EXHIBIT (A) (3)
BIRD CORPORATION
1077 PLEASANT STREET
NORWOOD, MA 02062
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about January 16, 1998 as
part of Bird Corporation's (the "Company") Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of record at
the close of business on January 14, 1998 of the Shares. Capitalized terms
used and not otherwise defined herein shall have the meaning ascribed to them
in the Schedule 14D-9. You are receiving this Information Statement in
connection with the possible election of persons to be designated by the
Purchaser to a majority of the seats on the Board of Directors of the Company
(the "Board"). Pursuant to the Merger Agreement, upon the acquisition by the
Purchaser of at least a majority of the outstanding Common Shares pursuant to
the Offer, the Purchaser shall be entitled to designate such number of
directors to be appointed to the Company's Board (the "Designated Directors")
as is required in order for the Designated Directors to constitute a majority
of the Board. At such time, the Company and the Board are required to take all
such action, including increasing the size of the Board or using their best
efforts to secure the resignations of incumbent directors, as needed to assure
that the Designated Directors constitute a majority of the Board. In addition,
in the event that after the acquisition by the Purchaser of at least a
majority of the outstanding Common Shares pursuant to the Offer and prior to
the Effective Date, the number of members of the Company's Board increases,
the Company and the Board are required at such time to take all such
additional action, including increasing the size of the Board, using their
best efforts to secure the resignation of incumbent directors or appointing
additional Designated Directors, as needed to assure that the Designated
Directors shall then constitute a majority of the Board. The parties to the
Merger Agreement have agreed to use their respective best efforts to ensure
that at least three members of the Board shall, at all times prior to the
Effective Date, be Continuing Directors.
This Information Statement is required by Section 14(f) of the Exchange Act,
and Rule 14f-1 thereunder. You are urged to read this Information Statement
carefully. However, you are not required to take any action.
The Purchaser commenced the Offer on January 16, 1998. The Offer is
scheduled to expire on February 13, 1998.
The information contained in this Information Statement (including
information listed in Schedule I to the Purchaser's Offer to Purchase and
information incorporated herein by reference) concerning CertainTeed, the
Purchaser and the Designated Directors has been furnished to the Company by
CertainTeed and the Purchaser, and the Company assumes no responsibility for
the accuracy or completeness of such information.
The Common Shares and the Preference Shares are the only classes of
securities of the Company outstanding which are entitled to vote upon adoption
of the Merger Agreement. Each Common Share and Preference Share has one vote
with respect thereto. As of January 14, 1998, there were 4,159,877 Common
Shares and 814,300 Preference Shares outstanding.
A-1
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Board currently consists of seven members. The Board is divided into
three classes, with each class to hold office for a term of three years and
the term of office of one class to expire each year. Mr. Anthony was appointed
to the Board on January 12, 1998.
DESIGNATED DIRECTORS
Pursuant to the Merger Agreement, immediately after the acquisition by the
Purchaser of at least a majority of the outstanding Common Shares pursuant to
the Offer, the Board will consist of seven members, four of whom will be
Designated Directors and three of whom will be Continuing Directors. Upon the
acquisition by the Purchaser of at least a majority of the outstanding Common
Shares pursuant to the Offer, and during the period after such acquisition and
prior to the Effective Date, the Company and the Board are required to take
any and all such action, including increasing the size of the Board,
appointing Designated Directors and using their best efforts to secure the
resignations of incumbent directors, as needed to cause the Designated
Directors to constitute a majority of the Board.
The Purchaser has informed the Company that it currently intends to choose
the following Designated Directors from the directors and executive officers
listed in Schedule I to the Offer to Purchase, a copy of which is being mailed
to the Company's stockholders together with the Schedule 14D-9: Gianpaolo
Caccini, George B. Amoss, Bradford C. Mattson, and James E. Hilyard. The
Purchaser has informed the Company that each of the Designated Directors has
consented to act as a director. The information on such Schedule I is
incorporated herein by reference. None of the Designated Directors (i) is
currently a director of, or holds any position with, the Company, (ii) has a
familial relationship with any of the directors or executive officers of the
Company or (iii) to the best knowledge of the Purchaser, beneficially owns any
securities (or rights to acquire any securities) of the Company. The Company
has been advised by the Purchaser that, to the best of Purchaser's knowledge,
none of the Designated Directors has been involved in any transaction with the
Company or any of its directors, executive officers or affiliates which are
required to be disclosed pursuant to the rules and regulations of the SEC,
except as may be disclosed herein or in the Schedule 14D-9. The business
address of the Purchaser and CertainTeed is 750 E. Swedesford Road, Valley
Forge, Pennsylvania 19482.
