UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 1995
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_____________to____________
Commission File Number: 1-4115
ZENITH ELECTRONICS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-1996520
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1000 Milwaukee Avenue, Glenview, Illinois 60025
(Address of principal executive offices) (Zip Code)
(708) 391-7000
(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
--- ---
As of July 31, 1995, there were 46,901,842 shares of Common Stock, par
value $1 per share, outstanding.
<PAGE>
ZENITH ELECTRONICS CORPORATION
FORM 10-Q
INDEX
Page
Number
--------
Part I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Statements of Operations --
Three and Six months ended July 1, 1995 and July 2, 1994 3
Condensed Consolidated Balance Sheets --
July 1, 1995, December 31, 1994 and July 2, 1994 4
Condensed Consolidated Statements of Cash Flows --
Six months ended July 1, 1995 and July 2, 1994 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Analysis of Operations 8
Liquidity and Capital Resources 9
Outlook 9
Part II. Other Information:
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 4. Submission of Matters to a Vote of Securities Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 13
Index to Exhibits 14
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ZENITH ELECTRONICS CORPORATION
------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-----------------------------------------------------------
In Millions, Except Per Share Amounts
Three Months Ended Six Months Ended
---------------------- ----------------------
July 1, July 2, July 1, July 2,
1995 1994 1995 1994
---------- ---------- ---------- ----------
Net sales $ 284.6 $ 299.0 $ 546.7 $ 596.1
---------- ---------- ---------- ----------
Costs, expenses and other:
Cost of products sold 276.6 270.1 525.1 546.4
Selling, general and
administrative 24.7 26.0 51.3 49.8
Engineering and research 11.6 11.4 23.5 22.8
Other operating expense
(income), net (Note 4) (5.9) (3.2) (10.4) (8.1)
Restructuring and other
charges (Note 3) 18.0 - 18.0 -
---------- ---------- ---------- ----------
Operating income (loss) (40.4) (5.3) (60.8) (14.8)
Gain on asset sales, net - 0.4 - 1.4
Interest expense (5.3) (3.7) (9.4) (7.1)
Interest income 0.2 0.2 0.4 0.2
---------- ---------- ---------- ----------
Income (loss) before income taxes (45.5) (8.4) (69.8) (20.3)
Income taxes (credit) (Note 5) (0.2) - (0.2) -
---------- ---------- ---------- ----------
Net Income (loss) $ (45.3) $ (8.4) $ (69.6) $ (20.3)
========== ========== ========== ==========
Net income (loss) per share of
common stock (Note 6) $ (0.97) $ (0.20) $ (1.50) $ (0.51)
========== ========== ========== ==========
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
ZENITH ELECTRONICS CORPORATION
------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
-------------------------------------------------
In Millions
July 1, December 31, July 2,
1995 1994 1994
-------- ------------ --------
ASSETS
------
Current assets:
Cash $ - $ 8.9 $ -
Receivables, net of allowance for
doubtful accounts of $3.2, $3.1
and $2.8, respectively 165.0 206.9 183.4
Inventories (Note 7) 284.8 245.2 303.9
Other 8.4 9.9 9.4
-------- ------------ --------
Total current assets 458.2 470.9 496.7
Property, plant and equipment, net 181.8 168.1 153.1
Other 15.5 14.6 15.1
-------- ------------ --------
Total assets $ 655.5 $ 653.6 $ 664.9
======== ============ ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Short-term debt (Note 8) $ 43.9 $ - $ 49.4
Current portion of long-term
debt (Note 8) 6.5 - -
Accounts payable 90.6 114.1 115.9
Income taxes payable 0.5 1.2 1.8
Accrued expenses 130.1 128.0 117.2
-------- ------------ --------
Total current liabilities 271.6 243.3 284.3
Long-term debt (Note 8) 215.5 182.0 182.0
Stockholders' equity:
Preferred stock - - -
Common stock (Note 9) 47.0 45.7 43.0
Additional paid-in capital 295.0 285.4 264.5
Retained earnings (deficit) (171.9) (102.3) (108.4)
Treasury stock (1.7) (0.5) (0.5)
-------- ------------ --------
Total stockholders' equity 168.4 228.3 198.6
-------- ------------ --------
Total liabilities and
stockholders' equity $ 655.5 $ 653.6 $ 664.9
======== ============ ========
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
ZENITH ELECTRONICS CORPORATION
------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-----------------------------------------------------------
In Millions
Increase (Decrease) in Cash
Six Months Ended
---------------------------
July 1, July 2,
1995 1994
----------- -----------
Cash flows from operating activities:
Net income (loss) $ (69.6) $ (20.3)
Adjustments to reconcile net income (loss) to
net cash used by operations:
Depreciation 16.5 14.9
Other (0.4) -
Gain on asset sales, net - (1.4)
