10-K
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BIRD CORPORATION
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(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, 1994
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
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
980 Washington Street, Dedham, MA 02026
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 461-1414
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, 1995 was $29,182,000. As of March 1, 1995 there
were 4,100,443 shares of Bird Corporation common stock, par value $1 per share,
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 1995 Annual Meeting of Stockholders to
be filed with the Commission by April 30, 1995 are incorporated by reference
into Parts I and III of this report.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
As a result of the sale of its vinyl building products business on March 8,
1995 (see "Recent Business Developments" below), Bird Corporation's current
manufacturing operation consists of one primary business unit (roofing
manufacturing and marketing) as well as a 90% interest in a vinyl window
assembly and marketing operation. In addition, Bird Corporation also has a
business segment known as the Environmental Group. Products currently
manufactured at Bird Corporation's roofing facility include asphalt shingles
and roll roofing for commercial and residential use. These products are
marketed directly and through independent wholesalers, including wholesalers
whose primary customers are roofing contractors. Vinyl windows assembled at
its vinyl window assembly facility are marketed directly through wholesalers
whose primary customers are window installers. All references herein to the
"Company" or "Bird" refer to Bird Corporation and its subsidiaries unless
otherwise indicated by the context.
The Environmental Group's business consists of an off-site environmental waste
treatment, recovery, and pre-treatment systems facility with a focus on the
petrochemical industry. The facility, located in San Leon, Texas (the "San Leon
Facility"), provides off-site processing capabilities for numerous
classifications of refinery waste that are not economically treatable at the
point of origin. The process at the San Leon Facility is designed to recover
commercial grade fuel oil and hazardous waste derived fuels for cement kiln
operations and to reduce the volume of residual waste material for
incineration. In June, 1994, the Company agreed to sell its 80% interest in
the San Leon Facility and withdraw from the environmental business and
therefore, recorded the operating results of such business as a discontinued
operation as of June 30, 1994.
RECENT BUSINESS DEVELOPMENTS
There have been a number of significant developments in the business of the
Company during 1994 and 1995, including the following:
- On March 4, 1994, the Company and its lending banks (the First
National Bank of Boston, Philadelphia National Bank,
incorporated as Corestates Bank, N.A. and the Bank of Tokyo)
executed the Third Amended Credit Agreement pursuant to which
the Company was permitted to borrow up to $65 million until
January 31, 1996. Loans, which were secured by substantially
all of the Company's assets, were made pursuant to a $40
million revolving credit line commitment for working capital
and letters of credit and a $25 million term loan for general
corporate purposes. The Third Amended Credit Agreement
represented a refinancing of loans under an earlier credit
agreement with the same banks.
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- 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. This loss is reflected as
a discontinued business activity expense in the consolidated
statement of operations.
- On June 18, 1994, the Company entered into a Settlement
Agreement and Full and Final Release ("Settlement") with the
minority shareholders of the Company's Bird Environmental Gulf
Coast, Inc. ("BEGCI") subsidiary (which owns the San Leon
Facility), thus resolving a suit filed by the minority
shareholders of the subsidiary claiming breach of contract and
a countersuit filed by the Company in 1994. Pursuant to the
Settlement, the Company agreed to sell its 80% interest in
BEGCI to the minority shareholders for $7.5 million on or
before February 28, 1995, subject to financing. During that
period, the Company retained the right to sell all of its
interest in BEGCI to another buyer. Since the Company's
decision to sell its interest in BEGCI and withdraw from the
environmental business, established a measurement date, the
Company wrote down the recorded value of BEGCI to $7.5 million
as of June 30, 1994. This remaining net asset value is shown
as "Assets held for sale" on the December 31, 1994 balance
sheet. The minority shareholders failed to exercise their
option to purchase the Company's 80% interest on or before the
February 28, 1995 deadline. The Company is continuing its
efforts to locate a suitable acquirer for the San Leon
Facility.
- 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 $24,245,000, including $1.3 million held in escrow
to pay any indemnification claims arising under the purchase
and sale agreement, and the assumption of certain liabilities
of the sold companies. The sale resulted in a gain of
$2,677,000. The purchase price was subject to adjustments
based on an audit of the book value of the acquired assets and
assumed liabilities as of the closing date. Such audit
resulted in an increase in the purchase price of $1,897,000
which was paid to the Company on November 17, 1994. Sales in
the amount of $67,089,000 were recorded for these businesses
for the period ending August 22, 1994.
- On August 30, 1994, the Company and the lessor of the
Company's roofing machine located at its Norwood,
Massachusetts facility entered into an agreement pursuant to
which the Company agreed to purchase the leased equipment for
a purchase price of approximately $4 million. Concurrent
with the Company's refinancing with Shawmut Capital on
November 30, 1994 (discussed below), the Company satisfied all
outstanding obligations under the purchase agreement with the
lessor and acquired title to the roofing machine.
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- 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") for $47.5
million subject to certain prescribed levels of working
capital. This transaction also included an option to purchase
the Company's interest in its Kensington window assembly
operation for a purchase price of up to $2.7 million. 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 of the vinyl
building products operation to Jannock for a purchase price of
$47.5 million was closed subject to adjustments for final
working capital. Proceeds from the sale were used to reduce
bank debt. Jannock has 30 days from the closing date to
exercise an option to acquire the Kensington window assembly
operation.
- 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 purchase price was subject to adjustment
based on an audit of the book value of the acquired assets and
assumed liabilities as of the closing date. On March 7, 1995,
the final adjusted purchase price was determined to be
$2,036,000.
- On November 30, 1994, Bird Incorporated entered into a $39
million three year Loan and Security Agreement (the "Loan
Agreement") with Barclays Business Credit, Inc. of
Glastonbury, Connecticut. The Loan Agreement provides a $24
million revolving credit commitment and two equal term loans
totaling $15 million. Up to $5 million of the revolving
credit facility can be used for letters of credit. Borrowings
under the Loan Agreement are guaranteed by the Company and are
secured by substantially all of the assets of the Company and
its subsidiaries. Initial borrowings under the Loan Agreement
were used to pay, in full, the outstanding loan balances under
the Third Amended Credit Agreement. On February 1, 1995,
Shawmut Bank, N.A. acquired Barclays Business Credit, Inc. and
changed the name from Barclays Business Credit, Inc. to
Shawmut Capital Corporation ("Shawmut Capital"). The terms
and conditions of the Loan Agreement remained unchanged. On
March 8, 1995, Shawmut Capital executed a First Amendment to
the Loan Agreement permitting the sale of the Company's vinyl
siding operation located in Bardstown, Kentucky to Jannock.
The First Amendment to the Loan Agreement reduced the amount
of the facility to $20 million consisting of a $15 million
revolving credit commitment and a $5 million term loan. Up to
$5 million of the revolving credit facility can be used for
letters of credit.
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HOUSING GROUP
Asphalt roofing products are manufactured 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 rhyolite granules. The Company's facilities
include a roofing manufacturing facility, a granule plant, a rhyolite quarry,
and a private landfill for the Company's use. In addition, the Company has
completed the construction of an asphalt oxidizer at its Norwood facility to
ensure a continuous supply of processed asphalt.
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. 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 was as follows: sales of asphalt roofing
products, 31% in 1994, 23% in 1993 and 24% in 1992; sales of vinyl products,
24% in 1994, 20% in 1993 and 23% in 1992; and sales through building materials
distribution centers (including roofing and vinyl products manufactured by the
Company), 45% in 1994, 57% in 1993 and 53% in 1992.
Vinyl window profiles are purchased and assembled into windows by Kensington,
Bird's joint venture company in the replacement window fabrication business.
Kensington is a major supplier of custom fabricated vinyl windows to installers
of replacement windows. Its principal geographic market is the eastern United
States (primarily within a six hundred mile radius of Pittsburgh,
Pennsylvania).
The principal geographic markets for the Company's manufactured roofing
products, due to limitations imposed by freight costs, are the Northeastern
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 credit-worthy
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 rhyolite
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, 1995. 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
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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 its asphalt oxidizer 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 quarry in Massachusetts.
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 as well in other
aspects, such as 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.
FINANCIAL AND RELATED 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. For financial information
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regarding the industry segments in which the Company previously operated, see
the Company's consolidated financial statements for 1994 filed herewith.
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 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."
ENVIRONMENTAL GROUP
The business of the Environmental Group consists of the recycling of oily
sludges at its fixed site facility in San Leon, Texas. This new facility
provides off-site processing capabilities for numerous classifications of
refinery waste that are not economically treatable at the point of origin. The
process at the facility is designed to recover commercial grade fuel oil and
hazardous waste derived fuels for cement kiln operations and to reduce the
volume of residual waste material for incineration and is currently in its
testing and debugging stage. The San Leon Facility became operational in
January, 1994 operating under an interim Part A permit. A permanent Part B
permit was issued by the Texas Natural Resource Conservation Commission (TNRCC)
on April 1, 1994.
On June 18, 1994, the Company agreed to sell its 80% interest in the San Leon
Facility to the minority shareholders of BEGCI for $7.5 million on or before
February 28, 1995. Prior to that date the Company retained the right to sell
its 80% interest to another buyer provided that the shares of common stock of
BEGCI owned by the minority shareholders were also sold at no less than the
same price per share. As of February 28, 1995, the minority shareholders had
not exercised their option to purchase the San Leon Facility. The Company is
continuing its efforts to locate a suitable acquirer for the San Leon Facility.
RAW MATERIALS
The San Leon Facility is designed to recycle and dispose of a variety of
petrochemical hazardous wastes. In that capacity the plant receives wastes
from generators and processes them to allow for safe disposal. The process
relies primarily on public utilities and does not require raw materials.
MARKETS AND DISTRIBUTION
The Company markets the products and services of its environmental segment
primarily in the Gulf Coast of the United States and revised
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its marketing strategy to focus on petrochemical waste streams requiring
special processing.
BACKLOG
Environmental regulations require immediate processing of waste material, so a
large backlog would hardly ever exist.
COMPETITION
The desorber technology operated by the Company's San Leon Facility is patented
by and licensed from one of the Facility's minority partners. The Company
believes there is no direct equivalent to this process; however, there are
alternative treatment technologies which customers, for a variety of reasons,
may continue to consider for the disposal or recycling of their wastes.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Financial information about the industrial segments in which the Company
operates, for the three years ended December 31, 1994, appear in Note 13 of the
Notes to Consolidated Financial Statements which is incorporated herein by
reference thereto.
EMPLOYEES
At December 31, 1994, the Company employed 474 people. As of March 8, 1995
following the sale of the Company's vinyl siding operation in Bardstown,
Kentucky, the Company employed 236 people.
ITEM 2. PROPERTIES
The Company's executive offices are located in Dedham, Massachusetts and are
leased. 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 manufacturing facility, a
granule plant, a rhyolite quarry and a private landfill for the Company's use.
The Company formerly leased its roofing machine and purchased such equipment
from the former lessor in November 1994. The Company also leases an industrial
laminator and certain other equipment which were fabricated for use in its
roofing plant. The laminator lease expires in 1998. As previously mentioned
the Company completed the construction of an asphalt oxidizer plant expansion
at the Norwood premises in January, 1995 to ensure a
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continuous supply of asphalt. The Company also leases storage and terminal
facilities in Providence, Rhode Island.
KENSINGTON WINDOW ASSEMBLY FACILITY
The Kensington window assembly facility is located in Leechburg, Pennsylvania
and is leased.
BEGCI'S ENVIRONMENTAL BUSINESS.
The San Leon Facility is owned by BEGCI.
ITEM 3. LEGAL PROCEEDINGS
The Company monitors its compliance with environmental regulations on an
ongoing basis. Periodically (about twice a year), the Company's general
counsel receives environmental site assessments from the operating managers
responsible for site environmental compliance. Appropriate action is
undertaken where needed. In addition, 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:
In March 1994, the Company received a notice of violation from the Texas
Natural Resource Conservation Commission ("TNRCC"). The notice alleged that
the Company was not in compliance with regulations of the TNRCC relating to
labeling, permitting, storage and disposal of certain hazardous waste. The
notice proposed certain corrective action on the part of the Company as well as
payment of certain unqualified administrative penalties. The Company is aware
of former uses at the site which may have resulted in the release of oil and/or
hazardous substances and materials, and which may become the subject of
corrective actions required by law. The Company has met with the TNRCC to
assess the nature and extent of any corrective action which may be required
with respect thereto, and to ascertain whether any penalties would be asserted.
In late 1994, the TNRCC determined that no enforcement action would be taken on
any of the alleged violations as stated in the March 1994 notice.
On January 13, 1995, the Company received a letter from the TNRCC alleging
three violations of TNRCC rules and six "areas of concern". The TNRCC has
issued no order nor made any findings which would be expected to lead to the
entry of any administrative penalties. The Company intends to respond to the
TNRCC within the specified time frame and has addressed the alleged violations.
The Company believes that this matter will not have a material impact on the
Company.
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
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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 estimates that the cost of corrective action to be taken
by it in accordance with the consent order will be approximately $100,000.
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. In the opinion of management and
based on management'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.
Site assessments performed for the Company by its environmental consultants GZA
GeoEnvironmental, Inc. in connection with the construction of the new asphalt
oxidizer at the Norwood roofing facility indicated the presence of reportable
quantities of hazardous or toxic material, most of which has since been
removed. The Company must complete certain additional remedial activities
described in the new Massachusetts Contingency Plan ("MCP") on or before August
2, 1996. In the opinion of management, any costs associated with these
additional remedial activities will not have a material effect on the results
of operations or financial condition of the Company.
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 from $200,000 to $700,000. As of December 31,
1994, the Company has provided a reserve of $440,000 for its proportionate
share of the estimated cleanup. The Company anticipates that $200,000 will be
reimbursed to the Company by the ADEQ in accordance with Arizona law and
regulation.
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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).
The Company has provided a reserve of $1 million at December 31, 1994 to offset
its estimate of the proportionate share (i.e., 16.5%) of the ultimate cost of
cleanup. Under a cost-sharing arrangement set forth in a consent decree with
the EPA, the other PRPs have agreed to incur 83.5% 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
$207,000 for its estimated share of the ultimate cost of clean-up for claims
(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. The site was inspected by the DEP in the early 1980s when
capital improvements were being made to the roofing
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plant. At that time, the DEP requested that the Company perform certain
remediation measures. The Company complied with such request. The
environmental condition of the site was studied in 1985 by an independent
engineering firm. The assessment was prompted by the request of a potential
lender which planned to take a mortgage on the property to collateralize a line
of credit to the Company. Upon review of the study, the lender extended credit
to the Company secured by a mortgage on the site. The DEP significantly
revised the regulations that govern the reporting, assessment and remediation
of hazardous waste sites in Massachusetts. The new 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 is again listed on the
August 1993 "Transition List of Confirmed Disposal Sites and Locations to be
Investigated."
Since 1981 Bird has been named as a defendant in approximately 450 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 Bird. Approximately 140 of these cases
are currently pending and costs of approximately $1.4 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. In light of nature and merits of the claims alleged, in the opinion of
management, the resolution of these remaining claims will not have a material
effect on the results of operations or financial condition of the Company.
INSURANCE AND PRODUCT LIABILITY CLAIMS
In 1991, the Company commenced an action against Wausau, and Wausau and
Continental Casualty Company, in turn, independently commenced certain actions
against the Company seeking declarations as to the obligations of the insurers
under the terms of liability insurance policies issued by the insurers to Bird
or the Logan-Long Company (which latter company was acquired by and merged into
Bird in 1976) to defend and indemnify Bird with respect to certain claims and
liabilities arising out of environmental conditions at and adjacent to various
locations including property formerly owned by Bird in Fulton, New York and
Franklin, Ohio and property located in Kingston, New Hampshire. The suits
involving Wausau were brought in the Superior Court for Norfolk County,
Massachusetts, and the Continental Casualty actions were commenced in the
Supreme Court of New York, Count of New York. On June 1, 1993, Wausau
commenced another 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 are 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 1996. In
the opinion of management, the pending litigation involving Wausau is too
preliminary to assess the impact on the results of operations and liquidity of
the Company.
The Company is also exposed to a number of other asserted and unasserted
potential claims encountered in the normal course of
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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, 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of the executive officers of the Company as of March 8,
1995, the date from which they have served as officers and their present
positions with the Company are as follows:
Joseph D. Vecchiolla 39 January 1994 President and Chief
Executive Officer
Frank S. Anthony 48 May 1984 Vice President,
General Counsel and
Corporate Secretary
Richard C. Maloof 49 January 1985 Vice President and
Chief Operating
Officer; President,
Roofing Group
Joseph M. Grigelevich 51 December 1988 Vice President
Finance and
Administration
Mr. Vecchiolla joined the Company in June 1993 as Vice President and Chief
Financial Officer. He was elected President, COO and CFO in November 1993 and
was given the additional responsibility of Acting CEO in December 1993 and was
elected to the Board of Directors. In January 1994, Mr. Vecchiolla was given
the full responsibility of CEO in addition to his other offices. Prior to his
association with Bird, Mr. Vecchiolla was Vice President and Chief Financial
Officer of Horizon Cellular Telephone Company (1991- 1993). Prior to that Mr.
Vecchiolla held the position of Executive Vice President of Educational
Publishing Corporation (1987- 1991). Mr. Anthony is an attorney and served in
the law department of Westinghouse Electric
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Corporation (1976-1983). Mr. Maloof and Mr. Grigelevich have served as
officers of the Company for more than five years.
These officers are appointed annually at an organizational meeting of the Board
of Directors immediately following the annual meeting of stockholders. There
are no family relationships among any of the officers of the Company nor are
any of the officers related to any member of the Board of Directors.
The Company had an employment agreement with Mr. Haufler, the former CEO. The
Employment Agreement was terminated on January 25, 1994. In December 1993, the
Company entered into an employment contract and a severance agreement with Mr.
Vecchiolla. The Company has also entered into agreements with several of its
other executive officers which become operative in the event of termination of
employment after a change in control of the Company or a change in the
individual's responsibilities following a change in control. These agreements
are described in the Company's definitive proxy statement for its 1995 Annual
Meeting which is to be filed with the Commission by April 30, 1995 and is
incorporated herein by reference.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
COMMON STOCK INFORMATION
The Company had 2,206 common shareholders of record at December 31, 1994.
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.
1994 1993
---- ----
QUARTER HIGH LOW HIGH LOW
------- ---- --- ---- ---
FIRST 12 1/4 8 4 1/4 11 3/4
SECOND 11 1/4 8 1/2 13 1/2 11 1/2
THIRD 10 1/2 7 13 1/4 11 1/2
FOURTH 10 8 13 1/2 6 1/2
The Company paid a cash dividend of 5 cents per common share in each quarter
during 1993. At the end of 1993 the Company suspended dividends on its common
stock.
Under the terms of the Loan Agreement between the company and Shawmut Capital,
the Company has agreed that it will refrain from paying cash
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dividends on its common stock or its $1.85 cumulative preference stock.
The Company is in arrears in the payment of dividends on its preference stock
and its 5% cumulative preferred stock. The Articles of Organization of the
Company provide that as long as any arrearage on the payment of dividends on
the Company's preferred stock exists, no dividends may be declared or paid on
any other class of stock of the Company and further provides that in the event
that full cumulative dividends on the preference stock have not been declared
and paid, the Company may not declare or pay any dividends or make any
distributions on, or purchase, redeem, or otherwise acquire, its common stock
until full cumulative dividends on the preference stock have been declared and
paid or set aside for payment.
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ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth certain financial data and are qualified in
their entirety by the more detailed Consolidated Financial Statements and
information included elsewhere herein:
Selected Consolidated Statement of Operations Data
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(Thousands of dollars, except per share amounts)
Net sales $167,886 $187,745 $164,202 $137,059 $128,997
-------- -------- -------- -------- --------
Costs and expenses:
Cost of sales 136,878 151,664 128,371 107,226 99,811
Selling, general and
administrative expenses 28,786 32,716 27,811 23,023 21,588
Interest expense 4,782 2,472 1,506 1,026 414
Discontinued business activities (income) (1,313) 268 178 189 (681)
Other (income) expense 4,680 5,903 (197) (331) (547)
-------- -------- -------- -------- --------
Earnings (loss) from continuing operations
before income taxes (5,927) (5,278) 6,533 5,926 8,412
Provision (benefit) for income taxes (7,010) (637) 869 498 614
-------- -------- -------- -------- --------
Earnings (loss) from continuing operations 1,083 (4,641) 5,664 5,428 7,798
-------- -------- -------- -------- --------
Discontinued operations:
Gain (loss) from operations of discontinued
businesses, net of taxes 1,245 (15,414) (2,573) (249) (1,073)
Loss on disposal of businesses, net of taxes (6,011) (11,000) 0 0 0
-------- -------- -------- -------- --------
Net loss from discontinued operations (4,766) (26,414) (2,573) (249) (1,073)
Cumulative effect of accounting change 0 2,733 0 0 0
-------- -------- -------- -------- --------
Net earnings (loss) ($3,683) ($28,322) $3,091 $5,179 $6,725
======== ======== ======== ======== ========
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Selected Consolidated Statement of Operations Data (continued)
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
(Thousands of dollars, except per share amounts)
Primary earnings (loss) per common share:
Continuing operations ($0.11) ($1.51) $1.00 $1.01 $1.73
Discontinued operations (1.20) (6.45) (0.62) (0.06) (0.30)
Cumulative effect of accounting change 0.00 0.67 0.00 0.00 0.00
------ ------ ------ ------ ------
Net earnings (loss) ($1.31) ($7.29) $0.38 $0.95 $1.43
====== ====== ====== ====== ======
Fully diluted earnings (loss) per common share:
Continuing operations ($0.11) ($1.51) $1.00 $1.01 $1.73
Discontinued operations (1.20) (6.45) (0.62) (0.06) (0.30)
Cumulative effect of accounting change 0.00 0.67 0.00 0.00 0.00
------ ------ ------ ------ ------
Net earnings (loss) ($1.31) ($7.29) $0.38 $0.95 $1.43
====== ====== ====== ====== ======
Cash dividend per common share $0.00 $0.15 $0.20 $0.20 $0.20
====== ====== ====== ====== ======
Book Value Per Common Share $5.07 $5.75 $12.83 $12.61 $11.59
====== ====== ====== ====== ======
Selected Consolidated Balance Sheet Data
DECEMBER 31,
---------------------------------------------------------
1994 1993 1992 1991 1990
------- -------- -------- ------- -------
(Thousands of dollars)
Total assets $85,705 $123,229 $119,075 $99,904 $80,835
Working capital $5,627 $30,090 $43,782 $34,179 $32,022
Long-term debt, excluding current portion $12,504 $43,127 $30,374 $12,150 $4,492
Stockholders' equity $37,718 $40,561 $69,101 $68,602 $60,323
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BIRD CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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. Effective as of
November 30, 1994, such needs are satisfied primarily by borrowing under the
Loan and Security Agreement ("Loan Agreement") between the Company and Barclays
Business Credit, Inc. of Glastonbury, Connecticut. On February 1, 1995,
Shawmut Bank, N.A. acquired Barclays Business Credit, Inc. concurrently
renaming Barclays Business Credit, Inc. to Shawmut Capital ("Shawmut Capital").
The terms and conditions of the Loan Agreement remained unchanged.
The Second Amended Credit Agreement contained financial and operating covenants
which, among other things, required the Company to maintain prescribed levels
of pre-tax earnings, net worth, ratios of debt to net worth and ratios of
current assets to current liabilities. As of September 30, 1993, the Company
was in default in the performance of its obligations with respect to certain of
its covenants under the Second Amended Credit Agreement regarding the ratio of
adjusted earnings, permitted capital expenditures and investments by the
Company in Kensington Partners, its window manufacturing joint venture. The
banks were under no obligation to make revolving credit loans under the Second
Amended Credit Agreement following the occurrence and during the continuance of
a default or event of default. The Banks continued to lend notwithstanding the
foregoing defaults. The Company classified the related debt as current on its
September 30, 1993 balance sheet in light of the fact that the Second Amended
Credit Agreement provided for automatic acceleration of the indebtedness upon
the occurrence of a default or event of default. No such acceleration
occurred.
On February 14, 1994 the Company's bank group entered into an agreement to
forbear from exercising their rights and remedies under the Second Amended
Credit Agreement and to continue to extend credit under the Second Amended
Credit Agreement through March 15, 1994. During this period of time, certain
operating and financial covenants in the forbearance agreement were operative,
and the Company agreed to collateralize the loans with the accounts receivable
of two of its roofing distribution companies.
On March 4, 1994, the Company and its lending banks executed the Third Amended
Credit Agreement, pursuant to which the Company was permitted to borrow up to
$65 million until January 31, 1996. Loans under the Third Amended Credit
Agreement, which were secured by substantially all of the Company's assets,
were made pursuant to a $40 million revolving credit line commitment for
working capital, letters of credit and a $25 million term loan for general
corporate purposes. The revolving credit
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line availability was determined with reference to a percentage of accounts
receivable and inventory which were pledged to the banks.
On August 22, 1994, the Company sold substantially all of the assets of its
building materials distribution businesses to a subsidiary of Wm. Cameron & Co.
(a "Cameron Subsidiary") for a purchase price of $24,245,000 based on the July
31, 1994 net book value. Concurrently, the Company exercised its right under
the Third Amended Credit Agreement to reduce the revolving credit commitment by
$13 million to $25,825,000, thereby reducing fees charged on the unused portion
of the facility. The purchase price with respect to assets acquired by a
Cameron Subsidiary at the August 22, 1994 closing was subject to later
adjustment based on an audit of the net book value of the acquired assets and
assumed liabilities as of the closing date. Due to the increase in the net
book value for the period from July 31, 1994 through August 31, 1994, the
Company received an additional $1,897,000 in respect of such adjustment, which
amount was paid to the Company on November 17, 1994. This sale resulted in a
gain of $2,677,000. On November 28, 1994, Ashley Aluminum, Inc., a Cameron
Subsidiary, acquired the net assets of Southland Building Products, Inc., the
Company's sole remaining building materials distribution business, for a
purchase price of $2,134,000 (which does not take into account $193,000 paid
for a minority interest acquired by the Company in contemplation of the closing
of the sale). There was an insignificant gain on this sale.
The Company used proceeds from the sale of the assets of its building materials
distribution business to reduce the term loan under the Third Amended Credit
Agreement from $25 million to $11,999,000 as of November 29, 1994 and to reduce
the amount outstanding under the revolving credit line to $11,529,000 as of the
same date. Under the terms of the Third Amended Credit Agreement, the term
loan was to be further reduced by a principal payment of $11.2 million on April
30, 1995 with the balance of the term loan payable on January 31, 1996.
Under the Third Amended Credit Agreement and prior to the execution of the
Loan Agreement dated November 30, 1994 with Shawmut Capital, repayment of the
term loan was also required to be made from excess proceeds of future asset
sales (calculated as the amount remaining after net asset sale proceeds were
used to reduce revolving credit loans to less than borrowing base availability
with borrowing base availability being calculated after the effect of such an
asset sale). The term loan was also required to be reduced on any date other
than the payment due dates specified in the preceding paragraph by the amount
(if any) by which the term loan exceeded 70% of the fair market value of all of
the Company's fixed assets.
The Third Amended Credit Agreement contained financial and operating covenants
which, among other things, (i) required the Company to maintain prescribed
levels of tangible net worth, net cash flow, earnings before interest, taxes,
depreciation and amortization, and ratio of current assets to current
liabilities, and (ii) limited capital expenditures by the Company. The Third
Amended Credit Agreement also contained restrictions on indebtedness, liens,
investments, distributions (including payment of dividends), mergers,
acquisitions and disposition of assets.
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20
In a letter dated April 11, 1994, the Company was notified by the Agent under
the Third Amended Credit Agreement of certain alleged defaults with respect to
certain post closing undertakings (that were primarily administrative in
nature) including but not limited to, delivery of certain legal opinions and
the issuance of certain certificates of title and title policies. By letters
dated April 20, 1994, July 20, 1994, August 17, 1994, September 1, 1994 and
September 13, 1994, the Company was notified by the agent bank under the Third
Amended Credit Agreement of the continuation of the defaults under certain of
the above-mentioned administrative covenants, as well as certain alleged
defaults and events of default resulting from the fact that the Company did not
meet its minimum net worth covenant as of June 30, 1994. The Company's failure
to satisfy the minimum net worth covenant was due to the $8,477,000 write-down
in the recorded value of Bird Environmental Gulf Coast, Inc. ("BEGCI"). The
banks were under no obligation to extend credit under the Third Amended Credit
Agreement following the occurrence and during the continuance of a default or
event of default. Although not formalized in the form of a written amendment,
waiver or forbearance, the banks continued to lend, and the Company continued
to take action necessary to cure certain of the alleged defaults and events of
default. The Company requested the banks to waive or to forbear from asserting
the remainder of the alleged defaults and events of default. During the
existence of these alleged defaults and events of default, the Company
continued to meet its payment obligations as required. As a result of the
alleged defaults and events of default, all loans under the Third Amended
Credit Agreement were classified as current on the September 30, 1994 balance
sheet.
Interest on the revolving credit line under the Third Amended Credit Agreement
accrued at the base rate (as specified in such agreement) plus 1% on all
borrowings and 1/2% on any unused portion. The interest on the term loan
portion accrued at the base rate plus 2%. Due to the Company's defaults under
the Third Amended Credit Agreement, however, except for a short period
following the August 22, 1994 closing of the sale of assets to a Cameron
Subsidiary, from April 11, 1994 until November 30, 1994, the Banks charged
interest on the loans under the Third Amended Credit Agreement at a rate of
interest equal to 4% above the rate otherwise applicable to each such loan.
Therefore, the interest rate for outstanding loans under the revolving credit
line was 13.50% and 14.50% for the term loan just prior to the refinancing with
Shawmut Capital on November 30, 1994.
On November 30, 1994, Bird Incorporated entered into a $39 million, three year
Loan and Security Agreement (the "Loan Agreement") with Shawmut Capital. At
the end of the three year period, the Loan Agreement is automatically renewed
annually for a one year period unless terminated specifically in writing. The
Loan Agreement consists 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. Up to $5 million of the revolving credit
facility can be used for letters of credit. Letters of credit outstanding as
of December 31, 1994 totaled $2,927,000. Intercompany loans and advances to
non-borrowing affiliates including BEGCI and Kensington are permitted under the
Loan Agreement. On March 8, 1995, Shawmut Capital executed the First Amendment
to the Loan Agreement permitting the sale of the Company's vinyl siding
operation located in
20
21
Bardstown, Kentucky. The First Amendment to the Loan Agreement amended the
amount of the facility to $20 million consisting of a $15 million revolving
credit commitment and a $5 million term loan. Up to $5 million of the
revolving credit facility can be used for letters of credit. 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 which may be 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 8, 1995, an
aggregate of $9,562,000 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 (except that the
Company is not precluded from consummating the sale of its interest in BEGCI).
The proceeds of the initial borrowings under the Loan Agreement were used to
pay in full the outstanding loan balances under the Third Amended Credit
Agreement. A commitment fee of $150,000 was due and paid to Shawmut Capital as
of the closing date of the Loan Agreement.
Interest on the revolving credit commitment under the Loan Agreement accrues at
the Shawmut Capital base rate (as specified in such Agreement) plus 1% on all
borrowings and the greater of $25,000 per annum or 1/4% on any unused portion
of the commitment payable monthly in arrears. Interest on Term Loan A and Term
Loan B accrues at the base rate plus 1 1/2%. The combined repayment of the
principal on Term Loan A and Term Loan B is $125,000 per month in year one and
$142,800 per month in years two and three with a final principal payment of
$10,072,800 due on November 30, 1997. Proceeds in excess of $100,000 from the
sale of fixed assets may, at Shawmut Capital's discretion, be applied to the
outstanding principal payments of the term loans.
In the event of a sale of the Company's 80% interest in BEGCI, proceeds would
be applied to the outstanding principal balance of Term Loan A. Proceeds from
the sale of the assets of the Vinyl division to Jannock on March 8, 1995 were
first applied to the repayment of Term Loan A, second to the repayment of Term
Loan B so that the outstanding principal amount of Term Loan B equals $5
million and third to the outstanding Revolving Credit Loan with the balance of
proceeds being retained by the Company. As of March 8, 1995, interest on the
loans outstanding under the Loan Agreement as amended by the First Amendment
thereto accrues at either the base rate or at the London Interbank
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Offering Rate ("LIBOR") plus 275 basis points at the borrower's election.
On January 25, 1994, the bank that was party to Kensington's Credit Agreement
dated October 25, 1993 gave notice that Kensington had breached certain
financial covenants including the ratio of Current Assets to Current
Liabilities, Tangible Net Worth and Total Liabilities to Tangible Net Worth in
each case as defined therein (although it continued to meet its payment
obligations throughout the term of the Credit Agreement). Subsequently, the
bank agreed to forbear from exercising its rights and remedies under such
agreement until August 31, 1994. In accordance with this forbearance
agreement, interest accrued at 3% above the bank's prime lending rate. On May
2, 1994, this bank applied the Company's $750,000 cash deposit, which was held
by the bank as collateral, against the total amount owed which was then
$2,158,000. A payment schedule was established to repay the remainder of the
loan. The loan availability calculation was amended to allow aggregate
borrowings equal to the lesser of the borrowing base calculation or a set
borrowing schedule over a prescribed time frame. The borrowing availability
schedule began April 29, 1994 at $1,550,000 and was periodically reduced to
$475,000 through August 31, 1994, at which time the outstanding balance was
paid in full.
This reduced borrowing availability schedule required Kensington to seek a new
lending arrangement. As of June 15, 1994, the Partnership entered into a
financing/factoring agreement with Bankers Capital of Chicago, Illinois. On
July 20, 1994, the Company's banks amended the Third Amended Credit Agreement
to permit the refinancing of Kensington with Bankers Capital. Under the terms
of the agreement, Bankers Capital agreed to provide up to $2.5 million in
financing based on the value of certain acceptable receivables. The amount
advanced at any one time cannot exceed 80% of the value of these receivables.
Interest on the amount advanced is at the prime lending rate plus 1 1/2%.
Additionally, Bankers Capital charges a fee ranging from 1.0% to 3.45% of the
total amount of the value of acceptable receivables used to extend financing
and based on the age of such receivables. As the receivables age, the
applicable fee percentage increases. In light of the interest and fees
described above, the average borrowing rate for 1994 under the Bankers Capital
Agreement was 22%. The financing by Bankers Capital is co-guaranteed by the
Company. Bankers Capital initially funded Kensington on August 25, 1994, which
funding included payment in full of the outstanding loan balance with
Kensington's previous lender.
On June 18, 1994, the Company entered into a Settlement Agreement and Full and
Final Release (the "Settlement Agreement") with the minority stockholders of
BEGCI, the owner of the San Leon Facility, thus resolving a suit filed by such
minority stockholders claiming a breach of contract and a countersuit filed by
the Company in January 1994. The claim was based on the minority stockholders'
allegations that the Company, without minority stockholder approval, caused
BEGCI to fund the construction of a solid waste treatment facility featuring
desorption technology owned by one of the minority stockholders rather than
funding a less costly liquid waste treatment facility featuring centrifuge
technology. Pursuant to the Settlement Agreement, the Company has agreed to
sell its 80% interest in BEGCI to the Minority
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Stockholders for approximately $7.5 million in cash on or before February 28,
1995. Such proposed sale was subject to financing, and also allowed the
Company to sell all of its interest in BEGCI to another buyer, provided that
the shares of common stock of BEGCI owned by the minority stockholders were
also sold at no less than the same price per share. The minority stockholders
continue to discuss financing with various interested parties. As the Board of
Directors decision to sell BEGCI and this Settlement Agreement established a
measurement date for financial accounting purposes, the Company has written
down the recorded value of BEGCI as of June 30, 1994 to $7.5 million. The
minority shareholders of BEGCI did not exercise their purchase option as of
February 28, 1995. The Company is continuing its efforts to locate a suitable
acquirer for the facility.
Until the Company's purchase of the roofing machine at the Company's Norwood,
Massachusetts facility on November 30, 1994, the operating lease on such
machine was collateralized by a mortgage on the Norwood property. The mortgage
required the consent of the lessor to allow a second mortgage on the real
property. The terms of the Third Amended Credit Agreement required security on
all of the Company's assets, and as a result, a second mortgage in favor of the
banks was placed on the Norwood property without obtaining the lessor's
consent. The Company was notified by a letter dated April 25, 1994 that the
lessor was declaring the Equipment Leasing Agreement dated as of December 28,
1984 (as amended) to be in default, and by a letter dated May 23, 1994, the
lessor declared the lease terminated. The Company and the lessor entered into
an agreement pursuant to which the Company agreed to purchase the leased
equipment for a purchase price of approximately $4 million payable in
installments between August 30, 1994 and January 15, 1995, by which date the
final payment of approximately $2.3 million had to be made. Concurrent with
the Company's refinancing with Shawmut Capital on November 30, 1994, the
Company satisfied all outstanding obligations with respect to the purchase
agreement it had entered into with the lessor and acquired title to the roofing
machine.
In order to control its cost and supply of asphalt, the Company constructed an
asphalt oxidizer plant at its roofing facility in Norwood, Massachusetts. Said
construction was completed as of 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 million.
Net cash and cash equivalents decreased during fiscal 1994 by $7,197,000 to
$321,000. The cash used by continuing operations for the fiscal period ended
December 31, 1994 increased $9,229,000, from $2,373,000 to $11,602,000. The
change was attributable primarily to the future tax benefit of approximately
$10.2 million recorded by the Company for fiscal 1994. In addition, there were
several significant changes in the balance sheet items such as a decrease of
approximately $3 million in trade accounts receivable, a decrease of
approximately $7 million in liabilities not relating to financing activities
and an decrease of $5 million relating to the liquidation reserve. In
addition, the Company recorded a charge of $9,747,000 relating to the disposal
of the environmental business for the period ended December 31, 1994. The
Company had approximately $19.4 million of net cash
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provided from investing activities for the period ended December 31, 1994 as
compared to a total of approximately $7 million of net cash used in investing
activities for the period ended December 31, 1993. The change is primarily the
result of $27 million of cash receipts from the proceeds of the sale of certain
of the Company's assets (including, primarily, the sale of the assets of the
distribution companies to a Cameron Subsidiary in August 1994), offset by cash
used for capital expenditures. The net cash resulting from financing
activities changed by $29 million for the period ended December 31, 1994 as
compared to the period ended December 31, 1993. The change is attributable to
the fact that during 1994 the Company repaid significant amounts of debt by
approximately $16 million in excess of borrowings, as compared to 1993 when the
Company borrowed approximately $16 million in excess of repayments.
There were several significant changes in the balance sheet accounts between
December 31, 1993 and December 31, 1994. The inventory balance decreased
$13,786,000 to $8,371,000 at December 31, 1994 from $22,157,000 at December 31,
1993. The decrease was due to management's deliberate decision to reduce
working capital and manage the level of inventories, coupled with the sale of
the Company's distribution businesses. Due to the seasonality of the business,
the winter months are historically the time when the Company builds its
inventory in anticipation of sales for the summer months. Other investments
balance at December 31, 1994 was $675,000 and $5,551,000 at December 31, 1993.
The decrease of approximately $4.9 million is due primarily to the sale of the
Company's 40% interest in Mid-South Building Supply, Inc. ("Mid-South") on June
10, 1994 and the decrease in cash value of corporate owned life insurance as a
result of take downs in cash surrender value to pay premiums and a $1.4 million
reduction as a result of funds returned to the Company under a cash surrender
value loan. The decrease in the Company's liquidation reserve reflects the
fact that, during the twelve months ended December 31, 1994, the Company was
able to either complete or terminate all of the contracts related to the
"on-site" environmental business, sell the related assets, close the facilities
and offices and terminate a significant number of employees.
ENVIRONMENTAL MATTERS
The Company monitors its compliance with environmental regulations on an
ongoing basis. Periodically (about twice a year), the Company's general
counsel receives environmental site assessments from the operating managers
responsible for site environmental compliance. Appropriate action is
undertaken where needed. In addition, 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:
In March 1994, the Company received a notice of violation from the Texas
Natural Resource Conservation Commission ("TNRCC"). The notice alleged that
the Company was not in compliance with regulations of the TNRCC relating to
labeling, permitting, storage and disposal of certain
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25
hazardous waste. The notice proposed certain corrective action on the part of
the Company as well as payment of certain unqualified administrative penalties.
The Company is aware of former uses at the site which may have resulted in the
release of oil and/or hazardous substances and materials, and which may become
the subject of corrective actions required by law. The Company has met with
the TNRCC to assess the nature and extent of any corrective action which may be
required with respect thereto, and to ascertain whether any penalties would be
asserted. In late 1994, the TNRCC determined that no enforcement action would
be taken on any of the alleged violations as stated in the March 1994 notice.
On January 13, 1995, the Company received a letter from the TNRCC alleging
three violations of TNRCC rules and six "areas of concern". The TNRCC has
issued no order nor made any findings which would be expected to lead to the
entry of any administrative penalties. The Company intends to respond to the
TNRCC within the specified time frame and has addressed the alleged violations.
The Company believes that this matter will not have a material impact on the
Company.
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. In addition, the Company is required to pay an administrative
penalty of $30,000. The Company estimates that the cost of corrective action
to be taken by it in accordance with the consent order will be approximately
$100,000.
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. In the opinion of management and
based on management'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.
Site assessments performed for the Company by its environmental consultants GZA
GeoEnvironmental, Inc. in connection with the construction of the new asphalt
oxidizer at the Norwood roofing facility indicated the presence of reportable
quantities of hazardous
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or toxic material, most of which has since been removed. The Company must
complete certain additional remedial activities described in the new
Massachusetts Contingency Plan ("MCP") on or before August 2, 1996. In the
opinion of management, any costs associated with these additional remedial
activities will not have a material effect on the results of operations or
financial condition of the Company.
