first became an executive officer of the Company on March 21, 1994. Prior to that time he was treasurer of the Company. Mr. Grigelevich's employment with the Company was terminated on May 31, 1995. 21 The following tables provide information concerning grants during 1995 to, and exercises of stock options and stock appreciation rights ("SARs") during 1995 by, the executive officers named in the Summary Compensation Table above and the value of unexercised stock options and SARs held by them at December 31, 1995. OPTION/SAR GRANTS IN LASTS FISCAL YEAR
INDIVIDUAL GRANTS -------------------------------------------------------------- NUMBER OF SECURITIES UNDERLYING PERCENT OF TOTAL EXERCISE GRANT DATE OPTIONS OPTIONS GRANTED PRICE EXPIRATION PRESENT NAME GRANTED(#) TO ALL EMPLOYEES ($/SHARE) DATE VALUE($)(1) ---- ---------- ---------------- --------- ------------ ----------- Richard C. Maloof....... 50,000(2) 100% 8.125 Apr. 3, 2005 $272,000
- -------- (1) This value was calculated using the Black-Scholes option pricing model and the following assumptions, which were representative of conditions existing when the options were granted: stock price volatility of 42.02%; risk free rate of return of 7.32%; dividend yield of 0%; and time of exercise, ten years. The actual value, if any, to be realized will depend on the excess of the market price of the Company's Common Stock over the exercise price on the date the option is exercised; there is no assurance that the value realized will be at or near the value estimated by the Black-Scholes model. (2) These options, which (when granted) were exercisable in five equal annual installments commencing one year after the date of grant, will become exercisable in full upon the consummation of the earlier of the Offer or the Merger. The Company and Mr. Maloof have amended these options so that they will be canceled upon the effective date of the Merger without payment of any consideration. AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED OPTIONS/SARS AT YEAR- IN-THE-MONEY OPTIONS/SARS END(#) AT YEAR-END($) -------------------------- ------------------------- SHARES VALUE ACQUIRED ON REALIZED EXERCISABLE EXERCISABLE NAME EXERCISE(#) ($)(1) (2) UNEXERCISABLE (2) UNEXERCISABLE ---- ----------- -------- ----------- ------------- ----------- ------------- Joseph D. Vechiolla..... 0 0 150,000 0 0 N/A Richard C. Maloof....... 0 0 67,500 50,000 0 0 William C. Kinsey....... 2,000 6,500 0(3) 0 0 N/A Frank S. Anthony........ 0 0 31,000 0 0 0 Joseph M. Grigelevich, Jr. ................... 0 0 0(3) 0 0 N/A
- -------- (1) Based on the difference between the fair market value of the securities underlying the options at date of exercise and the exercise price of the options. (2) Upon consummation of the Vinyl Sale on March 8, 1995, the vesting schedule of all unvested options as of such date was accelerated and the holders thereof became entitled to exercise such options in full or, in certain cases in lieu of such exercise, cash out some or all of such options. (3) Mr. Kinsey's and Mr. Grigelevich's employment with the Company terminated as of March 8, 1995 and May 31, 1995, respectively. All options were forfeited 90 days after termination of employment with the Company. 22 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table lists the stockholders known to management to be the beneficial owners of more than 5% of the outstanding Common Stock as of April 1, 1996 (except as otherwise noted).
AMOUNT AND NATURE OF PERCENT NAME AND ADDRESS BENEFICIAL OF OF BENEFICIAL OWNER OWNERSHIP CLASS - ------------------- -------------- ------- The Entwistle Company .. 546,139 shares(1) 13.2% Bigelow Street Hudson, MA 01749 S.M. Lorusso & Sons, Inc. .................. 332,121 shares(2) 8.1% Antonio J. Lorusso, Jr. James B. Lorusso Samuel A. Lorusso 331 West Street Walpole, MA 02081 Quest Advisory Corp. ... 329,950 shares(3) 8.0% Charles M. Royce 1414 Avenue of the Americas New York, NY 10019 Mellon Bank Corporation and its Subsidiaries .. 309,000 shares(4)(5) 7.5% One Mellon Bank Center Pittsburgh, PA 15258 Charles S. Bird, III ... 305,458 shares(5) 7.4% 13 Proctor Street Manchester, MA 01944 FMR Corp. .............. 266,753 shares(6) 6.2% Edward C. Johnson 3d Abigail P. Johnson 82 Devonshire Street Boston, MA 02109 Dimensional Fund Advisors Inc. ......... 232,400 shares(7) 5.6% 1299 Ocean Avenue 11th Floor Santa Monica, CA 90401 R. Keith Long .......... 208,500 shares(8) 5.1% Financial Institutions Insurance Group, Ltd. Joan Greco and John Fyfe Otter Creek Partners I, L.P. 400 Royal Palm Way Suite 400 Palm Beach, Florida 33480
- -------- (1) Based on information contained in an amended Schedule 13D filed with the SEC on April 1, 1987. The Schedule 13D reports that The Entwistle Company had sole voting and dispositive power with respect to all shares beneficially owned, including 8,539 shares it had the right to acquire upon conversion of shares of Preference Stock. (2) Based on information contained in a Schedule 13D amended through January 23, 1996 filed with the SEC. The Schedule 13D reports that S.M. Lorusso & Sons, Inc. ("Lorusso") had sole voting power and dispositive power with respect to 230,121 shares. Antonio J. Lorusso, Jr., president, director and a stockholder of Lorusso, had sole voting and dispositive power with respect to 20,000 shares and had shared voting and dispositive power with respect to 79,500 shares and James B. Lorusso, an officer, 23 director and a stockholder of Lorusso, had sole voting and dispositive power over 1,000 shares and Samuel A. Lorusso, an officer, director and stockholder of Lorusso, has shared voting and dispositive power with respect to 1,500 shares. (3) Based on information contained in a Schedule 13G amended through February 14, 1996 filed with the SEC. The Schedule 13G reports that Quest Advisory Corp. ("Quest") had sole voting and dispositive power with respect to 329,950 shares and that Charles M. Royce may be deemed a controlling person of Quest and as such may be deemed to beneficially own the shares although he disclaims such beneficial ownership. (4) Based on information contained in a Schedule 13G amended through January 31, 1996 filed with the SEC. The Schedule 13G reports that Mellon Bank Corporation had sole voting power with respect to 20,000 shares and sole dispositive power with respect to 20,000 shares and that Mellon Bank Corporation together with its subsidiaries, including Boston Safe Deposit and Trust Company, had shared voting power with respect to 293,629 shares, and shared dispositive power with respect to 289,000 shares, including 274,929 shares referred to in footnote (5), below. (5) Includes 274,929 shares held in a trust of which Boston Safe Deposit and Trust Company and Charles S. Bird, III are co-trustees with shared voting and dispositive power. See footnote (3) to the table below. (6) Based on information contained in a Schedule 13G amended through February 14, 1996 filed with the SEC. The Schedule 13G reports as follows: FMR Corp. and Edward C. Johnson 3d, chairman of FMR Corp. (who, with other family members including Abigail P. Johnson, forms a controlling group with respect to FMR Corp.), had sole voting power with respect to 8,900 shares, and FMR Corp., Edward C. Johnson 3d and certain investment companies (the "Fidelity Funds"), which are subsidiaries of FMR Corp. (including Fidelity Convertible Securities Fund), each had sole dispositive power with respect to 257,853 shares. The sole power to vote the 257,853 shares owned by the Fidelity Funds resides with the Fidelity Funds' Boards of Trustees. Fidelity Management and Research Company, a wholly owned subsidiary of FMR Corp., acts as investment advisor to the Fidelity Funds and carries out the voting of the shares under written guidelines established by the Fidelity Funds' Boards of Trustees. Of the 266,753 shares reported as beneficially owned by FMR Corp., as of December 31, 1995, 192,853 shares could be acquired upon conversion of Preference Shares. (7) Based on information contained in a Schedule 13G amended through February 7, 1996 filed with the SEC. The Schedule 13G reports that Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment advisor, is deemed to have beneficial ownership of 232,400 shares of Bird Corporation stock as of December 31, 1995, all of which shares are held in portfolios of DFA Investment Dimensions Group Inc. (the "Fund"), or in series of the DFA Investment Trust Company, a Delaware business trust (the "Trust"), each an open-end management investment company registered under the Investment Company Act of 1940, or the DFA Group Trust and DFA Participation Group Trust, investment vehicles for qualified employee benefit plans, all of which Dimensional serves as investment manager. The Schedule 13G reports that Dimensional had sole voting power with respect to 154,900 shares (persons who are officers of Dimensional also serve as officers of the Fund and the Trust and in their capacities as officers of the Fund and the Trust, these persons vote 21,700 additional shares which are owned by the Fund and 55,800 shares which are owned by the Trust) and sole dispositive power with respect to 232,400 shares. Dimensional disclaims beneficial ownership of all such shares. (8) Based on information contained in a Schedule 13D filed on March 8, 1996 jointly by Otter Creek Partners I, L.P. ("Otter Creek"), and R. Keith Long on his own behalf and on behalf of Financial Institutions Insurance Group, Ltd. ("FIIG"), and Joan Greco and John Fyfe, joint tenants with rights of survivorship ("Fyfe") (together, the "Reporting Persons"). The Schedule 13D reports that Otter Creek Management Inc. ("OCM") is the sole general partner and investment advisor of Otter Creek. Mr. Long is the sole executive officer, sole director and sole shareholder of OCM and currently serves as chairman of the Board of Directors of FIIG. Mr. Long also manages discretionary stock trading accounts for FIIG and Fyfe. Additionally, the Schedule 13D reports that each of Otter Creek, Mr. Long, FIIG and Fyfe had sole voting and sole dispositive power with respect to 92,200, 20,000, 39,000 and 57,300 shares, respectively. The Reporting Persons indicated in their Schedule 13D that they may, through one or more designees, seek representation on the Board of Directors of the Company. 24 The tables below set forth information provided by the individuals named therein as to the amount of the Company's Common Stock, Preference Stock and 5% Stock beneficially owned by the directors and executive officers of the Company, individually, and the directors and executive officers as a group, all as of April 1, 1996 except as otherwise noted. Unless otherwise indicated in the footnotes, each of the named persons and members of the group had sole voting and investment power with respect to the shares shown.
COMMON COMMON SHARES SHARES BENEFICIALLY SUBJECT PERCENT OWNED (EXCLUD- TO STOCK OF NAME ING STOCK OPTIONS) OPTIONS(1) TOTAL CLASS ---- ------------------ ---------- ------- ------- Robert P. Bass, Jr............... 47,086(2) 17,500 64,586 1.6% Charles S. Bird, III............. 292,858(3) 15,000 307,858 7.4% Francis J. Dunleavy.............. 1,000(4) 22,500 23,500 * John T. Dunlop................... 2,000(5) 20,000 22,000 * Joseph D. Vecchiolla............. 0 150,000 150,000 3.5% Guy W. Fiske..................... 6,000 22,500 28,500 * Loren R. Watts................... 1,000 10,000 11,000 * Frank S. Anthony................. 31,712(6) 31,000 62,712 1.5% Joseph M. Grigelevich, Jr........ 6,726(7) 0 6,726 * William C. Kinsey(8)............. 3,795 0 3,795 * Richard C. Maloof................ 37,563(9) 77,500 115,063 2.7% All directors and executive officers as a group (11 persons)........................ 429,740(10) 366,000 795,740 19.1%
- -------- * Less than 1% of the outstanding Common Stock. (1) Represents shares which the individual has a right to acquire by exercise of stock options exercisable on April 1, 1996 or within 60 days thereafter. (2) Includes 16,000 shares as to which Mr. Bass shares voting and investment power and 2,696 shares which may be acquired upon conversion of Preference Stock. (3) Includes 274,929 shares as to which Mr. Bird shares voting and investment power (see table on page A-6) and 3,595 shares which may be acquired upon conversion of Preference Stock. Does not include 100 shares owned by his wife, as to which he disclaims beneficial ownership. (4) Does not include ten shares owned by a child of Mr. Dunleavy, as to which he disclaims beneficial ownership. (5) Represents shares as to which Mr. Dunlop shares voting and investment power. (6) Includes 2,136 shares allocated to Mr. Anthony's account under the Company's Employees Savings and Profit Sharing Plan (the "Savings Plan") as of December 31, 1995. (7) Includes 45 shares which may be acquired upon conversion of Preference Stock and 6,481 shares allocated to his account under the Savings Plan as of December 31, 1995. Mr. Grigelevich was an executive officer of the Company until May 31, 1995, when his employment with the Company terminated. (8) Mr. Kinsey was an executive officer of the Company until March 8, 1995, when his employment with the Company terminated. (9) Includes 2,551 shares allocated to his account under the Savings Plan as of December 31, 1995 and 625 shares held jointly with members of his family. (10) Includes 293,554 shares as to which persons included in the group have shared voting and investment power, 6,336 shares which may be acquired upon conversion of Preference Stock, and 11,168 shares allocated to the accounts of officers under the Savings Plan as of December 31, 1995. 25
PREFERENCE SHARES PERCENT BENEFICIALLY OF NAME OWNED CLASS ---- ------------ ------- Robert P. Bass, Jr................................... 3,000 * Charles S. Bird, III................................. 4,000 * All directors and executive officers as a group (2 persons)............................................ 7,000 *
-------- * Less than 1% of the outstanding Preference Stock.
SHARES OF 5% STOCK PERCENT BENEFICIALLY OF NAME OWNED CLASS ---- ------------ ------- Charles S. Bird, III................................. 1,815 31% All directors and executive officers as a group (1 person)............................................. 1,815 31%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) An Index of Financial Statements and Schedules is on page F1 of this report. The Exhibit Index is on pages 27 through 29 of this report. (b) Reports on Form 8-K--No reports on Form 8-K were filed during the last quarter of the year ended December 31, 1995. (d) Financial Statements of Kensington Partners are on Pages F-29 through F- 45 of this report. ITEMS 14 (a)(3) AND (c) EXHIBITS BIRD CORPORATION NORWOOD, MASSACHUSETTS 26 EXHIBIT INDEX
EXHIBIT SEQUENTIAL NO. PAGE NO. ------- ---------- 3(a) Articles of Organization (Filed as Appendix B to the Company's Registration Statement on Form S-4, Registration No 33-34440 and incorporated herein by reference.) 3(b) By-laws of the Company as amended to date. (Filed as Exhibit 3(b) to the Company's report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference.) 4(a)(1) Forbearance Agreement dated as of February 14, 1994 with regard to the Revolving Credit Agreement dated as of December 17, 1990, as amended. (Filed as Exhibit 4 (a)(3) to the Company's Form 10-K for the year ended December 31, 1993 and incorporated herein by reference.) 4(a)(2) Third Amended and Restated Revolving Credit and Term Loan Agreement dated as of March 4, 1994 (Filed as Exhibit 4(a)(1) to the Company's Form 8-K dated March 14, 1994 and incorporated herein by reference.) 4(a)(3) Loan and Security Agreement dated as of November 30, 1994 (the "Loan Agreement") between Barclays Business Credit, Inc. (now known as Fleet Capital Corporation) and Bird Incorporated. (Filed as Exhibit 4(a)(3) to the Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference.) 4(a)(4) First Amendment dated as of March 8, 1995 to the Loan Agreement between Shawmut Capital Corporation (now known as Fleet Capital Corporation) and Bird Incorporated. (Filed as Exhibit 4(a)(4) to the Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference.) 4(a)(5) Rights Agreement dated as of November 25, 1986 between the Company and the First National Bank of Boston, as Rights Agent. (Filed as Exhibit 1 to Registration Statement on Form 8-A dated December 5, 1986 and incorporated herein by reference.) 4(a)(6) First Amendment dated May 24, 1990 to Rights Agreement dated as of November 25, 1986. (Filed as Exhibit 4(b)(2) to the Company's report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference.) 10(a)* Plan for Assistance to Key Employees in Financing Purchases of Company Stock (Filed as Exhibit 10(b) to the Company's report on Form 10-K for the year ended December 31, 1980 and incorporated herein by reference.) 10(b)* Plan for Deferring Payment of Senior Officer's Compensation (Adopted December 22, 1975). (Filed as Exhibit 10(c) to the Company's report on Form 10-K for the year ended December 31, 1980 and incorporated herein by reference.) 10(c)* 1975 Plan for Deferring Payment of Director's Compensation (Adopted June 23, 1975). (Filed as Exhibit 10(d) to the Company's report on Form 10-K for the year ended December 31, 1980 and incorporated herein by reference.) 10(d)* Settlement Agreement dated as of July 7, 1994 between Bird Corporation and George J. Haufler. (Filed as Exhibit 10(d) to the Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference.) 10(e)* Management Incentive Compensation Program adopted January 25, 1983. (Filed as Exhibit 10(m) to the Company's report on Form 10-K for the year ended December 31, 1982 and incorporated herein by reference.)
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EXHIBIT SEQUENTIAL NO. PAGE NO. ------- ---------- 10(f)* Bird Corporation 1982 Stock Option Plan as amended through January 29, 1992. (Filed as Exhibit 10(f) to the Company's report on Form 10-K for the year ended December 31, 1991 and incorporated herein by reference.) 10(g)* Bird Corporation 1992 Stock Option Plan. (Filed as Exhibit 10(g) to the Company's report on Form 10-K for the year ended December 31, 1992 incorporated herein by reference.) 10(h)* Bird Corporation Non-Employee Director Stock Option Plan. (Filed as Exhibit 10(h) to the Company's report on Form 10-K for the year ended December 31, 1992 incorporated herein by reference.) 10(i)(1)* Form of severance agreement with eight key executive employees of the Company. (Filed as Exhibit 10(n) to the Company's report on Form 10-K for the year ended December 31, 1984 and incorporated herein by reference.) 10(i)(2)* Form of Amendment dated May 24, 1990 to form of severance agreement. (Filed as Exhibit 10(g)(2) to the Company's report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference.) 10(k) Glass Mat Supply Agreement dated as of February 20, 1985 between the Company, The Flintkote Company and Genstar Roofing Company, Inc. (Filed as Exhibit 10(s) to Amendment No. 1 to the Company's report on Form 10- K for the year ended December 31, 1984 and incorporated herein by reference.) 10(l) Equipment Acquisition Agreement dated May 25, 1990 between BancBoston Leasing Inc. and Bird Incorporated. (Filed as Exhibit 10(j) to the Company's report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference.) 10(m) Equipment Acquisition Agreement dated July 23, 1986 between BancBoston Leasing Inc. and Bird Incorporated. (Filed as Exhibit 10(s) to the Company's report on Form 10-K for the year ended December 31, 1986 and incorporated herein by reference.) 10(n)(1)* Long Term Incentive Compensation Plan dated June 28, 1988. (Filed as Exhibit 10(v) to the Company's report on Form 10-Q for the quarter ended September 30, 1988 and incorporated herein by reference.) 10(n)(2)* Amendment dated May 24, 1990 to Long Term Incentive Compensation Plan. (Filed as Exhibit 10(o)(2) to the Company's report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference.) 10(o) Amendment dated February 1, 1994 to the First Amended and Restated Partnership Agreement between Bird Vinyl Products, Inc. and Kensington Manufacturing Company. (Filed as Exhibit 10(o)(2) to the Company's report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference.) 10(p)* Employment Agreement dated as of December 1, 1993 between the Company and Joseph D. Vecchiolla. (Filed as Exhibit 10(p) to the Company's report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference.) 10(q)* Severance Agreement dated as of December 21, 1993 between the Company and Joseph D. Vecchiolla. (Filed as Exhibit 10(q) to the Company's report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference.) 10(r)* Settlement Agreement dated as of November 25, 1994 between Bird Corporation and William A. Krivsky. (Filed as Exhibit 10(r) to the Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference.)
28
EXHIBIT SEQUENTIAL NO. PAGE NO. ------- ---------- 10(s) Asset Purchase Agreement dated as of August 19, 1994 between Bird Incorporated, Atlantic Building Products Corporation, Greater Louisville Aluminum, Inc., Southwest Roofing Supply, Inc., Southwest Express, Inc., New York Building Products, Inc., and Wm. Cameron & Co. (Filed as Exhibit (1) to the Company's Form 8-K dated August 31, 1994 and incorporated herein by reference.) 10(t) Asset Purchase Agreement dated as of September 23, 1994 among Bird Corporation, Bird Incorporated, and Jannock, Inc. (as amended by amendments dated as of January 27, 1995 and January 31, 1995). (Filed as Exhibit B to the Company's proxy statement dated February 10, 1995 for the special meeting of the stockholders to be held on March 7, 1995 and incorporated herein by reference.) 10(u)* Employment Agreement dated as of July 31, 1995 between the Company and Frank S. Anthony. (Filed as Exhibit 10(u) to the Company's Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). 10(v)* Amended Employment Agreement dated August 21, 1995 between the Company and Richard C. Maloof. (Filed as Exhibit 10(v) to the Company's Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by reference). 10(w) Stock Purchase Agreement dated as of November 29, 1995 by and among Bird Environmental Gulf Coast, Inc., Bird Environmental Technologies, Inc., Bird Corporation, GTS Duratek, Inc. and GTSD Sub II, Inc. 10(x) Amended Glass Mat Supply Agreement dated as of December 1, 1995 between the Company, Flintkote Company and Genstar Roofing Company, Inc. 10(y) Amended and Restated Agreement and Plan of Merger by and among CertainTeed Corporation, BI Expansion Corporation and Bird Corporation dated as of April 8, 1996. 11 Statement regarding computation of per share earnings (loss). 22 Significant subsidiaries. 23(a) Consent of Price Waterhouse LLP. 23(b) Consent of Alpern, Rosenthal and Company, independent accountants for Kensington Partners. 24 Power of Attorney. (Immediately preceding the signature page hereof.) 28 Annual report on Form 11-K of the Bird Employees' Savings and Profit Sharing Plan for the fiscal year ended December 31, 1995. (To be filed by amendment.)
- -------- * Indicates management contract or compensatory plan or arrangement 29 POWER OF ATTORNEY We, the undersigned officers and Directors of Bird Corporation, hereby severally constitute and appoint Richard C. Maloof and Frank S. Anthony, and each of them severally, our true and lawful attorneys or attorney, with full power to them and each of them to execute for us, and in our names in the capacities indicated below, and to file with the Securities and Exchange Commission the Annual Report on Form 10-K of Bird Corporation, for the fiscal year ended December 31, 1995, and any and all amendments thereto. IN WITNESS WHEREOF, we have signed this Power of Attorney in the capacities indicated on March 21, 1996. Principal Executive Officer: /s/ Richard C. Maloof President, Director - ------------------------------------- and Chief Operating RICHARD C. MALOOF Officer Principal Accounting Officer: /s/ Donald L. Sloper, Jr. Corporate Controller - ------------------------------------- DONALD L. SLOPER, JR. Directors /s/ Robert P. Bass, Jr. /s/ Francis J. Dunleavy - ------------------------------------- ------------------------------------- ROBERT P. BASS, JR. FRANCIS J. DUNLEAVY /s/ Charles S. Bird, Jr. /s/ John T. Dunlop - ------------------------------------- ------------------------------------- CHARLES S. BIRD, JR. JOHN T. DUNLOP /s/ Guy W. Fiske /s/ Joseph D. Vecchiolla - ------------------------------------- ------------------------------------- GUY W. FISKE JOSEPH D. VECCHIOLLA /s/ Loren R. Watts - ------------------------------------- LOREN R. WATTS 30 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. Bird Corporation (Registrant) * By __________________________________ RICHARD C. MALOOF PRESIDENT, COO PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. SIGNATURE TITLE DATE * President, Director, April 26, 1996 - ------------------------------------- and COO (Principal RICHARD C. MALOOF Executive Officer) * Corporate Controller April 26, 1996 - ------------------------------------- (Principal DONALD L. SLOPER, JR. Accounting Officer) * Director April 26, 1996 - ------------------------------------- JOSEPH D. VECCHIOLLA * Director April 26, 1996 - ------------------------------------- ROBERT P. BASS, JR. * Director April 26, 1996 - ------------------------------------- CHARLES S. BIRD, JR. * Director April 26, 1996 - ------------------------------------- FRANCIS J. DUNLEAVY * Director April 26, 1996 - ------------------------------------- JOHN T. DUNLOP 31 SIGNATURE TITLE DATE * Director April 26, 1996 - ------------------------------------- GUY W. FISKE * Director April 26, 1996 - ------------------------------------- LOREN R. WATTS /s/ Frank S. Anthony * By ________________________________ FRANK S. ANTHONY AS ATTORNEY-IN- FACT 32 BIRD CORPORATION AND SUBSIDIARIES FORM 10-K ITEMS 14(A)(1) AND (2) INDEX OF FINANCIAL STATEMENTS AND SCHEDULES The following consolidated financial statements of the registrant and its subsidiaries required to be included in Item 8 are listed below.
PAGE ---- Consolidated Financial Statements: Reports of independent accountants.................................. F-2 Balance sheets at December 31, 1995 and 1994........................ F-4 Statements of operations for each of the three years in the period ended December 31, 1995............................................ F-6 Statements of stockholders' equity for each of the three years in the period ended December 31, 1995................................. F-7 Statements of cash flows for each of the three years in the period ended December 31, 1995............................................ F-8 Notes to consolidated financial statements.......................... F-9
The following consolidated financial statement schedules of Bird Corporation and its subsidiaries are included in Item 14(a)(2) and should be read in conjunction with the financial statements included herein: Schedule II--Valuation and qualifying accounts..................... F-28
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto. F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Bird Corporation We have audited the consolidated balance sheets of Bird Corporation and its subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, of stockholders' equity and of cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Kensington Partners, which statements reflect total assets of $8.9 million at December 31, 1994, and total net sales of $24.2 million and $21.2 million and net losses of $5.3 million and $5.2 million for the years ended December 31, 1994 and 1993, respectively. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Kensington Partners, is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements listed in the index appearing under Item 14(a)(1) and (2) on Page F-1 present fairly, in all material respects, the financial position of Bird Corporation and its subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. As discussed in Note 4 to the consolidated financial statements, the Company changed its method of accounting for income taxes in 1993 to comply with a new pronouncement issued by the Financial Accounting Standards Board. /s/ Price Waterhouse LLP Boston, Massachusetts March 15, 1996 F-2 INDEPENDENT AUDITORS' REPORT To the Partners Kensington Partners and Affiliate Leechburg, Pennsylvania We have audited the accompanying combined balance sheet of Kensington Partners and Affiliate (Joint Venture Partnerships) as of December 31, 1994 and the related combined statements of operations and changes in partners' capital (deficit), and cash flows for the years ended December 31, 1994 and 1993. These financial statements are the responsibility of the Partnerships' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Kensington Partners and Affiliate as of December 31, 1994, and the results of their operations and their cash flows for the years ended December 31, 1994 and 1993, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that Kensington Partners and Affiliate will continue as going concerns. As discussed in Note 2 to the financial statements, the Companies have incurred significant operating losses and current liabilities exceed current assets. Those conditions, among others, raise substantial doubt about the Companies' ability to continue as going concerns. Management's plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Alpern, Rosenthal & Company Pittsburgh, Pennsylvania February 10, 1995 F-3 BIRD CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE, PAR VALUE, AND LIQUIDATION VALUE DATA)
DECEMBER 31, --------------- 1995 1994 ------- ------- ASSETS Current Assets: Cash and equivalents......................................... $ 3,679 $ 321 Accounts and notes receivable, less allowances--$153 in 1995 and $3,137 in 1994.......................................... 5,461 19,644 Inventories.................................................. 4,701 8,371 Refundable income taxes...................................... 1,021 0 Prepaid expenses and other assets............................ 1,157 3,095 Deferred income taxes........................................ 435 6,836 ------- ------- Total current assets....................................... 16,454 38,267 ------- ------- Property, Plant and Equipment: Land and land improvements................................... 2,810 3,145 Buildings.................................................... 7,184 11,742 Machinery and equipment...................................... 28,980 33,760 Construction in progress..................................... 672 5,705 ------- ------- 39,646 54,352 Less--Depreciation and amortization.......................... 16,127 24,323 ------- ------- 23,519 30,029 ------- ------- Assets held for sale........................................... 0 7,500 Deferred income taxes.......................................... 3,631 8,662 Other assets................................................... 99 1,247 ------- ------- $43,703 $85,705 ======= =======
See accompanying notes to consolidated financial statements. F-4 BIRD CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE, PAR VALUE, AND LIQUIDATION VALUE DATA)
DECEMBER 31, ---------------- 1995 1994 ------- ------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable.......................................... $ 3,394 $ 6,632 Accrued expenses.......................................... 5,881 7,039 Long-term debt, portion due within one year............... 1,113 18,071 Retirement plan contributions payable..................... 88 302 Income taxes payable...................................... 0 596 ------- ------- Total current liabilities............................... 10,476 32,640 ------- ------- Long-term debt, portion due after one year.................. 4,869 12,504 ------- ------- Other liabilities........................................... 3,942 2,715 ------- ------- Deferred income taxes....................................... 0 128 ------- ------- Total liabilities....................................... 19,287 47,987 ------- ------- Stockholders' Equity: 5% cumulative preferred stock, par value $100. Authorized 15,000 shares; issued 5,820 shares in 1995 and 1994 (liquidating preference $110 per share, aggregating $640,000).................................................. 582 582 Preference stock, par value $1. Authorized 1,500,000 shares; issued 814,300 shares of $1.85 cumulative convertible preference stock in 1995 and 1994 (liquidating value $20 per share, aggregating $16,286,000)........................ 814 814 Common stock, par value $1. Authorized 15,000,000 shares; 4,395,162 shares issued in 1995 and 4,375,179 shares issued in 1994.................................................... 4,395 4,375 Other capital............................................... 27,362 27,235 Retained earnings (deficit)................................. (5,746) 7,860 ------- ------- 27,407 40,866 Less-- Treasury stock, at cost, Common stock: 275,100 shares in 1995 and 1994............................................ (2,991) (2,991) Unearned compensation..................................... 0 (157) ------- ------- 24,416 37,718 ------- ------- Commitments and contingencies (Note 11) $43,703 $85,705 ======= =======
See accompanying notes to consolidated financial statements. F-5 BIRD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
YEAR ENDED DECEMBER 31, ---------------------------------- 1995 1994 1993 ---------- ---------- ---------- Net sales.................................. $ 54,180 $ 167,886 $ 187,745 ---------- ---------- ---------- Costs and expenses: Cost of sales............................ 48,007 136,878 151,664 Selling, general and administrative expense................................. 11,817 28,786 32,716 Interest expense......................... 927 4,782 2,472 Discontinued business activities (income) expense................................. (17,570) (1,313) 268 Equity losses from partnership........... 372 4,680 2,625 Other expense............................ 0 0 3,278 ---------- ---------- ---------- Total costs and expenses............... 43,553 173,813 193,023 ---------- ---------- ---------- Earnings (loss) from continuing operations before income taxes....................... 10,627 (5,927) (5,278) Provision (benefit) for income taxes....... 11,424 (7,010) (637) ---------- ---------- ---------- Earnings (loss) from continuing operations before cumulative effect of accounting change.................................... (797) 1,083 (4,641) ---------- ---------- ---------- Discontinued operations (Note 9): Income (loss) from operations of discontinued businesses, net of taxes... 0 1,245 (15,414) Loss on disposal of environmental business, 1993 includes a provision of $5,200,000 for operating losses during phase out period, net of taxes.......... (11,252) (6,011) (11,000) ---------- ---------- ---------- Net loss from discontinued operations.... (11,252) (4,766) (26,414) ---------- ---------- ---------- Cumulative effect of accounting change..... 0 0 2,733 ---------- ---------- ---------- Net loss before dividends.................. (12,049) (3,683) (28,322) Preferred and preference stock cumulative dividends................................. 1,536 1,536 1,536 ---------- ---------- ---------- Net loss applicable to common stockholders. $ (13,585) $ (5,219) $ (29,858) ========== ========== ========== Primary earnings (loss) per common share: Continuing operations.................... $ (0.57) $ (0.11) $ (1.51) Discontinued operations.................. (2.74) (1.20) (6.45) Cumulative effect of accounting change... 0.00 0.00 0.67 ---------- ---------- ---------- Net loss after dividends................... $ (3.31) $ (1.31) $ (7.29) ========== ========== ========== Fully diluted earnings (loss) per common share: Continuing operations.................... $ (0.57) $ (0.11) $ (1.51) Discontinued operations.................. (2.74) (1.20) (6.45) Cumulative effect of accounting change... 0.00 0.00 0.67 ---------- ---------- ---------- Net loss after dividends................... $ (3.31) $ (1.31) $ (7.29) ========== ========== ========== Average number of shares used in earnings per share computations.................... 4,104,965 3,992,251 4,097,999 ========== ========== ==========
See accompanying notes to consolidated financial statements. F-6 BIRD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
$1.85 5% CUMULATIVE CUMULATIVE CONVERTIBLE RETAINED COMMON TOTAL PREFERRED PREFERENCE COMMON OTHER EARNINGS STOCK IN UNEARNED STOCKHOLDERS' STOCK STOCK STOCK CAPITAL (DEFICIT) TREASURY COMPENSATION EQUITY ---------- ----------- ------ ------- --------- -------- ------------ ------------- Balance December 31, 1992................... $582 $814 $4,267 $25,401 $41,645 $(2,059) $(1,549) $69,101 Net loss................ (28,322) (28,322) Cash dividends declared: 5% cumulative preferred stock--$5 per share... (29) (29) $1.85 cumulative convertible preference stock $1.85 per share. (1,130) (1,130) Common stock $.15 per share.................. (613) (613) Common stock issued as compensation--1,200 shares................. 1 13 14 Common stock issued for contributions to employees' saving plan--19,119 shares.... 19 210 229 Common stock issued and note repayment upon exercise of stock options--4,080 shares.. 4 210 214 Purchase of 10,119 shares of common stock. (120) (120) Amortization of unearned compensation........... 595 595 Cumulative effect of accounting change...... 323 323 Tax effect of stock options exercised...... 303 303 Cumulative foreign currency translation... (4) (4) ---- ---- ------ ------- ------- ------- ------- ------- Balance December 31, 1993................... 582 814 4,291 26,456 11,551 (2,179) (954) 40,561 Net loss................ (3,683) (3,683) Cash dividends declared: 5% cumulative preferred stock--$1.25 per share................. (8) (8) Common stock issued as compensation--1,426 shares................. 1 14 15 Common stock issued for contributions to employees' saving plan--12,439 shares.... 13 110 123 Common stock issued upon exercise of stock options--69,750 shares common and 15,000 shares treasury........ 70 609 109 788 Purchase of 248 shares of common stock........ (3) (3) L.T. Incentive forfeitures--125,145 shares................. (910) 910 0 Common stock from distribution business-- 916 shares............. (6) (8) (14) Amortization of unearned compensation........... (113) (113) Cumulative foreign currency translation... 52 52 ---- ---- ------ ------- ------- ------- ------- ------- Balance December 31, 1994................... 582 814 4,375 27,235 7,860 (2,991) (157) 37,718 Net loss................ (12,049) (12,049) Cash dividends declared: 5% cumulative preferred stock--$1.25 per share................. (51) (51) $1.85 cumulative convertible preference stock--$1.85 per share................. (1,506) (1,506) Common stock issued as compensation--200 shares................. 1 1 Common stock issued for contributions to employees' saving plan--17,783 shares.... 18 112 130 Common stock issued upon exercise of stock options--2,000 shares common................. 2 14 16 Amortization of unearned compensation........... 157 157 ---- ---- ------ ------- ------- ------- ------- ------- Balance December 31, 1995................... $582 $814 $4,395 $27,362 $(5,746) $(2,991) $ 0 $24,416 ==== ==== ====== ======= ======= ======= ======= =======
See accompanying notes to consolidated financial statements. F-7 BIRD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ----------------------------------- 1995 1994 1993 ---------- ---------- ------------ (BRACKETS DENOTE CASH OUTFLOWS) Cash flow provided (used) by operations: Net loss................................. $ (12,049) $ (3,683) $ (28,322) Adjustments to reconcile to net cash provided by operations: Writedown of assets to net realizable value................................. 0 0 5,800 Depreciation and amortization.......... 2,861 4,317 8,714 Provision for losses on accounts receivable............................ 26 905 2,162 Deferred income taxes.................. 11,304 (10,172) (1,044) Cumulative effect of accounting change. 0 0 (2,733) Gain on sale of vinyl business......... (20,579) 0 0 Loss on sale of window business........ 1,959 0 0 Gain on sale of distribution business.. 0 (1,466) 0 Loss (gain) on disposal of environmental business................ 11,252 9,747 (858) Changes in balance sheet items: Accounts receivable.................... 3,120 (2,841) (8,199) Inventories............................ (2,664) 1,423 4,538 Prepaid expenses....................... 712 203 (2,039) Liabilities not related to financing activities............................ (14,325) (6,867) 11,646 Liquidation reserve.................... 0 (5,398) 5,398 Other assets........................... 128 2,230 2,564 --------- ---------- ------------ Cash flow used by operations: (18,255) (11,602) (2,373) --------- ---------- ------------ Cash flows from investing activities: Acquisition of property, plant and equipment, net........................ (1,590) (10,614) (16,251) Proceeds from disposal of assets....... 50,680 31,296 9,141 Additional investments in discontinued operations............................ (2,402) 0 0 Other investments...................... 651 (1,277) 159 --------- ---------- ------------ Net cash provided (used) in investing activities.............................. 47,339 19,405 (6,951) --------- ---------- ------------ Cash flows from financing activities: Debt proceeds.......................... 16,627 159,139 1,286,500 Debt repayments........................ (40,942) (175,091) (1,270,987) Dividends paid......................... (1,558) (8) (2,351) Purchase of treasury stock............. 0 (11) (120) Other equity changes................... 147 971 577 --------- ---------- ------------ Net cash provided (used) by financing activities.............................. (25,726) (15,000) 13,619 --------- ---------- ------------ Net increase (decrease) in cash and equivalents............................. 3,358 (7,197) 4,295 Cash and cash equivalents at beginning of year.................................... 321 7,518 3,223 --------- ---------- ------------ Cash and cash equivalents at end of year. $ 3,679 $ 321 $ 7,518 ========= ========== ============ Supplemental Disclosures: Cash paid during the year for: Interest............................... $ 1,501 $ 4,811 $ 2,160 Income taxes........................... $ 1,170 $ 363 $ 291
See accompanying notes to consolidated financial statements. F-8 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES Nature of Operations Bird Corporation is a manufacturer of asphalt roofing products. Currently, asphalt shingles and roll roofing are produced at the Company's plant in Norwood, Massachusetts for commercial and residential use. These products are marketed in the northeastern United States through independent wholesalers and building material retailers whose primary customers are roofing contractors. Basis of Consolidation The accompanying consolidated financial statements include the accounts of Bird Corporation and its majority-owned subsidiaries (the "Company"). All material intercompany activity has been eliminated from the financial statements. Investments in less than majority-owned companies are accounted for by the equity method. Certain prior year amounts have been reclassified to conform with the 1995 presentation. Pervasiveness of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentration of Risk and Major Customers The Company is dependent upon the economy in the northeastern United States and sells its products primarily to independent wholesalers and building material retailers for resale primarily to roofing contractors. One customer accounted for slightly more than 10% of the Company's sales during 1995 and accounts receivable at December 31, 1995. The principal raw materials used in the manufacture of asphalt roofing products are fiberglass mat, asphalt saturants and coatings and crushed granules. The Company's requirements for fiberglass mat are met primarily under a Glass Mat Supply Agreement with one vendor which expires on December 31, 1996. Fiberglass mat is also generally available in adequate quantities from a number of outside suppliers. Revenue Recognition The Company recognizes revenue when products are shipped or services are performed. Statement of Cash Flows The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Inventories Inventories are valued at the lower of cost or market. Cost is determined for a large portion of the inventories by the last-in, first-out (LIFO) method computed using the dollar value method for natural business unit pools. The cost of the remaining inventories is determined generally on a first-in, first- out (FIFO) basis. F-9 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Property, Plant and Equipment Property, plant and equipment is stated at cost. Depreciation has been provided in the financial statements primarily on the straight-line method at rates, based on reasonable estimates of useful lives, which fall within the following ranges for major asset classifications: Land improvements.......................................... 10 to 20 years Buildings.................................................. 20 to 40 years Machinery and equipment.................................... 5 to 20 years
Depreciation expense for continuing operations for 1995, 1994 and 1993 amounted to $2,831,000, $3,644,000 and $3,757,000, respectively. Maintenance, repairs and minor renewals are charged to earnings in the year in which the expense is incurred. Additions, improvements and major renewals are capitalized. The cost of assets retired or sold, together with the related accumulated depreciation, are removed from the accounts, and any gain or loss on disposition is credited or charged to earnings. The Company capitalizes interest cost on construction projects while in progress. The capitalized interest is recorded as part of the asset to which it is related and is amortized over the asset's estimated useful life. Retirement Plans The Company has a defined contribution plan covering substantially all eligible non-union salaried and non-union hourly employees. Annual contributions are made to the plan based on rates identified in the plan agreement. Advertising Advertising costs are charged to operations when incurred. The Company did not incur any costs associated with direct response advertising in 1995, 1994 and 1993, and there were no capitalized advertising costs at December 31, 1995 and 1994. Advertising expense for 1995, 1994 and 1993 was $503,000, $1,023,000 and $1,230,000, respectively. Earnings (Loss) per Common Share Primary earnings (loss) per common share is determined after deducting the dividend requirements of the preferred and preference shares and is based on the weighted average number of common shares outstanding during each period increased by the effect of dilutive stock options. Fully diluted earnings (loss) per common share also give effect to the reduction in earnings per share, if any, which would result from the conversion of the $1.85 cumulative convertible preference stock at the beginning of each period if the effect is dilutive. Environmental Matters The Company records a liability for environmental matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on the available evidence and site assessments. If an amount is likely to fall within a range and no single amount within that range can be determined to be a better estimate, the minimum amount of the range is recorded. If there are other participants and the liability is joint and several, the financial stability of the other participants is considered in determining the Company's accrual. In addition, the liability excludes claims for recoveries from insurance companies and other third parties until such claims for recoveries are probable of realization at which point they would be classified separately as a receivable. F-10 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Warranty Costs The Company warrants under certain circumstances that its building material products meet certain manufacturing and material specifications. The warranty policy is unique to each product, ranges from twenty to forty years, is generally for the material cost and requires the owner to meet specific criteria such as proof of purchase. The Company offers the original manufacturer's warranty only as part of the original sale and at no additional cost to the customer. In addition, for marketing considerations, the Company makes elective settlements in response to customer complaints. The Company records the liability for warranty claims and elective customer settlements when it determines that a specific liability exists or a payment will be made. 2. INVENTORIES The percentages of inventories valued on the LIFO method were 100% and 86% at December 31, 1995 and 1994, respectively. It is not practical to separate LIFO inventories by raw materials and finished goods components; however, the following table (in thousands) presents these components on a current cost basis with the LIFO reserve shown as a reduction.