It is expected that the Designated Directors will assume office at any time
following the acquisition by the Purchaser pursuant to the Offer of at least a
majority of the outstanding Common Shares, which acquisition cannot be earlier
than February 13, 1998, and that upon assuming office, the Designated
Directors will thereafter constitute at least a majority of the Board.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The table below sets forth certain information with respect to the current
Board of Directors and executive officers of the Company.
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POSITION WITH THE COMPANY; EXPIRATION
PRINCIPAL OCCUPATION AND OF PRESENT
OTHER BUSINESS ELECTED OR TERM OF
NAME AND AGE AFFILIATIONS(1) APPOINTED(2) OFFICE
---------------------------- ---------------------------- ------------ ----------
Frank S. Anthony, 51........ Director; Vice President, 1998 1998
General Counsel and
Corporate Secretary of the
Company since May 1984
Charles S. Bird, III, 72.... Director; Trustee of family 1962 1998
trusts
Herbert I. Corkin, 75....... Director; President, 1997 2000
Director and majority
shareholder, The Entwistle
Company, Hudson, MA;
Director, Citizen's Bank of
Rhode Island.
Antonio J. Lorusso, Jr., 50. Director; President, S.M. 1996 1999
Lorusso & Sons, Inc.
Richard C. Maloof, 52....... Director; President and 1994 1999
Chief Operating Officer of
the Company since April
1995; Vice President and
Chief Operating Officer of
the Company from April 1994
to April 1995; Vice
President of the Company and
President, Roofing and
Distribution Groups of the
Company for more than five
years prior thereto
Loren R. Watts, 63.......... Director; Retired Managing 1991 1998
Partner, Management
Consultant Services, Coopers
& Lybrand (certified public
accountants)
R. Keith Long, 50........... Director; sole shareholder, 1996 2000
Otter Creek Management,
Inc., a general partner of
Otter Creek Partners I, L.P.
- --------
(1) Includes business experience during past five years.
(2) At the 1990 annual meeting, the stockholders approved a reorganization
pursuant to which the then stockholders of Bird Incorporated became
stockholders of Bird Corporation, a newly organized Massachusetts
corporation, and Bird Incorporated became a wholly owned subsidiary of
Bird Corporation. This column indicates the date as of which a person was
first elected a director of the Company or of Bird Incorporated.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended December 31, 1997, the Board held seven (7) meetings.
Each of the directors attended more than seventy-five percent of the aggregate
of Board meetings and meetings of committees of the Board of which he is a
member.
The Audit Committee, which consisted during 1997 of Loren R. Watts
(Chairman), R. Keith Long, and Joseph Vecchiolla (until Mr. Vecchiolla's
resignation on December 11, 1997), meets periodically with the Company's
independent accountants to review the scope of the annual audit, to discuss
the adequacy of internal accounting controls and procedures and to perform
general oversight with respect to the accounting principles
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applied in the financial reporting of the Company. The Audit Committee also
meets with the Company's internal auditor and reviews the scope of the
internal audit plan and the results of audits performed thereunder. The Audit
Committee held three (3) meetings during 1997.
The function of the Stock Option, Compensation, and Organizational
Development Committee (the "Compensation Committee") is to administer the
Company's stock option plans, to recommend to the full Board the amount,
character, and method of payment of compensation of all executive officers and
certain other key employees of the Company, and to provide for organizational
development and succession planning. During 1997 the Compensation Committee
consisted of Antonio J. Lorusso (Chairman), Charles S. Bird, III, and Herbert
I. Corkin. The Compensation Committee held four (4) meetings in 1997.
The Company also has a Nominating Committee which, during 1997, consisted of
Charles S. Bird, III, Richard C. Maloof, and Joseph Vecchiolla (until Mr.
Vecchiolla's resignation on December 11, 1997). The Nominating Committee makes
recommendations to and otherwise assists the Board in connection with finding,
evaluating, and nominating directors of the Company. The Nominating Committee
held one (1) meeting during 1997.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists the stockholders known to management to be the
beneficial owners of more than 5% of the outstanding Common Shares as of
December 31, 1997 (except as otherwise noted).
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------- ----------------- --------
The Entwistle Company................................ 548,639 shares(1) 13.2%
Bigelow Street
Hudson, MA 01749
S.M. Lorusso & Sons, Inc. ........................... 410,121 shares(2) 9.8%
Antonio J. Lorusso, Jr.
James B. Lorusso
Samuel A. Lorusso
331 West Street
Walpole, MA 02081
Mellon Bank Corporation and its Subsidiaries......... 309,000 shares(3) 7.5%
One Mellon Bank Center
Pittsburgh, PA 15258
Charles S. Bird, III................................. 315,358 shares(4) 7.5%
13 Proctor Street
Manchester, MA 01944
Dimensional Fund Advisors Inc. ...................... 218,500 shares(5) 5.3%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
R. Keith Long........................................ 464,762 shares(6) 10.9%
Joan Greco and John Fyfe
Otter Creek Partners I L.P.
