FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-3315
PUBLICKER INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-0991870
(State of incorporation) (I.R.S. Employer
Identification No.)
1445 East Putnam Avenue, Old Greenwich, Connecticut 06870
(Address of principal executive offices)
(203) 637-4500
(Registrant's telephone number, including area code)
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 .
Number of shares of Common Stock outstanding as of September 30, 1996:
15,422,785
PART I. FINANCIAL INFORMATION
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS AS OF
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(in thousands of dollars)
September 30, December 31,
1996 1995 *
(unaudited)
ASSETS
Current assets:
Cash, including short-term investments of $7,476 in 1996 $8,017 $74
Restricted cash - 4,500
Trade receivables, less allowance for doubtful accounts
(1996 - $85; 1995 -$84) 3,901 3,817
Inventories 2,167 2,887
Net assets of discontinued operations 4,070 14,122
Other 501 715
Total current assets 18,656 26,915
Property, plant and equipment:
Land 522 513
Buildings 2,209 1,983
Machinery and equipment 3,411 2,867
Less - accumulated depreciation (1,785) (1,619)
4,357 3,744
Goodwill 2,773 2,834
Other assets 1,714 2,065
$27,500 $35,558
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term obligations, including current maturities $549 $8,683
Trade accounts payable 1,981 3,513
Accrued liabilities 4,054 12,693
Total current liabilities 6,584 24,889
Long-term debt 1,711 1,873
Other non-current liabilities 10,393 11,390
Total liabilities 18,688 38,152
Shareholders' equity:
Common shares, $0.10 par value,
Authorized, 40,000,000 shares
Issued - 16,029,937 shares in 1996 and 15,405,937 in 1995 1,603 1,541
Additional paid-in capital 46,790 42,488
Accumulated deficit (since January 1, 1984) (35,577) (42,732)
Common shares held in treasury, at cost (4,004) (3,891)
Total shareholders' equity 8,812 (2,594)
$ 27,500 $ 35,558
* Restated for discontinued operations
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(in thousands of dollars except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September30,
1996 1995* 1996 1995*
Sales and revenues:
Sales of goods $4,393 $3,589 $11,871 $12,935
Revenues from services 2,261 2,571 6,855 8,301
6,654 6,160 18,726 21,236
Costs and expenses:
Cost of sales 3,225 2,768 9,488 9,822
Cost of services 1,606 1,757 4,729 5,511
General and administrative expenses 1,903 2,015 6,596 6,238
Selling expenses 324 293 884 894
Special charge - - 1,632 -
7,058 6,833 23,329 22,465
Income (loss) from operations (404) (673) (4,603) (1,229)
Other (income) expenses:
Interest income (106) (25) (276) (135)
Interest expense 127 485 721 1,552
Cost of pensions - nonoperating 185 168 555 550
Legal settlements and other costs (20) 130 8 314
186 758 1,008 2,281
Income (loss) from continuing operations
before income taxes (590) (1,431) (5,611) (3,510)
Charge (credit) in lieu of income taxes (248) - (2,357) -
Income (loss) from continuing operations (342) (1,431) (3,254) (3,510)
Discontinued operations:
Income (loss) from discontinued operations (net of
charge in lieu of income taxes of $259 and
$1,191 for three and nine months
ended in 1996) 357 1,084 1,645 3,584
Gain on sale of discontinued operations (net of
charge in lieu of taxes of $4,894 and income
taxes payable of $1,452) - - 8,764 -
Net income (loss) $15 $(347) $7,155 $74
Earnings (loss) per common share:
Continuing operations $(.02) $(.10) $(.19) $(.24)
Discontinued operations .02 .08 .62 .25
$ - $(.02) $.43 $ .01
Common shares used in calculation of
earnings per share 17,229,000 14,797,410 17,047,545 14,730,489
*Restated for discontinued operations
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(in thousands of dollars except share data)
(unaudited)
Accumulated
Common Shares Additional Deficit Common Share-
Shares Paid-in Since Treasury holders'
Issued Amount Capital 1-1-84 Shares (1) Equity
Balance - December
31, 1995 15,405,937 $1,541 $42,488 $(42,732) $(3,891) $(2,594)
Issuance of
common shares 624,000 62 574 - - 636
Purchase of
treasury shares - - - - (113) (113)
Net income - - - 7,155 - 7,155
Charge in lieu
of income taxes(2) - - 3,728 - - 3,728
Balance - September
30, 1996 16,029,937 $1,603 $46,790 $(35,577) $(4,004) $8,812
(1) Represents 607,152 and 545,027 of common shares
held in treasury at September 30, 1996 and
December 31, 1995, respectively.
(2) Represents an increase in additional paid-in
capital for charge in lieu of income taxes
related to the utilization of net operating loss
carryforwards which existed as of January 1,
1984, the date of the corporate revaluation.
Such taxes will never be paid or payable and,
accordingly, are added directly to shareholders'
equity (See Note 5).
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(in thousands of dollars)
(unaudited)
Nine Months Ended
September 30,
1996 1995*
Cash flows from operating activities:
Income (loss) from continuing operations $ (3,254) $ (3,510)
Adjustments to reconcile income (loss) to net cash provided by
(used in) continuing operations:
Charge (credit) in lieu of income taxes (2,357) -
Depreciation and amortization 602 643
Provision for doubtful accounts - 58
Changes in operating assets and liabilities:
Restricted cash 4,500 (4,500)
Trade receivables (84) 435
Inventories 720 (467)
Other current assets 249 (172)
Other assets 260 (346)
Trade accounts payable (1,532) (1,141)
Accrued liabilities (8,639) 6,496
Other non-current liabilities (997) (5,486)
Net cash provided by (used in) continuing operations
(10,532) (7,990)
Income from discontinued operations 10,409 3,584
Adjustments to reconcile income to net cash provided by (used in)
discontinued operations:
Gain on sale of discontinued operations (13,658) -
Charge in lieu of income taxes 6,085 -
Decrease (increase) in net assets of discontinued operations
(3,888) (1,580)
Net cash provided by (used in) discontinued operations
(1,052) 2,004
Net cash provided by
(used in) operating activities (11,584) (5,986)
Cash flows from investing activities:
Proceeds from sale of discontinued operations 31,923 2,240
Capital expenditures (997) (374)
Net cash
provided by (used in) investing activities 30,926 1,866
Cash flows from financing activities:
Redemption of 13% Subordinated Notes (7,500) -
Borrowings (repayments) under
revolving credit lines (4,012) (259)
Borrowings (repayments)
of term loans and notes payable (1,210) 265
Proceeds from the issuance of common shares 636 592
Purchase of treasury stock (113) (279)
Net cash provided by (used in)
financing activities (12,199) 319
Net increase (decrease) in cash 7,143 (3,801)
Cash - beginning of period 874 6,274
Cash - end of period $ 8,017 $ 2,473
* Restated for discontinued operations
Note 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements
reflect all normal and recurring adjustments that are, in the opinion of
management, necessary to present fairly the financial position of Publicker
Industries Inc. and subsidiary companies as of September 30, 1996 and the
results
of their operations and their cash flows for the three and nine months ended
September 30, 1996 and 1995. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally
accepted accounting principles have been omitted. These condensed financial
statements should be read in conjunction with the financial statements and
notes
thereto included in the Company's Annual Report on Form 10-K for the year
ended
December 31, 1995.
Cash Flow Information
Cash paid for interest during the nine months ended September 30, 1996
and 1995 was approximately $812,000 and $1,156,000, respectively. Cash paid
for
income taxes was $1,332,000 for the nine months ended September 30, 1996. No
cash was paid for income taxes during 1995.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed using the weighted
average number of common shares and the dilutive effect of share equivalents
(stock options and warrants) outstanding during each period. The effect of
stock
options and warrants on the computation for 1995 were not included as they
were
antidilutive.
Note 2 - DISCONTINUED OPERATIONS
On October 31, 1996, the Company completed the sale of substantially
all of the assets of Masterview Window Company, Inc. ("Masterview") for
$15,250,000, plus the assumption of certain liabilities, subject to adjustment
based on the closing date net book value of assets sold. The buyer paid
$13,929,000 in cash at closing. Of the remaining $1,321,000 balance of the
purchase price, $845,000 will be held in escrow to cover potential purchase
price
and indemnity adjustments, which are not expected to be material. The balance
of the purchase price, or $476,000, will be held in escrow and released as the
Company expends funds for certain environmental remediation activities. The
gain
on the sale of Masterview, which is expected to be approximately $7,000,000
pretax, will be recorded in the fourth quarter of 1996.
On March 29, 1996, the Company sold substantially all of the assets of
Fenwal Electronics, Inc. ("Fenwal") for $26,483,000 in cash, plus the
assumption
of certain liabilities. On February 16, 1996, the Company sold substantially
all
of the assets of Bright Star Industries Incorporated ("Bright Star") for
$5,540,000, plus the assumption of certain liabilities. Of the purchase
price,
$100,000 will be held in escrow for one year to cover potential indemnity
adjustments, which are not expected to be material. The sales of Fenwal and
Bright Star resulted in a pretax gain of $15,110,000 which was offset by a
charge
in lieu of income taxes of $4,894,000 and income taxes payable of $1,452,000.
An amount equal to the charge in lieu of income taxes has been credited to
additional paid-in capital (see Note 5).
On January 31, 1995, the Company sold substantially all the assets of
Associated Testing Laboratories, Inc. ("ATL") for $2,240,000 in cash, plus the
assumption of certain liabilities.
Masterview, Fenwal, Bright Star and ATL have been reflected as
discontinued operations in the accompanying financial statements. Net sales
of
discontinued operations for the nine months ended September 30, 1996 and 1995
were $24,991,000 and $36,982,000, respectively.
Note 3 - DEBT
In October 1995, the Company entered into a three year $17,060,000
credit agreement ("Loan Agreement"). The Loan Agreement provides for a
revolving
credit line ("Revolver"), term promissory notes ("Term Notes") and a credit
facility for future capital expenditure financing. The Loan Agreement is
secured
by substantially all of the Company's assets and bears interest at a rate of
one
and one-half percent (1 1/2%) in excess of the prime rate.
The Loan Agreement and related documents contain certain covenants
including, among others, maintenance of minimum working capital and adjusted
net
worth (as defined). In the event the Loan Agreement, or portions thereof, is
repaid before maturity, the Company must pay a prepayment penalty equal to 3%
in
year one, 2% in year two and 1% in year three of the credit facility repaid.
In connection with the sale of discontinued operations, the outstanding
borrowings under the Revolver and the Term Loans related to Fenwal and Bright
Star were repaid. As of September 30, 1996, the Company had borrowing
availability under the Revolver based on eligible accounts receivable and
inventories, as defined, of approximately $4,000,000.
On April 19, 1996, the Company redeemed all of its outstanding 13%
Subordinated Notes due December 15, 1996. The redemption price was equal to
the
principal amount of $7,500,000, plus accrued interest to the redemption date.
Note 4 - INVENTORIES
Inventories at September 30, 1996 and December 31, 1995, consisted of
the following:
September 30, December 31,
1996 1995
(in thousands)
Raw materials and supplies $ 1,407 $ 1,521
Work in process 361 371
Finished goods 399 995
$ 2,167 $ 2,887
Note 5 - INCOME TAXES
As of September 30, 1996, approximately $94,000,000 of U.S. tax loss
carryforwards (subject to review by the Internal Revenue Service), expiring
from
1997 through 2010, were available to offset future taxable income. As a
result
of a corporate revaluation during 1984, tax benefits resulting from the
utilization in subsequent years of net operating loss carryforwards existing
as
of the date of the corporate revaluation will be excluded from the results of
operations and directly credited to additional paid-in capital when realized.
As of September 30, 1996, approximately $18,000,000 of the Company's U.S. tax
loss carryforwards predated the corporate revaluation.
As of September 30, 1996, deferred tax assets of approximately
$33,000,000 relating to the tax benefit of the Company's U.S. tax loss
carryforwards were offset by a full valuation allowance. As of September 30,
1996, approximately $6,000,000 of deferred tax assets predated the corporate
revaluation. Subsequent adjustments to the valuation allowance with respect
to
the deferred tax assets which predated the corporate revaluation would be
directly credited to additional paid-in capital.
For the nine months ended September 30, 1996, the Company recorded a
charge in lieu of income taxes of $3,728,000 and a provision for income taxes
currently payable of $1,452,000. The charge in lieu of income taxes relates
to
the utilization of net operating loss carryforwards which existed as of
January
1, 1984, the date of the corporate revaluation. Such taxes will never be paid
or payable and, accordingly, an amount equal to the charge has been credited
to
additional paid-in capital.
Note 6 - ENVIRONMENTAL LITIGATION
On April 12, 1996, a Consent Decree among the Company, the
Environmental Protection Agency, the U.S. Department of Justice and the
Pennsylvania Department of Environmental Protection ("PADEP") was entered by
the
court which resolved all of the United States' and PADEP's claims against the
Company for recovery of costs incurred in responding to releases of hazardous
substances at a facility previously owned and operated by the Company. The
Company had previously funded $4,500,000 into a court administered escrow
account. Following the entry of the Consent Decree, additional payments
totaling
$4,850,000 were made in April and May of 1996. Further payments totaling
$5,000,000 plus interest will be made to the United States and Commonwealth of
Pennsylvania over a six year period commencing on April 12, 1997.
Note 7 - SPECIAL CHARGE
During the fourth quarter of 1995, the Company decided to move the
operations of its Greenwald Industries, Inc. subsidiary from a leased facility
in Brooklyn, New York to a newly acquired facility in Chester, Connecticut. A
special charge of $1,632,000 was recorded in the first nine months of 1996
which
included $668,000 in severance costs associated with 110 terminated employees,
$246,000 for lease termination costs and $718,000 for costs related to plant
and
employee relocation, recruiting and training new personnel and for temporary
living allowances. The move was completed by April 30, 1996. As of September
30, 1996, the accrued liability related to the special charge was $148,000.
It
is expected that the remaining accrual balance will be expended by December
31,
1996.
Note 8 - COMMON STOCK LISTING
On July 11, 1996, the New York Stock Exchange ("NYSE") announced that
trading in the Company's common stock would be suspended before the opening of
trading on August 1, 1996. The NYSE staff indicated that its decision to
delist
was based on consideration of certain qualitative listing criteria, including
the
reduction in operations due to recent and proposed subsidiary sales, as well
as
the Company's failure to meet certain quantitative listing criteria, including
average net income for the last three years and net tangible assets. On
August
1, 1996, the Company's common stock began trading on the OTC Bulletin Board
under
the symbol PLKR. The Company filed an appeal of the NYSE staff decision. On
November 11, 1996, the NYSE Board of Directors' Committee for Review affirmed
the
staff decision to delist the Company's common stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Operating Results - Third Quarter
Publicker's consolidated sales of $6,654,000 for the third quarter of
1996 increased by approximately 8% from $6,160,000 for the third quarter of
1995.
The increase in sales was due to a 3% increase in selling prices and a 5%
increase in volume. The Company's loss from continuing operations for the
third
quarter of 1996 totaled $342,000 compared to a loss of $1,431,000 for the
third
quarter of 1995.