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 from $200,000 to $700,000. As of December 31,
1994, the Company has provided a reserve of $440,000 for its proportionate
share of the estimated 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).
The Company has provided a reserve of $1 million at December 31, 1994 to offset
its estimate of the proportionate share (i.e., 16.5%) of the ultimate cost of
cleanup. Under a cost-sharing arrangement set forth in a consent decree with
the EPA, the other PRPs have agreed to incur 83.5% 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
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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 $207,000 for its estimated share of the ultimate
cost of clean-up for claims (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. The site was inspected by the DEP in the early 1980s when
capital improvements were being made to the roofing plant. At that time, the
DEP requested that the Company perform certain remediation measures. The
Company complied with such request. The environmental condition of the site
was studied in 1985 by an independent engineering firm. The assessment was
prompted by the request of a potential lender which planned to take a mortgage
on the property to collateralize a line of credit to the Company. Upon review
of the study, the lender extended credit to the Company secured by a mortgage
on the site. 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 is again listed
on the August 1993 "Transition List of Confirmed Disposal Sites and Locations
to be Investigated."
Since 1981 Bird has been named as a defendant in approximately 450 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 Bird. Approximately 140 of these cases are
currently pending and costs of approximately $1.4 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. In
light of nature and merits of the claims alleged, in the opinion of management,
the resolution of these remaining claims will not have a material effect on the
results of operations or financial condition of the Company.
INSURANCE AND PRODUCT LIABILITY CLAIMS
In 1991, the Company commenced an action against Wausau, and Wausau and
Continental Casualty Company, in turn, independently commenced certain
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actions against the Company seeking declarations as to the obligations of the
insurers under the terms of liability insurance policies issued by the insurers
to Bird or the Logan-Long Company (which latter company was acquired by and
merged into Bird in 1976) to defend and indemnify Bird with respect to certain
claims and liabilities arising out of environmental conditions at and adjacent
to various locations including property formerly owned by Bird in Fulton, New
York and Franklin, Ohio and property located in Kingston, New Hampshire. The
suits involving Wausau were brought in the Superior Court for Norfolk County,
Massachusetts, and the Continental Casualty actions were commenced in the
Supreme Court of New York, Count of New York. On June 1, 1993, Wausau
commenced another 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 are 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 1996. In
the opinion of management, the pending litigation involving Wausau is too
preliminary to assess the impact on the results of operations and liquidity of
the Company.
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.
RESULTS OF OPERATIONS
The Company is focusing on its roofing manufacturing operations as its primary
business. The Company acknowledges that as a result of this decision, its
future prospects and sales will be tied solely to one line of business which
will, at least in the near future (and in the absence of any current plans of
the Company to expand significantly its operations and enter new markets), be
dependent upon the economy in the northeastern United States, the territory
which currently constitutes the Company's current market, and produce all of
its output at a single plant which currently relies on one major supplier for
critical raw materials (i.e., glass mat). 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,
future cost improvements which will result from the purchase of its roofing
machine from the former lessor and the completion of its construction of an
asphalt oxidizing plant. The Company's previous cash flow difficulties slowed
down the construction of the asphalt oxidizer, thus extending the period during
which the Company was required to purchase asphalt from more costly outside
vendors. In addition, due to the Company's limited working
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capital and to its difficulty in obtaining an adequate supply of asphalt for
"off-hours" and weekend production during peak- production times, the roofing
manufacturing facility was forced to operate at less than full capacity at
certain times during the year, resulting in limited inventory. Although the
Company was not always able to meet customers' demand for its roofing products
on a timely basis due to such circumstances, market share did not decrease
significantly. However, the Company's limited cash flow also hindered the
Company's ability to attract new customers.
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
to $167,886,000 as compared to fiscal 1993. 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
segments.
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 materials 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 expense of raw materials.
Selling, general and administrative ("SG&A") expenses for fiscal 1994 decreased
12.0% from $32,716,000 to $28,786,000. 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
(expressed 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 1994,
constituting a 93% increase. The increased interest expense
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30
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 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 partnership 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 a 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 sell 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 intends to operate the San Leon Facility until the sale of its
interest in BEGCI is consummated. No assurance can be given that a sale will
be successfully completed or, if completed, that such sale will be on terms
which are advantageous to the Company. However, the Company expects the sale
or disposition of BEGCI to occur by the end of the second quarter of 1995.
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
has completely withdrawn 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 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 outcome of the sales of assets and results of
operations, excess costs of $3,861,000 charged in 1993 have been reversed and
are recorded as discontinued operations in the consolidated statement of
operations ending December 31, 1994.
1993 COMPARED WITH 1992
Losses from continuing operations before income taxes in 1993 were
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31
approximately $5.3 million compared to earnings of approximately $6.5 million
in 1992. The write-off of non-performing assets and other corporate charges
were significant contributing factors to the 1993 aggregate loss.
Net sales from continuing operations in fiscal year 1993 increased
approximately $23.5 million or 14.3% over fiscal year 1992. The increase in
net sales was mostly due to the building products distribution business. The
year-to-year comparison also reflects the sale of the municipal sludge business
in mid-1993. During fiscal year 1993, it was the Company's intention to focus
its future efforts on its roofing manufacturing business and its vinyl
business. However, the Company was required to devote a greater amount of
working capital to support its environmental remediation business due to prior
contractual commitments to provide remediation services. Cost of sales in 1993
was approximately $151.7 million as compared to approximately $128.4 million in
1992, constituting an increase of 18%. Cost of sales stated as a percentage of
net sales was 80.8% in 1993 as compared to 78.2% in 1992. The major
contributing factor in such percentage increase was the increased expense of
raw materials primarily related to the roofing manufacturing business and, to a
lesser degree, to the Vinyl Business. The significant increase in cost of
sales in the fourth quarter in comparison to the third quarter related to
losses on contracts in the on-site environmental remediation business.
Interest expense was approximately $2.5 million in 1993 as compared to
approximately $1.5 million in 1992, constituting a 64% increase. The increase
was a result of the Company requiring a consistently higher debt level
throughout 1993, mainly to support its environmental remediation business.
This segment of business used more working capital in 1993 than 1992 and also
needed funds to complete the San Leon Facility. The increased debt levels and
higher interest rates resulted in higher interest expense. Cash flow
projections indicated that with the closing of the on-site business, completion
of the San Leon Facility, the amendment of the Second Amended Credit Agreement
and other cash conservation measures, debt levels would be rendered manageable.
Other non-recurring expenses totalled $6 million (net of income of
approximately $1.3 million from a settlement with a former vendor and of
approximately $2,625,000 constituting that portion of expenses incurred by
Kensington which are allocable to the Company) in 1993 compared to other income
of $200,000 in 1992. A series of non-recurring items at the end of 1993
required the Company to record a number of special charges to 1993 results of
operations. The principal items relating to such charges are outlined in the
following paragraphs:
- The Company increased by $500,000 a reserve for its environmental
cleanup of the Fulton Terminal Superfund Site described under
"Environmental Matters" above, based on site assessments and on
Bird's estimated share of the proportionate costs, without regard
to anticipated insurance proceeds.
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- The Company wrote off approximately $1.3 million in real property
investments it deemed imprudent to pursue in light of current
financing considerations. This write-off was based on the
estimated net realizable value of the property.
- A promissory note in the principal amount of approximately $1.3
million previously accepted by the Company to satisfy the
remaining portion of an outstanding receivable, which note was
collateralized by a second interest in an unsecured portfolio of
home improvement loans, was deemed to be of no value, based on an
assessment of the portfolio and the bankruptcy of the debtor;
therefore, it was written off.
- In connection with its termination of George J. Haufler, the
former Chief Executive Office of Bird, the Company established an
$850,000 reserve to cover a settlement provided for under Mr.
Haufler's employment agreement (which settlement has been paid in
full) and the Company's agreement to pay health insurance
premiums until 1997. The Company's obligations in this respect
have terminated in light of Mr. Haufler's recent death.
Kensington experienced severe operational problems due to a rapid increase in
business and product line changes in the latter part of 1993. This resulted in
a loss of approximately $5.2 million, half of which was allocable to the
Company under the terms of the Kensington Partnership Agreement.
In the third quarter of 1993, the restructuring reserve initially established
in 1992 to cover expenses related to severance payments, office closure,
relocation and other contractual liabilities for the consolidation and
reorganization of the environmental business was increased by $2 million. (See
the Notes to the 1994 Consolidated Financial Statements). On July 22, 1993,
the Company sold its environmental municipal sludge disposal business
aggregating a net pretax gain of $858,000 which is included in the loss from
operations of discontinued businesses. Additionally, the Company recorded a
provision totalling approximately $11 million which represented the estimated
net costs associated with the closing of the "on-site" business. These costs
include the write-down of assets to net realizable value, the expected loss
from operations resulting from projects being closed and general expenses
associated with closing a business and are shown as a loss in connection with
the disposal of the "on-site" business in the 1993 results. (See the Notes to
the 1994 Consolidated Financial Statements). All other results of the
Company's environmental operations for the comparative periods were
reclassified as discontinued operations upon the Company's decision to exit the
off-site environmental remediation business as described above.
A 12.1% tax benefit from continuing operations was booked in 1993 as compared
to a 13.3% tax provision in 1992. The Company's decision to record an
approximately $9 million valuation reserve in 1993 in accordance with the
Statement of Financial Accounting Standard No. 109, "Accounting for Income
Taxes" ("FAS 109") issued by the Financial Accounting Standards Board in
February 1992 (as further described in Note 4 of the Notes to the 1993
Consolidated Financial Statements) was
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the primary reason the effective rate was lower than the statutory rate.
1992 COMPARED WITH 1991
Earnings from continuing operations before income taxes amounted to $6.5
million compared to $5.9 million in 1991. Net sales of approximately $164.2
million were approximately $27.1 million higher than in 1991, constituting an
increase of 19.8%. The increase in sales related to acquisitions by, and
increased business (primarily in the Southwest) of, the Company's roofing
manufacturing business and its vinyl business. Cost of sales in 1992 was
approximately $128.4 million compared with approximately $107.2 million for
1991. Gross profit (expressed as a percentage of sales for 1992) remained
constant at 21.8%.
SG&A expenses in 1992 were approximately $27.8 million as compared to
approximately $23 million for 1991. The 20.8% increase in SG&A expenses was a
result of acquisitions in the roofing manufacturing business and the vinyl
business. SG&A expenses (expressed as a percentage of net sales) were 16.9% in
1992 and 16.8% in 1991.
Interest expense of approximately $1.5 million in 1992 increased $480,000 over
that in 1991 as a result of increased bank debt to fund new acquisitions and
capital expenditures made to expand the Company's environmental remediation
business.
The Company's effective tax rate from continuing operations and related tax
provisions for the fiscal year ended December 31, 1992 increased from the
comparable 1991 period due primarily to an increase in the alternative minimum
tax (the "AMT") as a result of the full utilization of AMT net operating loss
carryforwards in 1992.
Due to the Company's decision to exit completely from the environmental
business in June 1994, results of operations from all environmental business in
1992 and 1991 have been reclassified as discontinued operations.
INFLATION
The Company is continually seeking ways to deal with cost increases by
productivity improvements and cost reduction programs. In the Housing Group,
in recent years, the Company has not always been able to pass increased raw
material costs on 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 by productivity savings. Since the Environmental
Group is primarily a service business and the need for this service is mostly a
result of government regulations, inflation is not a major factor.
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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.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Items 10, 11, 12 and 13 (except the information on
executive officers) is included in the Company's definitive proxy statement for
its 1995 Annual Meeting of Stockholders which will be filed with the Commission
by April 30, 1995 and which is incorporated herein by reference. Information
on executive officers, required by Item 10, is included in PART I of this
report under the heading "Executive Officers of the Registrant".
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 -- through -- of this
report.
1. On February 23, 1995, the Company filed a Form 8-K/A-2 to amend
the Form 8-K previously filed to disclose the sale of
substantially all of the assets of its building materials
distribution businesses to Wm. Cameron & Co. The Form 8- K/A-2
included pro forma financial information, restated to reflect the
results of operations of the Company's environmental business as
discontinued operations as of June 30, 1994, assuming the sale of
the distribution businesses had occurred on that date.
2. On March 22, 1995, the Company filed a Form 8-K disclosing the
sale of substantially all of the assets related to its vinyl
siding business as conducted at its Bardstown, Kentucky facility
to Jannock, Inc. The Form 8-K included pro forma financial
information as of September 30, 1994, assuming the sale of the
vinyl business had occurred on that date.
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Items 14 (a) (3) and (c)
Exhibits
Bird Corporation
Dedham, Massachusetts
EXHIBIT INDEX
Sequential
Exhibit 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 Shawmut Capital Corporation) and Bird Incorporated.
4(a)(4) First Amendment dated as of March 8, 1995 to the Loan Agreement between Shawmut Capital Corporation
and Bird Incorporated.
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.)
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Sequential
Exhibit No. Page No.
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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.
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.)
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.)
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Sequential
Exhibit No. Page No.
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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.)
38
39
Sequential
Exhibit No. Page No.
----------- ----------
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.
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.)
11 Statement regarding computation of per share earnings(loss).
22 Significant subsidiaries.
39
40
Sequential
Exhibit No. Page No.
----------- ----------
23(a) Consent of Price Waterhouse LLP to incorporation by reference of 1994 financial statements in the
Company's Registration Statements on Form S-3, Registration No. 33-44475; Form S-4, Registration No.
33-44403; and Form S-8, Registration Nos. 33-36304, 33-36305, 33-67826 and 33-67828.
23(b) Consent of Alpern, Rosenthal and Company, independent accountants for Kensington Partners to
incorporation by reference of the 1994 Kensington Partners independent auditors' report in the
Company's Registration Statements on Form S-3, Registration No. 33-44475; Form S-4, Registration No.
33-44403; and Form S-8, Registration No. 33-36304, 33-36305, 33-67826 and 33-67828.
28 Annual report on Form 11-K of the Bird Employees' Savings and Profit Sharing Plan for the fiscal year
ended December 31, 1994. (To be filed by amendment.)
* Indicates management contract or compensatory plan or arrangement
40
41
POWER OF ATTORNEY
We, the undersigned officers and Directors of Bird Corporation, hereby
severally constitute and appoint Joseph D. Vecchiolla 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, 1994, and any and all amendments thereto.
IN WITNESS WHEREOF, we have signed this Power of Attorney in the
capacities indicated on March 24, 1994.
Principal Executive
Officer:
___________________________ President, Director and
Joseph D. Vecchiolla Chief Executive Officer
Principal Financial Officer:
___________________________ Vice President, Finance and
Joseph M. Grigelevich, Jr. Administration
Directors
___________________________ _______________________
Robert P. Bass, Jr. Francis J. Dunleavy
___________________________ _______________________
Charles S. Bird, Jr. John T. Dunlop
___________________________ _______________________
Robert L. Cooper Guy W. Fiske
___________________________ _______________________
Loren R. Watts Richard C. Maloof
41
42
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
------------------
JOSEPH D. VECCHIOLLA
PRESIDENT, CEO
March 24, 1995
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, March 24, 1995
JOSEPH D. VECCHIOLLA and CEO (Principal
Executive Officer)
__________________________ Vice President, March 24, 1995
JOSEPH M. GRIGELEVICH, JR. and CFO (Principal
Financial Officer)
___________________________ Corporate Controller March 24, 1995
DONALD L. SLOPER, JR. (Principal Accounting
Officer)
*
___________________________ Director March 24, 1995
ROBERT P. BASS, JR.
*
___________________________ Director March 24, 1995
CHARLES S. BIRD, JR.
42
43
SIGNATURES
(continued)
*
___________________________ Director March 24, 1995
ROBERT L. COOPER
*
___________________________ Director March 24, 1995
FRANCIS J. DUNLEAVY
*
___________________________ Director March 24, 1995
JOHN T. DUNLOP
*
___________________________ Director March 24, 1995
GUY W. FISKE
*
___________________________ Director March 24, 1995
RICHARD C. MALOOF
*
___________________________ Director March 24, 1995
LOREN R. WATTS
* By ___________________________
Frank S. Anthony as
Attorney-in-fact
43
44
ANNUAL REPORT ON FORM 10-K
ITEM 14 (a) (1) AND (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1994
BIRD CORPORATION
Dedham, Massachusetts
45
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.
Consolidated Financial Statements: Page
----
Reports of independent accountants ____________________________ F2
Balance sheets at December 31, 1994 and 1993 __________________ F4
Statements of operations for each of the three years in
the period ended December 31, 1994 ___________________________ F6
Statements of stockholders' equity for each of the three
years in the period ended December 31, 1994 __________________ F7
Statements of cash flows for each of the
three years in the period ended December 31, 1994 ____________ F10
Notes to consolidated financial statements ____________________ F11
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 _______________ F39
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.
F1
46
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, 1994 and 1993, and the related consolidated
statements of operations, of stockholders' equity and of cash flows for the
three years in the period ended December 31, 1994. 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, a 90% owned joint
venture, which statements reflect total assets of $8.9 million and $11.3
million at December 31, 1994 and 1993, respectively, total revenues of $24.2
million and $21.3 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 F1 present fairly, in all material respects, the
financial position of Bird Corporation and its subsidiaries as of December 31,
1994 and 1993, and the results of their operations and their cash flows for the
three years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles.
As discussed in Note 1 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 8, 1995
F2
47
INDEPENDENT AUDITORS' REPORT
To the Partners
Kensington Partners and Affiliate
Leechburg, Pennsylvania
We have audited the accompanying combined balance sheets of Kensingtion
Partners and Affiliated (Joint Venture Partnerships) as of December 31, 1994
and 1993 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 and the period from July 1, 1992 (Inception) to December 31,
1992. 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 assuarance 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 Kensingtion
Partners and Affiliate as of December 31, 1994 and 1993, and the results of
their operations and their cash flows for the years ended December 31, 1994 and
1993 and the period from July 1, 1992 (Inception) to December 31, 1992, 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
Alpern, Rosenthal & Company
Pittsburgh, Pennsylvania
February 10, 1995
F-3
48
BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
1994 1993
----------- ------------
Assets
Current Assets:
Cash and equivalents $321,000 $7,518,000
Accounts and notes receivable, less
allowances - $3,137,000 in 1994
and $4,273,000 in 1993 19,644,000 32,696,000
Inventories 8,371,000 22,157,000
Prepaid expenses and other assets 3,095,000 4,046,000
Deferred income tax 6,836,000 170,000
----------- ------------
Total current assets 38,267,000 66,587,000
----------- ------------
Property, Plant and Equipment:
Land and land improvements 3,145,000 4,716,000
Buildings 11,742,000 14,700,000
Machinery and equipment 33,760,000 40,686,000
Construction in progress 5,705,000 14,882,000
54,352,000 74,984,000
Less - Depreciation and amortization 24,323,000 30,410,000
----------- ------------
30,029,000 44,574,000
----------- ------------
Other investments 675,000 5,551,000
Assets held for sale 7,500,000 0
Deferred tax asset 8,662,000 5,051,000
Other assets 572,000 1,466,000
$85,705,000 $123,229,000
=========== ============
See accompanying notes to consolidated financial statements.
F 4
49
BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
1994 1993
----------- ------------
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $13,671,000 $26,377,000
Long-term debt, portion due within one year 18,071,000 3,400,000
Retirement plan contributions payable 302,000 513,000
Income taxes payable 596,000 809,000
Liquidation reserve 0 5,398,000
----------- ------------
Total current liabilities 32,640,000 36,497,000
----------- ------------
Long-term debt, portion due after one year 12,504,000 43,127,000
----------- ------------
Other liabilities 2,715,000 3,021,000
----------- ------------
Deferred income taxes 128,000 23,000
----------- ------------
Total liabilities 47,987,000 82,668,000
----------- ------------
Stockholders' Equity
5% cumulative preferred stock, par
value $100. Authorized 15,000 shares;
issued 5,820 shares in 1994 and 1993
(liquidating preference $110 per share,
aggregating $640,000) 582,000 582,000
Preference stock, par value $1. Authorized
1,500,000 shares; issued 814,300 shares
of $1.85 cumulative convertible preference
stock in 1994 and 1993(liquidating value $20
per share, aggregating $16,286,000) 814,000 814,000
Common stock, par value $1. Authorized
15,000,000 shares; 4,375,179 shares issued
in 1994 and 4,291,565 shares issued in 1993 4,375,000 4,291,000
Other capital 27,235,000 26,456,000
Retained earnings 7,860,000 11,551,000
----------- ------------
40,866,000 43,694,000
Less -
Treasury stock, at cost, Common:
275,100 shares in 1994 and 163,791 in 1993 (2,991,000) (2,179,000)
Unearned compensation (157,000) (954,000)
----------- ------------
37,718,000 40,561,000
----------- ------------
Commitments and contingencies (Note 12)
$85,705,000 $123,229,000
=========== ============
See accompanying notes to consolidated financial statements.
F 5
50
BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
1994 1993 1992
------------ ------------ ------------
Net Sales $167,886,000 $187,745,000 $164,202,000
------------ ------------ ------------
Costs and expenses:
Cost of sales 136,878,000 151,664,000 128,371,000
Selling, general and administrative expense 28,786,000 32,716,000 27,811,000
Interest expense 4,782,000 2,472,000 1,506,000
Discontinued business activities expense (income) (1,313,000) 268,000 178,000
Equity losses from partnership 4,680,000 2,625,000 0
Other (income) expense 0 3,278,000 (197,000)
------------ ------------ ------------
Total costs and expenses 173,813,000 193,023,000 157,669,000
------------ ------------ ------------
Earnings (loss) from continuing
operations before income taxes (5,927,000) (5,278,000) 6,533,000
Provision (benefit) for income taxes (7,010,000) (637,000) 869,000
------------ ------------ ------------
Earnings (loss) from continuing operations
before cumulative effect of accounting change 1,083,000 (4,641,000) 5,664,000
------------ ------------ ------------
Discontinued operations (Note 9):
Income (loss) from operations of
discontinued businesses, net of taxes 1,245,000 (15,414,000) (2,573,000)
Loss on disposal of environmental business,
1993 includes a provision of $5,200,000
for operating losses during phase out
period, net of taxes (6,011,000) (11,000,000) 0
------------ ------------ ------------
Net loss from discontinued operations (4,766,000) (26,414,000) (2,573,000)
------------ ------------ ------------
Cumulative effect of accounting change 0 2,733,000 0
------------ ------------ ------------
Net earnings (loss) before dividends (3,683,000) (28,322,000) 3,091,000
Preferred and preference stock
cumulative dividends 1,536,000 1,536,000 1,536,000
------------ ------------ ------------
Net earnings (loss) applicable to common
stockholders ($5,219,000) ($29,858,000) $1,555,000
============ ============ ============
Primary earnings (loss) per common share:
Continuing operations ($0.11) ($1.51) $1.00
Discontinued operations ($1.20) ($6.45) ($0.62)
------------ ------------ ------------
Cumulative effect of accounting change $0.00 $0.67 $0.00
Net earnings (loss) after dividends ($1.31) ($7.29) $0.38
============ ============ ============
See accompanying notes to consolidated financial statements.
F6
51
BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
$1.85
5% CUMULATIVE
CUMULATIVE CONVERTIBLE COMMON
PREFERRED PREFERENCE COMMON OTHER RETAINED STOCK IN
STOCK STOCK STOCK CAPITAL EARNINGS TREASURY
-------- -------- ---------- ----------- ----------- -----------
Balance January 1, 1994 $582,000 $814,000 $4,291,000 $26,456,000 $11,551,000 $(2,179,000)
Net (loss) (3,683,000)
Cash dividends declared:
5% cumulative preferred
stock - $1.25 per share (8,000)
Common stock issued as
compensation - 1,426 shares 1,000 14,000
Common stock issued for
contributions to employees'
saving plan - 12,439 shares 13,000 110,000
Common stock issued upon exercise
of stock options - 69,750 shares common
and 15,000 shares treasury 70,000 609,000 109,000
Purchase of 248 shares of
common stock (3,000)
L.T.Incentive forfeitures - 125,145 shares (910,000)
Common stock from distribution
business - 916 shares (6,000) (8,000)
Amortization of unearned
compensation
Cumulative foreign currency
translation 52,000
-------- -------- ---------- ----------- ----------- -----------
Balance December 31, 1994 $582,000 $814,000 $4,375,000 $27,235,000 $ 7,860,000 $(2,991,000)
======== ======== ========== =========== =========== ===========
TOTAL
UNEARNED STOCKHOLDERS
COMPENSATION EQUITY
------------ --------------
Balance January 1, 1994 $ (954,000) $ 40,561,000
Net (loss) (3,683,000)
Cash dividends declared:
5% cumulative preferred
stock - $5 per share (8,000)
Common stock issued as
compensation - 1,426 shares 15,000
Common stock issued for
contributions to employees'
saving plan - 12,439 shares 123,000
Common stock issued upon exercise
of stock options - 69,750 shares common
and 15,000 shares treasury 788,000
Purchase of 248 shares of
common stock (3,000)
L.T.Incentive forfeitures - 125,145 shares 910,000
Common stock from distribution
business - 916 shares (14,000)
Amortization of unearned
compensation (113,000) (113,000)
Cumulative foreign currency
translation 52,000
----------- ------------
Balance December 31, 1994 $ (157,000) $ 37,718,000
=========== ============
F7
52
BIRD CORPORATION SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
$1.85
5% CUMULATIVE
CUMULATIVE CONVERTIBLE COMMON
PREFERRED PREFERENCE COMMON OTHER RETAINED STOCK IN
STOCK STOCK STOCK CAPITAL EARNINGS TREASURY
-------- -------- ---------- ----------- ----------- -----------
Balance January 1, 1993 $582,000 $814,000 $4,267,000 $25,401,000 $41,645,000 $(2,059,000)
Net (loss) (28,322,000)
Cash dividends declared:
5% cumulative preferred
stock - $5 per share (29,000)
$1.85 cumulative
convertible preference stock
$1.85 per share (1,130,000)
Common stock $.15 per share (613,000)
Common stock issued as
compensation - 1,200 shares 1,000 13,000
Common stock issued for
contributions to employees'
saving plan - 19,119 shares 19,000 210,000
Common stock issued and note
repayment upon exercise of stock
options - 4,080 shares 4,000 210,000
Purchase of 10,119 shares of
common stock (120,000)
Amortization of unearned
compensation
Cumulative effect of
accounting change 323,000
Tax effect of stock options
exercised 303,000
Cumulative foreign currency
translation (4,000)
-------- -------- ---------- ----------- ----------- -----------
Balance December 31, 1993 $582,000 $814,000 $4,291,000 $26,456,000 $11,551,000 $(2,179,000)
======== ======== ========== =========== =========== ===========
TOTAL
UNEARNED STOCKHOLDERS
COMPENSATION EQUITY
------------ --------------
Balance January 1, 1993 $ (1,549,000) $ 69,101,000
Net (loss) (28,322,000)
Cash dividends declared:
5% cumulative preferred
stock - $5 per share (29,000)
$1.85 cumulative
convertible preference stock
$1.85 per share (1,130,000)
Common stock $.15 per share (613,000)
Common stock issued as
compensation - 1,200 shares 14,000
Common stock issued for
contributions to employees'
saving plan - 19,119 shares 229,000
Common stock issued and note
repayment upon exercise of stock
options - 4,080 shares 214,000
Purchase of 10,119 shares of
common stock (120,000)
Amortization of unearned
compensation 595,000 595,000
Cumulative effect of
accounting change 323,000
Tax effect of stock options
exercised 303,000
Cumulative foreign currency
translation (4,000)
----------- -----------
Balance December 31, 1993 $ (954,000) $40,561,000
=========== ===========
F8
53
BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
$1.85
5% CUMULATIVE
CUMULATIVE CONVERTIBLE COMMON
PREFERRED PREFERENCE COMMON OTHER RETAINED STOCK IN
STOCK STOCK STOCK CAPITAL EARNINGS TREASURY
-------- -------- ---------- ----------- ----------- -----------
Balance January 1, 1992 $590,000 $814,000 $4,213,000 $24,900,000 $ 40,906,000 $ (876,000)
Net earnings 3,091,000
Cash dividends declared:
5% cumulative preferred
stock - $5 per share (29,000)
$1.85 cumulative
convertible preference
stock - $1.85 per share (1,506,000)
Common stock - $.20 per share (817,000)
Common stock issued principally
in connection with acquisitions
12,820 shares 13,000 153,000
Common stock issued as
compensation- 1,200 shares 1,000 19,000
Common stock issued for
contributions to employees'
saving plan - 14,355 shares 14,000 195,000
Common stock issued upon
exercise of stock options
26,250 shares 26,000 178,000
Purchase of 91,981 shares of
common stock (1,183,000)
Amortization of unearned
compensation
5% cumulative preferred stock
purchased and retired-86 shares (8,000) 4,000
Cumulative foreign currency
translation (48,000)
-------- -------- ---------- ----------- ----------- -----------
Balance December 31, 1992 $582,000 $814,000 $4,267,000 $25,401,000 $ 41,645,000 $(2,059,000)
======== ======== ========== =========== =========== ===========
TOTAL
UNEARNED STOCKHOLDERS
COMPENSATION EQUITY
------------ --------------
Balance January 1, 1992 $(1,945,000) $ 68,602,000
Net earnings 3,091,000
Cash dividends declared:
5% cumulative preferred
stock - $5 per share (29,000)
$1.85 cumulative
convertible preference
stock - $1.85 per share (1,506,000)
Common stock - $.20 per share (817,000)
Common stock issued principally
in connection with acquisitions
12,820 shares 166,000
Common stock issued as
compensation- 1,200 shares 20,000
Common stock issued for
contributions to employees'
saving plan - 14,355 shares 209,000
Common stock issued upon
exercise of stock options
26,250 shares 204,000
Purchase of 91,981 shares of
common stock (1,183,000)
Amortization of unearned
compensation 396,000 396,000
5% cumulative preferred stock
purchased and retired-86 shares (4,000)
Cumulative foreign currency 0
translation (48,000)
----------- ------------
Balance December 31, 1992 $(1,549,000) $ 69,101,000
=========== ============
F9
54
BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31,
(Brackets denote cash outflows) 1994 1993 1992
---- ---- ----
Cash flow provided (used) by operations:
Earnings from operations ($3,683,000) ($28,322,000) $3,091,000
Adjustments to reconcile to net
cash provided by operations:
Writedown of assets to net realizable value 0 5,800,000 0
Depreciation and amortization 4,317,000 8,714,000 6,150,000
Provision for losses on accounts receivable 905,000 2,162,000 1,365,000
Deferred income taxes (10,172,000) (1,044,000) 196,000
Cumulative effect of accounting change 0 (2,733,000) 0
Gain on sale of distribution business (1,466,000) 0 0
Loss (gain) on disposal of environmental business 9,747,000 (858,000) 0
Changes in balance sheet items:
Accounts receivable (2,841,000) (8,199,000) (4,031,000)
Inventories 1,423,000 4,538,000 (6,373,000)
Prepaid expenses 203,000 (2,039,000) (324,000)
Liabilities not related to financing activities (6,867,000) 11,646,000 (1,390,000)
Liquidation reserve (5,398,000) 5,398,000 0
Other assets 2,230,000 2,564,000 526,000
------------ -------------- ------------
Cash flow provided (used) by operations: (11,602,000) (2,373,000) (790,000)
------------ -------------- ------------
Cash flows from investing activities:
Acquisition of property, plant and equipment,net (10,614,000) (16,251,000) (6,482,000)
Acquisition of businesses, less cash acquired 0 0 (2,800,000)
Proceeds from disposal of assets 31,296,000 9,141,000 0
Other investments (1,277,000) 159,000 (4,715,000)
------------ -------------- ------------
Net cash provided (used) in investing activities 19,405,000 (6,951,000) (13,997,000)
------------ -------------- ------------
Cash flows from financing activities:
Debt proceeds 159,139,000 1,286,500,000 723,489,000
Debt repayments (175,091,000) (1,270,987,000) (705,938,000)
Dividends paid (8,000) (2,351,000) (2,353,000)
Purchase of treasury stock (11,000) (120,000) (1,183,000)
Other equity changes 971,000 577,000 381,000
------------ -------------- ------------
Net cash provided (used) by financing activities (15,000,000) 13,619,000 14,396,000
------------ -------------- ------------
Net increase (decrease) in cash and equivalents (7,197,000) 4,295,000 (391,000)
Cash and cash equivalents at beginning of year 7,518,000 3,223,000 3,614,000
------------ -------------- ------------
Cash and cash equivalents at end of year $321,000 $7,518,000 $3,223,000
============ ============== ============
Supplemental Disclosures:
Cash paid during the year for:
Interest $4,811,000 $2,160,000 $1,521,000
Income taxes 363,000 291,000 1,762,000
Non-cash investing and financing activities:
Acquisition of businesses:
Fair value of assets 0 0 5,281,000
Stock issued for acquisitions 0 0 166,000
Cash paid 0 0 2,800,000
------------ -------------- ------------
Liabilities assumed $0 $0 $2,315,000
============ ============== ============
See accompanying notes to consolidated financial statements.
F10
55
BIRD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
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 1994 presentation.
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.
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
-------------------------------------------------------------------------------
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,
F11
56
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.
INCOME TAXES
The Company changed its method of accounting for income taxes from the
liability method under Statement of Financial Accounting Standards No. 96 to
the asset and liability method required by Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", ("FAS 109"), effective
January 1, 1993. As permitted under the new rules, prior years' financial
statements have not been restated. FAS 109 requires the recognition of
deferred taxes for the difference between financial statement and tax basis of
assets and liabilities utilizing current tax rates. Additionally, FAS 109
allows the recognition of a deferred tax asset for the estimated future tax
effect attributable to carryforwards.
EARNINGS(LOSS) PER COMMON SHARE
Primary earnings(loss) per common share are determined after deducting the
dividend requirements of the preferred and preference shares and are 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. 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.
F12
57
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 86% and 47% at
December 31, 1994 and 1993, respectively. It is not practical to separate LIFO
inventories by raw materials and finished goods components; however, the
following table presents these components on a current cost basis with the LIFO
reserve shown as a reduction.
December 31,
1994 1993
---- ----
Current costs:
Raw materials $ 3,554,000 $ 3,541,000
Finished goods 6,924,000 20,297,000
------------ ------------
10,478,000 23,838,000
Less LIFO reserve 2,107,000 1,681,000
------------ ------------
$ 8,371,000 $ 22,157,000
============ ============
Inventories, classified by business segment (see Note 13), were as follows:
December 31,
1994 1993
---- ----
Housing Group $ 8,371,000 $ 21,788,000
Environmental Systems 0 369,000
------------ ------------
$ 8,371,000 $ 22,157,000
============ ============
3. DEBT
At December 31, the Company's borrowings and debt obligations are summarized as
follows:
1994 1993
---- ----
Long Term Debt:
Revolving Credit Agreement $ 13,937,000 $ 44,000,000
Term Loans 15,000,000 0
Notes Payable 0 56,000
Obligations under capital leases 1,638,000 2,471,000
------------ ------------
30,575,000 46,527,000
Less - portion due within 18,071,000 3,400,000
------------ ------------
one year $ 12,504,000 $ 43,127,000
============= ============
F13
58
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. Effective as of
November 30, 1994, such needs are satisfied primarily by borrowing under the
Loan and Security Agreement ("Loan Agreement") between the Company and Barclays
Business Credit, Inc. of Glastonbury, Connecticut. On February 1, 1995,
Shawmut Bank, N.A. acquired Barclays Business Credit, Inc. concurrently
renaming Barclays Business Credit, Inc. to Shawmut Capital Corporation
("Shawmut Capital"). The terms and conditions of the Loan Agreement remained
unchanged.
The Second Amended Credit Agreement contained financial and operating covenants
which, among other things, required the Company to maintain prescribed levels
of pre-tax earnings, net worth, ratios of debt to net worth and ratios of
current assets to current liabilities. As of September 30, 1993, the Company
was in default in the performance of its obligations with respect to certain of
its covenants under the Second Amended Credit Agreement regarding the ratio of
adjusted earnings, permitted capital expenditures and investments by the
Company in Kensington Partners, its window manufacturing joint venture. The
banks were under no obligation to make revolving credit loans under the Second
Amended Credit Agreement following the occurrence and during the continuance of
a default or event of default. The Banks continued to lend notwithstanding the
foregoing defaults. The Company classified the related debt as current on its
September 30, 1993 balance sheet in light of the fact that the Second Amended
Credit Agreement provided for automatic acceleration of the indebtedness upon
the occurrence of a default or event of default. However, no such acceleration
occurred.
On February 14, 1994 the Company's bank group entered into an agreement to
forbear from exercising their rights and remedies under the Second Amended
Credit Agreement and to continue to extend credit under the Second Amended
Credit Agreement through March 15, 1994. During this period of time, certain
operating and financial covenants in the forbearance agreement were operative,
and the Company agreed to collateralize the loans with the accounts receivable
of two of its roofing distribution companies.
On March 4, 1994, the Company and its lending banks executed the Third Amended
Credit Agreement, pursuant to which the Company was permitted to borrow up to
$65 million until January 31, 1996. Loans under the Third Amended Credit
Agreement, which were secured by substantially all of the Company's assets,
were made pursuant to a $40 million revolving credit line commitment for
working capital, letters of credit and a $25 million term loan for general
corporate purposes. The revolving credit line availability was determined with
reference to a percentage of accounts receivable and inventory which were
pledged to the banks. The term loan had to be paid by January 31, 1996.
On August 22, 1994, the Company sold substantially all of the assets of its
building materials distribution businesses to a subsidiary of Wm. Cameron & Co.
(a "Cameron Subsidiary") for a purchase price of $24,245,000 based on the July
31, 1994 net book value.
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59
Concurrently, the Company exercised its right under the Third Amended Credit
Agreement to reduce the revolving credit commitment by $13 million to
$25,825,000, thereby reducing fees charged on the unused portion of the
facility. The purchase price with respect to assets acquired by a Cameron
Subsidiary at the August 22, 1994 closing was subject to a later adjustment
based on an audit of the net book value of the acquired assets and assumed
liabilities as of the closing date. Due to the increase in the net book value
for the period from July 31, 1994 through August 31, 1994, the Company received
an additional $1,897,000 in respect of such adjustment, which amount was paid
to the Company on November 17, 1994. On November 28, 1994, Ashley Aluminum,
Inc., a Cameron Subsidiary, acquired the net assets of Southland, the Company's
sole remaining building materials distribution business, for a purchase price
of $2,134,000 (which does not take into account $193,000 paid for a minority
interest acquired by the Company in contemplation of the closing of the sale).
There was an insignificant gain on this sale.
The Company used proceeds from the sale of the assets of its building materials
distribution business to reduce the term loan under the Third Amended Credit
Agreement from $25 million to $11,999,000 as of November 29, 1994 and to reduce
the amount outstanding under the revolving credit line to $11,529,000 as of the
same date. Under the terms of the Third Amended Credit Agreement, the term
loan was to be further reduced by a principal payment of $11.2 million on April
30, 1995 with the balance of the term loan payable on January 31, 1996.
Under the Third Amended Credit Agreement and prior to the execution of the
Shawmut Capital Loan Agreement dated November 30, 1994, repayment of the term
loan was also required to be made from excess proceeds of future asset sales
(calculated as the amount remaining after net asset sale proceeds were used to
reduce revolving credit loans to less than borrowing base availability with
borrowing base availability being calculated after the effect of such an asset
sale). The term loan was also required to be reduced on any date other than
the payment due dates specified in the preceding paragraph by the amount (if
any) by which the term loan exceeded 70% of the fair market value of all of the
Company's fixed assets.
The Third Amended Credit Agreement contained financial and operating covenants
which, among other things, (i) required the Company to maintain prescribed
levels of tangible net worth, net cash flow, earnings before interest, taxes,
depreciation and amortization, and ratio of current assets to current
liabilities, and (ii) limited capital expenditures by the Company. The Third
Amended Credit Agreement also contained restrictions on indebtedness, liens,
investments, distributions (including payment of dividends), mergers,
acquisitions and disposition of assets.
In a letter dated April 11, 1994, the Company was notified by the Agent under
the Third Amended Credit Agreement of certain alleged defaults with respect to
certain post closing undertakings (that were primarily administrative in
nature) including but not limited to, delivery of certain legal opinions and
the issuance of certain certificates of title and title policies. By letters
dated April 20, 1994, July 20, 1994, August 17, 1994, September 1, 1994 and
September 13, 1994, the Company was notified by the agent bank under the Third
F15
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Amended Credit Agreement of the continuation of the defaults under certain of
the above-mentioned administrative covenants, as well as certain alleged
defaults and events of default resulting from the fact that the Company did not
meet its minimum net worth covenant as of June 30, 1994. The Company's failure
to satisfy the minimum net worth covenant was due to the $8,477,000 write-down
in the recorded value of Bird Environmental Gulf Coast, Inc. ("BEGCI"). The
banks were under no obligation to extend credit under the Third Amended Credit
Agreement following the occurrence and during the continuance of a default or
event of default. Although not formalized in the form of a written amendment,
waiver or forbearance, the banks continued to lend, and the Company continued
to take action necessary to cure certain of the alleged defaults and events of
default. The Company requested the banks to waive or to forbear from asserting
the remainder of the alleged defaults and events of default. During the
existence of these alleged defaults and events of default, the Company
continued to meet its payment obligations as required. As a result of the
alleged defaults and events of default, all loans under the Third Amended
Credit Agreement were classified as current on the September 30, 1994 balance
sheet.