400 Royal Palm Way
Palm Beach, Florida 33480
East Ferry Investors, Inc............................ 248,400 shares(7) 6.0%
David G. Booth
15 Garden Place
Brooklyn, NY 11201
- --------
(1) Based on information contained in an amended Schedule 13D filed with the
SEC on April 1, 1987. The Schedule 13D reports that The Entwistle Company
had sole voting and dispositive power with respect to all shares
beneficially owned, including 8,539 shares it had the right to acquire
upon conversion of the Company's Convertible Preference Stock, par value
$1 per share, (the "Preference Stock"). Also includes options for the
purchase of 2,500 Common Shares exercisable as of December 31, 1997 or
within 60 days thereafter or upon a change in control.
(2) Based on information contained in a Schedule 13D amended through June 6,
1996 filed with the SEC. The Schedule 13D reports that S.M. Lorusso &
Sons, Inc. ("Lorusso") had sole voting power and dispositive power with
respect to 230,121 shares. Antonio J. Lorusso, Jr., president, director
and a stockholder of Lorusso, had sole voting and dispositive power with
respect to 20,000 shares and had shared voting and
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dispositive power with respect to 79,500 shares and James B. Lorusso, an
officer, director, and a stockholder of Lorusso, had sole voting and
dispositive power over 1,000 shares; Samuel A. Lorusso, an officer,
director, and stockholder of Lorusso, had shared voting and dispositive
power with respect to 1,500 shares. Also includes options for the purchase
of 5,000 Common Shares exercisable as of December 31, 1997 or within 60
days thereafter or upon a change in control.
(3) Based on information contained in a Schedule 13G amended through February
10, 1997 filed with the SEC. The Schedule 13G reports that Mellon Bank
Corporation had sole voting and dispositive power with respect to 20,000
shares and, together with its subsidiaries, including Boston Safe Deposit
and Trust Company, had shared voting and dispositive power with respect to
289,000 shares, including 274,929 shares referred to in footnote (4),
below.
(4) Includes 274,929 shares held in a trust of which Boston Safe Deposit and
Trust Company and Charles S. Bird, III are co-trustees with shared voting
and dispositive power and 3,595 of Common Shares that he has a right to
acquire upon conversion of the Company's Preference Stock. Also includes
options for the purchase of 22,500 Common Shares exercisable as of
December 31, 1997 or within 60 days thereafter or upon a change in
control.
(5) Based on information contained in a Schedule 13G amended through February
12, 1997 filed with the SEC. The Schedule 13G reports that Dimensional
Fund Advisors Inc. had sole voting and dispositive power with respect to
160,400 shares and sole dispositive power with respect to an additional
58,100 shares.
(6) Based in part on information contained in a Schedule 13D amended through
June 3, 1997 filed with the SEC. The Schedule 13D was filed jointly by
Otter Creek Partners I, L.P. ("Otter Creek"), R. Keith Long and Joan Greco
and John Fyfe, joint tenants with rights of survivorship (together,
"Fyfe"). The Schedule 13D and its amendments report that Otter Creek
Management, Inc. ("OCM") is the sole general partner and investment
advisor of Otter Creek and Mr. Long is the sole executive officer, sole
director and sole shareholder of OCM. Mr. Long also managed discretionary
stock trading accounts for Fyfe. Otter Creek reported sole voting and
dispositive power with respect to 160,900 Common Shares. Fyfe reported
sole voting and dispositive power with respect to 87,300 Common Shares.
Mr. Long reported sole voting and dispositive power over 109,000 shares.
Includes an aggregate of 102,562 shares of Common Stock that Otter Creek,
Fyfe and Mr. Long have a right to acquire upon conversion of the Company's
Preference Stock. Also includes options held by Mr. Long for the purchase
of 5,000 Common Shares exercisable as of December 31, 1997 or within 60
days thereafter or upon a change in control.
(7) Based on information contained in a Schedule 13D filed with the SEC on
August 22, 1997, jointly by East Ferry Investors, Inc. ("East Ferry") and
David G. Booth. The Schedule 13D reports that Mr. Booth controls East
Ferry and is East Ferry's sole stockholder and sole executive officer. Mr.
Booth, with East Ferry, had shared voting power and shared dispositive
power with respect to 248,400 shares of Common Stock.
A-6
The tables below set forth information provided by the individuals named
therein as to the amount of the Company's Common Shares, Preference Shares and
5% Cumulative Preferred Stock, par value $100 per share (the "5% Stock")
beneficially owned by the directors and executive officers of the Company,
individually, and the directors and executive officers as a group, all as of
December 31, 1997 except as otherwise noted. Unless otherwise indicated in the
footnotes, each of the named persons and members of the group has sole voting
and investment power with respect to the shares shown.