The Company reported net income of $15,000 for the third quarter of
1996 compared to a net loss of $347,000 or $.02 per share for the third
quarter
of 1995. The 1996 third quarter results included cost of pensions-
nonoperating
of $185,000 and income from discontinued operations of $357,000. The 1995
third
quarter results included cost of pensions-nonoperating of $168,000, legal
settlements and other costs of $130,000 and income from discontinued
operations
of $1,084,000. Interest expense decreased to $127,000 for the third quarter
of
1996 compared to $485,000 for the same period in 1995, due to a reduction in
overall debt levels.
Sales for the Company's manufacturing segment (which consists of one
subsidiary company, Greenwald Industries, Inc.) for the third quarter of 1996
were $4,393,000 compared to $3,589,000 for the third quarter of 1995. The
increase in sales was due to a 3% increase in selling prices and a 20%
increase
in volume. This segment had income from operations of $676,000 for the third
quarter of 1996 compared to $359,000 for the same
period in 1995.
Revenues for the Company's services segment (which consists of one
subsidiary company, Orr-Schelen-Mayeron & Associates, Inc.) decreased by
approximately 12% to $2,261,000 for the third quarter of 1996 compared to
$2,571,000 for the third quarter of 1995. A 4% increase in OSM's fee schedule
was more than offset by a significant reduction in production employee
headcount
versus 1995. The services segment had income from operations for the third
quarter of 1996 of $97,000 compared to a $56,000 loss for the same period in
1995.
Operating Results - Nine Months
For the nine months ended September 30, 1996, Publicker had
consolidated sales of $18,726,000 compared to $21,236,000 for 1995. The
decrease
in sales was due to a 15% decrease in volume offset by a 3% increase in
selling
prices. The Company's loss from continuing operations for the nine months
ended
September 30, 1996 totaled $3,254,000 compared to $3,510,000 for the nine
months
ended September 30, 1995.
The Company reported net income of $7,155,000 or $.43 per share for the
nine month period ended September 30, 1996 and $74,000 or $.01 per share for
the
comparable period in 1995. The 1996 results include cost of
pensions-nonoperating of $555,000 and income from discontinued operations of
$10,409,000.
The 1995 results include cost of pensions-nonoperating of $550,000, legal
settlements and costs of $314,000 and income from discontinued operations of
$3,584,000.
Sales for the Company's manufacturing segment for the first nine months
of 1996 totaled $11,871,000 as compared to $12,935,000 in 1995. The sales
decline was attributable to a disruption in business activities caused by
Greenwald's move to a newly acquired facility in Chester, Connecticut in
early
1996. The move was completed by April 30, 1996. This segment had a loss from
operations of $990,000 for the nine months ended September 30, 1996 compared
to
income of $1,498,000 for the prior year. The decrease in operating income of
$2,488,000 is primarily attributable to a $1,632,000 special charge associated
with Greenwald's move, a $372,000 writedown of certain obsolete inventories
and
a disruption in business activities caused by the move.
Revenues for the Company's services segment decreased by 17% to
$6,855,000 for the first nine months in 1996 from $8,301,000 in 1995. The
revenue decline was primarily due to a significant reduction in production
employee headcount versus 1995. The services segment had a loss from
operations
of $41,000 for the nine months ended September 30, 1996 as compared to income
of
$176,000 for the comparable 1995 period. The decline is due to certain
operating
inefficiencies and lower contract margins. In response to the decline in
income
from operations, OSM reduced headcount and implemented spending and other
controls in the first quarter of 1996.
On March 29, 1996, the Company sold substantially all of the assets of
Fenwal Electronics, Inc. ("Fenwal") for $26,843,000 in cash, plus the
assumption
of certain liabilities. On February 16, 1996, the Company sold substantially
all
of the assets of Bright Star Industries Incorporated ("Bright Star") for
$5,540,000, plus the assumption of certain liabilities. Of the purchase
price,
$100,000 will be held in escrow for one year to cover potential indemnity
adjustments, which are not expected to be material. The sales of Fenwal and
Bright Star resulted in a pretax gain of $15,110,000 which was offset by a
charge
in lieu of income taxes of $4,894,000 and income taxes payable of $1,452,000.
An amount equal to the charge in lieu of income taxes has been credited to
additional paid-in capital.
Liquidity
During the first nine months of 1996, cash, including short-term
investments, increased by $7,143,000. Operating activities consumed cash of
$11,584,000, investing activities provided cash of $30,926,000 and financing
activities consumed cash of $12,199,000. Operating activities principally
consisted of the loss from continuing operations coupled with a reduction in
accrued liabilities associated with the environmental payments to the United
States and Commonwealth of Pennsylvania. Investing activities consisted of
proceeds of $31,923,000 from the sale of Fenwal and Bright Star offset by
capital
expenditures of $997,000. Financing activities consisted of repayments of the
Company's 13% Subordinated Notes, revolving credit line, term loans and notes
payable of $12,722,000 and treasury stock purchases of $113,000 offset by
$636,000 of proceeds from the issuance of common shares upon the exercise of
stock options.
In October 1995, the Company entered into a three year $17,060,000
credit agreement ("Loan Agreement"). The Loan Agreement provides for a
revolving
credit line ("Revolver"), term promissory notes ("Term Notes") and a credit
facility for future capital expenditure financing. The Loan Agreement is
secured
by substantially all of the Company's assets and bears interest at a rate of
one
and one half percent (1 1/2%) in excess of the prime rate. The Loan Agreement
and related documents contain certain covenants including, among others,
maintenance of minimum working capital and adjusted net worth (as defined).
In connection with the sale of discontinued operations, the outstanding
borrowings under the Revolver and the Term Loans related to Fenwal and Bright
Star were repaid. As of September 30, 1996, the Company had borrowing
availability under the Revolver based on eligible accounts receivable and
inventories, as defined, of approximately $4,000,000.
On April 19, 1996, the Company redeemed all of its outstanding 13%
Subordinated Notes due December 15, 1996. The redemption price was equal to
the
principal amount of $7,500,000, plus accrued interest to the redemption date.
On April 12, 1996, the Consent Decree that settles the Company's
environmental litigation with the United States and the Commonwealth of
Pennsylvania was entered by the U.S. District Court for the Eastern District
of
Pennsylvania, and became effective. The Company previously funded $4,500,000
into a court administered escrow account. Following the entry of the Consent
Decree, additional payments totaling $4,850,000 were made in April and May of
1996. Further payments totaling $5,000,000 plus interest will be made to the
United States and the Commonwealth of Pennsylvania over a six year period.
As previously mentioned, the Company completed the sale of
substantially all of the assets of Bright Star and Fenwal in the first quarter
of 1996. On October 31, 1996, the Company completed the sale of substantially
all of the assets of Masterview Window Company, Inc. ("Masterview") to
Masterview
Acquisition Corp., a company formed by BancBoston Capital, for $15,250,000,
plus
the assumption of certain liabilities, subject to adjustment based on the
closing
date net book value of assets sold. The buyer paid $13,929,000 in cash at
closing. Of the remaining $1,321,000 balance of the purchase price, $845,000
will be held in escrow to cover potential purchase price and indemnity
adjustments, which are not expected to be material. The balance of the
purchase
price, or $476,000, will be held in escrow and released as the Company expends
funds
for certain environmental remediation activities. The gain on the sale
of Masterview, which is expected to be approximately $7,000,000 pretax, will
be
recorded in the fourth quarter of 1996. The Company has also entered into a
non-binding letter of intent to sell substantially all of the assets of
Greenwald
Industries. There can be no assurance that the parties will enter into a
definitive agreement or ultimately consummate the proposed sale of Greenwald.
On August 15, 1996, the Board of Directors of the Company authorized
the repurchase of up to 1,000,000 shares of the Company's common stock. The
timing of the purchases and the number of shares bought is determined based on
management's discretion and is dependent on market and business conditions.
Through September 30, 1996, the Company repurchased 49,000 shares of common
stock
under the buy-back program for an aggregate cost of $86,000.
During the first nine months of 1996, the Company's capital
expenditures totaled $997,000. The Company anticipates that its level of
capital
expenditures for 1996 will be less than those of 1995. The 1995 capital
expenditures of $2,755,000 included $2,100,000 related to a facility purchase
in
Chester, Connecticut. The Company has not entered into any material
commitments
for acquisitions or capital expenditures and retains the ability to increase
or
decrease capital expenditure levels as required. The Company anticipates that
it will be able to fund its capital expenditures during 1996 with its
available
cash resources and its other cash flows as well as through capital equipment
financing.
At September 30, 1996, approximately $94 million of U.S. tax loss
carryforwards (subject to review by the Internal Revenue Service), expiring
from
1997 through 2010, were available to offset future taxable income.
On July 11, 1996, the New York Stock Exchange ("NYSE") announced that
trading in the Company's common stock would be suspended before the opening of
trading on August 1, 1996. The NYSE staff indicated that its decision to
delist was
based on consideration of certain qualitative listing criteria, including the
reduction in operations due to recent and proposed subsidiary sales, as well
as
the Company's failure to meet certain quantitative listing criteria, including
average net income for the last three years and net tangible assets. On
August
1, 1996, the Company's common stock began trading on the OTC Bulletin Board
under
the symbol PLKR. The Company filed an appeal of the NYSE staff decision. On
November 11, 1996, the NYSE Board of Directors' Committee for Review affirmed
the
staff decision to delist the Company's common stock.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
General Litigation
Various legal proceedings are pending against the Company. The Company
considers all such proceedings to be ordinary litigation incident to the
character of its business. Certain claims
are covered by liability insurance. The Company believes that the resolution
of
those claims to the extent not covered by insurance will not, individually or
in
the aggregate, have a material adverse effect on the financial position or
results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 21, 1996, an annual meeting of the shareholders of the
Company was held at which directors were elected to serve until their
successors
shall have been elected and shall have qualified. Shareholders approved the
sale
of certain of the Company's operating subsidiaries and an amendment to the
articles of incorporation to increase the Company's authorized shares. The
appointment of the Company's outside auditors for the year ending December 31,
1996 was also ratified. The number of votes cast for, against or
withheld/abstained and the number of broker non-votes with regard to each
nominee
or matter are set forth below:
Withheld/ Broker
For Against Abstained
Non-votes
Election of directors:
Harry I. Freund 13,402,482 N/A 223,815 -
Jay S. Goldsmith13,402,990 N/A 223,307 -
David L. Herman 13,482,658 N/A 143,639 -
Clifford B. Cohn13,481,314 N/A 144,983 -
L.G. Schafran 13,483,321 N/A 142,976 -
James J. Weis 13,483,241 N/A 143,056 -
Approval of Plan of
Asset Transfer 7,922,829 125,305 65,206 5,512,957
Approval of Amendment to
Amended and Restated
Articles of Incorporation 11,211,793 414,716 1,770,096
229,692
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K.
Exhibit 10.1: Asset Purchase Agreement dated August 16, 1996 among
Masterview Window Company, Inc., Publicker Industries Inc., Hanten
Acquisition Co., as sellers, and Masterview Acquisition Corp., as
buyer.
Exhibit 11: Calculation of earnings per share
(b) Reports on Form 8-K: During the third quarter of 1996, the Company
filed three reports:
Form 8-K dated July 15, 1996, relating to New York Stock Exchange
decision to suspend trading of Company's common stock effective
August 1, 1996.
Form 8-K dated August 8, 1996, relating to suspension of trading of
Company's common shares on the New York Stock Exchange and
commencement of trading on the OTC Bulletin Board.
Form 8-K dated August 22, 1996, relating to the execution of a
definitive agreement to sell substantially all of the assets of
the Company's Masterview Window Company, Inc. subsidiary.
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PUBLICKER INDUSTRIES INC.
(Registrant)
Date: November 14, 1996 /s/ James J. Weis
James J. Weis, President
and
Chief Executive Officer
/s/ Antonio L. DeLise
Antonio L. DeLise, Vice
President -
Finance, Principal
Financial and
Accounting Officer
Exhibit 10.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made this 16th day of
August, 1996 among (i) Masterview Window Company, Inc., a Delaware
corporation with its
principal executive offices at 3065 South 43rd Avenue, Phoenix, Arizona 85009
as seller
("Seller"), (ii) Publicker Industries Inc., a Pennsylvania corporation with
its principal
executive offices at 1445 East Putnam Avenue, Old Greenwich, Connecticut
06870,
("Publicker"), (iii) Hanten Acquisition Co., a Delaware corporation with its
principal
executive offices at 1445 East Putnam Avenue, Old Greenwich, Connecticut 06870
(the
"Parent", and together with Publicker, the "Shareholders"), and (iv)
Masterview
Acquisition Corp., a Delaware corporation with its principal executive offices
at c/o
BancBoston Ventures Inc., 100 Federal Street, Boston, Massachusetts 02110, as
buyer
("Buyer").
RECITALS:
WHEREAS, Seller is engaged in the "Business" (as hereinafter defined);
WHEREAS, Publicker owns all of the issued and outstanding shares of stock
of
Parent and Parent owns all of the issued and outstanding shares of stock of
Seller; and
WHEREAS, Seller desires to sell, transfer and assign to Buyer, and Buyer
desires
to purchase and acquire from Seller, on the terms and subject to the
conditions set forth
in this Agreement, substantially all of the assets used in the conduct of the
Business.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and intending to be legally bound, the parties hereto
agree as
follows:
1. Interpretation.
A. Definitions. As used in this Agreement, the following terms shall
have the
following meanings:
"Business" shall mean the business in which the Seller is engaged on
the
Closing Date, as described in Schedule 1.A.1. hereto, at the locations listed
in Schedule
1.A.2. hereto.
"GAAP" shall mean generally accepted accounting principles applied
on a basis
consistent with the Financial Statements (provided, that, without limiting the
foregoing,
the screen liability reserve included as an accrued liability on the Final
Closing
Balance Sheet shall be determined in accordance with the same methodology used
in the
preparation of the Opening Balance Sheet).
"Know-How" shall mean all know-how and information (not necessarily
proprietary) used by Seller in the Business on the Closing Date including,
without
limitation, (1) design drawings, (2) specifications and performance criteria,
(3)
operating instructions and maintenance manuals, (4) manufacturing information
including
production documentation, methods, layouts and supplier and cost information,
(5) copies
of on-site computer software and related documentation, including, without
limitation,
source and object code to the extent available, (6) prototypes, models or
samples, (7)
files relating to applications for Intellectual Property Rights, and (8) all
files
relating to customers and other tangible materials that are used in the
Business on the
Closing Date.
"Copy Rights" shall mean all published and unpublished rights in
works of
authorship including, without limitation, (1) literary works, including
books,
periodicals, catalogs, directories, textual advertising such as brochures,
pamphlets and
other literature, tabular lists, lectures, manuals and computer programs and
data bases;
(2) pictorial, graphic and sculptural works, including maps, architectural
plans and
renderings, blueprints, photographs, prints and pictorial illustrations such
as labels
and pictorial advertising, posters, brochures and pamphlets, and pattern
designs; (3)
audiovisual works; (4) sound/recordings; and (5) mask works, and all U.S.
pending and
issued copyright or mask work registrations thereon.