Interest on the revolving credit line under the Third Amended Credit Agreement
accrued at the base rate (as specified in such agreement) plus 1% on all
borrowings and 1/2% on any unused portion. The interest on the term loan
portion accrued at the base rate plus 2%. Due to the Company's defaults under
the Third Amended Credit Agreement, however, except for a short period
following the August 22, 1994 closing of the sale of assets to a Cameron
Subsidiary, from April 11, 1994 until November 30, 1994, the Banks charged
interest on the loans under the Third Amended Credit Agreement at a rate of
interest equal to 4% above the rate otherwise applicable to each such loan.
Therefore, the interest rate for outstanding loans under the revolving credit
line was 13.50% and was 14.50% for the term loan just prior to the refinancing
with Shawmut Capital on November 30, 1994.
On November 30, 1994, Bird Incorporated entered into a three year $39 million,
Loan Agreement with Shawmut Capital. At the end of the three year period, the
Loan Agreement is automatically renewed for an additional one year period
unless terminated specifically in writing. The Loan Agreement consists 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. Up to
$5 million of the revolving credit facility can be used for letters of credit.
Letters of credit outstanding as of December 31, 1994 totaled $2,927,000.
Intercompany loans and advances to non-borrowing affiliates including BEGCI and
Kensington are permitted under the Loan Agreement. On March 8, 1995, the
Company sold the assets of its vinyl siding operation to Jannock, Inc. for
$47.5 million. Proceeds from the sale were used to reduce bank debt.
Concurrent with the sale of the assets of the vinyl siding operation, Shawmut
Capital executed the First Amendment to the Loan Agreement allowing for the
sale of the Company's vinyl siding operation located in Bardstown, Kentucky.
The First Amendment to the Loan Agreement amended the amount of the facility to
$20 million consisting of a $15 million revolving credit commitment and a $5
million term loan. Up to $5 million of the revolving credit facility can be
used for letters of credit.
F16
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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 8, 1995, an aggregate
of $9,562,000 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 (except that the
Company is not precluded from consummating the sale of its interest in BEGCI).
The proceeds of the initial borrowings under the Loan Agreement were used to
pay in full the outstanding loan balances under the Third Amended Credit
Agreement. A commitment fee of $150,000 was due and paid to Shawmut Capital as
of the closing date of the Loan Agreement.
Interest on the revolving credit commitment under the Loan Agreement accrues at
the Shawmut Capital base rate (as specified in such Agreement) plus 1% on all
borrowings and the greater of $25,000 per annum or 1/4% on any unused portion
of the commitment payable monthly in arrears. Interest on Term Loan A and Term
Loan B accrues at the base rate plus 1 1/2%. The combined repayment of the
principal on Term Loan A and Term Loan B is $125,000 per month in year one and
$142,800 per month in years two and three with a final principal payment of
$10,072,800 due on November 30, 1997. Proceeds in excess of $100,000 from the
sale of fixed assets may, at Shawmut Capital's discretion, be applied to the
outstanding principal payments of the term loans.
In the event of a sale of the Company's 80% interest in BEGCI, proceeds would
be applied to the outstanding principal balance of Term Loan A. Proceeds from
the sale of the assets of the Vinyl division to Jannock, Inc. on March 8, 1995
were first applied to the repayment of Term Loan A, second to the repayment of
Term Loan B so that the outstanding principal amount of Term Loan B equals $5
million and third to the outstanding Revolving Credit Loans with the balance of
proceeds to be retained by the Company. As of March 8, 1995, interest on the
loans outstanding under the First Amended Loan Agreement would accrue at either
the base rate or at the London Interbank Offering Rate ("LIBOR") plus 275 basis
points at the borrower's election.
F17
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On January 25, 1994, the bank that was party to Kensington's Credit Agreement
dated October 25, 1993 gave notice that Kensington had breached certain
financial covenants including the ratio of Current Assets to Current
Liabilities, Tangible Net Worth and Total Liabilities to Tangible Net Worth in
each case as defined therein (although it continued to meet its payment
obligations throughout the term of the Credit Agreement). Subsequently, the
bank agreed to forbear from exercising its rights and remedies under such
agreement until August 31, 1994. In accordance with this forbearance
agreement, interest accrued at 3% above the bank's prime lending rate. On May
2, 1994, this bank applied the Company's $750,000 cash deposit, which was held
by the bank as collateral, against the total amount owed which was then
$2,158,000. A payment schedule was established to repay the remainder of the
loan. The loan availability calculation was amended to allow aggregate
borrowings equal to the lesser of the borrowing base calculation or a set
borrowing schedule over a prescribed time frame. The borrowing availability
schedule began April 29, 1994 at $1,550,000 and was periodically reduced to
$475,000 through August 31, 1994, at which time the outstanding balance was
paid in full.
This reduced borrowing availability schedule required Kensington to seek a new
lending arrangement. As of June 15, 1994, the Partnership entered into a
financing/factoring agreement with Bankers Capital of Chicago, Illinois. On
July 20, 1994, the Company's Banks amended the Third Amended Credit Agreement
to permit the refinancing of Kensington with Bankers Capital. Under the terms
of the agreement, Bankers Capital agreed to provide up to $2.5 million in
financing based on the value of certain acceptable receivables. The amount
advanced at any one time cannot exceed 80% of the value of these receivables.
Interest on the amount advanced is at the prime lending rate plus 1 1/2%.
Additionally, Bankers Capital charges a fee ranging from 1.0% to 3.45% of the
total amount of the value of acceptable receivables used to extend financing
and based on the age of such receivables. As the receivables age, the
applicable fee percentage increases. In light of the interest and fees
described above, the average borrowing rate for 1994 under the Bankers Capital
Agreement was 22%. The financing by Bankers Capital is co-guaranteed by the
Company. Bankers Capital initially funded Kensington on August 25, 1994, which
funding included payment in full of the outstanding loan balance with
Kensington's previous lender.
On June 18, 1994, the Company entered into a Settlement Agreement and Full and
Final Release (the "Settlement Agreement") with the minority stockholders of
BEGCI, the owner of the San Leon Facility, thus resolving a suit filed by such
minority stockholders claiming a breach of contract and a countersuit filed by
the Company in January 1994. The claim was based on the minority stockholders'
allegations that the Company, without minority stockholder approval, caused
BEGCI to fund the construction of a solid waste treatment facility featuring
desorption technology owned by one of the minority stockholders rather than
funding a less costly liquid waste treatment facility featuring centrifuge
technology. Pursuant to the Settlement Agreement, the Company agreed to sell
its 80% interest in BEGCI to the Minority Stockholders for approximately $7.5
million in cash on or before February 28, 1995. Such proposed sale was subject
to financing, and also allowed the Company to sell all of its interest in BEGCI
to
F18
63
another buyer, provided that the shares of common stock of BEGCI owned by the
minority stockholders were also sold at no less than the same price per share.
As the Board of Directors decision to sell BEGCI and this Settlement Agreement
established a measurement date for financial accounting purposes, the Company
wrote down the recorded value of BEGCI as of June 30, 1994 to $7.5 million.
The minority shareholders of BEGCI did not exercise their purchase option as of
February 28, 1995. The Company is continuing its efforts to locate a suitable
acquirer for the Facility.
Until the Company's purchase of the roofing machine at the Company's Norwood,
Massachusetts facility on November 30, 1994, the operating lease on such
machine was collateralized by a mortgage on the Norwood property. The mortgage
required the consent of the lessor to allow a second mortgage on the real
property. The terms of the Third Amended Credit Agreement required security on
all of the Company's assets, and as a result, a second mortgage in favor of the
banks was placed on the Norwood property without obtaining the lessor's
consent. The Company was notified by letter dated April 25, 1994 that the
lessor was declaring the Equipment Leasing Agreement dated as of December 28,
1984 (as amended) to be in default, and by letter dated May 23, 1994, the
lessor declared the lease terminated. The Company and the lessor entered into
an agreement pursuant to which the Company agreed to purchase the leased
equipment for a purchase price of approximately $4 million payable in
installments between August 30, 1994 and January 15, 1995, by which date the
final payment of approximately $2.3 million had to be made. Concurrent with
the Company's refinancing with Shawmut Capital on November 30, 1994, the
Company satisfied all outstanding obligations with respect to the purchase
agreement it had entered into with the lessor and acquired title to the roofing
machine.
The Shawmut Capital Loan Agreement allows for up to $5 million in letters of
credit. Outstanding letters of credit as of December 31, 1994 approximate
$2,927,000 compared to $2,761,000 as of December 31, 1993.
The weighted average interest rate on short term borrowings at December 31,
1994 and December 31, 1993 were 9.53% and 9.24%, respectively. Average
interest rates, the interest rate at December 31 and the average and maximum
borrowings in thousands of dollars for the three years ended December 31, 1994,
1993 and 1992 under the Company's applicable loan agreements, are shown below:
1994 1993 1992
---- ---- ----
Interest rates:
Average during period 11.47% 4.92% 4.49%
At December 31 $13,937 @ 9.50% $44,000 @ 10% $9,000 @ 4.06%
$ 7,500 @ 9.75% $2,500 @ 4.75%
$ 7,500 @ 9.75% $8,000 @ 4.09%
$8,000 @ 4.20%
Average borrowings $41,100 $38,439 $ 22,966
Maximum borrowings $53,200 $44,000 $ 33,500
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The Company has capital lease obligations (see Note 12) with payments that
extend to 1998 at interest rates which vary between 3.4% and 7.4% per annum.
The principal balance of these obligations amounted to $1,638,000 and
$2,471,000 at December 31, 1994 and 1993, respectively.
Maturities of long-term debt for each of the five years subsequent to December
31, 1994 are as follows:
1995 - $18,071,000; 1996 - $1,134,000; 1997 - $11,110,000; 1998 - $260,000;
1999 - $0. The Company incurred net interest expense of $4,782,000 in 1994
(net of $257,000 capitalized interest), $2,472,000 in 1993 (net of $345,000
capitalized interest), and $1,506,000 in 1992.
4. INCOME TAXES
Earnings(loss) from continuing operations before income taxes and the
provision(benefit) for income taxes are shown below:
Year Ended December 31,
-----------------------
1994 1993 1992
---- ---- ----
Earnings(loss) from
continuing operations
before income taxes: $ (5,927,000) $ (5,278,000) $ 6,533,000
============ ============ ===========
Year Ended December 31,
-----------------------
1994 1993 1992
---- ---- ----
Provision(benefit) for
continuing operations:
Domestic:
Currently payable $ 200,000 $ 765,000 $ 1,544,000
Deferred (7,210,000) (1,402,000) (675,000)
---------- ----------- -----------
$(7,010,000) $ (637,000) $ 869,000
========== ============ ===========
The total provision(benefit) for income taxes varied from the U.S. federal
statutory rate for the following reasons:
1994 1993 1992
---- ---- ----
Continuing operations:
U.S. federal statutory rate (34.0%) (34.0%) 34.0%
State income taxes (6.5) 0.6 3.0
Corporate Owned Life Insurance (9.9) 0.0 0.0
Utilization of NOL
carryforward 0.0 0.0 (19.3)
Valuation reserve (67.5) 22.3 0.0
Other (0.4) (1.0) (4.4)
------ ---- -----
(118.3%) (12.1%) 13.3%
====== ====== =====
The net provision (benefit) for income taxes related to discontinued operations
amounted in total to $(2,962,000), $(304,000) and $621,000 for 1994, 1993 and
1992, respectively.
F20
65
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, 1994 and 1993 is as follows:
1994 1993
---- ----
(000) Omitted
Deferred tax assets:
Bad debt reserves $ 1,314 $ 1,150
Compensation/pension accruals 882 1,683
Reserves for liquidation
and restructuring 0 5,109
Investment in
non-consolidated subsidiary 4,284 0
Net operating loss carryover 9,129 5,349
Capital loss carryover 451 0
Investment tax credit carryover 1,233 1,233
Minimum tax credit carryover 1,091 1,091
Other reserves & accruals 3,389 1,272
------- -------
Total deferred tax assets 21,773 16,887
------- -------
Deferred tax liabilities:
Depreciation (1,403) (2,219)
Corporate owned life insurance 0 (470)
------- -------
Total deferred tax liabilities (1,403) 2,689
------- -------
Net deferred tax asset before
valuation reserve 20,370 14,198
Less: Valuation reserve (5,000) (9,000)
------- -------
Net deferred tax asset $15,370 $ 5,198
======= =======
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:
Year of Net Investment
Expiration Operating Loss Tax Credit
---------- -------------- ----------
1996 $ 0 $ 97,000
1997 0 317,000
1998 0 135,000
1999 0 212,000
2000 0 297,000
2001 0 175,000
2002 138,000 0
2008 9,862,000 0
2009 15,607,000 0
------------- -----------
$ 25,607,000 $ 1,233,000
============= ===========
Additionally, for federal income tax purposes, at December 31, 1994 the Company
had available for carryforward minimum tax credits with no expiration date and
capital losses that expire in the year 2000 aggregating $1,091,000 and
$1,326,000, respectively. If certain
F21
66
substantial changes in the Company's ownership should occur, there would be an
annual limitation on the amounts of the carryforwards, including certain
unrealized built-in losses which can be utilized for regular and alternative
minimum tax purposes.
The Company adopted FAS 109 in 1993 and has 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 booking of a valuation reserve if it is more likely
than not that the Company may not be able to realize the benefits of recorded
deferred tax assets. At December 31, 1994 the Company's net deferred tax asset
is approximately $20.4 million less a valuation reserve of $5 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. In the first quarter of 1995, the Company will record a gain
in excess of $20 million on the sale (as described in Note 15) of substantially
all of the assets related to the Company's vinyl business as conducted at the
Bardstown, Kentucky facility. As noted in Note 9, management expects to
dispose of its investment in BEGCI by the end of the second quarter of 1995 and
to offset the tax loss on such disposition against the gain on the sale of the
vinyl business. The Company also expects the Roofing operations to remain
profitable and to be a significant contributor of future taxable income. Based
on the above factors, the Company reduced the valuation reserve by $4 million.
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. Dividends have been paid through the
quarterly payment due on November 15, 1993 but have not been paid since that
date. 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, 933,325 shares of common stock are reserved
for issuance upon exercise of options and stock appreciation rights.
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Restrictions on the payment of dividends were imposed by the terms of the Third
Amended Credit Agreement. As a result of the defaults under the Third Amended
Credit Agreement, the Company suspended dividends on all classes of its stock
after the third quarter of 1993. As of December 31, 1994, dividends would have
had to have been paid (or declared and set apart for payment) in the amount of
$22,000 on the Preferred Stock and $1,883,000 on the Preference Stock before
any dividends could have been paid or declared on the Common Stock. On October
31, 1994, the Banks consented to payment of the fourth quarter, 1994 dividend
on the Preferred Stock. The quarterly dividend on the Preferred Stock due
December 1, 1994 was declared and paid in full as of that date. Restriction 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
Preferred Stock are permitted under the Loan Agreement.
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, 1994, 1993, and 1992 amounted to
$203,000, $352,000, and $329,000, 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
years ended December 31, 1993 and 1992 amounted to $145,000, and $148,000,
respectively. No profit sharing contribution was earned for 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, 1994, 1993, and 1992 amounted to $142,000, $155,000, and $141,000,
respectively.
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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 1994, 1993, and 1992 amounted to
$79,000, $71,000, and $71,000, respectively.
In December 1990, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("FAS 106"). This statement
establishes accounting standards principally for employers' accounting for
postretirement health care and life insurance benefits. It requires the
accrual of the expected cost of providing those benefits during the period that
employee services are rendered. The Company adopted FAS 106 effective January
1, 1993. Adoption of the new statement did not materially effect the Company's
financial position or results of operations.
EMPLOYEE INCENTIVE PLANS
Under the 1982 Stock Option Plan, as amended, options to purchase 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. The 1989 amendment increased from 700,000 to
900,000 the aggregate number of shares available for grant under 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
and any recipient may not receive option grants exceeding a total of 30,000
shares. An aggregate of 100,000 shares of common stock will be 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,
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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 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
years ended December 31, 1992, 1993 and 1994:
STOCK OPTIONS
-------------
Outstanding January 1, 1992
($5.00 to $18.875 per share) 411,530
Granted ($12.50 to $17.50 per share) 20,500
Exercised ($5.50 to $11.50 per share) (24,250)
Canceled ($11.50 per share) (1,800)
---------
Outstanding December 31, 1992
($5.00 to $18.875 per share) 405,980
========
Outstanding January 1, 1993
($5.00 to $18.875 per share) 405,980
Granted ($8.375 to $12.625 per share) 419,500
Exercised ($6.50 to $11.125 per share) (5,080)
Canceled ($8.875 to $18.875 per share) (21,600)
--------
Outstanding December 31, 1993
($5.00 to $17.50 per share) 798,800
========
Outstanding January 1, 1994
($5.00 to $17.50 per share) 798,800
Granted ($10.00 to $10.75 per share) 116,550
Exercised ($5.00 to $9.50 per share) (144,870)
Canceled ($6.375 to $15.00) per share) (269,830)
---------
Outstanding December 31, 1994
($5.00 to $17.50 per share) 500,650
========
Exercisable December 31, 1994
($5.00 to $17.50 per share) 205,450
Shares available for granting options:
January 1, 1994 279,395
December 31, 1994 432,675
In tandem with the stock options there are 27,200 stock appreciation rights at
December 31, 1994.
LONG TERM INCENTIVE COMPENSATION
Under the terms of a Long Term Incentive Compensation Plan, certain officers
and key management employees shall receive common stock of the Company on a
restricted time lapse grant basis. At December 31, 1994, 23,560 shares of the
Company's common stock had been issued from treasury stock and are being held
in escrow by the Company. These shares are released from escrow and delivered
to the plan's
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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, 1993, and
1992. Therefore, 40,670, 45,630, and 54,405 shares of the Company's common
stock were released in June of 1994, 1993, and 1992, respectively, to the
plan's participants. Additionally, 30,000 shares were released to the former
Chief Executive Officer as part of his Termination Agreement. As a result of
his termination and the termination of certain other officer and key management
personnel, 125,145 shares of restricted stock valued at $910,000 were forfeited
and returned to treasury stock.
Amortization of unearned compensation under this agreement for the years 1993
and 1992 amounted to $595,000 and $396,000, respectively. In 1994 amortization
was reduced by $113,000 associated with the forfeiture of shares. The
unamortized value of the shares granted is shown in the accompanying balance
sheet as unearned compensation.
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 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.
The purchase price is subject to adjustment based on an audit of the book value
of the acquired assets and assumed liabilities as of the closing date. Sales
for the current calendar year of $9,092,000 were recorded for this business for
the period ending November 27, 1994.
The Company recorded expenses related to discontinued business activities of
$153,000, $268,000, and $178,000, for the years 1994, 1993, and 1992,
respectively. These charges against earnings include warranty claims and
other costs directly related to discontinued business activities.
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8. OTHER INCOME AND EXPENSE
Other expense was $3.3 million in 1993 compared to other income of $.2 million
in 1992. A series of non-recurring items developed at the end of 1993 that
required a number of charges to 1993 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
enough 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 was previously considering the development of real property which,
as a result of the cash and bank situation, 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. An assessment of the portfolio and the bankruptcy of
the debtor, indicated the note to be of no value, therefore 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 the employment agreement of
which $776,190 was paid on February 4, 1994.
The remainder of "Other (Income)/Expense" is comprised of other miscellaneous
adjustments of a more normal 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 sell its 80% interest in 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. 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. Currently, the expected disposal date is by
the end of the second quarter of 1995. The Company continues to believe that
by the disposal date, the
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results of operations will be breakeven. 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. Accordingly, the
operating results, for all years presented, relating to the environmental
businesses have been recorded as discontinued operations. Net sales relating
to these environmental businesses amounted to $3,715,000, $24,681,000 and
$31,334,000 for 1994, 1993 and 1992, respectively.
Additionally, 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 are 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 is 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 have been reversed and
are recorded as discontinued operations in the consolidated statement of
operations for the twelve months ended December 31, 1994.
As of December 31, 1994, the remaining assets and liabilities relating to the
"on-site" environmental remediation business approximated $374,000 and $1.1
million, respectively. The assets relate primarily to accounts receivable due
to holdbacks on asset sales and the liabilities relate primarily to severance
payments, a disputed trade payable and certain other obligations such as for
taxes and workers compensation. The estimated net realizable value of its
investment in the "off-site" environmental remediation business totaled $7.5
million and is shown as "Assets held for sale" on the consolidated balance
sheet.
The $1,150,000 restructuring reserve established in 1992 included $400,000 for
severance payments, $150,000 for office closure, $100,000 for relocations, and
$500,000 for other expenses. This reserve is primarily related to the
consolidation of the environmental business. This amount, including the
operating results of the environmental businesses, is recorded as discontinued
operations.
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10. ACQUISITIONS
In March of 1992, the Company acquired certain assets of a Connecticut
distributor of building materials products. The cost of this acquisition was
not material to the financial condition of the Company. This acquisition, with
Atlantic Building Products Corporation of Vermont and Massachusetts, provided
the Company with the capacity for captive distribution of its housing products
in certain markets throughout the Northeast.
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"). The Company's portion of the joint venture
results have been reported using the equity method. In 1993, Kensington
accepted significant contracts which provided an immediate impact of new
orders. Additionally, Kensington greatly improved the design of its windows by
introducing a new manufacturing process. The combination of the rapid increase
of business and manufacturing changes caused unusual delays in meeting customer
needs and therefore sales and profits were negatively impacted. As a result,
Kensington experienced serious cash needs which further hampered production
requirements. On January 25, 1994 the bank servicing the Kensington loan gave
notice that Kensington had breached certain financial covenants. Subsequently,
the financing bank agreed to forbear from exercising their rights and remedies
under the loan agreement until April 30, 1994. Primarily as a result of
continuing losses and this financing situation, Kensington's independent
accountants have 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 ownership in
Kensington to 90%. The terms of the new agreement (which expires on December
31, 2012) allow 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 can match the additional
investment made by the Company. Under the terms of the Kensington Partnership
Agreement, a Management Committee was established to oversee the operations of
the partnership. The agreement required, among other things, unanimous
approval of the Management Committee for the following: (a) any distributions;
(b) the incurrence of any indebtedness; (c) the creation of any form of
encumbrance; (d) the adoption or modification of the partnership's annual plan
and operating budget; and (e) any transaction requiring expenditures in excess
of $15,000 and not contemplated in or provided for in the annual business plan
or operating budget. Each partner is entitled to name two of the five members
of the Management Committee with the fifth member being the President of
Kensington. Approval from both partners was required to hire the President of
Kensington. Significant operating decisions require unanimous approval as
noted above. Accordingly, the Company does not possess unilateral control and,
as a result, the partnership is accounted for on the equity method. The new
Management Committee formed by the partners has been established to oversee the
turnaround of the partnership's operations. Also, the partners hired a new
management team to run the partnership and report to the Management Committee.
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The following table represents summarized financial information for Kensington
Partners.
DECEMBER DECEMBER
1994 1993
---- ----
(000) omitted
Current assets $ 5,040 $ 7,101
Property and Equipment 3,137 2,870
Other Assets 677 1,377
-------- -------
Total Assets $ 8,854 $11,348
======== ======
Current Liabilities $ 9,722 $10,072
Other Liabilities 1,288 1,471
-------- -------
Total Liabilities $ 11,010 $11,543
======== =======
YEAR ENDED DECEMBER 31,
1994 1993
---- ----
(000) omitted
Net Sales $ 24,180 $21,169
Gross Profit 1,317 1,384
Net Loss (5,310) (5,249)
The Company recorded fifty percent of the loss from operations under the equity
method since inception through January, 1994 and ninety percent for the period
February through December 1994 which is shown separately on the consolidated
statement of operations. The Company's investment in Kensington is a
$1,164,000 deficit at December 31, 1994 which represents excess losses over
cost in acquired net assets. In 1994, the Company increased its investment by
contributing capital of $750,000 and by collateralizing $750,000 through a
deposit in Kensington's bank. In September 1993, the Company also
co-guaranteed a $2.5 million line of credit and a $1.3 million capital lease.
Accordingly, any default by Kensington would have caused a default on the
Company's Loan Agreement with its banks.
In September of 1992, the Company foreclosed on a security interest held by it
on collateral provided by a distributor of building material products serving
Long Island, New York. The Company operated the business under the name of
New York Building Products, as part of its former distribution business.
11. ADDITIONAL FINANCIAL INFORMATION
The following table sets forth additional financial information from continuing
operations:
YEARS ENDED DECEMBER 31,
------------------------
1994 1993 1992
---- ---- ----
Maintenance and Repairs $ 4,870,000 $ 5,530,000 $ 5,063,000
Depreciation of Property,
Plant and Equipment $ 3,644,000 $ 3,757,000 $ 3,600,000
Advertising $ 1,023,000 $ 1,230,000 $ 1,051,000
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Amortization of intangible assets, pre-operating costs and similar deferrals,
taxes other than payroll and income taxes, royalties and research and
development expenses were less than 1% of net sales.
The following items included in the consolidated balance sheet under the
caption "Accounts Payable and Accrued Expenses" amounted to 5% or more of the
total of current liabilities caption at December 31, 1994 and 1993.
1994 1993
---- ----
Accounts payable $ 6,632,000 $ 11,186,000
Remuneration and related items 940,000 1,095,000
Accrued expenses 6,099,000 9,346,000
Reserve for environmental contract
loss 0 4,750,000
------------ ------------
$ 13,671,000 $ 26,377,000
============ ============
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 1994, 1993 and
1992, the Company recorded (exclusive of those claims included in discontinued
business activities) approximately $2,687,000, $3,196,000, and $2,585,000,
respectively, in warranty expenses and elective customer settlements. The
warranty related expense included in discontinued business activities for 1994,
1993 and 1992 amounted to approximately $100,000, $104,000 and $93,000,
respectively. Based upon analyses performed by the Company's management
together with an outside consulting statistician, a reasonably possible range
of potential liability from unasserted warranty obligations for all products
sold prior to December 31, 1994 is estimated to be between $3.5 million and
$17.8 million. However, the Company has not recorded any liability 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. 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, 1994 minimum lease commitments under noncancelable
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operating leases are as follows:
YEAR REAL ESTATE EEUIPMENT TOTAL
---- ----------- --------- -----
1995 $ 119,000 $ 513,000 $ 632,000
1996 119,000 155,000 274,000
1997 119,000 56,000 175,000
1998 2,000 2,000 4,000
1999 2,000 0 2,000
Later years 41,000 0 41,000
---------- ---------- ----------
$ 402,000 $ 726,000 $1,128,000
========== ========== ==========
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:
YEAR AMOUNT
---- ------
1994 $ 2,883,000
1993 $ 3,202,000
1992 $ 3,050,000
The following represents property under capital leases:
DECEMBER 31,
1994 1993
---- ----
Machinery and equipment $3,790,000 $5,090,000
Less, accumulated depreciation 1,495,000 1,742,000
---------- ----------
$2,295,000 $3,348,000
========== ==========
At December 31, 1994 minimum lease commitments under capital leases are as
follows:
YEAR AMOUNT
---- ------
1995 $ 721,000
1996 434,000
1997 406,000
1998 267,000
1999 0
----------
Total minimum lease payments 1,828,000
Imputed interest (190,000)
----------
Total future principal payments
of lease obligations $1,638,000
==========
LITIGATION
Since 1981, the Company has been named as a defendant in approximately 450
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
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costs of approximately $1.4 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 anticipated resolution of
the pending claims will not, in the opinion of management, have a material
impact on the Company's consolidated financial position and results of
operations.
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 of the remedial work and
their expenses covered by the settlement agreement can only be estimated. The
Company has provided a reserve amounting to $1 million at December 31, 1994 for
its estimated share of the ultimate cost of cleanup most of which will be paid
in 1995.
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
$207,000 at December 31, 1994 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 March 1994, the Company received a notice of violation from the Texas
Natural Resource Conservation Commission ("TNRCC"). The notice alleged that
the Company was not in compliance with regulations of the
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TNRCC relating to labeling, permitting, storage and disposal of certain
hazardous waste. The notice proposed certain corrective action on the part of
the Company as well as payment of administrative penalties. In late 1994, the
TNRCC determined that no enforcement action would be taken on any of the
alleged violations as stated in the March 1994 notice.
On January 13, 1995, the Company received a letter from the TNRCC alleging
three violations of TNRCC rules and six "areas of concern". The TNRCC has
issued no orders nor made any findings which would be expected to lead to the
entry of any administrative penalties. The Company intends to respond to the
TNRCC within the specified time frame and has addressed the alleged violations.
The Company believes that this matter will not have a material impact to the
Company.
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.
13. 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 are distributed nationwide.
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 agreed to sell its interest in
BEGCI to the minority shareholders. Accordingly, due to the Company's exit
from the environmental business in its entirety, the results of operations have
been recorded as discontinued operations.
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, certain
notes receivable and property maintained for
F34
79
general corporate purposes. As discussed in Note 9, the results of operations
for the environmental group for the three years ended December 31, 1994 have
been recorded as discontinued operations. Accordingly, net sales, cost of
sales and SG&A relating to this segment are not shown below.
F35
80
13. OPERATIONS IN DIFFERENT INDUSTRIES (CONTINUED)
YEAR ENDED DECEMBER 31,
1994 1993 1992
-------- -------- --------
(000 omitted)
Housing Group
Net Sales $167,886 $187,745 $164,202
======== ======== ========
Cost of Sales $136,878 $151,664 $128,371
======== ======== ========
S.G.& A. $20,142 $25,746 $22,493
======== ======== ========
Earnings (loss) from continuing
operations before income taxes:
Housing group operating income $6,126 $7,121 $13,338
Other income 0 0 197
Other non-recurring income 1,466 877 0
-------- -------- --------
7,592 7,998 13,535
Interest exense (4,782) (2,472) (1,506)
Other write offs 0 (3,834) 0
Corporate office expenses (8,737) (6,970) (5,496)
-------- -------- --------
($5,927) ($5,278) $6,533
======== ======== ========
Identifiable assets:
Housing group $57,282 $95,663 $79,568
Environmental group 7,874 23,250 25,935
Corporate office 20,549 4,316 13,028
-------- -------- --------
$85,705 $123,229 $118,531
======== ======== ========
Depreciation:
Housing group $3,573 $3,670 $3,488
Environmental group 500 1,686 1,620
Corporate office 71 87 112
-------- -------- --------
$4,144 $5,443 $5,220
======== ======== ========
Capital expenditures:
Housing group $9,446 $4,505 $3,683
Environmental group 1,283 12,251 3,201
Corporate office 37 56 63
-------- -------- --------
$10,766 $16,812 $6,947
======== ======== ========
F36
81
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1994 and 1993 is shown below:
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
----------- ----------- ----------- ----------
(thousands of dollars, except per share amounts)
1994
Net sales $36,863 $58,486 $46,246 $26,291
Gross profit $6,670 $10,943 $9,169 $4,226 (1)
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
=========== =========== =========== ==========
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
----------- ----------- ----------- ----------
(thousands of dollars, except per share amounts)
1993
Net sales $34,943 $52,131 $53,438 $47,233
Gross profit $7,230 $10,922 $10,786 $7,143 (1)
Earnings(loss):
Continuing Operations $245 $1,296 $1,573 ($7,753)
Discontinued Operations ($1,407) ($1,114) ($2,857) ($21,038)
Cumulative effect of accounting
change $2,733 0 0 0
----------- ----------- ----------- ----------
Net earnings (loss) $1,571 $182 ($1,284) ($28,791)
=========== =========== =========== ==========
Earnings per share data:
Primary earnings (loss) per
common share:
Continuing operations ($0.04) $0.22 $0.29 ($1.97)
Discontinued operations ($0.34) ($0.27) ($0.70) ($5.10)
Cumulative effect
of accounting change $0.67 $0.00 $0.00 $0.00
----------- ----------- ----------- ----------
Net earnings (loss) $0.29 ($0.05) ($0.41) ($7.07)
=========== =========== =========== ==========
(1) 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.
F37
82
15. SALE OF VINYL BUSINESS
At a special meeting held March 7, 1995, the stockholders of Bird Corporation
approved the sale by the Company and its wholly-owned subsidiary, Bird
Incorporated, of substantially all of the assets that are related to Bird's
vinyl business as conducted at its Bardstown, Kentucky facility to Jannock,
Inc. for $47.5 million in cash (subject to certain adjustments downward) and
the assumption of specified liabilities of the vinyl business. This
transaction also includes an option to purchase the Company's interest in
Kensington Partners for a purchase price of $2,780,000 which will net the
Company up to an additional $1,390,000. Kensington Partners operates a vinyl
window fabrication business in Leechburg, Pennsylvania.
The unaudited pro forma consolidated condensed balance sheet of the Company as
of December 31, 1994 after giving effect to the exclusion of the vinyl
business assets and liabilities and the use of proceeds from the sale of the
vinyl business to reduce bank debt is as follows:
(000 Omitted, except per share data)
ASSETS LIABILITIES & STOCKHOLDERS EQUITY
------ ---------------------------------
Current assets $ 32,988 Current liabilities $ 13,901
Property and equipment 24,933 Other liabilities 8,825
Other assets 16,053 Stockholders' equity 51,248
-------- --------
$ 73,974 $ 73,974
======== ========
The unaudited pro forma results from continuing operations of the Company for
the year ended December 31, 1994 after giving effect to the exclusion of the
vinyl business operating results are as follows:
Revenue $ 127,167,000
=============
Net loss $ (8,574,000)
=============
Net loss per common share $ (2.15)
=============
F38
83
SCHEDULE II
BIRD CORPORATION and Subsidiaries
VALUATION AND QUALIFYING ACCOUNTS
Year Ended December 31, 1994
ADDITIONS
-------------------------
CHARGED OR CHARGED OR
BALANCE CREDITED TO CREDITED TO BALANCE
DECEMBER 31, COSTS AND OTHER DECEMBER 31,
1993 EXPENSES ACCOUNT DEDUCTIONS 1994
------------ ----------- ----------- ---------- ------------
Deducted from assets:
Allowance for
doubtful accounts:
Current $4,273,000 $ 905,000 $100,000(a) $(2,141,000)(b) $3,137,000
========== ========== ======== =========== ==========
(a) Represents the recovery of balances previously written off.
(b) Represents the allowance for doubtful accounts of businesses sold $540,000
and the uncollectible balances written off by a charge to reserve of
$1,601,000.
F39
84
SCHEDULE II
BIRD CORPORATION and Subsidiaries
VALUATION AND QUALIFYING ACCOUNTS
Year Ended December 31, 1993
ADDITIONS
-------------------------
CHARGED OR CHARGED OR
BALANCE CREDITED TO CREDITED TO BALANCE
DECEMBER 31, COSTS AND OTHER DECEMBER 31,
1992 EXPENSES ACCOUNT DEDUCTIONS 1993
----------- ----------- ----------- ---------- ------------
Deducted from assets:
Allowance for
doubtful accounts:
Current $ 2,978,000 $ 2,162,000 $ 47,000(a) $ (914,000)(b) $ 4,273,000
=========== =========== =========== ========== ===========
(a) Represents recovery of balances previously written off.
(b) Uncollectible balances written off by a charge to reserve.
F40
85
SCHEDULE II
BIRD CORPORATION and Subsidiaries
VALUATION AND QUALIFYING ACCOUNTS
Year Ended December 31, 1992
ADDITIONS
-------------------------
CHARGED OR CHARGED OR
BALANCE CREDITED TO CREDITED TO BALANCE
DECEMBER 31, COSTS AND OTHER DECEMBER 31,
1991 EXPENSES ACCOUNT DEDUCTIONS 1992
----------- ----------- ----------- ---------- ------------
Deducted from assets:
Allowance for
doubtful accounts:
Current $ 1,235,000 $ 1,365,000 $ 1,347,000(a) $ (969,000)(b) $ 2,978,000
=========== =========== =========== ========== ===========
(a) Represents the allowance for doubtful accounts of businesses
acquired $1,290,000 and the recovery of balances previously written
off $57,000.
(b) Uncollectible balances written off by a charge to reserve.
F41
86
EXHIBIT 11
BIRD CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (1)
(Thousands of dollars, except share and per share amounts)
YEAR ENDED DECEMBER 31,
1994 1993 1992
Primary earnings per share --------- --------- ---------
Earnings (loss) from continuing operations $1,083 ($1,908) $5,664
Deduct dividend requirements:
Preferred stock (30) (30) (30)
Convertible preference stock (1,506) (1,506) (1,506)
--------- --------- ---------
Net earnings (loss) from continuing operations (453) (3,444) 4,128
Net loss from discontinued operations (4,766) (26,414) (2,573)
--------- --------- ---------
Net earnings (loss) applicable
to common stock ($5,219) ($29,858) $1,555
--------- --------- ---------
Weighted average number of common
shares outstanding (1) 3,992,251 4,097,999 4,009,832
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 0 131,613
--------- --------- ---------
Weighted average number of common
shares outstanding as adjusted 3,992,251 4,097,999 4,141,445
--------- --------- ---------
Primary earnings (loss) per common share:
Continuing operations ($0.11) ($1.51) $1.00
Discontinued operations ($1.20) ($6.45) ($0.62)
Cumulative effect of accounting change $0.00 $0.67 $0.00
--------- --------- ---------
Applicable to common stock ($1.31) ($7.29) $0.38
--------- --------- ---------
F42
87
EXHIBIT 11
BIRD CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (1)
(Thousands of dollars, except share and per share amounts)
YEAR ENDED DECEMBER 31,
1994 1993 1992
--------- --------- ---------
Fully diluted earnings per share (2)
Earnings from (loss) continuing operations $1,083 ($1,908) $5,664
Deduct dividend requirements of
preferred stock (30) (30) (30)
--------- --------- ---------
Net earnings (loss) from continuing operations 1,053 (1,938) 5,634
Net loss from discontinued operations (4,766) (26,414) (2,573)
--------- --------- ---------
Net earnings (loss) applicable
to common stock ($3,713) ($28,352) $3,061
--------- --------- ---------
Weighted average number of common
shares outstanding (1) 3,992,251 4,097,999 4,010,751
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 99,828
Assuming conversion of convertible
preference stock 731,955 731,955 731,955
--------- --------- ---------
Weighted average number of common
shares outstanding as adjusted 4,724,206 4,829,954 4,842,534
--------- --------- ---------
Fully diluted earnings (loss) per common share:
Continuing operations $0.22 ($0.97) $1.16
Discontinued operations ($1.01) ($5.57) ($0.53)
Cumulative effect of accounting change $0.00 $0.67 $0.00
--------- --------- ---------
Applicable to common stock ($0.79) ($5.87) $0.63
--------- --------- ---------
(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
F43
88
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
Bird Environmental Gulf Coast, Inc. Texas
Bird Environmental Technologies, Inc. (F/K/A Delaware
Bird Environmental Systems and Services, Inc.)
Bird-Kensington Holding Corporation Delaware
F44
89
EXHIBIT 23 (a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of these 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 8, 1995; appearing on Page F2 of Bird
Corporation's Form 10-K for the year ended December 31, 1994.
/s/ Price Waterhouse LLP
Boston, Massachusetts
March 24, 1995
F45
90
EXHIBIT 23(B)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of these 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 F3 of Bird
Corporation's Form 10-K for the year ended December 31, 1994.
/s/ Alpern, Rosenthal & Company
Alpern, Rosenthal & Company
Pittsburgh, Pennsylvania
March 24, 1995
F46
91
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
COMBINED FINANCIAL STATEMENTS
AND SUPPLEMENTAL INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1994
AND 1993 AND THE PERIOD JULY 1, 1992
(INCEPTION) TO DECEMBER 31, 1992
92
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
COMBINED FINANCIAL STATEMENTS
________________________________________________________
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993 AND
THE PERIOD JULY 1, 1992 (INCEPTION) TO DECEMBER 31, 1992
________________________________________________________
TABLE OF CONTENTS
PAGE
----
FINANCIAL STATEMENTS
Independent Auditors' Report 2
Combined Balance Sheets 3
Combined Statements of Operations and Partners' Capital (Deficit) 4
Combined Statements of Cash Flows 5 - 6
Notes to the Combined Financial Statements 7 - 19
SUPPLEMENTAL INFORMATION
Independent Auditors' Report on Financial Statement Schedule 20
Financial Statement Schedule II 21
93
INDEPENDENT AUDITORS' REPORT
TO THE PARTNERS
KENSINGTON PARTNERS AND AFFILIATE
Leechburg, Pennsylvania
We have audited the accompanying combined balance sheets of Kensington
Partners and Affiliate (Joint Venture Partnerships) as of December 31, 1994 and
1993 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 and the period from July 1, 1992 (Inception) to December 31, 1992. 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 1993, and the results of
their operations and their cash flows for the years ended December 31, 1994 and
1993 and the period from July 1, 1992 (Inception) to December 31, 1992, 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
94
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
COMBINED BALANCE SHEETS
--------------------------------------------------------------------------------------------------------------------
DECEMBER 31 1994 1993
--------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 55,655 $ 15,518
Accounts receivable
Trade - net of allowance for doubtful
accounts of $323,000 in 1994
and $195,000 in 1993 - Note 3 1,742,715 2,763,207
Related parties - Note 13B 1,286,189 1,231,094
Inventories - Note 4 1,875,584 2,956,397
Prepaid expenses 79,862 134,320
----------- -----------
TOTAL CURRENT ASSETS 5,040,005 7,100,536
----------- -----------
PROPERTY AND EQUIPMENT - At cost - net of
accumulated depreciation of $1,139,398 and $642,433
as of December 31, 1994 and 1993 - Note 5 3,136,639 2,870,341
----------- -----------
OTHER ASSETS
Other receivables - related party - net of
allowance - Note 13E 306,386 100,000
Other assets - Note 6 371,249 1,277,233
----------- -----------
677,635 1,377,233
----------- -----------
TOTAL ASSETS $ 8,854,279 $11,348,110
=========== ===========
The accompanying notes are an integral part of these combined financial
statements.