DECEMBER 31, -------------- 1995 1994 ------ ------- Current Costs: Raw materials............................................... $1,202 $ 3,554 Finished goods.............................................. 4,217 6,924 ------ ------- 5,419 10,478 Less LIFO reserve........................................... 718 2,107 ------ ------- $4,701 $ 8,371 ====== =======
3. DEBT At December 31, the Company's borrowings and debt obligations are summarized as follows (in thousands):
1995 1994 ------ ------- Long Term Debt: Revolving Credit Agreement................................. $ 0 $13,937 Term Loans................................................. 5,000 15,000 Obligations under capital leases........................... 982 1,638 ------ ------- 5,982 30,575 Less--portion due within one year.......................... 1,113 18,071 ------ ------- $4,869 $12,504 ====== =======
Prior to November 30, 1994, the Company's external financial needs were satisfied by borrowing under the Second and Third Amended Credit Agreements with The First National Bank of Boston, Philadelphia National Bank incorporated as Corestates Bank, N.A. and The Bank of Tokyo Trust Company. On November 30, 1994, Bird Incorporated entered into a three year $39 million Loan Agreement with Fleet Capital Corporation ("Fleet Capital"), previously Barclays Business Credit, Inc. and Shawmut Capital Corporation. At the end of the three year period, the Loan Agreement will be automatically renewed for F-11 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) successive one year periods unless terminated specifically in writing. The Loan Agreement consisted of a $24 million revolving credit commitment and two equal term loans (Term loan A and Term loan B, as defined in the Loan Agreement) totaling $15 million. On March 8, 1995 the Company sold the assets of its vinyl siding operation to Jannock, Inc. for $47.5 million which was reduced to approximately $42.5 million by post- closing working capital adjustments (see Note 7). The proceeds from the sale were used to reduce bank debt. Concurrent with the sale, Fleet Capital executed the First Amendment to the Loan Agreement amending the amount of the facility to $20 million consisting of a $15 million revolving credit commitment and a $5 million term loan. On January 10, 1996, the Company paid down the term loan so that the outstanding principal balance equaled $2.5 million. Up to $5 million of the revolving credit facility can be used for letters of credit. Letters of credit outstanding as of December 31, 1995 totaled $2,233,000 compared to $2,927,000 as of December 31, 1994. Borrowings by Bird Incorporated under the Loan Agreement are guaranteed by the Company and the Company's other subsidiaries and are secured by substantially all of the assets of the Company and its subsidiaries. The revolving credit line availability is determined with reference to a percentage of accounts receivable and inventory which are pledged to the lender. During the period January 1 through April 30, the Loan Agreement provides a $2 million over advance on accounts receivable and inventories in order to assist the Company in assuring adequate funding of any seasonal build up of accounts receivable which may occur under sales programs offered during the winter months. Currently, the availability calculation does not allow borrowings to the full extent of the revolving credit commitment, due to the seasonality of the building materials manufacturing business. As of March 15, 1996, an aggregate of $7,683,000 was available to the Company under the terms of the revolving credit facility under the Loan Agreement. The Loan Agreement contains financial and operating covenants which, among other things, (i) require the Company to maintain prescribed levels of tangible net worth, net cash flow and working capital and (ii) place limits on the Company's capital expenditures. The Loan Agreement also contains restrictions on indebtedness, liens, investments, distributions (including payment of common and preference dividends), mergers, acquisitions and disposition of assets. As of September 30, 1995, the Company was in default under Section 8.3.3 of the Loan Agreement as a result of failing to achieve a stated level of cash flow for the third quarter of 1995. As a result of the weak remodeling market during 1995, sales volume and earnings were less than anticipated, negatively impacting cash flow. At the request of the Company, Fleet Capital waived the cash flow requirements for the third quarter without penalty and amended this and other financial covenants for subsequent periods based on a review of the Company's financial condition and future projections. As of December 31, 1995, the Company was in compliance with all covenants. Interest on the revolving credit commitment under the First Amended Loan Agreement accrues at the Fleet Capital base rate (as specified in such Agreement) or the London Interbank Offering Rate ("LIBOR") plus 2 3/4% at the Company's election on all borrowings plus the greater of $25,000 per annum or 1/4% on any unused portion of the commitment payable monthly in arrears. The interest on the term loan accrues at the base rate or the LIBOR rate plus 2 3/4% at the Company's election. The interest rate on outstanding borrowings at December 31, 1995 was 8.69%. The repayment of the principal on the term loan is at the rate of $62,500 per month through November 1996 and $71,417 per month thereafter with a final principal payment of $3,455,800 due on November 30, 1997. Proceeds in excess of $100,000 from the sale of fixed assets may, at Fleet Capital's discretion, be applied to the outstanding principal payments of the term loan. The weighted average interest rates on short term borrowings at December 31, 1995 and December 31, 1994 were 9.74% and 9.53%, respectively. The fair value of the Company's total debt approximated the carrying value at December 31, 1995 and 1994, respectively. The fair value is based on management's estimate of current rates available to the Company for similar debt with the same remaining maturity. F-12 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Maturities of long-term debt for each of the five years subsequent to December 31, 1995 are as follows: 1996--$1,113,000; 1997--$4,614,000; 1998--$255,000; 1999--$0; 2000--$0. The Company incurred net interest expense of $927,000 in 1995, $4,782,000 in 1994 (net of $257,000 capitalized interest), and $2,472,000 in 1993 (net of $345,000 capitalized interest). 4. INCOME TAXES Earnings (loss) from continuing operations before income taxes and the provision (benefit) for income taxes are shown below (in thousands):
YEAR ENDED DECEMBER 31, ------------------------ 1995 1994 1993 ------- ------- ------- Earnings (loss) from continuing operations before income taxes........................................ $10,627 $(5,927) $(5,278) ======= ======= ======= Provision (benefit) for continuing operations: Currently payable.................................. $ 120 $ 200 $ 765 Deferred........................................... 11,304 (7,210) (1,402) ------- ------- ------- $11,424 $(7,010) $ (637) ======= ======= =======
The provision (benefit) for income taxes on continuing operations varied from the U.S. federal statutory rate for the following reasons:
1995 1994 1993 ----- ------ ----- Continuing operations: U.S. federal statutory rate............................. 34.0% (34.0)% (34.0)% State income taxes...................................... 7.3 (6.5) 0.6 Corporate owned life insurance.......................... 2.5 (9.9) 0.0 Effect of valuation allowance........................... 63.7 (67.5) 22.3 Other................................................... 0.0 (0.4) (1.0) ----- ------ ----- 107.5% (118.3)% (12.1)% ===== ====== =====
The net provision (benefit) for income taxes related to discontinued operations amounted to $(2,962,000) and $304,000 for 1994 and 1993, respectively. F-13 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The deferred income tax asset recorded in the consolidated balance sheet results from differences between financial statement and tax reporting of income and deductions. A summary of the composition of the deferred income tax asset at December 31, 1995 and 1994 is as follows (in thousands):
1995 1994 -------- ------- Deferred tax assets: Bad debt reserves....................................... $ 66 $ 1,314 Compensation/pension accruals........................... 648 882 Investment in non-consolidated subsidiary............... 0 4,284 Net operating loss carryover............................ 14,810 9,129 Capital loss carryover.................................. 0 451 Investment tax credit carryover......................... 1,233 1,233 Minimum tax credit carryover............................ 1,091 1,091 Other reserves & accruals............................... 3,222 3,389 -------- ------- Total deferred tax assets............................. 21,070 21,773 Deferred tax liabilities: Depreciation............................................ (1,942) (1,403) -------- ------- Net deferred tax asset before valuation reserve........... 19,128 20,370 Less: Valuation reserve................................... (15,062) (5,000) -------- ------- Net deferred tax asset.................................... $ 4,066 $15,370 ======== =======
The Company has available for federal income tax purposes unused net operating loss and investment tax credit carryforwards, which may provide future tax benefits, expiring as follows (in thousands):
YEAR OF NET INVESTMENT EXPIRATION OPERATING LOSS TAX CREDIT ---------- -------------- ---------- 1996............................................ $ 0 $ 97 1997............................................ 0 317 1998............................................ 0 135 1999............................................ 0 212 2000............................................ 0 297 2001............................................ 0 175 2002............................................ 138 0 2008............................................ 9,898 0 2009............................................ 16,711 0 2010............................................ 16,229 0 ------- ------ $42,976 $1,233 ======= ======
Additionally, for federal income tax purposes, at December 31, 1995 the Company had available for carryforward minimum tax credits with no expiration aggregating $1,091,000. If certain substantial changes in the Company's ownership should occur, there would be an annual limitation on the amount of the carryforwards, including certain unrealized built-in losses, which can be utilized for regular and alternative minimum tax purposes. (See Note 14 regarding proposed merger with CertainTeed Corporation.) The Company adopted FAS 109 in 1993 and recorded the cumulative effect of the change in accounting principle of approximately $2.7 million as a benefit in the results of operations for the first quarter of 1993. This accounting change also requires the recognition of a valuation reserve if it is more likely than not that F-14 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) the Company may not be able to realize the benefits of recorded deferred tax assets. At December 31, 1995 the Company's net deferred tax asset is approximately $19.1 million less a valuation reserve of $15.1 million. As required under FAS 109, this valuation reserve was determined based upon the Company's review of all available evidence including projections of future taxable income. During 1995, the company disposed of Bird-Kensington Holding Corporation and Bird Environmental Gulf Coast, Inc. (as disclosed in Notes 7 and 9, respectively) resulting in losses not anticipated at the end of the previous year. In addition, the lower overall demand and price weakness in the northeast caused by a mild 1994/1995 winter followed by a hot, dry summer negatively impacted profits of the roofing operations. Based on the above factors, the Company increased the valuation reserve by $10.1 million. The Company expects to be profitable and with other tax planning strategies expects to generate future taxable income. Realization of the $4,066,000 net deferred tax asset is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Although realization is not assured, management believes that it is more likely than not that the net deferred tax asset will be realized. The amount of the net deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. 5. STOCKHOLDERS' EQUITY The $1.85 cumulative convertible preference stock is redeemable, in whole or in part, at the option of the Company, at a redemption price of $20.00 per share on and after May 15, 1993. The convertible preference stock has a liquidation value of $20.00 per share and is convertible at the option of the holder into common stock of the Company at a conversion price of $22.25 per share, subject to adjustment in certain events. Dividends are cumulative from the date of issue and are payable quarterly. There are four preference dividends in arrears. The Company has the option to redeem the convertible preference stock. The Company's 5% cumulative preferred stock ranks senior to the convertible preference stock as to dividends and upon liquidation. On June 18, 1992 the Company announced that its Board of Directors authorized it to buy back, on the open market or in privately negotiated transactions, up to 400,000 of its outstanding shares of common stock at prices available from time to time that the Company deems attractive. Since this announcement the Company has repurchased 248 shares in 1994, 5,364 shares in 1993 and 92,007 shares in 1992. The Company is prohibited from purchasing its common stock as long as dividends on the convertible preference stock are in arrears. Under the 1992 Stock Option Plan described in Note 6, 931,325 shares of common stock are reserved for issuance upon exercise of options and stock appreciation rights at December 31, 1995. Restrictions on the payment of dividends on common and preference stock are imposed by the terms of the Loan Agreement dated November 30, 1994. Payment of dividends on the preferred stock are permitted under the Loan Agreement. As of December 31, 1995, all dividends current and in arrears on the preferred stock in the amount of $29,000 and $22,000 respectively, have been declared and paid in full. Dividends are in arrears on the preference stock in the aggregate amount of $1,506,000 for the four quarterly periods ended February 15, 1995 and must be paid in full before any dividends could be declared and paid on the common stock. The quarterly dividends on the preference stock due May 15, August 15, and November 15, 1995 in the aggregate amount of $1,130,000, along with one dividend in arrears in the amount of $377,000, have with the consent of Fleet Capital, been declared and paid in full. The Company has a Rights Agreement which, as amended, entitles certain common stockholders to purchase shares of common stock of the Company or securities of an acquiring entity in the event of certain F-15 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) efforts to acquire control of the Company. The proposed merger with CertainTeed Corporation (Note 14) will not trigger the exercisability of these rights. 6. EMPLOYEE BENEFIT PLANS Retirement Plans The Company's "Bird Employees' Savings and Profit Sharing Plan" provides for a defined base contribution and profit sharing and savings contributions. Defined Base Contribution The Company contributes annually 2-7% of plan participants' basic compensation depending upon their age and employment status as of December 31, 1984. Vesting accrues at 20% per year of service. Contributions for continuing operations for the years ended December 31, 1995, 1994, and 1993 amounted to $72,000, $203,000, and $352,000, respectively. Profit Sharing Contribution Profit sharing contributions are made annually, if earned, based upon certain defined levels of return on equity by the Company and its business units. The distribution of the contribution to the plan's participants is based upon annual basic compensation. Contributions for continuing operations for the year ended December 31, 1993 amounted to $145,000. No profit sharing contributions were earned for 1995 or 1994. Savings Contribution The Company's savings plan provides that eligible employees may contribute to the plan any whole percentage of their basic compensation varying from 2 to 15%. The Company may make discretionary matching contributions not exceeding 6% of the participant's basic compensation during the plan year. Such matching Company contributions are invested in shares of the Company's common stock. The Company's contributions for continuing operations for the years ended December 31, 1995, 1994, and 1993 amounted to $124,000, $142,000, and $155,000, respectively. Post Retirement Benefits Certain health care and life insurance benefits are provided for substantially all of the Company's retired employees, except those covered under union plans. Benefits are provided by the payment of premiums for life insurance benefits and the reimbursement for eligible employees of a portion of their health care premiums. The Company's cost for the years 1995, 1994, and 1993 amounted to $66,000, $79,000, and $71,000, respectively. Employee Incentive Plans Under the 1982 Stock Option Plan, as amended, options to purchase up to 900,000 shares of the Company's common stock may be granted to officers, directors and key employees upon terms and conditions determined by a committee of the Board of Directors which administers the plan. In 1993, the Company adopted a new stock option plan which allows the issuance of up to 450,000 stock options in addition to the unissued shares approved for issuance under the 1982 plan. The new plan will expire in 2002 and no further options will be granted under the former plan. A Non-Employee Directors' Stock Option Plan was also adopted in 1993 which will automatically provide grants of options to each non-employee director serving on the Board of Directors at the time of such grant. Each annual grant will cover 2,500 shares of common stock F-16 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) and any recipient may not receive option grants exceeding a total of 30,000 shares. An aggregate of 100,000 shares of common stock are available for grants under the Non-Employee Directors' Stock Option Plan. Options granted by the committee may be designated as either incentive stock options, as defined under the current tax laws, or non-qualified options. The committee may also grant stock appreciation rights, either singly or in tandem with stock options. A right entitles the holder to benefit from market appreciation in the Company's common stock subject to the right between the date of the grant and the date of exercise without any payment on the part of the holder. Upon exercise of a right, the holder surrenders the option and receives an amount of common stock (or, at the election of the committee, cash) equal in value to the amount of such appreciation. The exercise price of options specified by the committee must be at least 100% of the fair market value of the Company's common stock as of the date of grant. All options and rights granted become exercisable at the rate of 20 to 25% per year, on a cumulative basis, beginning with the first anniversary of the date of grant for options granted under the Stock Option Plan and in full one year after grant for option granted under the Non-Employee Directors' Stock Option Plan. In case of termination of employment, options and grants vested, but not yet exercised, are subject to forfeiture under the Stock Option Plan and are exercisable up to 90 days after termination for the Non-Employee Directors' Stock Option Plan. Transactions involving the Stock Option Plan are summarized as follows for the year ended December 31, 1995:
STOCK OPTIONS ------------- Outstanding January 1, 1995 ($5.00 to $17.50 per share)........ 500,650 Granted ($6.625 to $8.125 per share)........................... 65,000 Exercised ($5.00 per share).................................... (2,000) Canceled ($5.50 to $17.50 per share)........................... (125,550) -------- Outstanding December 31, 1995 ($5.00 to $17.50 per share)...... 438,100 ======== Exercisable December 31, 1995 ($5.00 to $17.50 per share)...... 186,300 Shares available for granting options: January 1, 1995................................................ 432,675 December 31, 1995.............................................. 493,225
In tandem with the stock options there are 9,500 stock appreciation rights at December 31, 1995. During 1995, the Financial Accounting Standards Board issued "Statement of Financial Accounting Standards No. 123 Accounting for Stock Based Compensation" ("FAS 123"). The Company intends to adopt FAS 123 through disclosure only in 1996. Long Term Incentive Compensation Under the terms of a Long Term Incentive Compensation Plan, certain officers and key management employees received common stock of the Company on a restricted time lapse grant basis. These shares were to be released from escrow and delivered to the plan's participants when the market price of the Company's common stock achieved certain designated levels between $12 and $24 per share for 30 consecutive days prior to June 28, 1994 or in any event if the participant has remained in the continuous employ of the Company through June 2003. Certain market prices were achieved and maintained for the required 30- day period during 1994 and 1993. Therefore, 40,670 and 45,630 shares of the Company's common stock were released in June of 1994 and 1993, respectively, to the plan's participants. Additionally, 30,000 shares were released F-17 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) to the former Chief Executive Officer in 1994 as part of his Termination Agreement. As a result of his termination and the termination of certain other officer and key management personnel during 1994, 125,145 shares of restricted stock valued at $910,000 were forfeited and returned to treasury stock. Upon consummation of the vinyl sale, all restrictions on the remaining 23,560 shares of common stock held under the plan automatically lapsed and such shares were distributed to the intended recipients. Amortization of unearned compensation under this agreement for the years 1995 and 1993 amounted to $157,000 and $595,000, respectively. In 1994 amortization was reduced by $113,000 associated with the forfeiture of shares. 7. DISCONTINUED BUSINESS ACTIVITIES The Company records income and expenses associated with former business activities on the Consolidated Statement of Operations under the caption "Discontinued Business Activities". On March 8, 1995, the Company sold substantially all of the assets of its vinyl business to Jannock, Inc. for $47.5 million in cash subject to certain downward adjustments which totaled $4,962,000. Net of adjustments, the gain on the sale of the vinyl business totaled $20,579,000. Sales of $6,365,000 were recorded for the now discontinued vinyl business for the period ending March 7, 1995. On June 2, 1995 the Company sold all of the outstanding capital stock of Bird-Kensington Holding Corp., which owned the Company's interest in Kensington Partners, to Jannock, Inc. The purchase price consisted of cash in the gross amount of $2,780,000 and the assumption of certain liabilities related to the Kensington window business. The sale resulted in a loss of $1,959,000. Sales of $4,265,000 were recorded for this business for the period March 1, 1995 through June 2, 1995. On June 10, 1994, the Company's 40% interest in Mid-South Building Supply, Inc. was redeemed for $1 million in cash resulting in a loss of $1,261,000. On August 22, 1994, the Company sold the assets of substantially all of its distribution businesses to Wm. Cameron & Co. for a purchase price consisting of cash in the amount of $26,142,000, including $1 million held in escrow to pay any indemnification claims arising under the purchase and sale agreement. The sale resulted in a gain of $2,677,000. Sales of $67,089,000 were recorded for these businesses for the period ending August, 22, 1994. On November 28, 1994, the Company sold its last remaining building materials distribution business, Southland Building Products, Inc., to Ashley Aluminum, Inc. for a purchase price of $2,134,000. The sale resulted in a modest gain. Sales of $9,092,000 were recorded for this business for the period ending November 27, 1994. The Company recorded other expenses related to discontinued business activities of $1,050,000, $153,000, and $268,000, for the years 1995, 1994, and 1993, respectively. These charges against earnings include warranty claims and other costs directly related to discontinued business activities. Expenses incurred in 1995 also included $1.5 million in provisions relating to employee benefit plans and product liability claims associated with former roofing operations which were offset by a $602,000 crude oil refund from the Department of Energy. F-18 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 8. OTHER EXPENSE Other expense was $3.3 million in 1993. A series of non-recurring items developed at the end of 1993 that required a number of charges to results of operations. The majority of these are outlined in the following paragraphs: Accounting requirements associated with the responsible parties on an environmental cleanup require the Company to maintain a reserve sufficient to absorb the full cost of the Company's portion of the cleanup. Based on recent site assessments, the Company increased the cleanup reserve by $500,000 based on the Company's estimated share of the proportionate costs. The Company had been considering the development of certain real property. As a result of cash flow and bank covenant constraints, no further development was possible. Based on the estimated net realizable value of the property, the Company wrote-off its $1.3 million investment. To satisfy the remaining portion of an outstanding receivable, the Company previously accepted a $1.3 million note, collateralized by a secondary interest in a mortgage portfolio. Because assessment of the portfolio and the bankruptcy of the debtor indicated the note to be of no value it was written off. The termination of the former Chief Executive Officer of the Company resulted in a $850,000 reserve to cover a settlement under an employment agreement which was paid in 1994. The remainder of "Other Expense" is comprised of other miscellaneous adjustments of a more typical nature and income of approximately $1.3 million from a settlement with an insurance provider relating to product liability claims. 9. DISCONTINUED OPERATIONS Environmental Businesses On June 18, 1994, the Company agreed to cause the sale of its 80% interest in its "off-site" environmental business, Bird Environmental Gulf Coast, Inc. ("BEGCI") to the minority shareholders thereof, subject to financing, resulting in the complete withdrawal from the environmental business. Accordingly, the Company, as of June 30, 1994, recorded the operating results of BEGCI as a discontinued operation for all years presented. In conjunction with this decision, the Company recorded an aggregate charge of approximately $9 million, to adjust its book value to approximate the net realizable value of $7.5 million at June 30, 1994. In June 1994, the Company estimated that the results of operations from the "off-site" environmental business would be breakeven through the disposal date and, accordingly, no liability for anticipated losses from the measurement date to the disposal date was recorded. However, at December 31, 1994, the Company had invested an additional $1,270,000 in BEGCI which, based on the Company's assessment, would not be recoverable and was accordingly written-off, thus maintaining the Company's investment at $7.5 million. During 1995, the minority partner became unable to finance the purchase of the facility and efforts to attract another purchaser were unsuccessful. In July 1995, the Company's Board of Directors suspended further funding of the facility. As a result of this action, during the second quarter of 1995, the Company's remaining investment of $8.6 million was written off and a $3 million reserve was established for additional expenses associated with the closure of the facility. On November 29, 1995, the Company caused the sale of all of the outstanding capital stock of BEGCI to GTS Duratek, Inc. for a purchase price of $1.00. Of the $3 million reserve established in the second quarter of 1995, $2,050,000 was utilized, while $650,000 remains at December 31, 1995 for future claims against discontinued operations. F-19 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) In 1993 the Company decided to close the "on-site" environmental remediation business. This business involved environmental remediation projects such as the processing of oily waste sites at a refinery, operations and management of waste processing sites and the removal and remediation of sludge. The contracts with customers were generally fixed price and usually for periods less than one year. As a result of the decision to exit this business, the Company recorded a provision totaling approximately $11 million. Included in this provision was a $5.8 million write-down of certain assets to net realizable value, $2.1 million for certain contracts including any additional amounts due to stipulated buyouts, $635,000 for severance-related payments, $740,000 for inventory and other assets, $1 million for the write-off of intangible assets and $700,000 for other expenses due to lease buyouts, fees and other general expenses. Included in the 1993 environmental results is a restructuring reserve of $2 million relating primarily to the environmental business. Included in this provision is $300,000 for severance and benefit payments, $700,000 for lease buyouts, $650,000 for expected losses on exiting certain contracts, and $350,000 of other costs. This charge was offset by a $858,000 gain on the sale of the municipal sludge business. These amounts, including the operating results, are recorded as discontinued operations. Based upon the actual results of the environmental "on-site" remediation operations and the sale of its assets, excess costs of $3,861,000 charged in 1993 were reversed and recorded as discontinued operations in the consolidated statement of operations for the twelve months ended December 31, 1994. Net sales relating to these environmental businesses amounted to $2,848,000, $3,715,000 and $24,681,000 for 1995, 1994 and 1993, respectively. 10. ACQUISITIONS On July 1, 1992 the Company entered into a 50% joint venture with Kensington Manufacturing Company to manufacture vinyl replacement windows through Kensington Partners ("Kensington"). In 1993, Kensington experienced serious cash needs which hampered production requirements. As a result of continuing losses and the inability of Kensington to properly finance its operation, Kensington's independent accountants issued "going concern" opinions at December 31, 1994 and December 31, 1993. After negotiating with its partner, Bird Corporation agreed to invest additional cash in return for temporarily increasing its ownership in Kensington to 90%. The terms of the new agreement allowed Kensington to return to an equal partnership if, before the later of December 31, 1994 or six months following the Company's last investment (made in August, 1994), its partner matched the additional investment made by the Company. As of February 28, 1995, the minority partner did not match the additional investment made by the Company. As a result, the Company's ownership in the joint venture was permanently fixed at 90%, resulting in a change in financial reporting from the equity method to consolidation beginning March 1, 1995 through June 2, 1995 when the operation was sold (see Note 7). The Company recorded 50% of the joint venture's loss from operations under the equity method from inception through January 31, 1994 and 90% for the period February 1, 1994 through February 28, 1995. Equity losses from Kensington are shown separately on the consolidated statements of operations. F-20 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The following table represents summarized financial information for Kensington Partners for the year ended December 31, 1994 (in thousands): Current Assets.................................................... $ 5,040 Property and Equipment............................................ 3,137 Other Assets...................................................... 677 ------- Total Assets.................................................. $ 8,854 ======= Current Liabilities............................................... $ 9,722 Other Liabilities................................................. 1,288 ------- Total Liabilities............................................. $11,010 =======
The following table represents summarized financial information for the years ended December 31, 1994 and December 31, 1993 and the two month period ended February 28, 1995 (in thousands):
1995 1994 1993 ------ ------- ------- Net Sales........................................ $1,774 $24,180 $21,169 Gross Profit (Loss).............................. $ (18) $ 1,317 $ 1,384 Net Loss......................................... $ (413) $(5,310) $(5,249)
11. COMMITMENTS AND CONTINGENCIES Lease Commitments The Company leases certain manufacturing, administrative, warehousing, transportation equipment and other facilities. The leases generally provide that the Company pay the taxes, insurance and maintenance expenses related to the leased assets. At December 31, 1995 minimum lease commitments under noncancelable operating leases are as follows (in thousands):
YEAR ---- 1996.............................................................. $ 986 1997.............................................................. 899 1998.............................................................. 740 1999.............................................................. 740 2000.............................................................. 740 Later years....................................................... 10,353 ------- $14,458 =======
Total rental expense for continuing operations, exclusive of taxes, insurance and other expenses paid by the lessee related to all operating leases (including those with terms of less than one year) was as follows (in thousands):
YEAR AMOUNT ---- ------ 1995............................................................... $1,059 1994............................................................... $2,883 1993............................................................... $3,202
F-21 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The following represents property under capital leases (in thousands):
DECEMBER 31, ------------- 1995 1994 ------ ------ Machinery and equipment....................................... $2,456 $3,790 Less, accumulated depreciation................................ 903 1,495 ------ ------ $1,553 $2,295 ====== ======
At December 31, 1995 minimum lease commitments under capital leases are as follows (in thousands):
YEAR AMOUNT ---- ------ 1996.............................................................. $ 412 1997.............................................................. 406 1998.............................................................. 262 1999.............................................................. 0 2000.............................................................. 0 ------ Total minimum lease payments...................................... 1,080 Imputed interest (@ rates ranging from 3.4% to 7.2%).............. (98) ------ Total future principal payments of lease obligations.............. $ 982 ======
Litigation Since 1981, the Company has been named as a defendant in approximately 550 product liability cases throughout the United States by persons claiming to have suffered asbestos-related diseases as a result of alleged exposure to asbestos in products manufactured and sold by the Company. Approximately 140 of these cases are currently pending and costs of approximately $2 million in the aggregate have been incurred in the defense of these claims since 1981. The Company's insurance provider has accepted the defense of these cases under an agreement for sharing of the costs of defense, settlements and judgements, if any. The Company has provided a reserve amounting to $950,000 at December 31, 1995 for its estimated share of losses related to these claims. In light of the nature and merits of the claims alleged, in the opinion of management, the resolution of these remaining claims will not have a material adverse effect on the results of operations or financial condition of the Company. In 1986, the Company, along with numerous other companies, was named by the United States Environmental Protection Agency ("EPA") as a Potentially Responsible Party ("PRP") under the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, 42 U.S.C. Paragraph 9601, et seq. ("CERCLA"), in connection with the existence of hazardous substances at a site known as the Fulton Terminal Superfund site located in Fulton, Oswego County, New York. On September 28, 1990 the Company and a number of other PRPs reached a negotiated settlement with the EPA pursuant to which the settling PRPs agreed to pay the costs of certain expenses in connection with the proceedings, and to pay certain other expenses including the costs and expenses of administering a trust fund to be established by the settling PRPs. The settlement agreement is embodied in a consent decree lodged with the United States District Court for the Western District of New York. The ultimate cost to the Company of the remedial work and other expenses covered by the settlement agreement is estimated to be between $1 million to $2 million. This range is based, in part, on an allocation of certain sites' costs which, due to the joint and several nature of the liability, could increase if the other PRP's are unable to bear their allocated share. The Company has provided a reserve of approximately $1 million at December 31, 1995 to cover the remaining proportionate share of the estimated total remaining cost of cleanup, most of which will be paid in 1996. F-22 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Based on information currently available to the Company, management believes that it is probable that the major responsible parties will fully pay the cost apportioned to them. Management believes that, based on its financial position and the estimated accrual recorded, its remediation expense with respect to this site is not likely to have a material adverse effect on its consolidated financial position or results of operations of the Company. The Company has been named as a PRP with respect to certain other sites which are being investigated by federal or state agencies responsible for regulation of the environment. Status as a PRP means that the Company may be jointly and severally liable for all of the potential monetary sanctions and remediation costs applicable to each site. In assessing the potential liability of the Company at each site, management has considered, among other things, the aggregate potential cleanup costs of each site; the apparent involvement of the Company at each site and its prospective share of the remediation costs attributable thereto; the number of the PRPs identified with respect to each site and their financial ability to contribute their proportionate shares of the remediation costs for such site; the availability of insurance coverage for the Company's involvement at each site and the likelihood that such coverage may be contested; and whether and to what extent potential sources of contribution from other PRPs or indemnification by insurance companies constitute reliable sources of recovery for the Company. On the basis of such consideration, management has determined that such environmental matters will not have a material affect on the Company's financial position or results of operations. The Company has provided an aggregate reserve amounting to approximately $300,000 at December 31, 1995 for its estimated share of the ultimate cost of cleanup for such claims excluding any potential sources of indemnification or recovery from third parties. In 1992, a subsidiary of the Company, Bird Atlantic Corporation, formerly Atlantic Building Products Corporation ("ABPCO"), commenced an action against a former vendor, alleging violation of an exclusive distributorship without adequate and fair compensation to ABPCO. A jury trial was held in November 1995 in the Superior Court of Plymouth County, Massachusetts. The jury found in favor of ABPCO and judgement was entered on January 26, 1996 in the principal amount of approximately $1.8 million. The award, with interest accruing at 12% per annum, is expected to be in excess of $3 million and will not be reported as income until collected. The defendant has appealed the judgement. The Company is also exposed to a number of other asserted and unasserted potential claims encountered in the normal course of business and unrelated to environmental matters. In the opinion of management, the resolution of such claims will not have a material adverse effect on the Company's financial position or results of operations. Warranty Obligations The Company warrants under certain circumstances that its Housing Group's products meet certain manufacturing and material specifications. In addition, for marketing considerations, the Company makes elective settlements in response to customer complaints. The Company records the liability for warranty claims and elective customer settlements when it determines that a specific liability exists or a payment will be made. During 1995, 1994 and 1993, the Company recorded (exclusive of those claims included in discontinued business activities) approximately $2,262,000, $2,687,000, and $3,196,000, respectively, in warranty expenses and elective customer settlements. The warranty related expense included in discontinued business activities for 1995, 1994 and 1993 amounted to approximately $94,000, $100,000 and $104,000, respectively. Based upon analyses performed by the Company's management, a reasonably possible range of potential liability from unasserted warranty obligations for all products sold prior to December 31, 1995 is estimated to be between $3.5 million and $16.5 million. However, the Company has not recorded any liability F-23 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) for these future unasserted claims or complaints because management has concluded, based on such analyses, that no particular estimate within this range is probable. 12. OPERATIONS IN DIFFERENT INDUSTRIES The Company has had two business segments which it defined as the Housing Group and the Environmental Group. The Housing Group manufactures and markets residential and commercial roofing products in the northeastern United States, including a full line of fiberglass based asphalt shingles and roll roofing. The Group also manufactured vinyl siding, window profiles, trim and accessories which were distributed nationwide. In prior years, the Group operated distribution centers primarily in the southeastern and southwestern markets for vinyl siding and in the Arizona and northeastern markets for roofing and other building materials products. The Company's Environmental Group provided recycling, remediation, and beneficial re-use services for applications as diverse as food processing waste streams, oily waste recovery and the treatment of municipal wastes. Generally, these on-site services recovered valuable constituents, removed wastes and reduced the volume of materials which must be disposed of by other means. In December 1993, the Company decided to close this portion of the environmental segment and dedicate this group to operating BEGCI, the fixed site facility in Texas. As discussed in Note 9, the Company sold its interest in BEGCI in November 1995 to GTS Duratek, Inc. Net sales represent sales to unaffiliated customers. Identifiable assets are those that are used in the Company's operations in each industry segment. Corporate assets are principally cash investments and equivalents and property maintained for general corporate purposes. As discussed in Note 9, the results of operations for the environmental group for the three years ended December 31, 1995 have been recorded as discontinued operations. Accordingly, net sales, cost of sales and SG&A relating to this segment are not shown below. F-24 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED DECEMBER 31, --------------------------- 1995 1994 1993 ------- -------- -------- HOUSING GROUP Net Sales........................................ $54,180 $167,886 $187,745 ======= ======== ======== Earnings (loss) from continuing operations before income taxes: Housing group operating income................. $ 189 $ 6,126 $ 7,121 Other non-recurring income..................... 17,722 1,466 877 Interest expense............................... (927) (4,782) (2,472) Corporate office expenses...................... (6,357) (8,737) (6,970) Other write offs............................... 0 0 (3,834) ------- -------- -------- $10,627 $ (5,927) $ (5,278) ======= ======== ======== Identifiable assets: Housing group.................................. $34,111 $ 57,282 $ 95,663 Environmental group............................ 75 7,874 23,250 Corporate office............................... 9,517 20,549 4,316 ------- -------- -------- $43,703 $ 85,705 $123,229 ======= ======== ======== Depreciation: Housing group.................................. $ 2,759 $ 3,573 $ 3,670 Environmental group............................ 0 500 1,686 Corporate office............................... 72 71 87 ------- -------- -------- $ 2,831 $ 4,144 $ 5,443 ======= ======== ======== Capital expenditures: Housing group.................................. $ 1,924 $ 9,446 $ 4,505 Environmental group............................ 0 1,283 12,251 Corporate office............................... 0 37 56 ------- -------- -------- $ 1,924 $ 10,766 $ 16,812 ======= ======== ========
F-25 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 13. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for 1995 and 1994 is shown below:
THREE MONTHS ENDED ----------------------------------------------------- MARCH 31 JUNE 30 SEPT. 30 DEC. 31 ------------ ------------ ------------ ----------- (THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) 1995 Net Sales............... $ 16,623 $ 15,138 $ 12,170 $111110,249 Gross Profit............ $ 1,532 $ 2,621 $ 1,817 $ 203 (1) Earnings (loss): Continuing operations. $ 9,036 $ (4,066) $ (596) $ (5,171) Discontinued operations........... (236) (11,368) 0 352 ----------- ------------ ----------- ----------- Net earnings (loss)..... $ 8,800 $ (15,434) $ (596) $ (4,819) =========== ============ =========== =========== Earnings per share data: Primary earnings (loss) per common share: Continuing operations. $ 2.11 $ (1.08) $ (0.24) $ (1.35) Discontinued operations........... (0.06) (2.77) 0.00 0.09 ----------- ------------ ----------- ----------- Net earnings (loss)... $ 2.05 $ (3.85) $ (0.24) $ (1.26) =========== ============ =========== =========== 1994 Net sales............... $ 36,863 $ 58,486 $ 46,246 $222226,291 Gross profit............ $ 6,670 $ 10,943 $ 9,169 $ 4,226 (2) Earnings (loss): Continuing operations. $ (3,398) $ (1,480) $ 3,304 $ 2,657 Discontinued operations........... (750) (5,708) (907) 2,599 ----------- ------------ ----------- ----------- Net earnings (loss)..... $ (4,148) $ (7,188) $ 2,397 $ 5,256 =========== ============ =========== =========== Earnings per share data: Primary earnings (loss) per common share: Continuing operations. $ (0.92) $ (0.45) $ 0.76 $ 0.56 Discontinued operations........... (0.18) (1.37) (0.24) 0.64 ----------- ------------ ----------- ----------- Net earnings (loss)... $ (1.10) $ (1.82) $ 0.52 $ 1.20 =========== ============ =========== ===========
- -------- (1) Decrease in gross profit in the fourth quarter compared to the previous quarter is due to sales price weakness and the decline in sales volume attributable to a weak re-roofing market caused by a dry, hot summer. (2) Decrease in gross profit in the fourth quarter compared to the previous quarter is due primarily to increased raw material costs that could not be passed on via price increases. 14. MERGER WITH CERTAINTEED CORPORATION On March 14, 1996, the Company signed a definitive agreement with CertainTeed Corporation, a subsidiary of Saint-Gobain Corporation, providing for CertainTeed to acquire in a merger transaction all of the Company's outstanding common, preferred and preference shares. Upon the effective date of the merger, each share of the Company's outstanding common stock, par value $1 per share, will be converted into the right to receive an amount in cash equal to $7.50. The Company's outstanding 5% cumulative preferred stock, par value $100 per share, will remain issued and outstanding F-26 BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) upon the effective date of the merger and will be called for redemption and retirement as soon as practicable thereafter at a price equal to $110, plus all accrued and unpaid dividends thereon as of the date of redemption and retirement. Each share of the Company's outstanding $1.85 cumulative convertible preference stock, par value $1 per share, will be converted into the right to receive $20 plus all accrued and unpaid dividends thereon as of the effective date of the merger. All outstanding options to purchase common stock under the 1982 Stock Option Plan, the 1992 Stock Option Plan, and the 1992 Non-Employee Directors' Stock Option Plan will be converted into the right to receive an amount in cash equal to $7.50 per share less the exercise price per share. Any option with an exercise price equal to or greater than $7.50 will be cancelled on the effective date of the merger without any payment to the option holder. Completion of the merger is subject to approval by the Company's shareholders and appropriate governmental authorities. The merger is not subject to a financing contingency. The Company's Board of Directors has received a fairness opinion from its investment bankers regarding the merger. The closing of the merger is anticipated at the end of the second quarter, following distribution of proxy materials to the Company's shareholders and approval at a special meeting. F-27 SCHEDULE II BIRD CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN THOUSANDS)
ADDITIONS ---------------------- BALANCE CHARGED TO CHARGED TO BALANCE BEGINNING COST AND OTHER AT END OF YEAR EXPENSES ACCOUNTS(A) DEDUCTIONS OF YEAR --------- ---------- ----------- ---------- ------- Year Ended December 31, 1995: Allowance for doubtful accounts.............. $3,137 $ 26 $ 56 $(3,066)(c) $ 153 Valuation allowance for deferred tax assets... $5,000 $10,789 $ 0 $ (727) $15,062 Year Ended December 31, 1994: Allowance for doubtful accounts.............. $4,273 $ 905 $100 $(2,141)(b) $ 3,137 Valuation allowance for deferred tax assets... $9,000 $ 0 $ 0 $(4,000) $ 5,000 Year Ended December 31, 1993: Allowance for doubtful accounts.............. $2,978 $ 2,162 $ 47 $ (914)(b) $ 4,273 Valuation allowance for deferred tax assets... $ 0 $ 9,000 $ 0 $ 0 $ 9,000
- -------- (a) Represents recovery of balances previously written off. (b) Uncollectible accounts written off by a charge to reserve. (c) Represents the allowance for doubtful accounts of vinyl business sold of $517 and the uncollectible accounts written off by a charge to reserve of $2,549. F-28 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) COMBINED FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION ITEM 14(d) DECEMBER 31, 1994 F-29 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1994 TABLE OF CONTENTS
PAGE ---- Financial Statements Independent Auditors' Report............................................. F-31 Combined Balance Sheet................................................... F-32 Combined Statements of Operations and Partners' Capital (Deficit)........ F-33 Combined Statements of Cash Flows........................................ F-34 Notes to the Combined Financial Statements............................... F-35 Supplemental Information Independent Auditors' Report on Financial Statement Schedule............. F-45 Financial Statement Schedule II.......................................... F-46
F-30 INDEPENDENT AUDITORS' REPORT To the Partners Kensington Partners and Affiliate Leechburg, Pennsylvania We have audited the accompanying combined balance sheet of Kensington Partners and Affiliate (Joint Venture Partnerships) as of December 31, 1994 and the related combined statements of operations and changes in partners' capital (deficit), and cash flows for the years ended December 31, 1994 and 1993. These financial statements are the responsibility of the Partnerships' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Kensington Partners and Affiliate as of December 31, 1994, and the results of their operations and their cash flows for the years ended December 31, 1994 and 1993, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that Kensington Partners and Affiliate will continue as going concerns. As discussed in Note 2 to the financial statements, the Companies have incurred significant operating losses and current liabilities exceed current assets. Those conditions, among others, raise substantial doubt about the Companies' ability to continue as going concerns. Management's plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Alpern, Rosenthal & Company Pittsburgh, Pennsylvania February 10, 1995 F-31 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) COMBINED BALANCE SHEET DECEMBER 31, 1994 ASSETS CURRENT ASSETS Cash............................................................ $ 55,655 Accounts receivable Trade--net of allowance for doubtful accounts of $323,000-- Note 3....................................................... 1,742,715 Related parties--Note 13B..................................... 1,286,189 Inventories--Note 4............................................. 1,875,584 Prepaid expenses................................................ 79,862 ----------- TOTAL CURRENT ASSETS........................................ 5,040,005 ----------- PROPERTY AND EQUIPMENT--At cost--net of accumulated depreciation of $1,139,398--Note 5.......................................... 3,136,639 ----------- OTHER ASSETS Other receivables--related party--net of allowance--Note 13E.... 306,386 Other assets--Note 6............................................ 371,249 ----------- 677,635 ----------- TOTAL ASSETS................................................ $ 8,854,279 =========== LIABILITIES AND PARTNERS' DEFICIT CURRENT LIABILITIES Demand notes payable--Note 7.................................... $ 1,628,302 Current maturities of capital lease obligations and long-term debt--Note 8................................................... 312,023 Accounts payable Trade......................................................... 2,485,977 Related parties--Note 13A..................................... 3,654,990 Accrued expenses--Note 9........................................ 1,640,238 ----------- TOTAL CURRENT LIABILITIES................................... 9,721,530 ----------- LONG-TERM LIABILITIES Capital lease obligations and long-term debt--net of current maturities--Note 8............................................. 807,012 Accounts payable--trade--long-term.............................. 354,636 Other long-term liabilities--related parties--Notes 13D and 13E. 126,314 ----------- TOTAL LONG-TERM LIABILITIES................................. 1,287,962 ----------- TOTAL LIABILITIES........................................... 11,009,492 PARTNERS' DEFICIT................................................. (2,155,213) COMMITMENTS AND CONTINGENCIES--NOTE 12............................ -- ----------- TOTAL LIABILITIES AND PARTNERS' DEFICIT..................... $ 8,854,279 ===========