"Patent Rights" shall mean all (1) rights to inventions/conceived on
or
before the Closing Date by employees of the Seller who are engaged solely in
the
operation of the Business; (2) pending U.S. and foreign applications owned by
the Seller;
and (3) U.S. and foreign patents owned by the Seller, or for which the Seller
has the
right to apply for as of the Closing Date.
"Trademarks" shall mean trade names, trademarks, service marks,
trade dress
and product configurations that are used by the Seller to identify the
Business or any
part thereof and all (1) goodwill and associated common law rights; (2)
registration
applications pending thereon in any province, state or country; and (3)
registrations
issued thereon.
"Trade Secrets" shall mean all proprietary information that is used
by the
Seller in the Business and that (1) derives independent economic value, actual
or
potential, from not being generally known to, and not being readily
ascertainable by,
third parties who can obtain economic value from its disclosure or use and (2)
is the
subject of efforts by the Seller that were reasonable under the circumstances
to maintain
its secrecy, such as, without limitation, proprietary specifications,
formulas, drawings,
models, blueprints, software, production techniques and processes, retail and
wholesale
customer lists, vendor lists, compilations, merchandising information, cost
and pricing
information, business systems and methods.
"Intellectual Property Rights" shall mean the Patent Rights, Copy
Rights,
Trademarks and Trade Secrets as more fully described herein and other similar
rights in
technology that are in each case used by the Seller in the Business,
including, without
limitation, those items set forth in Schedule 1.A.3 hereto.
2. Sale of Assets and Assumption of Liabilities.
A. Assets Sold and Retained.
1. Assets Purchased. At the Closing,
Seller agrees to sell, transfer, convey, assign and deliver to Buyer and Buyer
agrees to
purchase and acquire, according to the terms and conditions of this Agreement,
all of
Seller's right, title, and interest in and to all of the assets and
properties, other
than the assets identified in Section 2.A.2 hereof, of the Seller
(collectively, the
"Purchased Assets"), including, without limitation, the following:
(a)all personal property leases listed on Schedule 2.A.1.a
hereto (the
"Personal Property Leases") and all real property leases listed on Schedule
2.A.1.a
hereto (the "Real Property Leases") and all leasehold improvements and
structures on the
real property leased thereby, and, to the extent covered by the Real Property
Leases, any
and all fixtures, machinery, installations, equipment and other property
attached thereto
or located thereon (the "Leased Real Property");
(b)all contracts of the Business, including, without
limitation, customer
contracts, royalty and license agreements and rights, contracts and agreements
for the
purchase or sale of utilities, goods, materials and services, rights to use
technology
owned by others and certain other agreements, including without limitation the
contracts
listed on Schedule 4.K, other than the contracts listed on Schedule 2.A.2.h,
which the
Buyer is not assuming (collectively, the "Contracts");
(c)all prepaid expenses and deposits of the Business;
(d)all accounts receivable of the Business or other rights to
receive
payment for services provided by the Business as of the Closing Date (the
"Closing Date
Receivables");
(e)all inventory of supplies, raw materials, component parts,
work-in-progress and finished goods of the Business on hand as of the Closing
Date (the
"Inventory");
(f)all plants, fixtures, machinery, installations, equipment,
tools, spare
parts, fittings, supplies, tractors, trailers, motor vehicles and other
tangible personal
property used in the Business, including, without limitation, those items set
forth on
Schedule 4.V ("Equipment");
(g)all on-site computer hardware and software owned by the
Seller and used
in the Business at the locations identified in Schedule 1.A.2 hereto (the
"Computer
Hardware and Software");
(h)all goodwill of the Business;
(i)the Know-How;
(j)the Intellectual Property Rights and all business names,
including the
right to use the name "Masterview Window Company, Inc." or derivations thereof
in the
conduct of the Business;
(k)all operating data, books and records of Seller, including
employment
and personnel records, customer lists and information, relating to customers
and
suppliers, with respect to the Business;
(l)to the extent assignment to the Buyer is permitted by law or
contract,
all rights, licenses, permits, and other operating agreements (in each case,
both
governmental and private) with respect to the Seller's right to provide
services of the
Business at the locations identified in Schedule 1.A.2 hereto or for which the
Seller is
the licensee, including without limitation those set forth on Schedule 4.F
attached
hereto, (the "Licenses and Permits");
(m)all of the Seller's rights under any agreements with respect
to the
employee plans described on Schedule 2.A.1.m hereto (the "Assumed Benefit
Arrangements");
and
(n)the real property described on Schedule 2.A.1.n hereto (the
"Real
Property"), and all structures, fixtures and improvements thereon; and
(o)all other assets, whether tangible or intangible that are
used by Seller
in the Business except as excluded by Section 2.A.2 (the "Other Assets").
2. Assets Retained. Notwithstanding
the provisions of Section 2.A.1, the Seller is not selling, assigning,
transferring or
conveying to Buyer the following assets, which shall be excluded from the
transactions
contemplated by this Agreement (the "Excluded Assets"):
(a) all receivables from either of the
Shareholders or any of their subsidiaries or affiliates;
(b) all cash, and cash equivalents and
investment securities;
(c) all prepaid expenses and deposits
of the Business to the extent not included in the Final Closing Balance Sheet;
(d)except as provided in Section 6.D.1 hereof, all of the
Seller's pension
plan or 401(k) plan assets;
(e)insurance policies of the Seller, except for (i) those
policies
specifically listed on Schedule 2.A.2.e, which are being assumed by the Buyer,
and (ii)
policies maintained by Seller with respect to the Assumed Benefit
Arrangements;
(f)all income or franchise tax refunds, deposits or credits;
(g)all insurance related refunds or claims, other than refunds
or claims
related to the insurance policies listed on Schedule 2.A.2.e; and
(h)the contracts listed on Schedule 2.A.2.h hereto.
3. Transfers of Personal Property
Leases, Real Property Leases and Contracts. To facilitate the assignment or
transfer of
Personal Property Leases, Real Property Leases and Contracts, Seller shall
execute such
documents of assignment or transfer as may be prepared by Buyer and reasonably
acceptable
to Seller (and which shall not impose any liability or obligation on
Shareholders or
Seller) that are necessary or appropriate for evidencing or recording the
assignments or
transfers to Buyer. Subject to the terms of Section 2.E hereof, in the event
any
assignment or transfer of any Personal Property Lease, Real Property Lease or
Contract
cannot be obtained, Seller and Buyer shall enter into a mutually satisfactory
license,
sublicense, lease, or independent contractor agreement, agency or other
relationship with
respect hereto with the intent of providing the same benefits and obligations
to Buyer
as if such assignment had occurred.
4. Transfer of Know-How. The
communication of transferred Know-How from Seller to Buyer shall occur
primarily through
Buyer's acquisition of property and engagement of Seller's personnel, provided
that
Seller shall have no responsibility to insure that any of its employees become
the
employees of Buyer. In addition, in order to facilitate the transfer of such
Know-How,
Seller shall use reasonable efforts, for a period of two (2) years from the
Closing Date,
to provide to Buyer, upon Buyer's written request, copies of any documents or
other
information in Seller's possession, defining or specifying the subject matter,
nature and
extent of the Know-How and take such other action as the parties mutually
agree is
reasonably necessary or appropriate to effectuate the transfer of such
Know-How.
B. Assignment of Intellectual Property Rights. On the Closing Date,
Seller
shall execute and deliver assignments with respect to the Intellectual
Property Rights
set forth on Schedule 1.A.3, including all goodwill associated therewith.
C. Risk of Loss. The risk of loss and all obligations to insure the
tangible
assets of the Business shall remain with Seller until the Closing, and shall
transfer
from Seller to Buyer at the time of Closing.
D. "As Is" Condition. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
THE
PURCHASED ASSETS ARE BEING SOLD "AS IS" AND "WHERE IS" AND "WITH ALL DEFECTS"
WITHOUT ANY
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED.
E. Assumption of Contractual Rights and Obligations Related Thereto.
At the
time of Closing, the Buyer shall assume, and hereby agrees to perform, the
rights and
obligations, and any other contractual obligations pursuant to the Personal
Property
Leases, Real Property Leases and the Contracts (collectively, the "Transferred
Rights,
Obligations and Agreements"), which are assigned to the Buyer to the extent
the
obligations arise or are to be performed following the Closing Date.
The Buyer shall use commercially reasonable efforts to assume and perform
all
of the corresponding obligations thereunder. To the extent that the
assignment hereunder
of any of the Transferred Rights, Obligations, Agreements or the assignment
under Section
2.B above shall require the consent of any other party (or in the event that
any of the
same shall be non-assignable), neither this Agreement nor any actions taken
hereunder
shall constitute an assignment or an agreement to assign if such assignment or
attempted
assignment would constitute a breach thereof or result in the loss or
diminution thereof;
provided, however, that in each such case, the Seller and the Buyer shall use
commercially reasonable efforts to obtain the consent of such other party to
an
assignment to the Buyer.
If such consent is not obtained, the Seller shall cooperate with the
Buyer in
a reasonable arrangement designed to provide the Buyer with the benefits and
burdens of
any such Transferred Rights, Obligations and Agreements and under the
Intellectual
Property Rights, including appointing the Buyer to act as its agent to perform
all of the
Seller's obligations under such Transferred Rights, Obligations and Agreements
and to
collect and promptly remit to the Buyer all compensation received by Seller
pursuant to
those Transferred Rights, Obligations and Agreements and to enforce, for the
account and
benefit of the Buyer, any and all rights of the Seller against any other
person arising
out of the breach or cancellation of such Transferred Rights, Obligations and
Agreements
by such other person or otherwise (any and all of which arrangements shall
constitute,
as between the parties hereto, a deemed assignment or transfer); provided
that, to the
extent that Seller is required to undertake any services or take any actions
in
furtherance of the performance of such Transferred Rights, Obligations and
Agreements,
any such services or actions shall be the subject of a separate agreement that
the
parties shall, in good faith, negotiate as promptly as possible and which
shall be
mutually acceptable to the parties. Each party shall be responsible for all
of its costs
and expenses incurred by it in connection with the actions required of it
under this
Section 2.E.
F. Assumption of Certain Liabilities by Buyer. From and after the
Closing,
Buyer shall, without any further responsibility or liability of or recourse to
Seller,
or any of its affiliates or their respective directors, shareholders,
officers,
employees, agents, consultants, representatives, successors, transferees or
assignees,
assume and be solely liable and responsible for the following liabilities and
obligations
arising out of the ownership of the Purchased Assets or the operation of the
Business
(the "Assumed Liabilities"):
1. all liabilities and obligations of
Seller under all Personal Property Leases, Real Property Leases, Contracts and
all other
of the Transferred Rights, Obligations and Agreements assigned or transferred
to Buyer
pursuant to Section 2.A hereof (or deemed assigned or transferred pursuant to
Section 2.E
hereof) which arise or are to be performed following the Closing Date, but
excluding the
"Excluded Liabilities" (as defined in Section 2.G hereof);
2. all accounts payable and accrued
liabilities of the Seller reflected on the unaudited December 31, 1995 balance
sheet of
the Seller to the extent that such accounts payable and accrued liabilities
remain
outstanding at the Closing, but excluding any Excluded Liabilities; and
3. all accounts payable and accrued
liabilities of the type set forth on the unaudited December 31, 1995 balance
sheet of the
Seller incurred by the Seller in connection with the Business in the ordinary
course of
business subsequent to December 31, 1995 and through the Closing Date to the
extent
accrued in accordance with GAAP and reflected on the Final Closing Balance
Sheet, but
excluding any Excluded Liabilities; and
4. liabilities of the Seller for any
contractual product warranty claim with respect to any product sold by the
Seller prior
to the Closing Date to the extent such liabilities do not exceed $50,000 in
aggregate
amount.
The assumption by Buyer of the Assumed Liabilities and the transfer
thereof by
Seller shall in no way expand the rights or remedies of any third party
against Seller
or Buyer as compared to the rights and remedies which such third party would
otherwise
have had.
G. All Other Liabilities Excluded. Notwithstanding the foregoing,
Seller
agrees that Buyer is assuming only those liabilities and obligations
enumerated in
Section 2.F and no others and Buyer and its affiliates and their respective
directors,
shareholders, officers, employees, agents, consultants, representatives,
successors and
transferees or assignees, shall have no liability or responsibility for any
liability or
obligation arising out of Seller's ownership or operation of the Purchased
Assets or the
Business prior to the Closing Date (except as expressly provided in Section
2.F),
including, without limitation, the following liabilities and obligations of
Seller (the
"Excluded Liabilities"):
1. any obligation of the Seller to
either of the Shareholders or any of their subsidiaries or affiliates;
2. any current or long-term liability
or obligation of the Seller with respect to indebtedness for borrowed money
and any
related debt issuance costs and with respect to any uncleared checks issued by
the Seller
which are outstanding on the Closing Date (all of which will be paid by
Seller);
3. any liability or obligation of the
Seller for income or franchise taxes;
4. any liability with respect to any
of the matters disclosed on Schedules 4.G, 4.L, and 4.N hereto;
5. liabilities for any contractual
product warranty claim with respect to any product sold by Seller prior to the
Closing
Date to the extent such liabilities exceed $50,000 in the aggregate amount
(the "Excluded
Warranty Claims"); and
6. any liabilities for management
bonuses accrued through the Closing.
3. Purchase Price: Payment: Adjustment.
A. Purchase Price.
1. Price. The purchase price for the
sale and transfer of the Purchased Assets shall be Fifteen Million Two Hundred
Fifty
Thousand Dollars ($15,250,000), plus the assumption of the Assumed Liabilities
set forth
in Section 2.F hereof, subject to adjustment as provided in Section 3.C (the
"Purchase
Price").
2. Allocation. Seller and Buyer
hereby agree that the Purchase Price paid for the Purchased Assets and the
noncompetition
covenant in Section 6.D.6 shall be allocated for purposes of this Agreement
and for tax
purposes in a manner to be agreed upon by Buyer and Seller prior to the
Closing and in
accordance with all applicable tax laws and regulations. Seller and Buyer
covenant and
agree that each shall prepare its tax returns employing the allocation made
pursuant to
this Section 3.A.2 and shall not take a position in any tax proceeding or
audit
inconsistent with such allocation. Seller and Buyer shall give prompt notice
to each
other of the commencement of any tax audit or the assertion of any proposed
deficiency
or adjustment by any taxing authority or agency which challenges such
allocation. Upon
determination of the Final Adjustment (as defined below) in accordance with
Section 3.C,
Seller and Buyer shall agree on a revised allocation of the Purchase Price
which reflects
the Final Adjustment.
B. Payment of Purchase Price. At the Closing, (i) Six Hundred Thousand
Dollars ($600,000) of the Purchase Price (the "Escrowed Funds") shall be
deposited by
Buyer into an Escrow Account to be established in accordance with the terms of
an escrow
agreement in the form of Exhibit A hereto (the "Escrow Agreement"), (ii) a
portion of the
Purchase Price equal to the Environmental Escrow Amount (as defined in Section
6.F
hereof) shall be deposited by Buyer into an escrow account to be established
in
accordance with the terms of an escrow agreement in the form of Exhibit B
hereto (the
"Environmental Escrow Agreement") and (iii) the balance of the Purchase
Price (the
"Cash Purchase Price"), as determined in accordance with Sections C.1 and C.2
below,
shall be paid by Buyer to Seller in immediately available funds.