COMMON
COMMON SHARES SHARES
BENEFICIALLY SUBJECT
OWNED (EXCLUDING TO STOCK PERCENT
NAME STOCK OPTIONS) OPTIONS(1) TOTAL OF CLASS
---- ---------------- ---------- --------- --------
Charles S. Bird, III............ 292,858(2) 22,500 315,358 7.5%
Herbert I. Corkin............... 546, 139(3) 2,500 548,639 13.2%
R. Keith Long................... 459,762(4) 5,000 464,762 10.9%
Antonio J. Lorusso, Jr. ........ 405,121(5) 5,000 410,121 9.8%
Loren R. Watts.................. 4,000 17,500 21,500 *
Frank S. Anthony................ 32,624(6) 34,000 66,624 1.6%
Richard C. Maloof............... 48,984(7) 155,000 203,984 4.7%
All directors and executive
officers as a group (seven
persons)....................... 1,787,488(8) 241,500 2,030,988 44.9%
- --------
* Less than 1% of the outstanding Common Shares.
(1) Represents shares which the individual has a right to acquire by exercise
of stock options exercisable December 31, 1997 or within 60 days
thereafter, or which are exercisable upon a change in control.
(2) Includes 274,929 shares as to which Mr. Bird shares voting and dispositive
power and 3,595 shares which may be acquired upon conversion of Preference
Shares.
(3) The Entwistle Company has sole voting and dispositive power with respect
to all shares beneficially owned, including 8,539 shares it has the right
to acquire upon conversion of the Company's Preference Stock. Mr. Corkin
controls the Entwistle Company.
(4) Otter Creek Management, Inc. ("OCM") is the sole general partner and
investment advisor of Otter Creek Partners I L.P. ("Otter Creek"). Mr.
Long is the sole executive officer, sole director, and sole shareholder of
OCM. Mr. Long also managed discretionary stock trading accounts for Joan
Greco and John Fyfe, joint tenants with right of survivorship ("Fyfe").
Includes an aggregate of 102,562 shares of Common Stock that Otter Creek,
Mr. Long and Fyfe have a right to acquire upon conversion of the Company's
Preference Stock.
(5) S.M. Lorusso & Sons, Inc. ("Lorusso") has sole voting power and
dispositive power with respect to 230,121 shares. Antonio J. Lorusso, Jr.,
president, director and a stockholder of Lorusso, has sole voting and
dispositive power with respect to 20,000 shares and had shared voting and
dispositive power with respect to 79,500 shares and James B. Lorusso, an
officer, director, and a stockholder of Lorusso, has sole voting and
dispositive power over 1,000 shares; Samuel A. Lorusso, an officer,
director, and stockholder of Lorusso, has shared voting and dispositive
power with respect to 1,500 shares.
(6) Includes 3,048 shares allocated to Mr. Anthony's account under the Bird
Employees' Savings and Profit Sharing Plan (the "Savings Plan") as of
December 31, 1997.
(7) Includes 4,169 shares allocated to Mr. Maloof's account under the Savings
Plan as of December 31, 1997, 10,625 shares held jointly with members of
his family as to which he has shared voting and dispositive power and
2,337 shares of Common Stock which may be acquired upon conversion of the
Preference Stock.
(8) Includes 433,554 shares as to which persons included in the group have
shared voting and investment power, 118,831 shares which may be acquired
upon conversion of Preference Shares, and 7,217 shares allocated to the
accounts of officers under the Savings Plan as of December 31, 1997.
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PREFERENCE
SHARES
BENEFICIALLY PERCENT
NAME OWNED OF CLASS
---- ------------ --------
Charles S. Bird, III.............................. 4,000 *
Herbert I. Corkin................................. 9,500 1.2%
Richard C. Maloof................................. 2,600 *
R. Keith Long..................................... 114,100 14.0%
A.J. Lorusso, Jr.................................. 2,000 *
All directors and executive officers as a group
(five persons)................................... 132,200 16.2%
--------
* Less than 1% of the outstanding Preference Stock.
SHARES OF
5% STOCK
BENEFICIALLY PERCENT
NAME OWNED OF CLASS
---- ------------ --------
Charles S. Bird, III.............................. 1,815 31%
All directors and executive officers as a group
(one person)..................................... 1,815 31%
COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who hold more than 10% of the Company's Common
Shares to file with the SEC reports of ownership and changes in ownership of
the Company's equity securities. Based on reports received by the Company and
representations of certain reporting persons, the Company believes that all
filing requirements applicable to its officers, directors, and greater than
10% beneficial owners with respect to fiscal year 1997 have been met.