The accompanying notes are an integral part of these combined financial statements. F-32 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) COMBINED STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31 -------------------------------- 1994 1993 --------------- --------------- NET SALES (related parties--1994--26%, 1993-- 34%)........................................ $24,180,093 $21,169,467 COST OF GOODS SOLD (purchased from related parties--1994--28%, 1993--27%).................................. 22,863,159 19,785,555 --------------- --------------- GROSS PROFIT............................. 1,316,934 1,383,912 OPERATING EXPENSES (related parties--1994-- 11%, 1993--23%)............................. 5,346,966 6,012,508 --------------- --------------- LOSS FROM OPERATIONS..................... (4,030,032) (4,628,596) --------------- --------------- OTHER INCOME (EXPENSE) Interest expense........................... (289,638) (155,452) Income (loss) from equity investment....... 3,468 (69,578) Provision for doubtful accounts............ (595,417) (202,154) Tax penalties.............................. (199,872) -- Other expense--net......................... (198,186) (193,647) --------------- --------------- TOTAL OTHER EXPENSE...................... (1,279,645) (620,831) --------------- --------------- NET LOSS................................. (5,309,677) (5,249,427) PARTNERS' CAPITAL (DEFICIT)--Beginning of year........................................ (195,526) 4,453,901 Capital Contributions...................... 3,349,990 600,000 --------------- --------------- PARTNERS' DEFICIT--End of year............... $(2,155,213) $(195,526) =============== ===============
The accompanying notes are an integral part of these combined financial statements. F-33 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31 -------------------------------- 1994 1993 --------------- --------------- CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES Net loss................................... $ (5,309,677) $ (5,249,427) Adjustments for noncash items included in net loss Depreciation and amortization............ 763,183 540,921 (Income) loss from equity investment..... (3,468) 68,578 Working capital changes (below).......... 2,818,892 3,269,036 --------------- --------------- NET CASH USED FOR OPERATING ACTIVITIES. (1,731,070) (1,370,892) --------------- --------------- CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES Purchase of property and equipment......... (38,222) (132,650) Proceeds from sale of equipment............ 81,430 -- Other assets............................... (98,273) (280,508) Other receivables--related parties......... 18,723 (100,000) --------------- --------------- NET CASH USED FOR INVESTING ACTIVITIES. (36,342) (513,158) --------------- --------------- CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES Cash contributed by the partners--Note 10.. 2,825,000 600,000 Demand notes payable....................... (617,278) 1,335,000 Proceeds from long-term debt............... 169,706 34,107 Payments on long-term debt................. (631,082) (399,543) Other long-term liabilities--related parties................................... 61,203 306,286 --------------- --------------- NET CASH PROVIDED BY FINANCING ACTIVITIES............................ 1,807,549 1,875,850 --------------- --------------- INCREASE (DECREASE) IN CASH.................. 40,137 (8,200) CASH--Beginning of year...................... 15,518 23,718 --------------- --------------- CASH--End of year............................ $ 55,655 $ 15,518 =============== =============== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for interest....... $ 255,304 $ 152,341 =============== =============== NONCASH INVESTING AND FINANCING ACTIVITIES Capital lease and debt obligations incurred for acquisition of equipment................ $ 68,431 $ 1,502,028 =============== =============== Partners' capital contribution of inventory.. $ 399,990 $ -- =============== =============== Liability to related party contributed to capital..................................... $ 125,000 $ -- =============== =============== WORKING CAPITAL (INCREASES) DECREASES Accounts receivable Trade...................................... $ 1,020,492 $ (1,210,178) Related parties............................ (280,204) (13,661) Inventories.................................. 1,480,803 (921,219) Other current assets and liabilities......... 940,601 520,199 Accounts payable Trade...................................... (1,087,268) 2,825,082 Related parties............................ 744,468 2,068,813 --------------- --------------- INCREASE IN WORKING CAPITAL............ $ 2,818,892 $ 3,269,036 =============== ===============
The accompanying notes are an integral part of these combined financial statements. F-34 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. PRINCIPLES OF COMBINATION The accompanying combined financial statements include the accounts of Kensington Partners (KP), combined with the accounts of North American Installations Company (NAICO). NAICO is owned 100% by common owners of KP. All significant intercompany balances and transactions have been eliminated in the preparation of the combined financial statements. The combined group is herein referred to as "the Companies". KP is a joint venture partnership formed by ZES, Inc. (formerly Kensington Manufacturing Company) (ZES) and Bird-Kensington Holding Corp., an indirect subsidiary of Bird Corporation (Bird). NAICO was formed in May 1993, as a joint venture partnership, and ceased operations in 1994. B. NATURE OF BUSINESS Kensington Partners operates in one principal industry segment: the manufacture of vinyl replacement windows for wholesalers and home remodelers. The Partnership grants credit to its customers, substantially all of which are retail and wholesale resellers of windows located in the eastern half of the United States. NAICO was an exclusive installer of KP windows for a significant customer of KP, a retail seller of windows to end users, which has sales throughout the United States. The installation of the windows has been transferred to the customer that purchases the windows. C. CASH AND CASH EQUIVALENTS Interest-bearing deposits and other investments with original maturities of three months or less are considered cash equivalents. D. ACCOUNTS RECEIVABLE The Companies provide for estimated losses on uncollectible accounts receivable based on historical data and management's evaluation of individual accounts receivable balances at the end of the year. E. INVENTORIES The Companies value all of its inventories at the lower of cost or market. Raw materials are determined on the last-in, first-out (LIFO) method. Work-in- process and finished goods inventories are determined on a first-in, first-out (FIFO) method. F. DEPRECIATION Depreciation is computed by the straight-line method at rates intended to distribute the cost of the assets over their estimated useful lives. Property under capital lease is being amortized over the life of the lease in accordance with generally accepted accounting principles. Rates used by principal classifications are as follows:
RATE (YEARS) ------- Warehouse and manufacturing equipment............................. 3-10 Furniture and fixtures............................................ 5-10 Leasehold improvements............................................ 3-15 Transportation equipment.......................................... 3-6
F-35 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED) NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Maintenance and repairs which are not considered to extend the useful lives of assets are charged to operations as incurred. Upon sale or retirement, the cost of assets and related allowances are removed from the accounts and any resulting gains or losses are included in other income (expense) for the year. G. INVESTMENT IN AFFILIATED COMPANY The Companies' investment in a joint venture partnership is carried on the equity basis, which approximates the Companies' equity in the underlying net book value. H. PRODUCT WARRANTIES The Companies provide an accrual for future warranty costs based upon actual claims experience. The warranties are limited and provide for parts and/or labor based upon the type of window sold. I. INCOME TAXES The Companies are being treated as partnerships for Federal and state income tax purposes. Under the Internal Revenue Code provisions for partnerships, the partners reflect their proportionate share of the Companies' taxable income or loss on their respective income tax returns, and the Companies are not liable for income taxes. J. RECLASSIFICATION Certain reclassifications were made to the amounts previously reported for December 31, 1993 to conform with the 1994 classifications. NOTE 2--OPERATIONS AND LIQUIDITY The Companies' combined financial statements have been presented on the basis that they are going concerns, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Companies incurred net losses of approximately $5,310,000 and negative cash flows from operations of $1,731,000 for 1994. At December 31, 1994, the balance sheet reflects an excess of current liabilities over current assets of $4,682,000, and a net capital deficiency of $2,155,000. In addition, a lease agreement (Note 12A) is in default as a result of late payments being made and certain payroll and sales taxes are delinquent. (Note 9) Management believes the above mentioned losses and the associated balance sheet deficiencies are a result of adding new products in 1993 which required different manufacturing processes and a significant increase in orders, which put strain on the existing systems. The combination of the above resulted in manufacturing inefficiencies, low asset performance, excessive delivery costs and inadequate management information. During 1993, the Companies embarked on a program to correct the problems associated with operations. Management believes that the major components of the plan have been achieved in 1994 and that the effect of addressing and correcting these problems during 1994 will have a positive impact on 1995 operating results. During the first quarter of 1995, KP has secured price increases from a majority of its customers and negotiated a price reduction from a major vendor. In addition, KP continues on a program to increase productivity, which includes: simplifying product lines, improving plant layout, management training and investing in labor saving equipment. KP has also begun a sales program to broaden its customer base. F-36 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED) NOTE 2--OPERATIONS AND LIQUIDITY (CONTINUED) The outcome of the uncertainties discussed above cannot be predicted at this time. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Companies be unable to continue in existence. NOTE 3--ACCOUNTS RECEIVABLE At December 31, 1994, accounts receivable--trade from three customers were approximately 67% of trade receivables. Sales to these unrelated customers comprised 67% of total sales for the years ended December 31, 1994. Sales to these customers comprised 51% of total sales for the year ended December 31, 1993. NOTE 4--INVENTORIES Inventories at December 31, 1994 are as follows: Raw materials................................................. $ 950,893 Allowance to state raw materials at LIFO cost................. (39,005) ---------- Raw materials at LIFO cost.................................... 911,888 Work-in-process............................................... 648,987 Finished goods................................................ 314,709 ---------- Total Inventories......................................... $1,875,584 ==========
NOTE 5--PROPERTY AND EQUIPMENT Property and equipment at December 31, 1994 is as follows: Equipment under capital leases--Note 8........................ $1,785,817 Warehouse and manufacturing equipment......................... 1,715,676 Furniture and fixtures........................................ 290,258 Leasehold improvements........................................ 419,791 Transportation equipment...................................... 64,495 ---------- 4,276,037 Less: Accumulated depreciation 1,139,398 ---------- Total Property and Equipment.............................. $3,136,639 ==========
NOTE 6--OTHER ASSETS Other assets at December 31, 1994 is as follows: Deposits......................................................... $199,838 Sample windows................................................... 89,965 Other assets..................................................... 81,446 -------- $371,249 ========
F-37 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED) NOTE 7--DEMAND NOTES On June 15, 1994, KP entered into a financing/factoring agreement with a lending institution to sell, on an ongoing basis, up to 80% or $2,500,000, whichever is less, of acceptable trade accounts receivable. All accounts receivable that remain unpaid after 90 days of the purchase by the lender are subject to recourse at the lender's discretion. KP may, at any time, repurchase the accounts receivable sold. The agreement, which expires on June 15, 1995, is subject to automatic renewal for a six month period, unless notice of nonrenewal is given by either party. The loan was funded with $1,000,000, at which time the Companies' line of credit was paid in full (see below). Under the terms of this agreement, fees ranging from 1% to 3 1/2% are based on the number of days to collect the trade receivable, with a guaranteed minimum monthly fee of $5,000. In addition, interest is charged on any amounts advanced under the agreement, at the rate of prime (8 1/2% at December 31, 1994) plus 1 1/2%. Under the terms of this agreement, Bird has guaranteed $1,250,000 of this debt. The amount outstanding under this agreement, included in the accompanying balance sheet at December 31, 1994, is net of a $150,000 cash reserve held by the lending institution. Prior to June 15, 1994, the Companies had a line-of-credit, with maximum borrowings of $2,500,000. Interest was payable monthly at the bank's basic rate plus 1% (see below). The borrowings on the line were collateralized by substantially all the assets of the Companies. The line was guaranteed by the partners of the Companies. In early 1994, the bank cited defaults under the line of credit agreement and made demand for payment. Based on agreements between the Companies and the bank in February and April, 1994, the bank agreed to forebear collection and set a final due date of August 31, 1994. In addition, the interest rate was changed to the bank's basic rate plus 3%. Bird was required to put up $750,000 as additional collateral, which was later applied to the line. Bird was also required to make additional payments totaling $1,200,000. The payments by Bird were recorded as capital contributions to the partnership. NOTE 8--CAPITAL LEASE OBLIGATIONS AND LONG-TERM DEBT The following is a schedule by years of future minimum lease payments under capital leases and installment notes together with the present value of the net minimum lease payments and note payments as of December 31, 1994: 1995.......................................................... $ 332,000 1996.......................................................... 287,000 1997.......................................................... 278,000 1998.......................................................... 334,000 --------- Net minimum lease payments.................................. 1,231,000 Less: Amount representing interest............................ 158,000 --------- Present value of net minimum lease payments................. 1,073,000 Long-term debt principal payments--all due within one year.... 46,000 --------- Net obligations under capital leases and notes payable...... 1,119,000 Less: Current portion......................................... 312,000 --------- Long-term obligations under capital leases and notes payable.................................................... $ 807,000 =========
F-38 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED) NOTE 8--CAPITAL LEASE OBLIGATIONS AND LONG-TERM DEBT (CONTINUED) The partners have guaranteed substantially all of the above lease obligations. Assets under capital lease are capitalized using interest rates appropriate at the inception of each lease. The following is an analysis of the Companies' assets under capital lease obligations, included in property and equipment (Note 5), at December 31, 1994: Warehouse and manufacturing equipment......................... $1,624,677 Transportation equipment...................................... 161,140 ---------- 1,785,817 Less: Accumulated amortization................................ 290,729 ---------- Total..................................................... $1,495,088 ==========
NOTE 9--ACCRUED EXPENSES Accrued expenses at December 31, 1994 are as follows: Accrued and withheld payroll and payroll taxes (Note 2)....... $ 575,500 Accrued and collected sales taxes (Note 2).................... 502,415 Accrued tax penalties and interest............................ 239,219 Accrued vacation.............................................. 155,510 Accrued real estate taxes..................................... 105,932 Other accrued expenses........................................ 61,662 ---------- Total Accrued Expenses.................................... $1,640,238 ==========
NOTE 10--PARTNERS' CAPITAL Effective July 1, 1992, ZES entered into an agreement with Bird through one of Bird's indirect subsidiaries to form a joint venture partnership, Kensington Partners (KP), for the purpose of manufacturing and selling custom windows, a business previously conducted by ZES. ZES' capital contribution to KP consisted of all of its assets subject to certain of its liabilities, including $2,800,000 owed to Jones and Brown, Inc. (J&B), a related party. Bird's capital contribution consisted of $2,800,000, in cash, which was used to pay off the amount owed by KP to J&B, subsequent to the inception of the Partnership. The net assets contributed by ZES were $1,689,000. During 1994, the partners entered into an agreement to restructure the partnership agreement of KP and to make capital contributions. Each partner's ownership percentage is to be adjusted plus or minus 2% for each $50,000 of capital contributed or collateral provided on the bank loan, but in no event should a partner be diluted below 10%. A diluted partner is entitled to cure any shortfall between its capital account and the other partner's capital account by contributing the capital necessary to equalize each partner's capital account by the later of December 31, 1994 or six months from the date of the last capital contribution (August 1994) made on or before December 31, 1994. Pursuant to the agreement, Bird contributed $2,700,000 in cash, including payments on debt (Note 7), and $150,000 of inventory. ZES has contributed $250,000 in cash and $250,000 of inventory. Accordingly, the ownership percentages for Bird and ZES at December 31, 1994 are 90% and 10%, respectively. In addition to the capital contributed, the partners have advanced various amounts of working capital during 1994 (Note 13). F-39 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED) NOTE 10--PARTNERS' CAPITAL (CONTINUED) In September 1994, Bird entered into a sales agreement with Jannock, Inc. to sell all of the assets of a wholly owned subsidiary, Bird Incorporated. The sales agreement contains an option for Jannock to purchase Bird's interest in Kensington Partners for $2,780,000. In addition to the purchase price, Jannock would assume all of Bird's obligations under various security agreements. The option, which expires on April 7, 1995, is subject to Bird fulfilling its obligations under the partnership agreement. Subsequent to December 31, 1994, Bird advanced KP approximately $524,000. NOTE 11--RETIREMENT PLANS KP participates in a multi-employer defined benefit pension plan for the electrician's union employees. Plan contributions are determined by the union labor agreement. Management has not expressed any intent to terminate its participation in this plan. KP contributed approximately $191,000 and $163,000 to this plan during the years ended December 31, 1994 and 1993, respectively. The Companies also sponsors an executive retirement plan. Under the provisions of the plan certain key employees may elect, at their discretion, to contribute to the plan. The Companies provide a matching contribution of one half of all employee contributions up to a maximum of 3% of gross compensation. Contributions are used to purchase variable rate annuities. Additional benefits under this plan include proceeds from life insurance policies owned by KP or the cash value upon termination of employment. The Companies' contributions to this plan were not material for the years ended December 31, 1994 and 1993. NOTE 12--COMMITMENTS AND CONTINGENCIES A. OPERATING LEASES The Companies lease various operating facilities from related and unrelated parties and transportation equipment from unrelated parties under various operating leases. Rent expense for the years ended December 31, 1994 and 1993 are as follows:
1994 1993 -------- -------- Facilities leases--primarily related party................ $285,000 $263,000 Transportation equipment.................................. 133,000 67,000 -------- -------- $418,000 $330,000 ======== ========
The following are the approximate future minimum operating lease payments at December 31, 1994, substantially all of which are due to a related party:
YEAR ENDING DECEMBER 31 AMOUNT ----------- ---------- 1995........................................................ $ 239,000 1996........................................................ 227,000 1997........................................................ 215,000 1998........................................................ 215,000 1999........................................................ 215,000 Thereafter................................................... 1,280,000 ---------- Total minimum lease payments.................................. $2,391,000 ==========
F-40 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED) NOTE 12--COMMITMENTS AND CONTINGENCIES (CONTINUED) KP is currently in default on its lease for its primary operating facility as a result of not making the required rent payments as they became due. Rent of approximately $237,000, due a related party, has been accrued in the accompanying balance sheets at December 31, 1994. Based upon the current payment plan, approximately $61,000 of the accrued rent at December 31, 1994 is included in other long-term liabilities--related parties. B. PURCHASE COMMITMENTS KP and Bird have entered into a supply agreement which requires KP to purchase specified quantities of raw materials from Bird beginning in 1993 and ending in the year 2002. Minimum purchases for the next five years are 1995, $900,000; 1996, $1,100,000; 1997, $1,300,000; and 1998 and 1999, the greater of $1,300,000 or actual amounts purchased in 1997. The agreement includes penalties for shortfalls in purchases on a per year basis. Shortfalls can be offset with credits from years when excess volume is purchased. KP and Domken Plastics (Note 13A) have entered into a supply agreement which requires KP to purchase $2,500,000 of raw materials, annually, through 1999. The agreement includes penalties for shortfalls in total purchases over the term of the agreement. C. SUPPLY AGREEMENTS KP has entered into a supply agreement with a customer that primarily purchases through Quantum II Partners (Notes 12D and 13E). The agreement requires KP to provide not less than 90% of the customer's total requirement of Quantum II vinyl replacement windows (Note 12D). D. LITIGATION On September 13, 1994, a complaint was filed in Middlesex Superior Court by the other 50% owner of Quantum II Partners (Note 13E) and others, including Quantum II Partners (collectively, the plaintiffs), against Kensington Partners and Quantum II Partners (collectively, the defendants). The plaintiffs allege various breaches of contract on the part of the defendants including breach of a partnership agreement, a supply agreement (Note 12C) and an employment agreement along with other complaints under the Massachusetts Unfair Trade Practices Act. The plaintiffs are seeking relief of actual damages in an unspecified amount and a doubling or trebling of such damages as provided in the Unfair Trade Practices Act. KP believes that the claims filed by the plaintiffs have no merit and denies any liability. On October 4, 1994, the defendants filed a complaint in Federal Court alleging various breaches of contract by the plaintiffs and seeking collection of outstanding balances due to the Company from the plaintiffs of approximately $560,000, included in accounts receivable--trade. No answers have been filed in these actions because the parties are involved in settlement negotiations. With respect to the litigation filed by KP for the collection of the 1994 balances receivable, management estimates that some loss may occur and has recorded its estimate of possible loss as an allowance for doubtful accounts. The Company anticipates that a settlement agreement will be achieved, as currently contemplated. If the matter is not settled, and goes to trial, management believes that the ultimate loss, if any, will not exceed the amounts recorded. F-41 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED) NOTE 13--RELATED PARTY TRANSACTIONS The Companies have entered into various transactions with related parties during the years ended December 31, 1994 and 1993. The transactions are as follows: A. PURCHASES AND PAYABLES The Companies have purchases for raw materials, advertising services, and commissions from the following related parties as of and for the years ended December 31, 1994 and 1993:
1994 1993 ---------- ---------- Vinyl Division of Bird, Inc........................... $2,862,000 $2,053,000 Domken Plastics Limited (DPL)......................... $3,616,000 $2,964,000 Quantum II Partners (see below)....................... $ 200,000 $ 440,000 Design Matrix, Inc. (DMI)--Advertising................ $ -- $ 147,000
Accounts payable to related parties at December 31,1994 is as follows: Bird, Inc..................................................... $1,947,000 Domken Plastics Limited (DPL)................................. 1,436,000 Quantum II (Notes 12D and 13E)................................ 16,000 Other related parties......................................... 256,000 ---------- $3,655,000 ==========
DMI and DPL are related through common ownership with ZES. A stockholder of ZES was compensated approximately $143,000 during the year ended December 31, 1993 for services rendered in assisting with the acquisition of raw materials from DPL. In addition, J&B was also compensated $86,000 during 1993 for similar services. Any compensation for services discussed above was reimbursed directly by DPL to ZES for the year ended December 31, 1994. Fees from J&B for computer software support of approximately $144,000 were charged to operations for the year ended December 31, 1994. B. SALES AND RECEIVABLES The Companies had sales to Jones & Brown, Inc. (J&B), a related party through common ownership with ZES, of approximately $5,890,000 and $7,255,000 for 1994 and 1993, respectively. In addition, the Companies had sales to other related parties of approximately $471,000 for 1994. Accounts receivable from related parties are as follows as of December 31, 1994: J&B............................................................ $1,174,000 Other.......................................................... 112,000 ---------- Total........................................................ $1,286,000 ==========
F-42 KENSINGTON PARTNERS AND AFFILIATE (JOINT VENTURE PARTNERSHIPS) NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED) NOTE 13--RELATED PARTY TRANSACTIONS (CONTINUED) C. RENTS KP rents facilities from related parties (Note 12). D. MANAGEMENT FEES Management fees of approximately $488,000 were paid to J&B under a management contract for the year ended December 31, 1993. The management agreement was terminated effective December 31, 1993. E. OTHER Kensington Partners owns a 50% equity investment in Quantum II Partners (Note 12D). Quantum II was formed during 1993 to be the exclusive marketing representative to sell Quantum II replacement windows manufactured by KP. Quantum II Partners reported a net partnership deficit of approximately $130,000 and $138,000 for 1994 and 1993, respectively. KP has reflected its share of Quantum's excess of liabilities over assets in other long-term liabilities. At December 31, 1994, approximately $306,000 due from Quantum II is included in other receivables--related parties. This amount is net of an allowance for doubtful accounts of $65,000. EVENT (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITORS' REPORT In 1995, Jannock, Inc. exercised its option to purchase Bird's interest, owned by its wholly-owned subsidiary Bird-Kensington Holding Corporation, in KP. Immediately preceding the sale, Bird purchased ZES' interest in KP for $1,000,000. In addition, Bird invested in KP $4,090,000 prior to the sale to fulfill provisions in the asset purchase agreement. On June 2, 1995, the stock of Bird-Kensington Holding Corporation, which owned the assets and liabilities of KP was sold by Bird to Jannock, Inc. in exchange for cash of $2,780,000 and assumption of certain liabilities. In April 1996, the litigation (Note 12D) between the other 50% owner of Quantum II Partners (Note 13E) and Bird, as successor in interest to certain of Kensington Partners' rights and obligations under the Quantum II Partnership, Supply and Sales Representative Agreements, was concluded as a result of the parties entering into a settlement agreement. The agreement calls for Bird to receive total payments of $410,000, cancellation of the Sales Representative and Supply Agreements and termination of the partnership. F-43 INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE To the Partners Kensington Partners and Affiliate Leechburg, Pennsylvania We have audited the combined financial statements of Kensington Partners and Affiliate as of December 31, 1994 and for each of the two years in the period then ended, and have issued our report thereon dated February 10, 1995. In connection with our audits of these financial statements, we audited financial statement schedule II. In our opinion, such a financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects, the information set forth therein. /s/ Alpern, Rosenthal & Company Pittsburgh, Pennsylvania February 10, 1995 F-44 SCHEDULE II KENSINGTON PARTNERS AND AFFILIATE VALUATION AND QUALIFYING ACCOUNTS YEAR ENDED DECEMBER 31, 1994
ADDITIONS --------------------- BALANCE CHARGED TO CHARGED TO BALANCE BEGINNING COSTS AND OTHER AT END OF YEAR EXPENSES ACCOUNTS DEDUCTIONS(1) OF YEAR --------- ---------- ---------- ------------- -------- Year Ended December 31, 1994: Allowance for doubtful accounts............. $195,000 $595,000 $-- $402,000 $388,000 ======== ======== ==== ======== ======== Year Ended December 31, 1993: Allowance for doubtful accounts............. $ 66,000 $202,000 $-- $ 73,000 $195,000 ======== ======== ==== ======== ========
- -------- (1) Uncollectible accounts written off. F-45 EX-10.(W) 2 STOCK PURCHASE AGREEMENT EXHIBIT 10(w) STOCK PURCHASE AGREEMENT BY AND AMONG BIRD ENVIRONMENTAL GULF COAST, INC.; BIRD ENVIRONMENTAL TECHNOLOGIES, INC.; BIRD CORPORATION; GTS DURATEK, INC.; AND GTSD SUB II, INC. DATED AS OF NOVEMBER 29, 1995 TABLE OF CONTENTS ARTICLE I: DEFINITIONS.............................................................. 1 ARTICLE II: SALE AND PURCHASE OF STOCK.............................................. 4 Section 2.1 Purchase and Sale.................................................. 4 Section 2.2 Purchase Price..................................................... 4 Section 2.3 Closing............................................................ 5 ARTICLE III: REPRESENTATIONS AND WARRANTIES OF BETI and BIRD..................................................................... 6 Section 3.1 Organization, Standing and Authority of BETI; Title to Stock....... 6 Section 3.2 Organization, Standing and Authority of Bird....................... 6 Section 3.3 Organization, Standing, Authority and Capitalization of Company.... 7 Section 3.4 No Conflicts....................................................... 8 Section 3.5 No Other Pending Transactions...................................... 9 Section 3.6 Company's Names, Business, and Location of Company Assets.......... 9 Section 3.7 Subsidiaries....................................................... 9 Section 3.8 Financial Statements............................................... 9 Section 3.9 No Undisclosed Liabilities......................................... 10 Section 3.10 Absence of Certain Changes, Events or Conditions.................. 10 Section 3.11 Litigation and Other Proceedings.................................. 10 Section 3.12 Licenses and Approvals............................................ 11 Section 3.13 Legal Compliance.................................................. 11 Section 3.14. Material Contracts And Agreements................................ 12 Section 3.15 Title Matters..................................................... 12 Section 3.16 Labor Matters..................................................... 13 Section 3.17 Employee Benefit Plans and Pension Plans.......................... 13 Section 3.18 Insurance......................................................... 13 Section 3.19 Condition of Company Assets....................................... 14 Section 3.20 Intellectual Property............................................. 14 Section 3.21 Environmental Matters............................................. 15 Section 3.22 Customers and Suppliers........................................... 17 Section 3.23 Brokers and Finders............................................... 17 Section 3.24 Accounts Receivable............................................... 18 Section 3.25 No Material Adverse Change........................................ 18 Section 3.26 Books and Records................................................. 18 Section 3.27 Disaster.......................................................... 18
Section 3.28 Tax Returns and Audits............................................ 18 Section 3.29 Due Diligence Review.............................................. 19 Section 3.30 Disclosure........................................................ 19 ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF PURCHASER AND GTSD................................................................... 19 Section 4.1 Organizational Matters; Authority.................................. 19 Section 4.2 No Conflicts....................................................... 20 Section 4.3 Litigation......................................................... 20 Section 4.4 Brokers and Finders................................................ 20 ARTICLE V: COVENANTS AND AGREEMENTS................................................. 20 Section 5.1 Consents; Cause Conditions to be Satisfied......................... 20 Section 5.2 Best Efforts....................................................... 21 Section 5.3 Certain Notifications.............................................. 21 Section 5.4 Competition........................................................ 21 Section 5.5 Non-Interference Agreement......................................... 22 Section 5.6 Confidentiality.................................................... 23 Section 5.7 Tax Election....................................................... 23 Section 5.8 Notification of Certain Events..................................... 23 Section 5.9 Sharing of Expenses for RFI Work Plan.............................. 23 Section 5.10 Closure Trust Fund................................................ 24 Section 5.11 Knowledge of the Company.......................................... 24 Section 5.12 Vehicle Leases.................................................... 24 Section 5.13 Use of Company Logo............................................... 25 ARTICLE VI: CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS.......................................................................... 25 Section 6.1 Receipt of Stock Certificates...................................... 25 Section 6.2 Minority Shareholders Agreements................................... 25 Section 6.3 Payments by Bird................................................... 25 Section 6.4 Release from Liability............................................. 25 Section 6.5 Required Approvals................................................. 26 Section 6.6 Filings............................................................ 26 Section 6.7 Actions or Events Interfering with Agreement....................... 26 Section 6.8 Representations and Warranties..................................... 26 Section 6.9 Compliance with Agreements......................................... 26 Section 6.10 Delivery of Certificates.......................................... 27 Section 6.11 Resignation of Officers and Directors............................. 27
-2- Section 6.12 Termination of Certain Agreements................................. 27 ARTICLE VII: CONDITIONS PRECEDENT TO THE COMPANY'S, BETI'S AND BIRD'S OBLIGATIONS........................................................ 28 Section 7.1 Compliance with Agreements......................................... 28 Section 7.2 Release of Liabilities............................................. 28 Section 7.3 Representations and Warranties..................................... 28 Section 7.4 Compliance with Agreements......................................... 28 Section 7.5 Delivery of Certificates........................................... 28 Section 7.6 Proceedings Taken.................................................. 29 ARTICLE VIII: INDEMNIFICATION....................................................... 29 Section 8.1 Indemnification by BETI and Bird................................... 29 Section 8.2 Indemnification by Purchaser and GTSD.............................. 30 Section 8.3 Procedures for Third Party Claims.................................. 30 Section 8.4 Limits for Recovery of Losses...................................... 31 Section 8.5 Waiver of Contribution............................................. 31 Section 8.6 Sole Remedy........................................................ 31 ARTICLE IX: SURVIVAL................................................................ 31 ARTICLE X: MISCELLANEOUS............................................................ 32 Section 10.1 No Assignment..................................................... 32 Section 10.2 Costs............................................................. 32 Section 10.3 Publicity......................................................... 32 Section 10.4 Confidentiality................................................... 32 Section 10.5 Parties in Interest............................................... 33 Section 10.6 Entire Agreement.................................................. 33 Section 10.7 Construction...................................................... 33 Section 10.8 Notices........................................................... 33 Section 10.9 Counterparts...................................................... 35 Section 10.10 Governing Law.................................................... 35 Section 10.11 Specific Performance............................................. 35 Section 10.12 Severability..................................................... 36 Section 10.13 Further Assurances............................................... 36 Section 10.14 No Drafting Presumption.......................................... 36 Section 10.15 Incorporation by Reference; Use of Certain Terms................. 36 Section 10.16 Amendment and Waiver............................................. 36 Section 10.17 Waiver of Jury Trial............................................. 36
-3- STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of this 29th day of November, 1995 by and among Bird Environmental Gulf Coast, Inc., a Texas corporation (the "Company"); Bird Environmental Technologies, Inc., a Delaware corporation and the sole stockholder of the Company ("BETI"); Bird Corporation, a Massachusetts corporation and the parent corporation of BETI ("Bird"); GTS Duratek, Inc., a Delaware corporation ("GTSD"), and GTSD Sub II, Inc., a Maryland corporation and a wholly-owned subsidiary of GTSD (the "Purchaser"). W I T N E S S E T H : WHEREAS, BETI desires to sell to the Purchaser and the Purchaser desires to purchase from BETI all of the capital stock of the Company held by BETI, which constitutes 80% of the issued and outstanding stock of the Company, upon the terms and provisions hereinafter set forth. WHEREAS, contemporaneously with the execution and delivery of this Agreement and effective as of the date hereof, (i) the Company, the Purchaser, GTSD and James Hogan, Mark Hogan, Barry Hogan and Samuel Lucas III (collectively, the "Minority Shareholders") will execute and deliver that certain Shareholders Agreement (the "Shareholders Agreement") outlining certain rights between the parties as stockholders of the Company, (ii) the Company will have executed with each of Mark Hogan, Barry Hogan and Samuel Lucas III employment agreements (the "Employment Agreements") and (iii) the Company, GTSD and James Hogan will have executed and delivered that certain technology license agreement (the "License Agreement") pursuant to which James Hogan will license to the Company and GTSD the technologies specified therein. The Shareholders Agreement, the Employment Agreements and the License Agreement shall be collectively referred to herein as the "Minority Shareholders Agreements". NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: ARTICLE I: DEFINITIONS In addition to those terms defined elsewhere herein, when used herein, the following capitalized terms shall have the meanings indicated: "Affiliate" of a specified person means a person that (in the case of Bird or BETI only, as of the date hereof) directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. "Applicable Authority" shall mean any foreign, federal, state or local governmental or quasi-governmental instrumentality, agency, department, bureau, board or commission having authority or purporting to have authority over the Company, any of the Company Assets, or the operation of the Company's Business, including any entity with licensing or regulatory authority concerning Company and the operation of Company's Business. "Applicable Laws" shall mean all foreign, federal, state and local laws, regulations, rules, orders, decrees, ordinances or judgments applicable to the Company, the Company Assets, or the operation of the Company's Business, including all laws concerning the licensing and regulation of the Company and the conduct of the Company's Business. "Bird Instruments" shall mean the following documents to which the Minority Shareholders, certain of their Affiliates and certain Affiliates of Bird are parties: (a) that certain Pre-Incorporation Agreement dated August 9, 1991; (b) that certain Stock Option Agreement dated August 9, 1991; (c) that certain Voting Agreement dated August 9, 1991; (d) that certain Stock Purchase Agreement dated August 9, 1991; (e) that certain Amendment Agreement dated August 9, 1991; and (f) that certain Agreement dated June 18, 1994, forms of which documents are attached hereto as APPENDIX I. "Bird Letter of Intent" shall mean the letter of intent dated as of September 6, 1995 addressed to Mr. Frank S. Anthony, Vice President and General Counsel of Bird, from GTSD. "Code" means the Internal Revenue Code of 1986, as amended, and the regulations and interpretations thereunder. "Company Assets" shall mean all of the properties and assets owned or leased by the Company, including without limitation, all of the following: the Property, the Tangible Operating Assets, the Intellectual Property, the Company Contracts, the Leases, and the Licenses and Approvals (as each term is defined below). "Company's Business" shall mean developing and implementing waste treatment technologies, as such activity was conducted prior to the shutdown or suspension of its operations as contemplated by the Bird Letter of Intent. "Company Contracts" shall mean, collectively, all contracts or agreements to which the Company is a party or by which the Company or any of the Company Assets is bound, including personal property leases, franchise, manufacturer's representative, distributorship, service, supply, maintenance, employee, leasing and management contracts and agreements affecting or involving the Property or the Company's Business. "GAAP" shall mean United States generally accepted accounting principles, applied on a consistent basis. -2- "Inventory" means all of Company's inventories as of the Closing Date relating to the Products, including all ingredients, finished goods, work in progress, raw materials, marketing materials and production, shipping and packaging supplies. "Leases" shall mean, collectively, all of the oral or written leases, subleases, licenses, concession agreements or other use or occupancy agreements pursuant to which the Company or any other party is entitled to occupy and use any portion of the Property or pursuant to which Company leases to or from any other party any real property, including all renewals, extensions, modifications or supplements to any of the foregoing or substitutions for any of the foregoing. "Licenses and Approvals" shall mean all certificates, licenses, permits or other approvals required or obtained by the Company in connection with the use or ownership of the Company Assets, the operation of the Company's Business or in connection with its use and occupancy of the Leased Facility or any of the Property. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or other charge of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction and including any lien or charge arising by statute or other law. "Material Adverse Effect" shall mean any material and adverse effect on the assets, properties, liabilities, business affairs, results of operations, condition (financial or otherwise) or prospects of the Company, provided that an effect resulting solely from the shutdown or suspension of the operations of and funding of the Company as described in the Bird Letter of Intent shall not be deemed to constitute a Material Adverse Effect. "Minority Shareholders" shall mean Barry Hogan, Brad Hogan, Samuel Lucas, III and James Hogan as shareholders holding in the aggregate 20% of the issued and outstanding capital stock of the Company. "Minority Shareholders' Letter of Intent" shall mean the letter of intent dated as of September 7, 1995 addressed to Mr. Barry K. Hogan, Executive Vice President of the Company from GTSD. "Organizational Documents" shall mean a corporation's Articles or Certificate of Incorporation and By-Laws, as amended or supplemented. "Person" or "person" means an individual, corporation, partnership, firm, association, joint venture, trust, unincorporated organization, government, governmental body, agency, political subdivision or other entity. "Products" means all of the products manufactured, distributed, marketed, sold or packaged in connection with the operation of the Company's Business. -3- "Property" shall mean, collectively, all of the land and the improvements thereon, together with any tangible property located thereon which would constitute a "fixture" under the laws of the State of Maryland and all personal property owned or leased by Company and used or useful in connection with the operation of the Company's business (other than that personal property included within the definition of "Tangible Operating Assets") and all of Company's right, title and interest in and to all privileges, appurtenances, and advantages belonging or in any way appertaining to any such land, including all easements, rights-of-way, water and riparian rights, air rights above the land, development rights, and all rights, title and interest in and to all adjoining streets, roads or alleys (public or private, open or proposed). "Restricted Agreement" shall refer to any of the Leases and Company Contracts (as each is defined in this Article I), to the extent that any such Lease or Company Contract contains any provision that, as a result of the consummation of the transactions contemplated by this Agreement, causes one or more of the following to occur: (i) Company is deemed to be in default under such Lease or Company Contract (with or without the giving of notice and any cure period); (ii) automatically voids such Lease or Company Contract or renders voidable by any party other than Company, the Lease or Company Contract or provides any party other than the Company with a right to terminate or rescind such Lease or Company Contract; (iii) imposes any fine, penalty, charge or increase in payments or other charges required to be made by the Company under such Lease or Company Contract; or (iv) otherwise modifies any of the material terms of such Lease or Company Contract. "Stock" shall mean the Company's common stock, $0.01 par value per share. "Tangible Operating Assets" shall mean, collectively, all of the tangible personal property owned or leased by the Company, wheresoever located, including Inventory, trade fixtures, stock-in-trade, equipment, and supplies. ARTICLE II: SALE AND PURCHASE OF STOCK Section 2.1 Purchase and Sale. Subject to the terms and conditions hereinafter set forth, at the Closing, BETI will sell and transfer to Purchaser, and Purchaser will purchase from BETI, 560 shares of Stock, which is all of the Stock owned by BETI and which represents 80% of the issued and outstanding stock of the Company, free and clear of any and all Liens. Section 2.2 Purchase Price. The purchase price for the purchase of the Stock shall be the sum of $1.00 (the "Purchase Price") and no further payment from the Purchaser shall be required for the Stock. BETI hereby acknowledges receipt of the Purchase Price in full payment of the Stock. -4- Section 2.3 Closing. (a) Generally. Subject to the terms and conditions of this Agreement, the sale and purchase of the Stock contemplated hereby (the "Closing") shall take place at 10:00 a.m., local time, on November 29, 1995 (the "Closing Date") at the offices of Piper & Marbury L.L.P., or at such other time, date or place as BETI, Bird and Purchaser may mutually agree; provided, however, that prior to the Closing, all of the conditions in Articles VI and VII of this Agreement shall have been satisfied or waived, as the case may be. (b) BETI's Obligations at Closing. At the Closing, BETI will pay any costs required to be paid by it hereunder and will deliver to Purchaser the following (collectively, the "BETI Closing Documents"): (i) all original stock certificates in due and proper form evidencing the Stock to be sold by BETI; (ii) an endorsement on each original Stock certificate or separate stock powers duly executed in blank, together with such other instruments of conveyance as may be reasonably acceptable to Purchaser and its counsel and sufficient to transfer full, marketable title to the Stock to Purchaser, free and clear of any Liens; (iii) duly-executed resignations of each of the directors and officers of the Company; (iv) a good standing certificate of Company, dated no earlier than 5 calendar days prior to the Closing Date, certifying that the Company is in good standing in the State of Texas; and (v) such other documents and instruments as may be required to consummate the transactions contemplated hereunder. (c) Purchaser's Obligations at Closing. At the Closing, Purchaser will pay any costs required to be paid by it hereunder and will deliver the following to BETI: (i) the Purchase Price; and (ii) such other documents and instruments as shall be required to consummate the transactions contemplated hereunder. (d) Bird's Obligations at or Prior to the Closing. To the extent that the current liabilities of the Company exceed the current assets of the Company as of August 31, 1995 (as determined by a nationally recognized independent public accounting firm selected by mutual agreement of Purchaser and Bird and set forth on Schedule 2.3(d) hereto), Bird will either (i) at or prior to the Closing, make payments on behalf of the Company to reduce the Company's outstanding accounts payable in the amount and to the extent that the Company's current -5- liabilities exceed its current assets at August 31, 1995 or (ii) at the Closing, pay to the Company the amount by which the Company's current liabilities exceeded current assets at August 31, 1995. ARTICLE III: REPRESENTATIONS AND WARRANTIES OF BETI AND BIRD BETI and Bird hereby jointly and severally represent and warrant to Purchaser and GTSD as of the Closing Date as follows: Section 3.1 Organization, Standing and Authority of BETI; Title to Stock. (a) BETI is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. (b) BETI has all requisite corporate power and authority to execute, deliver and perform this Agreement and each of the instruments, documents, and agreements contemplated herein to be executed and delivered by BETI pursuant to this Agreement (collectively, the "BETI Instruments"). The execution, delivery and performance of this Agreement and the BETI Instruments have been duly authorized and approved by all necessary corporate action, and this Agreement and the BETI Instruments, when duly executed and delivered by BETI will constitute valid and legally binding obligations of BETI, enforceable against BETI in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to the rights of creditors generally. (c) BETI owns 80% of the issued and outstanding capital stock of the Company free and clear of any Liens, right of first refusal or restriction of any kind other than to the Minority Shareholders. BETI is not a party to or bound by any options, calls, contracts of commitments of any character relating to any of the Stock or any other equity or debt security issued or to be issued by the Company, including any agreement, instrument or understanding, order or decree that would restrict the transfer by BETI of the Stock pursuant to this Agreement, other than agreements with the Minority Shareholders (which agreements will be terminated at or prior to the Closing). Section 3.2 Organization, Standing and Authority of Bird. (a) Bird is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts. (b) Bird has all requisite corporate power and authority to execute, deliver and perform this Agreement and each of the instruments, documents, and agreements contemplated herein to be executed and delivered by Bird pursuant to this Agreement (collectively, the "Bird Instruments"). The execution, delivery and performance of this Agreement and of the Bird -6- Instruments have been duly authorized and approved by all necessary corporate action, and this Agreement and the Bird Instruments, when duly executed and delivered by Bird, will constitute valid and legally binding obligations of Bird, enforceable against Bird in accordance with their terms. Section 3.3 Organization, Standing, Authority and Capitalization of Company. (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas and has all requisite corporate power and authority to carry on the Company's Business as it is now being conducted and to own or lease the Company Assets. True, complete and correct copies of the Organizational Documents of the Company have been delivered to GTSD and the Organizational Documents are in full force and effect. The Company is not in violation, breach or default of any of the provisions of its Organizational Documents. The Company is duly qualified to do business in the jurisdictions set forth in Schedule 3.3(a) attached hereto, which jurisdictions represent all of the jurisdictions where the Company is required to be qualified as the result of the location of its assets or the conduct of the Company's Business, other than where the failure to qualify would not have a Material Adverse Effect. (b) Company has all requisite corporate power and authority to execute, deliver and perform this Agreement and each of the instruments, documents, and agreements contemplated herein to be executed and delivered by Company pursuant to this Agreement (collectively, the "Company Instruments"). The execution, delivery and performance of this Agreement and of the Company Instruments have been duly authorized and approved by all necessary corporate action, and this Agreement and the Company Instruments, when duly executed and delivered by the Company, will constitute valid