C. Adjustment to and Payment of the Balance of the Purchase Price. The
Purchase Price has been derived by and agreed upon by the parties based on the
Net Book
Value (as defined below) as set forth on the unaudited balance sheet of Seller
as of
December 31, 1995, as shown on Exhibit C hereto (the "Opening Balance Sheet").
The
Purchase Price is subject to a dollar for dollar adjustment, upward or
downward, based
upon the change in the Net Book Value as set forth on the Final Closing
Balance Sheet (as
defined below) from that shown on the Opening Balance Sheet ($3,932,000).
Such
adjustment shall be the "Differential." The Differential shall be determined
as follows:
1. At the Closing, the Seller shall
have prepared and delivered to the Buyer (i) an unaudited balance sheet (the
"Initial
Closing Balance Sheet") of the Seller as of the month ended prior to the
Closing Date
(the "Calculation Date"), prepared in accordance with GAAP (except that there
shall be
no accrual for management and executive bonuses on such balance sheet) and
(ii) a
certificate of the Seller, certifying (A) that the Initial Closing Balance
Sheet was
prepared on the basis described in clause (i) above and (B) containing the
Seller's
calculation based on the Initial Closing Balance Sheet of the Net Book Value
as of the
Calculation Date.
2. If, as of the Calculation Date, (i)
the Net Book Value is less than $3,932,000, the Cash Purchase Price payable at
the
Closing shall be reduced by the amount, if any, by which the Net Book Value is
less than
$3,932,000 or (ii) the Net Book Value is greater than $3,932,000, the Cash
Purchase Price
payable at the Closing shall be increased by the amount, if any, by which the
Net Book
Value is greater than $3,932,000. Such adjustment shall be calculated based
on the
Initial Closing Balance Sheet and the officer's certificate delivered pursuant
to
paragraph 1 above. The adjustment made at the Closing pursuant to the
preceding sentence
(the "Initial Adjustment") is subject to subsequent adjustment as provided in
paragraphs
3, 4, 5 and 6 below.
3. Within forty-five (45) days after
the Closing Date, Seller shall prepare and deliver to Buyer an unaudited
balance sheet
(the "Final Closing Balance Sheet") showing the Net Book Value as of the close
of
business on the Closing Date immediately prior to giving effect to the
Closing. The
Final Closing Balance Sheet shall be prepared in accordance with GAAP (except
that there
shall be no accrual for management and executive bonuses on such balance
sheet).
Inventories included on the Final Closing Balance Sheet shall be valued on the
basis of
a physical inventory conducted by the Buyer and the Seller, with their
respective
independent accountants, within two (2) days following the Closing Date.
Following
delivery of the Final Closing Balance Sheet by Seller, Seller shall cooperate
with the
Buyer's independent accountants in connection with their review of the Final
Closing
Balance Sheet and shall permit the Buyer's accountants to review and make
copies of all
work papers, schedules and calculations used in the preparation thereof.
4. When the Seller delivers the Final
Closing Balance Sheet, the Seller shall also deliver a certificate (i)
certifying that
the Final Closing Balance Sheet was prepared in accordance with GAAP in
accordance with
the procedures set forth in paragraph 3 above and (ii) containing the Seller's
calculations, based on the Final Closing Balance Sheet (the "Seller's Proposed
Calculations") of the Net Book Value as of the Closing Date.
5. Within forty-five (45) days after
receipt of the Final Closing Balance Sheet and the accompanying certificate,
the Buyer
shall notify the Seller of its agreement or disagreement with the Final
Closing Balance
Sheet and the accuracy of any of the Seller's Proposed Calculations. During
such forty-five (45) day period, the Buyer shall have the right to direct its
independent
accountants, at the Buyer's expense, to review and test the Final Closing
Balance Sheet.
If the Buyer, after such review and test, disagrees with the Seller's Proposed
Calculations, and the Seller does not accept the Buyer's proposed alternative
calculations (the "Buyer's Proposed Calculations"), then, within thirty (30)
days after
the date of the Seller's rejection of the Buyer's Proposed Calculations, the
Seller and
the Buyer shall select another nationally recognized independent accounting
firm (other
than the Seller's independent accountants and the Buyer's independent
accountants) to
resolve the remaining disputed items (the "Remaining Disputed Items") by
conducting its
own review and test of the Final Closing Balance Sheet and thereafter
selecting either
the Buyer's Proposed Calculations of the Remaining Disputed Items or the
Seller's
Proposed Calculations of the Remaining Disputed Items or an amount in between
the two.
Each of the Buyer and the Seller agree that it shall be bound by such other
accounting
firm's determination of the Remaining Disputed Items. The fees and expenses
of such
accounting firm shall be paid jointly by the Buyer and the Seller, provided
that if the
difference between the Final Adjustment (as defined below) and the Final
Adjustment that
would have resulted from the use of the Proposed Calculations of one of the
parties
hereto (the "Erroneous Party") is more than twice as great as the difference
between the
Final Adjustment and the Final Adjustment that would have resulted from the
use of the
other party's Proposed Calculations, the Erroneous Party shall pay all of the
fees and
expenses of such accounting firm.
6. Upon the determination pursuant to
paragraph 5 of this Section 3.C of the Final Closing Balance Sheet and Net
Book Value as
of the Closing Date, the Purchase Price shall be recalculated pursuant to the
formula
contained in paragraph 2 of this Section 3.C using the Net Book Value so
determined
pursuant to paragraph 5 as of the Closing Date in lieu of the Net Book Value
used in the
Initial Adjustment as of the Calculation Date. If the Purchase Price as
adjusted
pursuant to this paragraph 6 (the "Final Adjustment") is greater than the
Purchase Price
as adjusted pursuant to the Initial Adjustment, the Buyer shall pay the amount
of such
excess to the Seller in cash and all of the Purchase Price Escrow Amount (as
defined in
the Escrow Agreement) shall be released to the Seller. If the Purchase Price
as adjusted
pursuant to the Final Adjustment is lower than the Purchase Price as adjusted
pursuant
to the Initial Adjustment and the amount of such difference is less than the
Purchase
Price Escrow Amount, the Seller shall pay the amount of such difference to the
Buyer by
releasing the Purchase Price Escrow Amount to the extent sufficient to cover
such payment
and the balance of the Purchase Price Escrow Amount shall be released to the
Seller. If
the Purchase Price as adjusted pursuant to the Final Adjustment is lower than
the
Purchase Price as adjusted pursuant to the Initial Adjustment and the amount
of such
difference is greater than the Purchase Price Escrow Amount, the Seller shall
pay the
amount of such difference to the Buyer by releasing all of the Purchase Price
Escrow
Amount to the Buyer and by paying the balance of such difference in cash to
the Buyer.
Any such payment and release of the Purchase Price Escrow Amount shall be made
within ten
(10) days after the determination of the Final Adjustment pursuant to this
paragraph 6.
7. For the purposes of preparing the
Opening Balance Sheet and the Final Closing Balance Sheet, the following
accounts and all
other Excluded Assets and Excluded Liabilities have been and will be excluded
therefrom:
(i) cash;
(ii) goodwill;
(iii) income or franchise taxes; and
(iv) inter-company accounts.
8. For purposes of this Section 3.C,
the term "Net Book Value," with respect to any balance sheet of the Seller,
shall mean
the Purchased Assets less the Assumed Liabilities, in each case as set forth
on such
balance sheet, but in any case shall not include prepaid assets which relate
solely to
the prepayment of liabilities which are Excluded Liabilities.
9. Notwithstanding any other provision
of this Agreement, Buyer's sole and exclusive remedy in connection with any
disagreement
with the Final Closing Balance Sheet, Seller's Proposed Calculations or any
certificate
delivered by Seller pursuant to this Section 3.C shall be to invoke the
dispute
resolution mechanism set forth in paragraph 5 of this Section 3.C, and Buyer
shall not
be entitled to seek indemnification pursuant to Section 8 hereof in connection
with any
of the foregoing.
D. Closing Date. The closing of this transaction shall take place on
or
before the later of the third business day following satisfaction or waiver of
the
conditions to closing set forth in Section 9 and October 31, 1996 (herein the
"Closing
or "Closing Date"), at which time the transfer of title to and possession of
the
Purchased Assets shall occur and the payment of the Purchase Price as set
forth in
Section 3.B shall occur. At the Closing, each of the parties hereto shall
execute and
deliver all consideration, instruments and documents reasonably required to
carry out the
terms and provisions of this Agreement. Possession of all of the Purchased
Assets shall
be delivered to Buyer by Seller immediately upon the Closing. The Closing
shall take
place in the offices of Bingham, Dana & Gould, LLP, 150 Federal Street,
Boston,
Massachusetts at 10:00 a.m. local time on date referred to above or at an
earlier date
and time to be mutually agreed upon between the parties.
E. Waiver of Bulk Transfer Provisions. Buyer hereby waives compliance
with
all provisions of the Bulk Sales Laws of Arizona, if applicable to the
transactions
herein contemplated, and in consideration of such waiver Seller agrees to
indemnify Buyer
against and hold it harmless from any and all loss, cost, damage, liability,
deficiency
or expense resulting from or arising out of such noncompliance to the extent
not
involving an Assumed Liability, provided that the provisions of Section 8.C
hereof shall
apply to this indemnity as if it were set forth therein.
4. Representations and Warranties of Seller and Shareholders.
In order to induce Buyer to enter into this Agreement and to consummate
the
transactions contemplated hereunder, Seller and Shareholders, jointly and
severally,
represent and warrant to Buyer, as follows:
A. Title to Assets. Seller has, and will have on the Closing Date,
good and
marketable title to and legal right and power to convey all of the Purchased
Assets being
transferred hereby, free and clear of any and all mortgages, liens, pledges,
security
interests, privileges, charges, claims or encumbrances of every kind, nature
and
description (collectively, "Encumbrances") except as set forth on Schedule 4.A
attached
hereto (or as set forth on Schedule 2.A.2.h., which Encumbrances on Schedule
2.A.2.h.
will be removed on or prior to the Closing Date). Upon the consummation of the
transactions contemplated hereby, Buyer will acquire (i) good title to the
Purchased
Assets owned by Seller, free and clear of any Encumbrances and (ii) the right
to use, and
valid leasehold interest in, any of the Purchased Assets not owned by Seller,
in each
case subject to the liens, rights of others and lease agreements reflected on
Schedule
4.A (the "Permitted Encumbrances").
B. Organization and Qualification. Seller is a corporation duly
organized,
validly existing and in good standing under the laws of the State of Delaware
with
corporate power to own its properties and to carry on its business as it is
now being
conducted and Seller is duly qualified to transact business and is in good
standing as
a foreign corporation in the States of Arizona, California and Nevada.
C. Power and Authority. Each of Seller and Shareholders has the
corporate
power to execute and deliver this Agreement, the Escrow Agreement, the
Environmental
Escrow Agreement and the other documents and instruments contemplated hereby
(the
"Transaction Documents") and to incur and perform its obligations hereunder
and
thereunder. The execution, delivery and performance of the Transaction
Documents and the
transactions contemplated hereby and thereby have been duly authorized by all
necessary
corporate action on the part of Seller and Shareholders, and each of the
Transaction
Documents is the legal, valid and binding obligation of each of Seller and
Shareholders,
enforceable in accordance with its terms.
D. Approvals and Consents; Noncontravention. The execution, delivery,
and
performance of the Transaction Documents by Seller and Shareholders and the
consummation
of the transactions contemplated hereby and thereby by Seller and
Shareholders, will not
(i) violate any statute, regulation or ordinance of any governmental authority
or require
any filing with or authorization, consent or approval of any government or
governmental
agency, (ii) conflict with, result in the breach of, or constitute a violation
or default
under any of the provisions of the respective Articles of Incorporation or By
Laws of
Seller and Shareholders or (iii) except as set forth on Schedule 4.K.,
conflict with or
result in a breach of any material agreement, deed, contract, mortgage,
indenture, writ,
order, decree, contractual obligation or instrument to which Seller or
Shareholders is
a party or by which either of them or any of the Purchased Assets are or may
be bound,
or constitute a default (or an event which with the lapse of time or the
giving of
notice, or both, would constitute a default) thereunder, or result in the
creation or
imposition of any lien, charge or encumbrance, on or with respect to the
Purchased
Assets.
E. Tax Returns; Withholdings. Seller has filed all federal tax returns
and
all state and any foreign or local tax returns which are required to have been
filed, and
has paid all taxes and governmental charges shown thereon as due. All amounts
required
to be withheld by Seller from employees for income tax, social security
contributions,
unemployment tax and workers' compensation have been withheld and either (i)
have been
paid to the appropriate governmental agencies or (ii) will be paid by the
Seller to the
appropriate governmental agencies when due.
F. Compliance with Laws; Permits. Except as set forth on Schedule
4.F.2, at
all times since December 19, 1990, Seller has complied in all material
respects with all
applicable laws and regulations of foreign, federal, state and local
governments and all
agencies thereof and all orders, judgments, injunctions, decrees or similar
commands, in
each case that affect the Business or the Purchased Assets, and no claims have
been filed
alleging a material violation of any such law, regulation, order, judgment,
injunction
or decree. Seller holds, and the Licenses and Permits listed on Schedule
4.F.1
constitute, all of the material permits, licenses, certificates and other
authorizations
of foreign, federal, state and local governmental agencies necessary to
conduct the
Business as it is presently being conducted or required in connection with the
ownership
of the Purchased Assets. All such permits, licenses and certificates are in
full force
and effect, and Seller has not since January 1, 1995 received any notice of
intent to
revoke or not to renew any of such permits, licenses and certificates. True
and complete
copies of the Licenses and Permits listed on Schedule 4.F.1 have previously
been
delivered to Buyer.
G. Litigation. There are no legal actions, suits, arbitrations or
other
legal, administrative or other governmental proceedings (i) pending against
Seller, the
Business or the Purchased Assets, (ii) to Seller's knowledge, threatened
against Seller,
the Business or the Purchased Assets and (iii) affecting Seller, the Business
or the
Purchased Assets (which in the case of this clause (iii) could reasonably be
expected to
have a material adverse effect on the Business or the ability of Seller to
consummate the
transactions contemplated hereby), in each case at law or in equity or by or
before any
governmental department, commission, board, agency, bureau, tribunal or
instrumentality,
except as shown on Schedule 4.G attached hereto.
H. Financial Statements. Seller has delivered to Buyer copies of the
unaudited financial statements of the Seller, as of December 31, 1995
("Financial
Statements"). The Financial Statements (i) have been prepared from and are in
accordance
with the Seller's books and records and (ii) fairly present in all material
respects the
financial condition or results of operations of Seller as of the relevant
dates thereof
and for the periods covered thereby in accordance with generally accepted
accounting
principles and, to the extent consistent therewith, Seller's accounting
practices,
policies and procedures, applied on a consistent basis throughout the periods
indicated.
The Opening Balance Sheet, attached hereto as Exhibit C, was prepared from the
Financial
Statements in accordance with this Section 4.H to reflect the elimination of
(i) cash
balances, (ii) goodwill, (iii) accrued management and executive bonuses
(except for a
mutually agreed upon bonus accrual in the amount of $150,000 which is deemed
to represent
a "normalized" year-end bonus accrual), (iv) income and franchise taxes, (v)
intercompany
account balances and (vi) all other Excluded Assets and Excluded Liabilities.