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EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid
or accrued for services in all capacities to the Company during each of the
last three fiscal years to each of the executive officers of the Company who
served as such during 1997. No one served as Chief Executive Officer during
1997.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
SECURITIES
OTHER UNDERLYING ALL
ANNUAL RESTRICTED STOCK OTHER
NAME AND PRINCIPAL COMPEN- STOCK OPTIONS/SA LTIP COMPEN-
POSITION YEAR SALARY($) MCIP($) SATION($)(1) AWARDS RS(#) PAYOUTS(2) SATION($)
- ------------------ ---- --------- ------- ------------ ---------- ---------- ---------- ----------
Richard C. Maloof....... 1997 221,106 4,781 -- -- -- -- 7,843(3)
Vice President and 1996 216,154 129,844 -- -- 50,000 22,700 7,500(3)
Chief Operating
Officer(5) 1995 195,962 30,000 11,538 -- 50,000 81,938 7,500(3)
Frank S. Anthony........ 1997 142,490 2,311 -- -- -- -- 5,634(3)
Vice President and 1996 139,808 48,440 -- -- 15,000 13,617 296,682(4)
General Counsel(6) 6,864(3)
1995 135,000 12,540 -- -- -- 49,163 150,000(4)
10,545(3)
1994 135,000 30,000 22,444 -- -- 43,870 8,496(3)
- --------
(1) Payment in lieu of vacation. Does not include certain perquisites and
other personal benefits, the cost of which to the Company was below the
disclosure thresholds established by the Securities and Exchange
Commission.
(2) In 1995 restrictions on all stock held in escrow pursuant to the Company's
Long Term Incentive Plan (the "LTIP") lapsed as a result of the Vinyl Sale
and shares were distributed to the persons named in the table. Represents
the value of Common Stock allocated to each officer on the date of
restriction lapse and reimbursement for withholding taxes arising from the
lapse of restrictions on restricted stock held by each officer in
accordance with provisions of the LTIP. The LTIP is terminated.
(3) Represents contributions by the Company to the Savings Plan.
(4) Represents severance payments received in connection with the change in
control which occurred pursuant to the Vinyl Sale and payment to a
separate trust established by the Company with a bank trustee to which
amounts otherwise payable to Mr. Anthony in excess of those permitted to
be contributed to the Savings Plan under limits imposed by the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), are
contributed.
(5) Mr. Maloof was elected Chief Operating Officer in April 1994, President in
April 1995 and to the Board of Directors in December 1994. Prior to that
time, he served as Vice President and President of the Company's Roofing
and Distribution Groups.
(6) Mr. Anthony was elected Vice President in 1984 and to the Board of
Directors in 1998.
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The following tables provide information concerning grants during 1997 to,
and exercises of stock options and stock appreciation rights ("SARs") during
1997 by, the executive officers named in the Summary Compensation Table above
and the value of unexercised stock options and SARs held by them at December
31, 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
None
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT YEAR- IN-THE-MONEY OPTIONS/SARS
END(#) AT YEAR-END($)
------------------------- -------------------------
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
Richard C. Maloof....... 0 0 85,000 70,000 0 0
Frank S. Anthony........ 0 0 22,000 12,000 0 0
- --------
(1) Based on the difference between the fair market value of the securities
underlying the options at date of exercise and the exercise price of the
options.
STOCK OPTION PLANS
Employee Stock Option Plans. The Company's executive officers currently
participate in the 1992 Option Plan. Prior to the approval of the 1992 Option
Plan by the Company's stockholders on May 27, 1993 the Company's executive
officers participated in the Company's 1982 Option Plan, which was terminated
by the Board on May 27, 1993. To the extent options or stock appreciation
rights granted under the 1982 Option Plan remain outstanding, such options and
stock appreciation rights are governed by the terms of the 1982 Option Plan.
The following is a general description of the 1992 Option Plan and the 1982
Option Plan (together, the "Plans").
The Plans permit the grant of options that qualify as incentive stock
options under Section 422 of the Internal Revenue Code, non-qualified stock
options and stock appreciation rights. Options and rights to purchase up to
450,000 Common Shares, plus any unused Common Shares under the 1982 Option
Plan, may be granted under the 1992 Option Plan. The 1982 Option Plan had
permitted the issuance of 900,000 Common Shares, as adjusted, pursuant to
options and rights granted under such plan. Any Common Shares subject to an
option or right granted under the 1992 Option Plan which expires or is
terminated without being exercised in full may again be subject to an option
or right.