95
--------------------------------------------------------------------------------------------------------------------
1994 1993
--------------------------------------------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' DEFICIT
CURRENT LIABILITIES
Demand notes payable - Note 7 $ 1,628,302 $ 2,245,580
Current maturities of capital lease
obligations and long-term debt - Note 8 312,023 415,500
Accounts payable
Trade 2,485,977 3,927,881
Related parties - Note 13A 3,654,990 2,729,235
Accrued expenses - Note 9 1,640,238 754,095
----------- -----------
TOTAL CURRENT LIABILITIES 9,721,530 10,072,291
----------- -----------
LONG-TERM LIABILITIES
Capital lease obligations and long-term debt -
net of current maturities - Note 8 807,012 1,096,480
Accounts payable - trade - long-term 354,636 -
Other long-term liabilities - related parties -
Notes 13D and 13E 126,314 374,865
----------- -----------
TOTAL LONG-TERM LIABILITIES 1,287,962 1,471,345
----------- -----------
TOTAL LIABILITIES 11,009,492 11,543,636
PARTNERS' DEFICIT (2,155,213) (195,526)
COMMITMENTS AND CONTINGENCIES - Note 12 - -
----------- -----------
TOTAL LIABILITIES AND PARTNERS' DEFICIT $ 8,854,279 $11,348,110
=========== ===========
Page 3
96
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
COMBINED STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL (DEFICIT)
------------------------------------------------------------------------------------------------------------------
FROM INCEPTION -
YEAR JULY 1, 1992
---------------------------------- ----------------
FOR THE PERIODS ENDED DECEMBER 31 1994 1993 1992
------------------------------------------------------------------------------------------------------------------
NET SALES (related parties - 1994 - 26%,
1993 - 34%, 1992 - 33%) $24,180,093 $21,169,467 $10,091,187
COST OF GOODS SOLD (purchased
from related parties - 1994 - 28%,
1993 - 27%, 1992 - 25%) 22,863,159 19,785,555 7,946,321
----------- ----------- -----------
GROSS PROFIT 1,316,934 1,383,912 2,144,866
OPERATING EXPENSES (related parties -
1994 - 11%, 1993 - 23%, 1992 - 17%) 5,346,966 6,012,508 2,079,567
----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS (4,030,032) (4,628,596) 65,299
----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest expense (289,638) (155,452) (31,371)
Income (loss) from equity investment 3,468 (69,578) -
Provision for doubtful accounts (595,417) (202,154) (45,842)
Tax penalties (199,872) - -
Other expense - net (198,186) (193,647) (24,157)
----------- ------- -----------
TOTAL OTHER EXPENSE (1,279,645) (620,831) (101,370)
----------- ------- -----------
NET LOSS (5,309,677) (5,249,427) (36,071)
PARTNERS' CAPITAL (DEFICIT) - Beginning
of year (195,526) 4,453,901 -
Capital Contributions 3,349,990 600,000 4,489,972
----------- -------- -----------
PARTNERS' CAPITAL (DEFICIT) - End of year ($ 2,155,213) ($195,526) $ 4,453,901
=========== ======== ===========
The accompanying notes are an integral part of these combined financial
statements.
Page 4
97
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
COMBINED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------------------------------------------
FROM INCEPTION -
YEAR JULY 1, 1992
------------------------------------ ----------------
FOR THE PERIODS ENDED DECEMBER 31 1994 1993 1992
------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES
Net loss
($ 5,309,677) ($ 5,249,427) ($ 36,071)
Adjustments for noncash items
included in net loss:
Depreciation and amortization 763,183 540,921 224,726
(Income) loss from equity investment (3,468) 68,578 -
Working capital changes (below) 2,818,892 3,269,036 (880,230)
----------- ----------- -----------
NET CASH USED FOR
OPERATING ACTIVITIES (1,731,070) (1,370,892) (691,575)
----------- ----------- -----------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES
Purchase of property and equipment (38,222) (132,650) (37,527)
Proceeds from sale of equipment 81,430 - -
Other assets (98,273) (280,508) (59,373)
Other receivables - related parties 18,723 (100,000) -
----------- ----------- -----------
NET CASH USED FOR
INVESTING ACTIVITIES (36,342) (513,158) (96,900)
----------- ----------- -----------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
Cash contributed by the
partners - Note 10 2,825,000 600,000 2,835,305
Reduction in payables to
Jones & Brown - Note 10 - - (2,800,000)
Demand notes payable (617,278) 1,335,000 910,580
Proceeds from long-term debt 169,706 34,107 -
Payments on long-term debt (631,082) (399,543) (133,692)
Other long-term liabilities -
related parties 61,203 306,286 -
----------- ----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,807,549 1,875,850 812,193
----------- ----------- -----------
INCREASE (DECREASE) IN CASH 40,137 (8,200) 23,718
CASH - Beginning of year 15,518 23,718 -
----------- ----------- -----------
CASH - End of year $ 55,655 $ 15,518 $ 23,718
=========== =========== ===========
The accompanying notes are an integral part of these combined financial
statements.
Page 5
98
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
COMBINED STATEMENTS OF CASH FLOWS (CONTINUED)
------------------------------------------------------------------------------------------------------------------
FROM INCEPTION -
YEAR JULY 1, 1992
---------------------------------- ----------------
FOR THE PERIODS ENDED DECEMBER 31 1994 1993 1992
------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 255,304 $ 152,341 $ 29,438
=========== =========== ===========
NONCASH INVESTING AND FINANCING ACTIVITIES
Capital lease and debt obligations
incurred for acquisition of equipment $ 68,431 $ 1,502,028 $ 34,379
=========== =========== ===========
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) $ 268,123
Related parties (280,204) (13,661) (416,137)
Inventories
1,480,803 (921,219) (189,952)
Other current assets and
liabilities 940,601 520,199 108,386
Accounts payable
Trade
(1,087,268) 2,825,082 (1,263,416)
Related parties 744,468 2,068,813 612,766
----------- ----------- -----------
INCREASE (DECREASE) IN
WORKING CAPITAL $ 2,818,892 $ 3,269,036 ($880,230)
=========== =========== ===========
The accompanying notes are an integral part of these combined financial
statements.
Page 6
99
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. At
December 31, 1993, the Companies had an overdraft position of
approximately $345,000, at a bank, caused by outstanding checks. The
overdraft was included in accounts payable.
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.
Page 7
100
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
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.
Page 8
101
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
J. RECLASSIFICATION
Certain reclassifications were made to the amounts previously
reported for December 31, 1993 and 1992 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.
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.
Page 9
102
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - ACCOUNTS RECEIVABLE
At December 31, 1994 and 1993, accounts receivable - trade from three
customers were approximately 67% and 73% of trade receivables, respectively.
Sales to these unrelated customers comprised 67% and 51% of total sales for the
years ended December 31, 1994 and 1993, respectively.
Sales to one unrelated customer comprised 30% of total sales for the
period ended December 31, 1992.
NOTE 4 - INVENTORIES
Inventories at December 31, 1994 and 1993 are as follows:
1994 1993
---- ----
Raw materials $ 950,893 $1,536,349
Allowance to state raw materials at LIFO cost (39,005) (30,524)
---------- ----------
Raw materials at LIFO cost 911,888 1,505,825
Work-in-process 648,987 1,030,514
Finished goods 314,709 420,058
---------- ----------
Total Inventories $1,875,584 $2,956,397
========== ==========
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1994 and 1993 are as follows:
1994 1993
---- ----
Equipment under capital leases - Note 8 $1,785,817 $1,025,563
Warehouse and manufacturing equipment 1,715,676 1,621,784
Furniture and fixtures 290,258 290,258
Leasehold improvements 419,791 419,791
Transportation equipment 64,495 155,378
---------- ----------
4,276,037 3,512,774
Less: Accumulated depreciation 1,139,398 642,433
---------- ----------
Total Property and Equipment $3,136,639 $2,870,341
========== ==========
Page 10
103
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - OTHER ASSETS
Other assets at December 31, 1994 and 1993 are as follows:
1994 1993
---- ----
Deposits $ 199,838 $ 816,638
Sample windows 89,965 152,324
Marketing supplies inventory -
119,489
Other assets 81,446 188,782
---------- ----------
$ 371,249 $1,277,233
========== ==========
Deposits at December 31, 1993 consist primarily of deposits on equipment
purchases.
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.
Page 11
104
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - DEMAND NOTES (CONTINUED)
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
==========
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 and 1993:
Page 12
105
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 - CAPITAL LEASE OBLIGATIONS AND LONG-TERM DEBT (CONTINUED)
1994 1993
---- ----
Warehouse and manufacturing equipment $1,624,677 $ 840,422
Transportation equipment 161,140 185,141
---------- ----------
1,785,817 1,025,563
Manufacturing equipment under capital lease,
not yet placed in service - included
in deposits (Note 6) - 764,640
---------- ----------
1,785,817 1,790,203
Less: Accumulated amortization 290,729 128,976
---------- ----------
Total $1,495,088 $1,661,227
========== ==========
NOTE 9 - ACCRUED EXPENSES
Accrued expenses at December 31, 1994 and 1993 are as follows:
1994 1993
---- ----
Accrued and withheld payroll and payroll taxes (Note 2) $ 575,500 $ 423,855
Accrued and collected sales taxes (Note 2) 502,415 42,478
Accrued tax penalties and interest 239,219 -
Accrued vacation 155,510 143,717
Accrued real estate taxes 105,932 -
Other accrued expenses 61,662 144,045
---------- ----------
Total Accrued Expenses $1,640,238 $ 754,095
========== ==========
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.
Page 13
106
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 - PARTNERS' CAPITAL (CONTINUED)
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).
In September 1994, Bird entered into an 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, $163,000
and $60,000 to this plan during the periods ended December 31, 1994, 1993 and
1992, 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.
Page 14
107
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 - RETIREMENT PLANS (CONTINUED)
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. The plan was not in effect during 1992.
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 period ended
December 31, 1994, 1993 and 1992 is as follows:
1994 1993 1992
---- ---- ----
Facilities leases - primarily
related party $ 285,000 $ 263,000 $ 128,000
Transportation equipment 133,000 67,000 48,000
---------- ---------- ----------
$ 418,000 $ 330,000 $ 176,000
========== ========== ==========
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
==========
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 and $66,000, due a related
party, has been accrued in the accompanying balance sheets at December
31, 1994 and 1993, respectively. 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.
Page 15
108
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
B. PURCHASE COMMITMENTS (CONTINUED)
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.
Page 16
109
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
D. LITIGATION (CONTINUED)
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.
NOTE 13 - RELATED PARTY TRANSACTIONS
The Companies have entered into various transactions with related
parties during the years ended December 31, 1994, 1993 and the period July 1,
1992 (Inception) to December 31, 1992. 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 periods ended December 31, 1994, 1993 and 1992:
PURCHASES
---------
1994 1993 1992
---- ---- ----
Vinyl Division of Bird, Inc. $2,862,000 $2,053,000 $ 85,000
Domken Plastics Limited (DPL) $3,616,000 $2,964,000 $9,760,000
Quantum II Partners (see below) $ 200,000 $ 440,000 $ -
Design Matrix, Inc. (DMI) -
Advertising $ - $ 147,000 $ 53,000
Accounts payable to related parties at December 31,1994 and 1993
are as follows:
ACCOUNTS PAYABLE
----------------
1994 1993
---- ----
Bird, Inc. $1,947,000 $1,219,000
Domken Plastics Limited (DPL) 1,436,000 1,210,000
Quantum II (Notes 12D and 13E) 16,000 163,000
Other related parties 256,000 138,000
---------- ----------
$3,655,000 $2,730,000
========== ==========
Page 17
110
KENSINGTON PARTNERS AND AFFILIATE
(JOINT VENTURE PARTNERSHIPS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 - RELATED PARTY TRANSACTIONS (CONTINUED)
A. PURCHASES AND PAYABLES (CONTINUED)
DMI and DPL are related through common ownership with ZES.
A stockholder of ZES was compensated approximately $143,000 and
$105,000 during the year ended December 31, 1993 and the six months
ended December 31, 1992, respectively, for services rendered in
assisting with the acquisition of raw materials from DPL. At December
31, 1993, approximately $48,000 was due to the stockholder. 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,
$7,255,000 and $3,327,000 for 1994, 1993 and 1992, 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 and 1993:
1994 1993
---- ----
J&B $1,174,000 $ 987,000
Quantum II Partners (Note 13E) -
225,000
Other 112,000 19,000
---------- ----------
Total $1,286,000 $1,231,000
========== ==========
C. RENTS
KP rents facilities from related parties (Note 12).
D. MANAGEMENT FEES
Management fees of approximately $488,000 and $224,000 were paid to
J&B under a management contract for the year ended December 31, 1993 and
the six months ended December 31, 1992, respectively. The management
agreement was terminated effective December 31, 1993.
Page 18
111
KENSINGTON PARTNERS AND AFFILIATE
(Joint Venture Partnerships)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 - RELATED PARTY TRANSACTIONS (CONTINUED)
D. MANAGEMENT FEES (CONTINUED)
In addition, a management fee of approximately $181,000 for 1993
was due to Bird at December 31, 1993. The amount is included in the
accompanying combined balance sheets in other long-term liabilities.
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.
During the year ended December 31, 1993, KP advanced Quantum II
$377,000. At December 31, 1993, the remaining advance due to KP was
approximately $325,000, of which $100,000 was included in other assets
as a note receivable. The remaining balance was included in accounts
receivable (Note 13B).
Included in other long-term liabilities as of December 31, 1993 is
$125,000 due to a stockholder of ZES. Subsequent to December 31, 1993,
the amount was transferred by the stockholder to ZES and then
contributed by ZES to KP's capital (Note 10).
Page 19
112
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 1993 and for the years ended December
31, 1994 and 1993 and the period from July 1, 1992 (Inception) to December 31,
1992, 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 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
Page 20
113
KENSINGTON PARTNERS AND AFFILIATE
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1994 and 1993 and the
Period July 1, 1992 (Inception) to December 31, 1992
Additions
Balance Charged to Charged to Balance
beginning cost and other Deduc- at end
of year expenses accounts tions(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
======== ======== ======== ======== ========
PERIOD JULY 1, 1992 (INCEPTION)
TO DECEMBER 31, 1992:
Allowance for doubtful accounts $ 59,000 $ 46,000 $ - $ 39,000 $ 66,000
======== ======== ======== ======== ========
(1) Uncollectible accounts written off.
Page 21
EX-4.(A)(3)
2
LOAN & SECURITY AGREEMENT
1
Exhibit 4(a)(3)
-------------------------------------------------------------------------------
BIRD INCORPORATED
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
LOAN AND SECURITY AGREEMENT
Dated: November 30, 1994
$39,000,000.00
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
BARCLAYS BUSINESS CREDIT, INC.
------------------------------------------------------------------------------
2
TABLE OF CONTENTS
Page
----
[TO BE INSERTED]
3
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this 30th day of
November, 1994, by and between BARCLAYS BUSINESS CREDIT, INC. ("Lender"), a
Connecticut corporation with an office at 200 Glastonbury Boulevard,
Glastonbury, Connecticut 06033; and Bird Incorporated, a Massachusetts
corporation with its chief executive office and principal place of business at
980 Washington Street, Dedham, Massachusetts 02026 (the "Borrower").
Capitalized terms used in this Agreement have the meanings assigned to them in
Appendix A, General Definitions. Accounting terms not otherwise specifically
defined herein shall be construed in accordance with GAAP consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a Total Credit Facility of up to $39,000,000
available upon Borrower's request therefor, as follows:
1.1 Revolving Credit Loans.
----------------------
1.1.1 LOANS AND RESERVES. Lender agrees, for so long as no
Default or Event of Default exists, to make Revolving Credit Loans to Borrower
from time to time, as requested by Borrower in the manner set forth in
subsection 3.1.1 hereof, up to a maximum principal amount at any time
outstanding equal to the Borrowing Base at such time MINUS the LC Amount and
reserves, if any. Lender shall have the right to establish reserves in such
amounts, and with respect to such matters, as Lender shall deem reasonably
necessary or appropriate, against the amount of Revolving Credit Loans which
Borrower may otherwise request under this subsection 1.1.1 or subsection 1.1.2,
including, without limitation, with respect to (i) price adjustments, damages,
unearned discounts, returned products or other matters for which credit
memoranda are issued in the ordinary course of Borrower's business; (ii)
shrinkage, spoilage and obsolescence of Inventory; (iii) slow moving Inventory;
(iv) other sums chargeable against Borrower's Loan Account as Revolving Credit
Loans under any section of this Agreement; (v) amounts owing by Borrower to any
Person to the extent secured by a Lien on, or trust over, any Property of
Borrower; and (vi) such other matters, events, conditions or contingencies as
to which Lender, in its reasonable credit judgment, determines reserves should
be established from time to time hereunder.
1.1.2 SEASONAL OVERADVANCE. During the period from January 1
through and including April 30 of each calendar year, Lender may, in its
discretion, make Revolving Credit Loans
-1-
4
to Borrower up to a maximum principal amount at any time outstanding equal to
the Borrowing Base at such time PLUS $2,000,000 MINUS the LC Amount and
reserves, if any (any such Revolving Credit Loans in excess of the
Borrowing Base are referred to individually as a "Seasonal Overadvance" and
collectively as "Seasonal Overadvances"). In no event shall the total of the
Revolving Credit Loans, Seasonal Overadvances and the LC Amount outstanding at
any time exceed $24,000,000. All Seasonal Overadvances shall be payable on the
earlier of demand by Lender or April 30 of each year, shall be secured by the
Collateral and shall bear interest as provided in this Agreement for Revolving
Credit Loans generally.
1.1.3 USE OF PROCEEDS. The Revolving Credit Loans shall be
used solely for the satisfaction of existing Indebtedness of Borrower to The
First National Bank of Boston, Philadelphia National Bank, incorporated as
Corestates Bank, N.A. and The Bank of Tokyo Trust Company, Citicorp and for
Borrower's general operating capital needs in a manner consistent with the
provisions of this Agreement and all applicable laws.
1.2 Term Loans.
----------
1.2.1 TERM LOAN A. Lender agrees to make a term loan to
Borrower on the Closing Date in the principal amount of $7,500,000.00, which
shall be repayable in accordance with the terms of the Term Note A and
shall be secured by all of the Collateral. The proceeds of the Term Loan A
shall be used solely for purposes for which the proceeds of the Revolving
Credit Loans are authorized to be used.
1.2.2 TERM LOAN B. Lender agrees to make a term loan to
Borrower on the Closing Date in the principal amount of $7,500,000.00, which
shall be repayable in accordance with the terms of the Term Note B and shall be
secured by all of the Collateral. The proceeds of the Term Loan B shall be used
solely for purposes for which the proceeds of the Revolving Credit Loans are
authorized to be used.
1.3 LETTERS OF CREDIT; LC GUARANTIES. Lender agrees, for so
long as no Default or Event of Default exists and if requested by Borrower, to
(i) issue its, or cause to be issued its Affiliate's, Letters of Credit for the
account of Borrower or (ii) execute LC Guaranties by which Lender or its
Affiliate shall guaranty the payment or performance by Borrower of its
reimbursement obligations with respect to Letters of Credit and letters of
credit issued for Borrower's account by other Persons in support of Borrower's
obligations (other than obligations for the repayment of Money Borrowed),
PROVIDED that the LC Amount at any time shall not exceed $5,000,000.00. No
Letter of Credit or LC Guaranty may have an expiration date that is after the
last day of the Original Term or the then applicable Renewal Term. Any amounts
paid by Lender under any LC Guaranty or in connection
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with any Letter of Credit shall be treated as Revolving Credit Loans,
shall be secured by all of the Collateral and shall bear interest and be
payable at the same rate and in the same manner as Revolving Credit Loans.
SECTION 2. INTEREST, FEES AND CHARGES
2.1 Interest.
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2.1.1 RATES OF INTEREST. Interest shall accrue on the Term
Loans in accordance with the terms of the Term Notes. Interest shall accrue on
the principal amount of the Revolving Credit Loans outstanding at the end of
each day at a fluctuating rate per annum equal to the Base Rate PLUS 1.0%. The
rate of interest shall increase or decrease by an amount equal to any increase
or decrease in the Base Rate, effective as of the opening of business on the
day that any such change in the Base Rate occurs.
2.1.2 DEFAULT RATE OF INTEREST. Upon and after the occurrence
of an Event of Default, and notice thereof by Lender and during the
continuation thereof, the principal amount of all Loans shall bear interest at
a rate per annum equal to 2.0% above the interest rate otherwise applicable
thereto (the "Default Rate").
2.1.3 MAXIMUM INTEREST. In no event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under the Term Notes
and charged collected pursuant to the terms of this Agreement or pursuant to
the Term Notes exceed the highest rate permissible under any law which a court
of competent jurisdiction shall, in a final determination, deem applicable
hereto. If any provisions of this Agreement, or the Term Notes are in
contravention of any such law, such provisions shall be deemed amended to
conform thereto.
2.2 COMPUTATION OF INTEREST AND FEES. Interest, Letter
of Credit and LC Guaranty fees and unused line fees and collection charges
hereunder shall be calculated daily and shall be computed on the actual number
of days elapsed over a year of 360 days. For the purpose of computing interest
hereunder, all items of payment received by Lender shall be deemed applied by
Lender on account of the Obligations (subject to final payment of such items)
one (1) Business Day after receipt by Lender of such items in Lender's account
located in Glastonbury, Connecticut.
2.3 COMMITMENT FEE. Borrower shall pay to Lender a
commitment fee of $150,000.00, which shall be fully earned and
nonrefundable on the Closing Date and shall be paid concurrently with the
initial Loan hereunder.
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2.4 LETTER OF CREDIT AND LC GUARANTY FEES. Borrower
shall pay to Lender:
(i) for standby Letters of Credit and LC Guaranties
of standby Letters of Credit, 1.75% per annum of the aggregate
face amount of such Letters of Credit and LC Guaranties
outstanding from time to time during the term of this
Agreement, PLUS all normal and customary charges associated
with the issuance thereof, which fees and charges shall be
deemed fully earned upon issuance of each such Letter of
Credit or LC Guaranty, shall be due and payable on the first
Business Day of each month and shall not be subject to rebate
or proration upon the termination of this Agreement for any
reason; and
(ii) for documentary Letters of Credit and LC
Guaranties of documentary Letters of Credit, a fee equal to
1.75% per annum of the face amount of each such Letter of
Credit or LC Guaranty, payable upon the issuance of such
Letter of Credit or execution of such LC Guaranty and
an additional fee equal to 1.75% per annum of the face amount
of such Letter of Credit or LC Guaranty payable upon each
renewal thereof and each extension thereof PLUS the normal and
customary charges associated with the issuance and
administration of each such Letter of Credit or LC Guaranty
(which fees and charges shall be fully earned upon issuance,
renewal or extension (as the case may be) of each such Letter
of Credit or LC Guaranty, shall be due and payable on the
first Business Day of each month, and shall not be subject to
rebate or proration upon the termination of this Agreement for
any reason).
2.5 UNUSED LINE FEE. Borrower shall pay to Lender a fee
equal to the greater of (i) $25,000 per year, or (ii) .25% per annum of
the average monthly amount by which the Total Credit Facility exceeds the sum
of the outstanding principal balance of the Revolving Credit Loans, Term Loans
and LC Amount. The unused line fee shall be payable monthly in arrears on the
first day of each calendar month hereafter. At year end, Lender shall determine
the balance of the unused line fee then owing for such year and if any is
owing, Borrower shall pay such amount to Lender on demand.
2.6 [Intentionally Deleted].
2.7 REIMBURSEMENT OF AUDIT AND APPRAISAL EXPENSES.
Borrower shall reimburse Lender for its out of pocket audit and appraisal
expenses incurred from time to time in connection with audits and
appraisals of Borrower's books and records and such other matters as Lender
shall deem appropriate. Audit expenses shall be payable on the first day of
the month following the date of issuance by Lender of a request for payment
thereof to Borrower.
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2.8 REIMBURSEMENT OF EXPENSES. If, at any time or times
regardless of whether or not an Event of Default then exists, Lender or any
Participating Lender incurs legal or accounting expenses or any other costs
or out-of-pocket expenses in connection with (i) the negotiation and
preparation of this Agreement or any of the other Loan Documents, any amendment
of or modification of this Agreement or any of the other Loan Documents, or any
sale or attempted sale of any interest herein to a Participating Lender; (ii)
the administration of this Agreement or any of the other Loan Documents and the
transactions contemplated hereby and thereby; (iii) any litigation, contest,
dispute, suit, proceeding or action (whether instituted by Lender, Borrower or
any other Person) in any way relating to the Collateral, this Agreement or any
of the other Loan Documents or Borrower's affairs; (iv) any attempt to enforce
any rights of Lender or any Participating Lender against Borrower or any other
Person which may be obligated to Lender by virtue of this Agreement or any of
the other Loan Documents, including, without limitation, the Account Debtors;
or (v) any attempt to inspect, verify, protect, preserve, restore, collect,
sell, liquidate or otherwise dispose of or realize upon the Collateral; then
all such legal and accounting expenses, other costs and out of pocket expenses
of Lender shall be charged to Borrower. All amounts chargeable to Borrower
under this Section 2.8 shall be Obligations secured by all of the Collateral,
shall be payable on demand to Lender or to such Participating Lender, as the
case may be, and shall bear interest from the due date thereof until paid in
full at the rate applicable to Revolving Credit Loans from time to time.
Borrower shall also reimburse Lender for expenses incurred by Lender in its
administration of the Collateral to the extent and in the manner provided in
Section 6 hereof. Lender acknowledges the receipt from Borrower of a $50,000
deposit prior to the Closing Date for application to Lender's costs and
expenses incurred prior thereto, and that the balance, if any, of such deposit
remaining after payment of such costs and expenses will be credited to the
Borrower's Loan Account.
2.9 BANK CHARGES. Borrower shall pay to Lender, on demand,
any and all reasonable fees, costs or expenses which Lender or any
Participating Lender pays to a bank or other similar institution (including,
without limitation, any reasonable fees paid by Lender to any Participating
Lender) arising out of or in connection with (i) the forwarding to Borrower or
any other Person on behalf of Borrower, by Lender or any Participating Lender,
of proceeds of loans made by Lender to Borrower pursuant to this Agreement and
(ii) the depositing for collection, by Lender or any Participating Lender, of
any check or item of payment received or delivered to Lender or any
Participating Lender on account of the Obligations.
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SECTION 3. LOAN ADMINISTRATION.
3.1 MANNER OF BORROWING REVOLVING CREDIT LOANS. Borrowings under
the credit facility established pursuant to Section 1 hereof shall be as
follows:
3.1.1 LOAN REQUESTS. A request for a Revolving Credit Loan
shall be made, or shall be deemed to be made, in the following manner: (i)
Borrower may give Lender notice of its intention to borrow, in which notice
Borrower shall specify the amount of the proposed borrowing and the proposed
borrowing date, no later than 11:00 a.m. Glastonbury, Connecticut time on the
proposed borrowing date, PROVIDED, however, that no such request may be made at
a time when there exists a Default or an Event of Default; and (ii) the becoming
due of any amount required to be paid under this Agreement or the Term Notes,
whether as interest or for any other Obligation, shall be deemed irrevocably to
be a request for a Revolving Credit Loan on the due date in the amount required
to pay such interest or other Obligation. As an accommodation to Borrower,
Lender may permit telephonic requests for loans and electronic transmittal of
instructions, authorizations, agreements or reports to Lender by Borrower.
Unless Borrower specifically directs Lender in writing not to accept or act
upon telephonic or electronic communications from Borrower, Lender shall have
no liability to Borrower for any loss or damage suffered by Borrower as a
result of Lender's honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports communicated to it
telephonically or electronically and purporting to have been sent to Lender by
Borrower and Lender shall have no duty to verify the origin of any such
communication or the authority of the person sending it.
3. 1.2 DISBURSEMENT. Borrower hereby irrevocably authorizes
Lender to disburse the proceeds of each Revolving Credit Loan requested,
or deemed to be requested, pursuant to this subsection 3.1.2 as follows: (i)
the proceeds of each Revolving Credit Loan requested under subsection 3.1.1(i)
shall be disbursed by Lender in lawful money of the United States of America in
immediately available funds, in the case of the initial borrowing, in
accordance with the terms of the written disbursement letter from Borrower, and
in the case of each subsequent borrowing, by wire transfer to such bank account
as may be agreed upon by Borrower and Lender from time to time or elsewhere if
pursuant to a written direction from Borrower; and (ii) the proceeds of each
Revolving Credit Loan requested under subsection 3.1.1(ii) shall be disbursed
by Lender by way of direct payment of the relevant interest or other
Obligation.
3.1.3 AUTHORIZATION. Borrower hereby irrevocably authorizes
Lender, in Lender's sole discretion, to advance to Borrower, and to charge to
Borrower's Loan Account hereunder as a Revolving Credit Loan, a sum sufficient
to pay all interest
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accrued on the Obligations during the immediately preceding month and to
pay all costs, fees and expenses at any time owed by Borrower to Lender
hereunder.
3.2 PAYMENTS. Except where evidenced by notes or other
instruments issued or made by Borrower to Lender specifically containing
payment provisions which are in conflict with this Section 3.2 (in which event
the conflicting provisions of said notes or other instruments shall govern and
control), the Obligations shall be payable as follows:
3.2.1 PRINCIPAL. Principal payable on account of Revolving
Credit Loans shall be payable by Borrower to Lender immediately upon the
earliest of (i) the receipt by Lender or Borrower of any proceeds of any of the
Collateral other than Equipment or real Property, to the extent of said
proceeds, (ii) the occurrence of an Event of Default in consequence of which
Lender elects to accelerate the maturity and payment of the Obligations, or
(iii) termination of this Agreement pursuant to Section 4 hereof; PROVIDED,
HOWEVER, that if an Overadvance shall exist at any time, Borrower shall, on
demand, repay the Overadvance.
3.2.2 INTEREST. Interest accrued on the Revolving Credit Loans
shall be due on the earliest of (i) the first calendar day of each month (for
the immediately preceding month), computed through the last calendar day of the
preceding month, (ii) the occurrence of an Event of Default in consequence of
which Lender elects to accelerate the maturity and payment of the Obligations
or (iii) termination of this Agreement pursuant to Section 4 hereof.
3.2.3 COSTS, FEES AND CHARGES. Costs, fees and charges payable
pursuant to this Agreement shall be payable by Borrower as and when provided
in Section 2 hereof, to Lender or to any other Person designated by Lender in
writing.
3.2.4 OTHER OBLIGATIONS. The balance of the Obligations
requiring the payment of money, if any, shall be payable by Borrower to
Lender as and when provided in this Agreement, the Other Agreements or the
Security Documents, or on demand, whichever is later.
3.3 Mandatory Prepayments.
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3.3.1 PROCEEDS OF SALE, LOSS, DESTRUCTION OR CONDEMNATION OF
COLLATERAL. Except as provided in subsection 3.3.2 hereof and subsection
6.4.2 hereof, if Borrower sells any of the Equipment or real Property, or if
any of the Collateral is lost or destroyed or taken by condemnation, Borrower
shall pay to Lender, unless otherwise agreed by Lender, as and when received by
Borrower and as a mandatory prepayment of the Term loans (as determined by
Lender), a sum equal to the net proceeds, i.e.,
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a request by Borrower from Lender for a Revolving Credit Loan on the due
date of, and in an aggregate amount required to pay, such principal, accrued
interest, fees or other charges, and the proceeds of each such Revolving Credit
Loan may be disbursed by Lender by way of direct payment of the relevant
Obligation and shall bear interest as a Base Rate Advance.
(ii) Whenever Borrower desires to convert all or a
portion of an outstanding Base Rate Advance or LIBOR Rate
Advance into one or more Advances of another type, or to
continue outstanding a LIBOR Rate Advance for a new Interest
Period, Borrower shall have Lender written notice (or telephone
notice promptly confirmed in writing) at least one (1) Business
Day before the conversion into a Base Rate Advance and at least
three (3) Business days before the conversion into or
continuation of a LIBOR Rate Advance. Such notice (a "Notice
of Conversion/Continuation") shall be given prior to
11:00 a.m., Glastonbury, Connecticut time, on the date
specified. Each such Notice of Conversion/Continuation shall be
irrevocable and shall specify the aggregate principal amount of
the Advance to be converted or continued, the date of such
conversion or continuation, whether the Advance is being
converted into or continued as a LIBOR Rate Advance (and, if so,
the duration of the Interest Period to be applicable thereto)
or a Base Rate Advance. If, upon the expiration of any
Interest Period in respect of any LIBOR Rate Advance, Borrower
shall have failed, or pursuant to the following sentence be
unable, to deliver the Notice of Conversion/Continuation,
Borrower shall be deemed to have elected to convert or
continue such LIBOR Rate Advance to a Base Rate Advance. So
long as any Default or Event of Default shall have occurred
and be continuing, no Advance may be converted into or
continued as (upon expiration of the current Interest Period)
a LIBOR Rate Advance. No conversion of any LIBOR Rate
Advance shall be permitted except on the last day of the
Interest Period in respect thereto.
(iii) The becoming due of any amount required to be paid
under this Agreement or the Term Note, whether as interest or
for any other Obligation, shall be deemed irrevocably to be a
request for a Revolving Credit Loan on the due date in the
amount required to pay such interest or other Obligation.
(iv) In no event shall the number of Advances outstanding
under the Revolving Credit Loans or the Term Loan exceed four
(4), but for purposes of determining the number of Advances
outstanding, all Base Rate Advances outstanding at any time
shall be considered as
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gross revenues less reasonable out of pocket expenses associated with
sale or disposition (including insurance payments) received by Borrower from
such sale, loss, destruction or condemnation.
3.3.2 PROCEEDS OF BEGC SALE. If BET sells its interest in
BEGC or BEGC sells the San Leon Facility, Borrower shall pay or cause to
be paid to Lender as and when received and as a mandatory prepayment of Term
Loan A, a sum equal to the lesser of (a) the proceeds received from such sale
and (b) the outstanding principal balance and accrued and unpaid interest on
Term Loan A.
3.3.3 PROCEEDS OF VINYL PRODUCTS DIVISION SALE. If Borrower
sells the Vinyl Products Division, the proceeds shall be applied as set forth
in Section 3.8.
3.4 APPLICATION OF PAYMENTS AND COLLECTIONS. All items of
payment received by Lender by 12:00 noon, Glastonbury, Connecticut time, on
any Business Day shall be deemed received on that Business Day. All items of
payment received after 12:00 noon, Glastonbury, Connecticut time, on any
Business Day shall be deemed received on the following Business Day. Borrower
irrevocably waives the right to direct the application of any and all payments
and collections at any time or times hereafter received by Lender from or on
behalf of Borrower, and Borrower does hereby irrevocably agree that Lender
shall have the continuing exclusive right to apply and reapply any and all such
payments and collections received at any time or times hereafter by Lender or
its agent against the Obligations, in such manner as Lender may deem advisable,
notwithstanding any entry by Lender upon any of its books and records;
provided, however, that prior to an Event of Default, Lender will use its
reasonable efforts to apply items of payment received in respect of Accounts
and Inventory to the Revolving Credit Loans and items of payment received in
respect of the assets described in Section 3.3 hereof in accordance with the
terms thereof; and provided, further, that upon and after the occurrence of an
Event of Default, Lender may, in its sole discretion, apply such items against
any of the Obligations. If as the result of collections of Accounts as
authorized by subsection 6.2.6 hereof a credit balance exists in the Loan
Account, such credit balance shall not accrue interest in favor of Borrower,
but shall be available to Borrower at any time or times for so long as no
Default or Event of Default exists. Such credit balance shall not be applied or
be deemed to have been applied as a prepayment of the Term Loans, except that
Lender may, at its option, offset such credit balance against any of the
Obligations upon and after the occurrence of an Event of Default.
3.5 ALL LOANS TO CONSTITUTE ONE OBLIGATION. The Loans shall
constitute one general Obligation of Borrower, and shall be secured by Lender's
Lien upon all of the Collateral.
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3.6 LOAN ACCOUNT. Lender shall enter all Loans as debits
to the Loan Account and shall also record in the Loan Account all payments
made by Borrower on any Obligations and all proceeds of Collateral which are
finally paid to Lender, and may record therein, in accordance with customary
accounting practice, other debits and credits, including interest and all
charges and expenses properly chargeable to Borrower.
3.7 STATEMENTS OF ACCOUNT. Lender will account to Borrower
monthly with a statement of Loans, charges and payments made pursuant to this
Agreement, and such account rendered by Lender shall be deemed final, binding
and conclusive upon Borrower unless Lender is notified by Borrower in writing
to the contrary within 30 days of the date each accounting is mailed to
Borrower. Such notice shall only be deemed an objection to those items
specifically objected to therein.
3.8 AMENDMENT UPON CLOSING OF SALE OF VINYL PRODUCTS
OPERATION. If Borrower closes the sale of its Vinyl Products Division with
Jannock Limited pursuant to the agreement attached as Exhibit R hereto, the
proceeds shall be applied first to the repayment of Term Loan A, second to the
repayment of Term Loan B so that the outstanding principal amount equals
$5,000,000, third to the outstanding Revolving Credit Loans and the balance
will be retained by the Borrower. Upon the closing of the Vinyl Products
Division sale and the application of the net proceeds as provided herein, the
Lender and Borrower shall then enter into an Amendment to this Agreement in
substantially the form set forth as Exhibit S hereto and the instruments and
documents referred to therein and Borrower shall thereupon have the right to
request Revolving Credit Loans in accordance with the terms of this Agreement,
as amended by such Amendment.
SECTION 4. TERM AND TERMINATION
4.1 TERM OF AGREEMENT. Subject to Lender's right to cease making
Loans to Borrower upon or after the occurrence of any Default or Event of
Default, this Agreement shall be in effect for a period of three (3) years from
the date hereof, through and including November 30, 1997 (the "Original Term"),
and this Agreement shall automatically renew itself for one-year periods
thereafter (the "Renewal Terms"), unless terminated as provided in Section 4.2
hereof.
4.2 Termination.
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4.2.1 TERMINATION BY LENDER. Upon at least 90 days prior written
notice to Borrower, Lender may terminate this Agreement as of the last day of
the Original Term or the then current Renewal Term and Lender may terminate
this Agreement without notice upon or after the occurrence of an Event of
Default.
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4.2.2 TERMINATION BY BORROWER. Upon at least 90 days prior
written notice to Lender, Borrower may, at its option, terminate this
Agreement; PROVIDED, HOWEVER, no such termination shall be effective until
Borrower has paid all of the Obligations (including charges due under Section
4.2.3) in immediately available funds and all Letters of Credit and LC
Guaranties have expired or have been cash collateralized to Lender's
satisfaction. Any notice of termination given by Borrower shall be irrevocable
unless Lender otherwise agrees in writing, and Lender shall have no obligation
to make any Loans or issue or procure any Letters of Credit or LC Guaranties on
or after the termination date stated in such notice. Borrower may elect to
terminate this Agreement in its entirety only. No section of this Agreement or
type of Loan available hereunder may be terminated singly.
4.2.3 TERMINATION CHARGES. At the effective date of termination
of this Agreement for any reason, Borrower shall pay to Lender (in addition
to the then outstanding principal, accrued interest and other charges
owing under the terms of this Agreement and any of the other Loan Documents) as
liquidated damages for the loss of the bargain and not as a penalty, an amount
equal to 2.0% of the highest of the Average Loan Balances outstanding during
the immediately prior twelve (12) month period if termination occurs during the
first twelve-month period of the Original Term (November 30, 1994 through
November 30, 1995); 1.0% of the highest of the Average Loan Balances
outstanding during the immediately prior twelve (12) month period if
termination occurs during the second twelve-month period of the Original Term
December 1, 1995) through November 30, 1994); and if termination occurs
thereafter, no termination charge shall be payable.
4.2.4 EFFECT OF TERMINATION. All of the Obligations shall be
immediately due and payable upon the termination date stated in any notice
of termination of this Agreement. All undertakings, agreements, covenants,
warranties and representations of Borrower contained in the Loan Documents
shall survive any such termination and Lender shall retain its Liens in the
Collateral and all of its rights and remedies under the Loan Documents
notwithstanding such termination until Borrower has paid the Obligations to
Lender, in full, in immediately available funds, together with the applicable
termination charge, if any. Notwithstanding the payment in full of the
Obligations, Lender shall not be required to terminate its security interests
in the Collateral unless, with respect to any loss or damage Lender may incur
as a result of dishonored checks or other items of payment received by Lender
from Borrower or any Account Debtor and applied to the Obligations, Lender
shall, at its option, (i) have received a written agreement, executed by
Borrower and by any Person whose loans or other advances to Borrower are used
in whole or in part to satisfy the Obligations, indemnifying Lender from any
such loss or damage; or (ii) have retained such monetary reserves or received a
letter of credit in
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form and substance and from a bank satisfactory to Lender for such period of
time as Lender, in its reasonable discretion, may deem necessary to protect
Lender from any such loss or damage.
SECTION 5. SECURITY INTERESTS
5.1 SECURITY INTEREST IN COLLATERAL. To secure the prompt payment
and performance to Lender of the Obligations, Borrower hereby grants to
Lender a continuing Lien upon all of Borrower's assets, including all of the
following Property and interests in Property of Borrower, whether now owned or
existing or hereafter created, acquired or arising and wheresoever located:
(i) Accounts;
(ii) Inventory;
(iii) Equipment;
(iv) General Intangibles;
(v) All monies and other Property of any kind now or at
any time or times hereafter in the possession or under the
control of Lender or a bailee or Affiliate of Lender;
(vi) All accessions to, substitutions for and all
replacements, products and cash and non-cash proceeds of
(i) through (v) above, including, without limitation, proceeds
of and unearned premiums with respect to insurance policies
insuring any of the Collateral; and
(vii) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs,
and other computer materials and records) of Borrower
pertaining to any of (i) through (vi) above.