I. Absence of Undisclosed Liabilities. Except for the obligations or
liabilities (i) disclosed or referred to in the Opening Balance Sheet, or (ii)
incurred
by Seller with respect to the Business in the ordinary course of business
after the date
of the Opening Balance Sheet and either discharged prior to the Closing or
reflected or
reserved against on the Final Closing Balance Sheet, there are no obligations
or
liabilities arising out of or relating to transactions or events with respect
to the
Business entered into or occurring prior to the date hereof that would be
required to be
reserved against or disclosed in a balance sheet of Seller prepared in a
manner
consistent with the preparation of the Opening Balance Sheet.
J. Personnel.
1. Compensation. Schedule 4.J.1
hereto sets forth a complete and accurate list of (a) each employee of the
Seller and the
rate and amount of the compensation payable to such employee for the fiscal
year ended
December 31, 1995, and (b) the rate and amount of such compensation payable to
each such
employee through June 30, 1996. There have been no changes in such
compensation since
June 30, 1996 except (i) increases granted in the ordinary course of business
consistent
with past practice and (ii) as indicated on Schedule 4.J.1 hereto. Except as
listed in
Schedule 4.J.1 hereto, the Seller has no employment agreement, written or
oral, with any
currently active employee, including any agreement to provide any bonus or
benefit to any
such employee. Except as set forth on Schedule 4.J.1, since December 31,
1995, the
Seller has not made any pension, bonus or other payment, other than base
salary, or
become obligated to make any such payment, to any employee of the Seller.
Except as set
forth on Schedule 4.J.1, the Seller has no outstanding loans or advances to
employees.
2. Employee Benefit Plans.
(a) Except as set forth on
Schedule 4.J.2 hereto, neither the Seller nor any trade or business (whether
or not
incorporated) that is a member of a group described in Section 414(b) or
Section 414(c)
of the United States Internal Revenue Code of 1986, as amended (the "Code"),
of which the
Seller is a member (a "Related Entity") maintains or has any obligation to
make
contributions to any employee benefit plan within the meaning of Section 3(3)
of the
United States Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or
any other retirement, profit sharing, deferred compensation, stock option,
bonus, share
appreciation right, severance, group or individual health, dental, medical,
life
insurance, survivor benefit or other benefit program for officers, employees,
consultants
or directors, current or former, of the Business. Each employee benefit plan
(within the
meaning of Section 3(3) of ERISA) set forth on Schedule 4.J.2 hereto, other
than any such
plan which is a multiemployer plan as defined at Section 3(37) or Section
4001(a)(3) (a
"Multiemployer Plan"), is hereinafter referred to as an "ERISA Plan", and each
other
plan, program or arrangement set forth on Schedule 4.J.2 hereto (other than
any such
plan, program or arrangement that is a Multiemployer Plan) is hereinafter
referred to as
a "Non-ERISA Plan". The Seller has heretofore delivered to the Buyer true,
correct and
complete copies of each ERISA Plan and of each Non-ERISA Plan and, with
respect to any
such Plan which is an Assumed Benefit Arrangement, copies of (i) any
associated trust,
custodial, insurance or service agreements, (ii) any annual report, actuarial
report or
disclosure materials (including any summary plan descriptions) submitted to
any
governmental agency or distributed to participants or beneficiaries thereunder
in the
current or any of the six (6) preceding calendar years and (iii) the most
recently
delivered IRS determination letter, and any other governmental advisory
opinions or
rulings applicable to such Plan. All ERISA Plans and Non-ERISA Plans which
are Assumed
Benefit Arrangements have been maintained and operated in material compliance
with all
federal, state and local laws and regulations applicable to such plans, and
the terms and
conditions of the respective plan documents.
(b) Neither the Seller nor any Related
Entity has engaged in any transaction with or involving an Assumed Benefit
Arrangement
in connection with which it could be subject to either a civil penalty
assessed pursuant
to Section 502(i) of ERISA, or a tax imposed by Section 4975 of the Code or
any tax or
penalty under any federal, state or local laws applicable to any Non-ERISA
Plan which is
an Assumed Benefit Arrangement. Except as otherwise noted in Schedule 4.J.2
hereto, no
ERISA Plan is subject to Title IV of ERISA. Neither the Seller nor any
Related Entity
has incurred, or is expected to incur, any material liability to the United
States
Pension Benefit Guaranty Corporation ("PBGC"), any Multiemployer Plan or to
any other
governmental authority, pension or retirement board, or other agency, under
any federal,
state or local law.
(c)Full payment has been made of all amounts that the Seller or
any Related
Entity is required, under the terms of each ERISA Plan, Non-ERISA Plan and
Multiemployer
Plan which is an Assumed Benefit Arrangement, or pursuant to applicable
federal, state
or local law, to have paid as contributions to such ERISA Plan, Non-ERISA Plan
or
Multiemployer Plan (as the case may be) as of the last day of the most recent
fiscal year
of such ERISA Plan, Non-ERISA Plan or Multiemployer Plan (as the case may be)
ended prior
to the date hereof, and no accumulated funding deficiency (as defined in
Section 302 of
ERISA and Section 412 of the Code), whether or not waived, exists with respect
to any
ERISA Plan.
(d)Except as set forth on Schedule 4.J.2 hereto,
(i)no action, suit, proceeding or investigation is pending or,
to the
knowledge of Seller, threatened against any Assumed Benefit Arrangement or
the Seller
concerning any Assumed Benefit Arrangement other than routine claims for
benefits, or,
to the knowledge of the Seller and the Shareholders, any fiduciary or service
provider
thereof and, to the knowledge of the Seller and the Shareholders, there is no
basis for
any such legal action or proceeding;
(ii)no communication, report or disclosure has been made which,
at the time
made, did not accurately reflect the terms and operations of any Assumed
Benefit
Arrangement;
(iii)no Assumed Benefit Arrangement provides welfare benefits
subsequent
to termination of employment to employees or their beneficiaries (except to
the extent
required by applicable state insurance laws and Title I, Part 6 of ERISA and
Section
4980B of the Code);
(iv)no benefits due under any Assumed Benefit Arrangement have
been
forfeited subject to the possibility of reinstatement (which possibility would
still
exist on or after the Closing Date); and
(v)the Seller has not undertaken to maintain any Assumed
Benefit
Arrangement for any period of time and each such Arrangement is terminable at
the sole
discretion of the sponsor thereof, subject only to such constraints as may be
imposed by
applicable law.
(e)Effect of Transactions. The execution of this Agreement and
the
consummation of the transactions contemplated hereby will not result in any
payment
(whether of severance pay or otherwise) becoming due from any ERISA Plan or
Non-ERISA
Plan of the Seller to any current or former director, officer, consultant or
employee of
the Seller or result in the vesting, acceleration of payment or increases in
the amount
of any benefit payable to or in respect of any such current or former
director, officer,
consultant or employee.
K. Contracts. Schedules 4.K and 2.A.2.h set forth a complete and
accurate
list of all contracts to which the Seller is a party or by which the Seller is
bound or
to which the Seller or any of the Purchased Assets is subject (the "Material
Agreements"), except (a) contracts or purchase orders for goods and services
entered into
in the ordinary course of business which have a remaining term of less than
one year and
each of which does not require payments in the aggregate by any party thereto
of more
than $25,000, (b) contracts terminable by the Seller upon 30 days' notice or
less without
the payment of any termination fee or penalty, and (c) contracts listed in
other
Schedules hereto. As used in this Section 4.K, the word "contract" means and
includes
every agreement or understanding of any kind, written or oral, which is
legally
enforceable by or against the Seller, and specifically includes (a) contracts
and other
agreements with any current or former officer, director, employee, consultant
or
shareholder or any partnership, corporation, joint venture or any other entity
in which
any such person has an interest; (b) agreements with any labor union or
association with
respect to the representation of any employee; (c) contracts and other
agreements for the
provision of services by the Seller; (d) bonds or other security agreements
provided by
any party in connection with the business of the Seller; (e) contracts and
other
agreements for the sale of any of the Seller's assets or properties other than
in the
ordinary course of business or for the grant to any person of any preferential
rights to
purchase any of the Seller's assets or properties; (f) joint venture
agreements relating
to the assets, properties or business of the Seller or by or to which it or
any of its
assets or properties are bound or subject; (g) contracts or other agreements
under which
the Seller agrees to indemnify any party, to share tax liability of any party,
or to
refrain from competing with any party; (h) any contracts or other agreements
with regard
to indebtedness for borrowed money; or (i) any other contract or other
agreement whether
or not made in the ordinary course of business. The Seller has delivered to
the Buyer
true, correct and complete copies of all Material Agreements, together with
all
modifications and supplements thereto. All of the Material Agreements are in
full force
and effect, and no breach or default by Seller or, to the knowledge of Seller,
by any
other party has occurred with respect thereto. Except as identified on
Schedule 4.K, no
approval or consent of any person is needed in order that the Material
Agreements
continue in full force and effect following the assignment of such contracts
to the Buyer
pursuant to this Agreement.
L. Employment. Except as listed in Schedule 4.L hereto, Seller has
complied
in all material respects with all applicable laws relating to the employment
of labor,
including provisions thereof relating to wages, hours, equal opportunity,
collective
bargaining and immigration or citizenship status, with respect to any
employees of the
Business. In the last five (5) years, Seller has experienced no strikes.
None of the
employees of the Sellers are covered by any collective bargaining agreement,
and no
collective bargaining agreement is currently being negotiated by the Seller.
M. Intellectual Property Rights. Schedule 1.A.3 hereto sets forth a
complete
and accurate list of all of the Seller's pending and issued copyright
registrations, U.S.
and foreign patents and patent applications, trade names, trademarks, service
marks,
trademark registrations, trademark applications, and all written agreements
under which
the Seller licenses Intellectual Property Rights (other than software licenses
in the
licensor's standard form). Seller owns or has a valid right or license to use
all of the
Intellectual Property Rights which are necessary for the conduct of, or are
used in, the
Business as the Business is presently being conducted and such rights and
interests are
either (i) freely transferable to Buyer in the transaction contemplated by
this Agreement
or (ii) will be licensed and made available for use by Buyer from and after
the Closing
Date without cost. Seller has no knowledge and has received no notice to the
effect that
any service or products that it provides or sells, or any process, method,
part or
material it employs in the Business, infringes on any trademark, trade name,
copyright
or patent or is in conflict with any asserted right of another. There is no
pending or,
to the knowledge of Seller, threatened, claim or litigation against Seller
contesting its
right to use any of the Intellectual Property Rights being transferred or
licensed to
Buyer, or asserting its misuse of any thereof, which would deprive Buyer of
its right to
assert its rights thereunder or which would prevent the sale of any service or
product
produced, provided or sold by Buyer utilizing the Intellectual Property Rights
to be
transferred to Buyer.
N. Environmental Matters.
1. Definitions. As used in this
Agreement:
(a)"Hazardous Materials" means (a) any and all hazardous
substances,
pollutants, and contaminants (as defined by the Comprehensive Environmental
Response,
Compensation and Liability Act of 1980, as amended ("CERCLA")), hazardous
wastes (as
defined by the Resource Conservation and Recovery Act ("RCRA")); hazardous
materials (as
defined by the Hazardous Materials Transportation Act); toxic substances (as
defined by
the Toxic Substances Control Act ("TSCA")); toxic chemicals or extremely
hazardous
substances (as defined by the Emergency Planning and Community Right-To-Know
Act);
hazardous air pollutants (as defined by the Clean Air Act); hazardous
substances (as
defined by the Clean Water Act); (b) petroleum or petroleum products;
polychlorinated
biphenyls ("PCBs"); asbestos-containing materials; and (c) any other toxics,
chemicals,
wastes, substances, or materials which are regulated under any of the
Environmental Laws
(as defined herein);
(b)"Environmental Laws" means all applicable federal, state,
local and
foreign laws, rules, regulations, codes, ordinances, orders, decrees, permits,
licenses
and judgments in effect as of the date of this Agreement and relating to the
environment
and/or the use, generation, storage, disposal, treatment, transportation,
recycling, sale
or release of Hazardous Materials, including, without limitation, CERCLA,
RCRA, the Clean
Water Act, the Clean Air Act and TSCA;
(c)"Environmental Matters" means matters relating to pollution,
contamination or protection of the environment, release or disposal of
Hazardous
Materials, compliance with Environmental Laws (including, without limitation,
matters
relating to any "Environmental Costs" (as defined herein)) or to any releases
or
threatened releases of Hazardous Materials into the air, surface water,
groundwater or
soil, or resulting from the generation, use, storage, treatment, recycling,
transportation, disposal or sale of Hazardous Materials); and
(d)"Environmental Costs" means any cleanup costs, remediation,
removal, or
other response or site rehabilitation costs (including, without limitation,
costs to
bring the Business into compliance with all applicable Environmental Laws),
investigation
costs (including, without limitation, the reasonable fees and costs of
consultants, legal
counsel and other experts in connection with any environmental investigation,
testing,
audits, assessments or studies), losses, liabilities, obligations, payments,
damages
(including, without limitation, any actual, punitive or consequential damages
(a) to
third parties (including employees) for personal injury or damage to property,
or (b) to
natural resources, fines, penalties, judgments, and amounts paid in settlement
arising
out of or resulting from any Environmental Matter.
2. Environmental Representations and
Warranties of Seller and Shareholders. Except as disclosed in Schedule 4.N
hereto:
(a)all material permits, approvals, authorizations, licenses,
certificates
of authorization, registrations or other consents required under all
applicable
Environmental Laws for the operation of the Business and the occupancy of the
properties
listed on Schedule 2.A.1.a hereto (the "Environmental Permits") have been
obtained or
applied for, and there are no pending or, to the knowledge of Seller and
Shareholders,
threatened actions to modify, restrict, rescind or challenge any Environmental
Permit;
(b)there are no material violations of any Environmental Permit
at any of
the properties listed on Schedule 2.A.1.a hereof;
(c)Seller has not received any notice in writing (i) of the
violation of
any Environmental Laws by Seller in connection with the operation of the
Business at any
of the properties listed on Schedule 2.A.1.a hereof or (ii) of any pending or
threatened
legal action against Seller in connection with the operation of the Business
at any of
the properties listed on Schedule 2.A.1.a hereof under the authority of any
Environmental
Law or related to the release of or exposure to any Hazardous Material;
(d)since December 19, 1990, no amounts of Hazardous Materials
were disposed
of by Seller prior to the Closing Date in, on, under, above or around the
properties
listed on Schedule 2.A.1.a, except in accordance with all applicable
Environmental Laws;
(e)the processes and activities of Seller are in substantial
compliance
with all applicable Environmental Laws and regulations;
(f)there are no underground storage tanks on, at or below any
of the real
property listed on Schedule 2.A.1.a hereof; and
(g)since December 19, 1990, there have been no releases (i.e.
no past or
present releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging,
injecting, escaping, disposing or dumping) or threatened releases of Hazardous
Materials
on, upon, into or from any real property listed on Schedule 2.A.1.a hereto
except in
accordance with all applicable Environmental Laws.