The 1992 Option Plan is administered by a committee of non-employee members
of the Board (the "Committee"). Within specified guidelines, the Committee has
the authority under the 1992 Option Plan to determine the terms and conditions
under which options and rights may be granted and generally to interpret,
construe and implement the provisions of the 1992 Option Plan.
Options or rights under the 1992 Option Plan may be granted to officers and
other selected key employees of the Company and its subsidiaries and to any
other person who is determined by the Committee to contribute to the success
of the Company or any subsidiary.
The exercise price of any option granted under the Plans may not be less
than the fair market value of the Common Shares subject to the option on the
date the option is granted (or, in the case of an incentive stock option
granted to an employee who owns more than 10% of the outstanding Common
Shares, 110% of such fair market value). The maximum term of an option granted
under the 1992 Option Plan is 15 years, and the maximum term of an option
granted under the 1982 Option Plan is 10 years. Each optionee (except non-
employee director optionees under the 1982 Option Plan) must remain in the
continuous employ of the Company for one year after the date of grant of an
option under the Plans before exercising any part of the option.
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The Merger Agreement provides that immediately following the Effective Date,
the 1992 Option Plan will be terminated and that no further rights or options
may be granted under the 1992 Option Plan subsequent to the date of the Merger
Agreement.
Non-Employee Directors Option Plan. The Non-Employee Directors Option Plan
was approved by the Company's stockholders on May 27, 1993. The following is a
general description of the Non-Employee Directors Option Plan.
Options granted under the Non-Employee Directors Option Plan are non-
statutory options not intended to qualify under Section 422 of the Internal
Revenue Code. An aggregate of 100,000 Common Shares are available for grants
under the Non-Employee Directors Option Plan. Common Shares subject to options
which terminate unexercised will be available for future option grants.
The Non-Employee Directors Option Plan automatically provides annual grants
of options to each Director who is serving on the Board at the time of such
grant and who is not also an employee of the Company or any subsidiary. The
exercise price of options granted under the Non-Employee Directors Option Plan
are equal to the fair market value of Common Shares subject thereto on the
date of grant. Options are exercisable in full one year after the date of
grant.
The Merger Agreement provides that immediately following the Effective Date,
the Non-Employee Directors Option Plan will be terminated and that no further
options may be granted thereunder subsequent to the date of the Merger
Agreement.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Employment Contracts
Mr. Anthony entered into a one-year employment contract with the Company,
commencing April 1, 1995, at the same annual rate of compensation ($135,000
plus a bonus of 35% of such amount if MICP targets are obtained) and with the
same fringe benefit package (participation in the Company's Savings Plan and
customary health insurance and life insurance benefits) as he received prior
to the Vinyl Sale. As a result of the "change in control" which was deemed to
have occurred as a result of the Vinyl Sale, Mr. Anthony became entitled to
severance benefits. Pursuant to the terms of his employment contract, Mr.
Anthony received $150,000 as a partial severance payment and agreed to defer
the payment of the balance thereof until the expiration of his employment
contract. Pursuant to the terms of his contract, the balance of Mr. Anthony's
severance payment, approximately $315,000, was paid on March 31, 1996.
On April 1, 1996 Mr. Anthony's employment contract automatically converted
to an oral employment agreement on the same terms, terminable by either party
upon 60 days' notice.
Termination of Employment and Change in Control Arrangements
The Company's 1982 Option Plan, 1992 Option Plan and 1992 Non-Employee
Directors Option Plan provide for accelerated benefits, and the Executive
Severance Contract (as defined below) provides for severance payments,
following the occurrence of a "change in control" of the Company. For purposes
of these plans and such contract, a "change in control" is deemed to have
occurred if, among other things, any person is or becomes the beneficial owner
of securities of the Company representing 30% or more of the combined voting
power of the securities of the Company then outstanding or in the event of a
merger or consolidation of the Company with another corporation resulting in
either (i) the stockholders of the Company, immediately prior to the merger or
consolidation, not beneficially owning, immediately after the merger or
consolidation, shares of the surviving entity representing 50% or more of the
combined voting power of the securities of the surviving entity then
outstanding or (ii) the members of the Board, immediately prior to the merger
or consolidation, not constituting, immediately after the merger or
consolidation, a majority of the Board of Directors of the surviving entity.
A-11
Executive Severance Contract.
The Company has entered into a severance agreement with Richard C. Maloof,
the Company's President and Chief Operating Officer, dated as of October 14,
1984, as amended, April 1, 1986, May 24, 1990 and August 21, 1995, February
17, 1997, and January 12, 1998 (as so amended, the "Executive Severance
Contract") the terms of which provide for severance benefits to be paid to Mr.