5.2 LIEN PERFECTION; FURTHER ASSURANCES. Borrower shall
execute such UCC-1 financing statements as are required by the Code and
such other instruments, assignments or documents as are necessary to perfect
Lender's Lien upon any of the Collateral and shall take such other action as
may be required to perfect or to continue the perfection of Lender's Lien upon
the Collateral. Unless prohibited by applicable law, Borrower hereby authorizes
Lender to execute and file any such financing statement on Borrower's behalf.
The parties agree that a carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in any
appropriate office in lieu thereof. At Lender's request, Borrower shall also
promptly execute or cause to be executed and shall deliver to Lender any and
all documents, instruments and agreements deemed necessary by
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a Lender to give effect to or carry out the terms or intent of the Loan
Documents.
5.3 LIEN ON REALTY. The due and punctual payment and
performance of the Obligations shall also be secured by the Lien created
by the Mortgages upon all real Property of Borrower and its Subsidiaries
described therein. The Mortgages shall be executed by Borrower in favor of
Lender and shall be duly recorded, at Borrower's expense, in each office where
such recording is required to constitute a fully perfected Lien on the real
Property covered thereby. Borrower shall deliver to Lender, at Borrower's
expense, mortgagee title insurance policies issued by a title insurance company
satisfactory to Lender, which policies shall be in form and substance
satisfactory to Lender and shall insure a valid first Lien in favor of Lender
on the Property covered thereby, subject only to those exceptions acceptable to
Lender and its counsel. Borrower shall deliver to Lender such other documents,
including, without limitation, instrument surveys of real Property, as Lender
and its counsel may reasonably request relating to the real Property subject to
the Mortgage.
SECTION 6. COLLATERAL ADMINISTRATION
6.1 General.
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6.1.1 LOCATION OF COLLATERAL. All Collateral, other than
Inventory in transit and motor vehicles, will at all times be kept by
Borrower and its Subsidiaries at one or more of the business locations set
forth in EXHIBIT B hereto and shall not, without the prior written approval of
Lender, be moved therefrom except, prior to an Event of Default and Lender's
acceleration of the maturity of the Obligations in consequence thereof, for (i)
sales of Inventory in the ordinary course of business; and (ii) removals in
connection with dispositions of Equipment that are authorized by subsection
6.4.2 hereof.
6.1.2 INSURANCE OF COLLATERAL. Borrower shall maintain and
pay for insurance upon all Collateral wherever located and with respect to
Borrower's business, covering casualty, hazard, public liability and such other
risks in such amounts and with such insurance companies as are
reasonably satisfactory to Lender. Borrower shall deliver true and complete
photocopies of such policies to Lender with satisfactory lender's loss payable
endorsements, naming Lender as sole loss payee, assignee or additional insured,
as appropriate. Each policy of insurance or endorsement shall contain a clause
requiring the insurer to give not less than 30 days prior written notice to
Lender in the event of cancellation of the policy for any reason whatsoever and
a clause specifying that the interest of Lender shall not be impaired or
invalidated by any act or neglect of Borrower or the owner of the Property or
by the occupation of the premises for purposes more hazardous than are
permitted by said
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a policy. If Borrower fails to provide and pay for such insurance, Lender
may, at its option, but shall not be required to, procure the same and charge
Borrower therefor. Borrower agrees to deliver to Lender, promptly as rendered,
true copies of all reports made in any reporting forms to insurance companies.
6.1.3 PROTECTION OF COLLATERAL. All expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping the Collateral,
any and all excise, property, sales, and use taxes imposed by any state,
federal, or local authority on any of the Collateral or in respect of the sale
thereof shall be borne and paid by Borrower. If Borrower fails to promptly pay
any portion thereof when due, Lender may, at its option, but shall not be
required to, pay the same and charge Borrower therefor. Lender shall not be
liable or responsible in any way for the safekeeping of any of the Collateral
or for any loss or damage thereto (except for reasonable care in the custody
thereof while any Collateral is in Lender's actual possession) or for any
diminution in the value thereof, or for any act or default of any warehouseman,
carrier, forwarding agency, or other person whomsoever, but the same shall be
at Borrower's sole risk.
6.2 Administration of Accounts.
--------------------------
6.2.1 RECORDS, SCHEDULES AND ASSIGNMENTS OF ACCOUNTS. Borrower shall
keep accurate and complete records of its Accounts and all payments and
collections thereon and shall submit to Lender on a weekly or more frequent
basis, as Lender shall request, a sales and collections report for the
preceding period, in form satisfactory to Lender. On or before the fifteenth
day of each month from and after the date hereof, Borrower shall deliver to
Lender, in form acceptable to Lender, a detailed aged trial balance of all
Accounts existing as of the last day of the preceding month, specifying the
names, addresses, face value, dates of invoices and due dates for each Account
Debtor obligated on an Account so listed ("Schedule of Accounts"), and, upon
Lender's request therefor, copies of proof of delivery and the original copy of
all documents, including, without limitation, repayment histories and present
status reports relating to the Accounts so scheduled and such other matters and
information relating to the status of then existing Accounts as Lender shall
reasonably request. In addition, if Accounts in an aggregate face amount in
excess of $100,000 become ineligible because they fall within one of the
specified categories of ineligibility set forth in the definition of Eligible
Accounts or otherwise established by Lender, Borrower shall notify Lender of
such occurrence on the first Business Day following such occurrence and the
Borrowing Base shall thereupon be adjusted to reflect such occurrence. If
requested by Lender, Borrower shall execute and deliver to Lender formal
written assignments of all of its Accounts weekly or daily, which shall include
all Accounts that have been created since the date of the last assignment,
together with copies of invoices or invoice registers related thereto.
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6.2.2 DISCOUNTS, ALLOWANCES, DISPUTES. If Borrower grants any
discounts, allowances or credits that are not shown on the face of the
invoice for the Account involved, Borrower shall report such discounts,
allowances or credits, as the case may be, to Lender as part of the next
required Schedule of Accounts. If any amounts due and owing in excess of
$75,000 are in dispute between Borrower and any Account Debtor, Borrower shall
provide Lender with written notice thereof at the time of submission of the
next Schedule of Accounts, explaining in detail the reason for the dispute, all
claims related thereto and the amount in controversy. Upon and after the
occurrence of an Event of Default, Lender shall have the right to settle or
adjust all disputes and claims directly with the Account Debtor and to
compromise the amount or extend the time for payment of the Accounts upon such
terms and conditions as Lender may deem advisable, and to charge the
deficiencies, costs and expenses thereof, including attorney's fees, to
Borrower.
6.2.3 TAXES. If an Account includes a charge for any tax payable to
any governmental taxing authority, Lender is authorized, in its sole
discretion, to pay the amount thereof to the proper taxing authority for the
account of Borrower and to charge Borrower therefor, provided, however that
Lender shall not be liable for any taxes to any governmental taxing authority
that may be due by Borrower.
6.2.4 ACCOUNT VERIFICATION. Whether or not a Default or an Event of
Default has occurred, any of Lender's officers, employees or agents shall
have the right, at any time or times hereafter, in the name of Lender, any
designee of Lender or Borrower, to verify the validity, amount or any other
matter relating to any Accounts by mail, telephone, telegraph or otherwise.
Borrower shall cooperate fully with Lender in an effort to facilitate and
promptly conclude any such verification process.
6.2.5 MAINTENANCE OF DOMINION ACCOUNT. Borrower shall maintain a
Dominion Account pursuant to a lockbox arrangement acceptable to Lender with
such banks as may be selected by Borrower and be acceptable to Lender. Borrower
shall issue to any such banks an irrevocable letter of instruction directing
such banks to deposit all payments or other remittances received in the
lockbox to the Dominion Account for application on account of the Obligations.
All funds deposited in the Dominion Account shall immediately become the
property of Lender and Borrower shall obtain the agreement by such banks in
favor of Lender to waive any offset rights against the funds so deposited.
Lender assumes no responsibility for such lockbox arrangement, including,
without limitation, any claim of accord and satisfaction or release with
respect to deposits accepted by any bank thereunder.
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6.2.6 COLLECTION OF ACCOUNTS, PROCEEDS OF COLLATERAL. To expedite
collection, Borrower shall endeavor in the first instance to make collection
of its Accounts for Lender. All remittances received by Borrower on account of
Accounts, together with the proceeds of any other Collateral, shall be held as
Lender's property by Borrower as trustee of an express trust for Lender's
benefit and Borrower shall immediately deposit same in kind in the Dominion
Account. Lender retains the right at all times after the occurrence of a
Default or an Event of Default to notify Account Debtors that Accounts have
been assigned to Lender and to collect Accounts directly in its own name and to
charge the collection costs and expenses, including attorneys' fees to
Borrower.
6.3 Administration of Inventory.
---------------------------
6.3.1 RECORDS AND REPORTS OF INVENTORY. Borrower shall keep accurate
and complete records of its inventory. Borrower shall furnish to Lender
Inventory reports in form and detail satisfactory to Lender at such times as
Lender may request, but at least once each month, not later than the twentieth
day of such month. Borrower shall conduct a physical inventory no less
frequently than annually and shall provide to Lender a report based on each
such physical inventory promptly thereafter, together with such supporting
information as Lender shall request.
6.3.2 RETURNS OF INVENTORY. If at any time or times hereafter any
Account Debtor returns any Inventory to Borrower the shipment of which
generated an Account on which such Account Debtor is obligated in excess of
$100,000, Borrower shall immediately notify Lender of the same, specifying the
reason for such return and the location, condition and intended disposition of
the returned Inventory.
6.4 Administration of Equipment.
---------------------------
6.4.1 RECORDS AND SCHEDULES OF EQUIPMENT. Borrower shall keep
accurate records itemizing and describing the kind, type, quality, quantity
and value of its Equipment and all dispositions made in accordance with
subsection 6.4.2 hereof, and shall furnish Lender with a current schedule
containing the foregoing information on at least an annual basis and more often
if reasonably requested by Lender. Immediately on request therefor by Lender,
Borrower shall deliver to Lender any and all evidence of ownership, if any, of
any of the Equipment.
6.4.2 DISPOSITIONS OF EQUIPMENT. Borrower will not sell, lease or
otherwise dispose of or transfer any of the Equipment or any part thereof
without the prior written consent of Lender; PROVIDED, HOWEVER, that the
foregoing restriction shall not apply, for so long as.no Default or Event
of Default exists, to (i) dispositions of Equipment which, in the aggregate
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during any consecutive twelve-month period, has a fair market value or book
value, whichever is less, of $100,000 or less, provided that all proceeds
thereof are remitted to Lender for application to the Revolving Credit
Loans,/or (ii) replacements of Equipment that is substantially worn, damaged or
obsolete with Equipment of like kind, function and value, provided that the
replacement Equipment shall be acquired prior to or concurrently with any
disposition of the Equipment that is to be replaced, the replacement Equipment
shall be free and clear of Liens other than Permitted Liens that are not
Purchase Money Liens, and Borrower shall have given Lender at least 5 days
prior written notice of such disposition.
6.5 PAYMENT OF CHARGES. All amounts chargeable to Borrower under
Section 6 hereof shall be Obligations secured by all of the Collateral,
shall be payable on demand and shall bear interest from the date such advance
was made until paid in full at the rate applicable to Revolving Credit Loans
from time to time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 GENERAL REPRESENTATIONS AND WARRANTIES. To induce Lender to
enter into this Agreement and to make advances hereunder, Borrower warrants,
represents and covenants to Lender that:
7.1.1 ORGANIZATION AND QUALIFICATION. Each of Parent, Borrower and
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each of
Parent, Borrower and its Subsidiaries is duly qualified and is authorized to
do business and is in good standing as a foreign corporation in each state or
jurisdiction listed on EXHIBIT C hereto and in all other states and
jurisdictions in which the failure of Parent or Borrower or any of its
Subsidiaries to be so qualified would have a material adverse effect on the
financial condition, business or Properties of Borrower or Parent, Borrower and
its Subsidiaries, taken as a whole.
7.1.2 CORPORATE POWER AND AUTHORITY. Each of Parent, Borrower and
its Subsidiaries is duly authorized and empowered to enter into, execute,
deliver and perform each of the Loan Documents to which it is a party. The
execution, delivery and performance of this Agreement and each of the other
Loan Documents have been duly authorized by all necessary corporate action and
do not and will not (i) require any consent or approval of the shareholders of
Parent or Borrower or any of its Subsidiaries; (ii) contravene Parent's or
Borrower's or any of its Subsidiaries' charter, articles or certificate of
incorporation or by-laws; (iii) violate, or cause Parent or Borrower or any of
its Subsidiaries to be in default under, any provision of any law, rule,
regulation, order, writ, judgment,
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injunction, decree, determination or award in effect having applicability
to Parent or Borrower or any of its Subsidiaries; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which Parent or Borrower or any of its
Subsidiaries is a party or by which Parent or Borrower or its Subsidiaries'
Properties may be bound or affected; or (v) result in, or require, the creation
or imposition of any Lien (other than Permitted Liens) upon or with respect to
any of the Properties now owned or hereafter acquired by Parent or Borrower or
any of its Subsidiaries.
7.1.3 LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and each of
the other Loan Documents when delivered, under this Agreement will be, a legal,
valid and binding obligation of each of Parent, Borrower and its Subsidiaries
executing such document, enforceable against such party in accordance with its
respective terms.
7.1.4 CAPITAL STRUCTURE. Exhibit D hereto states (i) the correct name
of each of the Subsidiaries of Borrower, its jurisdiction of incorporation and
the percentage of its Voting Stock owned by Borrower, (ii) the name of each of
Borrower's corporate or joint venture Affiliates and the nature of the
affiliation, (iii) the number, nature and holder of all outstanding Securities
of Borrower and each Subsidiary of Borrower and (iv) the number of authorized,
issued and treasury shares of Borrower and each Subsidiary of Borrower.
Borrower has good title to all of the shares it purports to own of the stock of
each of its Subsidiaries, free and clear in each case of any Lien other than
Permitted Liens. All such shares have been duly issued and are fully paid and
non-assessable. There are no outstanding options to purchase, or any rights or
warrants to subscribe for, or any commitments or agreements to issue or sell,
or any Securities or obligations convertible into, or any powers of attorney
relating to, shares of the capital stock of Borrower or any of its
Subsidiaries. There are no outstanding agreements or instruments binding upon
any of Borrower's shareholders relating to the ownership of its shares of
capital stock.
7.1.5 CORPORATE NAMES. Neither Borrower, Parent nor any of its
Subsidiaries has been known as or used any corporate, fictitious or trade names
except those listed on EXHIBIT E hereto. Except as set forth on EXHIBIT E,
neither Borrower, Parent nor any of its Subsidiaries has been the surviving
corporation of a merger or consolidation or acquired all or substantially all
of the assets of any Person.
7.1.6 BUSINESS LOCATIONS; Agent for Process. Each of Parent's,
Borrower's and its Subsidiaries' chief executive office and other places of
business are as listed on EXHIBIT B hereto. During the preceding one-year
period, neither Parent, Borrower nor any of its Subsidiaries has had an office,
place of
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business or agent for service of process other than as listed on EXHIBIT B.
Except as shown on EXHIBIT B, no inventory is stored with a bailee,
warehouseman or similar party, nor is any Inventory consigned to any Person.
7.1.7 TITLE TO PROPERTIES; PRIORITY OF LIENS. Each of Parent, Borrower
and its Subsidiaries has good, indefeasible and marketable title to and fee
simple ownership of, or valid and subsisting leasehold interests in, all of its
real Property, and good title to all of the Collateral and all of its other
Property, in each case, free and clear of all Liens except Permitted Liens.
Borrower has paid or discharged all lawful claims which, if unpaid, might
become a Lien against any of Borrower's Properties that is not a Permitted Lien
The Liens granted to Lender under Section 5 hereof are first priority Liens,
subject only to Permitted Liens.
7.1.8 ACCOUNTS. Lender may rely, in determining which Accounts are
Eligible Accounts, on all statements and representations made by Borrower with
respect to any Account or Accounts. Unless otherwise indicated in writing to
Lender, with respect to each Account:
(i) It is genuine and in all respects what it purports to be, and it is
not evidenced by an instrument or a judgment;
(ii) It arises out of a completed, bona fide sale and delivery of goods
or rendition of services by Borrower in the ordinary course of its business
and in accordance with the terms and conditions of all purchase orders,
contracts or other documents relating thereto and forming a part of the
contract between Borrower and the Account Debtor;
(iii) It is for a liquidated amount maturing as stated in the duplicate
invoice covering such sale or rendition of services, a copy of which has
been furnished or is available to Lender;
(iv) Such Account, and Lender's security interest therein, is not, and
Borrower has no knowledge that such Account will (by voluntary act or
omission of Borrower) be in the future, subject to any offset, Lien,
deduction, defense, dispute, counterclaim or any other adverse condition
except for disputes resulting in returned goods where the amount in
controversy is reasonably deemed by Lender to be immaterial, and each such
Account is absolutely owing to Borrower and is not contingent in any
respect or for any reason;
(v) Borrower has made no agreement with any Account Debtor thereunder
for any extension, compromise,
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settlement or modification of any such Account or any deduction therefrom,
except discounts or allowances which are granted by Borrower in the ordinary
course of its business for prompt payment and which are reflected in the
calculation of the net amount of each respective invoice related thereto and
are reflected in the Schedules of Accounts submitted to Lender pursuant to
subsection 6.2.1 hereof;
(vi) There are no facts, events or occurrences which in any way impair
the validity or enforceability of any Accounts or tend to reduce the amount
payable thereunder from the face amount of the invoice and statements
delivered to Lender with respect thereto;
(vii) To the best of Borrower's knowledge, the Account Debtor
thereunder (1) had the capacity to contract at the time any contract or
other document giving rise to the Account was executed and (2) such Account
Debtor is Solvent; and
(viii) To the best of Borrower's knowledge, there are no proceedings or
actions which are threatened or pending against any Account Debtor
thereunder which might result in any material adverse change in such
Account Debtor's financial condition or the collectibility of such Account.
7.1.9 EQUIPMENT. The Equipment is in good operating condition and
repair, and all necessary replacements of and repairs thereto shall be made so
that the value and operating efficiency of the Equipment shall be maintained
and preserved, reasonable wear and tear excepted. Borrower will not permit any
of the Equipment to become affixed to any real Property leased to Borrower so
that an interest arises therein under the real estate laws of the applicable
jurisdiction unless the landlord of such real Property has executed a landlord
waiver or leasehold mortgage in favor of and in form acceptable to Lender, and
Borrower will not permit any of the Equipment to become an accession to any
personal Property other than Equipment that is subject to first priority
(except for Permitted Liens) Liens in favor of Lender.
7.1.10 FINANCIAL STATEMENTS; FISCAL YEAR. The consolidated and
consolidating balance sheets of Parent, Borrower and such other Persons
described therein (including the accounts of all Subsidiaries of Borrower for
the respective periods during which a Subsidiary relationship existed) as of
September 30, 1994, and the related statements of income, changes in
stockholder's equity, and changes in financial position for the periods ended
on such dates, have been prepared in accordance with GAAP, and present fairly
the financial positions of Parent, Borrower and such Persons at such dates and
the results of
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Borrower's operations for such periods. Since September 30, 1994, there has
been no material adverse change in the condition, financial or otherwise, of
Parent, Borrower and such other Persons as shown on the Consolidated balance
sheet as of such date and no change in the aggregate value of Equipment and
real Property owned by Borrower or such other Persons, except changes in the
ordinary course of business, none of which individually or in the aggregate has
been materially adverse. The fiscal year of Parent, Borrower and each of its
Subsidiaries ends on December 31 of each year.
7.1.11 FULL DISCLOSURE. The financial statements referred to in
subsection 7.1.10 hereof do not, nor does this Agreement or any other written
statement of Borrower, Parent or any Subsidiary to Lender, contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading. There is no fact which
Borrower has failed to disclose to Lender in writing which materially affects
adversely or, so far as Borrower can now foresee, will materially affect
adversely the Properties, business, prospects, profits or condition (financial
or otherwise) of Borrower or of Parent, Borrower and its Subsidiaries, taken as
a whole, or the ability of Parent, Borrower or its Subsidiaries to perform this
Agreement or the other Loan Documents.
7.1.12 SOLVENT FINANCIAL CONDITION. Borrower is and Parent, Borrower
and its Subsidiaries collectively on a Consolidated basis are now and, after
giving effect to the Loans to be made and the Letters of Credit and LC
Guaranties to be issued hereunder, at all times will be, Solvent.
7.1.13 SURETY OBLIGATIONS. Neither Parent, Borrower nor any of its
Subsidiaries is obligated as surety or indemnitor under any surety or similar
bond or other contract issued or entered into or any agreement to assure
payment, performance or completion of performance of any undertaking or
obligation of any Person, except as set forth in Exhibit T.
7.1.14 TAXES. Borrower's federal tax identification number is
04-1090960. The federal tax identification number of Parent and each of
Borrower's Subsidiaries is shown on EXHIBIT F hereto. Parent, Borrower and each
of its Subsidiaries has filed all federal, state and local tax returns and
other reports it is required by law to file and has paid, or made provision for
the payment of, all taxes, assessments, fees, levies and other governmental
charges upon it, its income and Properties as and when such taxes, assessments,
fees, levies and charges that are due and payable, unless and to the extent any
thereof are being actively contested in good faith and by appropriate
proceedings and Borrower maintains reasonable reserves on its books therefor.
The provision for taxes on the books of Borrower and its Subsidiaries are
adequate for all years
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not closed by applicable statutes, and for its current fiscal year.
7.1.15 BROKERS. There are no claims for brokerage commissions, finder's
fees or investment banking fees in connection with the transactions
contemplated by this Agreement.
7.1.16 PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. Each of Parent,
Borrower and its Subsidiaries owns or possesses all the patents, trademarks,
service marks, trade names, copyrights and licenses necessary for the present
and planned future conduct of its business without any known conflict with the
rights of others. All such patents, trademarks, service marks, tradenames,
copyrights, licenses and other similar rights are listed on Exhibit G hereto.
7.1.17 GOVERNMENTAL CONSENTS. Each of Parent, Borrower and its
Subsidiaries has, and is in good standing with respect to, all governmental
consents, approvals, licenses, authorizations, permits, certificates,
inspections and franchises necessary to continue to conduct its business as
heretofore or proposed to be conducted by it and to own or lease and operate
its Properties as now owned or leased by it.
7.1.18 COMPLIANCE WITH LAWS. Each of Parent, Borrower and its
Subsidiaries has duly complied with, and its Properties, business operations
and leaseholds are in compliance in all material respects with, the provisions
of all federal, state and local laws, rules and regulations applicable to
Parent, Borrower or such Subsidiary, as applicable, its Properties or the
conduct of its business including, without limitation, all applicable
Environmental Laws, and there have been no citations, notices or orders of
noncompliance issued to Parent, Borrower or any of its Subsidiaries under any
such law, rule or regulation, except as set forth in Exhibit U. Each of Parent,
Borrower and its Subsidiaries has established and maintains an adequate
monitoring system to insure that it remains in compliance with all federal,
state and local laws, rules and regulations applicable to it including, without
limitation, all applicable Environmental Laws. No Inventory has been produced
in violation of the Fair Labor Standards Act (29 U.S.C. section 201 ET SEQ.),
as amended.
7.1.19 RESTRICTIONS. Neither Parent, Borrower nor any of its
Subsidiaries is a party or subject to any contract, agreement, or charter or
other corporate restriction, which materially and adversely affects its
business or the use or ownership of any of its Properties. Neither Parent,
Borrower nor any of its Subsidiaries is a party or subject to any contract or
agreement which restricts its right or ability to incur Indebtedness, other
than as set forth on EXHIBIT H hereto, none of which prohibit the execution of
or compliance with this Agreement or the other Loan Documents by Parent,
Borrower or any of its Subsidiaries, as applicable.
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7.1.20 LITIGATION. Except as set forth on EXHIBIT I hereto, there are
no actions, suits, proceedings or investigations pending, or to the knowledge
of Borrower, threatened, against or affecting Parent, Borrower or any of its
Subsidiaries, or the business, operations, Properties, prospects, profits or
condition of Parent, Borrower or any of its Subsidiaries. Neither Parent,
Borrower nor any of its Subsidiaries is in default with respect to any order,
writ, injunction, judgment, decree or rule of any court, governmental authority
or arbitration board or tribunal.
7.1.21 NO DEFAULTS. No event has occurred and no condition exists which
would, upon or after the execution and delivery of this Agreement or Borrower's
performance hereunder, constitute a Default or an Event of Default. Neither
Parent, Borrower nor any of its Subsidiaries is in default, and no event has
occurred and no condition exists which constitutes, or which with the passage
of time or the giving of notice or both would constitute, a default in the
payment of any Indebtedness to any Person for Money Borrowed.
7.1.22 LEASES. EXHIBIT J hereto is a complete listing of all
capitalized leases of Parent, Borrower and its Subsidiaries and EXHIBIT K
hereto is a complete listing of all operating leases of Parent, Borrower and
its Subsidiaries. Each of Borrower and its Subsidiaries is in full compliance
with all of the terms of each of its respective capitalized and operating
leases.
7.1.23 PENSION PLANS. Except as disclosed on EXHIBIT L hereto, neither
Parent, Borrower nor any of its Subsidiaries has any Plan. Parent, Borrower and
each of its Subsidiaries is in full compliance with the requirements of ERISA
and the regulations promulgated thereunder with respect to each Plan. No fact
or situation that could result in a material adverse change in the financial
condition of Parent, Borrower and its Subsidiaries taken as a whole exists in
connection with any Plan. Neither Parent, Borrower nor any of its Subsidiaries
has any withdrawal liability in connection with a Multiemployer Plan.
7.1.24 TRADE RELATIONS. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between (a) Borrower or (b) Parent, Borrower and its
Subsidiaries, taken as a whole, and any customer or any group of customers
whose purchases individually or in the aggregate are material to the business
of Parent, Borrower or any of its Subsidiaries, or with any material supplier,
and there exists no present condition or state of facts or circumstances
which would materially and adversely affect Borrower or Borrower and its
Subsidiaries, taken as whole, or prevent Borrower or Borrower and its
Subsidiaries, taken as whole, from conducting such business after the
consummation of
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the transaction contemplated by this Agreement in substantially the same manner
in which it has heretofore been conducted.
7.1.25 LABOR RELATIONS. Except as described on EXHIBIT M hereto,
neither Parent, Borrower nor any of its Subsidiaries is a party to any
collective bargaining agreement. There are no material grievances, disputes or
controversies with any union or any other organization of Parent's or
Borrower's or any of its Subsidiaries' employees, or threats of strikes, work
stoppages or any asserted pending demands for collective bargaining by any
union or organization.
7.2 CONTINUOUS NATURE OF REPRESENTATIONS AND WARRANTIES. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall remain accurate, complete and
not misleading at all times during the term of this Agreement, except for
changes in the nature of Parent's or Borrower's or its Subsidiaries' business
or operations that would render the information in any exhibit attached hereto
either inaccurate, incomplete or misleading, so long as Lender has consented to
such changes or such changes are expressly permitted by this Agreement.
7.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Parent, Borrower and its Subsidiaries contained in this Agreement
or any of the other Loan Documents shall survive the execution, delivery and
acceptance thereof by Lender and the parties thereto and the closing of the
transactions described therein or related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1 AFFIRMATIVE COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
8.1.1 VISITS AND INSPECTIONS. Permit representatives of Lender, from
time to time, as often as may be reasonably requested, but only during normal
business hours, to visit and inspect the Properties of Parent, Borrower and
each of its Subsidiaries, inspect, audit and make extracts from its books and
records, and discuss with its officers, its employees and its independent
accountants, Parent's, Borrower's and each of its Subsidiaries' business,
assets, liabilities, financial condition, business prospects and results of
operations.
8.1.2 NOTICES. Promptly notify Lender in writing of the occurrence of
any event or the existence of any fact which renders any representation or
warranty in this Agreement or any of the other Loan Documents inaccurate,
incomplete or misleading.
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8.1.3 FINANCIAL STATEMENTS. Keep, and cause each Subsidiary to keep,
adequate records and books of account with respect to its business activities
in which proper entries are made in accordance with GAAP reflecting all its
financial transactions; and cause to be prepared and furnished to Lender the
following (all to be prepared in accordance with GAAP applied on a consistent
basis, unless Borrower's certified public accountants concur in any change
therein and such change is disclosed to Lender and is consistent with GAAP):
(i) not later than 90 days after the close of each fiscal year
of Borrower, unqualified audited financial statements of Borrower and
its Subsidiaries as of the end of such year, on a Consolidated and
consolidating basis, certified by a firm of independent certified
public accountants of recognized standing selected by Borrower but
acceptable to Lender (except for a qualification for a change in
accounting principles with which the accountant concurs);
(ii) not later than 30 days after the end of each month
hereafter, including the last month of Borrower's fiscal year,
unaudited interim financial statements of Borrower and its Subsidiaries
as of the end of such month and of the portion of Parent's and
Borrower's financial year then elapsed, on a Consolidated and
consolidating basis, certified by the principal financial officer of
Borrower as prepared in accordance with GAAP and fairly presenting the
Consolidated financial position and results of operations of Borrower
and its Subsidiaries for such month and period subject only to changes
from audit and year-end adjustments and except that such statements
need not contain notes;
(iii) promptly after the sending or filing thereof, as the case
may be, copies of any proxy statements, financial statements or reports
which Parent has made available to its shareholders and copies of any
regular, periodic and special reports or registration statements which
Parent files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or any
national securities exchange;
(iv) promptly after the filing thereof, copies of any annual
report to be filed with ERISA in connection with each Plan; and
(v) such other data and information (financial and otherwise)
as Lender, from time to time, may reasonably request, bearing upon or
related to the Collateral or Parent's or Borrower's and each of its
Subsidiaries' financial condition or results of operations.
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Concurrently with the delivery of the financial statements described in
clause (i) of this subsection 8.1.3, Borrower shall forward to Lender a copy of
the accountants' letter to Parent's and Borrower's management that is prepared
in connection with such financial statements. Concurrently with the delivery of
the financial statements described in clauses (i) and (ii) of this subsection
8.1.3, or more frequently if requested by Lender, Borrower shall cause to be
prepared and furnished to Lender a Compliance Certificate in the form of
EXHIBIT N hereto executed by the Chief Financial Officer of Borrower.
8.1.4 LANDLORD AND STORAGE AGREEMENTS. Provide Lender with copies of
all agreements between Borrower or any of its Subsidiaries and any landlord or
warehouseman which owns any premises at which any Inventory may, from time to
time, be kept.
8.1.5 GUARANTOR FINANCIAL STATEMENTS. Deliver or cause to be
delivered to Lender financial statements for each Guarantor in form and
substance satisfactory to Lender at such intervals and covering such time
periods as Lender may request.
8.1.6 PROJECTIONS. No later than 30 days prior to the end of each
fiscal year of Borrower, deliver to Lender Projections of Borrower for the
forthcoming 3 years, year by year, and for the forthcoming fiscal year, month
by month.
8.2 NEGATIVE COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless Lender has first consented thereto in writing, it will
not:
8.2.1 MERGERS; CONSOLIDATIONS; ACQUISITIONS. Merge or consolidate, or
permit any Subsidiary of Borrower to merge or consolidate, with any Person; nor
acquire, nor permit any of its Subsidiaries to acquire, all or any substantial
part of the Properties of any Person.
8.2.2 LOANS. Make, or permit any Subsidiary of Borrower to make, any
loans or other advances of money (other than for salary, travel advances,
advances against commissions and other similar advances in the ordinary course
of business) to any Person except as set forth on EXHIBIT O hereto.
8.2.3 TOTAL INDEBTEDNESS. Create, incur, assume, or suffer to exist, or
permit any Subsidiary of Borrower to create, incur or suffer to exist, any
Indebtedness, except:
(i) Obligations owing to Lender;
(ii) Subordinated Debt existing on the date of this Agreement;
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(iii) Indebtedness of any Subsidiary of Borrower to Borrower;
(iv) accounts payable to trade creditors and current
operating expenses (other than for Money Borrowed) which are not aged
more than 120 days from billing date or more than 60 days from the due
date, in each case incurred in the ordinary course of business and paid
within such time period, unless the same are being actively contested
in good faith and by appropriate and lawful proceedings; and Parent,
Borrower or such Subsidiary shall have set aside such reserves, if any,
with respect thereto as are required by GAAP and deemed adequate by
Parent, Borrower or such Subsidiary and its independent accountants;
(v) Obligations to pay Rentals permitted by subsection
8.2.13;
(vi) Permitted Purchase Money Indebtedness (including
Capitalized Lease Obligations);
(vii) Indebtedness existing as of the Closing Date set forth
on Exhibit V_ PROVIDED, THAT, Borrower shall not, directly or
indirectly, (A) amend, modify, alter or change the terms of such
Indebtedness or any agreement, document or instrument related thereto
as in effect on the date hereof, or (B) redeem, retire, defease,
purchase or otherwise acquire such Indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, and Borrower
shall furnish to Lender all notices or demands in connection with such
Indebtedness either received by Borrower or on its behalf, promptly
after the receipt thereof, or sent by Borrower or on its behalf,
concurrently with the sending thereof, as the case may be; and
(viii) Such additional Indebtedness as Lender may hereafter
approve in writing.
8.2.4 AFFILIATE TRANSACTIONS. Enter into, or be a party to, or permit
any Subsidiary of Borrower to enter into or be a party to, any transaction with
any Affiliate of Parent or Borrower or stockholder, except in the ordinary
course of and pursuant to the reasonable requirements of Borrower's or such
Subsidiary's business and upon fair and reasonable terms which are fully
disclosed to Lender and are no less favorable to Borrower than would obtain in
a comparable arm's length transaction with a Person not an Affiliate or
stockholder of Parent, Borrower or such Subsidiary.
8.2.5 LIMITATION ON LIENS. Create or suffer to exist, or permit any
Subsidiary of Borrower to create or suffer to exist, any Lien upon any of its
Property, income or profits, whether now owned or hereafter acquired, except:
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(i) Liens at any time granted in favor of Lender;
(ii) Liens for taxes (excluding any Lien imposed pursuant to
any of the provisions of ERISA) not yet due, or being contested in the
manner described in subsection 7.1.14 hereto, but only if in Lender's
judgment such Lien does not adversely affect Lender's rights or the
priority of Lender's Lien in the Collateral;
(iii) Liens arising in the ordinary course of Borrower's
business by operation of law or regulation, but only if payment in
respect of any such Lien is not at the time required and such Liens do
not, in the aggregate, materially detract from the value of the
Property of Borrower or materially impair the use thereof in the
operation of Borrower's business;
(iv) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(v) Liens securing Indebtedness of one of Borrower's
Subsidiaries to Borrower or another such Subsidiary;
(vi) such other Liens as appear on EXHIBIT P hereto; and
(vii) such other Liens as Lender may hereafter approve in
writing.
8.2.6 Subordinated Debt. Make, or permit any Subsidiary of Borrower to
make, any payment of any part or all of any Subordinated Debt or take any other
action or omit to take any other action in respect of any Subordinated Debt,
except in accordance with the Subordination Agreement relative thereto.
8.2.7 DISTRIBUTIONS. Declare or make, or permit any Subsidiary of
Borrower to declare or make, any Distributions except as set forth on EXHIBIT Q
hereto.
8.2.8 CAPITAL EXPENDITURES. Make Capital Expenditures (including,
without limitation, by way of capitalized leases) which, in the aggregate, as
to Parent, Borrower and its Subsidiaries, exceed the amounts set forth below
for the period corresponding thereto:
PERIOD AMOUNT
January 1, 1995 through December 31, 1995 $5,000,000
January 1, 1996 through December 31, 1996 $4,650,000
January 1, 1997 through December 31, 1997 $4,900,000
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8.2.9 DISPOSITION OF ASSETS. Except as set forth on Exhibit
X_, sell, lease or otherwise dispose of any of, or permit any Subsidiary of
Borrower to sell, lease or otherwise dispose any of, its Properties, including
any disposition of Property as part of a sale and leaseback transaction, to or
in favor of any Person, except (i) sales of Inventory in the ordinary course of
business for so long as no Event of Default exists hereunder, (ii) a transfer
of Property to Borrower by Parent or a Subsidiary of Borrower or (iii)
dispositions expressly authorized by this Agreement.
8.2.10 STOCK OF SUBSIDIARIES. Permit any of its Subsidiaries
to issue any additional shares of its capital stock except director's
qualifying shares.
8.2.11 BILL-AND-HOLD SALES, ETC. Make a sale to any customer
on a bill-and-hold, guaranteed sale, sale and return, sale on approval or
consignment basis, or any sale on a repurchase or return basis, except for
consignment sales made in the ordinary course of the Borrower's business, and
in a manner consistent with the Borrower's past practices, set forth on Exhibit
W. Borrower shall notify Lender of any new consignment accounts by immediately
submitting to Lender a revised Exhibit W when any new consignment account is
opened.
8.2.12 RESTRICTED INVESTMENT. Make or have, or permit any
Subsidiary of Borrower to make or have, any Restricted Investment.
8.2.13 LEASES. Become, or permit any of its Subsidiaries to
become, a lessee under any operating lease (other than a lease under which
Borrower or any of its Subsidiaries is lessor) of Property if the aggregate
Rentals payable during any current or future period of 12 consecutive months
under the lease in question and all other leases under which Borrower or any of
its Subsidiaries is then lessee would exceed $750,000. The term "Rentals"
means, as of the date of determination, all payments which the lessee is
required to make by the terms of any lease.
8.2.14 TAX CONSOLIDATION. File or consent to the filing of any
consolidated income tax return with any Person other than Parent and a
Subsidiary of Borrower.
8.2.15 GUARANTIES. Guarantee, assume, endorse or otherwise, in
any way, become directly or contingently liable with respect to the
Indebtedness of any Person except by endorsement of instruments or items of
payment for deposit or collection.
8.3 SPECIFIC FINANCIAL COVENANTS. During the term of this
Agreement, and thereafter for so long as there are any Obligations to Lender,
Borrower covenants that, unless otherwise consented to by Lender in writing, it
shall:
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8.3.1 MINIMUM WORKING CAPITAL. Maintain at all time Consolidated
Working Capital of not less than the amount shown for the period corresponding
thereto:
Period Amount
------ ------
Closing Date $250,000
December 1, 1994 through December 31, 1994 ($500,000)
January 1 through March 31 of each year ($3,000,000)
Apri1 through June 30 of each year $0
July 1 through September 30 of each year $2,000,000
October 1 through December 31 of each year $1,000,000
8.3.2 MINIMUM ADJUSTED TANGIBLE NET WORTH. Maintain at all times a
Consolidated Adjusted Tangible Net worth of not less than the amount shown
below for the period corresponding thereto:
Period Amount
------ ------
Closing Date through June 29, 1995 $15,000,000
June 30, 1995 through September 29, 1995 $16,500,000
September 30, 1995 through June 29, 1996 $17,500,000
June 30, 1996 through September 29, 1996 $19,000,000
September 30, 1996 through June 29, 1997 $20,000,000
June 30, 1997 through September 29, 1997 $21,500,000
September 30, 1997 through June 29, 1998 $22,500 000
8.3.3 CASH FLOW. Achieve Cash Flow for each fiscal quarter of not
less than the amount show below for the period corresponding thereto:
Period Amount
------ ------
January 1, 1995 through March 31, 1995 ($2,500,000)
January 1, 1995 through June 30, 1995 ($500,000)
January 1, 1995 through September 30, 1995 $1,000,000
January 1, 1995 through December 31, 1995 $750,000
Each fiscal quarter end thereafter,
retrospectively, for the preceding four
fiscal quarters $750,000
SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Lender under
the other sections of this Agreement, Lender shall not be required to make any
Loan under this Agreement unless and until each of the following conditions has
been and continues to be satisfied:
9.1 DOCUMENTATION. Lender shall have received, in form and substance
satisfactory to Lender and its counsel, a duly
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executed copy of this Agreement and the other Loan Documents, together with
such additional documents, instruments and certificates as Lender and its
counsel shall require in connection therewith from time to time, all in form and
substance satisfactory to Lender and its counsel.
9.2 NO DEFAULT. No Default or Event of Default shall exist.
9.3 OTHER LOAN DOCUMENTS. Each of the conditions precedent set
forth in the other Loan Documents shall have been satisfied.
9.4 AVAILABILITY. Lender shall have determined that immediately
after Lender has made the initial Loans and issued the initial Letters of
Credit and LC Guaranties contemplated hereby, and paid all closing costs
incurred in connection with the transactions contemplated hereby, Availability
shall not be less than $2,000,000.
9.5 NO LITIGATION. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain
or prohibit, or to obtain damages in respect of, or which is related to or
arises out of this Agreement or the consummation of the transactions
contemplated hereby.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 EVENTS OF DEFAULT. The occurrence of one or more of the
following events shall constitute an "Event of Default":
10.1.1 PAYMENT OF NOTES. Borrower shall fail to pay any
installment of principal, interest or premium, if any, owing on the Term Notes.
10.1.2 PAYMENT OF OTHER OBLIGATIONS. Borrower shall fail to pay
any of the Obligations that are not evidenced by the Term Notes on the due date
thereof (whether due at stated maturity, on demand, upon acceleration or
otherwise).
10.1.3 MISREPRESENTATIONS. Any representation, warranty or other
statement made or furnished to Lender by or on behalf of Borrower, any
Subsidiary of Borrower or Guarantor in this Agreement, any of the other Loan
Documents or any instrument, certificate or financial statement furnished in
compliance with or in reference thereto proves to have been false or misleading
in any material respect when made or furnished or when reaffirmed pursuant to
Section 7.2 hereof.