O. Absence of Certain Changes. Except as set forth on Schedule 4.O,
since
December 31, 1995 the Seller has carried on the Business only in the ordinary
course, and
there has not been (a) any change in the assets, liabilities, sales, income or
business
of the Seller or in its relationships with suppliers, customers or lessors,
other than
changes which have not been, either in any case or in the aggregate,
materially adverse;
(b) any acquisition or disposition by the Seller of any asset or property with
a value in
excess of $25,000 other than in the ordinary course of business; (c) any
damage,
destruction or loss, whether or not covered by insurance, materially and
adversely
affecting, either in any case or in the aggregate, the property or business of
the Seller;
(d) any declaration, setting aside or payment of any dividend or any other
distributions
in respect of the Seller's capital stock; (e) any increase in the
compensation, pension
or other benefits payable or to become payable by the Seller to any of its
officers or
employees, or any bonus payments or arrangements made to or with any of them
(other than
pursuant to the terms of any existing written agreement or plan of which the
Buyer has
been supplied complete and correct copies of); (f) any forgiveness or
cancellation of any
debt or claim by the Seller or any waiver of any right of material value other
than
compromises of accounts receivable in the ordinary course of business and
other than debts
or claims forgiven or canceled by the Seller in an aggregate amount less than
$25,000;
(g) any entry by the Seller into any material transaction, or any incurrence
by the Seller
of any material obligations or liabilities, whether absolute, accrued,
contingent or
otherwise (including, without limitation, liabilities as guarantor or
otherwise with
respect to obligations of others), other than, in each case, in the ordinary
course of
business; or (h) any discharge or satisfaction by the Seller of any lien or
encumbrance
or payment by the Seller of any obligation or liability (fixed or contingent)
other than
(A) current liabilities included in the Opening Balance Sheet, (B) current
liabilities
incurred since the date of the Opening Balance Sheet in the ordinary course of
business
and (C) any other obligations or liabilities of the Seller which in the
aggregate do not
exceed $25,000.
P. Real Property Leases. Schedule 2.A.1.a hereto lists all leases
pursuant
to which the Seller holds any real property for use in the Business. Complete
and
accurate copies of the Real Property Leases have been delivered to the Buyer.
Neither the
Seller nor the Shareholders has received any notice that either the whole or
any portion
of the Leased Real Property is to be condemned, requisitioned or otherwise
taken by public
authority. Neither the Seller nor the Shareholders has any knowledge of any
public
improvements which may result in special assessments against or otherwise
affect the
Leased Real Property. Each of the Real Property Leases is valid and
subsisting and, upon
receipt of any consents required in connection with the transfer of such
leases as
contemplated hereby, no event or condition exists which constitutes, or after
notice or
lapse of time or both would constitute, a default thereunder by the Seller, or
to the
knowledge of Seller and Shareholders, by any other party thereto. The
leasehold interests
of the Seller with respect to any Real Estate Lease are subject to no
Encumbrances.
Q. Purchased Assets Complete. The Purchased Assets, together with the
Excluded Assets, constitute substantially all of the assets used by the Seller
in the
conduct of the Business as currently conducted by the Seller. Without
limiting the
foregoing, the Computer Hardware and Software constitute all computer hardware
and
software used in the Business.
R. Accounts Receivable. All Closing Date Receivables represent sales
made in
the ordinary course of business and are valid obligations owing to the Seller.
S. Real Property. Schedule 2.a.1.n hereto lists all real property
owned by
the Seller. No lease or sublease to any other person is in effect with
respect to the
Real Property. The Real Property and the operation thereof conforms to the
requirements
of all restrictive covenants or other encumbrances affecting all or any part
of the Real
Property. There are no actual, pending or to Seller's knowledge threatened
condemnation
proceedings which could result in a lis pendens or other lien or encumbrance
on the Real
Property. All utilities required to operate the Real Property have been
connected and are
currently serving such Real Property. The Real Property is not located in a
flood hazard
zone. The Seller has no knowledge of any public improvement that may result
in special
assessments against or otherwise affect any of the Real Property.
T. Potential Conflicts of Interest. Except as set forth on Schedule
4.T, no
officer, director or stockholder of the Seller (a) to the knowledge of Seller,
owns,
directly or indirectly, any interest in (excepting not more than 1% stock
holdings for
investment purposes in securities of publicly held and traded companies) or is
an officer,
director, employee or consultant of any Person which is a competitor, lessor,
lessee,
customer or supplier of the Seller; (b) owns, directly or indirectly, in whole
or in part,
any tangible or intangible property which the Seller is using or the use of
which is
necessary for the business of the Seller; or (c) has any cause of action or
other claim
whatsoever against, or owes any amount to, the Seller, except for claims in
the ordinary
course of business, such as for accrued vacation pay, accrued benefits under
employee
benefit plans and similar matters and agreements.
U. Disclosure. No representation or warranty by the Seller or any of
the
Shareholders in this Agreement or in any exhibit, schedule, written statement,
certificate
or other document delivered or to be delivered to the Buyer pursuant hereto or
in
connection with the consummation of the transactions contemplated hereby
contains or will
contain any untrue statement of a material fact or omits or will omit to state
a material
fact required to be stated therein or necessary to make the statements
contained therein
not misleading.
V. Equipment. Schedule 4.V hereto sets forth a complete and accurate
list of
all items of Equipment with a value in excess of $10,000 which are used by the
Seller in
the conduct of the Business as currently conducted by the Seller. All of such
items of
Equipment are located at the locations listed in Schedule 1.A.2., except as
noted on such
Schedule. The Personal Property Leases listed on Schedule 2.A.1.a hereto
include all
leases by the Seller of any item of personal property used in the Business
which require
payments in excess of $5,000 per annum.
5. Representations and Warranties of Buyer.
In order to induce Seller and Shareholders to enter into this Agreement
and to
consummate the transactions contemplated hereunder, Buyer represents and
warrants to
Seller and Shareholders as follows:
A. Organization and Qualification. Buyer is a corporation duly
organized,
validly existing and in good standing under the laws of the State of Delaware
with
corporate power to own its properties and to carry on its business as
presently conducted.
B. Power and Authority. Buyer has the corporate power to execute and
deliver
the Transaction Documents to which it is a party and to incur and perform its
obligations
hereunder and thereunder. The execution and delivery of the Transaction
Documents to
which the Buyer is a party and the transactions contemplated hereby and
thereby have been
duly authorized by all necessary corporate action on the part of Buyer, and
each of the
Transaction Documents to which the Buyer is a party is a legal, valid and
binding
obligation of Buyer enforceable in accordance with terms.
C. Approvals and Consents; Noncontravention. The execution, delivery,
and
performance by Buyer of the Transaction Documents to which it is a party and
the
consummation of the transactions contemplated hereby and thereby, will not (i)
violate any
statute, regulation or ordinance of any governmental authority or require any
filing with
or authorization, consent or approval of any government or governmental
agency, (ii)
conflict with, result in the breach of, or constitute a violation or default
under any of
the provisions of the Certificate of Incorporation or By Laws of Buyer, (iii)
conflict
with or result in a breach of any material agreement, deed, contract,
mortgage, indenture,
writ, order, decree, contractual obligation or instrument to which Buyer is a
party or by
which it or any of its assets are or may be bound, or constitute a default (or
an event
which, with the lapse of time or the giving of notice, or both, would
constitute a
default) thereunder.
6. Covenants.
A. Publicity. Buyer, Seller and Shareholders shall consult with each
other
before issuing any press release or other public announcement concerning the
transactions
contemplated by this Agreement and, except as may be required by applicable
law or any
listing agreement with or regulation or rule of any listing agreement with or
regulation
or rule of any stock exchange on which securities of Seller, Buyer or
Shareholders are
listed or traded, will not issue any such press release or announcement prior
to such
consultation. If Buyer, Seller or Shareholders is so required to issue such
press release
or announcement it shall use its best efforts to inform the other party hereto
prior to
issuing such press release.
B. Retention of and Access to Books and Records. For a period of seven
(7)
years after the Closing Date, the parties shall retain books or records
relating to the
Business, and any party, wishing to dispose or destroy books or records, shall
provide not
less than thirty (30) days prior written notice to the other party of such
proposed
action. If the recipient of such notice desires to obtain any of such
documents, it may
do so by notifying the other party in writing at any time prior to the
scheduled date for
such destruction or disposal. Such notice must specify the documents which
the requesting
party wishes to obtain. The parties shall then promptly arrange for the
delivery of such
documents. All out-of-pocket costs associated with the delivery of the
requested
documents shall be paid by the requesting party. Buyer shall, subject to such
reasonable
limitations as may be necessary to protect proprietary information, at the
expense of
Seller, and on reasonable prior notice to Buyer, (a) afford Shareholders and
Seller, and
their counsel, accountants, consultants and other representatives reasonable
access during
normal business hours at the business locations of the Purchased Assets to
examine and
copy the books, tax returns, records and files of Seller which relate to
periods prior to
the Closing Date, and (b) cooperate with reasonable requests of Shareholders
and Seller
with respect to gathering information contained therein which may be necessary
to respond
to inquiries or requests made by any governmental authority or courts which
relate to any
tax returns or other documents filed by or on behalf of Shareholders and
Seller prior to
or relating to the periods prior to the Closing Date. Seller shall, at
Buyer's sole
expense, during normal business hours, afford Buyer and its agents reasonable
access to
and the opportunity to review and make copies of, all canceled checks of
Seller relating
to the Business in connection with any reasonable request of Buyer.
C. HSR Act. Within ten days after the date of determination of the
Environmental Escrow Amount, Buyer shall (or shall cause its ultimate parent
entity to)
and Shareholder shall each file a notification of the acquisition contemplated
hereby with
the Antitrust Division of the Department of Justice and the Bureau of
Competition of the
Federal Trade Commission pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of
1976 (the "HSR Act"). Each party filing such notification shall advise the
other promptly
upon receiving any request for additional information or other communication
with respect
to such filing from the Antitrust Division of the Department of Justice or the
Bureau of
Competition of the Federal Trade Commission and shall use its reasonable
commercial
efforts to provide the information requested and otherwise respond to such
request or
communication.
D. Covenants of Seller and Shareholders.
1. 401(k) Plan. Effective as of the
Closing Date, Seller's obligation to make contributions to (other than
contributions
attributable to the periods ending on or prior to the Closing Date but payable
thereafter), the Publicker Industries Inc. 401(k) Plan (the "Publicker 401(k)
Plan") shall
cease, and the employees of the Business shall cease to accrue benefits under
the
Publicker 401(k) Plan. As soon as practicable thereafter, Seller shall (i)
pay to the
trustee of the Publicker 401(k) Plan all employee and employer contributions
attributable
to periods ending on or prior to the Closing Date, (ii) cause such amounts to
be allocated
to participant accounts and (iii) cause the trustee of the Publicker 401(k)
Plan to
transfer to the trust established within 75 days after Closing pursuant to, or
the annuity
contract purchased in connection with, Buyer's 401(k) Plan in accordance with
Section 414(1) of the Code an amount in cash equal to the aggregate account
balances
(vested or unvested) under the Publicker 401(k) Plan of those Hired Employees
employed by
Buyer as of the date of transfer. Such account balances shall be determined
as of the
Closing Date but shall be reduced by any benefit or withdrawal payments made
to such Hired
Employees to the date of transfer, be adjusted by the contributions heretofore
described
and by any gains or losses properly allocable to each such account from the
Closing Date
to the date of transfer.
Notwithstanding the foregoing, if any Hired Employee has an
outstanding loan
from the Publicker 401(k) Plan as of the date of the transfer, the promissory
note
representing the same and any and all ancillary and related documents shall be
assigned
to Buyer's 401(k) Plan in lieu of cash in the amount then due under such loan.
Pending
the transfer described here, or the termination of the Hired Employee's
employment with
Buyer if earlier, Buyer shall withhold from the Hired Employee's pay and remit
to the
Publicker 401(k) Plan any required repayment of an outstanding loan from such
Plan as and
when due under the terms of such loan and Buyer and Seller shall otherwise
cooperate as
reasonably necessary to avoid a deemed distribution of such outstanding loan.
Buyer's 401(k) Plan shall credit each Hired Employee whose account
is
transferred to such Plan with service for purposes of participation and
vesting equal to
that credited to such Hired Employee under the Publicker 401(k) Plan as of the
Closing
Date. Such service shall be determined solely from data reflected on a
schedule to be
prepared by the Shareholder and furnished to the Buyer as soon as practicable
after the
Closing Date.
Seller and Shareholders hereby represent and warrant that the
Publicker
401(k) Plan has determined by the Internal Revenue Service (the "IRS") to
constitute a
qualified plan under 401(a) of the Code, that nothing has occurred since the
date of the
last such determination which could reasonably be expected to result in a
revocation of
such determination, and that to the knowledge of Seller and Shareholders, the
Publicker
401(k) Plan has been at all relevant times been maintained and operated in
material
compliance with applicable law, including the Code.
Buyer hereby represents and warrants that Buyer's 401(k) Plan will
be a newly
established plan and either (i) will be a prototype plan that is the subject
of an
outstanding favorable opinion as to its form under 401(a) of the Code or (ii)
that Buyer
will submit such Plan promptly following its adoption to the IRS for a
determination as
to its initial qualification under 401(a) of the Code and make such
amendments thereto
as the Internal Revenue Service may request to secure such determination.
1A.Welfare Plans. Effective as of the Closing Date, the Hired
Employees
shall cease to be covered under any employee welfare benefit plans maintained
by
Shareholder, and except as those plans may otherwise provide, Shareholder
shall have no
obligation to make premium or other payments on behalf of the Hired Employees
in respect
of periods after such date. Buyer shall assume the plans listed on Schedule
2.A.1.m. as
of the Closing Date, and Shareholder and Seller shall have no responsibility,
liability
or obligations as to such plans in respect of periods after such date.
2. Protection of Confidential
Information. Each of Seller and Shareholders hereby agree, for a period of
five (5) years
after the Closing Date to safeguard against disclosure to third parties all
Trade Secrets
transferred to Buyer hereunder, by using reasonable secrecy measures and not
less than the
same degree of care as for its own similar proprietary information.
3. Solicitation of Employees. For a
period of five (5) years after the Closing Date, each of Seller and
Shareholders shall
not, without Buyer's prior written consent, directly or indirectly solicit any
person
known to Seller to be an employee of Buyer nor shall Seller or Shareholders
encourage any
such employee to terminate his or her employment with Buyer.
4. Intellectual Property. To the
extent Seller fails to transfer any Intellectual Property Rights or to make
available any
which are currently used in the operation of the Business as it is presently
conducted,
Seller shall take all commercially reasonable actions required to effect or
assist such
transfer so as to confer upon Buyer those benefits held by Seller which attend
a use of
such Intellectual Property Rights in connection with the Business.
5. Name. As of the Closing, Seller
shall amend its articles of incorporation to change its name to a name not
similar to
"Masterview Window Company, Inc."