Maloof in the event that his employment with the Company is terminated
subsequent to a "change in control" of the Company. Severance benefits are
payable if, after a "change in control," (i) the employment of Mr. Maloof is
terminated either by the Company (other than for "Disability" or "Cause") or
by Mr. Maloof for "Good Reason" (which term includes, but is not limited to a
substantial alteration in the nature of Mr. Maloof's responsibilities from
those in effect immediately prior to a "change in control") or (ii) Mr. Maloof
negotiates in good faith an employment agreement with a person to whom
substantially all of the Company's Common Shares are sold providing for his
employment commencing on the date of sale on such terms and conditions not
less generous than those on which he is then employed by the Company
(regardless of whether or not any such employment agreement is ever executed).
The Company has acknowledged that a "Change in Control" occurred under the
Executive Severance Contract as a result of the Vinyl Sale.
If the right to receive severance benefits is triggered under the Executive
Severance Contract, Mr. Maloof will be entitled to receive severance pay in
the amount of two times the sum of (i) Mr. Maloof's then current annual base
salary and (ii) the amount of any bonus paid (which for severance purposes,
includes any distributions made under the terms of the LTIP in 1995 and 1996
and bonuses awarded to Mr. Maloof by the Compensation Committee). Mr. Maloof
would also receive an amount equal to a pro rata portion of all contingent
bonus awards to which Mr. Maloof might be entitled in the year of termination.
Under no circumstances shall the amount be less than what Mr. Maloof would
have received had the calculation been made in 1996. The Company estimates
that if the right to receive severance benefits under the Executive Severance
Contract is triggered, Mr. Maloof would be entitled to receive approximately
$870,000, including the approximately $135,000 Mr. Maloof will receive
pursuant to the Incentive Compensation Program (discussed below).
Incentive Compensation Program
In the event that the Offer is consummated, Mr. Maloof will receive a bonus
of approximately $135,000 and Mr. Anthony will receive a bonus of
approximately $50,000 pursuant to the 1998 MICP Plan.
Stock Option Plans and Non-Employee Directors Option Plan.
Under the Plans, the vesting of all options to purchase Common Shares
outstanding but not yet exercisable will be accelerated upon a "change in
control." Each optionee will have, for a period of thirty (30) days after the
change in control occurs, the right (the "Cash-Out Right"), with respect to
all or a part of the shares subject to the options or stock appreciation
rights of such person, to receive an amount in cash in lieu of such optionee's
right to exercise all options in full, equal to the product of (i) the number
of shares as to which the employee exercises the Cash-Out Right and (ii) the
amount by which the purchase price of each such share under the applicable
option or stock appreciation right is exceeded by the greater of (x) the fair
market value of such shares on the date the employee exercises the Cash-Out
Right or (y) the highest purchase price paid or offered per share in any bona
fide transaction related to the "change in control" of the Company at any time
during the preceding 60-day period (as determined by the Compensation
Committee of the Board). In addition, if the employment of any employee
terminates after the expiration of the applicable waiting period for the
exercise of an option or right granted to such employee under the Plans, such
employee may for up to three months after the date of termination (or for up
to one year if termination is on account of long-term disability) exercise
such option or right. The Plans provide for a similar one-year period to
exercise options or rights subsequent to the death of an employee occurring
while in the employ of the Company or of any subsidiary or within any period
after termination of employment during which such employee has the right to
exercise such options or rights.
A-12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For the fiscal year ended December 31, 1997, the Company paid fees and
disbursements in the amount of $1,707,393 to S. M. Lorusso & Sons, Inc., the
company that operates the Company's quarry located in Wrentham, Massachusetts.
Mr. Antonio J. Lorusso, Jr., is president, director, and a stockholder of S.
M. Lorusso & Sons, Inc. As of January 1, 1998, Mr. Lorusso is a member of a
group that is the beneficial owner of 9.8% of the Company's Common Stock.
LEGAL MATTERS
On or about April 18, 1996, Bird Incorporated, a subsidiary of the Company,
received a grand jury subpoena issued upon application of the United States
Department of Justice, Antitrust Division, for the production of certain
documents. In addition, Mr. Maloof and a senior manager of the Company
received grand jury subpoenas requiring the production of certain documents
and each of them to testify before the grand jury. The Department of Justice
informed the Company on October 8, 1996 that the investigation was closed on
September 27, 1996, without taking any action.