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10.1.4 BREACH OF SPECIFIC COVENANTS. Borrower shall fail or
neglect to perform, keep or observe any covenant contained in Sections 5.2,
5.3, 6.1, 6.2, 6.3, 6.4, 8.1.1, 8.1.3, 8.2 or 8.3 hereof on the date that
Borrower is required to perform, keep or observe such covenant.
10.1.5 BREACH OF OTHER COVENANTS. Borrower shall fail or
neglect to perform, keep or observe any covenant contained in this Agreement
(other than a covenant which is dealt with specifically elsewhere in Section
10.1 hereof) and the breach of such other covenant is not cured to Lender's
satisfaction within 20 days after the sooner to occur of Borrower's receipt of
notice of such breach from Lender or the date on which such failure or neglect
first becomes known to any officer of Borrower.
10.1.6 DEFAULT UNDER SECURITY DOCUMENTS/OTHER AGREEMENTS. Any
event of default shall occur under, or Borrower shall default in the
performance or observance of any term, covenant, condition or agreement
contained in, any of the Security Documents; or the Other Agreements; and such
default shall continue beyond any applicable grace period.
10.1.7 OTHER DEFAULTS. There shall occur any default or event
of default on the part of Borrower under any agreement, document or instrument
to which Borrower is a party or by which Borrower or any of its Property is
bound, creating or relating to any Indebtedness (other than the Obligations) if
the payment or maturity of such Indebtedness is accelerated in consequence of
such event of default or demand for payment of such Indebtedness is made.
10.1.8 UNINSURED LOSSES. Any material loss, theft, damage or
destruction of any of the Collateral not fully covered (subject to such
deductibles as Lender shall have permitted) by insurance.
10.1.9 ADVERSE CHANGES. There shall occur any material adverse
change in the financial condition or business prospects of Borrower or Parent,
Borrower and its Subsidiaries, taken as a whole.
10.1.10 INSOLVENCY AND RELATED PROCEEDINGS. (I) Borrower or
Borrower and the Guarantors taken as a whole shall cease to be Solvent or (ii)
Borrower or any Guarantor shall suffer the appointment of a receiver, trustee,
custodian or similar fiduciary, or shall make an assignment for the benefit of
creditors, or any petition for an order for relief shall be filed by or against
Borrower or any Guarantor under the Bankruptcy Code (if against Borrower or any
Guarantor, the continuation of such proceeding for more than 30 days), or
Borrower or any Guarantor shall make any offer of settlement, extension or
composition to their respective unsecured creditors generally.
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10.1.11 BUSINESS DISRUPTION; CONDEMNATION. There shall occur a
cessation of a substantial part of the business of Borrower or Parent, Borrower
and its Subsidiaries, taken as a whole, for a period which significantly
affects Borrower's or Parent, Borrower and its Subsidiaries' capacity to
continue its or their business on a profitable basis; or Borrower or Parent,
Borrower and its Subsidiaries shall suffer the loss or revocation of any
license or permit now held or hereafter acquired by such entities which is
necessary to the continued or lawful operation of its or their business; or
Borrower or Parent, Borrower and its Subsidiaries, taken as a whole, shall be
enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its business
affairs; or any material lease or agreement pursuant to which Borrower or
Parent, Borrower and its Subsidiaries, taken as a whole, leases, uses or
occupies any Property shall be canceled or terminated prior to the expiration
of its stated term; or any part of the Collateral shall be taken through
condemnation or the value of such Property shall be impaired through
condemnation.
10.1.12 CHANGE OF OWNERSHIP. Parent shall cease to own and
control, beneficially and of record, all of the issued and outstanding capital
stock of Borrower.
10.1.13 ERISA. A Reportable Event shall occur which Lender, in
its sole discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for
any Plan, or if any Plan shall be terminated or any such trustee shall be
requested or appointed, or if Borrower, any Subsidiary of Borrower or any
Guarantor is in "default" (as defined in Section 4219(c)(5) of ERISA) with
respect to payments to a Multiemployer Plan resulting from Borrower's, such
Subsidiary's or such Guarantor's complete or partial withdrawal from such Plan.
10.1.14 CHALLENGE TO AGREEMENT. Borrower, any Subsidiary of
Borrower or any Guarantor, or any Affiliate of any of them, shall challenge or
contest in any action, suit or proceeding the validity or enforceability of
this Agreement, or any of the other Loan Documents, the legality or
enforceability of any of the Obligations or the perfection or priority of any
Lien granted to Lender.
10.1.15 REPUDIATION OF OR DEFAULT UNDER GUARANTY AGREEMENT. Any
Guarantor shall revoke or attempt to revoke the Guaranty Agreement signed by
such Guarantor, or shall repudiate such Guarantor's liability thereunder or
shall be in default under the terms thereof.
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10.1.16 CRIMINAL FORFEITURE. Borrower, any Subsidiary of
Borrower or any Guarantor shall be criminally indicted or convicted under any
law that could lead to a forfeiture of any Property of Borrower, any Subsidiary
of Borrower or any Guarantor.
10.1.17 JUDGMENTS. Any money judgment, writ of attachment or
similar process is filed against Borrower, any Subsidiary of Borrower or any
Guarantor, or any of their respective Property, and is not paid or bonded, in
full, or dismissed within 10 days of such filing.
10.2 ACCELERATION OF THE OBLIGATIONS. Without in any way limiting
the right of Lender to demand payment of any portion of the Obligations payable
on demand in accordance with Section 3.2 hereof, upon or at any time after the
occurrence of an Event of Default, all or any portion of the Obligations shall,
at the option of Lender and without presentment, demand protest or further
notice by Lender, become at once due and payable and Borrower shall forthwith
pay to Lender, the full amount of such Obligations, PROVIDED, that upon the
occurrence of an Event of Default specified in subsection 10.1.10 hereof, all
of the Obligations shall become automatically due and payable without
declaration, notice or demand by Lender.
10.3 OTHER REMEDIES. Upon and after the occurrence of an Event of
Default, Lender shall have and may exercise from time to time the following
rights and remedies:
10.3.1 All of the rights and remedies of a secured party under
the Code or under other applicable law, and all other legal and equitable
rights to which Lender may be entitled, all of which rights and remedies shall
be cumulative and shall be in addition to any other rights or remedies
contained in this Agreement or any of the other Loan Documents, and none of
which shall be exclusive.
10.3.2 The right to take immediate possession of the
Collateral, and to (i) require Borrower to assemble the Collateral, at
Borrower's expense, and make it available to Lender at a place designated by
Lender which is reasonably convenient to both parties, and (ii) enter any
premises where any of the Collateral shall be located and to keep and store the
Collateral on said premises until sold (and if said premises be the Property of
Borrower, Borrower agrees not to charge Lender for storage thereof).
10.3.3 The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as may
be required by law, in lots or in bulk, for cash or on credit, all as Lender,
in its sole discretion, may deem advisable. Borrower agrees that 10 days
written notice to Borrower of any public or private sale or
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other disposition of Collateral shall be reasonable notice thereof, and such
sale shall be at such locations as Lender may designate in said notice. Lender
shall have the right to conduct such sales on Borrower's premises without
charge therefor and such sales may be adjourned from time to time in accordance
with applicable law. Lender shall have the right to sell, lease or otherwise
dispose of the Collateral, or any part thereof, for cash, credit or any
combination thereof, and Lender may purchase all or any part of the Collateral
at public or, if permitted by law, private sale and, in lieu of actual payment
of such purchase price, may set off the amount of such price against the
Obligations. The proceeds realized from the sale of any Collateral may be
applied, after allowing 2 Business Days for collection, first to the costs,
expenses and attorneys' fees incurred by Lender in collecting the Obligations,
in enforcing the rights of Lender under the Loan Documents and in collecting,
retaking, completing, protecting, removing, storing, advertising for sale,
selling and delivering any Collateral, second to the interest due upon any of
the Obligations; and third, to the principal of the Obligations. If any
deficiency shall arise, Borrower and each Guarantor shall remain jointly and
severally liable to Lender therefor.
10.3.4 Lender is hereby granted a license or other right to
use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, tradenemes, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral and Borrower's rights under all licenses
and all franchise agreements shall inure to Lender's benefit.
10.3.5 Lender may, at its option, require Borrower to deposit
with Lender funds equal to the LC Amount and, if Borrower fails to promptly
make such deposit, Lender may advance such amount as a Revolving Credit Loan
(whether or not an Overadvance is created thereby). Any such deposit or advance
shall be held by Lender as a reserve to fund future payments on such LC
Guaranties and future drawings against such Letters of Credit. At such time as
all LC Guaranties have been paid or terminated and all Letters of Credit have
been drawn upon or expired, any amounts remaining in such reserve shall be
applied against any outstanding Obligations, or, if all Obligations have been
indefeasibly paid in full, returned to Borrower.
10.4 REMEDIES CUMULATIVE; NO WAIVER. All covenants,
conditions, provisions, warranties, guaranties, indemnities, and other
undertakings of Borrower contained in this Agreement and the other Loan
Documents, or in any document referred to herein or contained in any agreement
supplementary hereto or in any schedule or in any Guaranty Agreement given to
Lender or contained in any other agreement between Lender and Borrower,
heretofore, concurrently, or hereafter entered into, shall be
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deemed cumulative to and not in derogation or substitution of any of the terms,
covenants, conditions, or agreements of Borrower herein contained. The failure
or delay of Lender to require strict performance by Borrower of any provision
of this Agreement or to exercise or enforce any rights, Liens, powers, or
remedies hereunder or under any of the aforesaid agreements or other documents
or security or Collateral shall not operate as a waiver of such performance,
Liens, rights, powers and remedies, but all such requirements, Liens, rights,
powers, and remedies shall continue in full force and effect until all Loans
and all other Obligations owing or to become owing from Borrower to Lender
shall have been fully satisfied. None of the undertakings, agreements,
warranties, covenants and representations of Borrower contained in this
Agreement or any of the other Loan Documents and no Event of Default by
Borrower under this Agreement or any other Loan Documents shall be deemed to
have been suspended or waived by Lender, unless such suspension or waiver is by
an instrument in writing specifying such suspension or waiver and is signed by
a duly authorized representative of Lender and directed to Borrower.
SECTION 11. MISCELLANEOUS
11.1 POWER OF ATTORNEY. Borrower hereby irrevocably designates,
makes, constitutes and appoints Lender (and all Persons designated by Lender)
as Borrower's true and lawful attorney (and agent-in-fact) and Lender, or
Lender's agent, may, without notice to Borrower and in either Borrower's or
Lender's name, but at the cost and expense of Borrower:
11.1.1 At such time or times upon or after the occurrence of a
Default or an Event of Default as Lender or said agent, in its sole discretion,
may determine, endorse Borrower's name on any checks, notes, acceptances,
drafts, money orders or any other evidence of payment or proceeds of the
Collateral which come into the possession of Lender or under Lender's control.
11.1.2 At such time or times upon or after the occurrence of
an Event of Default as Lender or its agent in its sole discretion may
determine: (i) demand payment of the Accounts from the Account Debtors, enforce
payment of the Accounts by legal proceedings or otherwise, and generally
exercise all of Borrower's rights and remedies with respect to the collection
of the Accounts; (ii) settle, adjust, compromise, discharge or release any of
the Accounts or other Collateral or any legal proceedings brought to collect
any of the Accounts or other Collateral; (iii) sell or assign any of the
Accounts and other Collateral upon such terms, for such amounts and at such
time or times as Lender deems advisable; (iv) take control, in any manner, of
any item of payment or proceeds relating to any Collateral; (v) prepare, file
and sign Borrower's name to a proof of claim in bankruptcy or similar document
against any Account Debtor or to any notice of lien, assignment or satisfaction
of
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lien or similar document in connection with any of the Collateral; (vi)
receive, open and dispose of all mail addressed to Borrower and to notify
postal authorities to change the address for delivery thereof to such address
as Lender may designate; (vii) endorse the name of Borrower upon any of the
items of payment or proceeds relating to any Collateral and deposit the same to
the account of Lender on account of the Obligations; (viii) endorse the name of
Borrower upon any chattel paper, document, instrument, invoice, freight bill,
bill of lading or similar document or agreement relating to the Accounts,
Inventory and any other Collateral; (ix) use Borrower's stationery and sign the
name of Borrower to verifications of the Accounts and notices thereof to
Account Debtors; (x) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Accounts, Inventory, Equipment and any other Collateral; (xi) make and adjust
claims under policies of insurance; and (xii) do all other acts and things
necessary, in Lender's determination, to fulfill Borrower's obligations under
this Agreement.
11.2 INDEMNITY. Borrower hereby agrees to indemnify Lender and hold
Lender harmless from and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by Lender (including reasonable attorneys
fees and legal expenses) as the result of Borrower's failure to observe,
perform or discharge Borrower's duties hereunder. In addition, Borrower shall
defend Lender against and save it harmless from all claims of any Person with
respect to the Collateral. Without limiting the generality of the foregoing,
these indemnities shall extend to any claims asserted against Lender by any
Person under any Environmental Laws or similar laws by reason of Borrower's or
any other Person's failure to comply with laws applicable to solid or hazardous
waste materials or other toxic substances. Notwithstanding any contrary
provision in this Agreement, the obligation of Borrower under this Section 11.2
shall survive the payment in full of the Obligations and the termination of
this Agreement.
11.3 MODIFICATION OF AGREEMENT; SALE OF INTEREST. This Agreement may
not be modified, altered or amended, except by an agreement in writing signed
by Borrower and Lender. Borrower may not sell, assign or transfer any interest
in this Agreement, any of the other Loan Documents, or any of the Obligations,
or any portion thereof, including, without limitation, Borrower's rights,
title, interests, remedies, powers, and duties hereunder or thereunder.
Borrower hereby consents to Lender's participation, sale, assignment, transfer
or other disposition, at any time or times hereafter, of this Agreement and any
of the other Loan Documents, or of any portion hereof or thereof, including,
without limitation, Lender's rights, title, interests, remedies powers, and
duties hereunder or thereunder. Lender , will give Borrower prior notice of any
such participation, sale, assignment, transfer or other disposition. In the
case of an
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assignment, the assignee shall have, to the extent of such assignment, the same
rights, benefits and obligations as it would if it were "Lender" hereunder and
Lender shall be relieved of all obligations hereunder upon any such
assignments. Borrower agrees that it will use its best efforts to assist and
cooperate with Lender in any manner reasonably requested by Lender to effect
the sale of participations in or assignments of any of the Loan Documents or
any portion thereof or interest therein, including, without limitation,
assisting in the preparation of appropriate disclosure documents. Borrower
further agrees that Lender may disclose credit information regarding Borrower
and its Subsidiaries to any potential participant or assignee.
11.4 SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions
of this Agreement.
11.5 SUCCESSORS AND ASSIGNS. This Agreement, the Other Agreements
and the Security Documents shall be binding upon and inure to the benefit of
the successors and assigns of Borrower and Lender permitted under Section 11.3
hereof.
11.6 CUMULATIVE EFFECT; CONFLICT OF TERMS. The provisions of the
Other Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.2
hereof and except as otherwise provided in any of the other Loan Documents by
specific reference to the applicable provision of this Agreement, if any
provision contained in this Agreement is in direct conflict with, or
inconsistent with, any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.
11.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which counterparts taken together shall constitute
but one and the same instrument.
11.8 NOTICE. Except as otherwise provided herein, all notices,
requests and demands to or upon a party hereto, to be effective, shall be in
writing and shall be sent by certified or registered mail, return receipt
requested, by personal delivery against receipt, by overnight courier or by
facsimile and, unless otherwise expressly provided herein, shall be deemed to
have been validly served, given or delivered immediately when delivered
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against receipt, one Business Day after deposit in the mail, postage paid,
or with an overnight courier or, in the case of facsimile notice, when sent,
addressed as follows:
If to Lender: Barclays Business Credit, Inc.
200 Glastonbury Boulevard
Glastonbury, CT 06033
Attention: Jeffrey P. Hoffman
Facsimile No.: (203) 657-7759
With a copy to: Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, MA 02111
Attention: Jeffery L. Keffer
Facsimile No.: (617) 439-3278
If to Borrower: Bird Incorporated
980 Washington Street
Dedham, MA 02026
Attention: Joseph M. Grigelevich, Jr.
Treasurer
Facsimile No.: (617) 461-1618
With a copy to: Mintz, Levin, Cohn, Ferris,
Glovsky & Popeo
One Financial Center
Boston, MA 02111
Attention: Whitton E. Norris, III
Facsimile No.: (617) 542-2241
or to such other address as each party may designate for itself by notice given
in accordance with this Section 11.8; PROVIDED, HOWEVER, that any notice,
request or demand to or upon Lender pursuant to subsection 3.1.1 or 4.2.2
hereof shall not be effective until received by Lender.
11.9 LENDER'S CONSENT. Whenever Lender's consent is required to be
obtained under this Agreement, any of the Other Agreements or any of the
Security Documents as a condition to any action, inaction, condition or event,
Lender shall be authorized to give or withhold such consent in its reasonable
discretion (unless this Agreement provides otherwise) and to condition its
consent upon the giving of additional collateral security for the Obligations,
the payment of money or any other matter.
11.10 CREDIT INQUIRIES. Borrower hereby authorizes and permits Lender
to respond to usual and customary credit inquiries from third parties
concerning Borrower or any of its Subsidiaries.
11.11 TIME OF ESSENCE. Time is of the essence of this Agreement, the
Other Agreements and the Security Documents.
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11.12 ENTIRE AGREEMENT. This Agreement and the other Loan Documents,
together with all other instruments, agreements and certificates executed by
the parties in connection therewith or with reference thereto embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral or written.
11.13 INTERPRETATION. No provision of this Agreement or any of the
other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.
11.14 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
BOSTON, MASSACHUSETTS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS: PROVIDED,
HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION
OTHER THAN MASSACHUSETTS, THE LAWS OF SUCH JURISDICTION SHALL GOVERN THE
METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF LENDER'S LIEN UPON SUCH
COLLATERAL AND THE ENFORCEMENT OF LENDER'S OTHER REMEDIES IN RESPECT OF SUCH
COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM
OR INCONSISTENT WITH THE LAWS OF MASSACHUSETTS. AS PART OF THE CONSIDERATION
FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR
PRINCIPAL PLACE OF BUSINESS OF BORROWER OR LENDER, BORROWER HEREBY CONSENTS AND
AGREES THAT THE SUPERIOR COURT OF SUFFOLK COUNTY, MASSACHUSETTS, OR, AT
LENDER'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
MASSACHUSETTS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT OR
TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. BORROWER EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH
BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT
THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE
DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR 3
DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN
THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF LENDER TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE
ENFORCEMENT BY LENDER OF ANY JUDGMENT OR
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ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS
AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
11.15 WAIVERS BY BORROWER. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY
JURY (WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN
DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL: (ii) PRESENTMENT, DEMAND AND
PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY,
RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL
PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS CHATTEL PAPER AND
GUARANTIES AT ANY TIME HELD BY LENDER ON WHICH BORROWER MAY IN ANY WAY BE
LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER LENDER MAY DO IN THIS REGARD;
(iii) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY
BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER
TO EXERCISE ANY OF LENDER'S REMEDIES; (iv) THE BENEFIT OF ALL VALUATION,
APPRAISEMENT AND EXEMPTION LAWS; AND (v) NOTICE OF ACCEPTANCE HEREOF. BORROWER
ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER'S
ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING
WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER WARRANTS AND REPRESENTS
THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS
KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS
A WRITTEN CONSENT TO A TRIAL BY THE COURT.
11.16 PREJUDGMENT REMEDIES. BORROWER HEREBY WAIVES SUCH RIGHTS AS IT
MAY HAVE TO NOTICE AND/OR HEARING UNDER ANY APPLICABLE FEDERAL OR STATE LAWS
INCLUDING, WITHOUT LIMITATION, CONNECTICUT GENERAL STATUTES SECTIONS 52-278A,
ET-SEQ., AS AMENDED, PERTAINING TO THE EXERCISE BY LENDER OF SUCH RIGHTS AS THE
LENDER MAY HAVE INCLUDING, BUT NOT LIMITED TO, THE RIGHT TO SEEK PREJUDGMENT
REMEDIES AND/OR DEPRIVE BORROWER OF OR AFFECT THE USE OF OR POSSESSION OR
ENJOYMENT OF BORROWER'S PROPERTY PRIOR TO THE RENDITION OF A FINAL JUDGMENT
AGAINST THE BORROWER. THE BORROWER FURTHER WAIVES ANY RIGHT IT MAY HAVE TO
REQUIRE LENDER TO PROVIDE A BOND OR OTHER SECURITY AS A PRECONDITION TO OR IN
CONNECTION WITH ANY PREJUDGMENT REMEDY SOUGHT BY LENDER.
IN WITNESS WHEREOF, this Agreement has been duly executed in Boston,
Massachusetts, on the day and year specified at the beginning of this
Agreement.
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ATTEST: BIRD INCORPORATED
("Borrower")
By
------------------------------ --------------------------------
Clerk Title
[CORPORATE SEAL] -------------------------
Accepted in , :
------- -----------
BARCLAYS BUSINESS CREDIT, INC.
("Lender")
By
--------------------------------
Title
-------------------------
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APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of November 30,
1994, by and between Barclays Business Credit, Inc. and Bird Incorporated, the
following terms shall have the following meanings (terms defined in the
singular to have the same meaning when used in the plural and vice versa):
ACCOUNT DEBTOR - any Person who is or may become obligated under or on
account of an Account.
ACCOUNTS - all accounts, contract rights, chattel paper, instruments
and documents, whether now owned or hereafter created or acquired by Borrower
or in which Borrower now has or hereafter acquired any interest.
ADJUSTED NET EARNINGS FROM OPERATIONS - with respect to any fiscal
period, means the net earnings (or loss) after provision for income taxes for
such fiscal period of Borrower, as reflected on the financial statement of
Borrower supplied to Lender pursuant to subsection 8.1.3 of the Agreement, but
excluding:
(i) any gain or loss arising from the sale of capital assets;
(ii) any gain arising from any write-up of assets;
(iii) earnings of any Subsidiary of Borrower accrued prior to the
date it became a Subsidiary;
(iv) earnings of any corporation, substantially all the assets
of which have been acquired in any manner by Borrower, realized by such
corporation prior to the date of such acquisition;
(v) net earnings of any business entity (other than a
Subsidiary of Borrower) in which Borrower has an ownership interest unless
such net earnings shall have actually been received by Borrower in the form
of cash distributions;
(vi) any portion of the net earnings of any Subsidiary of
Borrower which for any reason is unavailable for payment of dividends to
Borrower;
(vii) the earnings of any Person to which any assets of Borrower
shall have been sold, transferred of disposed of, or into which Borrower
shall have merged, or
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been a party to any consolidation or other form of reorganization,
prior to the date of such transaction;
(viii) any gain arising from the acquisition of any
Securities of Borrower; and
(ix) any non-cash gain or loss arising from
extraordinary or non-recurring items.
ADJUSTED TANGIBLE ASSETS - all assets except: (i) any surplus
resulting from any write-up of assets subsequent to September 30, 1994;
(ii) deferred assets, other than prepaid insurance and prepaid taxes; (iii)
patents, copyrights, trademarks, trade names, non-compete agreements,
franchises and other similar intangibles; (iv) goodwill, including any amounts,
however designated on a Consolidated balance sheet of a Person or its
Subsidiaries, representing the excess of the purchase price paid for assets or
stock over the value assigned thereto on the books of such Person; (v)
Restricted Investments; (vi) unamortized debt discount and expense; (vii)
assets located and notes and receivables due from obligors outside of the
United States of America; and (viii) Accounts, notes and other receivables due
from Affiliates or employees.
ADJUSTED TANGIBLE NET WORTH - at any date means a sum equal to:
(i) the net book value (after deducting related
depreciation, obsolescence, amortization, valuation, and other
proper reserves) at which the Adjusted Tangible Assets of a Person
would be shown on a balance sheet at such date in accordance with
GAAP, minus
-----
(ii) the amount at which such Person's liabilities (other than
capital stock and surplus) would be shown on such balance sheet in
accordance with GAAP, and including as liabilities all reserves for
contingencies and other potential liabilities.
AFFILIATE - a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, a Person; (ii) which beneficially owns or
holds 5% or more of any class of the Voting Stock of a Person; or (iii) 5% or
more of the Voting Stock (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of which is beneficially owned
or held by a Person or a Subsidiary of a Person.
AGREEMENT - the Loan and Security Agreement referred to in the first
sentence of this Appendix A, all Exhibits thereto and this Appendix A.
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APPLICABLE INVENTORY RATE - the following percentages with respect
to the respective types of Eligible Inventory:
Type of
-------
Eligible Inventory Percentage
------------------ ----------
Raw Materials 60%
Vinyl Products Finished Goods 60%
Roofing Materials Finished Goods 70%
AVAILABILITY - the amount of money which Borrower is entitled to
borrow from time to time as Revolving Credit Loans, such amount being the
difference derived when the sum of the principal amount of Revolving Credit
Loans then outstanding (including any amounts which Lender may have paid for the
account of Borrower pursuant to any of the Loan Documents and which have not
been reimbursed by Borrower) and the LC Amount is subtracted from the Borrowing
Base. If the amount outstanding is equal to or greater than the Borrowing Base,
Availability is 0.
AVERAGE LOAN BALANCE - for any month, the amount obtained by adding
the unpaid balance of the Revolving Credit Loans and Term Loans owing by
Borrower to Lender at the end of each day for each day during the month in
question and by dividing such sum by the number of days in such month.
BEGC - Bird Environmental Gulf Coast, Inc., a Texas corporation,
of which BET owns eighty percent (80%) of the capital stock, and its
successors and assigns.
BET - Bird Environmental Technology, Inc., a Delaware corporation
and Subsidiary of Borrower, and its successors and assigns.
BANK - Shawmut Bank Connecticut, N.A.
BANKRUPTCY CODE - the Bankruptcy Reform Act of 1978, as amended and
restated from time to time, and codified as in U.S.C. [SECTION] 101 et. seq.
BASE RATE - the rate of interest generally announced or quoted by
Bank from time to time as its base rate for commercial loans, whether or not
such rate is the lowest rate charged by Bank to its most preferred borrowers;
and if such base rate for commercial loans is discontinued by Bank as a
standard, a comparable reference rate designated by Bank as a substitute
therefor shall be the Base Rate.
BORROWING BASE - as at any date of determination thereof, an amount
equal to the lesser of:
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(i) $39,000,000 minus the unpaid principal
balance of the Term Loans at such date; or
(ii) an amount equal to:
(a) 85% of the net amount of Eligible
Accounts outstanding at such date;
PLUS
(b) the lesser of $10,000,000 or 70% of
the net amount of Eligible Deferred Accounts outstanding
on such date;
PLUS
(c) the lesser of (1) $10,000,000 or (2)
the Applicable Eligible Inventory Advance Rate of the value
of Eligible Inventory at such date calculated on the basis of
the lower of cost or market with the cost of raw materials and
finished goods calculated on a first-in, first-out basis.
For purposes hereof, the net amount of
Eligible Accounts at any-time shall be the face amount of
such Eligible Accounts less any and all returns, rebates,
discounts (which may, at Lender's option, be calculated on
shortest terms), credits, allowances or excise taxes of any
nature at any time issued, owing, claimed by Account Debtors,
granted, outstanding or payable in connection with such
Accounts at such time.
BUSINESS DAY - any day excluding Saturday, Sunday and any day which is
a legal holiday under the laws of the Commonwealth of Massachusetts, State of
Connecticut or the State of Illinois or is a day on which banking institutions
located in any of such states are closed. The Borrowing Base will be determined
from time to time by Lender based upon the reports and information furnished
under Sections 6.2 and 6.3 hereof.
CAPITAL EXPENDITURES - expenditures made or liabilities incurred for
the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year, including the total principal portion of Capitalized Lease Obligations.
CAPITALIZED LEASE OBLIGATION - any Indebtedness represented by
obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
CASH FLOW - for any period, means Borrower's Consolidated (i) Adjusted
Net Earnings from Operations for such period, PLUS
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(ii) depreciation and amortization expenses for such period, MINUS (iii)
Fixed Charges, MINUS (iv) non-financed Capital Expenditures, MINUS (v)
Distributions.
CLOSING DATE - the date on which all of the conditions precedent in
Section 9 of the Agreement are satisfied and the initial Loan is made or
the initial Letter of Credit or LC Guaranty is issued under the Agreement.
CODE - the Uniform Commercial Code as adopted and in force in the
Commonwealth of Massachusetts, as from time to time in effect.
COLLATERAL - all of the Property and interests in Property described
in Section 5 of the Agreement, and all other Property and interests in
Property that now or hereafter secure the payment and performance of any of the
Obligations.
CONSOLIDATED - the consolidation in accordance with GAAP of the
accounts or other items as to which such term applies.
CURRENT ASSETS - at any date means the amount at which all of the
current assets of a Person would be properly classified as current assets shown
on a balance sheet at such date in accordance with GAAP except that
amounts due from Affiliates and investments in Affiliates shall be excluded
therefrom.
CURRENT LIABILITIES - at any date means the amount at which all of the
current liabilities of a Person would be properly classified as current
liabilities on a balance sheet at such date in accordance with GAAP.
DEFAULT - an event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, become an Event
of Default.
DEFAULT RATE - as defined in subsection 2.1.2 of the Agreement.
DISTRIBUTION - in respect of any corporation means and includes: (i)
the payment of any dividends or other distributions on capital stock of the
corporation (except distributions in such stock) and (ii) the redemption or
acquisition of Securities unless made contemporaneously from the net proceeds
of the sale of Securities.
DOMINION ACCOUNT - a special account of Lender established by
Borrower pursuant to the Agreement at a bank selected by Borrower, but
acceptable to Lender in its reasonable discretion, and over which Lender shall
have sole and exclusive access and control for withdrawal purposes.
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50
ELIGIBLE ACCOUNT - an Account arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services which
Lender, in its sole credit judgment, deems to be an Eligible Account. Without
limiting the generality of the foregoing, no Account shall be an Eligible
Account- if:
(i) it arises out of a sale made by Borrower to a Subsidiary
or an Affiliate of Borrower or to a Person controlled by an Affiliate
of Borrower; or
(ii) it is unpaid for more than 60 days after the original due
date shown on the invoice; or
(iii) it is due or unpaid more than 120 days after the original
invoice date; or
(iv) 50% or more of the Accounts from the Account Debtor are
not deemed Eligible Accounts hereunder; or
(v) the total unpaid Accounts of the Account Debtor exceed 20%
of the net amount of all Eligible Accounts, to the extent of such
excess; or
(vi) any covenant, representation or warranty contained in the
Agreement with respect to such Account has been breached; or
(vii) the Account Debtor is also Borrower's creditor or supplier,
or the Account Debtor has disputed liability with respect to such Account, or
the Account Debtor has made any claim with respect to any other Account due
from such Account Debtor to Borrower, or the Account otherwise is or may become
subject to any right of setoff by the Account Debtor; or
(viii) the Account Debtor has commenced a voluntary case under
the federal bankruptcy laws, as now constituted or hereafter amended, or made
an assignment for the benefit of creditors, or a decree or order for relief has
been entered by a court having jurisdiction in the premises in respect of the
Account Debtor in an involuntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or any other petition or other application
for relief under the federal bankruptcy laws has been filed against the Account
Debtor, or if the Account Debtor has failed, suspended business, ceased to be
Solvent, or consented to or suffered a receiver, trustee, liquidator or
custodian to be appointed for it or for all or a significant portion of its
assets or affairs; or
(ix) it arises from a sale to an Account Debtor outside the
United States, unless the sale is on letter of
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credit, guaranty or acceptance terms, in each case acceptable to
Lender in its sole discretion; or
(x) it arises from a sale to the Account Debtor on a
bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval,
consignment or any other repurchase or return basis; or
(xi) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless Borrower assigns
its right to payment of such Account to Lender, in a manner
satisfactory to Lender, so as to comply with the Assignment of
Claims Act of 1940 (31 U.S.C. [SECTION]203 ET SEQ., as amended); or
(xii) the Account is subject to a Lien other than a Permitted
Lien; or
(xiii) the goods giving rise to such Account have not been
delivered to and accepted by the Account Debtor or the services giving
rise to such Account have not been performed by Borrower and accepted
by the Account Debtor or the Account otherwise does not represent a
final sale; or
(xiv) the Account is evidenced by chattel paper or an instrument
of any kind, or has been reduced to judgment; or
(xv) Borrower has made any agreement with the Account Debtor
for any deduction therefrom, except for discounts or allowances which
are made in the ordinary course of business for prompt payment and
which discounts or allowances are reflected in the calculation of the
face value of each invoice related to such Account; or
(xvi) Borrower has made an agreement with the Account Debtor to
extend the time of payment thereof except for agreements entered into
in conformity with a dating program reasonably satisfactory to Lender.
ELIGIBLE DEFERRED ACCOUNT - an Account that otherwise satisfies all
the criteria for an Eligible Account, except that the Account is subject
to Borrower's deferral program as in effect on the Closing Date and it is not
unpaid for more than 60 days after the due date established pursuant to
Borrower's deferral program to but not to exceed 120 days after the original
invoice date thereof provided, that such Account shall be deemed to be an
Eligible Account only to the extent that it is due and not subject to any
credit or guarantee from the Borrower.
ELIGIBLE INVENTORY - such Inventory of Borrower (other than packaging
materials and supplies) which Lender, in its sole
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52
credit judgment, deems to be Eligible Inventory. Without limiting the
generality of the foregoing, no Inventory shall be Eligible Inventory if:
(i) it iS not raw materials or finished goods, or
work-in-process that is, in Lender's opinion,. readily marketable in
its current form; or
(ii) it is not in good, new and saleable condition; or
(iii) it is slow-moving, obsolete or unmerchantable; or
(iv) it does not meet all standards imposed by any governmental
agency or authority; or
(v) it does not conform in all respects to the warranties and
representations set forth in the Agreement,
(vi) it is not at all times subject to Lender's duly perfected,
first priority security interest and no other Lien except a Permitted
Lien; or
(vii) it is not situated at a location in compliance with the
Agreement or is in transit.
ENVIRONMENTAL LAWS - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety and environmental matters.
EQUIPMENT - all machinery, apparatus, equipment, fittings, furniture
fixtures motor vehicles and other tangible personal Property (other than
Inventory) of every kind and description used in Borrower's operations or owned
by Borrower or in which Borrower has an interest, whether now owned or
hereafter acquired by Borrower and wherever located, and all parts, accessories
and special tools and all increases and accessions thereto and substitutions
and replacements therefor.
ERISA - a the Employee Retirement Income Security Act of 1974, as
amended, and all rules and regulations from time to time promulgated thereunder.
EVENT OF DEFAULT - as defined in Section 10.1 of the Agreement.
FIXED CHARGES - for any accounting period, the sum of: (i) scheduled
principal payments required to be made during such period in respect to
Indebtedness, plus (ii) Capital Expenditures not financed by borrowings under
any other financing arrangement otherwise permitted hereunder during any such
period, all determined in accordance with GAAP.
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53
GAAP - generally accepted account principles in the United
States of America in effect from time to time.
GENERAL INTANGIBLES - all personal property of Borrower (including
things in action) other than goods, Accounts, chattel paper, documents,
instruments and money, whether now owned or hereafter created or acquired by
Borrower.
GUARANTORS - the Parent and each Subsidiary and any other Person who
may hereafter guarantee payment or performance of the whole or any part of
the Obligations.
GUARANTY AGREEMENTS - the Continuing Guaranty Agreements which are to
be executed by each Guarantor in form and substance satisfactory to Lender.
INDEBTEDNESS - as applied to a Person means, without duplication
(i) all items which in accordance with GAAP would be included
in determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which Indebtedness
is to be determined, including, without limitation, Capitalized
Lease Obligations,
(ii) all obligations of other Persons which such Person
has guaranteed,
(iii) all reimbursement obligations in connection with letters
of credit or letter of credit guaranties issued for the account of
such Person including obligations for letters of credit which have
been drawn upon, and
(iv) in the case of Borrower (without duplication), the
Obligations.
INTEREST EXPENSE - with respect to any fiscal period, the interest
expense incurred for such period as determined in accordance with GAAP
plus the Letter of Credit and LC Guaranty fees owing for such period.
INVENTORY - all of Borrower's inventory, whether now owned or hereafter
acquired including, but not limited to, all goods intended for sale or lease by
Borrower, or for display or demonstration; all work in process; all raw
materials, including but not limited to, all sand, gravel, stone and rhyolite
granulars and other materials and supplies of every nature and description used
or which might be used in connection with the manufacture, printing, packing,
shipping, advertising, selling, leasing or furnishing of such goods or
otherwise used or consumed
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in Borrower's business; and all documents evidencing and General Intangibles
relating to any of the foregoing, whether now owned or hereafter acquired
by Borrower.
KENSINGTON - Kensington Partners, a Pennsylvania general partnership,
and its successors and assigns.
LC AMOUNT - at any time, the aggregate undrawn face amount of all
Letters of Credit and LC Guaranties then outstanding.
LC GUARANTY - any guaranty pursuant to which Lender or any Affiliate
of Lender shall guaranty the payment or performance by Borrower of its
reimbursement obligation under any letter of credit.
LETTER OF CREDIT - any letter of credit issued by Lender or any of
Lender's Affiliates for the account of Borrower.
LIEN - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on common law, statute or contract. The term "Lien" shall also include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property. For the purpose of the Agreement, Borrower shall be deemed
to be the owner of any Property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for security
purposes.
LOAN ACCOUNT - the loan account established on the books of Lender
pursuant to Section 3.6 of the Agreement.
LOAN DOCUMENTS - the Agreement, the Other Agreements and the Security
Documents.
LOANS - all loans and advances of any kind made by Lender pursuant to
the Agreement.
MONEY BORROWED - means (i) Indebtedness arising from the lending of
money by any Person to Borrower; (ii) Indebtedness, whether or not in any such
case arising from the lending by any Person of money to Borrower, (A) which is
represented bynotes payable or drafts accepted that evidence extensions of
credit, (B) which constitutes obligations evidenced by bonds, debentures, notes
or similar instruments, or (C) upon which interest charges are customarily paid
(other than accounts payable) or that was issued or assumed as full or partial
payment for Property; (iii) Indebtedness that constitutes a Capitalized Lease
Obligation; (iv) reimbursement obligations with respect to letters of credit or
guaranties of letters of credit and (v) Indebtedness of Borrower under any
guaranty of obligations that would constitute
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Indebtedness for Money Borrowed under clauses (i) through (iii) hereof, if
owed directly by Borrower.
MORTGAGES - the mortgage, security agreement and financing statements
to be executed by Borrower and Guarantors on or about the Closing Date in favor
of Lender and by which Borrower shall grant and convey to Lender, as security
for the Obligations, a Lien upon the real Property of Borrower and/or
Guarantors located at Norwood, Massachusetts, Walpole, Massachusetts;
Barnstable, Massachusetts; Franklin Massachusetts; Wrentham, Massachusetts; and
Bardstown, Kentucky.
MULTIEMPLOYER PLAN - has the meaning set forth in Section 4001(a)(3)
of ERISA.
NET WORTH - at any date of determination thereof, (i) the aggregate
amount of all assets of Borrower and its Subsidiaries on a Consolidated basis
as may be properly classified as such, less (ii) the aggregate amount of all
liabilities of Borrower [and its Subsidiaries on a Consolidated basis], all as
determined in accordance with GAAP.
OBLIGATIONS - all Loans and all other advances, debts, liabilities,
obligations, covenants and duties, together with all interest, fees and other
charges thereon, owing, arising, due or payable from Borrower to Lender of any
kind or nature, present or future, whether or not evidenced by any note,
guaranty or other instrument, whether arising under the Agreement or any of the
other Loan Documents or otherwise whether direct or indirect (including those
acquired by assignment), absolute or contingent, primary or secondary, due or
to become due, now existing or hereafter arising and however acquired.
ORIGINAL TERM - as defined in Section 4.1 of the Agreement.
OTHER AGREEMENTS - any and all agreements, instruments and documents
(other than the Agreement and the Security Documents), heretofore, now or
hereafter executed by Borrower, any Subsidiary of Borrower or any other third
party and delivered to Lender in respect of the transactions contemplated by
the Agreement.
OVERADVANCE - the amount, if any, by which the outstanding principal
amount of Revolving Credit Loans plus the LC Amount exceeds the Borrowing Base.
PARENT - Bird Corporation, a Massachusetts corporation and its
successors and assigns.
PARTICIPATING LENDER - each Person who shall be granted the right by
Lender to participate in any of the Loans described in the Agreement and who
shall have entered into a participation agreement in form and substance
satisfactory to Lender.
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PERMITTED LIENS - any Lien of a kind specified in subsection 8.2.5
of the Agreement.
PERMITTED PURCHASE MONEY INDEBTEDNESS - Purchase Money indebtedness of
Borrower incurred after the date hereof which is secured by a Purchase Money
Lien and which, when aggregated with the principal amount of all other such
Indebtedness and Capitalized Lease Obligations of Borrower at the time
outstanding, does not exceed $2,000,000 on the Closing Date and not more than
$2,000,000 incurred in each fiscal year of the Borrower thereafter. For the
purposes of this definition, the principal amount of any Purchase Money
Indebtedness consisting of capitalized leases shall be computed as a
Capitalized Lease Obligation.
PERSON - an individual, partnership, corporation, limited liability
company, joint stock company, land trust, business trust, or unincorporated
organization, or a government or agency or political subdivision thereof.
PLAN - an employee benefit plan now or hereafter maintained for
employees of Borrower that is covered by Title IV of ERISA.
PROJECTIONS - Borrower's forecasted Consolidated and consolidating (a)
balance sheets, (b) profit and loss statements, (c) cash flow statements, and
(d) capitalization statements all , prepared on a consistent basis with
Borrower's historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions.