6. Non-Competition. Each of the
Seller and the Shareholders agrees that for a period commencing on the Closing
Date and
continuing through the fifth anniversary of the Closing Date, the Seller and
the
Shareholders will not engage in the Designated Industry anywhere in the world,
alone or
as a shareholder, partner or consultant of any other business organization;
provided, that
the foregoing restriction shall not prevent the Seller or Shareholders from
(i) owning ten
percent (10%) or less of the equity securities of any publicly traded company
engaged in
the Designated Industry or (ii) acquiring and operating any entity which
derives less than
ten percent (10%) of its gross revenues from the Designated Industry. The
term
"Designated Industry" means the business of the manufacture, distribution or
sale of
windows and doors.
7. Maintenance of Business Prior to
Closing. From the date hereof through the Closing, Seller shall continue to
carry on the
Business in the ordinary course and in accordance with past practice. Without
limiting
the foregoing, (i) the Seller will maintain the Purchased Assets in good
operating
condition and repair, ordinary wear and tear excepted, (ii) the Seller will
not grant any
general or uniform increase in the rates of pay of employees of the Seller or
in the
benefits under any bonus or pension plan or other contract for or with any
such employees,
(iii) the Seller will not declare or pay any dividends on or make any
distribution in
respect of any shares of its capital stock, or issue, purchase, redeem or
acquire for
value any shares of its capital stock, (iv) the Seller will not enter into any
material
contract or commitment or engage in any material transaction not in the usual
and ordinary
course of business and consistent with the business practices of the Seller,
(v) the
Seller shall not purchase or sell or otherwise dispose of any capital asset
with a market
value in excess of $5,000 or of capital assets with market value aggregating
in excess of
$10,000 and in no event shall purchase, sell or otherwise dispose of any
capital asset
other than in the ordinary course of business, (vi) the Seller shall use its
reasonable
commercial efforts to preserve its business organization intact, to keep
available to
Buyer the present key officers and employees of Seller and to preserve for
Buyer the
present relationships of the Seller's suppliers and customers and others
having business
relations with Seller, (vii) the Seller shall not do any act or omit to do any
act which
will cause a material breach of any contract, commitment or obligation of
Seller, (viii)
the Seller shall comply in all material respects with all laws, regulations
and orders
applicable to the Seller or the Purchased Assets, and (ix) the Seller will
promptly advise
the Buyer of any material adverse change in the condition of any of the
Purchased Assets
or the Business.
E. Covenants of Buyer.
1. Employment. As of the Closing, the
Buyer will hire all employees of the Business at substantially the same level
of
compensation and benefits as provided by the Seller immediately prior to the
Closing
(except (i) with respect to Fred Bengtson who will enter into a separate
written
employment agreement with the Buyer and (ii) the Buyer's 401(k) Plan will be
established
after the Closing in accordance with the terms of this Agreement) to continue
working in
their present capacities with the Business (all such employees including Mr.
Bengtson
being referred to herein as the "Hired Employees"); provided, however, that
nothing
contained in this Section 6.D.1 shall (x) require that Buyer continue to
employ any
employee after the Closing Date or (y) restrict the Buyer's ability to change
the level
of compensation and benefits provided to any Hired Employee after the Closing
Date. Any
obligations under the Worker Adjustment and Retraining Notification Act
("WARN")
attributable to the failure of Buyer to employ or continue to employ all such
persons are
hereby assumed by Buyer. The Seller shall be responsible for the severance or
displacement pay, if any, due for any Hired Employee if any severance or
displacement pay
is due to such Hired Employee as a consequence of his termination by Seller
even though
such employee is hired by the Buyer on the Closing Date and the Buyer shall be
responsible
for the severance or displacement pay, if any, due to any Hired Employee
subsequently
terminated by the Buyer, with any such obligations to be determined by the
terms of the
severance or displacement pay arrangements maintained by the Seller and the
Buyer,
respectively.
F. Environmental Matters. The Seller and the Shareholders have agreed
to
retain Geraghty & Miller, Inc. to conduct a Phase II investigation of the
Seller's Real
Property located at 3065 South 43rd Avenue, Phoenix, Arizona (the "Site"), in
accordance
with the terms of (i) the proposal letter dated July 25, 1996 from Geraghty &
Miller to
Patton Boggs, L.L.P. and (ii) the addendum thereto prepared by Geraghty &
Miller dated
August 16, 1996, ((i) and (ii) being collectively referred to herein as the
"Initial
Proposal"), and to prepare a report (the "Phase II Report") and setting forth
the results
of such investigation. Upon completion of the Phase II Report, Geraghty &
Miller, Inc.
will prepare a report (the "Remediation Proposal") summarizing the estimated
costs of
remediation of the Site in accordance with the Initial Proposal. The Buyer's
consultants,
Roux Associates, Inc., shall be given the opportunity to review the Phase II
Report and
the Remediation Proposal, including without limitation, the determination of
remediation
expenses. If the Buyer's consultants disagree with the determination of the
remediation
expenses by the Seller's consultants, the Buyer shall give written notice
thereof to
Seller, stating specifically its disagreement with the determination of the
remediation
expenses by Seller's consultants and providing the estimate of remediation
expenses
proposed by its consultants, together with documentary support for such
estimate. The
Seller and the Buyer shall then select a third consultant to resolve the
determination of
the remediation expenses for the Site, provided, that, in any event the
determination of
remediation expenses made by the third consultant shall be within the range of
estimates
provided by the Seller's consultant and the Buyer's consultant. The
remediation expenses
for the Site shall include the actual costs of remediation together with all
costs of
reconfiguring and reconstructing the physical facilities located on the Site
to the extent
necessary to continue the operations of the Business during the remediation
period and to
restore the physical facilities to their original condition following
completion of the
remediation. Upon determination of the amount of such remediation expenses
(whether by
agreement by the Buyer and Seller or by the third consultant) (the
"Remediation
Expenses"), the lesser of $500,000 and the Remediation Expenses (such amount,
the
"Environmental Escrow Amount") shall be deducted from the Purchase Price and
placed in
escrow pursuant to the Environmental Escrow Agreement, as provided in Section
3.B hereof.
The Seller agrees that it shall diligently pursue and complete, at its own
expense, the
remediation of the Site in accordance with the Remediation Proposal as finally
determined
by agreement of the Buyer and Seller or by the third consultant. The
Remediation Expenses
incurred by the Seller in connection with such remediation activities shall be
submitted
to the escrow agent in accordance with the Environmental Escrow Agreement and
paid to the
Seller from the Environmental Escrow Amount as provided in the Environmental
Escrow
Agreement.
7. WARRANTY CLAIMS.
The Buyer hereby agrees that it will service any Excluded Warranty Claims
after
the Closing Date, provided, that (i) with respect to Excluded Warranty Claims
up to an
aggregate of $50,000 in Excluded Warranty Claims, the Seller shall pay to the
Buyer an
amount equal to 100% of the out-of-pocket costs incurred by the Buyer in
connection with
the servicing of such Excluded Warranty Claims, and (ii) with respect to
Excluded
Warranty Claims (or any portion of an Excluded Warranty Claim) thereafter,
the Seller
shall pay to the Buyer an amount equal to 130% of the out-of-pocket costs
incurred by the
Buyer in connection with the servicing of such Excluded Warranty Claims. The
Buyer shall
give Seller written notice prior to servicing any Excluded Warranty Claim.
Promptly
following the end of each calendar month, the Buyer shall furnish to the
Seller a
statement with reasonable specificity of all servicing costs incurred by the
Buyer with
respect to any Excluded Warranty Claims during the previous calendar month and
the Seller
shall pay to Buyer the appropriate amount in accordance with the first
sentence of this
Section 7 within 15 days after receipt of such statement. If at any time, the
Seller
shall fail to timely pay to the Buyer any amounts required to be paid to the
Buyer
pursuant to this Section 7, and such failure remains uncured within 10 days
after written
notice from the Buyer to the Seller, the Buyer shall have no further
obligation to service
any Excluded Warranty Claims. This Section 7 shall terminate and be of no
further force
or effect on the first anniversary of the Closing Date.
8. Indemnification.
The indemnification provided by this Section 8 shall be the exclusive
remedy
for any breach of, or failure to perform, any representations, warranties,
covenants or
agreements set forth in this Agreement or any Schedule or Exhibit hereto.
A. Seller's and Shareholders' Indemnity. Seller and Shareholders,
jointly and
severally, shall indemnify, defend and hold Buyer harmless from, against and
in respect
of any and all claims, expenses, liabilities, damages, losses, costs,
government
proceedings, causes of action, demands, judgments (including, without
limitation,
reasonable attorneys fees) (collectively, the "Claims") to the extent suffered
or incurred
by Buyer by reason of any of the following:
1. Seller's failure to pay, discharge
or perform any of its liabilities or obligations other than the Assumed
Liabilities, but
including, without limitation, the Excluded Liabilities;
2. any violations of any Environmental
Law resulting from the operation of the Business or occupancy of the property
listed in
Schedule 1.A.2 hereto after December 19, 1990 and through the Closing Date;
3. any breach of, or failure by Seller
or Shareholders to perform, any of its representations, warranties, covenants
or
agreements set forth in this Agreement or any Schedule or Exhibit hereto; and
4. the presence on the property listed
on Schedule 1.A.2 of any Hazardous Materials including contamination of ground
water,
surface water, air or soils on, over, under or around said property or on,
over, under or
around adjacent property prior to the Closing Date.
B. Buyer's Indemnity. Buyer shall indemnify defend and hold Seller and
Shareholders harmless from, against and in respect of any and all claims,
expenses,
liabilities, damages, losses, costs, government proceedings, causes of action,
demands,
and judgments (including, without limitation, reasonable attorney's fees)
(collectively,
the "Claims") to the extent suffered or incurred by Seller or Shareholders by
reason of
any of the following:
1. any claim or cause of action by any
party arising from Buyer's failure to pay, discharge or perform any of the
Assumed
Liabilities;
2. any claim or cause of action by any
party arising from Buyer's operation of the Business and use of the Purchased
Assets after
the Closing, other than a claim or cause of action which is subject to
indemnification
pursuant to Section 8.A hereof;
3. any violations of any Environmental
Law resulting from the operation of the Business or occupancy of the property
listed in
Schedule 1.A.2 hereto subsequent to the Closing Date other than a violation
which is
subject to indemnification pursuant to Section 8.A hereof; and
4. any breach of, or failure by Buyer
to perform, any of its representations, warranties, covenants or agreements
set forth in
this Agreement or any Schedule or Exhibit hereto.
C. Indemnity Procedure. Subject to the time limitations and amounts
set forth
in Section 8.D below, the Buyer, Seller and Shareholders shall each follow the
following
procedures, as the case may be:
1. Notice. Any party seeking
indemnification hereunder (the "Indemnified Party") shall promptly notify the
other party
hereto (the "Indemnifying Party") of any action, suit, proceeding, demand or
breach (a
"Claim") with respect to which the Indemnified Party claims indemnification
hereunder,
provided that failure of the Indemnified Party to give such notice shall not
relieve the
Indemnifying Party of its obligations under this Section 8 except to the
extent, if at
all, that such Indemnifying Party shall have been prejudiced thereby.
2. Third Party Claims. If such Claim
relates to any action, suit, proceeding or demand instituted against the
Indemnified Party
by a third party (a "Third Party Claim"), the Indemnifying Party shall be
entitled to
participate in the defense of such Third Party Claim after receipt of notice
of such claim
from the Indemnified Party. Within thirty (30) days after receipt of notice
of a
particular matter from the Indemnified Party, the Indemnifying Party may
assume the
defense of such Third Party Claim, in which case the Indemnifying Party shall
have the
authority to negotiate, compromise and settle such Third Party Claim, if and
only if the
following conditions are satisfied:
(i)the Indemnifying Party shall have confirmed in writing that
it is
obligated hereunder to indemnify the Indemnified Party with respect to such
Third Party
Claim; and
(ii)the Indemnified Party shall not have given the Indemnifying
Party
written notice that it has determined, in the exercise of its reasonable
discretion, that
a conflict of interest make separate representation by the Indemnified Party's
own counsel
advisable.
The Indemnified Party shall retain the right to employ its own counsel
and to
participate in the defense of any Third Party Claim, the defense of which has
been assumed
by the Indemnifying Party pursuant hereto, but the Indemnified Party shall
bear and shall
be solely responsible for its own costs and expenses in connection with such
participation. Each of the parties hereto shall cooperate with each other in
the defense
of any Third Party Claim by the other party hereto. Each of the parties shall
make
available to the other party reasonable access to books and records relating
to the Third
Party Claim and shall make available such party's personnel to the extent
reasonably
necessary in connection with the defense of such Third Party Claim.
3. Method and Manner of Paying Claims.
In the event of any claims under this Section 8, the claimant shall advise the
party or
parties who are required to provide indemnification therefor in writing of the
amount and
circumstances surrounding such claim. With respect to liquidated claims, if
within thirty
days the other party has not contested such claim in writing, the other party
will pay the
full amount thereof within ten days after the expiration of such period;
provided that
payment of any amount required to be paid by the Seller or the Shareholders to
the Buyer
under this Section 8 shall be made from the Escrowed Funds in accordance with
the
provisions of the Escrow Agreement. Any amount owed by an Indemnifying Party
hereunder
with respect to any Claim may be set-off by the Indemnified Party against any
amounts owed
by the Indemnified Party to any Indemnifying Party.
D. Limitations of Indemnities.
1. Notwithstanding the provisions of
Sections 8.A, 8.B and 8.C hereof, no payment shall be made by an indemnifying
party to an
indemnified party based upon any claim of an indemnified party under this
Section 8 until
the amount of all such claims (after deducting insurance proceeds and third
party
recoveries paid to or for the benefit of the indemnified party) shall total,
in the
aggregate of one hundred thousand dollars ($100,000) (the "Minimum Damages")
for any
liabilities (excluding tax liabilities, the Excluded Liabilities and claims
related to a
breach of the representation made in Section 4.A (collectively, the "Unlimited
Claims"),
each of which shall be fully reimbursed), in which event only the amount of
such claims
of the indemnified party in excess of the Minimum Damages (after deducting any
insurance
proceeds and third party recoveries paid to or for the benefit of the
indemnified party)
shall be subject to indemnification in accordance with the terms of Sections
8.A, 8.B and
8.C hereof. Notwithstanding the provisions of Sections 8.A, 8.B and 8.C
hereof, the
maximum liability of the Shareholders and the Seller (in the aggregate) or of
the Buyer
under this Section 8 (other than with respect to Unlimited Claims) shall be
limited to two
million five hundred thousand dollars ($2,500,000).
2. The parties' respective obligations
to indemnify each other under Sections 8.A, 8.B and 8.C hereof shall expire on
the
following anniversaries of the Closing Date:
(a) the seventh (7th) anniversary, with
respect to all tax claims and all claims involving Environmental Matters; and
(b) the second anniversary, with
respect to all other matters.
E. Remedies. The indemnification provisions set forth in this Section
8 shall
be Seller's and Buyer's sole and exclusive remedy against each other and
Shareholders for
any breach or misrepresentation of any covenant or representation made herein,
provided
that, Seller and Buyer shall retain all remedies at law or in equity in the
event of any
willful fraud committed by the other party hereto in connection with the terms
of this
Agreement.