DIRECTORS' COMPENSATION
Mr. Vecchiolla received compensation from April 1, 1995 at the rate of
$100,000 per year for serving as Chairman of the Board and of the Executive
Committee. His compensation was voluntarily reduced to an annual rate of
$60,000 on January 1, 1996. On May 1, 1996, the Board reinstated his salary at
$100,000 per year. On May 23, 1996, Mr. Vecchiolla was granted a non-qualified
option to purchase up to 50,000 shares of Common Stock at an excise price of
$4.375. Mr. Vecchiolla's salary was reduced to $36,000 per year, starting June
1, 1997. Mr. Vecchiolla resigned as a Director on December 11, 1997, and all
payments to him as Director ceased as of December 31, 1997. During 1997, other
non-employee members of the Board received an annual retainer of $7,000, a fee
of $750 for each Board meeting attended ($375 for a telephonic Board meeting)
and a fee of $750 for each committee meeting attended ($375 for a telephonic
committee meeting). The chairmen of the Audit and Compensation Committees
received an annual retainer of $1,000. Expenses incurred in attending meetings
are reimbursed.
Effective October 1, 1997, Directors are paid an annual retainer of $7,000.
They no longer receive compensation for attending Board and Committee meetings
nor does the Chairman of the Compensation Committee or the Audit Committee
receive any additional fee.
Pursuant to the Non-Employee Directors Option Plan, non-employee directors
are also entitled to receive each year a non-qualified stock option to acquire
2,500 shares of the Company's Common Stock (provided that the maximum number
of shares subject to options granted to any director may not exceed 30,000
shares). Such options are granted on the date of the annual meeting each year
and become exercisable in full one year later. During 1997, each non-employee
director was granted such an option to purchase 2,500 Common Shares at an
exercise price of $4.50 per share.
A-13
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for compensation decisions with
respect to senior management of the Company, as well as for organizational
development and succession planning within the Company.
The Compensation Committee's compensation philosophy and policies applicable
to executive officers emphasize pay for performance and increased stockholder
value within a framework of compensation levels comparable to companies of
similar size. Base salary, annual MICP awards, and long-term incentive awards
are structured to provide total compensation levels for executive officers
that are intended to be below competitive compensation amounts when operating
results are at or below acceptable levels and above average levels when
results are outstanding or other targets or personal goals are achieved. The
Compensation Committee has used outside consulting assistance for plan design
and consultant and independent survey data in setting compensation levels and
has relied, in the case of officers other than the Chief Executive Officer, on
recommendations of the Chief Executive Officer which are reviewed and modified
where appropriate by the Committee.
In recent years, long-term awards have primarily taken the form of stock
option grants, which are designed to align the interests of executives with
those of the stockholders and reward executives when stockholder value
increases. Stock options are granted at an exercise price equal to the market
price of the Company's Common Stock on the date of grant.
Salaries for the Chief Executive Officer and other executive officers are
based in part upon a range of salaries for each office developed from a survey
of compensation practices at competitive companies. During 1997, Mr. Maloof's
base salary was decreased from $225,000 annually to $208,125 annually and Mr.
Anthony's base salary was decreased from $145,000 annually to $134,125
annually. In December 1997, Messrs. Maloof's and Anthony's base salaries were
reinstated at $225,000 and $145,000, respectively.
One of the principal elements of variable compensation for senior executive
officers is found in the annual MICP awards. In 1997, the possible pay out for
1997 was set at 60% of base salary in the case of the President, 35% of base
salary in the case of the Vice President, and between 20% and 30% of base
salary in the case of other members of the corporate staff and other key
members of the Company. In 1997, awards to management were tied to achievement
of goals with respect to increased cash flow and profitability on an equal
50/50 basis.
The Committee believes that the combination of salary and bonus rewards was
appropriate based upon the task imposed upon management to simultaneously
operate the business in a very competitive environment and to entertain
prospective merger proposals.
Based on current compensation levels and the present structure of the
Company's executive compensation programs, the Committee believes that the
compensation payable to executives will not be subject to the limitation on
deductibility imposed by the Omnibus Budget Reconciliation Act of 1993. If
such limitation should become applicable in the future, the Committee and the
Company will determine whether any changes in the Company's compensation
programs are advisable.
Stock Option, Compensation,
andOrganizational
DevelopmentCommittee:
Herbert I. Corkin
Charles S. Bird, III
Antonio J. Lorusso, Jr., Chairman
A-14
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Common Stock
of the Company for the last five fiscal years with the cumulative total returns
of the Russell 2000 index and the Value Line Building Materials Industry Index,
assuming an investment of $100 in the Company's Common Stock and each index at
the close of trading on December 31, 1992 and the reinvestment of all
dividends. The total stockholder return data for the Russell 2000 Index and the
Value Line Building Materials Index is provided by Value Line Institutional
Services.
CHART
BIRD CORPORATION
Total Cumulative Shareholder Return for
Five-Year Period Ending December 31, 1997
December 31... 1992 1993 1994 1995 1996 1997
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Bird Corporation 100.00 73.97 75.63 40.85 45.82 35.33
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Russell 2000 100.00 118.91 116.55 149.70 174.30 213.00
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VL Building Materials 100.00 129.20 96.42 134.25 150.44 178.86
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A-15