PROPERTY - any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
PURCHASE MONEY INDEBTEDNESS - means and includes (i) Indebtedness
(other than the Obligations) for the payment of all or any part of the purchase
price of any fixed assets, (ii) any Indebtedness (other than the Obligations)
incurred at the time of or within 10 days prior to or after the acquisition of
any fixed assets for the purpose of financing all or any part of the purchase
price thereof, and (iii) any renewals, extensions or refinancings thereof, but
not any increases in the principal amounts thereof outstanding at the time.
PURCHASE MONEY LIEN - a Lien upon fixed assets which secures Purchase
Money Indebtedness, but only if such Lien shall at all times be confined solely
to the fixed assets the purchase price of which was financed through the
incurrence of the Purchase Money Indebtedness secured by such Lien.
RENTALS - as defined in subsection 8.2.12 of the Agreement.
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RENEWAL TERMS - as defined in Section 4.1 of the Agreement.
REPORTABLE EVENT - any of the events set forth in Section 4043(b) of
ERISA.
RESTRICTED INVESTMENT - any investment made in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or other
obligation or Security, or by loan, advance or capital contribution, or
otherwise, or in any Property except the following:
(i) investments in one or more Subsidiaries of Borrower to the
extent existing on the Closing Date;
(ii) Property to be used in the ordinary course of business;
(iii) Current Assets arising from the sale of goods and
services in the ordinary course of business of Borrower and its
Subsidiaries;
(iv) investments in direct obligations of the United States of
America, or any agency thereof or obligations guaranteed by the United
States of America, provided that such obligations mature within one
year from the date of acquisition thereof;
(v) investments in certificates of deposit maturing within one
year from the date of acquisition issued by a bank or trust company
organized under the laws of the United States or any state thereof
having capital surplus and undivided profits aggregating at least
$100,000,000; and
(vi) investments in commercial paper given the highest rating
by a national credit rating agency and maturing not more than 270 days
from the date of creation thereof.
REVOLVING CREDIT LOAN - a Loan made by Lender as provided in Section 2.1
of the Agreement.
SAN LEON FACILITY - the waste processing facility owned by BAGC located
in San Leon, Texas.
SCHEDULE OF ACCOUNTS - as defined in subsection 6.4.1 of the Agreement.
SEASONAL OVERADVANCE - a Revolving Credit Loan made pursuant to
subsection 1.1.2.
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SECURITY - shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
SECURITY DOCUMENTS - the Guaranty Agreements, the Mortgages, Trademark
Collateral Assignment and Security Agreement, Patent Collateral Assignment and
Security Agreement, Collateral Assignment of Licenses, Permits and Contracts,
Collateral Assignments of Leases and Rents, Environmental Indemnities, Pledge
and Security Agreements, and all other instruments and agreements now or at any
time hereafter securing the whole or any part of the Obligations.
SOLVENT - as to any Person, such Person (i) owns Property whose fair
saleable value is greater than the amount required to pay all of such Person's
Indebtedness (including contingent debts), (ii) is able to pay all of its
Indebtedness as such Indebtedness matures and (iii) has capital sufficient to
carry on its business and transactions and all business and transactions in
which it is about to engage.
STOCKHOLDER'S EQUITY - at any date, the sum of Borrower's stated
capital, paid-in surplus and retained earnings, less treasury stock, all as
determined in accordance with GAAP, and specifically not including any
reevaluation surplus.
SUBORDINATED DEBT - Indebtedness of Borrower that is subordinated to
the Obligations in a manner satisfactory to Lender.
SUBORDINATION AGREEMENT - a Subordination Agreement among Borrower,
Lender and the holder of any Subordinated Debt, in form and substance
satisfactory to Lender.
SUBSIDIARY - any corporation, partnership, joint venture or other
entity of which a Person owns, directly or indirectly through one or more
intermediaries, 50% or more of the Voting Stock at the time of determination.
TERM LOANS - the Loans described in subsections 1.2.1 and 1.2.2 of the
Agreement.
TERM NOTES - the Secured Promissory Notes to be executed by Borrower on
or about the Closing Date in favor of Lender to evidence the Term Loans which
shall be in the form of EXHIBITS A-1 AND A-2 to the Agreement.
TOTAL CREDIT FACILITY - $39,000,000.
TOTAL LIABILITIES - at any date means all amounts properly classified
as liabilities on a balance sheet at such date in accordance with GAAP, plus
all reserves for contingencies.
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VINYL PRODUCTS DIVISION - the vinyl products manufacturing operation of
Borrower which is primarily located in Bardstown, Kentucky.
VOTING STOCK - Securities of any class or classes of a corporation,
partnership, joint venture or other legalentity the holders of which are
ordinarily, in the absence of contingencies, entitled to elect a majority of
the corporate directors (or Persons performing similar functions).
WORKING CAPITAL - at any date means Current Assets minus Current
Liabilities.
OTHER TERMS. All other terms contained in the Agreement shall have,
when the context so indicates, the meanings provided for by the Code to the
extent the same are used or defined therein.
CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents
and list of exhibits appear as a matter of convenience only and shall not
affect the interpretation of the Agreement. All references to statutes and
related regulations shall include any amendments of same and any successor
statutes and regulations. All references to any of the Loan Documents shall
include any and all modifications thereto and any and all extensions or
renewals thereof.
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EX-4.(A)(4)
3
FIRST AMENDMENT TO LOAN DOCUMENTS
1
EXHIBIT 4(a)(4)
BIRD INCORPORATED
980 Washington Street, Suite 120
Dedham, Massachusetts 02026
March 8, 1995
Shawmut Capital Corporation
200 Glastonbury Boulevard
Glastonbury, Connecticut 06033
Re: FIRST AMENDMENT TO LOAN DOCUMENTS
---------------------------------
Ladies and Gentlemen:
Reference is made to the Loan and Security Agreement dated November 30,
1994 ("Loan Agreement") and all supplements, agreements, documents and
instruments entered into by Bird Incorporated (the "Borrower") and Barclays
Business Credit, Inc. ("BCI") pursuant thereto (collectively, the "Loan
Documents"). Except as otherwise defined herein, capitalized terms used herein
shall have the meanings given them in the Loan Documents. BCI transferred the
Loans and Loan Documents to Shawmut Capital Corporation on January 31, 1995 and
Shawmut Capital Corporation is referred to herein as "Lender". This First
Amendment to Loan Documents is referred to as the "First Amendment"
BACKGROUND. The Borrower has consummated the sale of its Vinyl Products
Division to Jannock Limited and has applied the proceeds of such sale according
to Section 3.8 of the Loan Agreement. In further accordance with Section 3.8,
the Borrower and Lender have agreed, subject to the terms of this First
Amendment, to decrease the maximum credit under the Loan Agreement from Thirty
Nine Million Dollars ($39,000,000) to Twenty Million Dollars ($20,000,000.00),
to decrease the principal amount of Term Note B from $7,500,000 to $5,000,000,
to add a LIBOR rate option to the Loan Agreement and to certain other
amendments to the Loan Documents as set forth herein.
Subject to the satisfaction of the terms and conditions hereof, Lender,
the Borrower and the Guarantors have agreed that the Loan Documents shall be
amended as follows:
A. AMENDMENTS TO THE LOAN AGREEMENT.
1. Section 1 of the Loan Agreement is hereby amended by deleting the
symbol and number "$39,000,000" in the fourth line of the Section, and
substituting in lieu thereof the symbol, number and words "$20,000,000 or such
lesser amount as may be elected by Borrower pursuant to Section 4.2.3 hereof".
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2. Section 1.1.2 of the Loan Agreement is hereby amended by deleting
the symbol and number "$24,000,000" and substituting in lieu thereof the
symbol, number and words "$15,000,000 or such lesser amount as may be elected
by Borrower pursuant to Section 4.2.3 hereof".
3. Section 1.2.2 of the Loan Agreement is hereby amended by deleting
the Section in its entirety and substituting in lieu thereof the following:
1.2.2 TERM LOAN B. Term Loan B shall be reduced from the
original principal amount of $7,500,000 to a principal amount of $5,000,000,
which shall be repayable in accordance with the terms of the Amended and
Restated Term Note B and shall be secured by all of the Collateral. The Term
Loan B shall, at Borrower's option, be made or continued as, or converted into,
one or more Advances consisting of Base Rate Advances or LIBOR Rate Advances.
4. Section 2.1.1 of the Loan Agreement is hereby amended by deleting
the Section in its entirety and substituting the following in lieu thereof:
2.1.1 INTEREST RATES. Borrower agrees to pay interest in
respect of all unpaid principal amounts of the Loans from the
respective dates such principal amounts are advanced until paid
(whether at stated maturity, on acceleration, or otherwise) at a rate
per annum equal to the applicable rate indicated below:
(i) For each Base Rate Advance, the Base Rate, and
(ii) For each LIBOR Rate Advance, the relevant Adjusted
LIBOR Rate for the applicable Interest Period selected by
Borrower in conformity with this Agreement plus 275 basis
points.
Upon determining the Adjusted LIBOR Rate for any Interest
Period requested by Borrower, Lender shall promptly notify Borrower
thereof by telephone or in writing. Such determination shall, absent
manifest error, be final, conclusive and binding on all parties and
for all purposes.
The applicable rates of interest with respect to all Base Rate
Advances shall be increased or decreased, as the case may be, by an
amount equal to any increase or decrease in the Base Rate, with such
adjustments to be effective as of the opening of business on the date
that any such change in the Base Rate becomes effective.
2.1.2 INTEREST PERIODS. In connection with the making or
continuation of, or conversion into, a LIBOR Rate Advance, Borrower
shall select an interest period (each an "Interest Period") to be
applicable to such LIBOR Rate Advance, which Interest Period shall
commence on the date
3
such LIBOR Rate Advance is made and shall end on a numerically
corresponding date in the first, second, third or sixth month thereafter;
PROVIDED, HOWEVER, that:
(i) the initial Interest Period for a LIBOR Rate Advance shall
commence on the date of such borrowing (including the date of any
conversion from an Advance of other type) and each Interest Period
occurring thereafter in respect of such Advance shall commence on
the date on which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on
the next succeeding Business Day, provided that if any Interest Period
in respect of a LIBOR Rate Advance would otherwise expire on a day
which is not a Business Day but is a day of the month after which
no further Business Day occurs in such month, such Interest Period
shall expire on the next preceding Business Day;
(iii) any Interest Period which begins on a day for which there
is no numerically corresponding day in the calendar month at the end
of such Interest Period shall expire on the last Business Day of
such calendar month; and
(iv) no Interest Period shall extend beyond the termination
date of this Agreement pursuant to Section 4 hereof or, in the
case of any LIBOR Rate Advance forming a part of th.e Term Loan,
beyond the final maturity date of the Term Loan.
2.1.3 INTEREST RATE NOT ASCERTAINABLE. If Lender shall determine
(which determination shall, absent manifest error, be final, conclusive
and binding upon all parties) that on any date for determining the Adjusted
LIBOR Rate for any Interest Period, by reason of any changes arising after the
date of this Agreement affecting the London interbank market or Lender's
position in such market, adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the definition of
Adjusted LIBOR Rate, then, and in any such event, Lender shall forthwith give
notice (by telephone confirmed in writing) to Borrower of such determination.
Until Lender notifies Borrower that the circumstances giving rise to the
suspension described herein no longer exist, the obligation of Lender to make
LIBOR Rate Advances shall be suspended, and such affected Loans then
outstanding shall, at the end of the then applicable Interest Period or at such
earlier time as may be required by Applicable Law, bear the same interest as
Base Rate Advances.
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5. Section 2.1.2 of the Loan Agreement is hereby amended by
deleting the number "2.1.2" and substituting in lieu thereof the number
"2.1.4".
6. Section 2.1.3 of the Loan Agreement is hereby amended by deleting
the number "2.1.3" and substituting in lieu thereof the number "2.1.5".
7. The Loan Agreement is hereby amended by adding Sections 2.10 and
2.11 as follows:
2.10 FUNDING LOSSES. Borrower shall compensate Lender, upon
Lender's written request (which request shall set forth the basis for
requesting such amounts and which request shall, absent manifest
error, be final, conclusive and binding upon all of the parties
hereto), for all losses, expenses and liabilities (including any
interest paid by Lender to lenders of funds borrowed by Lender to make
or carry any LIBOR Rate Advances to the extent not recovered by Lender
in connection with the re-employment of such funds), which Lender may
sustain: (i) if for any reason (other than a default by Lender) a
borrowing of, or conversion to or continuation of, LIBOR Rate Advances
does not occur on the date specified therefor in a Notice of Borrowing
or Notice of Conversion/Continuation (whether or not withdrawn), (ii)
if any repayment (including prepayments and any conversions pursuant
to this Agreement) of any of its LIBOR Rate Advances occurs on a date
that is not the last day of an Interest Period applicable thereto, or
(iii) if, for any reason, Borrower defaults in its obligation to repay
LIBOR Rate Advances when required by the terms of this Agreement. For
purposes of this Section 2.10, all references to Lender shall be
deemed to include any bank holding company or bank parent of Lender.
2.11 INCREASED COSTS. If, by reason of (x) after the date
hereof, the introduction of or any change (including any change by way
of imposition or increase of Statutory Reserves or other reserve
requirements) in or in the interpretation of any law or regulation, or
(y) the. compliance with any guideline or request from any central
bank or other governmental authority or quasi-governmental authority
exercising control over banks or financial institutions generally
(whether or not having the force of law):
(i) Lender shall be subject to any tax, duty or other
charge with respect to any LIBOR Rate Advance or its
obligation to make LIBOR Rate Advances, or shall change the
basis of taxation of payment to a Lender of the principal of
or interest on any LIBOR Rate Advances or its obligation to
make LIBOR Rate Advances (except for changes in the rate of
Tax on the overall net income of Lender imposed by the
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jurisdiction in which Lender's principal executive office
is located); or
(ii) any reserve (including any imposed by the Board of
Governors of the Federal Reserve System), special deposits or
similar requirement against assets of, deposits with or for the
account of, or credit extended by, Lender shall be imposed or
deemed applicable or any other condition affecting LIBOR Rate
Advances or its obligation to make LIBOR Rate Advances shall be
imposed on Lender or the London interbank market;
and as a result thereof there shall be any increase in the cost to Lender
of agreeing to make or making, funding or maintaining LIBOR Rate Advances
(except to the extent already included in the determination of the applicable
Adjusted LIBOR Rate), or there shall be a reduction in the amount received or
receivable by Lender, then Borrower shall from time to time, upon written
notice from and demand by Lender (with a copy of such notice and demand to
Agent), pay to Lender, within five (5) Business Days after the date specified
in such notice and demand, an additional amount sufficient to indemnify Lender
against such increased cost. A certificate as to the amount of such increased
cost, showing such calculations in reasonable detail, submitted to Borrower by
Lender, shall, except for manifest error, be final, conclusive and binding for
all purposes.
If Lender shall advise Borrower at any time that, because of the
circumstances described hereinabove in this Section 2.11 or any other
circumstances arising after the date of this Agreement affecting Lender or the
London interbank market or Lender's position in such market, the Adjusted LIBOR
Rate, as determined by Lender, will not adequately and fairly reflect the cost
to Lender of funding LIBOR Rate Advances, then, and-in any such event:
(i) Lender shall forthwith give notice (by telephone
confirmed in writing) to Borrower of such advice;
(ii) Borrower's right to request and Lender's
obligation to make LIBOR Rate Advances shall be immediately
suspended and Borrower's right to continue a LIBOR Rate
Advance as such beyond the then applicable Interest Period
shall also be suspended; and
(iii) Lender shall make an advance as part of the
requested Borrowing of LIBOR Rate Advances as a Base Rate
Advance, which Base Rate Advance shall, for all purposes, be
considered part of such borrowing.
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6
For purposes of this Section 2.11, all references to Lender
shall be deemed to include any bank holding company or bank
parent of Lender.
8. Section 3.1.1 of the Loan and Security Agreement is hereby
amended by deleting the Section in its entirety and substituting in lieu
thereof the following:
3.1.1 LOAN REQUESTS. Borrowings of LIBOR Rate Advances
and Base Rate Advances shall be made and funded as follows:
(i) Whenever Borrower desires to borrow pursuant to
this Agreement (other than a borrowing resulting from a
conversion or continuation pursuant to Section 3.1.1(ii)
hereof), Borrower shall give Lender prior written notice (or
telephonic notice promptly confirmed in writing) of such
borrowing request (a "Notice of Borrowing"). Such Notice of
Borrowing shall be given prior to 11:00 a.m., Glastonbury,
Connecticut time at the office of Lender designated by
Lender from time to time (a) on the Business Day of the
requested date of such borrowing in the case of Base Rate
Advances, and (b) at least three (3) Business Days prior to
the requested date of such borrowing in the case of LIBOR
Rate Advances. Notices received after 11:00 a.m. shall be
deemed received on the next Business Day.
All Revolving Credit Loans made on the Closing Date
shall be made as Base Rate Advances and thereafter may be
made, continued as or converted into Base Rate Advances or
LIBOR Rate Advances. Each Notice of Borrowing shall be
irrevocable and shall specify (a) the principal amount of
the borrowing (which, in the case of each LIBOR Rate
Advance, shall be in the amount of $1,000,000 and $500,000
increments in excess thereof), (b) the date of borrowing
(which shall be a Business Day), (c) whether the borrowing
is to consist of Base Rate Advances or LIBOR Rate Advances
and the amount of each such Advance, and (d) in the c.ase of
LIBOR Rate Advances, the duration of the Interest Period to
be applicable thereto. Unless payment is otherwise timely
made by Borrower, the becoming due of any amount required to
be paid under this Agreement or any of the other Loan
Documents as principal, accrued interest, fees or other
charges shall be deemed irrevocably to be a request by
Borrower from Lender for a Revolving Credit Loan on the due
date of, and in an aggregate amount required to pay, such
principal, accrued interest, fees or other charges, and the
proceeds of each such Revolving Credit Loan may be disbursed
by Lender by way of direct payment of the relevant
Obligation and shall bear interest as a Base Rate Advance.
(ii) Whenever Borrower desires to convert all or a
portion of an outstanding Base Rate Advance or LIBOR
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Rate Advance into one or more Advances of another type, or
to continue outstanding a LIBOR Rate Advance for a new
Interest Period, Borrower shall give Lender written notice
(or telephone notice promptly confirmed in writing) at least
three (3) Business Days before the conversion into a Base
Rate Advance and at least three (3) Business Days before the
conversion into or continuation of a LIBOR Rate Advance.
Such notice (a "Notice of Conversion/Continuation") shall be
given prior to 11:00 a.m., Glastonbury, Connecticut time, on
the date specified. Each such Notice of
Conversion/Continuation shall be irrevocable and shall
specify the aggregate principal amount of the Advance to be
converted or continued, the date of such conversion or
continuation, whether the Advance is being converted into or
continued as a LIBOR Rate Advance (and, if so, the duration
of the Interest Period to be applicable thereto) or a Base
Rate Advance. If, upon the expiration of any Interest Period
in respect of any LIBOR Rate Advance, Borrower shall have
failed, or pursuant to the following sentence be unable, to
deliver the Notice of Conversion/Continuation, Borrower
shall be deemed to have elected to convert or continue such
LIBOR Rate Advance to a Base Rate Advance. So long as any
Default or Event of Default shall have occurred and be
continuing, no Advance may be converted into or continued as
(upon expiration of the current Interest Period) a LIBOR
Rate Advance. No conversion of any LIBOR Rate Advance shall
be permitted except on the last day of the Interest Period
in respect thereto.
(iii) The becoming due of any amount required to be
paid under this Agreement or the Term Note, whether as
interest or for any other Obligation, shall be deemed
irrevocably to be a request for a Revolving Credit Loan on
the due date in the amount required to pay such interest or
other Obligation.
(iv) In no event shall the number of Advances
outstanding under the Revolving Credit Loans or the Term
Loan exceed four (4), but for purposes of determining the
number of Advances outstanding, all Base Rate Advances
outstanding at any time shall be considered as one Advance.
Notwithstanding anything to the contrary in this Agreement,
in no event shall Borrower be authorized to obtain or
continue an Advance as a LIBOR Rate Advance, or to convert a
Base Rate Advance to a LIBOR Rate Advance, if, after giving
effect thereto, the aggregate principal amount of all LIBOR
Rate Advances then outstanding is greater than seventy-five
percent (75%) of the Average Loan Balance for the thirty-day
period immediately preceding the date of determination.
(v) As an accommodation to Borrower, Lender may permit
telephonic requests for loans and electronic
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transmittal of instructions, authorizations, agreements or
reports to Lender by Borrower. Unless Borrower specifically
directs Lender in writing not to accept or act upon
telephonic or electronic communications from Borrower,
Lender shall have no liability to Borrower for any loss or
damage suffered by Borrower as a result of Lender's
honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and
purporting to have been sent to Lender by Borrower and
Lender shall have no duty to verify the origin of any such
communication or the authority of the person sending it.
(vi) All fundings of Revolving Credit Loans by Lender
to Borrower shall be made by Lender' s disbursement of such
monies in immediately available funds by wire transfer to
such bank account as may be agreed upon by Borrower and
Lender from time to time.
9. Section 3.1.2 of the Loan Agreement is hereby amended by
deleting the number "3.1.1(ii)" on the second to last line of the Section and
substituting in lieu thereof the number, "3.1.1 (iii) ".
10. The Loan Agreement is hereby amended by deleting Section
3 . 2.1 in its entirety and inserting in lieu thereof the following:
3.2.1 REPAYMENT OF REVOLVING CREDIT LOANS. Borrower's obligation
to pay the principal of, and interest on, the Revolving Credit Loans to Lender
shall be evidenced by the records of Lender and all outstanding principal
amounts and accrued interest with respect to the Revolving Credit Loans shall
be due and payable as follows:
(i) Any portion of the Revolving Credit Loans
consisting of the principal amount of Base Rate Advances
shall be paid by Borrower to Lender immediately upon the
earliest of (a) the receipt by Lender or Borrower of any
proceeds of any Collateral (other than proceeds of Equipment
or real Property that are applied pursuant to Section 6.4.2
hereof), to the extent of such proceeds, (b) the occurrence
of an Event of Default in consequence of which Lender elects
to accelerate the maturity and payment of the Obligations or
(c) termination of this Agreement pursuant to Section 4
hereof. Interest accrued on the principal amount of each
Base Rate Advance shall be paid as provided in Section 3.2.2
hereof.
(ii) Any portion of the Revolving Credit Loans
consisting of the principal amount of LIBOR Rate Advances
outstanding shall be paid by Borrower to
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9
Lender, unless converted to a Base Rate Advance or
continued as a LIBOR Rate Advance in accordance with the
terms of this Agreement, upon the earliest of (a) the last
day of the Interest Period applicable thereto, (b) the
occurrence of an Event of Default in consequence of which
Lender elects to accelerate the maturity and payment of the
Obligations, or (c) termination of this Agreement pursuant
to Section 4 hereof. In no event shall Borrower be
authorized to pay any LIBOR Rate Advance prior to the last
day of the Interest Period applicable thereto unless
otherwise agreed to in writing by Lender or Borrower is
otherwise expressly authorized or required by any other
provision of this Agreement to pay any LIBOR Rate Advance
outstanding on a date other than the last day of the
Interest Period applicable thereto. Interest accrued on the
principal amount of each LIBOR Rate advance shall be paid as
provided in Section 3.2.2 hereof.
(iii) Notwithstanding anything to the contrary
contained elsewhere in this Agreement, if the principal
amount of Revolving Credit Loans outstanding at any time
shall exceed the Borrowing Base at such time, except for
Seasonal Overadvances as permitted under Section 1.1.2
hereof, Borrower shall, on demand, repay the outstanding
Revolving Credit Loans bearing interest as Base Rate
Advances in an amount sufficient to reduce the aggregate
unpaid principal amount of all Revolving Credit Loans by an
amount equal to such excess; and, if such payment of Base
Rate Advances is not sufficient to cure the Overadvance
Condition, then, Borrower shall immediately either (a)
deposit with Lender, for application to any outstanding
Revolving Credit Loans bearing interest as LIBOR Rate
Advances as the same become due and payable at the end of
the applicable Interest Period, cash in an amount sufficient
to cure such Overadvance Condition and any such cash shall
be held by Lender, pending disbursement of same to Lender,
in such interest bearing account or accounts as Lender may
select, or (b) pay the Revolving Credit Loans outstanding
that bear interest as LIBOR Rate Advances to the extent
necessary to cure such Overadvance Condition and also pay to
Lender any and all amounts required by Section 2.10 hereof
to be paid by reason of the prepayment of a LIBOR Rate
Advance prior to the last day of the Interest Period
applicable thereto.
11. The Loan Agreement is hereby amended by deleting Section
3.2.2 in its entirety and inserting in lieu thereof the following:
3.2.2 VARIABLE RATES AND PAYMENT OF INTEREST. Interest on
each Revolving Credit Loan shall accrue from and including the
date of such Revolving Credit Loan to but excluding the date of
any repayment thereof; PROVIDED,
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HOWEVER, that, if a Revolving Credit Loan is repaid on the same day made,
one day's interest shall be paid on such Loan. Accrued interest on all
Revolving Credit Loans shall be paid upon the earliest of (i) the first day
of each month (for the immediately preceding month), computed through the
last calendar day of the preceding month, (ii) prepayment in accordance
with Section 3.2.3 hereof, (iii) the occurrence of an Event of Default in
consequence of which Lender elects to accelerate the maturity and payment
of the Obligations, (iv) the last day of an Interest Period in respect of a
LIBOR Rate Advance, or (v) the termination of this Agreement pursuant to
Section 4 hereof. With respect to any Base Rate Advance converted into a
LIBOR Rate Loan on a day when interest would not otherwise have been
payable with respect to such Base Rate Advance, accrued interest to the
date of such conversion on the amount of such Base Rate Advance shall be
paid by Borrower on the conversion date.
3.2.3 OPTIONAL PREPAYMENTS OF LIBOR RATE ADVANCES. LIBOR Rate Advances
may be prepaid, at Borrower's option, at any time in whole or from time to
time in part, in amounts aggregating $500,000 or any greater integral
multiple thereof, by paying the principal amount to be prepaid, interest
accrued and unpaid thereon to the date of prepayment and all charges
pursuant to Section 2.10 hereof if such prepayment is made on a date other
than the last day of an applicable Interest Period. Borrower shall give
written notice (or telephonic notice confirmed in writing) to Lender of any
intended prepayment not less than two (2) Business Days prior to any
prepayment of LIBOR Rate Advances. Such notice, once given, shall be
irrevocable. All prepayments shall include payment of accrued interest on
the principal amount so prepaid, plus any charges owing under Section 2.10
hereof, and shall be applied to the payment of interest before application
to principal.
12. Section 3.2.3 of the Loan Agreement is hereby amended by deleting
the number "3.2.3" and substituting in lieu thereof the number "3.2.4".
13. Section 3.2.4 of the Loan Agreement is hereby amended by deleting
the number "3.2.4" and substituting in lieu thereof the number "3.2.5".
14. The financial covenants set forth in Section 8.3 shall be reviewed
by Borrower and Lender based upon the financial condition of Borrower upon the
consummation of the sale of the Vinyl Products Division and as projected by the
Borrower at that time. If within sixty (60) days of the date of this First
Amendment the Lender reasonably determines that modifications to such financial
covenants are necessary or desirable, the modified financial covenants, as
reasonably determined by Lender, shall be substituted for the financial
covenants in the Loan Agreement. During such sixty (60) day period Borrower
shall, in its regular monthly reports to Lender, notify Lender of any failure
to comply
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11
with any of the original financial convenants in the Loan Agreement. Lender
agrees that if such non-compliance is solely as a result of Borrower's sale of
its Vinyl Products Division, then Lender shall waive such non-compliance. If
the non- compliance is not solely a result of the Vinyl Products Division sale,
then Lender reserves its rights and shall have no obligation to waive such
non-compliance.
15. The Loan and Security Agreement is hereby amended by adding Section
3.9 thereto as follows:
3.9 ILLEGALITY. Notwithstanding anything to the contrary
contained elsewhere in this Agreement, if (x) any change in any law or
regulation or in the interpretation thereof by any governmental
authority charged with the administration thereof shall make it
unlawful for Lender to make or maintain a LIBOR Rate Advance or to give
effect to its obligations as contemplated hereby with respect to a
LIBOR Rate Advance or (y) at any time Lender determines that the making
or continuance of any LIBOR Rate Advance has become impracticable as a
result of a contingency occurring after the date hereof which adversely
effects the London Interbank Market or the position of Lender in such
market, then, by written notice to Borrower, Lender may (i) declare
that LIBOR Rate Advances will not thereafter be made by Lender,
whereupon any request by Borrower for a LIBOR Rate Advance shall be
deemed a request for a Base RAte Advance unless Lender's declaration
shall be subsequently withdrawn; and (ii) require that all outstanding
LIBOR Rate Advances be converted to Base Rate Advances, in which event
all such LIBOR Rate Advances shall be automatically converted to Base
Rate Advances as of the date of Borrower's receipt of the aforesaid
notice from Lender.
16. Section 4.2.3 of the Loan Agreement is hereby amended by adding the
following sentence at the end thereof:
"Notwithstanding the foregoing, the Borrower may upon thirty
(30) days written notice to Lender reduce the amount of the. Total
Credit Facility in increments of $1,000,000 to an amount not less
than $15,000,000. Each such reduction shall be accompanied by
prepayment of Revolving Credit Loans, together with accrued
interest on the amount prepaid to the date of such prepayment, to
the extent that the outstanding principal amount of the Loans plus
the LC Amount exceed the Total Credit Facility as reduced."
17. The definition of Borrowing Base in Appendix A to the Loan and
Security Agreement is hereby amended by deleting the symbol and number
"$39,000,000" and substituting in lieu thereof the symbol and number
"$20,000,000"; and by deleting the symbol and number "$10,000,000" and
substituting in lieu thereof the symbol and number "$5,000,000".
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12
18. The definition of Total Credit Facility in Appendix A to the Loan
and Security Agreement is hereby amended by deleting the symbol and number
"$39,000,000" and. inserting in lieu thereof the symbol and number "$20,000,000
or such lesser amount as Borrower may elect pursuant to Section 4.2.3 of the
Agreement".
19. Appendix A, General Definitions, is hereby amended by inserting the
following definitions according to alphabetical order therein:
ADJUSTED LIBOR RATE - with respect to each Interest Period for
a LIBOR Rate Advance, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the quotient of (a) the
LIBOR Rate in effect for such Interest Period divided by (b) a
percentage (expressed as a decimal) equal to 100% minus Statutory
Reserves.
ADVANCE - a Revolving Credit Loan, or portion thereof, or a
portion of the Term Loan, as the case may be, as provided under the
Agreement.
APPLICABLE LAW - all laws, rules and regulations applicable to
the Person, conduct, transaction, covenant or Loan Documents in
question, including, but not limited to, all applicable common law and
equitable principles; all provisions of all applicable state and
federal constitutions, statues, rules, regulations and orders of
governmental bodies; and all orders, judgments and decrees of all
courts and arbitrators.
BASE RATE ADVANCE - an Advance made or outstanding as a
Revolving Credit Loan or portion of the Term Loan, as the case may be,
bearing interest based on the Base Rate as provided in Section 2.1.1
hereof.
INTEREST PERIOD - as defined in Section 2.1.2.
LIBOR RATE - the rate, as determined by Lender, at which Dollar
deposits approximately equal in principal amount to the LIBOR Rate
Advance for which the LIBOR Rate is being determined and for a maturity
comparable to the Interest Period for which such LIBOR Rate will apply
is offered by the Bank in immediately available funds in the London
interbank market at approximately 11:00 a.m., London time, two (2)
Business Days prior to the commencement of such Interest Period.
LIBOR RATE ADVANCE - an Advance made or outstanding as a
Revolving Credit Loan or a portion of the Term Loan, as the case may
be, bearing interest based on the applicable Adjusted LIBOR Rate as
provided in Section 2.1.1 hereof.
NOTICE OF BORROWING - as defined in Section 2.2(A) hereof.
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NOTICE OF CONVERSION/CONTINUATION - as defined in Section 3.1.1
hereof.
OVERADVANCE CONDITION - at any date, a condition such that the
principal amount of the Revolving Credit Loans outstanding on such date
exceeds the Borrowing Base on such date, other than due to Seasonal
Overadvances permitted under Section 1.1.2.
STATUTORY RESERVES - on any date, the percentage (expressed as
a decimal) established by the Board of Governors which is the then
stated maximum rate for all reserves (including, but not limited to,
any emergency, supplemental or other marginal reserve requirements)
applicable to any member bank of the Federal Reserve System in respect
to Eurocurrency Liabilities (or any successor category of liabilities
under Regulation D). Such reserve percentage shall include, without
limitation, those imposed pursuant to Regulation D. The Statutory
Reserves shall be adjusted automatically on and as of the effective
date of any change in such percentage.
B. REPRESENTATIONS AND WARRANTIES.
To induce Lender to enter into this First Amendment, Borrower, Parent
and Subsidiaries warrant, represent and covenant to Lender that:
1. ORGANIZATION AND QUALIFICATION. Each of Parent, Borrower and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each of
Parent, Borrower and its Subsidiaries is duly qualified and is authorized to do
business and is in good standing as a foreign corporation in each state or
jurisdiction listed on Exhibit C to the Loan Agreement and in all other states
and jurisdictions in which the failure of - Parent or Borrower or any of its
Subsidiaries to be so qualified would have a material adverse effect on the
financial condition, business or Properties of Borrower or Parent, Borrower and
its Subsidiaries, taken as a whole.
2. CORPORATE POWER AND AUTHORITY. Each of Parent, Borrower and its
Subsidiaries is duly authorized and empowered to enter into, execute, deliver
and perform this First Amendment and each of the Loan Documents to which it is
a party. The execution, delivery and performance of this First Amendment and
each of the other Loan Documents have been duly authorized by all necessary
corporate action and do not and will not (i) require any consent or approval of
the shareholders of Parent or Borrower or any of its Subsidiaries; (ii)
contravene Parent's or Borrower's or any of its Subsidiaries' charter, articles
or certificate of incorporation or by-laws; (iii) violate, or cause Parent or
Borrower or any of its Subsidiaries to be in default under, any provision of
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award in effect having
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14
applicability to Parent or Borrower or any of its Subsidiaries; (iv) result in
a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which Parent or
Borrower or any of its Subsidiaries is a party or by which Parent or Borrower
or its Subsidiaries' Properties may be bound or affected; or (v) result in, or
require, the creation or imposition of any Lien (other than Permitted Liens)
upon or with respect to any of the Properties now owned or hereafter acquired
by Parent or Borrower or any of its Subsidiaries.
3. LEGALLY ENFORCEABLE AGREEMENT. This First Amendment is, and each of
the other Loan Documents when delivered under this First Amendment will be, a
legal, valid and binding obligation of each of Parent, Borrower and its
Subsidiaries executing such document, enforceable against such party in
accordance with its respective terms.
4. NO MATERIAL ADVERSE CHANGE. Since the date of the last financial
statements provided by the Borrower to the Lender, there has been no material
adverse change in the condition, financial or otherwise, of Parent, Borrower
and such other Persons as shown on the Consolidated balance sheet as of such
date and no change in the aggregate value of Equipment and real Property owned
by Borrower or such other Persons, except changes in the ordinary course of
business, none of which individually or in the aggregate has been materially
adverse.
5. HARRIS BANK LOCK BOX. All payment items received into Lock Box
number 95932 of the Harris Trust and Savings Bank represent the proceeds of
accounts receivable related solely to the sales of inventory of the Vinyl
Products Division of Bird Incorporated.
6. PROPERTY OF PARENT IN THE STATE OF KENTUCKY. Parent has no right,
title or interest in any property, real or personal, located in the State of
Kentucky.
7. CONTINUOUS NATURE OF REPRESENTATIONS AND WARRANTIES. Each
representation and warranty contained in the Loan Agreement and the other Loan
Documents remains accurate, complete and not misleading on the date of this
First Amendment, except for representations and warranties that are specific to
a prior date and changes in the nature of Parent's or Borrower's or its
Subsidiaries' business or operations that would render the information in any
exhibit attached thereto either inaccurate, incomplete or misleading, so long
as Lender has consented to such changes or such changes are expressly permitted
by this First Amendment.
C. CONDITIONS PRECEDENT.
Notwithstanding any other provision of this First Amendment or any of
the other Loan Documents, and without affecting in any manner the rights of
Lender under the other sections of this
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First Amendment, this First Amendment shall not be effective as to Lender
unless and until each of the following conditions has been and continues to be
satisfied:
1. DOCUMENTATION. Lender shall have received, in form and substance
satisfactory to Lender and its counsel, a duly executed copy of this First
Amendment, together with such additional documents, instruments and
certificates as Lender and its counsel shall require in connection therewith
from time to time, all in form and substance satisfactory to Lender and its
counsel.
2. NO DEFAULT. No Default or Event of Default shall exist.
3. NO LITIGATION. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any
court, governmental agency or legislative body to enjoin, restrain or prohibit,
or to obtain damages in respect of, or which is related to or arises out of the
Loan Agreement or this First Amendment or the consummation of the transactions
contemplated thereby or hereby.
F. ACKNOWLEDGEMENT OF OBLIGATIONS.
Borrower hereby (1) reaffirms and ratifies all of the promises,
agreements, covenants and obligations to Lender under or in respect of the Loan
Documents as amended hereby and (2) acknowledges that it is unconditionally
liable for the punctual and full payment of all Obligations, including, without
limitation, all charges, fees, expenses and costs (including attorneys' fees
and expenses) .under the Loan Documents, as amended hereby, and that it has no
defenses, counterclaims or setoffs with respect to full, complete and timely
payment and performance of all Obligations.
G. CONFIRMATION OF LIENS.
Borrower and Guarantors acknowledge, confirm and agree that the
Loan Documents, as amended hereby, are effective to grant to Lender duly
perfected, valid and enforceable first priority security interests and liens in
the Collateral described therein and that the locations for such Collateral
specified in the Loan Documents have not changed. Borrower and Guarantors
further acknowledge and agree that all Obligations of Borrower and Guarantors
are and shall be secured by the Collateral.
H. CONFIRMATION BY GUARANTORS.
The Guarantors, for value received, hereby assent to the Borrower's
execution and delivery of this First Amendment, and to the performance by the
Borrower of its agreements and obligations hereunder. This First Amendment and
the performance or consummation of any transaction or matter contemplated under
this First Amendment, shall not limit, restrict, extinguish or otherwise impair
any of the Guarantors' liabilities to Lender with respect to the payment and
other performance of the
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obligations of any other Guarantors pursuant to the continuing Guaranties,
dated November 30, 1994, executed for the benefit of Lender. The Guarantors
acknowledge that they are unconditionally liable to Lender for the full and
complete payment of all Obligations including, without limitation, all
charges, fees, expenses and costs (including attorney's fees and expenses)
under the Loan Documents and that the Guarantors have no defenses,
counterclaims or setoffs with respect to full, complete and timely payment of
any and all Obligations.
I. PAYMENT OF EXPENSES.
Borrower hereby acknowledges its obligation to pay to Lender all
attorneys' fees and costs incurred in connection with any revisions to or
further preparation of this First Amendment incurred after November 30, 1994,
as set forth in Section 2.8 of the Loan Agreement.
J. MISCELLANEOUS.
Except as set forth herein, the undersigned confirm and agree that the
Loan Documents remain in full force and effect without amendment or
modification of any kind. The execution and delivery of this First Amendment by
Lender shall not be construed as a waiver by Lender of any Event of Default
under the Loan Documents. This First Amendment, together with the Loan
Documents, constitute the entire agreement between the parties with respect to
the subject matter hereof and supersedes all prior dealings, correspondence,
conversations or communications between the parties with respect to the subject
matter hereof. This First Amendment and the transactions hereunder shall be
deemed to be consummated in the Commonwealth of Massachusetts and the other
Loan Documents shall be governed by and interpreted in accordance with the laws
of that state. This First Amendment and the agreements, instruments and
documents entered into pursuant hereto or in connection herewith shall be "Loan
Documents" under and as defined in the Loan Agreement.
Executed under seal on the date set forth above.
ATTEST: BIRD INCORPORATED
___________________________ By:__________________________________
Name:________________________________
Title: VP Finance & Administration
BIRD CORPORATION
___________________________ By:__________________________________
Name:________________________________
Title: VP Finance & Administration
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BIRD-KENSINGTON HOLDING CORP.
------------------------------ By:
--------------------------
Name:
------------------------
Title: VP Finance & Admin.
BIRD ATLANTIC CORPORATION
------------------------------ By:
--------------------------
Name:
------------------------
Title: VP Finance & Admin.
BIRD ENVIRONMENTAL TECHNOLOGIES,
INC.
------------------------------ By:
--------------------------
Name:
------------------------
Title: VP Finance & Admin.
RIVER PARK, INC.
------------------------------ By:
--------------------------
Name:
------------------------
Title: VP Finance & Admin.
RIVER PARK ASSOCIATES LIMITED
PARTNERSHIP
By: RIVER PARK, INC.
its General Partner
------------------------------ By:
--------------------------
Name:
------------------------
Title: VP Finance & Admin.
Accepted in Boston, Massachusetts
on _____________ , 1995
SHAWMUT CAPITAL CORPORATION
By: Jeffrey P. Hoffman
Name: Jeffrey P. Hoffman
Title: Vice President
-17-
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COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. March 8, 1995
Then personally appeared before me the above-named Joseph M.
Grigelevich, Jr., the V.P. of Finance & Admin. of Bird Incorporated, Bird
Corporation, Bird-Kensington Holding Corp., Bird Atlantic Corporation, Bird
Environmental Technologies, Inc., and River Park, Inc. and acknowledged the
foregoing instrument to be such person's free act and deed and the free act
and deed of said corporations.