and legally binding obligations of Company, enforceable against the Company in accordance with their terms. (c) The authorized capital stock of Company consists entirely of 3,000 shares of common stock, $0.01 par value, of which 700 shares are issued and outstanding. Three hundred (300) shares of common stock of Company are held in the Company's treasury and no shares of capital stock are reserved for issuance. All outstanding shares of capital stock of the Company have been duly authorized and are validly issued and are fully paid and non-assessable with no personal liability attaching to the ownership thereof. The Company is not a party to or bound by any options, warrants, rights, calls or other preemptive rights or other agreements or plans under which the Company may become obligated to issue, sell or transfer shares of its capital stock or other securities other than agreements with the Minority Shareholders (which agreements will be terminated at or prior to the Closing). (d) The designations, powers, preferences, rights, qualifications, limitations and restrictions in respect of each class and series of authorized capital stock of the Company are as set forth in the Organizational Documents of the Company, copies of which have been furnished to GTSD. -7- (e) There are no outstanding registration rights with respect to any capital stock of the Company other than as set forth in agreements with the Minority Shareholders (which agreements will be terminated at or prior to Closing). (f) The Company has no obligation (contingent or other) to purchase, redeem or otherwise acquire any of its capital stock or any interest therein or to pay any dividend or make any other distribution in respect thereof other than as set forth in agreements with the Minority Shareholders (which agreements will be terminated at or prior to Closing). (g) The Company has no knowledge of any voting agreements, voting trusts, stockholders' agreements, proxies or other agreements or understandings that are currently in effect or that are currently contemplated with respect to the voting of any capital stock of the Company other than as set forth in agreements with the Minority Shareholders (which agreements will be terminated at or prior to Closing). (h) All of the outstanding securities of the Company were issued in compliance with all applicable federal and state securities laws. (i) There are no outstanding contractual obligations (contingent or otherwise) of the Company that would prohibit or restrict the Company's ability to declare or pay dividends or to repurchase or redeem the Company's capital stock other than as set forth in agreements with the Minority Shareholders (which agreements will be terminated at or prior to Closing). (j) Since December 31, 1994, the Company has not (i) issued any capital stock, (ii) redeemed any capital stock, (iii) made any distributions on its capital stock or (iv) changed the tax basis of any of the Company Assets. Section 3.4 No Conflicts. Neither the execution and delivery of this Agreement nor the carrying out of the transactions contemplated hereby or under any of the Company Instruments, BETI Instruments or Bird Instruments will: (a) with or without notice or the passage of time or both, result in any violation, termination or modification of, or be in conflict with, (i) the Organizational Documents of the Company, BETI or Bird, (ii) any License and Approval, Lease or Company Contract, or any other instrument or agreement to which the Company, BETI or Bird is a party or by which the Company, BETI or Bird is bound other than agreements with the Minority Shareholders (which agreements will be terminated at or prior to Closing)., or (iii) any law, rule, regulation, ordinance, writ, injunction, judgment, decree or order applicable to the Company, BETI or Bird, (b) result in the creation of any Lien upon the Property or any of the other Company Assets or in the acceleration of any indebtedness or other obligation of the Company; or (c) require the filing, declaration or registration with, or permit, consent or approval of, or the giving of any notice to, any Applicable Authority, excluding, those that have already been obtained prior to the Closing. -8- Section 3.5 No Other Pending Transactions. Except for the transactions contemplated by this Agreement: (i) neither BETI nor Bird is a party to or bound by or the subject of any agreement, commitment or undertaking with respect to the sale of all or any part of the Stock of the Company; and (ii) the Company is not a party to or bound by or the subject of any agreement, undertaking or commitment to merge or consolidate with, or acquire all or substantially all of the property and assets of, any other person, corporation, or entity, or to sell, lease or exchange all or substantially all of the Company Assets to any other person, corporation, or entity. Section 3.6 Company's Names, Business, and Location of Company Assets. The Company has conducted business under the name "Bird Environmental Gulf Coast, Inc." and the "San Leon Recycling Center" and no other names. The Company is in the business of developing and implementing waste treatment technologies. The Company has not engaged in and does not currently engage in any other business other than as described in the preceding sentence. The Company's chief executive office and principal place of business is located at 2700 Avenue S, San Leon, Texas 77539. Substantially all of the Company Assets are located at same address as its chief executive office and the Company does not currently have any places of business other than at such address. Set forth on Schedule 3.6 attached hereto is a complete and accurate listing of all locations at which the Company has conducted business, as owner, operator, lessor or otherwise over the last ten (10) years. Section 3.7 Subsidiaries. The Company does not own, or have any contract or other right to acquire, directly or indirectly, any capital stock or other equity securities of any Person, nor does the Company have any direct or indirect equity or ownership interest in any business other than the Company's Business. Section 3.8 Financial Statements. (a) The Company, BETI or Bird has delivered to GTSD copies of: (i) the unaudited balance sheet of the Company as of December 31, 1994 and the unaudited balance sheet of the Company as of August 31, 1995, and (ii) the related consolidated statements of income for the related annual and eight month periods ended December 31, 1994 and August 31, 1995, respectively (collectively, the "Financial Statements"). (b) The Financial Statements: (i) were prepared in accordance with GAAP consistently applied throughout the periods covered thereby; (ii) present fairly the financial condition and the results of operations of the Company as at the respective dates of and for the periods referred to in such financial statements; and (iii) are true, complete and correct in all material respects. -9- Section 3.9 No Undisclosed Liabilities. Except as set forth on Schedule 3.9 attached hereto, the Company does not have any liabilities or obligations of any nature (whether known or unknown, matured or unmatured, disputed or undisputed, liquidated or unliquidated, fixed or contingent, secured or unsecured) except for liabilities or obligations reflected or reserved against in the Financial Statements and current liabilities incurred in the ordinary course of business since the respective dates thereof and provided such liabilities do not exceed $200,000 at Closing, which liabilities will be paid by Bird to Purchaser pursuant to Section 6.3 hereof at or prior to the Closing. Section 3.10 Absence of Certain Changes, Events or Conditions. Except as set forth in Schedule 3.10 attached hereto, since August 31, 1995: (a) the Company has not incurred any debt, obligation or liability except for normal debt incurred in the ordinary course of business and the Company Assets have not been subjected to any Liens other than those liens described on Schedule 3.10(a) attached hereto (the "Permitted Liens"); (b) the Company Assets have not been sold or transferred; (c) there has not been any change in the Company's authorized or issued capital stock; grant of any stock option or right to purchase shares of capital stock of the Company; issuance of any security convertible into such capital stock; grant of any registration rights; purchase, redemption, retirement or other acquisition by Company of any shares of any such capital stock; or declaration or payment of any dividend or other distribution or payment in respect of shares of capital stock; (d) there has not been any payment or increase by the Company of any bonuses, salaries, or other compensation to any stockholder, director, officer, or employee (except in the ordinary course of business) or entry into any employment, severance, or similar contract or agreement with any director, officer or employee; (e) there has not been any damage to or destruction or loss of any asset or property of Company, whether or not covered by insurance, materially and adversely affecting the properties, assets, business, financial condition or prospects of the Company taken as a whole; and (f) no agreements have been entered into, whether in writing or otherwise, to take any of the actions set forth in this Section 3.10. Section 3.11 Litigation and Other Proceedings. (a) Except as set forth on Schedule 3.11 attached hereto, there is no litigation, arbitration, mediation, or other investigation or proceeding pending nor, to the best of BETI's and Bird's -10- knowledge, threatened or in prospect, against or relating to the Company, the Company Assets, the Company's Business, or the transactions contemplated by this Agreement; nor, is there any valid basis for any such litigation, arbitration, mediation, or other investigation or proceeding relating to the transactions contemplated by this Agreement. Except as disclosed on Schedule 3.11 attached hereto, Company is not subject to, or bound by, any order of any court or Applicable Authority entered in any judicial, administrative or other proceeding to which it is or was a party. Except as set forth on Schedule 3.11 attached hereto, no matter set forth on Schedule 3.11 attached hereto would, if adversely decided, have a Material Adverse Effect on the business, operations, condition (financial or otherwise), liabilities, assets, earnings, working capital or prospects of the Company. (b) There is no litigation, arbitration, mediation, or other investigation or proceeding pending nor, to the best of Bird's or BETI's knowledge, threatened or in prospect, against or relating to Bird or BETI which seeks to prohibit, restrict or delay consummation of the transactions contemplated under this Agreement and there is no judgment, decree, injunction, ruling or order of any Court, Applicable Authority or arbitrator outstanding against Bird or BETI having any such effect. Section 3.12 Licenses and Approvals. Attached hereto as Schedule 3.12 is a complete and accurate list of all of the Licenses and Approvals held by Company. Company has provided GTSD with true, correct and complete copies of all of the Licenses and Approvals. To Bird's and BETI's actual or constructive knowledge, the Company owns or possesses and holds free from restrictions or conflicts with the rights of others all franchises, licenses, permits, consents, approvals and other authority (governmental or otherwise), and all rights and privileges with respect to the foregoing, as are necessary for the conduct of its business as now being conducted, and as proposed to be conducted, except where the failure to own or possess and hold such franchises, licenses, permits, consents, approvals and other authority (governmental or otherwise) would not have a Material Adverse Effect. All of the Licenses and Approvals are in full force and effect and Company is not in violation with respect to any of them. No proceedings are pending or, to the best of BETI's and Bird's knowledge, threatened by any Applicable Authority to revoke or limit the scope of any of the Licenses and Approvals. Except as noted on Schedule 3.12 attached hereto, none of the Licenses and Approvals would be rendered ineffective or be required to be reissued as a result of the consummation of the transactions contemplated hereby. Section 3.13 Legal Compliance. Except as set forth on Schedule 3.13 attached hereto and except for matters covered by Sections 3.16, 3.17 and 3.21 (which matters are addressed exclusively in such respective sections), to Bird's and BETI's actual or constructive knowledge, the Company's Business and the operations of the Company are being conducted in compliance with all Applicable Laws and neither the Company, BETI nor Bird has received notice from any Applicable Authority that the -11- Company, the Company's Business or the Company Assets is not in compliance with any Applicable Laws. Section 3.14. Material Contracts And Agreements. Listed on Schedule 3.14 is a listing of all material contracts, agreements, leases, indentures or instruments of the Company. With respect to such material contracts, agreements, leases, indentures or instruments of the Company, the Company and, to the best of BETI's and Bird's knowledge, each other party thereto have in all material respects performed all the obligations required to be performed by them to date, have received no notice of default and are not in default, in any material respect, (with due notice or lapse of time or both) under any material contract, agreement, indenture or other instrument now in effect to which the Company is a party or by which it or its property may be bound. Bird and BETI have no knowledge of any breach and have received no written notice of any anticipated breach by the other party to any material contract or commitment to which the Company is a party. Except as noted on Schedule 3.14 attached hereto, none of the Company's material contracts or agreements constitute a Restricted Agreement or would require the consent or approval of any party thereto, other than Company, or the consent or approval of any third party in connection with the consummation of the transactions contemplated hereby. Except as disclosed on Schedule 3.14, the Company is not a party to, or bound by, any material contract or agreement, any term of which materially adversely affects, or which the Company expects in the future to have a Material Adverse Effect. The Company is not a party to any contract or agreement with any Affiliate of the Company other than the Minority Shareholders (which agreements will be terminated at or prior to the Closing). Section 3.15 Title Matters. The Company has good and marketable title to the Company Assets owned by it, free and clear of all Liens except for (i) certain mechanics' liens or other similar statutory liens arising by operation of law in respect of obligations that are adequately reflected in the Company's balance sheet as of August 31, 1995, (ii) certain subsurface rights to the Company's real property (iii) certain exceptions to title listed on the title report effective October 11, 1995 and attached hereto as Schedule 3.15 and (iv) other encumbrances of record as of the date that title insurance was obtained on the real property (collectively Items (i) through (iv) shall be referred to as the "Encumbrances"). The Encumbrances that exist on the Company's real property will not in any material way adversely affect the Company's use or enjoyment of its real property and will not in any material way adversely affect the Company's operations. The Company does not lease any real property. None of the properties owned by the Company is subject to any Liens which could reasonably be expected to materially and adversely affect the assets, properties, liabilities, business, affairs, results of operations, condition (financial or otherwise) or prospects of the Company. -12- Section 3.16 Labor Matters. To Bird's and BETI's actual or constructive knowledge, the Company has complied in all material respects with all applicable federal and state laws relating to the employment of labor including the provisions thereof relating to wages, hours, collective bargaining and the payment of social security and taxes and is not liable for any arrears of wages or any tax or any penalty for failure to comply with any of the foregoing. No labor dispute, strike, work stoppage, employee action or labor relations problem of any kind which has affected or may affect Company has occurred since the inception of Company or, to BETI's and Bird's knowledge, is currently pending or threatened. Section 3.17 Employee Benefit Plans and Pension Plans. Copies of all of the Company's employee policy manuals have been provided to GTSD, which policy manuals contain a description of all material employee benefit plans and pension plans of the Company. The Company's employee benefit plans and pension plans comply in all material respects with applicable laws relating thereto and have been maintained in accordance with their plan documents. The Company has no liability (whether actual, contingent, with respect to any of its assets or otherwise) with respect to any of its employee benefit plans and other pension plans other than as adequately reflected in the Financial Statements. The Company, GTSD or any of GTSD's Affiliates will have no liability with respect to any benefit plans or pension plans of BETI or BETI's control group as defined in Section 414(b), (c), (m) or (o) of the Code. None of the Company's employee benefit plans and other pension plans contains any provisions which would prohibit the transactions contemplated by this Agreement or which would give rise to any severance, termination or other payments or liabilities as a result of the transactions contemplated by this Agreement. Schedule 3.17 attached hereto contains the most recent quarterly listing of workers' compensation claims and a schedule of workers' compensation claims of the Company for the last three fiscal years. Section 3.18 Insurance. The Company maintains and has maintained all such general liability, pollution liability, product liability, fire, casualty and motor vehicle insurance set forth on Schedule 3.18. All such insurance policies continue to be in full force and effect, and the Company is in compliance with all requirements and provisions thereof. True and correct copies of all insurance policies relating to such coverage have been provided by the Company to GTSD. No notice of cancellation has been given to or received by the Company with respect to any of its insurance policies, and no such policies are subject to any retroactive rate or audit adjustments or coinsurance arrangements. The Company, BETI and Bird have no reason to believe that the pollution liability insurance coverage will not be renewed upon expiration thereof at premiums substantially equivalent to those currently being paid by the Company. The Company is not currently involved in any projects and, accordingly, the Company is not currently required to post any completion performance and other bonds and indemnities. The Company, BETI or Bird -13- has provided GTSD with a list of all property damage, personal injury claims and workers' compensation claims asserted against the Company with respect to the Company's Business during the past five (5) years involving any claim in excess of $10,000. The Company has not received any notice from any insurance company or insurance board of underwriters of the existence of any default or unsafe condition with respect to the Property that remains unsatisfied or uncured or that will remain unsatisfied or uncured as of the Closing Date. Section 3.19 Condition of Company Assets. (a) The Company Assets include all assets, properties, licenses and other agreements necessary for the continued conduct of Company's Business after the Closing in substantially the same manner as conducted prior to the Closing. (b) Attached as Schedule 3.19(b) is a complete and accurate summary of all of the Tangible Operating Assets of Company. Section 3.20 Intellectual Property. (a) Schedule 3.20 hereto contains a complete and accurate list of all patents, trademarks, servicemarks and copyrights (registered or unregistered), trade names, assumed names, brand names and all applications therefor, owned, used or filed by the Company and the Company has sufficient trademarks, trade names, service marks, patent rights, copyrights, manufacturing processes, formulae, applications, trade secrets, know how, licenses, approvals and governmental authorizations (or rights thereto) (collectively, the "Intellectual Property") to conduct its business as conducted prior to the Closing Date except where the absence of such Intellectual Property would not have a Material Adverse Effect. Except as set forth in Schedule 3.20 attached hereto, the patents, trademarks and the copyrights that constitute Intellectual Property are valid, subsisting and enforceable, and the patents, registered trademarks and registered copyrights are duly recorded in the name of Company. (b) The Company has the right, free from any Liens, to use the Intellectual Property and the consummation of the transactions contemplated hereby will not alter or impair any such rights. Except as set forth in Schedule 3.20 attached hereto, within the last five years, no claims have been asserted by any entity or person with respect to, or challenging or questioning, the ownership, validity, enforceability or use of the Intellectual Property by the Company, nor, to the knowledge of BETI and Bird, is there a valid basis for any such claim. The use or other exploitation of such Intellectual Property by the Company prior to the Closing has not infringed the rights of any other entity or person. To the best of BETI's and Bird's knowledge, no entity or person is infringing the rights of the Company with respect to such Intellectual Property and the Company has no reasonable basis to claim such infringement. Schedule 3.20 attached hereto sets forth a complete and accurate list of all license agreements between Company and third-parties with respect to the use of the Intellectual Property. -14- Section 3.21 Environmental Matters. (a) As used in this Environmental Matters Section, the following terms shall have the definitions indicated: (i) "Company's Properties" means any real property or facility currently owned, leased or operated by the Company or previously owned, leased or operated by the Company. (ii) "Environmental Law" means any statute, regulation, rule, code, common law, order or judgment of any applicable federal, state, local or foreign jurisdiction relating to pollution, hazardous substances, hazardous wastes, petroleum or otherwise relating to protection of the environment, natural resources or human health, including, by way of example and not by way of limitation, the Clean Air Act ("CAA"); Clean Water Act ("CWA"); Resource Conservation and Recovery Act ("RCRA"); Comprehensive Environmental Response Compensation, and Liability Act ("CERCLA"); Emergency Planning and Community Right-to-Know Act ("EPCRA"); Federal Insecticide, Fungicide and Rodenticide Act; Safe Drinking Water Act ("SDWA"); Toxic Substances Control Act ("TSCA"); Hazardous Materials Transportation Act ("HMTA"); Occupational Safety and Health Act ("OSHA"); and Endangered Species Act of 1973, each as currently amended; (ii) "Regulated Substances" means any substance regulated under Environmental Laws, including but not limited to: asbestos and asbestos-containing materials ("ACMs"), polychlorinated biphenyls ("PCBs"); urea-formaldehyde in any of its forms; petroleum and its fractions; radioactive materials; and any substances defined as "hazardous waste," "hazardous substances," "pollutants or contaminants," "toxic substances," "hazardous chemicals," "hazardous air pollutants," "toxic chemicals" or "hazardous materials" under the CAA, CWA, RCRA, CERCLA, EPCRA, SDWA, TSCA, HMTA or OSHA. (iii) "Environmental Condition" means (a) the Release of any Regulated Substances into the environment in an amount and under circumstances that would require notice, removal or remediation, or constitute a basis for a claim or cause of action; (b) the environmental, health or safety aspects of the transportation, storage, treatment, handling, use or disposal of materials in connection with the operations or past operations of the Company's business; or (c) the violation, or alleged violation, of any Environmental Law, order, permit or license of or from any governmental authority, agency or court relating to environmental, health or safety matters; and -15- (iv) "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment of any Regulated Substance. (b) Except as set forth in Schedule 3.21, there has been no Release at, on, under or from any of the Company's Properties. (c) Except as set forth in Schedule 3.21, there has been no Release at, on, under or from any nearby properties that has migrated or threatened to migrate onto or under the Company's Properties or that would or could otherwise affect the Company's Properties, and, to the best knowledge of BETI and Bird, there is currently no threat of a Release at, on, under or from any nearby properties that would or could migrate onto or under the Company's Properties or that would or could otherwise affect the Company's Properties. (d) No PCBs, asbestos or ACMs, urea-formaldehyde or radioactive materials are located on the Company's Properties. (e) Except as set forth in Schedule 3.21, no storage tanks, underground or otherwise, are or have been located on any of the Company's Properties. To the knowledge of BETI and Bird, none of the storage tanks set forth in Schedule 3.21 is leaking or has ever leaked. (f) Except as set forth in Schedule 3.21, the Company has complied with all Environmental Laws with respect to any operations now or previously conducted by the Company. Except as set forth in Schedule 3.21, the Company has no existing or potential liability under any Environmental Laws. (g) Except as set forth in Schedule 3.21, the Company has not received any notice, letter, citation, order, warning, complaint, inquiry, information request or demand that: (i) it has violated or is in violation of any Environmental Law; (ii) there has been a Release at or from the Company's Properties, or any property where the company's wastes or products have been sent; or (iii) it may be or is liable, in whole or in part, for the costs of cleaning up, remediating, removing or responding to a Release. (h) To the best knowledge of the Company, BETI or Bird, no other party has received any notice, demand, suit, inquiry or information request pursuant to CERCLA or any comparable state law relating to the Company, the Company's Properties or any property where the Company's wastes or products have been sent. (i) None of the Company's Properties is listed on any regulatory list of contaminated properties, including but not limited to the National Priorities List promulgated pursuant to CERCLA, the CERCLIS or any federal, state or local counterpart. -16- (j) Except as set forth in Schedule 3.21, no environmental approvals, clearances or consents are required under applicable law from any governmental entity or authority in order for the parties to this Agreement to consummate the transactions contemplated herein or for the Company to conduct its business as presently conducted or proposed to be conducted. (k) The Company has disclosed, prior to the date of this Agreement, its waste practices, its use of Regulated Substances and all potentially material environmental matters, and has disclosed all reports, audits assessments, studies, inspections, evaluations, surveys, remedial action plans or other similar documents relating to any Environmental Condition, whether or not material, of the Company's Properties or operations. (l) Except as set forth in Schedule 3.21, to the knowledge of BETI and Bird, no location to which the Company transported or caused to be transported any Regulated Substances for storage, recycling, treatment or disposal is or has been the subject of any cleanup or remediation of such location pursuant to any Environmental Law. (m) The Company's Properties are not subject to any Lien in favor of any governmental entity or other party for any liability, costs, or damages incurred by such governmental entity or other party in response to a Release. Section 3.22 Customers and Suppliers. The Company, BETI or Bird has delivered to GTSD a complete and accurate list of the Company's ten largest customers and suppliers (measured by dollar volume of purchases and sales, as applicable) and the dollar amount of the Company's Business which each customer and supplier represented during the fiscal year ended 1994 and the eight months ended August 31, 1995. Neither the Company, BETI nor Bird has received any oral or written notice that any such supplier or any customer of Company does not plan to continue to do business with Company, or plans to reduce its supplies to or volume of orders from the Company or will not do business on substantially the same terms and conditions with Purchaser subsequent to the Closing Date as such supplier or customer did with Company before such date, except for those suppliers that may discontinue doing business with the Company or modify the terms upon which they do business with the Company due to the fact that the Company is delinquent in the payment for goods or services provided by such supplier. Section 3.23 Brokers and Finders. Neither the Company, BETI, Bird nor any of their officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the transactions contemplated by this Agreement. -17- Section 3.24 Accounts Receivable. All accounts receivable of the Company that are reflected in the Financial Statements (the "Accounts Receivable") represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business. All Accounts Receivable have been collected in full. Section 3.25 No Material Adverse Change. Since August 31, 1995, there has not been any material adverse change in the Company Assets or the Company's financial condition, customer or business prospects other than a change resulting from the shutdown or suspension of operations or of funding of the Company as described in the Bird Letter of Intent. Section 3.26 Books and Records. The minute books, stock record books, and other records of the Company, all of which have been made available to GTSD, are complete and correct and have been maintained in accordance with sound business practices. The minute books of the Company contain accurate and complete records of all meetings held of, and corporate action taken by, the stockholders, the Boards of Directors, and committees of the Boards of Directors of the Company, and no meeting of any such stockholders, Board of Directors, or committee has been held for which minutes have not been prepared and are not contained in such minute books. At the Closing, all of such books and records will be in the possession of the Company. Section 3.27 Disaster. Neither the business nor the Property of the Company is currently affected (or has been affected at any time since December 31, 1994) by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance), of a kind which (individually or in the aggregate) has, or could have, a Material Adverse Effect on the assets, properties, liabilities, business, affairs, results of operations, condition (financial or otherwise) or prospects of the Company. Section 3.28 Tax Returns and Audits. The Company has duly filed all income, franchise and other federal, state and local tax returns, notices and reports that it has been or is required to file. Except as may be otherwise disclosed in writing to the Purchaser or GTSD, the Company is not delinquent in the payment of any taxes nor has it requested any extension of time within which to file any tax return which return has not since been or will not be timely filed. No deficiency for any tax has been asserted or assessed against the Company other than as reflected in the Financial Statements. The -18- Company has withheld or otherwise collected all taxes or amounts it was required to withhold or collect under any applicable federal, state or local law, including, without limitation, any amounts required to be withheld or collected with respect to employee state and federal income tax withholding, social security, unemployment compensation, sales or use taxes or workmen's compensation, and all such amounts have been timely remitted to the proper authorities. Section 3.29 Due Diligence Review. The Company, BETI or Bird has made available for GTSD's review all information reasonably requested by the Purchaser in connection with GTSD's due diligence examination. Section 3.30 Disclosure. All schedules, exhibits, documents, certificates, reports or written statements furnished or to be furnished to GTSD by or on behalf of the Company, BETI or Bird with this Agreement or the transactions contemplated hereby and delivered at Closing are true, complete and accurate in all material respects, and no representation or warranty made in this Agreement or information furnished pursuant hereto to GTSD (including information contained in the schedules or documents referred to herein) contains any untrue statement of a material fact or fails to include a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they are made, not misleading. To Bird's and BETI's knowledge, neither Bird, BETI nor the Company has failed to disclose to GTSD any facts material to the business, operations, condition (financial or otherwise), liabilities, assets, earnings or working capital of the Company. ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF PURCHASER AND GTSD Purchaser and GTSD hereby jointly and severally represent and warrant to BETI and Bird as of the Closing Date as follows: Section 4.1 Organizational Matters; Authority. (a) Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland. GTSD is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. (b) Purchaser and GTSD have all requisite corporate power and authority to execute, deliver and perform this Agreement and each of the instruments, documents, and agreements contemplated herein to be executed and delivered by Purchaser pursuant to this Agreement to which each is a party (collectively, the "GTSD Instruments"). The execution, delivery and performance of this Agreement and of the GTSD Instruments have been duly authorized and -19- approved by all necessary corporate action and this Agreement and the GTSD Instruments, when duly executed and delivered by Purchaser and GTSD, as applicable, will constitute valid and legally binding obligations of Purchaser and GTSD, as applicable, enforceable against each that is a party thereto in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to the rights of creditors generally. (c) Purchaser is purchasing the Stock for its own account, and the Stock is being purchased by it for investment and not with a present view to any distribution thereof in violation of applicable securities laws. Section 4.2 No Conflicts. Neither the execution and delivery of this Agreement nor the carrying out of the transactions contemplated hereby or under any of the GTSD Instruments will: (a) with or without notice or the passage of time or both, result in any violation, termination or modification of, or be in conflict with, (i) the Organizational Documents of the Purchaser or GTSD, or (ii) any law, rule, regulation, ordinance, writ, injunction, judgment, decree or order applicable to the Purchaser or GTSD, (b) result in the creation of any Lien upon the property or assets of the Purchaser or GTSD or in the acceleration of any indebtedness or other obligation of the Purchaser or GTSD; or (c) require the filing, declaration or registration with, or permit, consent or approval of, or the giving of any notice to, any Applicable Authority, excluding, those that have already been obtained prior to the Closing. Section 4.3 Litigation. There is no litigation, arbitration, mediation, or other investigation or proceeding pending or, to Purchaser's and GTSD's knowledge, threatened or in prospect, against Purchaser or GTSD with respect to the transactions contemplated by this Agreement. Section 4.4 Brokers and Finders. Neither Purchaser, GTSD nor any of their officers, directors or employees have employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the transactions contemplated by this Agreement. ARTICLE V: COVENANTS AND AGREEMENTS Section 5.1 Consents; Cause Conditions to be Satisfied. The Company, BETI and Bird agree to take all necessary corporate or other action, and will use their reasonable best efforts to complete all filings and obtain, or assist Purchaser or GTSD in obtaining, such licenses, permits, consents, waivers, approvals, and authorizations of -20- third parties and Applicable Authorities as may be necessary or appropriate in connection with: (i) the execution and delivery of this Agreement; (ii) the consummation of the transactions contemplated hereby or (iii) the ownership or use of the Company Assets or the operation of the Company's Business. Section 5.2 Best Efforts. (a) Each of the Company, BETI and Bird shall use their reasonable best efforts to cause all of the conditions contained in Article VI of this Agreement to be satisfied. (b) Purchaser and GTSD shall use their reasonable best efforts to cause all of the conditions contained in Article VII of this Agreement to be satisfied. Section 5.3 Certain Notifications. At all times prior to the Closing, each party hereto shall as promptly as reasonably practicable notify the other in writing of the occurrence of any event as to which it obtains knowledge that would make the representations, warranties and disclosures made herein untrue or misleading or which is reasonably likely to result in the failure of a condition specified in Article VII or Article VIII hereof. Section 5.4 Competition. (a) The following terms when used in this Section 5.4 shall have the following meanings: "Competition" means (i) the treatment and disposal of hazardous and other wastes, and (ii) any business which is competitive with the Company's Business as it is now operated. "Directly or Indirectly" means either for one's own account or as a partner, shareholder, director, officer, principal, agent or employee of another person. "Person" means an individual, corporation, partnership, joint venture, trust or other entity. "Restricted Territory" means the United States, Canada and all other jurisdictions worldwide in which the Company is conducting or has conducted the Company's Business at or prior to the Closing. (b) BETI and Bird shall not, for a period of five years after the date hereof, Directly or Indirectly, engage in any Competition in the Restricted Territory; provided, that BETI or Bird may, without violating this covenant (i) own as a passive investment not in excess of 5% of the outstanding capital stock of a corporation which engages in Competition if such capital stock is a security which is actively traded on an established national securities exchange; and (ii) have an ownership interest otherwise proscribed by this Section 5.4 if such interest arises as a result of -21- the acquisition of a business entity not principally engaged in a business in Competition with that of the Company. (c) Neither BETI nor Bird shall, directly or indirectly, for itself or on behalf of any other Person, induce or attempt to induce any employee of the Company to leave his or her employment with the Company at any time within three years from the Closing Date. (d) BETI and Bird each acknowledges that in view of the nature of the Company's Business and the business objectives of Purchaser in acquiring it, the foregoing territorial and time limitations are reasonable and properly required for the adequate protection of Purchaser and that in the event that any such territorial or time limitation is deemed to be unreasonable and is then reduced by a court of competent jurisdiction, then, as reduced, the territorial and/or time limitation shall be enforced. (e) BETI and Bird further acknowledge that the remedy at law for any breach by it of the agreements contained in this Section 5.4 will be inadequate and that Purchaser will be entitled to seek injunctive relief without being required to prove actual damages or post bond. This Section 5.4 constitutes an independent and severable covenant and if any or all of the provisions of this Section 5.4 are held to be unenforceable for any reason whatsoever, it will not in any way invalidate or affect the remainder of this Agreement which will remain in full force and effect. Section 5.5 Non-Interference Agreement. BETI and Bird covenant and agree that neither they nor any Affiliate of either of them will, at any time after the Closing, directly or indirectly, for whatever reason, whether for their own account or for the account of any other person, firm, corporation or other organization: (i) solicit, deal with or otherwise interfere with any of the Company's Business or Company's existing or potential contracts or relationships with any affiliate, employee, officer, director or any independent contractor whether or not the person is employed by or associated with the Company on the Closing Date or at any time thereafter; (ii) solicit, accept, deal with or otherwise interfere with the continuance of supplies to Company (or the terms relating to such supplies), from any suppliers who have been supplying goods, materials or services to Company at any time during the last five years prior to the date of this Agreement; (iii) solicit, accept, deal with or otherwise interfere with the Company's Business or Company's existing or potential contracts or relationships with any independent contractor, customer, client or consultant of the Company, or any person who is a bona fide or prospective independent contractor, customer, client or consultant thereof; or (iv) solicit or otherwise interfere with any existing or proposed contract between the Company and any other party whatsoever. -22- Section 5.6 Confidentiality. BETI and Bird agree that they may possess certain data and knowledge of the operations of the Company which are proprietary in nature and confidential. BETI and Bird covenant and agree that they will not, for a period of three years after the Closing, reveal, divulge or make known to any person (other than Purchaser, GTSD or the Minority Shareholders) or use for its own account or for the account of any person, firm, corporation or other organization, any confidential or proprietary information, method, record, data, trade secret, pricing policy, bid amount, bid strategy, rate structure, personnel policy, method or practice of soliciting or obtaining or doing business by the Company, or any other confidential or proprietary information whatsoever relating to the Company or its Affiliates, whether or not obtained with the knowledge and permission of Purchaser or its Affiliates. BETI and Bird further covenant and agree that for a period of three years from the Closing Date, they shall not divulge any such confidential or proprietary information which it may acquire during any transition period in which it assists or consults with Purchaser or its Affiliates to facilitate the transfer and the continued success of the Company, respecting such confidential and proprietary information in trust for the sole benefit of Purchaser and its Affiliates and their successors and assigns. The foregoing provisions shall not be applicable to any disclosure or use of confidential information or knowledge that can be demonstrated to have (i) been publicly known prior to the date of this Agreement, (ii) become well known by publication or otherwise not due to the unauthorized act or omission on the part of BETI or Bird or their Affiliates, or (iii) been supplied to BETI or Bird by a third party without violation of the rights of the Company or the Purchaser or any other party. Section 5.7 Tax Election. The Company, Bird or BETI will not make any elections which changes the tax basis of the Company's assets or liabilities for any date subsequent to December 31, 1994 other than (i) depreciation of fixed assets through methods established in the 1994 federal income tax returns of the Company or (ii) changes in the normal course of business. Section 5.8 Notification of Certain Events. Bird covenants and agrees that it shall provide written notice to GTSD within 15 days of execution of an agreement providing for: (i) the merger or consolidation of Bird with or into any other entity, (ii) the sale of all or substantially all of the assets of Bird to another entity, (iii) the liquidation, dissolution or any other similar fundamental corporate transaction. Section 5.9 Sharing of Expenses for RFI Work Plan. The Company and Bird covenant and agree that they shall share equally all costs and expenses for Phase I of the RFI Work Plan which has been submitted to the Texas Natural Resource Conservation Commission ("TNRCC"). In connection therewith, the Company covenants and agrees that it shall use all reasonable efforts to minimize the costs and expenses of -23- such work and to use the Company's personnel to perform such work wherever reasonably possible. Section 5.10 Closure Trust Fund. The parties hereto covenant and agree that all contributions by, or on behalf of, the Company to the date hereof to the closure trust fund pursuant to that certain Trust Agreement between the Company, as grantor, and Texas Commerce Bank, N.A., as trustee, dated December 8, 1992 as required by the Texas Water Commission, the predecessor to the TNRCC, shall remain an asset of the Company following the Closing, and Bird, BETI or its Affiliates shall have no right or claim to such contributions. The parties further covenant and agree that the closure trust fund shall not be deemed to be a current asset for purposes of Bird's obligations pursuant to Section 2.3(d). GTSD and GTSD Sub covenant and agree that they will use their reasonable efforts to cause the Company to self-insure for any of the plant closure obligations mandated by the TNRCC and, in the event the Company is able to do so within two (2) years from the date of Closing hereunder, without any additional direct or indirect cost to the Company, effect on the Company's credit, or credit enhancement by GTSD or its Affiliates, it will distribute any funds contributed by the Company, BETI or Bird prior to the Closing and received from the termination of the trust fund, less any reasonable out of pocket expenses incurred by GTSD, the Company or their Affiliates in connection therewith, promptly to Bird. In the event the Company is able to reduce the plant closure obligations mandated by the TNRCC within two (2) years from the date of Closing hereunder, it will distribute to Bird a portion of the funds contributed by the Company, BETI or Bird prior to the Closing, and such portion shall equal the product of the aggregate amount of funds contributed prior to the Closing and the percentage reduction in the aggregate funding obligation of $2 million. The distributions to Bird required by the previous sentence will be made either (i) when funds are released from the trust fund, (ii) as the annual payments to the trust fund are reduced to the extent of such reduction or (iii) when the trust fund is terminated earlier than when it would have terminated otherwise but for the reduction. Section 5.11 Knowledge of the Company. For purposes of Article III hereof, the knowledge of the Company or the Minority Shareholders shall not be imputed to the knowledge of Bird or BETI whenever a representation or warranty contained therein is made to the knowledge of Bird or BETI. Section 5.12 Vehicle Leases. The Company agrees to assume the current leases for the Company's automobiles that are reflected on Schedule 5.12 hereto pursuant to the terms that are reflected on such schedule. -24- Section 5.13 Use of Company Logo. If and to the extent that the logo used by the Company prior to the date hereof is owned by BETI, Bird or an Affiliate thereof, then such party hereby assigns to the Company the right to use such logo for a period of two (2) years from the date hereof and such party agrees to execute any and all documents or instruments that may be reasonably necessary, as determined by counsel to the Company, to evidence such assignment. ARTICLE VI: CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS Unless waived in writing by Purchaser in its sole discretion, the obligations of Purchaser hereunder shall be subject to the fulfillment, prior to or at the Closing, of each of the following conditions precedent: Section 6.1 Receipt of Stock Certificates. The Purchaser shall concurrently receive the certificates for the Stock contemplated by Article II, Section 2.1 hereof. Section 6.2 Minority Shareholders Agreements. The Purchaser, GTSD and the Minority Shareholders shall have entered into the Minority Shareholders Agreements, including the Shareholders Agreement, the Employment Agreements and the License Agreement in forms acceptable to the Purchaser and GTSD. Section 6.3 Payments by Bird. Bird shall have paid (i) any amount required pursuant to Article II, Section 2.3(d) of this Agreement and (ii) any costs incurred by the Company in connection with putting the Bird Gulf Coast Recycling Center in a state of suspension during the period of August 31, 1995 until the Closing Date, which includes putting the desorber and other processing equipment in a safe shutdown condition, removing substantially all processed and unprocessed inventory and residuals from the site, emptying tanks that were being used by the Company and continuing the employment of the employees listed on Schedule 6.3 and providing the necessary support from the Company to complete GTSD's due diligence effort, provided that Bird will be limited to a maximum payment amount of $200,000 for such costs pursuant to this clause (ii) of this Section 6.3. Section 6.4 Release from Liability. The Minority Shareholders shall have released Purchaser, its Affiliates and their officers, directors, stockholders, employees, agents, successors and assigns from any and all obligations, -25- liabilities, claims, causes of action and damages whether past or present, real or contingent, in tort or contract or otherwise, in law or equity, including but not limited to, obligations in connection with the payment of severance benefits to any Minority Shareholders, whether arising under such individual's current employment agreements and arrangements with Bird, BETI, or any other subsidiary of Bird, or otherwise and such release shall be in form and substance reasonably acceptable to Purchaser and its counsel. Section 6.5 Required Approvals. All approvals, consents, waivers, actions or consents from any Applicable Authority or any other Person required for the consummation of the transactions contemplated hereby and necessary for the Company to engage in the Company's Business following the Closing shall have been obtained and shall be effective and in form and substance satisfactory to the Purchaser. Section 6.6 Filings. The Company, BETI and Bird shall make all filings and take all other actions necessary to cause the transaction contemplated hereby to become effective under applicable law. Section 6.7 Actions or Events Interfering with Agreement. No investigation, suit, action or other proceeding shall be threatened or pending before any court or governmental agency which seeks to restrain, prohibit or delay, or seeks damages or other relief in connection with, this Agreement or the transactions contemplated hereby, or which could have a Material Adverse Effect upon the financial condition, Company's Business, Company Assets or prospects of the Company. The Company shall not have been adversely affected in any material way by any act of God, fire, flood, war, labor disturbance, legislation (proposed or enacted) or other event or occurrence, and there shall have been no change in the Company Assets, financial condition, customer or business prospects since August 31, 1995 other than a change resulting from the shutdown or suspension of operations of the Gulf Coast Recycling Center. Section 6.8 Representations and Warranties. The representations and warranties set forth in Article III shall be true and accurate at and as of the Closing Date as though such representations and warranties were made at and as of such time. Section 6.9 Compliance with Agreements. The Company, BETI and Bird shall have performed and complied in all respects with all of the agreements, covenants and conditions required by this Agreement to be performed or complied with by them prior to or at the Closing Date. -26- Section 6.10 Delivery of Certificates. (a) Each of the Company, BETI and Bird shall have delivered to Purchaser a certificate of its president or any vice president certifying (i) the fulfillment of the conditions set forth in this Article VI, (ii) that attached as exhibits thereto are certified, true, correct and complete copies of resolutions of the Board of Directors of such corporation authorizing the execution and delivery of this Agreement, the performance of that party's obligations hereunder and appointing one or more specific individuals to execute and deliver all of the instruments and documents required to be executed and delivered by such party pursuant to the terms and conditions hereof and (iii) the names and signatures of the officers authorized to execute and deliver this Agreement and the other documents and instruments required hereby and that all such officers still hold the office or position set forth in such certificate. (b) The Company shall have delivered a certificate, dated as of the Closing Date, executed by the President and the Secretary of the Company, that: (i) certifies that attached as exhibits thereto are certified true, correct and complete copies of the Company's Organizational Documents and (ii) certifies that as of the Closing Date, the Company's Organizational Documents have not been revoked, rescinded or amended and remain in full force and effect. (c) The Company shall have furnished to Purchaser certificates of valid existence and good standing from the jurisdictions in which the Company is organized and certificates of qualification to do business as a foreign company in each of the jurisdictions in which such qualification is necessary. Section 6.11 Resignation of Officers and Directors. If and to the extent requested by the Purchaser, the existing officers and directors of the Company shall have submitted resignations to be effective upon the Closing. Section 6.12 Termination of Certain Agreements. The Bird Instruments, the License Agreement between Jim Hogan and the Company dated April 1, 1993, the Employment Letter between the Company and Brad Hogan dated August 9, 1991 and the Employment Letter between the Company and Barry Hogan dated July 1, 1994 shall have been terminated at or prior to the Closing and the Company, GTSD and its Affiliates shall have been released from any and all obligations and liabilities under such agreements. -27- ARTICLE VII: CONDITIONS PRECEDENT TO THE COMPANY'S, BETI'S AND BIRD'S OBLIGATIONS Unless waived in writing by the Company, BETI or Bird, the obligations of the Company, BETI or Bird hereunder shall all be subject to the fulfillment, prior to or at the Closing, of each of the following conditions precedent: Section 7.1 Compliance with Agreements. Purchaser and GTSD shall have performed and complied in all material respects with all of its agreements, covenants and conditions required by this Agreement to be performed or complied with by Purchaser and GTSD prior to or at the Closing Date. Section 7.2 Release of Liabilities. The Minority Shareholders shall have released the Company, BETI, Bird, any of their Affiliates and any of their officers, directors, stockholders, employees, agents, successors and assigns from any and all obligations, liabilities, claims, causes of action and damages, whether past or present, real or contingent, in tort or contract or otherwise, in law or equity, including but not limited to, obligations in connection with the payment of severance benefits to any Minority Shareholders, whether arising under such individual's current employment agreements and arrangements with Bird, BETI, or any other subsidiary of Bird, or otherwise, and such release shall be in form and substance reasonably acceptable to the Company, BETI and Bird and their counsel. Section 