9. Closing Conditions.
A. Conditions to Seller's Obligations. The obligations of Seller to
consummate the transactions provided for herein are subject, in the discretion
of Seller,
to the satisfaction, on or prior to the Closing Date, of each of the following
conditions;
provided that Seller shall have the right to waive any such condition, and the
parties
hereto agree that the Closing of this Agreement constitutes a waiver by Seller
of any such
condition and of any claim or right relating to the subject matter of any such
condition:
1. Representations, Warranties and
Covenants. All representations and warranties of Buyer contained in this
Agreement shall
be true and correct in all material respects at and as of the Closing Date,
except as and
to the extent that the facts and conditions upon which such representations
and warranties
are based are expressly required or permitted to be changed by the terms
hereof, and Buyer
shall have performed all agreements and covenants required hereby to be
performed by it
prior to or at the Closing Date.
2. Consents. All material consents,
approvals and waivers from governmental authorities (including expiration or
termination
of the waiting period under the HSR Act) and other parties necessary to permit
Buyer to
purchase the Purchased Assets from Seller as may be contemplated hereby shall
have been
obtained.
3. No Governmental Proceedings or
Litigation. No action, suit or proceeding before any court or governmental
body shall
have been instituted (and be pending) by any governmental authority to
restrain or
prohibit this Agreement or the consummation of the transactions contemplated
hereby. No
preliminary or permanent injunction or other order issued by any federal or
state court
of competent jurisdiction preventing consummation of the transactions
contemplated
hereunder shall be in effect.
4. Certificates. Buyer will furnish
Seller with such certificates of its officers and others to evidence
compliance with the
conditions set forth in this Article 9 as may be reasonably requested by
Seller.
5. Corporate Documents. Seller shall
have received resolutions adopted by the board of directors of Buyer approving
this
Agreement and the transactions contemplated hereby, certified by Buyer's
corporate
secretary.
6. Legal Opinion. Bingham, Dana &
Gould, LLP counsel to the Buyer, shall have delivered to the Seller a written
opinion,
dated the Closing Date and addressed to the Seller, substantially in the form
of Exhibit
D hereto.
7. Agreements. The Buyer shall have
executed and delivered the Transaction Documents to which it is a party, and
such
agreements shall be in full force and effect.
8. Shareholder Approval. The sale of
the Purchased Assets by Seller to Buyer shall have been approved by the
shareholders of
Publicker.
9. Environmental Matters. The Buyer
and Seller shall have received the Phase II Report and the Remediation
Expenses shall
have been finally determined in accordance with Section 6.F hereof.
B. Conditions to Buyer's Obligations. The obligations of Buyer to
consummate
the transactions provided for hereby are subject, in the discretion of Buyer,
to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions;
provided that Buyer shall have the right to waive any such condition, and the
parties
hereto agree that the Closing of this Agreement constitutes a waiver by Buyer
of any such
condition and of any claim or right relating to the subject matter of any such
condition:
1. Representations, Warranties and
Covenants. All representations and warranties of Seller and Shareholders
contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing
Date, except as and to the extent that the facts and conditions upon which
such
representations and warranties are based are expressly required or permitted
to be changed
by the terms hereof, and Seller and Shareholders shall have performed all
agreements and
covenants required hereby to be performed by them prior to or at the Closing
Date.
2. Consents. All material consents,
approvals and waivers from governmental authorities (including expiration or
termination
of the waiting period under the HSR Act) and other parties necessary to permit
Seller to
transfer the Purchased Assets to Buyer as contemplated hereby, and in the
aggregate
sufficient and adequate to carry on the Business as presently being conducted,
shall have
been obtained.
3. No Governmental Proceedings or
Litigation. No action, suit or proceeding before any court or governmental
body shall
have been instituted (and be pending) by any governmental authority to
restrain or
prohibit this Agreement or the consummation of the transactions contemplated
hereby. No
preliminary or permanent injunction or other order issued by any federal or
state court
of competent jurisdiction preventing consummation of the transactions
contemplated
hereunder shall be in effect.
4. Certificates. Seller will furnish
Buyer with such certificates of its officers and others to evidence compliance
with the
conditions set forth in this Article 9 as may be reasonably requested by
Buyer.
5. Corporate Documents. Buyer shall
have received from Seller and Shareholders, resolutions adopted by the board
of directors
of Seller approving this Agreement and the transactions contemplated hereby,
certified by
Seller's and each of the Shareholder's corporate secretary.
6. Legal Opinions. Kaye, Scholer,
Fierman, Hays & Handler, LLP, counsel to the Seller and the Shareholders
("Kaye,
Scholer"), shall have delivered to the Buyer a written opinion, dated the
Closing Date and
addressed to the Buyer, substantially in the form of Exhibit E hereto, and
Schnader,
Harrison, Segal & Lewis, special Pennsylvania counsel to Publicker, shall have
delivered
to the Buyer and Kaye, Scholer a written opinion, dated the Closing Date and
addressed to
the Buyer, substantially in the form of Exhibit F hereto.
7. Agreements. The Seller and the
Shareholders shall have executed and delivered the Transaction Documents to
which they are
a party, and such agreements shall be in full force and effect.
8. No Material Change. There shall
not have been or threatened to be, any material damage to or loss or
destruction of the
properties or assets owned or leased by the Seller (whether or not covered by
insurance)
or any material adverse change in the condition (financial or otherwise),
operations,
business, prospects or assets of the Seller or imposition of any law, rules or
regulations
which would materially adversely affect the condition (financial or
otherwise),
operations, business, prospects or assets of the Seller, other than changes
affecting
economic conditions generally.
9. Employment Agreement. Fred
Bengtson and the Buyer shall have entered into an employment agreement in form
and
substance satisfactory to the Buyer, and such employment agreement shall be in
full force
and effect.
10.Financing. The Buyer shall have obtained debt and equity
financing on
terms satisfactory to it, providing the Buyer with sufficient funds to pay the
Purchase
Price and all fees and expenses of the Buyer arising in connection with the
transactions
contemplated by this Agreement and providing the Buyer with sufficient
availability to
finance its working capital needs following the Closing, and all conditions
precedent to
funding under such financing arrangements (other than the purchase and sale
contemplated
hereby) shall have been satisfied or waived.
12.Repayment of Outstanding Indebtedness. All outstanding amounts
owed under
the indebtedness set forth under the heading "Notes Payable" on Schedule
2.A.2.h shall
have been repaid, and the obligees thereunder shall have executed payoff
letters and UCC-3
termination statements in form and substance reasonably satisfactory to the
Buyer.
13.Environmental Matters. The Buyer and Seller shall have received
the
Phase II Report and the Remediation Expenses shall have been finally
determined in
accordance with Section 6.F hereof.
10. Closing Documents.
A. Provided by Buyer.
1. Funds. Wire transfer of the full
amount of the Purchase Price as set forth in Section 3.B.
2. Assumptions. Executed Bills of
Sale and Assignments of Contracts in the form attached hereto as Exhibit G and
executed
assignments of lease agreements as specified in Schedule 2.A.1.a hereto.
3. Secretary's Certificates. All
resolutions of the Board of Directors of Buyer authorizing the transactions
contemplated
by this Agreement, certified by the Secretary of Buyer.
B. Provided By Seller.
1. Assignments and Bills of Sale.
Executed Bills of Sale and Assignments of Contracts in the form attached
hereto as Exhibit
G and executed assignments of lease agreements as specified in Schedule
2.A.1.a hereto.
2. Secretary's Certificates. All
resolutions of the Board of Directors of Seller and Shareholders and the
Parent as the
sole shareholder of Seller authorizing the transactions contemplated by this
Agreement,
certified by the Secretary of Seller and each Shareholder.
11. Miscellaneous.
A. Successors and Assigns. Except as otherwise provided in this
Agreement,
no party hereto shall assign this Agreement or any rights or obligations
hereunder
(including by operation of law) without the prior written consent of the other
parties
hereto and any such attempted assignment without such prior written consent
shall be void
and of no force and effect. This Agreement shall inure to the benefit of and
shall be
binding upon the successors and permitted assigns of the parties hereto.
B. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
C. Expenses. Seller, Shareholders and Buyer will pay their respective
costs
and expenses, including the expenses of their accounting and legal
representatives, in
connection with the origin, negotiation, execution and performance of this
Agreement.
D. Force Majeure. No party hereto shall be liable for any failure of
or delay
in the performance of this Agreement for the period that such failure or delay
is due to
acts of God, public enemy, civil war, strikes or labor disputes or any other
cause beyond
the parties' reasonable control. Each party agrees to notify the other party
promptly
upon the occurrence of any such cause and to carry out this Agreement as
promptly as
practicable after such cause is terminated.
E. Severability. If any part or provision of this Agreement shall be
determined to be invalid or unenforceable by a court of competent jurisdiction
or any
other legally constituted body having jurisdiction to make such determination,
such part
or provision shall be valid and enforceable to the maximum extent permitted by
law and the
remaining provisions of this Agreement shall be fully effective.
F. Brokers' and Finders' Fees. Each of the parties represents and
warrants
that, with the exception of Bowles Hollowell Connor & Co. ("BHC"), it has
dealt with no
broker or finder in connection with any of the transactions contemplated by
this Agreement
and, insofar as it knows, no broker or other person other than BHC is entitled
to any
commission or finder's fee in connection with any of these transactions.
Seller
acknowledges that it is solely responsible for the payment of any commission
or finder's
fee due BHC in connection with these transactions.
G. Notices. All notices, requests, demands and other communications
under
this Agreement shall be in writing and shall be deemed to have been duly given
(i) on the
date of service if served personally on the party to whom notice is to be
given, (ii) on
the day of transmission if sent by facsimile transmission to the facsimile
number given
below, and telephonic confirmation of receipt is obtained promptly after
completion of
transmission, (iii) on the day after delivery to Federal Express or similar
overnight
courier or the Express Mail service maintained by the United States Postal
Service, or
(iv) on the fifth (5th) day after mailing, if mailed to the party to whom
notice is to be
given, by first class mail, registered or certified, postage prepaid and
properly
addressed, to the party as follows:
If to Seller or
Shareholders: Masterview Window Company, Inc.
c/o Publicker Industries Inc.
1445 East Putnam Avenue
Old Greenwich, Connecticut 06870
Attn: Mr. James J. Weis
Telephone: (203) 637-4500
Facsimile: (203) 637-4807
Copy to: Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, NY 10022
Attention: Joel I. Greenberg, Esq.
Telephone: (212) 836-8000
Facsimile: (212) 836-7246
If to Buyer: c/o BancBoston Ventures Inc.
100 Federal Street
Boston Massachusetts 02110
Attention: John Cullinane, Vice President
Telephone: (617) 434-5591
Facsimile: (617) 434-1153
Copy to: Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Robert M. Wolf, Esq.
Telephone: (617) 951-8000
Facsimile: (617) 951-8736
Any party may change its address for the purpose of this Section 11.G by
giving the other
party notice of its new address in the manner set forth above.
H. Amendments; Waivers. This Agreement may be amended, modified,
superseded
or canceled, and any of the terms, covenants, representations, warranties or
conditions
hereof may be waived, only by written instrument executed by both parties
hereto, or in
the case of a waiver, by the party waiving compliance. Any waiver by any party
of any
condition, or of the breach of any provision, term, covenant, representation
or warranty
contained in this Agreement, in any one or more instances, shall not be deemed
to be nor
construed as further or continuing waiver of any such condition, or of the
breach of any
other provision, term, covenant, representation or warranty of this Agreement.
I. Entire Agreement. This Agreement, the Escrow Agreement, the
Environmental
Escrow Agreement and the exhibits referred to herein contain the entire
agreement of the
parties hereto with respect to the sale and purchase of the Purchased Assets
and the other
transactions contemplated herein, and any reference herein to this Agreement
shall be
deemed to include the schedules and exhibits attached hereto. All oral or
written
agreements, statements, representations, warranties, and understandings made
or entered
into by the parties prior to or contemporaneously with the execution of this
Agreement are
hereby rendered null and void and are merged herewith.
J. Further Matters. Each party agrees to execute such further
instruments of
assignment and transfer and to perform such additional acts and as are
necessary to
consummate the transactions contemplated by this Agreement.
K. Parties in Interest. Nothing in this Agreement is intended to
confer, or
confers, any rights or remedies under or by reason of this Agreement on any
persons other
than the parties to it and their respective successors and assigns. Nothing
in this
Agreement is intended to, or does, relieve or discharge the obligations or
liability of
any third persons to any party to this Agreement. No provision of this
Agreement shall
give any third persons any right of subrogation or action over or against any
party to
this Agreement.
L. Survival. The representations, warranties and covenants of the
parties set
forth herein shall survive the Closing date of this Agreement for the periods
set forth
in Section 8.D hereof.
M. Section and Paragraph Headings. The section and paragraph headings
in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
N. Counterparts. This Agreement may be executed in several
counterparts each
of which shall be deemed an original but all of which together shall
constitute one and
the same instrument.
O. Termination. This Agreement may be terminated as follows:
(a) by either the Seller and
Shareholders or the Buyer at any time on or after the close of business on
October 31,
1996 if the Closing has not occurred on or prior to such date, so long as such
failure to
close is not a result of a breach by the terminating party of any of its
obligations
hereunder; provided, that so long as the Buyer and Shareholder have filed
notifications
under the HSR Act in accordance with Section 6.C. on or prior to October 31,
1996, the
right to terminate this Agreement shall be extended to the third business day
following
the expiration or termination of the waiting period provided by the HSR Act;
(b) by the Buyer if the shareholders
of Publicker fail to approve the sale of the Purchased Assets by the Seller to
Buyer by
August 30, 1996;
(c) by the Seller and Shareholders if
the condition to closing set forth in Section 9.B.9 shall not have been
satisfied or
waived in writing by the Buyer by September 30, 1996; and
(d) by either the Seller and
Shareholders or the Buyer at any time after the fifth day following
determination of the
Remediation Expense Amount in accordance with Section 6.F hereof if the
Remediation
Expense exceeds $750,000.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly
executed as of the day and year first above written.
SHAREHOLDERS:
Publicker Industries Inc.
By:
Title:
Hanten Acquisition Co.
By:
Title:
SELLER:
Masterview Window Company, Inc.
By:
Title:
BUYER:
Masterview Acquisition Corp.
By:
Title:
Exhibit 11
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996(a) 1995(b) 1996(a) 1995(b)
(in thousands except per share data)
Net income (loss) $ 15 $ (347) $ 7,155 $ 74
Add - Interest savings, net
of tax effect 53 - 118 -
Adjusted net income (loss) $ 68 $ (347) $ 7,273 $ 74
Average common shares 15,453 14,797 15,271 14,730
Add - Stock options and
common stock purchase warrants 1,776 - 1,776 -
Adjusted common shares 17,229 14,797 17,047 14,730
Earnings per common share $ - $ (.02) $ .43 $.01
(a) Earnings per common share is
computed using the modified
treasury method. In accordance
with this method, proceeds from
the exercise of stock options and
warrants are first used to buy
back up to 20% of the Company's
common stock at the average price
for the period. Any remaining
proceeds are used to retire debt.
An adjustment is made to net
income to reflect interest assumed
to be saved on the debt
retirement, net of income taxes.
(b) Earnings per common share is
computed using the weighted
average number of common shares
outstanding during each period.
The effect of stock options and
warrants were not included as they
were antidilutive.