/s/ Donald L. Sloper, Jr.
-----------------------------------
DONALD L. SLOPER, JR.
NOTARY PUBLIC
My Commission Expires June 15, 2001
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19
EXHIBIT 4(a)(4)
AMENDED AND RESTATED
SECURED PROMISSORY TERM NOTE-B
$5,000,000.00 March 8, 1995
Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned (hereinafter "Borrower"), hereby
promises to pay to the order of SHAWMUT CAPITAL CORPORATION, INC., a
Connecticut corporation (hereinafter "Lender"), in such coin or currency of the
United States which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment, the principal sum of FIVE MILLION
DOLLARS ($5,000,000.00), together with interest from and after the date hereof
on the unpaid principal balance outstanding at a rate per annum equal to the
applicable rate indicated below: (i) For each Base Rate Advance, the Base Rate,
and (ii) For each LIBOR Rate Advance, the relevant Adjusted LIBOR Rate for the
applicable Interest Period selected by Borrower plus 275 basis points.
This Secured Promissory Note (the "Note") is one of the Term Notes
referred to in, and is issued pursuant to, that certain Loan and Security
Agreement between Borrower and Lender dated November 30, 1994, as amended by
the First Amendment to Loan Agreement dated the date hereof ( hereinafter, as
amended from time to time, the "Loan Agreement"), and is entitled to all of the
benefits and security of the Loan Agreement. All of the terms, covenants and
conditions of the Loan Agreement and the Security Documents are hereby made a
part of this Note and are deemed incorporated herein in full. All capitalized
terms used herein, unless otherwise specifically defined in this Note, shall
have the meanings ascribed to them in the Loan Agreement.
The rate of interest in effect hereunder for any Base Rate Advance
shall increase or decrease by an amount equal to any increase or decrease in
the Base Rate, effective as of the opening of business on the date that any
such change in the Base Rate occurs. Interest on all Advances hereunder shall
be computed in the manner provided in subsection 2.2 of the Loan Agreement.
For so long as no Event of Default shall have occurred the principal
amount and accrued interest of this Note shall be due and payable on the dates
and in the manner hereinafter set forth:
(a) Interest shall be due and payable monthly, in arrears, on
the first day of each month, commencing on April 1, 1995, and continuing until
such time as the full principal balance, together with all other amounts owing
hereunder, shall have been paid in full;
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20
(b) Principal shall be due and payable monthly commencing on January 1,
1996, and continuing on the first day of each month thereafter to and
including the first day of November 1, 1996, in installments of $62,500.00
each; and
(c) Principal shall be due and payable monthly commencing on December
1, 1996 and continuing on the first day of each month thereafter to and
including the first day of November 1, 1997, in installments of $71,416.67
each; and
(d) The entire remaining principal amount then outstanding, together
with any and all other amounts due hereunder, shall be due and payable on
November 30, 1997.
Notwithstanding the foregoing, the entire unpaid principal balance and accrued
interest on this Note shall be due and payable immediately upon any termination
of the Loan Agreement pursuant to Section 4 thereof.
This Note shall be subject to mandatory prepayment in accordance with
the provisions of Section 3.3 of the Loan Agreement. Borrower may also
terminate the Loan Agreement and, in connection with such termination, prepay
this Note in the manner provided in Section 4 of the Loan Agreement. The
prepayment of LIBOR Rate Advances shall be subject to the provisions of
Sections 3.2.3 and 2.10 of the Loan Agreement.
Upon the occurrence of an Event of Default, Lender shall have all of
the rights and remedies set forth in Section 10 of the Loan Agreement.
Time is of the essence of this Note. To the fullest extent permitted by
applicable law, Borrower, for itself and its legal representatives, successors
and assigns, expressly waives presentment, demand, protest, notice of dishonor,
notice of non- payment, notice of maturity, notice of protest, presentment for
the purpose of accelerating maturity, diligence in collection, and the benefit
of any exemption or insolvency laws.
Wherever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or remaining
provisions of this Note. No delay or failure on the part of Lender in the
exercise of any right or remedy hereunder shall operate as a waiver thereof,
nor as an acquiescence in any default, nor shall any single or partial exercise
by Lender of any right or remedy preclude any other right or remedy. Lender, at
its option, may enforce its rights against any collateral securing this Note
without enforcing its rights against Borrower, any guarantor of the
indebtedness evidenced hereby or any other property or indebtedness due or to
become due to Borrower.
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Borrower agrees that, without releasing or impairing Borrower's liability
hereunder, Lender may at any time release, surrender, substitute or
exchange any collateral securing this Note and may at any time release any
party primarily or secondarily liable for the indebtedness evidenced by this
Note.
This Note shall be governed by, and construed and enforced in
accordance with, the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed
and delivered in Boston, Massachusetts, on the date first above written.
ATTEST: BIRD INCORPORATED
a Massachusetts corporation
("Borrower")
/s/ Margaret M. Doak By: Joseph M. Grigelevich, Jr.
----------------------------- ---------------------------
Asst. Clerk Title: VP Finance & Admin.
[CORPORATE SEAL]
COMMONWEALTH OF MASSACHUSETTS
Norfolk, ss. March 8, 1995
Then personally appeared before me the above-named Joseph M.
Grigelevich, Jr., the VICE PRES. FIN. & ADM. of Bird Incorporated and
acknowledged the foregoing instrument to be such person's free act and deed
and the free act and deed of said corporation.
/s/ Donald L. Sloper, Jr.
------------------------
Notary Public
DONALD L. SLOPER, JR.
NOTARY PUBLIC
MY COMMISSION EXPIRES JUNE 15, 2001
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EX-10.(D)
4
SETTLEMENT AGREEMENT AS OF 8/7/94
1
EXHIBIT 10(d)*
SETTLEMENT AGREEMENT
--------------------
Settlement Agreement made as of the 7th day of July, 1994 by and
between Bird Corporation ("Bird"), a Massachusetts corporation with its
principal place of business in Dedham, Massachusetts, and George J. Haufler
("Haufler"), an individual residing in Weston, Massachusetts.
WHEREAS, Haufler was employed by Bird for over twelve years, during
which time he served in various executive capacities including president, chief
executive officer, chairman of the board of directors, and as a director; and
WHEREAS, on January 25, 1994, Bird's board of directors terminated
Haufler's employment with Bird, which termination Haufler has disputed; and
WHEREAS, Haufler has challenged the validity and propriety of his
disputed termination by the board of directors and has asserted that such
disputed termination was unlawful pursuant to federal and state statutes and
common law and further has asserted that such termination has caused him
substantial tortious injury; and
WHEREAS, Bird and its officers and directors deny Haufler's assertions
and deny liability for any of the causes of action which Haufler might have
asserted arising from his termination and do not, by this Settlement Agreement,
admit or concede liability or wrongdoing; and
2
WHEREAS, the parties deem it in their best interests to resolve all
claims of any kind, including without limitation the aforesaid dispute, which
the parties may have against each other;
NOW, THEREFORE, in consideration of the promises contained herein and
for other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree hereby as follows:
1. On the Closing Date (as defined in Section 19), Bird shall issue
and deliver to the escrow agent identified in Section 7.A. below certificates
in the name of Haufler representing Thirty Thousand (30,000) shares of Bird
common stock, all of which shall be allocable to compensation for the alleged
tortious injury which Haufler asserts he suffered as a result of Bird's alleged
conduct in connection with the events culminating in the termination of
Haufler's employment and the terms and conditions of that termination.
2. On the Closing Date, Bird shall execute and deliver to the escrow
agent identified in Section 7.A. below a Release of Haufler in the form
appended hereto as Exhibit A.
3. On the Closing Date, Haufler shall execute and deliver to the
escrow agent identified in Section 7.B. below a Release of Bird in the form
appended hereto as Exhibit B.
4. Prior to, on, and after the Closing, Bird shall provide to
Haufler, at Bird's expense, coverage under its group health plans in accordance
with the federal Consolidated Omnibus Budget
-- 2 --
3
Reconciliation Act of 1985 ("COBRA") for the statutory period of eighteen (18)
months commencing January 25, 1994. After the expiration of said period, Bird
will continue to provide health insurance for Haufler, at substantially the
same level of coverage as was provided to him as of January 24, 1994, under a
comprehensive medical conversion plan until Haufler reaches sixty-five (65)
years of age (hereinafter the "covered period"). Upon the expiration of the
covered period, Bird will be under no obligation to provide or to fund any
health insurance for Haufler, except with respect to any claim which Haufler
may submit subsequent to the covered period but which accrued or arose
during the covered period.
5. The parties acknowledge that prior to the Closing Date Haufler
converted his current life insurance policy, provided by Bird, to his own name.
Bird hereby agrees to reimburse Haufler for all premiums Haufler may pay to
continue said current life insurance policy through and including 3anuary 25,
1996. It is expressly understood and agreed that Haufler will not be reimbursed
for (i) the costs of conversion, or (ii) premium payments for life insurance
coverage after January 25, 1996.
6. Bird acknowledges (i) that it has approved a contribution under
the Bird Employees' Savings and Profit Sharing Plan (the "Savings Plan") for
the 1993 plan year that would result in an allocation to Haufler's account
thereunder in the amount of $13,139.66, and (ii) that $28,509.56 is required to
be
- 3 -
4
credited to Haufler under the Deferred Compensation Agreement for
George J. Haufler between Haufler and Bird, effective March 1, 1987, and
contributed to the trust (the "rabbi trust") established pursuant to the
associated Haufler Trust Agreement, dated February 27, 1987 (together, the
"Deferral Agreement"), for the year 1993. Haufler acknowledges that such
amounts are payable by Bird under the terms of the Savings Plan and the
Deferral Agreement in September, 1994. On the Closing Date Bird shall pay an
amount equal to such amounts ($41,649.22) to the escrow agent identified in
Section 7.B. below.
7.A. The escrow agent described herein, who shall be responsible for
the receipt and maintenance of Bird common stock certificates as described in
Section i herein and the Release as described in Section 2 herein, shall be:
Alan L. Lefkowitz, Esq.
Dechert Price & Rhoads
Ten Post Office Square South
Suite 1230
Boston, MA 02109
7.B. The escrow agent described herein, who shall be responsible for
the receipt and maintenance of the Release described in Section 3 herein and
the contributions described in Section 6 herein shall be:
Charles W. Robins, Esq.
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
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5
7.C. Each of the escrow agents shall have only the duties and
responsibilities specified for him in Section 9 below and none others, and
performance of such duties and responsibilities shall completely discharge such
escrow agent under this Settlement Agreement. If an escrow agent is unable for
any reason to perform any of his duties or responsibilities, he shall commence
an action of interpleader or like action in a court of competent jurisdiction
for instructions. Neither escrow agent shall incur any liability in the
performance of his duties hereunder, and each escrow agent shall be indemnified
by the party for whom he acts as escrow agent against all losses, costs
expenses and liabilities (including without limitation legal fees and expenses
and court costs) he may incur while acting as escrow agent hereunder, except
when occasioned by his gross negligence or willful misconduct.
8. For a period of seven (7) days following the Closing Date under
this Settlement Agreement (the "revocation period"), Haufler unilaterally may
revoke this Settlement Agreement by written notice to Bird, and this Settlement
Agreement shall not become effective or enforceable until the expiration of
such revocation period, PROVIDED HOWEVER, that nothing contained herein shall
be construed to excuse Bird and Haufler from transferring to the respective
escrow agents on the Closing Date the stock certificates identified in Section
herein, the
- 5 -
6
Releases identified in Section 2 and 3 herein, and the contributions
identified in Section 6 herein.
9. Immediately upon expiration of the revocation period provided in
Section 8 above, the Section 7.A. escrow agent shall release from escrow and
shall deliver to Haufler, through his counsel, the certificate(s) and Release
delivered to him pursuant to Sections 1 and 2, respectively, of this Settlement
Agreement. Immediately upon the expiration of the revocation period provided in
Section 8 above, the Section 7.B. escrow agent shall release from escrow and
shall deliver to Bird, through special counsel to the Bird board of directors,
the Release delivered to him pursuant to Section 3, and shall remit $28,509.56,
the amount equal to the Deferral Agreement contribution described in Section 6,
to the trustee of the rabbi trust on behalf of Bird. The Section 7.B. escrow
agent shall hold $13,139.66, the amount equal to the Savings Plan contribution
described in Section 6, in escrow until the date when the contributions for the
1993 plan year are actually deposited as provided in the Savings Plan, at which
time the escrow agent shall remit said amount to the trustee of the Savings
Plan trust on behalf of Bird. In the event Haufler exercises his right of
revocation during the revocation period as provided in Section 8 herein, this
Settlement Agreement shall immediately terminate, and neither Haufler nor Bird
shall have any rights or obligations under this Agreement. Thereupon, the
escrow agents shall return all
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7
documents and funds entrusted to them to their source, but nothing
contained herein shall be construed to excuse Bird from making the aforesaid
contributions identified in Section 6 above for Haufler's benefit in the
ordinary course.
10. Haufler hereby acknowledges that he has been given the opportunity
to consider this Settlement Agreement for a period of at least twenty-one (21)
days prior to executing it. If Haufler elects to execute this Settlement
Agreement within fewer than twenty-one (21) days of the date of its delivery to
him, Haufler hereby warrants and represents that such decision was entirely
voluntary and that he has the opportunity to consider this Settlement Agreement
for the entire twenty-one (21) day period. Haufler further warrants and
represents that he has had the opportunity to consult with his attorney prior
to executing this Settlement Agreement.
11. The execution and delivery of this Settlement Agreement is for the
purpose of settling the above-described dispute between the parties and is not
to be construed as an admission of any obligation, liability or wrongdoing of
any kind or nature on the part of either of the parties, which the parties
expressly deny. Upon release, and delivery or payment, by the applicable escrow
agent, at the expiration of the revocation period, of the Bird common stock
certificates referred to in Section 1, the Releases referred to in Sections 2
and 3, and the payment to the rabbi trust in accordance with Section 6, all
then outstanding
- 7 -
8
controversies and disputes between Haufler and Bird shall be deemed to have
been settled. Haufler hereby acknowledges that after the Closing he will not
make claims pursuant to the Bird Long Term Incentive Compensation Plan or
claims to any options, whether expired or not, for the purchase of stock of
Bird or any stock appreciation rights.
12. This Settlement Agreement shall be binding upon and inure to the
benefit of Bird and its affiliates, subsidiaries, parent corporations,
partnerships and joint ventures in which Bird is a partner or joint venturer,
and its agents, employees, officers, directors, successors and assigns, and
Haufler and his heirs, next of kin, executors, administrators, successors and
assigns.
13. Bird hereby warrants and represents that its execution of this
Settlement Agreement and its performance of its obligations hereunder have been
duly authorized by all necessary corporate action and that the Settlement
Agreement is valid, binding and enforceable upon Bird in accordance with its
terms.
14. This Settlement Agreement and the Exhibits hereto constitute the
entire agreement between the parties hereto pertaining to the subject matter
hereof and supersede all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, between the parties, and
there are no warranties, representations or other agreements between the
parties in connection with the subject matter hereof
- 8 -
9
except as specifically set forth herein; PROVIDED HOWEVER, that nothing
contained in this Section 14 or in this Settlement Agreement shall be construed
to be in derogation of, or to prejudice, compromise or diminish in any manner
whatsoever Haufler's rights to the following:
a. a final payment of $28,509.56 required to be made to the rabbi
trust under the Deferral Agreement, as set forth in Section 6
above, and all other continuing rights to which Haufler is
entitled under the existing terms and conditions of the Deferral
Agreement;
b. benefits under all insurance policies maintained by Bird after the
Closing Date providing for liability insurance coverage for present
and former officers and directors;
c. indemnification rights as provided in Bird's by-laws; and
d. a final contribution of $13,139.66 for the benefit of Haufler
under the Savings Plan, as set forth in Section 6 above, and all
other continuing rights and benefits to which Haufler is entitled
under the existing terms and conditions thereof.
The terms of all of the above-mentioned documents are incorporated herein by
reference, are integral to this Settlement Agreement, and rights thereunder
shall remain in full force and effect after the Closing Date.
15. This Settlement Agreement may be executed in one or more
counterparts, each of which when so executed shall be deemed an original, and
all such counterparts together shall constitute but one and the same
instrument.
16. This Settlement Agreement may be amended or modified only in
writing executed bY the parties hereto.
- 9 -
10
17. This Settlement Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.
18. If for any reason any provision of this Settlement Agreement is
held invalid, such invalidity shall not affect any other provision of this
Settlement Agreement not held so invalid, and each such other provision shall
continue in full force and effect.
19. Unless the parties otherwise agree in writing, the Closing shall be
July 12, 1994, which is the "Closing Date" referred to herein. The Closing will
be held at a time and place in Massachusetts acceptable to each of the parties.
IN WITNESS WHEREOF, Bird Corporation and George J. Haufler have
executed this Settlement Agreement as of the day and year first written above.
BIRD CORPORATION
Attest:______________________________ By:______________________________
Ass't Sec'y Duly Authorized
Dated 7/7/94
GEORGE J. HAUFLER
Witness:_____________________________ _________________________________
George J. Haufler
Dated:
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11
17. This Settlement Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.
18. If for any reason any provision of this Settlement Agreement is
held invalid, such invalidity shall not affect any other provision of this
Settlement Agreement not held so invalid, and each such other provision shall
continue in full force and effect.
19. Unless the parties otherwise agree in writing, the Closing shall be
July 12, 1994, which is the "Closing Date" referred to herein. The Closing will
be held at a time and place in Massachusetts acceptable to each of the parties.
IN WITNESS WHEREOF, Bird Corporation and George J. Haufler have
executed this Settlement Agreement as of the day and year first written above.
BIRD CORPORATION
Attest:__________________________ By:__________________________
Duly Authorized
Dated:
GEORGE J. HAUFLER
Witness:_________________________ _____________________________
George J. Haufler
Dated:
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12
AMENDMENT NO. 1 TO THE SETTLEMENT AGREEMENT OF
JULY 7, 1994 BETWEEN BIRD CORPORATION AND
GEORGE J. HAUFLER
Bird Corporation ("Bird") and George J. Haufler ("Haufler") hereby
amend their Settlement Agreement of July 7, 1994 as follows:
1. Bird's delivery to Haufler of Thirty Thousand (30,000) shares of
Bird common stock from Bird's Long Term Incentive Compensation Plan is solely
for the convenience of the parties and enables Bird expeditiously to deliver
unrestricted shares of Bird common stock to Haufler for a timely Closing
pursuant to this Settlement Agreement. Nothing in this Amendment No. 1 shall be
construed to contradict, detract from or be in derogation of the parties'
agreement in Section 1 of this Settlement Agreement that the delivery and
acceptance of the Bird common stock pursuant to the Settlement Agreement is
intended by the parties to serve as compensation for the alleged tortious
injury which Haufler asserts he suffered as a result of Bird's alleged conduct
in connection with the events culminating in the termination of Haufler's
employment and the terms and conditions of that termination.
2. The parties hereby warrant and represent that their respective
legal counsel, identified below, are duly authorized to execute this Amendment
No. 1 on behalf of their respective principals, and the parties further
acknowledge that this Amendment No. 1 is a valid amendment to the Settlement
13
Agreement pursuant to Section 16 thereof and shall be binding and
enforceable upon each party in accordance with its terms.
BIRD CORPORATION GEORGE J. HAUFLER
By its duly authorized By his duly authorized
attorneys, attorneys,
--------------------------- ---------------------------
Alan L. Lefkowitz Charles W. Robins
Susan M. Camillo Leonard G. Learner
DECHART, PRICE & RHOADS HUTCHINS, WHEELER & DITTMAR
Ten Post Office Square, South A Professional Corporation
Suite 1230 101 Federal Street
Boston, MA 02109 Boston, MA 02110
DATED: July 12, 1994
4549L
- 2 -
EX-10.(R)
5
SETTLEMENT AGREEMENT AS OF 11/25/94
1
EXHIBIT 10(r)*
SETTLEMENT AGREEMENT
--------------------
This Settlement Agreement is made as of the 25th day of November, 1994
by and between Bird Corporation ("Bird"), a Massachusetts corporation with its
principal place of business in Dedham, Massachusetts, and William A. Krivsky
("Krivsky"), an individual residing in Sharon, Massachusetts.
WHEREAS, Krivsky was employed by Bird for approximately eight years,
during which time he served as an officer of Bird and certain of its
affiliates;
WHEREAS, on August 5, 1994, Bird terminated Krivsky's employment with
Bird (the "Termination Date");
WHEREAS, Bird and Krivsky have. disagreed as to the terms of, and
Krivsky's rights in connection with, his termination of employment, but now
deem it in their best interests to resolve all claims and disputes that the
parties may have against each other, including without limitation claims for
injury to Krivsky's reputation; and
WHEREAS, Bird and Krivsky have agreed in principle that in settlement
and satisfaction of his asserted rights. Krivsky will receive certain severance
payments and certain other benefits in excess of those to which he would be
entitled under Bird's standard termination benefit policy, which policy is
summarized in a memorandum from Joseph D. Vecchiolla to Krivsky dated July 29,
1994 (the "Termination Memo"), a copy of which is attached hereto as Exhibit 1
and made a part hereof, and that Krivsky will release any and all claims he
might otherwise have against Bird relating to his employment and termination of
employment;
NOW, THEREFORE, in consideration of the promises contained herein and
for other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. REVOCATION PERIOD; EFFECTIVE DATE. For a period of seven (7)
days following the date that Krivsky executes this Settlement Agreement (the
"revocation period"), Krivsky unilaterally may revoke this Settlement Agreement
by written notice to Bird, and this Settlement Agreement shall not become
effective or enforceable until the expiration of such revocation period; the
date on which the revocation period expires without Krivsky having exercised
his right to revoke and this Settlement Agreement becomes effective shall be
the "Effective Date" of this Agreement. In the event Krivsky exercises his
right of revocation during the revocation period, this Settlement Agreement
shall immediately terminate, and neither Krivsky nor Bird shall have any rights
or obligations under this Agreement. Further, if Krivsky elects to execute this
Settlement Agreement within fewer
2
than twenty-one (21) days of the date of its delivery to him, Krivsky
hereby warrants and represents that such decision was entirely
voluntary and that he has been given the opportunity to consider
this Settlement Agreement for the entire twenty-one (21) day
period. Krivsky further warrants and represents that he has had the
opportunity to consult with his attorney concerning the provisions of
this Agreement prior to .executing this Settlement Agreement.
2. CASH PAYMENTS. Upon the occurrence of the Effective Date, Bird
agrees to pay to Krivsky, for a period of twenty (20) weeks, an amount equal to
his base salary as in effect immediately prior to his Termination Date, payable
biweekly. Said payments will be made from December 9, 1994 through April 14,
1995. The payments described in this Paragraph 2 shall not be required to be
reduced or modified in the event Krivsky accepts employment with, or otherwise
receives earned income from, a third party prior to completion of all such
payments.
3. LONG TERM INCENTIVE PLAN; ADDITIONAL PAYMENTS. Upon the occurrence
of the Effective Date, the parties agree (i) that the payment to Krivsky
pursuant the Bird Long Term Incentive Compensation Plan ("LTIP Plan") that
became payable on June 28, 1994 is the last payment to which Krivsky shall be
entitled under the LTIP Plan; (ii) that the June 2,8, 1994 LTIP Plan payment
shall be paid in shares of Bird common stock, except the 25% cash payment to be
made pursuant to the first clause of Paragraph 10 of the LTIP Plan; (iii) that
Bird shall increase the gross amount of Krivsky's award, payable in cash, by
$4,536.00, which amount Bird shall apply directly to satisfy Krivsky's tax
withholding obligations with respect to said LTIP Plan payment; (iv) that
Krivsky shall pay to Bird in cash all amounts of tax withholding remaining due
as a result of (ii) and (iii) above; (v) that Bird shall issue to Krivsky
without any payment from Krivsky 15,000 shares of Bird common stock; and (vi)
that all remaining shares of Bird common stock held in escrow for Krivsky's
benefit under the terms of the LTIP Plan shall be forfeited and shall revert to
the Bird treasury.
4. OPTIONS. Krivsky shall be entitled to exercise any stock options or
stock appreciation fights (SARs") issued by Bird and outstanding and
exercisable on Krivsky's Termination Date for such period as is permitted
under, and otherwise subject to and in accordance with the terms of, the
agreements evidencing said options and/or SARS ("options"); in addition, (a)
the Board of Directors of Bird (the "Board") has agreed to amend said options
and SARs, effective as of the Effective Date, to permit their exercise at any
time beginning with Krivsky's termination of employment and ending on December
20, 1994, in substantially the form attached hereto as Exhibit 2; and (b) upon
the occurrence of the Effective Date, Krivsky shall have the right, without
cost to him, (i) to apply the cash receivable upon simultaneous exercise and
sale of shares subject to said options, determined on the basis of a fair
market value per share of $8.75, to payment of
- 2 -
3
the exercise price under said options and to receive the net number of shares
remaining after said "cashless exercise;" and (ii) to elect that cash
(determined on the basis of a fair market value per share of $8.75) be payable
in exchange for a sufficient number of said shares to enable him to satisfy his
tax withholding obligations, which cash amount Bird shall apply directly to
satisfy Krivsky's tax withholding obligations with respect to said option
exercise.
5. DEFERRED COMPENSATION AGREEMENT. Krivsky has elected to, and
shall, receive in five approximately equal annual installments such amounts as
are credited to him under the terms of the Deferred Compensation Agreement for
William A. Krivsky between Krivsky and Bird, effective November 21, 1989, and
contributed to the trust (the "Rabbi Trust") established pursuant to the
associated Krivsky Trust Agreement, dated November 20, 1989 (together, the
"Deferral Agreement"), the first of which installments shall be payable as
provided in the amendment to said Deferred Compensation Agreement appended
hereto as Exhibit 3. In addition, Krivsky has requested, and the Board has
agreed, to amend the terms of said Deferred Compensation Agreement, in the form
attached hereto as Exhibit 3, to cause all then remaining benefits under the
Deferral Agreement to be paid in a single lump sum as soon as practicable, but
in no event later than thirty (30) days, after the occurrence of certain events
specified in said amendment.
6. INDEMNIFICATION; LIABILITY INSURANCE. Upon the occurrence of
the Effective Date, Krivsky shall be entitled, with respect to all of his acts
and omissions during the period that he was an employee of Bird, to the
indemnification rights provided under Bird's by-laws and to coverage under all
insurance policies maintained by Bird after the Effective Date providing for
liability insurance for present and former officers and directors of Bird.
7. NO OTHER ADDITIONAL RIGHTS OR BENEFITS. Krivsky acknowledges
and agrees that the only rights and benefits to which he is entitled from Bird
in connection with his employment with Bird and its affiliates and his
termination of such employment are the benefits described in Paragraphs 2
through 6 above and in the Termination Memo, to the extent provided in
Paragraph 9, and, except to the extent provided in said Paragraphs and Memo,
Krivsky specifically acknowledges and agrees (i) that after the Effective Date
he will not make any claims pursuant to any bonus or incentive plans maintained
by Bird, the LTIP Plan, any stock options or stock appreciation rights ("SARs")
granted by Bird, Bird's Management Incentive Compensation Plan (the "MICP
Plan"), Bird's health and life insurance arrangements, or the Deferral
Agreement, and (ii) that he hereby waives and surrenders, and will not assert,
any claims whatsoever that he may have had pursuant to the letter agreement
between Bird and Krivsky dated November 25, 1986, as amended as of May 24, 1990
(the "Parachute Agreement").
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4
8. RELEASES. Krivsky does hereby remise, release and forever
discharge, and by these presents does for himself and his heirs, next of kin,
executors, administrators, successors and assigns (collectively, "Krivsky")
remise, release and forever discharge Bird Corporation, a Massachusetts
corporation, and its affiliates, subsidiaries, parent corporations,
partnerships and joint ventures in which Bird is a partner or joint venturer,
and its agents, employees, officers, directors, successors and assigns
(collectively, "Bird"), jointly and severally, of and from any and all actions,
causes of action, suits, debts, controversies, damages, judgments, executions,
accounts, loss, claims, demands and liabilities whatsoever, in law or in equity
(collectively, "claims"), which against Bird Krivsky ever had, now has or may
have for, upon or by reason of any matter, cause or thing, from the beginning
of the world to the date of these presents, including, without limiting the
generality of the foregoing, any claims whatsoever arising from or related to
Krivsky's services as an officer or employee of Bird and the termination
thereof, and all claims under the Parachute Agreement.
This Release includes all claims arising during Krivsky's employment or
termination thereof arising under federal, state or local laws prohibiting
employment discrimination based upon age, race, sex, religion, handicap,
national origin or any other protected characteristic, including, but not
limited to, any and all claims under the Age Discrimination in Employment Act,
Title VII of the Civil Rights Act, the Americans with Disabilities Act and
Massachusetts General Laws, Chapter 151B and Chapter 93, and all claims for
injury to reputation.
Nothing contained in this Release shall be construed to be a waiver or
a release of Bird with respect to Krivsky's fights to the following:
a. payment of the amount credited to Krivsky's account prior to
his Termination Date pursuant to the Deferral Agreement, which
amount is payable from the Rabbi Trust only in accordance with
the existing terms and conditions of the Deferral Agreement, as
amended to the date hereof, and Paragraph 5 above;
b. payment under and in accordance with the terms and conditions
of the LTIP Plan and Paragraph 3 above of the amount of
Krivsky's benefit thereunder that became vested on June 28,
1994;
c. exercise of any Bird stock options or SARs granted to Krivsky,
to the extent they remain outstanding and were exercisable as
of the date of Krivsky's termination, in accordance with their
terms and Paragraph 4 above;
d. indemnification and insurance coverage to the extent provided
in Paragraph 6 above; or
- 4 -
5
e. rights under this Settlement Agreement, and under the
Termination Memo to the extent provided in Paragraph 9.
Bird does hereby remise, release and forever discharge Krivsky of and
from any and all actions, causes of action, suits, debts, controversies,
damages, judgments, executions, accounts, loss, claims, demands and liabilities
whatsoever, in law or in equity (collectively, "claims"), which against Krivsky
Bird ever had, now has or may have for, upon or by reason of any matter, cause
or thing, from the beginning of the world to the date of these presents, but
excluding any claims relating to conduct for which Krivsky would not be
entitled to indemnification under Bird's by-laws or that may hereafter arise
under this Settlement Agreement or the Termination Memo.
9. TERMINATION MEMO. The parties agree that the benefits described
in the paragraphs of the Termination Memo numbered 1 through 5, 7, 11, and the
second sentence of the paragraph numbered 6 on Exhibit 1 have been provided in
full and/or are as of the date of this agreement no longer applicable. The
parties also agree that the remaining provisions of the Termination Memo shall
continue to apply by their terms and are not inconsistent with this Agreement.
10. PURPOSE AND EXTENT OF AGREEMENT. The execution and delivery of
this Settlement Agreement is for the purpose of providing certain benefits to
Krivsky that exceed those that would otherwise have been provided pursuant to
Bird's standard severance policy and of settling any dispute that has arisen or
that might arise between the parties in connection with Krivsky's employment
with Bird and/or the termination of Krivsky's employment with Bird; it is not
to be construed as an admission of any obligation, liability or wrongdoing of
any kind or nature on the part of either of the parties, which the parties
expressly deny. Upon the Effective Date, all then outstanding controversies and
disputes between Krivsky and Bird shall be deemed to have been settled. Krivsky
hereby acknowledges that after the Effective Date he will not make claims
pursuant to any plan, program or policy of Bird, except to the extent and in
the manner provided under the terms of this Settlement Agreement.
11. BINDING EFFECT. This Settlement Agreement shall be binding upon
and inure to the benefit of Bird and its affiliates, subsidiaries, parent
corporations, partnerships and joint ventures in which Bird is a partner or
joint venturer, and its agents, employees, officers, directors, successors and
assigns, and Krivsky and his heirs, next of kin, executors, administrators,
successors and assigns.
- 5 -
6
12. AUTHORITY. Bird hereby warrants and represents that its
execution of this Settlement Agreement and its performance of its obligations
hereunder have been duly authorized by all necessary corporate action and that
the Settlement Agreement is valid, binding and enforceable upon Bird in
accordance with its terms.
13. ENTIRE AGREEMENT. This Settlement Agreement and the Exhibits
hereto constitute the entire agreement between the panics hereto pertaining to
the subject matter hereof and supersede all prior and contemporaneous
agreements, understandings, negotiations and discussions, whether oral or
written, between the panics, and there are no warranties, representations or
other agreements between the parties in connection with the subject matter
hereof; provided, however, that the parties understand and agree that this
Settlement Agreement shall not supersede the terms and conditions of the
instruments referred to in subparagraphs (a) through (e) of Paragraph 8 to the
extent such terms and conditions are specifically preserved thereunder.
14. COUNTERPARTS. This Settlement Agreement may be executed in one
or more counterparts, each of which when so executed shall be deemed an
original, and all such counterparts together shall constitute but one and the
same instrument.
15. AMENDMENT. This Settlement Agreement may be amended or modified
only in writing executed by the parties hereto.
16. GOVERNING LAW. This Settlement Agreement shall be governed by
the laws of the Commonwealth of Massachusetts.
17. SEVERABILITY. If for any reason any provision of this
Settlement Agreement is held invalid, such invalidity shall not affect any
other provision of this Settlement Agreement not held so invalid, and each such
other provision shall continue in full force and effect.
- 6 -
7
IN WITNESS WHEREOF, Bird Corporation and William A. Krivsky have
executed this Settlement Agreement as of the day and year first written above.
BIRD CORPORATION
Attest:__________________________ By:_______________________________
Joseph D. Vecchiolla, President
Dated:
William A. Krivsky
Witness:_________________________ __________________________________
William A. Krivsky
Dated: 11/25/94
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8
EXHIBIT 1
BIRD MEMORANDUM
CORPORATION____________________________________________________________________
To: William Krivsky From: Joe Vecchiolla
Subject: Benefits Status at Termination Date: 7/29/94
TERMINATION DATE: Your termination date is August 5, 1994.
REGULAR PAY: You will be paid for the two week period through your
termination date. As an exempt employee, you will have been paid up
through the termination date, August 5, 1994, not a week in arrears,
as is printed on the check stub.
VACATION PAY: In accordance with the Company Policy, you have earned
nine vacation days for the credited months up to the date of
termination. According to the payrol1 records, you have taken one
vacation day. Your final pay will be adjusted to provide for the
eight vacation days earned, but not taken.
SEPARATION PAY: You are eligible for six weeks of Separation Pay in
Lieu of Notice in accordance with Company Policy. Separation Pay in
Lieu of Notice payments will he made in the same biweekly schedule
your current pay. No deductions other than applicable payroll taxes
will be taken from your Separation Pay. Your pay-through date
September 16, 1994.
CAR ALLOWANCE: Your car allowance will end with the payment for the
month of July which was paid on July 22, 1994.
UNEMPLOYMENT COMPENSATION: You will be eligible to apply for
Unemployment Compensation benefits at the end of your Separation pay
period. It iS also the Company's right to discontinue Separation Pay
in the event you find other employment before the Separation period
ends.
GROUP INSURANCE: Your coverages under the BirdFLEX Core and Optional
Benefits terminate at the end of August, 1994. Your last deduction
for these coverages Will take place with the August 19 pay date.
Your life insurance coverage under the Key Manager Insurance Plan
will also terminate on August 31, 1994. You may convert this policy
to an indiVidual policy by paying Bird for the cash value of the
policy. The approximate cash value is $15,000.
COBRA: You will be notified in writing of your right to continue
Medical and Dental Coverages and a Health Care Reimbursement Account
under COBRA. If you accept the offer and pay the premiums within the
required time frame, you may continue coverages for up to 18 months
or until you become covered under another plan.
CONTINUATION OF OTHER COVERAGES: You may apply to convert Core
Benefit Plane such as Life Insurance and Long Term Disability Plans
to individual plans. YoU would purchase coverage directly from
9
CIGNA. Please contact Sheri Lyons if you have any interest in these
conversion options.
BESPSP: At termination, you will no longer be able to defer compensation into
the 401(k) plan. You will also be provided with a Request for Distribution
package. which will enable you to take a distribution from the Plan. The
Distribution package will explain that you may take a taxable distribution
from the Plan, or you may roll the proceeds over into an IRA or another
company 401(k) plan allowed by that plan). Distributions made directly
to an individual will involve mandatory withholding of Federa1 Income Taxes.
The Distribution package will also require you to decide whether to take any
Company Stock you may own in the Plan as shares or take the distribution as
cash. The trustee will process the Request for Distribution on the last day of
the month in which your request is received. Valuation of Plan assets,
determination of the value of your individual account balance, and processing
of the distribution check should normally take approximately 6-8 weeks after
the valuation date. Since you are eligible to retire, you may elect to defer
your distribution until the end of the year.
COMPANY BASE CONTRIBUTION FOR 1993: The contribution for 1993 will be
made to the Trust by September 15, 1994. If you have already taken a
distribution, the Trustee will follow the same decisions you made in processing
this contribution as were made on the balance of your account.
VESTING: You are 100% vested in all Company Contributions.
If you have any questions or require any assistance, please let me
know, or see John Woodlay.
10
EXHIBIT 2
PROPOSED VOTE OF
BIRD CORPORATION
BOARD OF DIRECTORS
VOTED: That, upon the Effective Date under the Settlement Agreement,
dated November 25, 1994, between this corporation and William A. Krivsky
("Krivsky"), each of Krivsky's stock option agreements evidencing
options granted by this corporation and listed on the attached Exhibit
A be, and hereby is, amended to permit Krivsky to exercise each of
said options during the period commencing with his date of termination
and ending on December 20, 1994, subject in all other respects to the
terms and provisions of said agreements.
11
EXHIBIT A TO
SETTLEMENT AGREEMENT
BETWEEN BIRD CORPORATION
AND WILLIAM A. KRIVSKY
VESTED OPTIONS OUTSTANDING
AND EXERCISABLE
THROUGH DECEMBER 20, 1994
GRANT OPTION NUMBER OF
DATE PRICE OPTIONS
----- ------ -------
11/25/86 $8.000 20,000
7/28/87 $8.875 3,000
4/26/88 $5.000* 8,000
------
TOTAL 31,000
======
*Option also includes Stock Appreciation Rights.
12
EXHIBIT 3
BIRD CORPORATION
DEFERRED COMPENSATION AGREEMENT FOR WILLIAM A. KRIVSKY
AMENDMENT
--------------------------------------------------------------------------------
WHEREAS, Bird Incorporated and William A. Krivsky (the "Executive")
entered into a Deferred Compensation Agreement for William A. Krivsky dated
February 27, 1987, as amended June 27, 1994 (the "Agreement"); and
WHEREAS, in connection with a certain Settlement Agreement between Bird
Corporation ("Bird") and the Executive of even date herewith Bird and the
Executive have agreed to amend the Agreement to provide for an immediate lump
sum payment upon the occurrence of certain events;
NOW, THEREFORE, the Agreement is hereby amended as follows, effective
as of the "Effective Date", as defined in said Settlement Agreement:
Paragraph 5(b) of the Agreement is hereby amended by adding to the end
of said paragraph the following:
Further, in the event that (i) all or substantially all of the
assets of either the Vinyl Division of Bird Incorporated or the
Roofing Division of Bird Incorporated are sold to a party that is
not a parent or subsidiary, direct or indirect ("affiliate"), of
Bird or (ii) the currently outstanding indebtedness of Bird and
its affiliates to its institutional lenders is refinanced, then
the Executive and legal counsel designated by the Executive shall
be given prompt written notice of the occurrence of any of the
events described in (i) or (ii) and the Executive shall be
entitled to elect in writing to receive the full amount then
payable from the Executive's Trust Fund in a single lump sum as
soon as practicable, but in no event more than thirty (30) days,
following such election.
Paragraph 5(c) of the Agreement is hereby amended by adding to the end
of said paragraph the following:
Notwithstanding the preceding sentence, the first installment
payable to the Executive pursuant to his election to receive
installments over a five year period shall be paid as soon as
practicable after the Effective Date of the Settlement Agreement
between the Executive and Bird Corporation, dated November 25,
1994, rather than being payable on January 15, 1995.
13
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
25th day of November, 1994.
Bird Corporation
By:
-------------------------------
Joseph D. Vecchiolla, President
----------------------------------
William A. Krivsky
14
W. A. KRIVSKY
LONG TERM INCENTIVE PLAN DISTRIBUTION AT JUNE 28,1994
CALCULATION OF GROSS INCOME
19,110 shares @ $8.75 $167,212.50
Cash at 25% per 9/15/94 letter 56,135.50
Additional cash per Agreement 4,536.00
----------
GROSS INCOME (W-2) $227,884.00
Federal Income Tax at 20% (45,576.80)
State Income Tax at 5.95% (13,559.10)
Medicare at 1.45% (3,304.32)
Other miscellaneous deductions (165,443.78)
----------
NET PAY DUE KRIVSKY $ -0-
==========
NOTE: W.A. Krivsky owes Bird $1,768.72 in excess withholdings since
the cash portion of this distribution was less than the tax
withholding.
EX-27
6
FINANCIAL DATA SCHEDULE
5
1
U.S. DOLLARS
YEAR
DEC-31-1994
JAN-01-1994
DEC-31-1994
1
321,000
0
22,781,000
3,137,000
8,371,000
38,267,000
54,352,000
24,323,000
85,640,000
32,640,000
12,504,000
4,375,000
0
1,396,000
35,095,000
85,705,000
167,886,000
167,886,000
136,878,000
136,878,000
0
0
4,782,000
5,927,000
(7,010,000)
1,083,000
(4,766,000)
0
0
(3,683,000)
(1.31)
(0.79)