7.3 Representations and Warranties. The representations and warranties set forth in Article IV shall be true and accurate at and as of the Closing Date as though such representations and warranties were made at and as of such time. Section 7.4 Compliance with Agreements. The Purchaser and GTSD shall have performed and complied in all respects with all of its agreements, covenants and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing Date. Section 7.5 Delivery of Certificates. The Purchaser and GTSD shall have delivered to the Company, BETI and Bird a certificate of their president or any vice president certifying (i) the fulfillment of the conditions set forth in this Article VII, (ii) that attached as exhibits thereto are certified, true, correct and complete copies of resolutions of the Board of Directors of such corporation authorizing the -28- execution and delivery of this Agreement, the performance of the Purchaser's and GTSD's obligations hereunder and appointing one or more specific individuals to execute and deliver all of the instruments and documents required to be executed and delivered by the Purchaser and GTSD pursuant to the terms and conditions hereof and (iii) the names and signatures of the officers authorized to execute and deliver this Agreement and the other documents and instruments required hereby and that all such officers still hold the office or position set forth in such certificate. Section 7.6 Proceedings Taken. All proceedings, corporate or other, to be taken by the Purchaser and GTSD, in connection with the transactions contemplated by this Agreement, shall have been taken. ARTICLE VIII: INDEMNIFICATION Section 8.1 Indemnification by BETI and Bird. (a) BETI and Bird hereby jointly and severally covenant and agree to indemnify the Purchaser, GTSD and their officers, directors, employees, agents, Affiliates, successors and assigns and hold each of them harmless against and with respect to any and all liabilities, losses, damages, claims, deficiencies, costs and expenses, interest, awards, judgments and penalties (including, without limitation, reasonable legal costs and expenses) actually suffered or incurred by it, (hereinafter, a "Loss"), arising out of or resulting from: (i) the breach of any representation or warranty by the BETI or Bird contained herein or in any document delivered hereunder at the Closing; (ii) the breach of any covenant or agreement by the Company, BETI or Bird contained herein or in any document delivered hereunder at the Closing; or (iii) any investigation, suit, action, demands, assessments, judgments or other proceeding by or before any court or governmental or regulatory agency which seeks to restrain, modify, prohibit or revoke, or seeks damages or other relief in connection with the consummation of this transaction. Notwithstanding anything herein to the contrary, the fact that an item may be disclosed on a schedule to this Agreement in response to a representation or warranty contained in Article III hereto, shall not in any way limit any rights that an indemnified party referred to in this Section 8.1(a) shall have to indemnification for any Losses resulting therefrom, except to the extent a statement in such schedule expressly limits or excludes any right to indemnity in respect thereof. The inclusion of an item on a schedule attached hereto is merely for purposes of disclosure and not to release Bird or BETI from any liability therefor, except as may be otherwise expressly provided on the schedule. -29- (b) In addition to any other indemnification provided herein, BETI and Bird hereby jointly and severally covenant and agree to indemnify the Company, Purchaser, GTSD and their officers, directors, employees, agents, Affiliates, successors and assigns and hold each of them harmless against and with respect to any and all Losses arising out of or resulting from: (i) the litigation between Universal Process Equipment, Inc. and Universal Industrial Refrigeration, Inc. and the Company and an Affiliate of Bird and the litigation between BAC Holdings Inc. and the Company; (ii) any additional assessment against the Company for taxes of any kind due and payable for the period up to and including the Closing Date; and (iii) items II, III, IV and VI reflected on Schedule 3.9 hereto. Section 8.2 Indemnification by Purchaser and GTSD. Purchaser and GTSD (but not their officers, directors, stockholders, employees, agents or Affiliates) hereby jointly and severally covenant and agree to indemnify BETI and Bird and their officers, directors, employees, agents, Affiliates, successors and assigns and holds each of them harmless against and with respect to any and all Losses, arising out of or resulting from: (a) the breach of any representation or warranty by Purchaser or GTSD contained herein or in any document delivered hereunder at the Closing; (b) the breach of any covenant or agreement by Purchaser or GTSD contained herein or in any document delivered hereunder at the Closing; (c) payment claims by any of the Company's vendors or suppliers to the extent such claims are fully reflected as payables on the August 31, 1995 balance sheet of the Company; or (d) payment claims that arise pursuant to the leasing of the Company's automobiles, which leases are assumed by the Company pursuant to Section 5.12 hereto, to the extent of the payment obligations reflected on Schedule 5.12 hereto. Section 8.3 Procedures for Third Party Claims. Promptly after the assertion by any third party of any claim against any party entitled to be indemnified under this Article VIII (the "Indemnitee") that, in the judgment of such Indemnitee, may result in the incurrence by such Indemnitee of Losses for which such Indemnitee would be entitled to indemnification pursuant to this Agreement, such Indemnitee shall deliver to the other party or parties who has indemnified such Losses hereunder ("Indemnitor") a written notice describing such claim. Such Indemnitor may participate in and, at its option upon acknowledgment of Indemnitee's right to indemnification for such matter, assume the defense of the Indemnitee against such claim, including the employment of counsel, -30- who shall be reasonably satisfactory to such Indemnitee. In such case, any Indemnitee shall have the right to employ separate counsel in any such action or claim and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the Indemnitor unless (i) the Indemnitor shall have failed, within a reasonable time after having been notified by the Indemnitee of the existence of such claim as provided in the preceding sentence, to assume the defense of the such claim, (ii) the employment of such counsel has been specifically authorized in writing by the Indemnitor or (iii) the named parties to any such action (including impleaded parties) include both such Indemnitee and the Indemnitor and such Indemnitee shall have been advised in writing by such counsel that there may be conflicting interests between Indemnitee and the Indemnitor in the legal defense thereof. No Indemnitor shall be liable to indemnify any Indemnitee for any compromise or settlement of any such action or claim effected without the consent of the Indemnitor. Section 8.4 Limits for Recovery of Losses. Notwithstanding anything herein to the contrary, BETI and Bird shall not be liable as Indemnitors for any Losses of Purchaser under this Article VIII unless and until the aggregate amount of all Losses hereunder by Purchaser equals or exceeds $50,000, in which case BETI and Bird shall be jointly and severally liable for all Losses pursuant to Section 8.1(a) of the indemnified parties identified in Section 8.1 up to a maximum aggregate amount of $500,000 (in excess of the $50,000 referred to above) and BETI and Bird shall be jointly and severally liable for all Losses pursuant to Section 8.1(b)(ii) of the indemnified parties identified in Section 8.1 up to a maximum aggregate amount of $125,000. Section 8.5 Waiver of Contribution. Neither BETI nor Bird shall have any right to seek contribution from the Company in the event that BETI and/or Bird is required to make any payments under this Article VIII. Section 8.6 Sole Remedy. Recourse under this Article VIII shall be Purchaser's, GTSD's and their officers, directors, employees, agents, Affiliates, successors and assigns sole remedy against BETI or Bird. ARTICLE IX: SURVIVAL Except for actions based upon a claim of fraud (which shall survive without limitation), all representations and warranties made pursuant to or in connection with this Agreement shall survive the Closing, but shall terminate two (2) years after the Closing Date; provided, that there shall be no such termination with respect to any representation or warranty as to which a bona fide claim has been asserted prior to such date. -31- ARTICLE X: MISCELLANEOUS Section 10.1 No Assignment. No assignment by any of the parties of their respective rights nor delegation by any of the parties of their respective duties shall be permitted hereunder without the prior written consent of all other parties hereto. Section 10.2 Costs. Each party hereto shall pay all fees and expenses incurred by it in connection with the negotiation, preparation, and performance of this Agreement, including fees and disbursements of their respective counsel, accountants and financial advisors. Section 10.3 Publicity. Prior to Closing, Purchaser, GTSD, the Company, BETI and Bird agree not to issue any statement or communication to the public or the press regarding the transactions contemplated by this Agreement without the prior written consent of the other parties; provided, however, that each party shall be permitted, upon notice to the other, to make such disclosures to the public or such governmental entities as its counsel reasonably should deem necessary to maintain compliance with applicable law. Section 10.4 Confidentiality. Purchaser, GTSD, the Company, BETI and Bird will hold, and will cause their employees, representatives, agents and affiliated persons to hold in strict confidence, and not disclose to any other party, and not use in any way except in connection with the transactions contemplated hereby, without the prior written consent of the other party, all confidential information obtained from the other party in connection with the transactions contemplated by this Agreement (including the existence of this Agreement, any of the terms hereof, and the negotiations between the parties hereto), except such information may be disclosed: (a) to Applicable Authorities and, where necessary, to any other person in connection with the obtaining of the Licenses and Approvals and the consents or waivers contemplated or required by the terms of this Agreement; (b) if required by court order or decree or any Applicable Law; (c) if it is publicly available through no act or failure to act of such party; (d) was already known to such party on a confidential basis on the date of receipt; (e) during the course of or in connection with any litigation, governmental investigation, arbitration or other proceedings based upon or in connection with the subject matter of this Agreement, including the failure of the transactions contemplated hereby to be consummated; or (f) if it is otherwise expressly provided for herein. -32- Section 10.5 Parties in Interest. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by the respective successors, heirs, personal representatives, and assigns permitted under the terms of this Agreement. Section 10.6 Entire Agreement. This Agreement, any Exhibits, Schedules and any other writings delivered pursuant hereto which form a part hereof and all other documents delivered contemporaneous with the execution hereof contain the entire understanding of the parties with respect to its subject matter and supersede all prior oral and written agreements and understandings between the parties with respect to its subject matter. In this regard, although the Bird Letter of Intent and the Minority Shareholders' Letter of Intent shall be merged into and superseded by this Agreement, certain descriptive language contained therein is expressly referred to herein and shall be interpreted as if expressly set forth herein. Section 10.7 Construction. The Article and Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The masculine pronoun shall include the feminine and neuter, and vice versa, where the context so requires. Section 10.8 Notices. Except as otherwise expressly stated, all notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and shall be deemed given upon the earlier of (i) when it is personally delivered, (ii) three (3) days after having been mailed by certified mail, postage prepaid, return receipt requested, (iii) two (2) days after having been sent by recognized overnight delivery service or (iv) one (1) day after having been sent by facsimile transmission, addressed as follows: If to GTSD: GTS Duratek, Inc. 8955 Guilford Road, Suite 200 Columbia, Maryland 21046 Attention: Robert E. Prince, President and Chief Executive Officer Telecopy No.: (301) 621-8211 -33- with a copy to: Piper & Marbury L.L.P. Charles Center South 36 South Charles Street Baltimore, Maryland 21201-3010 Attention: Henry D. Kahn, Esquire Telecopy No.: (410) 576-1700 If to Purchaser: GTSD Sub II, Inc. 8955 Guilford Road, Suite 200 Columbia, Maryland 21046 Attention: Robert E. Prince, President Telecopy No: (301) 621-8211 with a copy to: Piper & Marbury L.L.P. Charles Center South 36 South Charles Street Baltimore, Maryland 21201-3010 Attention: Henry D. Kahn, Esquire Telecopy No.: (410) 576-1700 If to Company: Bird Environmental Gulf Coast, Inc. 2700 Avenue S San Leon, Texas 77539 Attention: Bob Hensel, President Telecopier No.: (713) 559-1364 with a copy to: Piper & Marbury L.L.P. Charles Center South 36 South Charles Street Baltimore, Maryland 21201-3010 Attention: Henry D. Kahn, Esquire Telecopy No.: (410) 576-1700 -34- If to BETI: Bird Environmental Technologies, Inc. 1077 Pleasant Street Norwood, Massachusetts 02062 Attention: Frank S. Anthony, Vice President and General Counsel Telecopy No.: (617) 551-9507 If to Bird: Bird Corporation 1077 Pleasant Street Norwood, Massachusetts 02062 Attention: Frank S. Anthony, Vice President and General Counsel Telecopy No.: (617) 551-9507 or to such other address as the person to whom notice is to be given may have previously furnished to the other in writing in the manner set forth above, provided that notice of a change of address shall be deemed given only upon receipt. Section 10.9 Counterparts. This Agreement may be executed simultaneously in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 10.10 Governing Law. This Agreement is governed by and construed and enforced in accordance with the laws of the State of Maryland, excluding any laws thereof which would direct the application of the law of another jurisdiction, and exclusive venue for filing any lawsuit shall be in the federal courts in Maryland. Section 10.11 Specific Performance. The parties acknowledge and agree that the breach of the provisions of this Agreement could not be adequately compensated with monetary damages, and the parties hereto agree, accordingly, that injunctive relief and specific performance shall be appropriate remedies to enforce provisions of this Agreement and waive any claim or defense that there is an adequate remedy at law for such breach; provided, however, that nothing herein shall limit the remedies herein, legal or equitable, otherwise available and all remedies herein are in addition to any remedies available at law or otherwise. -35- Section 10.12 Severability. If any provision of this Agreement shall be held to be illegal, invalid or unenforceable under any applicable law, then such contravention or invalidity shall not invalidate the entire Agreement. Such provision shall be deemed modified to the extent necessary to render it legal, valid and enforceable, and if no such modification shall render it legal, valid and enforceable, then this Agreement shall be construed as if not containing the provision held to be invalid, and the rights and obligations of the parties shall be construed and enforced accordingly. Section 10.13 Further Assurances. From time to time, at Purchaser's request and without further consideration, BETI and Bird shall execute and deliver to Purchaser such documents and take such other action as Purchaser may reasonably request in order to consummate more effectively the transactions contemplated hereby. Section 10.14 No Drafting Presumption. Each of the parties hereto shall be deemed to have participated equally in the drafting and preparation of this Agreement and, accordingly, no presumption shall arise concerning the interpretation of any of the provisions hereof with respect to the party or parties responsible for its preparation. Section 10.15 Incorporation by Reference; Use of Certain Terms. All Exhibits and Schedules attached to this Agreement shall be deemed incorporated herein by reference as if fully set forth herein. When the context requires, the gender of all words used herein shall include the masculine, feminine and neuter and the number of all words shall include the singular and plural. Section 10.16 Amendment and Waiver. This Agreement may not be amended or modified except by a written instrument signed by the parties hereto. The waiver by any party of such party's rights under this Agreement in any particular instance or instances, whether intentional or otherwise, shall not be considered as a continuing waiver which would prevent subsequent enforcement of such rights or of any other rights. Section 10.17 Waiver of Jury Trial. THE COMPANY, BETI, BIRD, PURCHASER AND GTSD HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE STOCK, OR ANY -36- DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE COMPANY, BETI, BIRD, PURCHASER AND GTSD FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT OR THE STOCK. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE COURT. -37- IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the parties hereto on the date first above written. WITNESS/ATTEST: BIRD ENVIRONMENTAL GULF COAST, INC. By:_______________________________ By: _________________________(SEAL) Frank A. Anthony Vice President BIRD ENVIRONMENTAL TECHNOLOGIES, INC. By:_______________________________ By: _________________________(SEAL) Frank A. Anthony Vice President BIRD CORPORATION By:_______________________________ By: _________________________(SEAL) Frank A. Anthony Vice President GTS DURATEK, INC. By:_______________________________ By: _________________________(SEAL) Diane R. Brown, Secretary Robert F. Shawver Executive Vice President GTSD SUB II, INC. By:_______________________________ By: _________________________(SEAL) Diane R. Brown, Secretary Robert F. Shawver Vice President -38- EX-10.(X) 3 AMENDED GLASS MAT SUPPLY AGREEMENT EXHIBIT 10(X) SALES AGREEMENT DATE: December 1, 1995 1. PARTIES SELLER: GS ROOFING PRODUCTS CO., INC. 5525 MacArthur Blvd., Suite 900 Irving, Texas 75038 BUYER: BIRD INC. 1077 Pleasant Street Norwood, MA 02062 2. PRODUCT 2.0# CSF & 2.2# CSF GLASS MAT per attached Specifications and Agreement, in widths of 59-7/8, 61-7/8 and 36 inches ANNUAL QTY: Sixty percent (60%) of Buyers annual requirements, estimated to be approximately 3.9 mm squares FOB POINT: Seller's plant, Charleston, SC SHIPMENT: Rail car loads as arranged by Seller PRICE: 2.0# csf $1.34/csf Freight delivered & prepaid 2.2# csf $1.40/csf Freight delivered & prepaid Through March 31, 1996 Subject to a maximum 5% increase April 1, 1996 or thereafter if prices are increased by alternate competitive supplier TERMS: 1% 10th Prox Net 30th prox. on shipments prior to the 25th of the month for determination of due dates. Discount applies to material only and does not apply to freight costs. 3. PERIOD. The period of this Agreement will begin on January 1, 1996 and end on December 31, 1996. 4. QUANTITY. During this Agreement period, Buyer will purchase the specified Annual Quantity in approximately equal monthly quantities. Orders will be faxed to Seller's facility in Charleston, SC by the 15th of each month for the following month's requirements. 5. SHIPMENTS. Seller shall arrange for the carrier and shall be entitled to utilize the Buyer's contract rates from the CSXT Railroad of $1795/car (50' & 60'). Buyer will unload each shipment at its own risk and expense, including any demurrage or detention charges at destination. Shipper will be responsible for all risk and expense, including demurrage at the loading facility. If Seller is unable, after normal and reasonable efforts, to secure wide door cars, and Buyer is unable to reasonably delay shipment until such cars are available, then Seller will be required to provide delivery by truck, at the Sellers expense. 6. WARRANTIES. Seller warrant that Product will meet the "PURCHASE SPECIFICATION FOR GLASS MAT," as clarified by the summary of understanding titled "1996 BIRD ROOFING MAT SUPPLY PROGRAM,' copy attached. Seller MAKES NO OTHER REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, IN FACT OR IN LAW, INCLUDING WITHOUT LIMITATION THE WARRANTY OF MERCHANT ABILITY OR THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, OTHER THAN THE LIMITED WARRANTY SET FORTH ABOVE. 7. REMEDIES. If buyer fails to pay any indebtedness to Seller, Seller may, in addition to any other remedies, suspend shipments, change terms of payment or terminate this Agreement by notice to the Buyer. Buyer's obligation to perform will not be limited by any previous waiver by Seller. Product which fails to meet specifications will be returned to the Seller at the Sellers expense. 8. NOTICES. Notice by either Seller or Buyer will be made only by letter or facsimile addressed to the other part at this address in Article 1 and will be considered given as of the time it is deposited with the U.S. Postal Service or acknowledged as received by the other Party's facsimile machine. 9. GOVERNING LAW. This Agreement will be interpreted and the rights, obligations, and liabilities of the Parties determined in accordance with the laws of the State of New York. 10. PRICE AND PAYMENT TERMS. Price shall be in accordance with Article 2 above. If Seller is prevented by law, regulation or governmental action from continuing any price in effect under this Agreement, Seller may terminate this Agreement on thirty (30) days' notice. Buyer will be obligated to provide immediate written notice to Seller if and when the suppler or suppliers of Buyer's balance of requirements increase prices to Buyer. Seller will be permitted to increase prices at a comparable level, effective on the date of such other competitor's increase. The 1% 10th prox Net 30th prox Terms under this Agreement are the result of meeting competitive conditions outlined by the Buyer. Buyer shall keep in full force and effect a $300,000 letter of credit in favor of the Seller. Seller shall review with reasonableness the financial condition of the Buyer on or before July 1, 1996 to determine the need to continue such letter of credit. 11. EXCUSES FOR NO PERFORMANCE. Either Seller or Buyer will be excused from the obligations of this Agreement to the extent that performance is delayed or prevented by any circumstance (except financial) reasonably beyond its control or by fire, explosion, mechanical breakdown, strikes or other labor trouble, plant shutdown, unavailability of or interference with the usual means of transporting the Product or compliance with any law, regulation, order, recommendation or request of any governmental authority. In addition, Seller will be so excused in the event it is unable to acquire from its usual source and on terms it deems to be reasonable, any material necessary for manufacturing the Product. If, because of such circumstances, there should be a shortage of Product from the Seller, Seller will not be obligated to purchase products in order to perform this Agreement and may apportion its available Product among it internal needs and the Buyer's needs based upon the prior year sales, upon a prorated share of available Product. Quantities of Product consequently not shipped will be deducted from the applicable remaining quantity obligation unless the Parties agree otherwise. 12. SAFETY AND HEALTH COMMUNICATIONS. Seller will furnish to Buy Material Safety Data Sheets which include health, safety and other hazard communication information on Product consistent with the Occupational Safety and Health administration's hazard Communications Standard. Seller will also furnish other health or safety information as available. Buyer will disseminate appropriate health and safety information to all persons Buyer foresees may be exposed to Product (including but not limited to Buyer's employees, contractors and customers). 13. LIABILITIES-CLAIMS-INDEMNIFICATION. Buyer shall indemnify and hold the Seller harmless for any claim, loss or expense on account of any injury, disease or death of persons or damage to property arising directly out of use of the Product. These indemnity obligations of Buyer will survive termination of this Contract. Neither Seller nor Buyer will have any liability to the other for any claim (except for Indebtedness of Buyer to Seller) arising out of or in connection with this Agreement unless claimant gives the other Party notice of the claim, setting forth fully the facts on which it is based, within sixty (60) days of the date such facts were discovered or reasonably should have been discovered. Except as elsewhere herein provided, Seller's liability for defective or nonconforming Product will not exceed the purchase price and inbound freight costs of the Product involved in the claim and NEITHER PARTY WILL BE LIABLE FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES. 14. ENTIRETY AND RELEASE. This Agreement, as of the beginning date of it Period, contains the complete and exclusive agreement of Seller and Buyer concerning the Product identified in Article 2, merges and supersedes all prior understandings and representations (oral or written) and terminates all prior contracts between Seller and Buyer concerning the same product. Except for any indebtedness or indemnity obligation of Buyer to Seller, each releases the other from all claims arising in connection with any such prior contract, except as herein provided. Neither this Agreement nor any agreement supplementing or amending this Agreement (including any purchase order or other document issued by Buyer) will be binding unless signed by the Parties, and performance prior to such execution will not constitute a waiver of this requirement. 15. FURTHER LIMITATIONS. No action by the Buyer arising out of the Agreement shall commence later than sixty (60) days after the cause of action has occurred. 16. CONSIDERATIONS. Section deleted. 17. AMENDMENTS. No alteration, modification or change of this Agreement shall be valid except by an agreement in writing executed by the parties hereto. 18. OTHER PROVISIONS. (Attach additional page(s) Exhibits etc). GS ROOFING PRODUCTS COMPANY, INC. BY:______________________________ Thomas Gruss Date 3/15/96 BIRD ROOFING DIVISION BY:______________________________ R.C. Maloof Date 12/5/95 EX-10.(Y) 4 AGREEMENT AND PLAN OF MERGER EXHIBIT 10(Y) EXECUTION COPY =============================================================================== AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER by and among CERTAINTEED CORPORATION, BI EXPANSION CORP. and BIRD CORPORATION Dated as of April 8, 1996 =============================================================================== TABLE OF CONTENTS Page ---- ARTICLE I The Offer and the Merger ------------------------ SECTION 1.01. The Offer............................................. 1 SECTION 1.02. Company Actions....................................... 3 SECTION 1.03. Surviving Corporation................................. 5 SECTION 1.04. Articles of Organization.............................. 5 SECTION 1.05. By-Laws............................................... 5 SECTION 1.06. Directors............................................. 5 SECTION 1.07. Officers.............................................. 5 SECTION 1.08. Effective Date........................................ 5 SECTION 1.09. Additional Actions.................................... 6 SECTION 1.10. Company Common Stock, Preferred Stock and Preference Stock............................................... 6 SECTION 1.11. Conversion of Acquisition Sub Common Stock............ 7 SECTION 1.12. Dissenting Shares..................................... 7 SECTION 1.13. Surrender of Shares................................... 8 SECTION 1.14. Certain Benefit Plans................................. 9 ARTICLE II Representations and Warranties of the Company --------------------------------------------- SECTION 2.01. Corporate Organization................................ 10 SECTION 2.02. Capitalization of the Company......................... 11 SECTION 2.03. Subsidiaries.......................................... 12 SECTION 2.04. Authorization......................................... 12 SECTION 2.05. Absence of Conflicts; Consents........................ 13 SECTION 2.06. Compliance with Laws.................................. 14 SECTION 2.07. Financial Statements.................................. 15 SECTION 2.08. Absence of Material Changes........................... 16 SECTION 2.09. Litigation............................................ 16 SECTION 2.10. Patents and Trademarks................................ 16 SECTION 2.11. Material Contracts; Permits........................... 17 SECTION 2.12. Title to Properties and Related Matters............... 19 SECTION 2.13. Taxes................................................. 20 SECTION 2.14. Labor Agreements...................................... 23 SECTION 2.15. Benefit Plans......................................... 23 SECTION 2.16. Labor Disputes; Unfair Labor Practices................ 27 Contents, p. 2 Page ---- SECTION 2.17. Product Warranties.................................... 27 SECTION 2.18. Environmental Matters................................. 28 SECTION 2.19. Insurance............................................. 30 SECTION 2.20. SEC Filings........................................... 30 SECTION 2.21. Brokers and Finders................................... 31 SECTION 2.22. Rights Agreement; Antitakeover........................ 31 SECTION 2.23. Opinion of Financial Advisor.......................... 31 SECTION 2.24. Asbestos Claims....................................... 32 ARTICLE III Representations and Warranties of Parent ---------------------------------------- SECTION 3.01. Corporate Organization................................ 32 SECTION 3.02. Authorization......................................... 32 SECTION 3.03. Absence of Conflicts; Consents........................ 32 SECTION 3.04. Litigation............................................ 33 SECTION 3.05. Brokers and Finders................................... 34 ARTICLE IV Representations and Warranties of Acquisition Sub ------------------------------------------------- SECTION 4.01. Corporate Organization................................ 34 SECTION 4.02. Authorization......................................... 34 SECTION 4.03. Absence of Conflicts; Consents........................ 35 SECTION 4.04. Litigation............................................ 36 SECTION 4.05. Capitalization........................................ 36 SECTION 4.06. Brokers and Finders................................... 36 Contents, p. 3 Page ---- ARTICLE V Covenants --------- SECTION 5.01. Access and Information................................ 36 SECTION 5.02. Proxy Statement....................................... 37 SECTION 5.03. Stockholders' Meeting................................. 38 SECTION 5.04. Supplemental Information.............................. 38 SECTION 5.05. Further Assurances.................................... 38 SECTION 5.06. Conduct of Company Business Prior to the Effective Date................................................ 38 SECTION 5.07. Consents.............................................. 41 SECTION 5.08. Filings............................................... 41 SECTION 5.09. Filing of Articles of Merger.......................... 42 SECTION 5.10. Interim Financial Statements.......................... 42 SECTION 5.11. Public Announcements.................................. 42 SECTION 5.12. No Solicitation....................................... 43 SECTION 5.13. Validity of Representations........................... 44 SECTION 5.14. Employees; Benefits................................... 45 SECTION 5.15. Indemnification and Insurance......................... 45 SECTION 5.16. Redemption of 5% Stock and Preference Stock........... 46 SECTION 5.17. Material Contracts.................................... 47 SECTION 5.18. Tax Matters........................................... 47 SECTION 5.19. Dividend Payments..................................... 47 SECTION 5.20. Satisfaction of Conditions............................ 47 SECTION 5.21. Directors............................................. 47 ARTICLE VI Conditions to the Obligations of Parent --------------------------------------- and Acquisition Sub ------------------- SECTION 6.01. Representations and Warranties True................... 49 SECTION 6.02. Company's Performance................................. 49 SECTION 6.03. Authorization of Merger............................... 49 SECTION 6.04. Absence of Litigation................................. 49 SECTION 6.05. Directors............................................. 50 SECTION 6.06. Dissenting Shares..................................... 50 SECTION 6.07. Options............................................... 50 SECTION 6.08. Certificates.......................................... 50 Contents, p. 4 Page ---- ARTICLE VII Conditions to the Obligations of the Company -------------------------------------------- SECTION 7.01. Representations and Warranties True................... 51 SECTION 7.02. Parent's and Acquisition Sub's Performance............ 51 SECTION 7.03. Authorization of Merger............................... 51 SECTION 7.04. Absence of Litigation................................. 51 SECTION 7.05. Certificates.......................................... 52 ARTICLE VIII Closing ------- SECTION 8.01. Time and Place........................................ 52 SECTION 8.02. Deliveries at the Closing............................. 52 ARTICLE IX Termination and Abandonment of the Merger ----------------------------------------- SECTION 9.01. Termination........................................... 53 SECTION 9.02. Effect of Termination................................. 54 SECTION 9.03. Procedure for Termination and Amendment............... 55 ARTICLE X Miscellaneous ------------- SECTION 10.01. Expenses; Alternate Transaction Fee................. 55 SECTION 10.02. Non-Survival of Representations and Warranties...... 57 SECTION 10.03. Headings............................................ 57 SECTION 10.04. Notices............................................. 58 SECTION 10.05. Assignment.......................................... 59 SECTION 10.06. Complete Agreement.................................. 59 SECTION 10.07. Amendments and Waivers.............................. 59 SECTION 10.08. Counterparts........................................ 60 SECTION 10.09. Governing Law....................................... 60 SECTION 10.10. Accounting Terms.................................... 60 Contents, p. 5 Page ---- SECTION 10.11. Parties............................................. 60 Exhibits - -------- EXHIBIT A Conditions to the Offer EXHIBIT B Articles of Merger Contents, p. 5 Schedules - --------- SCHEDULE 2.01 Foreign Jurisdictions SCHEDULE 2.02 Capitalization SCHEDULE 2.03 Subsidiaries SCHEDULE 2.05 Conflicts, Consents, Approvals and Authorizations SCHEDULE 2.07 Company Financial Statements SCHEDULE 2.08 Absence of Material Changes SCHEDULE 2.09 Litigation SCHEDULE 2.10 Patents and Trademarks SCHEDULE 2.11 Material Contracts SCHEDULE 2.12 Real Property SCHEDULE 2.13 Taxes SCHEDULE 2.14 Labor Agreements SCHEDULE 2.15 Benefit Plans SCHEDULE 2.17 Product Warranties SCHEDULE 2.18 Environmental Matters SCHEDULE 2.19 Insurance SCHEDULE 2.20 SEC Filings SCHEDULE 5.06 Conduct of Business INDEX OF DEFINITIONS Definition Section ---------- ------- "Acquisition Sub" .......................... Introduction "Acquisition Sub Common Stock".............. Section 1.11 "Alternate Transaction Fee"................. Section 10.01(b) "Antitrust Division"........................ Section 2.05(e) "Applicable Laws"........................... Section 2.05(d) "Articles of Merger"........................ Section 1.08 "Balance Sheet"............................. Section 2.07(a) "Balance Sheet Date"........................ Section 2.07(a) "Benefit Plans"............................. Section 2.15(i) "CERCLA".................................... Section 2.18 "Certificates".............................. Section 1.13(b) "Closing"................................... Section 8.01 "Closing Date".............................. Section 8.01 "Code"...................................... Section 2.13 "Commonly Controlled Entity"................ Section 2.15(i) "Company"................................... Introduction "Common Stock Offer Price".................. Introduction "Company Common Stock"...................... Section 1.10(a)(i) "Company Estimates"......................... Section 2.18(g) "Company Financial Statements".............. Section 2.07(a) "Company Pension Plan"...................... Section 2.15(iii) "Company Property".......................... Section 2.12(a) "Company Willful Misrepresentation"......... Section 9.02(b) "Confidentiality Agreement"................. Section 5.01(b) "Consummation of the Offer"................. Section 5.02 "Continuing Directors"...................... Section 5.21 "Conversion Rights"......................... Section 2.02(c) "Covered Taxes"............................. Section 2.13(c) "Defined Benefit Plan"...................... Section 2.15(vi) "Defined Benefit Pension Plan".............. Section 2.15(vi) "Designated Director"....................... Section 5.21 "Director Option Plan"...................... Section 1.14(a)(i) "Dissenting Consideration".................. Section 1.12 "Dissenting Shares"......................... Section 1.12 "D&O Insurance"............................. Section 5.15(a) "Effective Date"............................ Section 1.08 "Effective Time"............................ Section 1.08 "Eligible Option"........................... Section 1.14(a)(i) "Environmental Laws"........................ Section 2.18 Definitions, p. 2 Definition Section ---------- ------- "ERISA".................................... Section 2.15(i) "Exchange Act"............................. Section 1.01(b) "Exchange Agent"........................... Section 1.13(a) "Expenses"................................. Section 10.01(b) "5% Stock"................................. Section 1.10(b) "5% Stock Consideration"................... Section 1.10(b) "French parcel"............................ Section 2.04(d) "FTC"...................................... Section 2.05(e) "GAAP"..................................... Section 2.07(a) "Governmental Authority"................... Section 2.05(d) "Hazardous Materials"...................... Section 2.18 "HSR Act".................................. Section 2.05(e) "Inactive Subsidiary"...................... Section 2.03(a) "Indemnified Parties"...................... Section 5.15(a) "Ineligible Option"........................ Section 1.14(a)(ii) "Information Statement".................... Section 2.20(b) "Interim Financial Statements"............. Section 2.07(b) "Judgment"................................. Section 2.05(d) "Leased Real Property"..................... Section 2.12(a) "Legal Action"............................. Section 2.09 "Lien"..................................... Section 2.05(b) "LTIP"..................................... Section 1.14(b) "Material Adverse Effect".................. Section 2.01 "Material Contracts"....................... Section 2.11 "Maximum Premium".......................... Section 5.15(a) "MBCL"..................................... Section 1.03 "Merger"................................... Introduction "Minimum Condition"........................ Exhibit A "1982 Stock Option Plan"................... Section 1.12(a)(i) "1992 Stock Option Plan"................... Section 1.12(a)(i) "Notice of Qualified Takeover Proposal".... Section 5.12(b) "Offer".................................... Introduction "Offer Document"........................... Section 1.01(b) "Options".................................. Section 1.14a)(i) "Owned Real Property"...................... Section 2.12(a) "Parent"................................... Introduction "Parent Willful Misrepresentation"......... Section 9.02(c) "Paying Agent"............................. Section 1.13 "PBGC"..................................... Section 2.15(i) "Pension Plan"............................. Section 2.15(i) "Permits".................................. Section 2.06 "Permitted Liens".......................... Section 2.12(b) "Person"................................... Section 2.05(c) Definitions, p. 3 Definition Section ---------- ------- "Preference Stock"......................... Section 1.10(c) "Preference Stock Consideration"........... Section 1.10(c) "Preference Stock Offer Price"............. Introduction "Proxy Statement".......................... Section 5.02(a) "Qualified Takeover Proposal".............. Section 5.12(a) "Release".................................. Section 2.18 "Rights"................................... Section 2.02(a) "Rights Agent"............................. Section 2.02(a) "Rights Agreement"......................... Section 2.02(a) "Return"................................... Section 2.13(a) "Savings Plan"............................. Section 1.14(c) "Schedule 14D-9"........................... Section 1.02(b) "SEC"...................................... Section 1.01(a) "SEC Documents"............................ Section 2.20(a) "Securities Act"........................... Section 2.20(a) "Special Meeting".......................... Section 5.03(a) "Subsidiary"............................... Section 2.01 "Surviving Corporation".................... Section 1.03 "Surviving Corporation Common Stock"....... Section 1.11 "Takeover Proposal"........................ Section 5.12(a) "Tax"...................................... Section 2.13(a) "Taxing Authority"......................... Section 2.13(a) "Total Merger Consideration"............... Section 1.10(a)(i) "Transmittal Letter"....................... Section 1.13(b) EXECUTION COPY This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER dated as of April 8, 1996, is entered into by and among CERTAINTEED CORPORATION, a Delaware corporation ("Parent"), BI EXPANSION CORP., a Massachusetts corporation ("Acquisition Sub"), and BIRD CORPORATION, a Massachusetts corporation (the "Company"), and amends and restates in its entirety the Agreement and Plan of Merger among Parent, Acquisition Sub and the Company dated as of March 14, 1996 (the "Prior Agreement"). WHEREAS the respective Boards of Directors of Parent, Acquisition Sub and the Company approved the Prior Agreement and have approved the making by Acquisition Sub of a tender offer from time to time (the "Offer") to purchase all outstanding shares of Company Common Stock (as defined below) at a price per share equal to the Total Merger Consideration (as defined below) (the "Common Stock Offer Price") and all outstanding shares of Preference Stock (as defined below) at a price per share equal to $20 plus all accrued and unpaid dividends thereon as of the date of the expiration of the Offer (the "Preference Stock Offer Price") along with the merger of Acquisition Sub with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth herein, as a result of which the Company will become a wholly owned subsidiary of Parent and the stockholders of the Company (other than stockholders who perfect appraisal rights) will be entitled to receive the consideration provided in this Agreement. NOW, THEREFORE, in consideration of the mutual benefits to be derived from this Agreement and of the representations, warranties, covenants and agreements hereinafter contained, Parent, Acquisition Sub and the Company agree as follows: ARTICLE I The Offer and the Merger ------------------------ SECTION 1.01. The Offer. (a) Subject to the provisions of ---------- this Agreement, as promptly as practicable, but in no event later than five business days after the public announcement of the Offer, Acquisition Sub shall commence the Offer. The obligation of Acquisition Sub to commence the Offer and accept for payment, and pay for, any shares of Company Common Stock tendered pursuant to the Offer shall be 2 subject to the conditions set forth in Exhibit A (any of which may be waived in whole or in part by Acquisition Sub in its sole discretion) and to the terms and conditions of this Agreement; provided, however, that -------- ------- Acquisition Sub shall not, without the Company's consent, waive the Minimum Condition if Parent shall have requested that the Company redeem the Preference Stock in accordance with Section 5.16). Acquisition Sub expressly reserves the right to modify the terms of the Offer, except that, without the consent of the Company, Acquisition Sub shall not (i) reduce the number of shares of Company Common Stock or Preference Stock (unless, with respect to the Preference Stock, Parent shall have requested that the Company redeem the Preference Stock in accordance with Section 5.16) to be purchased in the Offer, (ii) reduce the Common Stock Offer Price or the Preference Stock Offer Price, (iii) modify or add to the conditions set forth in Exhibit A, (iv) except as provided in the next sentence, extend the Offer, (v) change the form of consideration payable in the Offer or (vi) amend any other term of the Offer in a manner adverse in any material respect to the holders of Company Common Stock or Preference Stock. Notwithstanding the foregoing, Acquisition Sub may, without the consent of the Company, (i) extend the Offer beyond any scheduled expiration date (the initial scheduled expiration date being 20 business days following commencement of the Offer) for a period not to exceed 20 business days, if at any scheduled expiration date of the Offer, any of the conditions to Acquisition Sub's obligation to accept for payment, and pay for, shares of Company Common Stock or Preference Stock shall not be satisfied or waived, until such time as such conditions are satisfied or waived, (ii) extend the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer and (iii) terminate the Offer without prejudice to any of its and Parent's rights under this Agreement, including to proceed with the Merger in accordance with, and subject to the terms and conditions of, this Agreement. Subject to the terms and conditions of the Offer and this Agreement, Acquisition Sub shall accept for payment, and pay for, all shares of Company Common Stock and Preference Stock validly tendered and not withdrawn pursuant to the Offer that Acquisition Sub becomes obligated to accept for payment, and pay for, pursuant to the Offer as soon as practicable after expiration of the Offer, subject to compliance with Rule 14e-1(c) under the Exchange Act (as defined below). (b) On the date of commencement of the Offer, Parent and Acquisition Sub shall file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the Offer, which shall contain an offer to purchase and a related letter of transmittal and summary advertisement (such Schedule 14D-1 and the documents included therein pursuant to which the Offer will be made, together with any supplements or 3 amendments thereto, the "Offer Documents"). Parent and Acquisition Sub agree that the Offer Documents shall comply as to form in all material respects with the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act") and, on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by Parent or Acquisition Sub with respect to information regarding the Company or its subsidiaries or provided by the Company for inclusion or incorporation by reference in the Offer Documents. Each of Parent, Acquisition Sub and the Company agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect, and each of Parent and Acquisition Sub further agrees to take all steps necessary to amend or supplement the Offer Documents and to cause the Offer Documents as so amended or supplemented to be filed with the SEC and to be disseminated to the Company's stockholders, in each case as and to the extent required by applicable Federal securities laws. The Company and its counsel shall be given a reasonable opportunity to review and comment upon the Offer Documents and all amendments and supplements thereto prior to their filing with the SEC or dissemination to stockholders of the Company. Parent and Acquisition Sub agree to provide the Company and its counsel any comments or requests for additional information Parent, Acquisition Sub or their counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments and shall provide the Company and its counsel an opportunity to participate, including by way of discussion with the SEC or its staff, in the response of Parent and/or Acquisition Sub to such comments. (c) Parent shall provide or cause to be provided to Acquisition Sub on a timely basis the funds necessary to accept for payment, and pay for, any shares of Company Common Stock and Preference Stock that Acquisition Sub accepts for payment, and becomes obligated to pay for, pursuant to the Offer. SECTION 1.02. Company Actions. (a) The Company hereby ---------------- approves of and consents to the Offer and represents that the Board of Directors of the Company, at a meeting duly called and held, adopted resolutions approving this Agreement (as amended), the Offer, the Merger and the transactions contemplated hereby, determining that the terms of the Offer and the Merger are fair to, and in the best interests of, the Company's stockholders and recommending that the Company's stockholders approve and adopt this Agreement, accept the Offer and tender their shares pursuant to the Offer and/or vote their shares of Company Common Stock and Preference Stock in favor of the Merger. The Company has been advised by each of its directors and by each executive officer who as of the date hereof is aware of the 4 transactions contemplated hereby, that each such person either intends to tender pursuant to the Offer all shares of Company Common Stock and Preference Stock owned by such person or vote all shares of Company Common Stock and Preference Stock owned by such person in favor of the Merger. (b) Not later than the date the Offer Documents are filed with the SEC, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (which shall include the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder with respect to the persons to be named directors of the Company pursuant to Section 5.21) with respect to the Offer (such Schedule 14D-9, as amended from time to time, the "Schedule 14D-9") containing the recommendation described in Section 1.02(a) and shall mail the Schedule 14D-9 to the stockholders of the Company. The Schedule 14D-9 shall comply as to form in all material respects with the Exchange Act and the rules and regulations promulgated thereunder and, on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to information provided by Parent or Acquisition Sub for inclusion or incorporation by reference in the Schedule 14D-9. Each of the Company, Parent and Acquisition Sub agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that such information shall have become false or misleading in any material respect, and the Company further agrees to take all steps necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and disseminated to the Company's stockholders, in each case as and to the extent required by applicable Federal securities laws. Parent and its counsel shall be given a reasonable opportunity to review and comment upon the Schedule 14D-9 and all amendments and supplements thereto prior to their filing with the SEC or dissemination to stockholders of the Company. The Company agrees to provide Parent and its counsel in writing with any comments or requests for additional information the Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments and shall provide Parent and its counsel an opportunity to participate, including by way of discussions with the SEC or its staff, in the response of the Company to such comments. (c) In connection with the Offer, the Company shall cause its transfer agent to furnish Acquisition Sub promptly with mailing labels containing the names and addresses of the record holders of Company Common Stock and of the record holders of Preference Stock as of a recent date and of those persons becoming record holders 5 subsequent to such date, together with copies of all lists of stockholders, security position listings and computer files and all other information in the Company's possession or control regarding the beneficial owners of Company Common Stock and the beneficial owners of Preference Stock, and shall furnish to Acquisition Sub such information and assistance (including updated lists of stockholders, security position listings and computer files) as Parent may request in communicating the Offer to holders of Company Common Stock and Preference Stock. SECTION 1.03. Surviving Corporation. In accordance with the ---------------------- provisions of this Agreement and the Massachusetts Business Corporation Law, as amended (the "MBCL"), at the Effective Date (as defined in Section 1.08), Acquisition Sub shall be merged with and into the Company, and the Company shall be the surviving corporation in the Merger (hereinafter sometimes called the "Surviving Corporation"). At the Effective Date, the separate existence of Acquisition Sub shall cease. SECTION 1.04. Articles of Organization. (a) The Articles of ------------------------- Organization of the Company as amended pursuant to the Articles of Merger (as defined in Section 1.08), shall be the Articles of Organization of the Surviving Corporation. (b) The purposes of the Surviving Corporation shall be as set forth in the Articles of Organization of Acquisition Sub as in effect on the date hereof until such time as such purposes may be amended as provided in the Articles of Organization of the Surviving Corporation and by applicable law. SECTION 1.05. By-Laws. The By-Laws of Acquisition Sub as in -------- effect at the Effective Date shall be the By-Laws of the Surviving Corporation, until thereafter amended or repealed as provided by law. SECTION 1.06. Directors. The directors of Acquisition Sub at ---------- the Effective Date shall, from and after the Effective Date, be the directors of the Surviving Corporation and shall hold office from the Effective Date until their respective successors are duly elected or appointed and qualified in the manner provided in the Articles of Organization and By-Laws of the Surviving Corporation, or as otherwise provided by law. SECTION 1.07. Officers. The officers of Acquisition Sub at --------- the Effective Date shall, from and after the Effective Date, be the officers of the Surviving Corporation and shall hold office from the Effective Date until their respective successors are duly elected or appointed and qualified in the manner provided in the 6 Articles of Organization and By-Laws of the Surviving Corporation, or as otherwise provided by law. SECTION 1.08. Effective Date. The Merger shall become --------------- effective at the time of filing of articles of merger (substantially in the form set forth in Exhibit B annexed hereto) with the Secretary of State of the Commonwealth of Massachusetts in accordance with the provisions of Section 78 of the MBCL (the "Articles of Merger"). The Articles of Merger shall be filed with the Secretary of State of the Commonwealth of Massachusetts on the Closing Date. The date and time when the Merger becomes effective shall be herein referred to as the "Effective Date" and the "Effective Time", respectively. SECTION 1.09. Additional Actions. If, at any time after the ------------------- Effective Date, the Surviving Corporation determines that any deeds, bills of sale, assignments, assurances or any other acts or things are necessary or desirable (a) to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation, its right, title or interest in, to or under any of the rights, properties or assets of the Company or its Subsidiaries acquired or to be acquired by reason of, or as a result of, the Merger, or (b) otherwise to carry out the purposes of this Agreement, the Surviving Corporation and its proper officers and directors shall be authorized to execute and deliver, in the name and on behalf of the Company and its Subsidiaries, all such deeds, bills of sale, assignments and assurances and to do, in the name and on behalf of the Company and its Subsidiaries, all such other acts and things necessary or desirable to vest, perfect or confirm any and all right, title or interest in, to or under such rights, properties or assets in the Surviving Corporation or otherwise to carry out the purposes of this Agreement. SECTION 1.10. Company Common Stock, Preferred Stock and ------------------------------------------ Preference Stock. (a) Company Common Stock. (i) Each share of Common --------------------- Stock of the Company, par value $1 per share (including Rights as defined in Section 2.02(a)) (the "Company Common Stock") actually issued and outstanding at the Effective Date (except for Dissenting Shares, as defined in Section 1.12) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive $7.50 (the "Total Merger Consideration"). (ii) Each share of Company Common Stock held by Parent or Acquisition Sub or in the Company's treasury at the Effective Date shall, by virtue of the Merger, be canceled without payment of any consideration therefor and without any conversion thereof. (b) 5% Cumulative Preferred Stock. Each share of the ------------------------------ Company's 5% Cumulative Preferred Stock, par value $100 per share (the "5% Stock"), actually 7 issued and outstanding at the Effective Date, shall remain issued and outstanding after the Merger and shall be called for redemption and retirement as soon as practicable following the Merger (except for Dissenting Shares, as defined in Section 1.12), in accordance with the terms of Section 5.16(a), at a price equal to $110, plus all accrued and unpaid dividends thereon as of the date of redemption and retirement (the "5% Stock Consideration"), in accordance with the terms of the 5% Stock. (c) $1.85 Cumulative Convertible Preference Stock. (i) ---------------------------------------------- Unless called for redemption prior to the Closing pursuant to Section 5.16, each share of the Company's $1.85 Cumulative Convertible Preference Stock, par value $1 per share (the "Preference Stock"), actually issued and outstanding at the Effective Date (except for Dissenting Shares, as defined in Section 1.12) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive $20 plus all accrued and unpaid dividends thereon as of the Effective Date (whether redeemed or converted, the "Preference Stock Consideration"). (ii) Each share of Preference Stock held by Parent or Acquisition Sub or in the Company's treasury at the Effective Date shall, by virtue of the Merger, be cancelled without payment of any consideration therefor and without any conversion thereof. SECTION 1.11. Conversion of Acquisition Sub Common Stock. All ------------------------------------------- issued and outstanding shares of Common Stock, par value $1 per share, of Acquisition Sub (the "Acquisition Sub Common Stock") at the Effective Date shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and exchangeable for, in the aggregate, 4,123,178 fully paid and nonassessable shares of Common Stock, par value $1 per share, of the Surviving Corporation (the "Surviving Corporation Common Stock"). From and after the Effective Date, each outstanding certificate theretofore representing shares of Acquisition Sub Common Stock shall be deemed for all purposes to evidence ownership of, and to represent the number of shares of, Surviving Corporation Common Stock into which such shares of Acquisition Sub Common Stock shall have been converted. SECTION 1.12. Dissenting Shares. Notwithstanding anything in ------------------ this Agreement to the contrary, shares of Company Common Stock, 5% Stock and Preference Stock issued and outstanding on the Effective Date (other than any called for redemption pursuant to Section 5.16) which are held of record by stockholders who shall not have voted such shares in favor of the Merger, if applicable, and who shall have properly exercised rights to demand payment of the fair value of such shares in accordance with Sections 86 through 98, inclusive, of the MBCL ("Dissenting Shares") shall not be converted into the right to receive the consideration specified in Section 1.10(a), 1.10(b), or 1.10(c), respectively, but the holders thereof instead shall 8 be entitled to payment of the fair value of such shares in accordance with the provisions of Sections 86 to 92, inclusive, of the MBCL (the "Dissenting Consideration"); provided, however, that (i) if such a holder fails to file a -------- ------- notice of election to dissent in accordance with Section 86 of the MBCL or, after filing such notice of election, subsequently delivers an effective written withdrawal of such notice or fails to establish his entitlement to appraisal rights as provided in Sections 87 through 98, inclusive, of the MBCL, if he or she be so required, or (ii) if a court shall determine that such holder is not entitled to receive payment for his shares or such holder shall otherwise lose his or her appraisal rights, then in either of such cases, each share of Company Common Stock, 5% Stock or Preference Stock, respectively, held of record by such holder or holders shall automatically be converted into and represent only the right to receive the Total Merger Consideration, the 5% Stock Consideration or the Preference Stock Consideration, respectively, upon the surrender of the certificate or certificates representing such Dissenting Shares. The Company shall give Parent prompt notice of any demands received by the Company for payment of the fair value of such shares, and Parent shall have the right to participate in all the negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, make any payment (except to the extent that any such payment is made pursuant to a court order) with respect to, or settle or offer to settle, any such demands. SECTION 1.13. Surrender of Shares. (a) At and after the -------------------- Effective Date, Parent shall make available on a timely basis, by transferring to Chemical Mellon Shareholder Services, Inc. (the "Paying Agent") for the benefit of former stockholders of the Company, such funds as and when necessary to make the payments provided for in Section 1.10 herein with respect to the outstanding shares of Company Common Stock and Preference Stock (other than any called for redemption pursuant to Section 5.16). The Paying Agent shall agree to hold such funds in trust for the benefit of the former stockholders of the Company and deliver such funds in accordance with the terms hereof and the terms of a Paying Agency Agreement to be entered into by and between the Paying Agent and Parent. (b) Prior to or at the Effective Date, the Paying Agent shall mail or cause to be mailed to each record holder of an outstanding certificate or certificates which, immediately prior to the Effective Date, represented shares of Company Common Stock or Preference Stock (other than any called for redemption pursuant to Section 5.16) (the "Certificates"), a form letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent) (the "Transmittal Letter") and instructions for use in effecting the surrender of the Certificates for payment therefor. Upon surrender to the Paying Agent of a Certificate, together with such Transmittal Letter duly executed, the holder of such Certificate shall be entitled to 9 receive in exchange for each share of Company Common Stock or Preference Stock (other than any called for redemption pursuant to Section 5.16) represented by such Certificate, the Total Merger Consideration or Preference Stock Consideration, respectively, and such Certificate shall forthwith be canceled upon receipt by the holder of such Certificate of the Total Merger Consideration or Preference Stock Consideration, respectively. No interest will be paid or accrued on the Total Merger Consideration or Preference Stock Consideration payable upon the surrender of such Certificates. (c) If payment is to be made to a person other than the person in whose name the Certificate surrendered in exchange therefor is registered, it shall be a condition of payment of the Total Merger Consideration or Preference Stock Consideration, as the case may be, that the Certificate so surrendered be properly endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name of the record holder appears on such Certificate, and is otherwise in proper form for transfer, and that the Person requesting such payment shall pay any transfer or other taxes required by law as a result of such payment to a Person other than the record holder of the Certificate surrendered, or shall establish to Parent's satisfaction that such tax has been paid or is not applicable. (d) After the Effective Date, there shall be no further transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock or Preference Stock which are outstanding at the Effective Date. If, after the Effective Date, Certificates are presented to the Surviving Corporation or the Paying Agent for transfer, they shall be canceled and there shall be issued to the transferee in exchange for each share of Company Common Stock the Total Merger Consideration and in exchange for each share of Preference Stock the Preference Stock Consideration in accordance with Section 1.10 hereof. (e) The consideration payable upon the surrender for exchange of Certificates in accordance with the terms of this Article I shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock or Preference Stock theretofore represented by such Certificates, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock or Preference Stock which were outstanding immediately prior to the Effective Date. (f) None of Parent, Acquisition Sub, the Company or the Paying Agent shall be liable to any person in respect of any cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificates shall not have been surrendered prior to seven years after the Effective Date (or immediately prior to such earlier date on which any payment pursuant to this 10 Article I would otherwise escheat to or become the property of any Governmental Authority), the payment in respect of such Certificate shall, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto. SECTION 1.14. Certain Benefit Plans. (a) (i) With respect to ---------------------- unexpired options ("Options"), whether or not exercisable at the Effective Date, including stock appreciation rights relating thereto, outstanding on the Effective Date which have been issued pursuant to the Company's 1982 Stock Option Plan, as amended (the "1982 Stock Option Plan"), the Company's 1992 Stock Option Plan, as amended (the "1992 Stock Option Plan"), or the Company's 1992 Non-Employee Directors Stock Option Plan, as amended (the "Director Option Plan"), each such Option with an exercise price less than the Total Merger Consideration (an "Eligible Option") shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive, for each share of Company Common Stock subject thereto, a cash payment without interest equal to the Total Merger Consideration, less the per share exercise price of each such Option. Such Options shall be canceled upon such cash payment following the Merger. (ii) Any Option with an exercise price equal to or greater than the Total Merger Consideration (an "Ineligible Option") shall be canceled upon the Effective Date without payment of any consideration. (iii) The Company shall use its best efforts to amend each outstanding Option issued under the 1982 Stock Option Plan, the 1992 Stock Option Plan and the Director Option Plan to effect the transactions contemplated by this Agreement, including the cancellation of the Options in connection with the Merger in accordance with this Section 1.14. (b) There are no shares of Company Common Stock held in escrow pursuant to the Company's Long Term Incentive Compensation Plan (the "LTIP"). (c) Each share of Company Common Stock issued by the Company but not yet vested pursuant to the Company's Employees' Savings and Profit Sharing Plan (the "Savings Plan") shall, in connection with the Merger, become vested in the Person to whose account such share of Company Common Stock was issued and converted into the right to receive the Total Merger Consideration as provided in Section 1.10(a). (d) Immediately following the Effective Date, the Company's 1982 Stock Option Plan, 1992 Stock Option Plan, Director Option Plan, LTIP and Savings Plan shall be terminated and no further stock awards or stock options shall be granted thereunder from and after the date of this Agreement. 11 ARTICLE II Representations and Warranties of the Company --------------------------------------------- The Company hereby represents and warrants to Parent and Acquisition Sub as follows with respect to the Company and its Subsidiaries: SECTION 2.01. Corporate Organization. The Company is a ----------------------- corporation duly incorporated, validly existing and in good standing under the laws of the Commonwealth of Massachusetts with all requisite corporate power and authority to own, operate and lease its properties and to carry on its business as now being conducted. The Company is qualified to do business and is in good standing in each jurisdiction set forth in Schedule 2.01, which are the only jurisdictions in which such qualification is necessary except where failure to be qualified could not reasonably be expected to have a Material Adverse Effect. For purposes of this Agreement, a "Material Adverse Effect" is (a) a material adverse effect on the business, assets, properties, condition (financial or other) or results of operations of the Company and its Subsidiaries taken as a whole or the Surviving Corporation and its Subsidiaries taken as a whole or (b) a material adverse effect on the ability of the Company to carry out the transactions contemplated by this Agreement without significant unanticipated delay or expense. For purposes of this Agreement, a "Subsidiary" of any Person is any corporation of which a majority of all outstanding shares of capital stock (the holders of which are ordinarily and generally entitled to vote in the election of a majority of the members of the board of directors thereof) is owned, directly or indirectly, by such Person and/or other Subsidiaries of such Person. The Company has delivered to Parent complete and correct copies of its Articles of Organization and By-Laws, as amended to the date hereof. SECTION 2.02. Capitalization of the Company. (a) The ------------------------------ authorized capital stock of the Company consists of 15,000,000 shares of Company Common Stock, 15,000 shares of 5% Stock and 1,500,000 shares of Preference Stock. As of February 29, 1996, 4,123,178 shares of Company Common Stock, 5,820 shares of 5% Stock and 814,300 shares of Preference Stock were issued and are outstanding, 275,100 shares of Company Common Stock were held in the Company's treasury and 687,197 shares of Company Common Stock were reserved for issuance in connection with the rights (the "Rights") to purchase shares of Company Common Stock issued pursuant to the Rights Agreement dated as of November 25, 1986 (as amended from time to time, the "Rights Agreement") between the Company and The First National Bank of Boston (the "Rights Agent"). The Company has delivered to Parent a complete and correct copy of the Rights Agreement as amended and supplemented to the date hereof. All issued and outstanding shares of Company Common Stock, 5% 12 Stock and Preference Stock are duly and validly issued and outstanding, fully paid and nonassessable. The aggregate amount of accrued and unpaid dividends on the 5% Stock is zero and on the Preference Stock is $1,506,455. (b) As of the date hereof, there are outstanding unexercised, unexpired Options to purchase 288,100 shares of Company Common Stock, in each case with the exercise or "strike" price and other terms as set forth on Schedule 2.02 hereto. (c) Except as set forth in this Section 2.02 or on Schedule 2.02 hereto, there are no other shares of capital stock of the Company, or securities convertible into or exchangeable or exercisable for shares of capital stock of the Company or any of its Subsidiaries, outstanding, and there are no outstanding options, warrants, rights, contracts, commitments, understandings, arrangements or claims of any character by which the Company or any Subsidiary is or may become bound to issue, transfer, sell, repurchase or otherwise acquire or retire any shares of capital stock or other ownership interest of the Company or any Subsidiary, or any securities convertible into or exchangeable or exercisable for any such shares or other ownership interest (all of the foregoing being called "Conversion Rights") and, except as set forth in Section 2.02(a) and as reserved for issuance upon exercise of the Options described in Section 2.02(b) or the other Conversion Rights described in Schedule 2.02, no shares of capital stock of the Company are reserved for issuance. There are no voting trusts or other agreements or understandings to which the Company is a party with respect to the voting of the capital stock of the Company or any Subsidiary. Following consummation of the Merger no holder or beneficiary of any Conversion Rights shall be entitled to receive any securities of the Surviving Corporation or any other consideration not expressly contemplated by this Agreement. SECTION 2.03. Subsidiaries. (a) Schedule 2.03 hereto sets ------------- forth each Subsidiary and the jurisdiction of incorporation of such Subsidiary. Schedule 2.03 also sets forth each inactive Subsidiary (an "Inactive Subsidiary") of the Company. No Inactive Subsidiary has any assets or liabilities valued in excess of $5,000 or any business operations or real property nor has any Inactive Subsidiary conducted any business during the two-year period prior to the date of this Agreement. Except as disclosed on Schedule 2.03 hereto, all of the outstanding shares of capital stock and other ownership interest of the Company's Subsidiaries are owned, directly or indirectly, by the Company. Except as disclosed on Schedule 2.03, none of the shares or other ownership interests of the Subsidiaries owned or held by the Company, directly or indirectly, is subject to any pledge, Lien (as defined below) or claim of any kind. (b) Each Subsidiary (excluding each Inactive Subsidiary) is duly incorporated, validly existing and in good standing under the laws of the jurisdiction of 13 incorporation of each such Subsidiary, with all requisite corporate power and authority to own, operate and lease its properties and to carry on its business as now being conducted. Each Subsidiary (excluding each Inactive Subsidiary) is also qualified to do business and is in good standing in each jurisdiction in which such qualification is necessary, except where failure to be so qualified would not have a Material Adverse Effect. The Company has delivered to Parent complete and correct copies of the respective articles or certificates of incorporation or organization or By-Laws, as amended to the date hereof, of each of its Subsidiaries. (c) Except for its Subsidiaries, the Company does not directly or indirectly own any capital stock of or other equity interest in any corporation, partnership or other person and neither the Company nor any of its Subsidiaries is a member of or participant in any partnership, joint venture or similar person. SECTION 2.04. Authorization. (a) The Company has requisite -------------- corporate power and authority to execute and deliver this Agreement, and subject to the approval by the stockholders of the Company, to execute, deliver and file the Articles of Merger and, subject to the satisfaction of the conditions set forth herein and therein, to consummate the transactions contemplated hereby and thereby. (b) This Agreement, the Offer, the Merger and the other transactions contemplated hereby have been approved by the Board of Directors of the Company and, except for the approval of the Merger by the stockholders of the Company, no other corporate proceeding on the part of the Company is necessary to authorize this Agreement, the Offer, the Merger or the other transactions contemplated hereby or to consummate the Offer, the Merger and the other transactions contemplated hereby. The affirmative vote of the holders of (i) two-thirds of the outstanding shares of Company Common Stock and (ii) unless called for redemption pursuant to Section 5.16, two-thirds of the outstanding shares of the Preference Stock, approving the Merger are the only votes of the holders of any class or series of the Company's capital stock necessary to approve any of the transactions contemplated by this Agreement. (c) This Agreement has been duly and validly executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, and the Articles of Merger when executed and delivered pursuant hereto will be a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except in each case as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws in effect now or hereafter in effect relating to creditors' rights generally, and by equitable principles (whether considered in a proceeding at law or in equity). 14 (d) The transfer of the Company's granule crushing equipment to the Company's Wrentham and Franklin, MA quarry (at least with respect to the "French parcel" of such quarry) and its operation at such location will not conflict with, constitute a default under, result in the termination or in a right of termination of, or violate or be in conflict with, provide a basis for increased rights under, or result in a breach of any term or provision of, any term or provision of any Material Contract. SECTION 2.05. Absence of Conflicts; Consents. Except as set ------------------------------- forth in Schedule 2.05, neither the execution and delivery by Company of this Agreement and the Articles of Merger nor the consummation by the Company of the transactions contemplated hereby and thereby will: (a) assuming the approvals set forth in Section 2.04(b) have been obtained, conflict with or result in a breach of any provision of the respective articles or certificate of incorporation or organization or By-Laws of the Company or any Subsidiary; (b) to the knowledge of the Company, result in the creation of any lien, mortgage, agreement, right of way, charge, option, security interest, claim, restriction, easement, covenant, lease or encumbrance ("Lien") upon any of the properties of the Company or any of its Subsidiaries; (c) with or without giving of notice or the passage of time, or both, violate, or conflict with, or constitute a default under, or result in the termination or in a right of termination of, violate or be in conflict with, result in a breach of any term or provision of, or constitute a default under, or accelerate or permit the acceleration of the performance required by, or give any other natural person, corporation, trust, association, company, partnership, joint venture or other entity or any government, governmental agency, instrumentality or political subdivision ("Person") a basis for increased rights or termination or nonperformance under, or require any consent, authorization or approval under, any term or provision of any material Lien or any Material Contract to which the Company or any Subsidiary is a party or by which any of them are or their respective properties are subject or bound; (d) subject to the approval of the Merger by the Company's stockholders, to the knowledge of the Company, violate any provision of, or, except as set forth in Section 2.05(e), require any consent, authorization or approval under, any statute, law, ordinance, or administrative rule or regulation, Permit, order or license (collectively, but excluding Environmental Laws, "Applicable Laws") of any governmental agency, body or instrumentality (whether Federal, state, local or foreign) ("Governmental Authority"), or any 15 judicial, administrative or arbitration order, award, judgment, writ, injunction or decree (collectively, "Judgment") in each case applicable to the Company or any Subsidiary; or (e) require any consent, approval or authorization of, or declaration, filing or registration with, any Governmental Authority, to be made or obtained by or on behalf of the Company except (i) as required by the Exchange Act, (ii) the filing of the Articles of Merger and other appropriate merger documents, if any, as required by the MBCL, or in connection with the maintenance of qualification to do business in other jurisdictions, such other jurisdictions, and (iii) filings with the Federal Trade Commission ("FTC") and with the Antitrust Division of the U.S. Department of Justice (the "Antitrust Division") pursuant to Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the rules and regulations thereunder (the "HSR Act"). SECTION 2.06. Compliance with Laws. Neither the Company nor --------------------- any Subsidiary has been or is presently in violation of any provision of their respective certificates or articles of organization or incorporation or By-Laws, or of any Applicable Law or Judgment that would have a Material Adverse Effect. Except where the failure thereof would not cause a Material Adverse Effect, the Company and its Subsidiaries possess, and are in compliance in all material respects with the terms and provisions of all licenses, permits, certificates, authorizations, rights and other approvals of Governmental Authorities ("Permits") necessary for the operation of the business of the Company and its Subsidiaries. Except as set forth in Schedule 2.09 or 2.18, neither the Company nor any Subsidiary has been given written notice by any Governmental Authority of, or to the knowledge of Company, is under investigation by any Governmental Authority with respect to, any violation of any Applicable Law, Judgment or Permit. This Section 2.06 does not relate to environmental representations and warranties, which matters are exclusively the subject of Section 2.18. SECTION 2.07. Financial Statements. (a) Set forth on --------------------- Schedule 2.07 are the consolidated balance sheets of Company and its Subsidiaries as at December 31, 1994, and December 31, 1995, and the related consolidated statements of income, stockholders' equity and cash flows for the respective years then ended, including the notes thereto, and the report thereon of Price Waterhouse, independent certified public accountants (the "Company Financial Statements"). The Company Financial Statements present fairly in all material respects the consolidated financial position and the results of operations of the Company and its Subsidiaries as of the dates and for the periods indicated on the Company Financial Statements, in each case in conformity with generally accepted accounting principles ("GAAP"), consistently applied during such periods. Except as expressly contemplated or permitted by this Agreement or 16 disclosed in the Schedules hereto, to the knowledge of the Company, the Company and its Subsidiaries do not have any material liabilities of any nature (whether accrued, absolute, contingent, unasserted or otherwise) except (1) as disclosed, reflected or reserved against in the balance sheet (the "Balance Sheet") dated December 31, 1995 (the "Balance Sheet Date"), included in the Company Financial Statements and the notes thereto, and (2) as incurred in the ordinary course of business consistent with past practice and not in violation of this Agreement. (b) The inventory of the Company and its Subsidiaries, whether reflected on the Balance Sheet or subsequently acquired, is, and will be as of the Effective Date, generally of a quality and quantity usable and saleable consistent in all material respects with past practice, in the ordinary course of business. The inventory of the Company and its Subsidiaries is reflected on the Balance Sheet and in their respective books and records in accordance with GAAP applied on a basis consistent with past practice. (c) All accounts receivable of the Company and its Subsidiaries, whether reflected on the Balance Sheet or subsequently created, have arisen from bona fide transactions in the ordinary course of business. To the knowledge of the Company, all accounts receivable reflected on the Balance Sheet are good and collectible at the aggregate recorded amounts thereof, net of any applicable reserves for doubtful accounts reflected on the Balance Sheet and all customer accounts receivable created since the Balance Sheet Date are and will be as of the Effective Date good and collectible at the aggregate recorded amounts thereof, net of any applicable reserves for doubtful accounts reflected on the Balance Sheet or subsequently created consistent with past practice and experience. SECTION 2.08. Absence of Material Changes. Except as set ---------------------------- forth in Schedule 2.08 or as permitted by Section 5.06 or set forth in Schedule 5.06 or as expressly contemplated or permitted by this Agreement, since the Balance Sheet Date, each of the Company and its Subsidiaries has conducted its business in the ordinary course, and there has not been (and it is not reasonably expected there will be) (i) any event, change or circumstance causing, or reasonably anticipated to cause in the future, any Material Adverse Effect, except as otherwise disclosed to Parent in writing prior to the date of this Agreement, (ii) any declaration, setting aside or payment of any dividend (whether in cash, stock or property) with respect to any of the Company's capital stock, other than the minimum required dividends declared on the 5% Stock or the Preference Stock, (iii) (x) any granting by the Company or any of its Subsidiaries to any executive officer or director of the Company or any of its Subsidiaries of any increase in compensation, except as was required under employment agreements in effect as of the Balance Sheet Date, (y) any granting by the Company or any of its Subsidiaries to any such executive officer or director of any increase in severance or 17 termination pay, except as was required under employment, severance or termination agreements in effect as of the Balance Sheet Date or (z) any entry by the Company or any of its Subsidiaries into any employment, severance or termination agreement with any such executive officer or director, (iv) any damage, destruction or loss, whether or not covered by insurance, that has or could have a Material Adverse Effect, (v) any change in accounting methods, principles or practices by the Company materially affecting its assets, liabilities or business, except insofar as may have been required by a change in GAAP or (vi) any other action that would be prohibited by Section 5.06 on and after the date of this Agreement. SECTION 2.09. Litigation. Except as set forth in Schedule ----------- 2.09 and other than routine warranty claims against the Company that do not in the aggregate exceed in any material respect the level of such claims experienced historically by the Company in the ordinary course, neither the Company nor any Subsidiary is engaged in, and there is not to the knowledge of the Company pending, nor has the Company or any Subsidiary received written notice of, any legal action, suit, investigation, inquiry or proceeding by any Governmental Authority or other Person ("Legal Action"). SECTION 2.10. Patents and Trademarks. To the knowledge of the ----------------------- Company, the Company and its Subsidiaries own all patents, trademarks, service marks, trade names, copyrights, trade secrets, information, proprietary rights and processes necessary for their business as now conducted without any conflict with or infringement of the rights of others. Except as set forth in Schedule 2.10, there are no outstanding options, licenses or agreements of any kind relating to the foregoing, nor is the Company nor any Subsidiary bound by or a party to any material options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, information, proprietary rights and processes of any other Person. Except as set forth in Schedule 2.10 or relating to any matter that has been resolved or that the Company reasonably believes has been abandoned, none of the Company nor any Subsidiary has received any written communications alleging that the Company or any Subsidiary has violated any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other Person. SECTION 2.11. Material Contracts; Permits. Schedule 2.11(a) ---------------------------- sets forth a complete and accurate list of any of the following to which the Company or any Subsidiary is a party or by which Company or any Subsidiary is bound (collectively, "Material Contracts"): (a) all deeds, indentures, leases, subleases or other instruments by which an ownership, leasehold or other interest in real property is held by the Company or any Subsidiary; 18 (b) all contracts, commitments or agreements, including contracts or licenses pertaining to the payment of royalties (but excluding customer purchase orders, purchase orders for raw materials and warranties), to the extent such agreements include provisions that do or could involve payments or commitments (whether fixed or contingent) to or from the Company or any Subsidiary (i) for an amount (or potential amount) in excess of $200,000 or (ii) have a term longer than twelve (12) months in duration (except for such contracts, commitments or agreements terminable by the Company or the appropriate Subsidiary of the Company without penalty upon notice of 90 days or less); (c) all written management, compensation or employment contracts or contracts entered into with any executive officer or director of the Company or any Subsidiary; (d) all contracts or agreements under which the Company or any Subsidiary has any outstanding indebtedness, obligation or liability for borrowed money or the deferred purchase price of property or has the right or obligation to incur any such indebtedness, obligation or liability, in each case in an amount greater than $200,000; (e) all bonds or agreements of guarantee or indemnification in which the Company or any Subsidiary acts as surety, guarantor or indemnitor with respect to any obligation (fixed or contingent) in an amount or potential amount greater than $200,000; (f) all secrecy, noncompete or other agreements which (i) restrict the right of the Company or any Subsidiary to engage in any business reasonably related to its present activities or (ii) would restrict the right of Parent to engage in any business after the consummation of the transactions contemplated by this Agreement; (g) all current bank accounts that contain balances and safe deposit arrangements; (h) all agreements relating to preemptive or other preferential rights relating to capital stock, restrictions on the disposition of capital stock and registration rights; (i) all partnership and joint venture agreements; 19 (j) all agreements relating to material business acquisitions or dispositions during the last five years, including any separate tax or indemnification agreements; and (k) all material customer and supply agreements and all material sales representative, marketing, agency or distributorship agreements, to the extent such agreements include provisions that do or could involve payments or commitments (whether fixed or contingent) to or from the Company or any Subsidiary (i) for an amount in excess of $200,000 or (ii) have a term (including renewals that do not require the Company's or a Subsidiary's consent) longer than twelve months in duration (except for such contracts, commitments or agreements terminable by the Company or the appropriate Subsidiary of the Company without penalty upon notice of 90 days or less). Except as set forth on Schedule 2.11(a), (i) neither the Company nor any Subsidiary is in default under the terms of any Material Contract, which default permits the other party to adversely alter or terminate any rights of the Company or any Subsidiary or accelerate the obligations of the Company or any Subsidiary under such Material Contract or to collect damages, (ii) to the knowledge of the Company, no other party thereto is in default under the terms of any Material Contract and (iii) each Material Contract is in full force and effect. In order for the Company or any Subsidiary to perform its payment obligations noted under each of the Material Contracts set forth on Schedule 2.11(b), the only required payment will be the payment of the outstanding principal amount (and accrued interest thereon) owed by the Company under each such Material Contract which as of the date of this Agreement is set forth on Schedule 2.11(b) for each such Material Contract, without the payment of any premium or penalty, other than accrued interest or default interest. Upon the making of such payment under each such Material Contract, the Company will have no further obligation or liability under any such Material Contract, except for immaterial expenses relating to the termination of such Material Contracts. SECTION 2.12. Title to Properties and Related Matters. (a) ---------------------------------------- Schedule 2.12(a) sets forth all of the real property owned by the Company and each Subsidiary (the "Owned Real Property"). Schedule 2.12(b) sets forth all of the real property and interests in real property leased by the Company and each Subsidiary (the "Leased Real Property", and together with the Owned Real Property, the "Company Property"). Each of the Company or its Subsidiaries, as the case may be, has good and marketable fee title to the Owned Real Property, subject only to Permitted Liens (as defined in Section 2.12(b) below). Each of the Company or its Subsidiaries, as the case may be, has a valid and existing leasehold interest in all 20 Leased Real Property, subject only to Permitted Liens (as defined in Section 2.12(b) below). (b) All Company Property and personal properties owned by the Company or any Subsidiary are owned free and clear of all Liens (other than mortgages securing the Company's existing credit facility described in Schedule 2.11(b)) or leased free and clear of all Liens, except for (A) Liens for taxes and assessments or governmental charges or levies which are not at the time of Closing due or payable, (B) Liens in respect of pledges or deposits under workers' compensation laws or similar legislation, carriers', warehousemen's, mechanics', laborers' and materialmen's and similar Liens, which have been incurred in the ordinary course of business, so long as the obligations secured by such Liens are not then delinquent, (C) Liens incidental to the conduct of the business of the Company and its Subsidiaries (other than arising out of claims of infringement) which were not incurred in connection with the borrowing of money or the obtaining of advances or credits and which do not individually or in the aggregate materially detract from the value or materially impair the use and operation of the Company Property to which it relates or the value and operation of the business of the Company as presently conducted, (D) covenants, conditions, restrictions, easements and other similar matters of record existing as of the Effective Date which do not, individually or in the aggregate, impair the use and operation of the Company Property to which it relates in the business of the Company as presently conducted and (E) Liens set forth on Schedule 2.18 arising pursuant to Environmental Laws (the liens described in the foregoing clauses (A), (B), (C), (D) and (E) being "Permitted Liens") and (ii) the Owned Real Property and personal properties owned by the Company or any Subsidiary are not subject to any Liens, building or use restrictions, exceptions, variances, reservations or limitations of any nature whatsoever which interfere with or are violated by the existence of the improvements thereon or the current use and operation of each such Owned Real Property or personal properties, respectively, to which it relates in the business of the Company as currently conducted. SECTION 2.13. Taxes. (a) For purposes of this Agreement, (A) ------ "Tax" or "Taxes" shall mean all Federal, state, provincial, county, ----- local, municipal, foreign and other taxes, assessments, duties or similar charges of any kind whatsoever, including all corporate franchise, income, sales (including bulk sales), use, ad valorem, intangibles, receipts, value added, profits, license, withholding, payroll, employment, excise, premium, real property, personal property, customs, net worth, estimated, capital, gains, transfer, stamp, documentary, social security, alternative minimum, accumulated earnings, goods and services, recapture, recording, severance, environmental (including but not limited to, taxes under Section 59A of the Code), occupation and other taxes, and including any interest, penalties and additions imposed with respect to such amounts; (B) "Code" shall mean the ---- Internal Revenue Code of 1986, as amended, and reference to any Section of the Code shall refer to that Section 21 in effect at the date hereof; (C) "Taxing Authority" shall mean any domestic, ---------------- foreign, federal, national, state, provincial, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising Taxregulatory authority; and (D) "Return" or "Returns" ------ ------- shall mean all returns, declarations of estimated tax payments, reports, estimates, information returns and statements, including any related or supporting information filed with respect to any of the foregoing, maintained, filed or to be filed with any Taxing Authority in connection with the determination, assessment, collection or administration of any Taxes. (b) Except as set forth on Schedule 2.13, the Company and each of the Subsidiaries has timely filed or will timely file, as the case may be, with the appropriate Taxing Authority all Returns required to be filed on or prior to the date hereof or the Closing Date, as the case may be, and each such Return was or will be, as the case may be, complete and correct in all material respects at the time of filing. (c) Except as set forth on Schedule 2.13, all Taxes (including Taxes for which no Returns are required to be filed and including payroll and wage withholding Taxes) of the Company and any of the Subsidiaries or for which the Company or any of the Subsidiaries is or could otherwise be held liable, or which are or could otherwise become chargeable as an encumbrance upon any property or assets of the Company or any of the Subsidiaries ("Covered Taxes"), have been duly and timely paid. The amount of "accrued Taxes" shown on the Balance Sheet adequately reflects the liability for unpaid Taxes (including deferred Taxes) of Company and the Subsidiaries as of the Balance Sheet Date. (d) Except as set forth on Schedule 2.13, the Company has made available for inspection by Parent (A) complete and correct copies of all Returns of the Company and each of the Subsidiaries, with respect to Federal, state, provincial, county, local, municipal, foreign and other income, profits, corporate franchise, receipts, sales, excise, property, net worth and all other material Taxes, that are or have been required to be filed (except as noted in (b) above) for taxable periods ending with or within the last five calendar years and for such longer period as Parent has requested not to exceed the period of the relevant statute of limitations and (B) complete and correct copies of all ruling requests, private letter rulings, revenue agent reports, information document requests and responses thereto, notices of proposed deficiencies, deficiency notices, applications for changes in method of accounting, protests, petitions, closing agreements, settlement agreements, and any similar documents submitted by, received by or agreed to by or on behalf of the Company or any of the Subsidiaries and relating to material Covered Taxes. 22 (e) Except as set forth on Schedule 2.13, no liens for Taxes exist with respect to any of the assets or properties of any of the Subsidiaries or Company. The Returns of the Company and each of the Subsidiaries with respect to Federal income Taxes have been examined by the Internal Revenue Service, or the statute of limitations with respect to the relevant Tax liability has expired, for all taxable periods through and including the year ended December 31, 1982. All Returns with respect to state, county, local, municipal, provincial, foreign and other income, profits, corporate franchise, receipts, sales, excise, property, net worth, and capital Taxes, and with respect to all other material Taxes, have been examined by the appropriate Taxing Authority, or the statute of limitations with respect to the relevant Tax liability has expired, for all taxable periods through and including the taxable period listed with respect to each such jurisdiction. Except as set forth on Schedule 2.13, each deficiency resulting from any audit or examination relating to Covered Taxes by any Taxing Authority has been paid and no material issues were raised in writing by the relevant Taxing Authority during any such audit or examination that might apply to taxable periods other than the taxable period to which such audit or examination related. Except as set forth on Schedule 2.13, (A) no Returns with respect to Federal income Taxes are currently under audit or examination by the Internal Revenue Service and any other Taxing Authority, (B) no audit or examination relating to Covered Taxes is currently being conducted by the Internal Revenue Service or any other Taxing Authority and (C) neither the Internal Revenue Service nor any other Taxing Authority has given notice in writing that it will commence any such audit or examination. (f) Except as set forth in Schedule 2.13, no Taxing Authority is now asserting (in writing), or, to the knowledge of the Company or any of the Subsidiaries, threatening to assert (in writing), any deficiency or claim for Covered Taxes or any adjustment to any item of income, gain, deduction, loss, credit, or tax basis entering into the computation of Covered Taxes and there is no reasonable basis for any such assertion. (g) Except as set forth in Schedule 2.13, (A) no person has made with respect to the Company or any of the Subsidiaries, or with respect to any property held by the Company or any of the Subsidiaries, any consent under Section 341 of the Code, (B) no property of Company or any of the Subsidiaries constitutes "tax-exempt use property" (as defined in Section 168(h) of the Code), (C) neither the Company nor any of the Subsidiaries is a party to any lease made pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect prior to the date of enactment of the Tax Equity and Fiscal Responsibility Act of 1982 and (D) none of the assets of Company or any of the Subsidiaries is subject to a lease under Section 7701(h) of the Code or under any predecessor. 23 (h) There is no agreement or other document extending, or having the effect of extending, the period of assessment or collection of any Covered Taxes and no unrevoked power of attorney with respect to any Covered Taxes has been executed or filed with the Internal Revenue Service or any other Taxing Authority. (i) The Company has never been a member of any affiliated, consolidated, combined, unitary or aggregate group for purposes of filing Returns or paying Taxes at any time. (j) Except as set forth in Schedule 2.13, none of the Company or any of the Subsidiaries is a party to or is bound by any Tax sharing agreements (whether formal or informal) with any of its affiliates, or with any Taxing Authority. (k) None of the Company or any of the Subsidiaries will be required to include in a taxable period on or after the Closing Date taxable income attributable to income that economically accrued in a taxable period ending on or before the Closing Date, including, without limitation, as a result of the installment method of accounting, the completed contract method of accounting or the cash method of accounting. (l) Except as set forth on Schedule 2.13, none of the Company or any of the Subsidiaries will be required in a taxable period beginning on or after the Closing Date to include any amount in income pursuant to Section 481 of the Code (or any comparable provisions of state, local or foreign law), by reason of a change in accounting methods or otherwise, as a result of actions taken prior to the Closing Date. (m) Schedule 2.13 lists each state, county, local, municipal or foreign jurisdiction in which Company or any of the Subsidiaries files, has filed, is required to file or has been required to file a Return or is or has been liable for Tax on a "nexus" basis for the current and preceding five years. (n) The Company is not, and has not been during the five-year period ending on the date hereof or the Closing Date, as the case may be, a "United States real property holding corporation" within the meaning of Section 897 of the Code. (o) Schedule 2.13 provides true and correct descriptions of the following: items for which amounts for taxes have been reserved on the Balance Sheet in excess of reserves necessary to currently pay its operating tax liabilities. The Company has a consolidated net operating loss carryover for regular Federal income tax purposes as of December 31, 1995, of approximately $44 million. The Company has no material net operating loss carryovers in states other than New York (in which it has a net operating loss carryover of $198,000 as of December 31, 1995). The Company has tax credit carryforwards as of December 31, 1995, of approximately 24 $1.2 million for regular Federal income tax purposes, and no tax credit carryforwards for state tax purposes. In addition, the Company had approximately $1.1 million of minimum tax carryovers. (p) Schedule 2.13 sets forth the Company's best estimates, made in good faith, of the excess loss accounts for the Company and its Subsidiaries as of December 31, 1995. The Company estimates in good faith that neither it nor its Subsidiaries had positive balances in any deferred intercompany gain accounts as of December 31, 1995. (q) The schedules of the Company's best estimates, made in good faith, of the temporary and permanent differences as of December 31, 1995, previously submitted to the Company are true, correct and complete in all materials respects. (r) None of the Company, any of the Subsidiaries or any other affiliate of the Company has made any election under Section 13261(g)(2) or Section 13261(g)(3) of the Revenue Reconciliation Act of 1993. (s) None of the Company, any of the Subsidiaries or any other affiliate of the Company has available any foreign tax credits. SECTION 2.14. Labor Agreements. Except as identified on ----------------- Schedule 2.14, neither the Company nor any Subsidiary is a party to any union, collective bargaining, works council or similar agreement or arrangement. SECTION 2.15. Benefit Plans. (i) Schedule 2.15 is a list of -------------- each "employee pension benefit plan" (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) (hereinafter a "Pension Plan"), "employee welfare benefit plan" (as defined in Section 3(1) of ERISA, hereinafter a "Welfare Plan"), and each other plan, arrangement or policy relating to stock options, stock purchases, compensation, deferred compensation, severance, fringe benefits or other employee benefits, in each case maintained or contributed to, or required to be maintained or contributed to, by the Company and its Subsidiaries or any other person or entity that, together with the Company, is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code (each a "Commonly Controlled Entity") for the benefit of any present or former employees of the Company or any of its Subsidiaries (all the foregoing being herein called "Benefit Plans"). The Company has made available to Parent true, complete and correct copies of (1) each Benefit Plan, (2) the most recent annual report on Form 5500 as filed with the Internal Revenue Service with respect to each applicable Benefit Plan, (3) the most recent summary plan description (or similar document) with respect to each applicable 25 Benefit Plan and (4) each trust agreement and insurance or annuity contract relating to any Benefit Plan. (ii) Except as disclosed in Schedule 2.15, to the knowledge of the Company, each Benefit Plan has been administered in all material respects in accordance with its terms. Except as disclosed in Schedule 2.15, to the knowledge of the Company, the Company, its Subsidiaries and all the Benefit Plans are in compliance in all material respects with the applicable provisions of ERISA, the Code, and all other Applicable Laws. Except as disclosed in Schedule 2.15, to the knowledge of the Company, there are no investigations by any governmental agency, termination proceedings or other claims (except claims for benefits payable in the normal operation of the Benefit Plans), suits or proceedings against or involving any Benefit Plan or asserting any rights to or claims for benefits under any Benefit Plan that could give rise to a Material Adverse Effect, and to the knowledge of the Company, there are not any facts that could give rise to a Material Adverse Effect in the event of any such investigation, claim, suit or proceeding. (iii) Except as disclosed on Schedule 2.15, to the knowledge of the Company: (1) all contributions to the Benefit Plans required to be made by the Company or any of its Subsidiaries in accordance with the terms of the Benefit Plans, any applicable collective bargaining agreement and, when applicable, Section 302 of ERISA or Section 412 of the Code, have been timely made, (2) there has been no application for or waiver of the minimum funding standards imposed by Section 412 of the Code with respect to any Benefit Plan that is a Pension Plan, excluding any Pension Plan which is a multiemployer pension plan as defined in Section 4001(a)(3) of ERISA (hereinafter a "Company Pension Plan") and (3) no Company Pension Plan had an "accumulated funding deficiency" within the meaning of Section 412(a) of the Code as of the end of the most recently completed plan year. All such contributions to the Benefit Plans for any period ending before the Balance Sheet Date are properly accrued and reflected in the Balance Sheet and such contributions since such Balance Sheet Date will be reflected on subsequent balance sheets. (iv) Except as disclosed on Schedule 2.15, to the knowledge of the Company, (1) each Company Pension Plan that is intended to be a tax-qualified plan has been the subject of a determination letter from the Internal Revenue Service to the effect that such Company Pension Plan and each related trust is qualified and exempt from Federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, (2) no such determination letter has been revoked, and revocation has not been threatened, (3) no event has occurred and no circumstances exist that would adversely affect the tax-qualification of such Company Pension Plan and (4) such Company Pension Plan has not been amended since the effective date of its most recent determination letter in any respect that might adversely affect its qualification, 26 materially increase its cost or require security under Section 307 of ERISA. The Company has made available to Parent a copy of the most recent determination letter received with respect to each Company Pension Plan for which such a letter has been issued, as well as a copy of any pending application for a determination letter. The Company has also provided to Parent a list of all Company Pension Plan amendments as to which a favorable determination letter has not yet been received. (v) Schedule 2.15 discloses whether: (1) to the knowledge of the Company, any non-exempt "prohibited transaction" (as defined in Section 4975 of the Code or Section 406 of ERISA) has occurred that involves the assets of any Benefit Plan; (2) to the knowledge of the Company, any Company Pension Plan has been terminated or has been the subject of a "reportable event" (as defined in Section 4043 of ERISA and the regulations thereunder) for which the 30-day notice requirement has not been waived by the Pension Benefit Guaranty Corporation ("PBGC"); and (3) to the knowledge of the Company, the Company, any of its Subsidiaries or any trustee, administrator or other fiduciary of any Benefit Plan has engaged in any transaction or acted in a manner that could, or has failed to act so as to, subject the Company, any such Subsidiary or any trustee, administrator or other fiduciary to any material liability for breach of fiduciary duty under ERISA or any other applicable law. (vi) Except as disclosed on Schedule 2.15, to the knowledge of the Company, as of the most recent valuation date for each Company Pension Plan that is a "defined benefit pension plan" (as defined in Section 3(35) of ERISA (hereinafter a "Defined Benefit Plan")), there was not any amount of "unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA) under such Defined Benefit Plan, and the Company is not aware of any facts or circumstances that would materially change the funded status of any such Defined Benefit Plan. The Company has made available to Parent the most recent actuarial report or valuation with respect to each Defined Benefit Plan. (vii) Except as disclosed on Schedule 2.15, to the knowledge of the Company, no Commonly Controlled Entity has incurred any liability to a Pension Plan (other than for contributions not yet due) or to the PBGC (other than for the payment of premiums not yet due) that, when aggregated with other such liabilities, would result in a Material Adverse Effect to the Company, which liability has not been fully paid as of the date hereof if due and payable. (viii) No Commonly Controlled Entity has (a) engaged in a transaction described in Section 4069 of ERISA that could subject the Company to a material liability at any time after the date hereof or (b) acted in a manner that could, or failed to act so as to, result in material fines, penalties, taxes or related charges under (x) 27 Section 502(c), (i) or (l) of ERISA, (y) Section 4071 of ERISA or (z) Chapter 43 of the Code. (ix) Except as disclosed in Schedule 2.15, to the knowledge of the Company, no Commonly Controlled Entity has announced an intention to withdraw, but has not yet completed withdrawal, from a "multiemployer pension plan" (as defined in Section 4001(a)(3) of ERISA). Except as disclosed on Schedule 2.15, to the knowledge of the Company, no action has been taken, and no circumstances exist, that could result in either a partial or complete withdrawal from such a multiemployer pension plan by any Commonly Controlled Entity. Schedule 2.15 also lists for each Benefit Plan that is a multiemployer pension plan (excluding the multiemployer pension plan in respect of the Company's former New York Building Products, Inc. operations) the Company's best estimate, based upon the information supplied to it by each multiemployer pension plan, of the amount of withdrawal liability that would be incurred if each Commonly Controlled Entity were to make a complete withdrawal from each such plan as of the dates specified in Schedule 2.15. Schedule 2.15 also lists for each Benefit Plan that is a multiemployer pension plan (excluding the multiemployer pension plans in respect of the Company's former New York Building Products, Inc., and Bardstown operations) the Company's best estimate, based upon the information supplied to it by each multiemployer pension plan, of the amount of "unfunded vested benefits" (within the meaning of Section 4211 of ERISA) as of the dates specified in Schedule 2.15. As of the most recent valuation date for the multiemployer pension plan in respect of the Company's former New York Building Products Inc. operations, to the knowledge of the Company, based upon the information supplied to it by such multiemployer pension plan, there was not any amount of "unfunded vested benefits" under such plan. (x) The list of Welfare Plans in Schedule 2.15 discloses whether each Welfare Plan is (i) unfunded, (ii) funded through a "welfare benefit fund", as such term is defined in Section 419(e) of the Code, or other funding mechanism or (iii) insured. Except as disclosed on Schedule 2.15, to the knowledge of the Company, apart from the written provisions of the Welfare Plans disclosed to Parent, there are no understandings, agreements or undertakings, written or oral, that would prevent any such Welfare Plan from being amended or terminated at any time after the Closing Date. The Company and its Subsidiaries comply with the applicable requirements of Section 4980B(f) of the Code with respect to each Benefit Plan that is a group health plan, as such term is defined in Section 5000(b)(1) of the Code. (xi) Except as provided in Section 1.14 with respect to the 1982 Stock Option Plan, the 1992 Stock Option Plan, the Director Option Plan, the LTIP and the Savings Plan, and as provided in the employment and severance agreements listed in Schedules 2.11(a) and 2.15, no employee of the Company or any of its Subsidiaries 28 will be entitled to any additional material benefits or any acceleration of the time of payment or vesting of any material benefits under any Benefit Plan as a result of the transactions contemplated by this Agreement. (xii) During the period beginning on January 1, 1995, and ending on the date of this Agreement, there has been no change (a) in any actuarial or other assumption used to calculate funding obligations with respect to any Company Pension Plan or (b) in the manner in which contributions to any Company Pension Plan are made or the basis on which such contributions are determined. (xiii) Except as disclosed on Schedule 2.15, to the knowledge of the Company and based upon its best estimate, any amount that could be received (whether in cash or property or the vesting of property) as a result of any of the transactions contemplated by this Agreement by any employee, officer or director of the Company or any of its affiliates who is a "disqualified individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or Benefit Plan currently in effect would not be characterized as an "excess parachute payment" (as such term is defined in Section 280G(B)(1) of the Code). Schedule 2.15 sets forth (i) the Company's best estimate of the maximum amount that could be paid to each executive officer of Company as a result of the transactions contemplated by this Agreement under all employment, severance and termination agreements, other compensation arrangements and Benefit Plans currently in effect and (ii) the Company's best estimate of the "base amount" (as such term is defined in Section 280(b)(3) of the Code) for each such executive officer calculated as of the date of this Agreement. SECTION 2.16. Labor Disputes; Unfair Labor Practices. (a) --------------------------------------- There is neither pending nor, to the knowledge of the Company, threatened any labor dispute which could materially adversely affect the facility that is the subject of such dispute, or any strike or work stoppage involving the Company or any Subsidiary. (b) There is not now pending or, to the knowledge of the Company, threatened any charge or complaint against the Company or any Subsidiary by the National Labor Relations Board, any state or local labor or employment agency or any representative thereof. SECTION 2.17. Product Warranties. (a) The standard forms of ------------------- product warranties and guarantees used by the Company and each Subsidiary during the past five (5) years are attached as Schedule 2.17 hereto. Neither the Company nor any Subsidiary has authorized any product warranty or guaranty during such period of time other than pursuant to such forms. 29 (b) Other than as set forth on Schedule 2.17 or relating to any matter that has been resolved or that the Company reasonably believes has been abandoned, as of date of this Agreement, the Company has not received written notice of any product warranty or similar claims with an actual or alleged liability to the Company or any Subsidiary other than routine warranty claims against the Company that do not in the aggregate exceed in any material respect the level of such claims historically experienced by the Company in the ordinary course. The Company does not believe that the Assurance of Discontinuance dated November 1995 between the Commonwealth of Massachusetts and Bird, Inc. will result in an increase in liability for claims under product warranties over the level historically experienced by the Company in the ordinary course. SECTION 2.18. Environmental Matters. Except as disclosed in ---------------------- Schedule 2.18, with respect to the business and operations of the Company and its Subsidiaries and to the Owned Real Property and Leased Real Property: (a) No Hazardous Material has been used, possessed, Released, generated, manufactured or treated, on or under such Owned Real Property or Leased Real Property, as the case may be, by the Company or any Subsidiary in material violation of any Environmental Law. (b) The Company and each Subsidiary, as the case may be, has through the date hereof (i) secured and maintained compliance with all permits, certificates, licenses, approvals, registrations or authorizations required for the conduct of their respective businesses under Environmental Laws and (ii) maintained such Owned Real Property or Leased Real Property and conducted their respective business thereon in accordance in all material respects with all Environmental Laws. (c) No written notice, written request for information pursuant to common law, law or regulation, citation, summons, complaint or order has been received by the Company or any Subsidiary, and no penalty has been assessed and, to the knowledge of the Company, no investigation or review is pending or threatened by any Governmental Authority or other Person, with respect to the business and operations of the Company and its Subsidiaries or to such Owned Real Property or Leased Real Property, as the case may be, other than relating to any matter that has been resolved or that the Company reasonably believes has been abandoned, regarding (i) any alleged violation by the Company or any Subsidiary of any Environmental Laws, (ii) any alleged failure by the Company or any Subsidiary to have any environmental permit, certificate, license, approval, registration or authorization required under any Environmental Law, or (iii) any use, possession, spill, Release, threatened Release, storage, generation, manufacture, treatment, deposit, discharge, transportation 30 or disposal by or on behalf of the Company or any Subsidiary of any Hazardous Material. (d) Neither the Company nor any Subsidiary has entered into or agreed to any court decree or order nor are any of them subject to any judgment, decree or order relating to compliance with any Environmental Law or to investigation or cleanup under any Environmental Law. (e) There are no aboveground or underground storage tanks on any such Owned Real Property or Leased Real Property. (f) Neither the Company nor any Subsidiary has received any written notice of non-compliance with any applicable statutes, laws, ordinances, rules, orders and regulations of any Governmental Authority that relate to occupational health and safety, other than relating to any matter that has been resolved or that the Company reasonably believes has been abandoned. (g) The investigation, remediation, cleanup and other costs of the Company relating to compliance with any Environmental Law will not exceed an amount equal to 205% of the Company's estimates of such amounts (the "Company Estimates") provided to Parent by the Company in a letter dated January 30, 1996. The Company has used its best efforts in preparing the Company Estimates consistent with all recognized best engineering practices. As used in this Agreement, the term "Environmental Laws" means any and all applicable treaties, laws, regulations, enforceable requirements, binding determinations, orders, decrees, judgments, injunctions, permits, approvals, authorizations, licenses or variances, promulgated or entered into by any Governmental Authority, relating to the environment, conservation, preservation or reclamation of natural resources, or to the management, Release or threatened Release of Hazardous Materials, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. Section Section 9601 et seq. ("CERCLA"), the Federal Water Pollution -- --- Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. Section Section 1251 et seq., Clean Air Act of 1970, as amended, 42 U.S.C. Section -- --- Section 7401 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. -- --- Section Section 2601 et seq., the Occupational Safety and Health Act of 1970, -- --- as amended, 29 U.S.C. Section Section 651 et seq., the Emergency Planning and -- --- Community Right-to-Know Act of 1986, 42 U.S.C. Section Section 11001 et seq., -- --- the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. Section Section 300(f) et seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section -- --- Section 1801 et seq., and any similar or implementing state or local law, and -- --- all amendments or regulations promulgated thereunder. 31 As used in this Agreement, the term "Hazardous Materials" means all explosive or regulated radioactive materials or substances, hazardous or toxic substances, wastes or chemicals, petroleum (including crude oil or any faction thereof) or petroleum distillates, asbestos or asbestos containing materials, including materials listed in 49 C.F.R. Section 172.101 and materials defined as hazardous substances pursuant to Section 101(14) of the CERCLA. As used in this Agreement, the term "Release" means any spilling, emitting, leaking, pumping, pouring, emptying, injecting, depositing, disposing, discharging, dispersing, leaching, emanating or migrating of any Hazardous Materials in, into, onto, or though the environment (including ambient air, surface water, groundwater, soils, land surface, subsurface strata, workplace or structure). SECTION 2.19. Insurance. The Company and each Subsidiary has ---------- been and is insured by financially sound and reputable insurers unaffiliated with the Company with respect to its and their properties and the conduct of its and their business in such amounts and against such risks as are consistent with industry practice. The insurance coverage provided by such policies of insurance will be continued through the Effective Date and will not terminate or lapse by reason of the transactions contemplated by this Agreement. The Company has provided to Parent copies of such policies of insurance. Except as set forth in Schedule 2.19, neither the Company nor any Subsidiary has been denied insurance coverage by any carrier in the last three years. SECTION 2.20. SEC Filings. (a) Schedule 2.20 sets forth all ------------ of the documents filed since January 1, 1994 through the date of this Agreement by the Company with the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act"), or the Exchange Act. The documents listed in Schedule 2.20 (the "SEC Documents") are all the documents the Company was required to file under the Securities Act or the Exchange Act since January 1, 1994, and at the time they were filed and when supplemented or amended, the SEC Documents complied with the requirements of the Securities Act and the Exchange Act, as applicable, and at such time, none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents, at the time they were filed and when supplemented or amended, complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be 32 indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods therein indicated (subject, in the case of unaudited statements, to normal year-end audit adjustments). (b) None of the information supplied or to be supplied by the Company for inclusion or incorporation by reference in (i) the Offer Documents or (ii) the information to be filed by the Company in connection with the Offer pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder (the "Information Statement"), will, at the respective times the Offer Documents and the Information Statement are filed with the SEC and first published, sent or given to holders of shares of Company Common Stock or Preference Stock, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Information Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder. SECTION 2.21. Brokers and Finders. The Company has not -------------------- employed any broker or finder or incurred any liability for any brokerage fees, commissions, finders' fees or similar fees or expenses in connection with this Agreement or the Merger contemplated herein except for Dillon, Read & Co. Inc. The Company has delivered to Parent a copy of its engagement letter with Dillon, Read & Co. Inc. The estimated investment banking and legal fees and expenses incurred and to be incurred by the Company in connection with this Agreement and the Merger contemplated by this Agreement have been disclosed to Parent in writing on the date hereof. SECTION 2.22. Rights Agreement; Antitakeover. (a) The ------------------------------- Company has taken all necessary action to (i) amend the Rights Agreement to render the Rights inapplicable to the Offer and the Merger and the other transactions contemplated by this Agreement and (ii) ensure that (y) neither Parent nor any of its affiliates is an Acquiring Person (as defined in the Rights Agreement) and (z) a Stock Acquisition Date, a Distribution Date or a Triggering Event (as such terms are defined in the Rights Agreement) does not occur by reason of the announcement or consummation of the Offer and the Merger or any of the other transactions contemplated by this Agreement. (b) The Company has taken or will take prior to Closing all action necessary to approve the Offer and the Merger such that the approval (along with the stockholder approval required pursuant to Section 6.03) is sufficient to render entirely inapplicable to the Offer and the Merger or Parent or Acquisition Sub the provisions of 33 Chapter 110C, 110D, 110E and 110F of the Massachusetts General Laws. No other antitakeover or similar statute or regulation applies or purports to apply to the transactions contemplated by this Agreement. SECTION 2.23. Opinion of Financial Advisor. The Company ----------------------------- has received the opinion of Dillon, Read & Co. Inc. to the effect that the consideration to be received in the Offer and the Merger by the Company's stockholders is fair to the Company's stockholders from a financial point of view, a copy of which opinion has been delivered to Parent. SECTION 2.24. Asbestos Claims. The Agreement of Settlement ---------------- dated March 8, 1993, between Employers Insurance of Wausau and the Company with respect to insurance coverage for the Company's exposure for future asbestos expenses and liabilities is in full force and effect. ARTICLE III Representations and Warranties of Parent ---------------------------------------- Parent hereby represents and warrants to the Company as follows: SECTION 3.01. Corporate Organization. Parent is a corporation ----------------------- duly incorporated, validly existing and in good standing under the laws of Delaware with all requisite power and authority to own, operate and lease its properties and to carry on its business as now being conducted. Parent is qualified to do business and is in good standing in each jurisdiction in which such qualification is necessary, except where failure to be qualified would not reasonably be expected to have a material adverse effect on the ability of Parent to carry out the transactions contemplated hereby without significant unanticipated delay. SECTION 3.02. Authorization. (a) Parent has requisite -------------- corporate power and authority to execute and deliver this Agreement and, subject to the satisfaction of the conditions set forth herein and therein, to consummate the transactions contemplated hereby and thereby. (b) This Agreement has been approved by the Board of Directors of Parent and upon such approval no other corporate proceeding on the part of Parent is necessary to authorize this Agreement or to consummate the transactions contemplated hereby. 34 (c) This Agreement has been duly and validly executed and delivered by Parent and is a valid and binding agreement of Parent, enforceable against Parent in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws in effect now or hereafter in effect relating to creditors' rights generally and by equitable principles (whether considered in a proceeding at law or in equity). SECTION 3.03. Absence of Conflicts; Consents. Neither the ------------------------------- execution and delivery by Parent of this Agreement nor the consummation by Parent of the transactions contemplated hereby will: (a) conflict with or result in a breach of any provision of the certificate of incorporation or By-Laws of Parent which would have a material adverse effect on the ability of Parent to carry out the transactions contemplated hereby without significant unanticipated delay; (b) result in the creation of any Lien upon any of the properties of Parent which would have a material adverse effect on the ability of Parent to carry out the transactions contemplated hereby without significant unanticipated delay; (c) with or without giving of notice or the passage of time, or both, violate, or conflict with, or constitute a default under, or result in the termination or in a right of termination of, violate or be in conflict with, result in a breach of any term or provision of, or constitute a default under, or accelerate or permit the acceleration of the performance required by, or give any other Person a basis for accelerated or increased rights or termination or nonperformance under, or require any consent, authorization or approval under, any term or provision of any Lien, lease, license or other agreement or instrument to which Parent or any of its Subsidiaries is a party or by which it or they are bound, except to the extent that such circumstance would not have a material adverse effect on the ability of Parent to carry out the transactions contemplated hereby without significant unanticipated delay; (d) subject to the approval of the Merger by the Company's stockholders, to the knowledge of Parent, violate any provision of, or require any consent, authorization or approval under, any Applicable Laws of any Governmental Authority, or any Judgment applicable to Parent or any of its Subsidiaries, except to the extent that such circumstance would not have a material adverse effect on the ability of Parent to carry out the transactions contemplated hereby without significant unanticipated delay; or 35 (e) require any consent, approval or authorization of, or declaration, filing or registration with, any Governmental Authority, to be made or obtained by or on behalf of Parent except (i) as required by the Exchange Act, (ii) the filing of the Articles of Merger and other appropriate merger documents, if any, as required by the laws of the Commonwealth of Massachusetts or, in connection with the maintenance of qualification to do business in other jurisdictions, such other jurisdictions and (iii) filings with the FTC and with the Antitrust Division under the HSR Act. SECTION 3.04. Litigation. Neither Parent nor any of its ----------- Subsidiaries is engaged in, and there is not, to the knowledge of Parent, pending, nor has Parent or any of its Subsidiaries received any written notice of, any Legal Action which would prevent Parent from consummating the transactions contemplated hereby. SECTION 3.05. Brokers and Finders. Parent has not employed -------------------- any broker or finder or incurred any liability for any brokerage fees, commissions, finders' fees or similar fees or expenses in connection with this Agreement or the transactions contemplated hereby except for McFarland Dewey & Co. In the event that the Company shall be obligated to pay Parent's Expenses pursuant to Article X, Parent will deliver to the Company a copy of its engagement letter with McFarland Dewey & Co. ARTICLE IV Representations and Warranties of Acquisition Sub ------------------------------------------------- Acquisition Sub hereby represents and warrants to the Company as follows: SECTION 4.01. Corporate Organization. Acquisition Sub is a ----------------------- corporation duly incorporated, validly existing and in good standing under the laws of the Commonwealth of Massachusetts and has not engaged in any operations or incurred any obligations other than incident to its organization and the performance of this Agreement. SECTION 4.02. Authorization. (a) Acquisition Sub has all -------------- requisite corporate power and authority, if necessary, to execute, deliver and file the Articles of Merger and to execute and deliver this Agreement and, subject to the satisfaction of the conditions set forth herein, to consummate the transactions contemplated hereby. This Agreement has been approved by the Board of Directors of Acquisition Sub, and no other corporate proceeding on the part of Acquisition Sub is necessary to authorize this 36 Agreement or to consummate the transactions contemplated hereby without significant unanticipated delay. (b) The Agreement has been duly and validly executed and delivered by Acquisition Sub and is a valid and binding agreement of Acquisition Sub, enforceable against Acquisition Sub in accordance with its terms, enforceable against Acquisition Sub in accordance with its terms, except in each case as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws in effect now or hereafter in effect relating to creditors' rights generally and by equitable principles (whether considered in a proceeding at law or in equity). SECTION 4.03. Absence of Conflicts; Consents. Neither the ------------------------------- execution and delivery by Acquisition Sub of this Agreement nor the consummation by Acquisition Sub of the transactions contemplated hereby will: (a) conflict with or result in a breach of any provision of the Articles of Organization or By-Laws of Acquisition Sub which would have a material adverse effect on the ability of Acquisition Sub to carry out the transactions contemplated hereby without significant unanticipated delay; (b) result in the creation of any Lien upon any of the properties of Acquisition Sub which would have a material adverse effect on the ability of Acquisition Sub to carry out the transactions contemplated hereby without significant unanticipated delay; (c) with or without giving of notice or the passage of time, or both, violate, or conflict with, or constitute a default under, or result in the termination or in a right of termination of, violate or be in conflict with, result in a breach of any term or provision of, or constitute a default under, or accelerate or permit the acceleration of the performance required by, or give any other Person a basis for accelerated or increased rights or termination or nonperformance under, or require any consent, authorization or approval under, any term or provision of any Lien, lease, license or other agreement or instrument to which Acquisition Sub or any of its Subsidiaries is a party or by which it or they are bound, unless such circumstance would not have a material adverse effect on the ability of Acquisition Sub to carry out the transactions contemplated hereby without significant unanticipated delay; (d) subject to the approval of the Merger by the Company's stockholders, to the knowledge of Acquisition Sub, violate any provision of, or require any consent, authorization or approval under, any Applicable Laws of any Governmental Authority, or any Judgment applicable to Acquisition Sub or 37 any of its Subsidiaries, except to the extent that such circumstance would not have a material adverse effect on the ability of Acquisition Sub to carry out the transactions contemplated hereby without significant unanticipated delay; or (e) require any consent, approval or authorization of, or declaration, filing or registration with, any Governmental Authority, to be made or obtained by or on behalf of Acquisition Sub except (i) as required by the Exchange Act, (ii) the filing of the Articles of Merger and other appropriate merger documents, if any, as required by the laws of the Commonwealth of Massachusetts or, in connection with the maintenance of qualification to do business in other jurisdictions, such other jurisdictions and (iii) filings with the FTC and with the Antitrust Division under the HSR Act. SECTION 4.04. Litigation. Neither Acquisition Sub nor any of ----------- its Subsidiaries is engaged in, and there is not, to the knowledge of Acquisition Sub, pending, nor has Acquisition Sub received any written notice of, any Legal Action which would prevent Acquisition Sub from consummating the transactions contemplated hereby. SECTION 4.05. Capitalization. The authorized capital stock of --------------- Acquisition Sub consists of 200,000 shares of Common Stock, $1 par value, of which 100 shares are issued and outstanding. All issued and outstanding shares of Acquisition Sub Common Stock have been validly issued and are fully paid, nonassessable and free of preemptive rights and all of such shares are owned, beneficially and of record, by Parent. There are no outstanding securities convertible into or exchangeable or exercisable for shares of capital stock of Acquisition Sub. SECTION 4.06. Brokers and Finders. Acquisition Sub has not -------------------- employed any broker or finder or incurred any liability for any brokerage fees, commissions, finders' fees or similar fees or expenses in connection with this Agreement or the transactions contemplated hereby. ARTICLE V Covenants --------- SECTION 5.01. Access and Information. (a) From the date ----------------------- hereof until the Effective Date or, if earlier, the date of termination of this Agreement pursuant to Section 9.01, the Company shall, and shall cause its Subsidiaries to, afford to Parent and to Parent's officers, employees, accountants, counsel and other authorized representatives full access, upon reasonable notice to the Company, to their 38 plants, properties, books and records during normal business hours for the purpose of making such investigations as Parent shall reasonably desire in connection with the transactions contemplated hereby, at its expense (except as otherwise contemplated by Section 10.01), and the Company shall use its reasonable efforts to cause its and its Subsidiaries' representatives to furnish promptly to Parent such additional financial and operating data and other information regarding the business and properties of the Company and its Subsidiaries as Parent may from time to time reasonably request for such purpose. In addition, the Company shall afford to Parent and to Parent's officers, employees, accountants, counsel and other authorized representatives the right to speak directly with the lenders of the Company and its Subsidiaries in the presence of representatives of the Company selected by the Chief Executive Officer of the Company, including without limitation, Fleet Capital Corporation. (b) The provisions of the confidentiality agreement dated April 13, 1994 (the "Confidentiality Agreement"), between the Company and Saint-Gobain Corporation in connection with the transactions contemplated hereby shall be incorporated herein and made a part hereof except that the termination of such Agreement shall be extended to December 31, 1996. SECTION 5.02. Proxy Statement. (a) The Company shall prepare ---------------- and file with the SEC, as soon as reasonably practicable, the proxy statement to be distributed to the Company's stockholders in connection with the Special Meeting referred to in Section 5.03 (the "Proxy Statement"), and the Company shall use all reasonable efforts to have such Proxy Statement cleared by the SEC. The Proxy Statement shall comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation is made by the Company with respect to statements made or incorporated by reference therein based on information supplied or required to be supplied by Parent or Acquisition Sub for inclusion or incorporation by reference in the Proxy Statement. (b) Parent shall cooperate with the Company in preparing the Proxy Statement and making any filings required to be made pursuant to this Section 5.02, and the Company shall consult with Parent in that regard and keep Parent fully informed of its progress with respect thereto and provide to Parent copies of the Proxy Statement and all such filings for review and approval prior to the finalization thereof. (c) Parent and the Company shall furnish to each other, and each other's counsel, all such information as may be required and requested in connection with the preparation of the Proxy Statement and the filing of the Proxy Statement with the SEC, and each represents and warrants to the other that no written information furnished as provided for in this Section 5.02(c) which has been prepared by the responsible party will contain any untrue statement of a material fact or omit to state a material fact 39 required to be stated in order to make any information so furnished, in light of the circumstances under which it is so furnished, not misleading. (d) Parent and the Company shall each promptly notify the other if at any time before the Effective Date it becomes aware that the Proxy Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. In such event, the Company shall prepare a supplement or amendment to the Proxy Statement which corrects such misstatements or omissions and shall cause the same to be filed with the SEC and distributed to the stockholders of the Company in accordance with the Exchange Act. (e) Upon the acceptance of any shares of Company Common Stock and Preference Stock (if any) by Acquisition Sub pursuant to the Offer (the "Consummation of the Offer"), Parent shall cause Acquisition Sub to vote all its shares of Company Common Stock and Preference Stock in favor of the Merger. SECTION 5.03. Stockholders' Meeting. (a) The Company shall ---------------------- call a special meeting of its stockholders ("Special Meeting") to consider and vote upon the matters necessary for the consummation of the transactions contemplated by this Agreement and shall recommend to its stockholders a vote "FOR" the Merger; provided, however, that nothing contained in this -------- ------- Section 5.03(a) or any other provision of this Agreement shall prohibit the Company or its Board of Directors, or the representatives of either of them, from recommending to the stockholders of the Company against, or withdrawing, modifying or changing its recommendation to the stockholders with respect to, the Merger, if permitted by Section 5.12 hereof. (b) The date of the Special Meeting shall be determined jointly by Parent and the Company, but shall occur as soon as practicable following the SEC's approval of the Proxy Statement and related proxy materials. SECTION 5.04. Supplemental Information. From time to time ------------------------- prior to the Effective Date, the Company shall promptly advise Parent of any inaccuracy of which it has knowledge in any Schedules which it has delivered pursuant to this Agreement if any matter arises hereafter which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in any such Schedule. Such updating shall not cure any breach or misrepresentation or failure of any closing condition that may exist based on the Schedules originally delivered with this Agreement. 40 SECTION 5.05. Further Assurances. Consistent with the terms ------------------- and conditions hereof, each party hereto shall execute and deliver such instruments and take such other action as the other parties hereto may reasonably require in order to carry out this Agreement and the transactions contemplated hereby. SECTION 5.06. Conduct of Company Business Prior to the Effective --------------------------------------------------- Date. (a) Except as set forth on Schedule 5.06 or any other Schedule hereto - ----- with reference to this Section 5.06 or otherwise consented to or approved by an authorized officer of Parent or as expressly contemplated or permitted by this Agreement, the Company agrees that prior to the Effective Date (or, if earlier, when a majority of the members of the Board of Directors of the Company are designees of Acquisition Sub in accordance with Section 5.21) the business of the Company and its Subsidiaries shall be conducted in the ordinary course consistent with past practice and: (i) no change shall be made in the respective articles or certificate of organization or incorporation or By-Laws of the Company or any of its Subsidiaries; (ii) no change shall be made in the number of shares of the Company's authorized, issued or outstanding capital stock; nor shall any Conversion Rights be granted, made, redeemed or amended; nor shall the Company or any Subsidiary issue, deliver, pledge or sell any such shares, securities or obligations (except deliveries or pledges in favor of the Company's senior lenders); provided, however, that the Company -------- ------- shall be permitted to issue shares or other securities as contemplated by the Savings Plan as in effect on the date hereof and shall be permitted to issue shares of Common Stock in connection with the due exercise of Options under the 1982 Stock Option Plan, the 1992 Stock Option Plan, the Director Option Plan or any other right or convertible security outstanding as of the date of this Agreement in accordance with the existing terms thereof; (iii) except as required with respect to the 5% Stock (including the obligations set forth in Section 5.19) or with respect to the Preference Stock as permitted in Section 5.19, (x) no dividend shall be declared or paid or other distribution (whether in cash, stock, property or any combination thereof) or payment declared or made in respect of the Company Common Stock or any other outstanding capital stock of the Company, nor shall the Company or any Subsidiary (y) purchase, acquire or redeem any shares of Company Common Stock, 5% Stock or Preference Stock or (z) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock; 41 (iv) neither the Company nor any Subsidiary shall enter into any Material Contract, or except in the ordinary course of business consistent with past practice any other agreement, commitment or instrument; (v) the Company shall use and shall cause each Subsidiary to use its and their respective reasonable efforts to preserve its and their business organization intact, to keep available the services of its and their officers and present key employees and to preserve its and their properties and the goodwill of its and their suppliers, customers and others with whom business relationships exist; (vi) the Company shall not take, agree to take or permit any Subsidiary to take any action or do or permit to be done anything in the conduct of its business or that of any Subsidiary which would be contrary to or in breach of any of the terms or provisions of this Agreement or which would cause any of the representations of the Company contained herein to be or become untrue in any material respect; (vii) neither the Company nor any of its Subsidiaries shall adopt or amend in any material respect or terminate any Benefit Plan, except as required by law, or change any actuarial or other assumption used to calculate funding obligations with respect to any Company Pension Plan (except to the extent that failure to make such change would result in noncompliance with GAAP, ERISA or the Code), or change the manner in which contributions to any Company Pension Plan are made or the basis on which such contributions are determined, except as required by Applicable Law; (viii) the Company shall not acquire or agree to acquire (x) by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof or (y) any assets that are material, individually or in the aggregate, to the Company and its Subsidiaries taken as a whole, except purchases of inventory, raw materials, supplies and similar materials in the ordinary course of business consistent with past practice and capital expenditures complying with clause (xi); (ix) the Company shall not sell, lease, license, mortgage or otherwise encumber or subject to any Lien (except in favor of the Company's senior lenders or Permitted Liens) or otherwise dispose of any of its material properties or assets, except bona fide sales of inventory in the ordinary course of business consistent with past practice; 42 (x) the Company shall not (x) incur any indebtedness for borrowed money or guarantee any such indebtedness of another person, issue or sell any debt securities or warrants or other rights to acquire any debt securities of the Company or any of its Subsidiaries, guarantee any debt securities of another person, enter into any "keep well" or other agreement to maintain any financial statement condition of another person or enter into any arrangement having the economic effect of any of the foregoing, except for short-term borrowings incurred in the ordinary course of business consistent with past practice and routine endorsements in the process of collection, or (y) make any loans, advances or capital contributions to, or investments in, any other person, other than to the Company or any direct or indirect wholly owned Subsidiary of the Company or routine travel and similar advances to employees; (xi) the Company shall not make or agree to make any new capital expenditure or expenditures which, individually, is in excess of $100,000 or, in the aggregate, are in excess of $250,000; (xii) the Company shall not make any tax election or settle or compromise any income tax liability; provided that Parent shall not -------- unreasonably withhold any consent or approval of any such tax election, settlement or compromise; and provided further that the filing of the ---------------- Company's 1995 Federal income tax return and 1995 state and local income tax returns shall not constitute the settling or compromising of any income tax liability for purposes of this paragraph; (xiii) the Company shall not pay, discharge or satisfy any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities that are reflected or reserved against in, the Balance Sheet or incurred since the date of the Balance Sheet in the ordinary course of business consistent with past practice, or waive the benefits of, or agree to modify in any manner, any confidentiality, standstill or similar agreement to which the Company or any of its Subsidiaries is a party, except as permitted by Section 5.12; and (xiv) the Company shall not authorize any of, or commit or agree to take any of, the foregoing actions. (b) Parent shall respond within a reasonable period of time to any request for consent or approval required under Section 5.06. 43 (c) Advice of Changes. The Company shall promptly advise ------------------ Parent orally and in writing of any change or event of which the Company has knowledge having, or which, insofar as can reasonably be foreseen, would have, a Material Adverse Effect. SECTION 5.07. Consents. Each of the Company, Parent and --------- Acquisition Sub shall, and shall cause each of their Subsidiaries to, use its and their reasonable efforts to obtain prior to the Effective Date all approvals, authorizations and consents of all third Persons identified on Schedule 2.05 and all Permits which are necessary for (i) the consummation of the Offer, the Merger and the other transactions contemplated hereby, (ii) the ownership or leasing and operation by the Surviving Corporation and each of its Subsidiaries of all the properties and assets of the Company and its Subsidiaries and (iii) the conduct by the Surviving Corporation and each of its Subsidiaries of the business of the Company and its Subsidiaries as conducted by such entities on the date hereof. SECTION 5.08. Filings. The Company, Parent and Acquisition -------- Sub shall use their reasonable efforts to respond as promptly as practicable to all inquiries received from the FTC or the Antitrust Division for additional information or documentation in connection with all notices, reports or other documentation filed by Parent and the Company under the HSR Act. The Company, Parent and Acquisition Sub shall take such reasonable action as may be necessary under state and Federal securities laws applicable to or necessary for, and will file all documents and notifications with the SEC and other Governmental Authorities reasonably necessary for, the consummation of the Offer, the Merger and the transactions contemplated hereby. Each party shall furnish the other and the other's counsel with all information reasonably requested by such other party pertaining to it and its subsidiaries and affiliates as may be required in order to enable such other party to take all such actions as required by this Section 5.08. Nothing in this Agreement shall require Parent to dispose of, or make any change in, any portion of its or the Company's assets or business or to pay any material amount or incur any other material burden in order to obtain any consent, approval or authorization or satisfy any condition in connection with the Closing. SECTION 5.09. Filing of Articles of Merger. Subject to the ----------------------------- terms and conditions of this Agreement, as soon as practicable following the approval of the Merger by the stockholders of the Company contemplated by Section 5.03 hereof, the Company, Parent and Acquisition Sub will cause the Articles of Merger to be filed with the Secretary of State of the Commonwealth of Massachusetts. SECTION 5.10. Interim Financial Statements. Until the ----------------------------- Effective Date or, if earlier, the date of termination of this Agreement pursuant to Section 9.01, as 44 soon as practicable but in no event later than 30 days after the end of each month beginning with February 1996, the Company shall deliver to Parent unaudited consolidated financial information for such month and the corresponding month of the preceding year as prepared by the Company's management for its own internal purposes, such information to be held in confidence in accordance with Section 5.01(b) hereof. Until the Effective Date or, if earlier, the date of termination of this Agreement pursuant to Section 9.01, the Company shall deliver to Parent its Form 10-Q for each quarter within 45 days after the end of such quarter after the date of this Agreement (but not later than the business day prior to the date of filing of such Form 10-Q with the SEC). The financial statements contained therein shall present fairly in all material respects the Company's consolidated financial condition, results of operations and changes in financial position (on a consolidated basis) as at the date or for the periods indicated in accordance with GAAP consistently applied, except as otherwise indicated in such statements and except as to format and footnote disclosure shall be prepared in conformity with the requirements of Rule 10-01 of Regulation S-X under the Exchange Act and Item 303 of Regulation S-K. SECTION 5.11. Public Announcements. (a) The parties agree --------------------- that the initial press release to be issued with respect to the transactions contemplated by this Agreement shall be in the form heretofore agreed to by the parties. Thereafter, unless required by Applicable Law or by the rules of any applicable self-regulatory organizations, the Company, Parent and Acquisition Sub shall not, and shall each cause their respective officers, employees and other authorized representatives not to, prior to the Effective Date, issue any press release or make any other public disclosure or announcement or otherwise make any disclosure to any third Person (other than by way of the Offer Documents, the Schedule 14D-9 and the Proxy Statement referred to in Section 5.02) concerning the transactions contemplated by this Agreement or the terms and provisions hereof. (b) Should any press release or other public disclosure be required to be made, then the party required to make such release or disclosure shall not make such release or disclosure without first using its reasonable efforts to obtain the prior written consent of the other parties hereto as to both the timing and content of such press release or public disclosure, which consent shall not be unreasonably withheld. SECTION 5.12. No Solicitation. (a) The Company shall not, ---------------- nor shall it permit any of its Subsidiaries or affiliates to, nor shall it authorize or permit any officer, director or employee of, or any investment banker, attorney or other advisor or representative of, the Company or any of its Subsidiaries to, (i) solicit or initiate, or knowingly encourage the submission of, any takeover proposal, (ii) participate in any discussions or negotiations regarding, or furnish to any person any information with respect to any takeover proposal (except for (1) non-confidential information, or 45 (2) filings with the SEC); provided, however, that prior to the earlier of -------- ------- (x) the Consummation of the Offer or (y) the Special Meeting, to the extent required by the fiduciary obligations of the Board of Directors of the Company, as determined in good faith by the Board of Directors based on the advice of counsel, the Company may, (A) in response to an unsolicited request therefor, furnish information with respect to the Company (pursuant to a confidentiality agreement at least as restrictive as the Confidentiality Agreement (as determined by the Company's counsel)) to any person who has indicated to the Company that it is interested in pursuing a qualified takeover proposal and discuss such information (but not the terms of any possible takeover proposal) with such person and (B) upon receipt by the Company of a qualified takeover proposal, following the delivery to Parent of the notice required pursuant to Section 5.12(c), participate in discussions or negotiations regarding such qualified takeover proposal. Without limiting the foregoing, it is understood that any violation of the restrictions set forth in the preceding sentence by any officer of the Company or any of its Subsidiaries or any investment banker, attorney or other advisor or representative of the Company or any of its Subsidiaries, shall be deemed to be a breach of this Section 5.12 by the Company. For purposes of this Agreement, "takeover proposal" means any proposal for a merger or other business combination (regardless of legal form) involving the Company or any Subsidiary or any proposal or offer to acquire in any manner, directly or indirectly, a substantial portion of the assets or business of the Company or a substantial equity interest in, or any substantial amount of voting securities of, the Company or any Subsidiary, or any other transaction outside the ordinary course of business and not otherwise specifically permitted by the terms of this Agreement the consummation of which would impede or prevent the consummation of the Merger pursuant to the terms of this Agreement; and "qualified takeover proposal" means a takeover proposal having terms which the Board of Directors of the Company determines (based on, among other things, the advice of a financial advisor of nationally recognized reputation) in its good faith reasonable judgment to be more favorable to the holders of Company Common Stock than the Total Merger Consideration and holders of Preference Stock than the Preference Stock Consideration and likely to be fully financed and consummated. (b) Neither the Board of Directors of the Company nor any committee thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent or Acquisition Sub, the approval or recommendation by such Board of Directors or any such committee of this Agreement, the Offer or the Merger, (ii) approve or recommend, or propose to approve or recommend, any takeover proposal or (iii) enter into any agreement with respect to any takeover proposal. Notwithstanding the foregoing, in the event the Board of Directors of the Company receives a qualified takeover proposal, the Board of Directors or any committee thereof or the Company may (subject to the limitations contained in this Section) withdraw or modify its approval or recommendation of this Agreement, the Offer or the Merger at 46 any time after 48 hours following Parent's receipt of written notice (a "Notice of Qualified Takeover Proposal") advising Parent that the Board of Directors has received a qualified takeover proposal, specifying the material terms and conditions of such qualified takeover proposal and identifying the person making such qualified takeover proposal. The Company may take any of the foregoing actions pursuant to the preceding sentence only until the earlier of (x) the Consummation of the Offer or (y) the approval of the Merger at the Special Meeting. Nothing contained herein shall prohibit the Company from taking and disclosing to its stockholders a position contemplated by Rule 14e-2(a) following Parent's receipt of a Notice of Qualified Takeover Proposal provided that the Company does not withdraw or modify its position with respect to the Merger or approve or recommend a takeover proposal. (c) In addition to the obligations of the Company set forth in paragraph (b) of this Section, the Company shall promptly advise Parent orally and in writing of any request for information or of any takeover proposal, or any inquiry with respect to any takeover proposal, the material terms and conditions of such request, takeover proposal or inquiry, and the identity of the person making any such takeover proposal or inquiry. The Company shall keep Parent fully informed of the status and details of any such request, takeover proposal or inquiry. SECTION 5.13. Validity of Representations. Parent, ---------------------------- Acquisition Sub and the Company shall each take such action as is reasonably necessary to render their respective representations and warranties accurate on and as of the Effective Date. Without limiting the foregoing, the Company shall take any action required by Parent to ensure the accuracy of Section 2.22 including redemption of the Rights if Parent determines that would be desirable. SECTION 5.14. Employees; Benefits. Parent and Acquisition Sub -------------------- shall honor (i) all employment, severance or similar contractual arrangements in accordance with their terms in existence on the date of this Agreement and disclosed prior to the date of this Agreement to Parent and (ii) all legally imposed obligations relating to employment matters. After the Closing Date, Parent and Acquisition Sub shall comply with enforceable Applicable Law, including without limitation the Workers Adjustment Retraining Notification Act, 29 U.S.C. Section 2101 et seq. It is the current intention of Parent -- --- and Acquisition Sub to cause the Surviving Corporation to provide benefits to employees of the Company and its Subsidiaries that are no less favorable in the aggregate to such employees than those in effect on the date of this Agreement; provided, however, that the foregoing shall not limit or restrict the - -------- ------- right of the Surviving Corporation or its Subsidiaries to terminate the employment of such employees or subsequently to modify the benefits or other terms of employment of such employees, to the extent permitted by enforceable Applicable Law. 47 SECTION 5.15. Indemnification and Insurance. (a) Parent and ------------------------------ Acquisition Sub hereby agree that all rights to indemnification now existing in favor of the directors or officers of the Company and its Subsidiaries (the "Indemnified Parties") as currently provided in their respective certificates or articles of incorporation or organization and By-Laws or in any agreements, contracts or arrangements with the Company or any of its Subsidiaries in effect on the date hereof and previously furnished to Parent and to the extent not in violation of applicable state law, shall survive the Merger and shall continue in full force and effect for a period of five years from the Effective Date; provided that, in the event any claim or claims are asserted or made within - -------- such five year period, all rights to indemnification in respect of any such claim or claims shall continue until the disposition of any and all such claims. Without limiting the foregoing, to the extent currently provided in the certificates or articles of incorporation or organization and By-Laws of the Company and its Subsidiaries and Massachusetts law, or agreements, contracts or arrangements disclosed to Parent with the Company or any of the Subsidiaries, in the event that any Indemnified Party becomes involved in any capacity in any action, proceeding or investigation in connection with any matter, including the transaction contemplated by this Agreement, occurring prior to, and including, the Effective Date, or otherwise relating to or arising out of such matters, Parent or the Surviving Corporation shall periodically advance to such Indemnified Party his or her legal and other expenses (including the costs of any investigation and preparation incurred in connection therewith). Parent shall use all reasonable efforts to maintain in effect, or shall cause the Surviving Corporation to use all reasonable efforts to maintain in effect, for two years after the Effective Date, directors' and officers' liability insurance ("D&O Insurance") covering those persons covered by the Company's directors' and officers' liability insurance on the date of this Agreement or the Effective Date and which is substantially equivalent in terms of coverage and amount as the Company has in effect on the Effective Date so long as such insurance is available and the annual premium therefor would not be in excess of 200% of the last annual premium paid prior to the date of this Agreement (the "Maximum Premium"). If the existing D&O Insurance expires, is terminated or cancelled during such two-year period, Parent will use all reasonable efforts to cause to be obtained as much D&O Insurance as can be obtained for the remainder of such period for an annualized premium not in excess of the Maximum Premium, on terms and conditions no less advantageous than the existing D&O Insurance. The Company represents to Parent that the Maximum Premium is $179,000. (b) Any Indemnified Party wishing to claim indemnification hereunder, upon learning of any such Legal Action, shall promptly notify Parent and the Surviving Corporation with respect thereto, but the failure to so notify shall not relieve Parent or the Surviving Corporation of any liability it may have to such Indemnified Party 48 hereunder except to the extent that Parent and the Surviving Corporation are materially prejudiced thereby. (c) Parent and the Surviving Corporation shall periodically, as requested, advance to such Indemnified Party his, her or its legal and other expenses (including the cost of investigation and preparation incurred in connection therewith) to the extent such Indemnified Party is indemnified pursuant to the terms of this Section 5.15, unless it is ultimately determined by a court of competent jurisdiction that such Indemnified Party is not entitled to indemnification hereunder. (d) Parent and the Surviving Corporation shall be subrogated to any rights any Indemnified Party may have with respect to any amounts paid to or on behalf of such Indemnified Party by Parent and the Surviving Corporation hereunder. SECTION 5.16. Redemption of 5% Stock and Preference Stock. -------------------------------------------- (a) In connection with the Merger, the Company, Parent and Acquisition Sub hereby agree that the 5% Stock shall be redeemed and retired, as soon as practicable following the Effective Date for the 5% Stock Consideration in accordance with the Surviving Corporation's Articles of Organization. (b) Prior to the date specified in the call notice for the redemption and retirement of the 5% Stock, the Surviving Corporation shall cause to be deposited with an appropriate trust company or bank, for the credit of the holders of the 5% Stock, sufficient funds to be paid to such holders for redemption and retirement of all of such shares of 5% Stock as provided for herein and in the Surviving Corporation's Articles of Organization. (c) If requested by Parent or Acquisition Sub, the Company shall as soon as practicable thereafter and prior to the Effective Time deliver a notice of redemption fixing a date of redemption at the earliest permitted date and cause to be deposited with an appropriate trust company or bank, for the credit of the holders of the Preference Stock, sufficient funds to be paid to such holders for redemption and retirement of all outstanding shares of Preference Stock as provided for herein, in the Certificate of Vote of Directors that established the Preference Stock and in the Company's Articles of Organization. In such case Parent shall transfer to the Company immediately prior to such deposit the amount thereof in exchange for the issuance to it by the Company of that number of shares of Company Common Stock equal to the amount of such deposit divided by the Total Merger Consideration. Parent may decide whether to deliver any request under this Section 5.16(c) in its sole discretion, and, notwithstanding any other provision of this Agreement (including Section 5.20) shall not be obligated to do so even if redemption of the Preference Stock would cause satisfaction of a condition set forth in Article VI or Article VII that otherwise would not be satisfied. 49 SECTION 5.17. Material Contracts. The Company shall not enter ------------------- into any material modification or amendment concerning any Material Contract listed on Schedule 2.11(a) or 2.11(b) without the consent of Parent, which consent shall not be unreasonably withheld. Immediately after the Closing, Parent shall cause the Surviving Corporation to pay the outstanding principal amount (and accrued interest thereon) owed by the Company under each Material Contract set forth on Schedule 2.11(b). SECTION 5.18. Tax Matters. Promptly after the request of ------------ Parent and in any event no later than three months from the date of such request, the Company shall provide to Parent true, complete and correct (in all material respects) copies of (a) a schedule setting forth the deferred intercompany gain account, and the excess loss account of each of its Subsidiaries, and (b) a schedule setting forth the Federal income tax basis for the stock of each of the Subsidiaries except those Subsidiaries for which such information cannot be obtained after due inquiry. SECTION 5.19. Dividend Payments. The Company shall declare ------------------ and pay or set apart for payment accumulated dividends on the 5% Stock to the extent required such that the holders of 5% Stock shall not at any time be entitled to vote pursuant to paragraph (d) of Article IV of the Company's Articles of Organization. The Company shall not declare or pay or set apart for payment any accumulated dividends on the Preference Stock, except that after the Consummation of the Offer the Company may declare and make such payment to the extent required to prevent holders of Preference Stock from at any time being entitled to vote pursuant to subparagraph (8) of the Company's Certificate of Vote of Directors Establishing a Series of a Class of Stock with respect to the Preference Stock. SECTION 5.20. Satisfaction of Conditions. The Company, Parent --------------------------- and Acquisition Sub shall each take all reasonable actions that may be required to satisfy the conditions set forth in Article VI and Article VII hereof, respectively. SECTION 5.21. Directors. Subject to compliance with ---------- applicable law (including Section 14(f) of the Exchange Act), upon the acquisition by Acquisition Sub of at least a majority of the outstanding Common Stock pursuant to the Offer, Acquisition Sub shall be entitled to designate at least a majority of the members of the Board of Directors of the Company, and the Company and its Board of Directors shall, at such time, take any and all such action (including to increase the size of the Board of Directors or to use its best efforts to cause directors to resign) needed to cause a sufficient number of Acquisition Sub's designees to be appointed to the Company's Board of Directors that such designees shall constitute such majority (any director so designated by Acquisition Sub, a "Designated Director"). It is understood that immediately after the acquisition by Acquisition Sub of at least a majority of the outstanding Common Stock pursuant to the Offer (x) the Company's Board of Directors 50 shall consist of seven members, (y) the initial designees of Acquisition Sub to the Company's Board of Directors are expected to be Michel L. Besson, Peter R. Dachowski, Thomas A. Decker and James E. Hilyard and (z) the remaining members of the Company's Board of Directors are expected to be Robert P. Bass, Jr., Richard C. Maloof and Joseph D. Vecchiolla. In the event that, after the acquisition by Acquisition Sub of at least a majority of the outstanding Common Stock pursuant to the Offer and prior to the Effective Time, the number of members of the Board of Directors increases (including pursuant to the provisions of the Preference Stock and the 5% Stock), the Company and its Board of Directors shall, at such time, take any and all such additional action (including to increase the size of the Board of Directors, to use its best efforts to cause additional directors to resign and to appoint additional designees of Acquisition Sub) needed to cause a sufficient number of Acquisition Sub's designees to be appointed to the Board of Directors that such designees shall then constitute at least a majority of the members of the Board of Directors. The parties hereto shall use their respective best efforts to cause at least three members of the Company's Board of Directors at all times prior to the Effective Time to be Continuing Directors. "Continuing Director" means (a) any member of the Company's Board of Directors on the date of this Agreement, (b) any member of the Company's Board of Directors who is not an employee or director or affiliate of, and not a Designated Director or other nominee of, Acquisition Sub or Parent or their respective Subsidiaries, and (c) any successor of a Continuing Director who is (i) not an employee or director or affiliate of, and not a Designated Director of other nominee of, Acquisition Sub or Parent or their respective Subsidiaries and (ii) recommended to succeed such Continuing Director by at least a majority of the then Continuing Directors. ARTICLE VI Conditions to the Obligations of Parent --------------------------------------- and Acquisition Sub ------------------- Each and every obligation of Parent and Acquisition Sub under this Agreement shall be subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions, each of which may be waived by Parent and Acquisition Sub except as otherwise provided by law, provided that, -------- upon the Consummation of the Offer, each of the following conditions (other than the conditions set forth in Section 6.03(b) and (d) and 6.04(b)) shall be deemed waived by Parent and Acquisition Sub: SECTION 6.01. Representations and Warranties True. The ------------------------------------ representations and warranties of the Company contained in this Agreement (without 51 regard to any information provided under Section 5.04) that are qualified as to materiality shall be true and correct, and the representations that are not so qualified shall be true and correct in all material respects, in each case on and as of the date hereof and on and as of the Effective Date, and between the date hereof and the Effective Date there shall not have been any event or change in circumstance causing or reasonably anticipated to cause in the future any Material Adverse Effect. SECTION 6.02. Company's Performance. Each of the obligations ---------------------- of the Company to be performed by it on or before the Closing Date pursuant to the terms of this Agreement shall have been duly performed or complied with in all material respects by the Closing. SECTION 6.03. Authorization of Merger. (a) All corporate ------------------------ action necessary by the Company to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby (including the Offer and the Merger) shall have been duly and validly taken, and the Company and Acquisition Sub shall have full right and power to merge on the terms provided herein. (b) The holders of the Company Common Stock and of the Preference Stock shall have duly approved the Merger at the Special Meeting called for that purpose (other than if such approval shall not have occurred solely due to the breach by Parent or Acquisition Sub of Section 5.02(e)). (c) All consents, approvals and authorizations from third Persons and Governmental Authorities identified on Schedule 2.05 and Schedule 2.11(b) required to consummate the transactions contemplated by this Agreement shall have been obtained. (d) All applicable waiting periods under the HSR Act shall have expired or been terminated. SECTION 6.04. Absence of Litigation. (a) There shall not be ---------------------- pending or threatened any suit, action or proceeding by any Governmental Authority (i) challenging the acquisition by Parent or Acquisition Sub of any shares of Company Common Stock or Preference Stock, seeking to restrain or prohibit the consummation of the Merger or any of the other transactions contemplated by this Agreement or seeking to obtain from the Company, Parent or Acquisition Sub any damages related to the Merger or the other transactions contemplated hereby that are material in relation to the Company and its Subsidiaries taken as a whole, (ii) seeking to prohibit or limit the ownership or operation by the Company, Parent or any of their respective Subsidiaries of any material portion of the business or assets of the Company, Parent or any of their respective Subsidiaries, or to compel the Company, Parent or any of their respective 52 Subsidiaries to dispose of or hold separate any material portion of the business or assets of the Company, Parent or any of their respective Subsidiaries, as a result of the Merger or any of the other transactions contemplated by this Agreement, (iii) seeking to impose limitations on the ability of Parent or Acquisition Sub to acquire or hold, or exercise full rights of ownership of, any shares of Surviving Corporation Common Stock, (iv) seeking to prohibit Parent or any of its Subsidiaries from effectively controlling in any material respect the business or operations of the Company or its Subsidiaries or of Parent and its Subsidiaries or (v) which otherwise is reasonably likely to have a Material Adverse Effect. (b) No statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order or legal restraint or prohibition enacted, entered, promulgated, enforced, issued or deemed applicable to the Merger or the transactions contemplated thereby, or any other action shall be taken by any Governmental Authority or court, in each case preventing the consummation of the Merger or the transactions contemplated thereby, shall be in effect. SECTION 6.05. Directors. All directors of the Company whose ---------- resignation is requested by Parent at least five days before the Closing Date will have submitted their resignations as directors effective as of the Closing Date. SECTION 6.06. Dissenting Shares. No more than ten percent of ------------------ the issued and outstanding shares of any class of equity securities of the Company entitled to dissenters rights as of the Closing Date shall be Dissenting Shares entitled to receive the Dissenting Consideration as provided in Section 1.12 hereof. SECTION 6.07. Options. Each outstanding Option issued under -------- the 1982 Stock Option Plan, the 1992 Stock Option Plan and the Director Option Plan shall have been amended as contemplated by Section 1.14. SECTION 6.08. Certificates. The Company shall have furnished ------------- Parent with such certificates of its officers and others to evidence compliance with the conditions set forth in this Article VI as may be reasonably requested by Parent. The form and substance of all opinions, certificates and other documents hereunder shall be satisfactory in all reasonable respects to Parent and its counsel. 53 ARTICLE VII Conditions to the Obligations of the Company -------------------------------------------- Each and every obligation of Company under this Agreement shall be subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions, each of which may be waived by the Company except as otherwise provided by law, provided that, upon the Consummation of the -------- Offer, each of the following conditions (other than the conditions set forth in Sections 7.03 and 7.04) shall be deemed waived by the Company: SECTION 7.01. Representations and Warranties True. The ------------------------------------ representations and warranties of Parent and Acquisition Sub contained in this Agreement that are qualified as to materiality shall be true and correct, and the representations that are not so qualified shall be true and correct in all material respects, in each case on and as of the date hereof and on and as of the Effective Date. SECTION 7.02. Parent's and Acquisition Sub's Performance. ------------------------------------------- Each of the obligations of Parent and Acquisition Sub to be performed by them on or before the Closing Date pursuant to the terms hereof shall have been duly performed and complied with in all material respects by the Closing. SECTION 7.03. Authorization of Merger. (a) All corporate ------------------------ action necessary by Acquisition Sub and Parent to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby shall have been duly and validly taken, and Acquisition Sub shall have full right and power to merge on the terms provided herein. The Company's stockholders shall have approved the Merger at the Special Meeting called for that purpose. (b) All consents, approvals and authorizations from third Persons and Governmental Authorities identified on Schedule 2.05 required to consummate the transactions contemplated by this Agreement shall have been obtained. (c) All applicable waiting periods under the HSR Act shall have expired or been terminated. SECTION 7.04. Absence of Litigation. No Judgment shall have ---------------------- been entered by a Governmental Authority with proper jurisdiction and not revised prohibiting the Merger, and no Legal Action shall have been instituted by any Governmental Authority challenging the Merger which if successful would prohibit the consummation of the Merger. 54 SECTION 7.05. Certificates. Parent and Acquisition Sub shall ------------- have furnished Company with such certificates of their respective officers and others to evidence compliance with the conditions set forth in this Article VII as may be reasonably requested by Company. The form and substance of all certificates and other documents hereunder shall be satisfactory in all reasonable respects to Company and its counsel. ARTICLE VIII Closing ------- SECTION 8.01. Time and Place. Subject to the provisions of --------------- Articles VI, VII and IX hereof, the closing (the "Closing") of the Merger shall take place at the offices of Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New York 10019 at 9:30 a.m., local time, on a date (the "Closing Date") which is to be: (a) as soon as practicable after the latest to occur of the date by which the stockholders of the Company shall have approved the Merger pursuant to Section 5.03, the date of expiration or termination of any waiting period, including any extensions thereof, which may be applicable to the Merger under the provisions of the HSR Act, or the date of satisfaction of all other conditions to the Closing set forth herein the satisfaction of which is not waived other than conditions that, by their terms, are to be satisfied on the Closing Date; or (b) such other place, at such other time, or on such other date as Parent, Acquisition Sub and the Company may mutually agree upon for the Closing to take place. The Closing Date shall be the Effective Date. SECTION 8.02. Deliveries at the Closing. Subject to the -------------------------- provisions of Articles VI, VII and IX hereof, at the Closing: (a) If the Consummation of the Offer shall not have occurred, there shall be delivered to Parent, Acquisition Sub and the Company the certificates and other documents and instruments required to be delivered under Articles VI and VII hereof. (b) Parent, Acquisition Sub and Company shall cause the Articles of Merger to be filed in accordance with the provisions of the MBCL and shall 55 take any and all other lawful actions and do any and all other lawful things necessary to effect the Merger and to cause the Merger to become effective. ARTICLE IX Termination and Abandonment of the Merger ----------------------------------------- SECTION 9.01. Termination. (a) Unless the Consummation of ------------ the Offer shall have occurred and Designated Directors shall constitute at least a majority of the members of the Board of Directors of the Company, this Agreement shall be terminated, and the Merger abandoned, if the stockholders of the Company fail to approve the Merger as contemplated by Section 5.03 hereof. (b) Notwithstanding approval of this Agreement and the transactions contemplated hereby by the stockholders of the Company or by the sole stockholder of Acquisition Sub, this Agreement may be terminated, and the Offer and the Merger abandoned, at any time prior to the Effective Date: (i) by the mutual consent of Parent, Acquisition Sub and the Company; or (ii) unless the Consummation of the Offer shall have occurred and Designated Directors shall constitute at least a majority of the members of the Board of Directors of the Company, by Parent, Acquisition Sub or the Company at any time after September 30, 1996; or (iii) by Parent or Acquisition Sub, (A) if the Offer terminates without any shares being accepted for payment due to (x) failure of the Minimum Condition or (y) any of the other conditions set forth in Exhibit A hereto (other than solely paragraph (c) thereto) shall have become impossible to fulfill and shall not have been waived, (B) if any of the conditions set forth in Article VI hereof shall become impossible to fulfill and shall not have been waived or deemed waived in accordance with the terms of this Agreement (it being understood that with respect to Section 6.04(b) any condition therein relating to an order, injunction or judicial decree shall be deemed not to have become impossible to fulfill until such order, injunction or decree shall have become final and non-appealable) or (C) if the Board of Directors pursuant to Section 5.12(b) withdraws or modifies its approval or recommendation of this Agreement, the Offer or the Merger; or 56 (iv) by the Company, if any of the conditions set forth in Article VII hereof shall become impossible to fulfill, and shall not have been waived in accordance with the terms of this Agreement; or (v) unless the Consummation of the Offer shall have occurred and Designated Directors shall constitute at least a majority of the members of the Board of Directors of the Company, by Parent or Acquisition Sub if the Company fails to perform in any material respect any of its obligations hereunder or breaches in any material respect any provision hereof, and the Company has failed to perform such obligation or cure such breach, within 10 days of its receipt of written notice thereof from Parent or Acquisition Sub, and such failure to perform shall not have been waived in accordance with the terms of this Agreement; (vi) by the Company if Parent or Acquisition Sub fails to perform in any material respect any of its obligations hereunder or breaches in any material respect any provision hereof, and Parent and Acquisition Sub have failed to perform such obligation or cure such breach, within 10 days of its receipt of written notice thereof from the Company, and such failure to perform shall not have been waived in accordance with the terms of this Agreement; (vii) by the Company if (A) the Board of Directors pursuant to Section 5.12(b) withdraws or modifies its approval or recommendation of this Agreement, the Offer or the Merger and (B) the Company pays Parent all Expenses and the Alternate Transaction Fee in cash, in each case as provided in Section 10.01(b); or (viii) by the Company if Acquisition Sub (A) shall have failed to commence the Offer within the time required under the Exchange Act or (B) shall have failed to pay for any Company Common Stock or Preference Stock accepted for payment pursuant to the Offer and, in the case of clause (B), Acquisition Sub shall have failed to make such payment within three business days of receipt of written notice thereof from the Company. SECTION 9.02. Effect of Termination. (a) In the event of the ---------------------- termination and abandonment of this Agreement and the Merger: (i) this Agreement shall become void and have no effect, without any liability on the part of any party or its directors, officers or stockholders, except Section 5.01(b) shall survive and except as provided in Article X hereof; provided that, except as provided in -------- ---- Sections 9.02(b) and 9.02(c), each party 57 shall have the right to bring suit against any other party for any breach of this Agreement; and except that if the Company has called the Preference Stock for redemption pursuant to a request by the Purchaser pursuant to Section 5.16, Parent's obligation to purchase, and the Company's obligation to sell, shares of Common Stock pursuant to such Section on the terms set forth therein shall survive; and (ii) each party will redeliver all documents, work papers and other material and all copies thereof of any other party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the party furnishing the same and, at the request of any other party, will destroy any analyses, compilations, studies or other documents prepared using such furnished information. (b) Notwithstanding any provisions to the contrary herein, the sole remedy of Parent or Acquisition Sub for a breach by the Company of any representation or warranty set forth in Article II of this Agreement shall be the termination of this Agreement (if permitted by Section 9.01) unless such breach was made with the actual knowledge of the President and Chief Executive Officer of the Company, the Vice President of Finance and Administration of the Company or the General Counsel of the Company, after due inquiry of other managerial employees of the Company who would be reasonably expected to have knowledge as to the matter represented (a "Company Willful Misrepresentation"). (c) Notwithstanding any provisions to the contrary herein, the sole remedy of the Company for a breach by Parent or Acquisition Sub of any representation or warranty set forth in Article III or IV, respectively, of this Agreement shall be the termination of this Agreement (if permitted by Section 9.01) unless such breach was made with the actual knowledge of the President, Executive Vice President or Senior Vice President of Parent, after due inquiry of other managerial employees of Parent who would be reasonably expected to have knowledge as to the matter represented (a "Parent Willful Misrepresentation"). SECTION 9.03. Procedure for Termination and Amendment. A ---------------------------------------- termination of this Agreement pursuant to Section 9.01 or an amendment of this Agreement in accordance with Section 10.07 shall, in order to be effective, require in the case of the Company action by its Board of Directors or the duly authorized designee of its Board of Directors. In the event that Acquisition Sub's designees are appointed or elected to the Board of Directors of the Company as provided in Section 5.21, after the Consummation of the Offer and prior to the Effective Time, the affirmative vote of at least a majority of the Continuing Directors shall be required for the Company to agree to amend, waive compliance with or terminate this Agreement. 58 ARTICLE X Miscellaneous ------------- SECTION 10.01. Expenses; Alternate Transaction Fee. (a) ------------------------------------ Except as provided by Section 10.01(b), (c) or (d) each of the parties hereto shall bear its own costs, fees and expenses in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the Prior Agreement and the consummation of the transactions contemplated hereby, including, without limitation, fees, commissions and expenses (including, without limitation, all filing, printing, copying, mailing, telephone, transportation and delivery charges) payable to brokers, finders, investment bankers, consultants, exchange or transfer agents, attorneys, accountants and other professionals, whether or not the Consummation of the Offer occurs or the Merger is consummated. (b) If the Board of Directors of the Company pursuant to Section 5.12(b) wishes to withdraw or adversely modify its approval or recommendation of this Agreement, the Offer or the Merger, prior to exercising its rights under Section 5.12(b), the Company shall pay in same day funds to Parent: (i) its Expenses incurred to date and thereafter shall pay in same day funds to Parent within one business day after demand therefor all subsequently incurred Expenses, provided, that the Company shall not be obligated hereunder to -------- pay any such Expenses to the extent they exceed an aggregate of $1 million and (ii) an alternative transaction fee of $1.5 million (the "Alternate Transaction Fee"). For purposes of Sections 10.01(b) and (c), "Expenses" shall mean all out-of-pocket fees and expenses (including without limitation all travel expenses and all fees and expenses of counsel, investment banking firms, accountants, experts and consultants to Parent or Acquisition Sub) incurred or paid by or on behalf of Parent or Acquisition Sub during or after 1994 in connection with or leading to this Agreement, the transactions contemplated hereby, and performing or securing the performance of the obligations of the parties hereunder, including, without limitation, such fees and expenses related to preparation and negotiation of documentation and conducting due diligence. Parent shall within 36 hours after request therefor advise the Company of an estimate of its Expenses if the Company wishes to exercise its rights under Section 5.12(b). (c) In the event a takeover proposal from a party other than Parent or one of its affiliates is received by the Company or publicly disclosed prior to the expiration of the Offer (or in the case of clauses (B) and (C), prior to the Special Meeting) or, if earlier, termination of this Agreement, and (A) at the scheduled expiration date of the Offer a sufficient number of shares of Company Common Stock and Preference Stock shall not 59 have been tendered or redeemed to satisfy the Minimum Condition, (B) at the Special Meeting the required approval of the Merger by the Company's stockholders is not obtained, or (C) this Agreement is terminated (other than by the Company pursuant to Section 9.01(vi)) prior to a vote on the Merger at the Special Meeting, unless the Consummation of the Offer shall have occurred the Company shall pay in same day funds to Parent within two business days after the earlier of such expiration date, Special Meeting or termination of this Agreement (i) all Expenses incurred to date and thereafter will pay in same day funds to Parent within one business day after demand therefor all subsequently incurred Expenses, provided, that the Company shall not be obligated hereunder -------- to pay any such Expenses to the extent they exceed an aggregate of $1 million, and (ii) the Alternate Transaction Fee. (d) In the event this Agreement is terminated, the Offer is terminated or the Merger does not occur (i) solely due to a breach by Parent or Acquisition Sub of any of its covenants or obligations hereunder or due to a Parent Willful Misrepresentation or (ii) solely due to a breach by the Company of any of its covenants or obligations hereunder or due to a Company Willful Misrepresentation, then in the case of a termination pursuant to clause (i) above, Parent and Acquisition Sub shall promptly pay to the Company, and in the case of termination pursuant to clause (ii) above, the Company shall promptly pay to Parent and Acquisition Sub, in same day funds all Expenses incurred to date (after giving credit for any reimbursement already made under Section 10.01(b) or (c)) and thereafter shall pay in same day funds within one business day after demand therefor all subsequently incurred Expenses. For purposes of this paragraph 10.01(d) "Expenses" shall mean all out-of-pocket fees and expenses (including without limitation all travel expenses and all fees and expenses of counsel, investment banking firms, accountants, experts and consultants to Parent or the Company, as the case may be) incurred or paid by or on behalf of Parent, Acquisition Sub or the Company, as the case may be, during or after 1994 in connection with or leading to this Agreement, the transactions contemplated hereby, and performing or securing performance of the obligations of the parties hereunder, including, without limitation, such fees and expenses related to preparation and negotiation of documentation and conducting due diligence. This Section shall not limit damages that would otherwise be recoverable for breaches hereunder. SECTION 10.02. Non-Survival of Representations and Warranties. ----------------------------------------------- The respective representations and warranties, obligations, covenants and agreements of the Company, Parent and Acquisition Sub contained herein or in any Schedule, certificate or letter delivered pursuant hereto (other than those contained in Section 10.01 hereof and those which by their terms extend beyond the Effective Date or termination of this Agreement) shall expire with, and be terminated and extinguished by the effectiveness of the Merger and shall not survive the Effective Date or, if earlier, the date of termination of this Agreement pursuant to Article IX hereof. 60 SECTION 10.03. Headings. The descriptive headings of the --------- several Articles and Sections of this Agreement are inserted for convenience only and do not constitute a part of this Agreement and shall not in any manner affect the meaning or interpretation of the terms of this Agreement. SECTION 10.04. Notices. (a) Any notices or other -------- communications required or permitted hereunder shall be addressed as follows: If to Parent or Acquisition Sub to: CertainTeed Corporation 750 E. Swedesford Road Valley Forge, Pennsylvania 19482 Attn: Thomas A. Decker, Esq. Executive Vice President and General Counsel Tel: (610) 341-7424 Fax: (610) 341-7087 Cravath, Swaine & Moore 825 Eighth Avenue New York, New York 10019 Attn: Philip A. Gelston Tel: (212) 474-1548 Fax: (212) 474-3700 If to the Company to: Bird Corporation 1077 Pleasant Street Norwood, Massachusetts 02062-6714 Attn: President Tel: (617) 461-1414 Fax: (617) 461-1619 61 Copy to: Bart Friedman, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Tel: (212) 701-3000 Fax: (212) 269-5420 or such other address as shall be furnished in writing by either party in accordance with this Section 10.04, and any such notice or communication shall be deemed to have been given as of the date so mailed. (b) Notices or other communications shall be deemed given (i) if delivered personally, upon delivery, (ii) if delivered by registered or certified mail (return receipt requested), upon the earlier of actual delivery or three business days after being mailed, (iii) if delivered by overnight courier or similar service, upon delivery, or (iv) if given by fax, upon confirmation of transmission by fax; provided that if such notice or other communications would be otherwise deemed given on a day which is not a business day, the delivery shall be deemed given the first business day following such day. SECTION 10.05. Assignment. This Agreement and all of the ----------- provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by any of the parties hereto, either in whole or in part, without the prior written consent of the other parties hereto. SECTION 10.06. Complete Agreement. This Agreement, including ------------------- the Schedules, exhibits and other writings referred to herein or delivered pursuant hereto, contains the entire understanding among the parties with respect to the Offer, the Merger and the related transactions and supersedes all prior arrangements or understandings with respect thereto, including the Prior Agreement, except for the Confidentiality Agreement. There are no restrictions, agreements, promises, warranties, covenants or undertakings other than those expressly set forth herein. SECTION 10.07. Amendments and Waivers. (a) Subject to the ----------------------- provisions contained in Articles VI and VII hereof and subject to Section 9.03, at any time prior to the Effective Date if authorized by their respective Boards of Directors and to the extent permitted by law, the parties hereto may, by written agreement, modify, amend, or supplement any term or provision of this Agreement. Any written 62 instrument or agreement referred to in this paragraph shall be validly and sufficiently authorized for the purposes of this Agreement if signed on behalf of the Company, Parent and Acquisition Sub by a person authorized to sign this Agreement on their behalf. (b) This Agreement may be amended at any time only by a written instrument executed by the Company, Parent and Acquisition Sub. No delay on the part of any party hereto in exercising any right hereunder shall operate as a waiver of such right, nor shall any waiver, express or implied, by any party hereto of any right hereunder or of any failure to provide and perform hereunder or breach hereof by either party hereto constitute or be deemed to constitute a waiver of any other failure to provide and perform hereunder or breach hereof by any party hereto whether of a similar or dissimilar nature thereto. SECTION 10.08. Counterparts. This Agreement may be executed ------------- in two or more counterparts, all of which shall be considered one and the same agreement and each of which shall be deemed an original. SECTION 10.09. Governing Law. EXCEPT AS TO THE PROVISIONS OF -------------- SECTIONS 1.03 THROUGH 1.14 (WHICH SHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS), THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ITS CONFLICT OF LAWS RULES) AS TO ALL MATTERS, INCLUDING, BUT NOT LIMITED TO, MATTERS OF VALIDITY, CONSTRUCTION, EFFECT AND PERFORMANCE. SECTION 10.10. Accounting Terms. All accounting terms used ----------------- herein that are not expressly defined in this Agreement shall have the meanings given to them in accordance with GAAP. SECTION 10.11. Parties. Nothing in this Agreement is intended -------- to confer any rights or remedies under or by reason of this Agreement on any persons or entities other than the parties hereto and their respective successors and permitted assigns in accordance with Section 10.05 hereof, except for the provisions of Section 5.15. Without limiting the foregoing, no third Person shall be a beneficiary of any provision of this Agreement, except for the provisions of Section 5.15. 63 IN WITNESS WHEREOF, each of Parent, Acquisition Sub and the Company has executed this Agreement, or has caused this Agreement to be executed on its behalf by a representative duly authorized, all as of the day and year first above written. BIRD CORPORATION, by --------------------------- Name: Joseph D. Vecchiolla [Seal] Title: Chairman by --------------------------- Name: Frank Anthony Title: Vice President by --------------------------- Name: Elizabeth Arcieri Title: Treasurer CERTAINTEED CORPORATION, by --------------------------- Name: James E. Hilyard Title: Vice President 64 BI EXPANSION CORP., by --------------------------- Name: James E. Hilyard [Seal] Title: Vice President by --------------------------- Name: John R. Mesher Title: Assistant Treasurer EXHIBIT A Conditions to the Offer ----------------------- Notwithstanding any other term of the Offer or this Agreement, Acquisition Sub shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, to pay for any shares of Company Common Stock or Preference Stock tendered pursuant to the Offer unless, (i) there shall have been validly tendered and not withdrawn prior to the expiration of the Offer such number of shares of Company Common Stock that would constitute at least 66-2/3% of the outstanding shares (determined on a fully diluted basis) of Company Common Stock, (ii) either (x) there shall have been validly tendered and not withdrawn prior to the expiration of the Offer such number of shares of Preference Stock that would constitute at least 66-2/3% of the outstanding shares of Preference Stock or (y) the Purchaser shall have elected to cause the Company to call for redemption the Preference Stock pursuant to Section 5.16 (clauses (i) and (ii) together being the "Minimum Condition"), (iii) any waiting period under the HSR Act applicable to the purchase of shares of Company Common Stock and Preference Stock pursuant to the Offer shall have expired or been terminated and (iv) all consents, approvals, orders or authorizations of, or registrations, declarations or filings with, any Governmental Authority required or necessary in connection with the Offer, the Merger and this Agreement and the transactions contemplated by this Agreement shall have been obtained and shall be in full force and effect. Furthermore, notwithstanding any other term of the Offer or this Agreement, Acquisition Sub shall not be required to accept for payment or, subject as aforesaid, to pay for any shares of Company Common Stock or Preference Stock not theretofore accepted for payment or paid for, and may terminate the Offer if, at any time on or after the date of this Agreement and before the Consummation of the Offer, any of the following conditions exist: (a) The representations and warranties of the Company contained in this Agreement (without regard to any information provided under Section 5.04) that are qualified as to materiality shall not be true and correct, and the representations that are not so qualified shall not be true and correct in all material respects, in each case on and as of the date hereof and on and as of the date of the scheduled expiration of the Offer. (b) Any of the obligations of the Company to be performed by it on or before the date of the scheduled expiration of the Offer pursuant to the terms of this Agreement shall not have been duly performed or complied with in all material respects by that date. (c) Since the Balance Sheet Date, there shall have occurred (or it shall be reasonably expected that there will be) any event, change or circumstance causing, or reasonably anticipated to cause in the future, any Material Adverse Effect. (d) Any consents, approvals and authorizations from third Persons and Governmental Authorities identified on Schedule 2.05 and Schedule 2.11(b) required to consummate the transactions contemplated by this Agreement shall not have been obtained. (e) There shall be pending or threatened any suit, action or proceeding by any Governmental Authority (i) challenging the acquisition by Parent or Acquisition Sub of any shares of Company Common Stock or Preference Stock, seeking to restrain or prohibit the consummation of the Offer, the Merger or any of the other transactions contemplated by this Agreement or seeking to obtain from the Company, Parent or Acquisition Sub any damages related to the Offer, the Merger or the other transactions contemplated hereby that are material in relation to the Company and its Subsidiaries taken as a whole, (ii) seeking to prohibit or limit the ownership or operation by the Company, Parent or any of their respective Subsidiaries of any material portion of the business or assets of the Company, Parent or any of their respective Subsidiaries, or to compel the Company, Parent or any of their respective Subsidiaries to dispose of or hold separate any material portion of the business or assets of the Company, Parent or any of their respective Subsidiaries, as a result of the Offer, the Merger or any of the other transactions contemplated by this Agreement, (iii) seeking to impose limitations on the ability of Parent or Acquisition Sub to acquire or hold, or exercise full rights of ownership of, any shares of Surviving Corporation Common Stock, (iv) seeking to prohibit Parent or any of its Subsidiaries from effectively controlling in any material respect the business or operations of the Company or its Subsidiaries or of Parent and its Subsidiaries or (v) which otherwise is reasonably likely to have a Material Adverse Effect. (f) There shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, or any other action shall be taken by any Governmental Authority or court, other than the application to the Offer or the Merger of applicable waiting periods under the HSR Act, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (e) above. (g) The Board of Directors of the Company or any committee thereof shall have withdrawn or modified in a manner adverse to Parent its approval or recommendation of the Offer, the Merger or this Agreement or resolved to take any of such actions. (h) The Agreement shall have been terminated in accordance with its terms. The foregoing conditions are for the sole benefit of Acquisition Sub and Parent and may, subject to the terms of the Agreement, be waived by Acquisition Sub and Parent in whole or in part at any time and from time to time in their sole discretion. The failure by Parent or Acquisition Sub at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances, and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. EXHIBIT B FEDERAL IDENTIFICATION FEDERAL IDENTIFICATION NO. Applied For NO. 04-3082903 ------------------ ------------------ BI Expansion Bird Corporation THE COMMONWEALTH OF MASSACHUSETTS William Francis Galvin Secretary of the Commonwealth One Ashburton Place, Boston, Massachusetts 02108-1512 ARTICLES OF MERGER (General Laws, Chapter 156B, Section 78) Merger of BI Expansion Corp. and --------------------------------------- Bird Corporation --------------------------------------- --------------------------------------- --------------------------------------- the constituent corporations, into Bird Corporation --------------------------------------- one of the constituent corporations. The undersigned officers of each of the constituent corporations certify under the penalties of perjury as follows: 1. An agreement of merger has been duly adopted in compliance with the requirements of General Laws, Chapter 156B, Section 78, and will be kept as provided by Subsection (d) thereof. The surviving corporation will furnish a copy of said agreement to any of its stockholders, or to any person who was a stockholder of any constituent corporation, upon written request and without charge. 2. The effective date of the merger determined pursuant to the agreement of merger shall be the date approved and filed by the Secretary of the Commonwealth. If a later effective date is desired, specify such date which shall not be more than thirty days after the date of filing: 3. (For a merger) The following amendments to the Articles of Organization of the surviving corporation have been effected pursuant to the agreement of merger: Article II of the Articles of Organization of Bird Corporation has been replaced in its entirety by the following amendment: The purpose of the corporation is to engage in the following business activities: To acquire, hold for investment, or sell securities of corporations and any other type of real or personal property and to engage in and carry on any other business or activity permitted to be conducted by a corporation organized under Chapter 156B of Massachusetts General Laws. (For a consolidation) (a) the purpose of the resulting corporation is to engage in the following business activities: Not Applicable. (b) State the total number of shares and the par value, if any, of each class of stock which the resulting corporation is authorized to issue. Not Applicable.
- -------------------------------------------------------------------------------- WITHOUT PAR VALUE WITH PAR VALUE - -------------------------------------------------------------------------------- TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE - -------------------------------------------------------------------------------- Common: Common: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Preferred: Preferred: - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
**(c) If more than one class of stock is authorized, state a distinguishing designation for each class and provide a description of the preferences, voting powers, qualifications, and special or relative rights or privileges of each class and of each series then established. Not Applicable. **(d) The restrictions, if any, on the transfer of stock contained in the agreement of consolidation are: Not Applicable. **(e) Other lawful provisions, if any, for the conduct and regulation of the business and affairs of the corporation, for its voluntary dissolution, or for limiting, defining, or regulating the powers of the corporation, or of its directors or stockholders, or of any class of stockholders: Not Applicable. **If there are no provisions state "None". 4. The information contained in Item 4 is not a permanent part of the Articles of Organization of the *surviving corporation. (a) The street address of the *surviving corporation in Massachusetts is: (post office boxes are not acceptable) c/o CT Corporation System, 2 Oliver Street, Boston, MA 02109 (b) The name, residential address, and post office address of each director and officer of the *surviving corporation is: NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS President: Peter R. Dachowski 321 Woodmont Circle Same Berwyn, PA 19312 Treasurer: James F. Harkins, Jr. 27 Meadow Creek Lane Same Glenmoore, PA 19343 Clerk: John R. Mesher 128 Aspen Drive Same Downington, PA 19335 Directors: Peter R. Dachowski See Above See Above Thomas A. Decker 319 Chester Road Same Devon, PA 19333 (c) The fiscal year (i.e. tax year) of the *surviving corporation shall end on the last day of the month of: December (d) The name and business address of the resident agent, if any, of the *surviving corporation is: CT Corporation System 2 Oliver Street, Boston, MA 02109 The undersigned officers of the several constituent corporations listed above further state under the penalties of perjury as to their respective corporations that the agreement of *merger has been duly executed on behalf of such corporation and duly approved by the stockholders of such corporation in the manner required by General Laws, Chapter 156B, Section 78. Frank S. Anthony - ---------------------------------------------------, *Vice President Frank S. Anthony - ---------------------------------------------------, *Clerk of Bird Corporation - -------------------------------------------------------------------------------- (Name of constituent corporation) John R. Mesher - ---------------------------------------------------, *Vice President John R. Mesher - ---------------------------------------------------, *Clerk of BI Expansion Corp. - -------------------------------------------------------------------------------- (Name of constituent corporation) THE COMMONWEALTH OF MASSACHUSETTS ARTICLES OF *CONSOLIDATION / *MERGER (General Laws, Chapter 156B, Section 78) =========================================== I hereby approve the within Articles of *Consolidation / *Merger and the filing fee in the amount of $_________________, having been paid said articles are deemed to have been filed with me this ___________ day of ____________________ , 19___. Effective date: _____________________________________ WILLIAM FRANCIS GALVIN Secretary of the Commonwealth TO BE FILLED IN BY CORPORATION Photocopy of document to be sent to: Cynthia A. Nastanski, Esq. ---------------------------------- Cravath, Swaine & Moore 825 Eighth Avenue ---------------------------------- New York, NY 10019 ---------------------------------- Telephone: (212) 474-1762 ----------------------- EX-11 5 COMPUTATION OF EARNINGS EXHIBIT 11 BIRD CORPORATION COMPUTATION OF EARNINGS PER COMMON SHARE (1) (In thousands, except share and per share amounts)
YEAR ENDED DECEMBER 31, 1995 1994 1993 -------------- -------------- -------------- Primary earnings per share Earnings (loss) from continuing operations ($797) $1,083 ($1,908) Deduct dividend requirements: Preferred stock (30) (30) (30) Convertible preference stock (1,506) (1,506) (1,506) -------------- -------------- -------------- Net loss from continuing operations (2,333) (453) (3,444) Net loss from discontinued operations (11,252) (4,766) (26,414) -------------- -------------- -------------- Net loss applicable to common stock ($13,585) ($5,219) ($29,858) ============== ============== ============== Weighted average number of common shares outstanding (1) 4,104,965 3,992,251 4,097,999 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options (3) 0 0 0 -------------- -------------- -------------- Weighted average number of common shares outstanding as adjusted 4,104,965 3,992,251 4,097,999 ============== ============== ============== Primary earnings (loss) per common share: Continuing operations ($0.57) ($0.11) ($1.51) Discontinued operations (2.74) (1.20) (6.45) Cumulative effect of accounting change 0.00 0.00 0.67 -------------- -------------- -------------- Applicable to common stock ($3.31) ($1.31) ($7.29) ============== ============== ==============
EXHIBIT 11 BIRD CORPORATION COMPUTATION OF EARNINGS PER COMMON SHARE (1) (In thousands, except share and per share amounts)
YEAR ENDED DECEMBER 31, 1995 1994 1993 -------------- -------------- -------------- Fully diluted earnings per share (2) Earnings from (loss) continuing operations ($797) $1,083 ($1,908) Deduct dividend requirements of preferred stock (30) (30) (30) -------------- -------------- -------------- Net earnings (loss) from continuing operations (827) 1,053 (1,938) Net loss from discontinued operations (11,252) (4,766) (26,414) -------------- -------------- -------------- Net loss applicable to common stock ($12,079) ($3,713) ($28,352) ============== ============== ============== Weighted average number of common shares outstanding (1) 4,104,965 3,992,251 4,097,999 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options 0 0 0 Assuming conversion of convertible preference stock 731,955 731,955 731,955 -------------- -------------- -------------- Weighted average number of common shares outstanding as adjusted 4,836,920 4,724,206 4,829,954 ============== ============== ============== Fully diluted earnings (loss) per common share: Continuing operations ($0.17) $0.22 ($0.97) Discontinued operations (2.33) (1.01) (5.57) Cumulative effect of accounting change 0.00 0.00 0.67 -------------- -------------- -------------- Applicable to common stock ($2.50) ($0.79) ($5.87) ============== ============== ==============
(1) See Note 1 of Notes to Consolidated Financial Statements. (2) These calculations are submitted in accordance with Securities Exchange Act of 1934, Release No. 9083, although in certain instances, it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive result. (3) APB 15 paragraph 30 indicates computation of primary earnings per share should not give effect to common stock equivalents if their inclusion has the effect of decreasing the loss per share amount otherwise computed or is anti-dilutive. EX-22 6 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 22 BIRD CORPORATION Significant Subsidiaries: All subsidiaries are majority owned and are included in the Consolidated Financial Statements. State in Which Incorporated or Organized Bird Incorporated Massachusetts EX-23.(A) 7 CONSENT OF PRICE WATERHOUSE LLP EXHIBIT 23(a) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (No. 33-44475); Form S-4 (No. 33-44403) and Forms S-8 (Nos. 33-36304, 33-67826, 33-67828 and 33-36305) of our report dated March 16, 1996 appearing on Page F-2 of Bird Corporation's Annual Report on Form 10-K/A for the year ended December 31, 1995. /s/ Price Waterhouse LLP Boston, Massachusetts April 26, 1996 EX-23.(B) 8 CONSENT OF ALPERN, ROSENTHAL AND COMPANY EXHIBIT 23(b) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (No. 33-44475); Form S-4 (No. 33-44403) and Forms S-8 (Nos. 33-36304, 33-67826, 33-67828 and 33-36305) of our report dated February 10, 1995; appearing on Page F-3 of Bird Corporation's Form 10-K/A for the year ended December 31, 1995. /s/ Alpern, Rosenthal & Company Pittsburgh, Pennsylvania April 26, 1996 -----END PRIVACY-ENHANCED MESSAGE-----