Changes in assets and liabilities:
Current accounts (18.3) (94.1)
Other assets (0.9) (0.1)
----------- -----------
Net cash used by operating activities (72.7) (101.0)
----------- -----------
Cash flows from investing activities:
Capital additions (30.2) (28.0)
Proceeds from asset sales - 14.8
----------- -----------
Net cash used by investing activities (30.2) (13.2)
----------- -----------
Cash flows from financing activities:
Short-term borrowings, net 43.9 49.4
Proceeds from issuance of long-term debt 40.0 12.0
Proceeds from issuance of common stock, net 10.1 66.5
Principal payments on long-term debt - (34.5)
----------- -----------
Net cash provided by financing activities 94.0 93.4
----------- -----------
Decrease in cash (8.9) (20.8)
Cash at beginning of period 8.9 20.8
----------- -----------
Cash at end of period $ - $ -
=========== ===========
Increase (decrease) in cash attributable to
changes in current accounts:
Receivables, net $ 40.7 $ (21.7)
Income taxes, net 0.5 0.8
Inventories (39.6) (101.2)
Other assets 1.5 (3.3)
Accounts payable and accrued expenses (21.4) 31.3
----------- -----------
Net change in current accounts $ (18.3) $ (94.1)
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid (refunded) during the period for:
Interest $ 8.8 $ 8.6
Income taxes (1.0) (0.1)
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
Zenith Electronics Corporation
------------------------------
Notes to Condensed Consolidated Financial Statements (Unaudited)
----------------------------------------------------------------
Note 1 - Basis of presentation
The accompanying unaudited condensed consolidated financial statements
("financial statements") have been prepared in accordance with generally
accepted accounting principles and pursuant to the rules and regulations of
the Securities and Exchange Commission. The accuracy of the amounts in the
financial statements is in some respects dependent upon facts that will exist,
and procedures that will be performed by the Company, later in the year. In
the opinion of management, all adjustments necessary for a fair presentation
of the financial statements have been included and are of a normal, recurring
nature. For further information, refer to the consolidated financial
statements and notes thereto included in the Company's Form 10-K for the year
ended December 31, 1994.
Note 2 - Subsequent event
On July 17, 1995, it was announced that LG Electronics Inc. (LGE), formerly
GoldStar Co. Ltd., and the Company signed a definitive agreement under which
LGE plans to acquire a controlling interest in the Company. Pursuant to the
agreement, LGE will purchase, for $10 per share, 16.5 million newly issued
shares of the Company's common stock and 18.619 million shares from the
Company's shareholders in a tender offer. LGE currently owns 1.45 million
shares of the Company's common stock, and upon successful completion of this
transaction, LGE will own approximately 57.7 percent of the outstanding
common stock of the Company. The transaction is subject to the completion of
a successful tender offer, the approval by the Company's shareholders of the
issuance and sale of the new shares, certain governmental and regulatory
approvals and the satisfaction of customary closing conditions.
Note 3 - Restructuring and other charges
During the second quarter of 1995, the Company recorded a charge of $18.0
million primarily to restructure its core Consumer Electronics and Network
Systems business. The major elements of the restructuring related to (i)
severance expenses ($9.6 million) associated with employment reductions,
primarily in the Company's U.S. salaried workforce and (ii) costs associated
with realigned distribution activities ($2.7 million) as the Company changed
to direct-to-retail distribution on a nationwide basis. The remaining
charges related to other non-recurring items, including certain environmental,
legal and other regulatory matters, along with trade receivable write-offs
(primarily for accounts in Mexico as a result of the peso devaluation).
Note 4 - Other operating expense (income)
Royalty income accrued in relation to tuning system patents (after deducting
legal expenses) was $5.3 million and $9.2 million for the three and six
months ended July 1, 1995, respectively, and $4.8 million and $9.9 million for
the three and six months ended July 2, 1994, respectively. These amounts are
included in Other Operating Expense (Income).
Note 5 - Income taxes
As of July 1, 1995, the Company had $456.3 million of net operating loss
carryovers (NOLs) available for financial statement purposes. For Federal
income tax purposes, the Company had NOLs of $456.1 million (which expire
from 2004 through 2010) and unused tax credits of $6.2 million (which expire
from 1995 through 2002). The consummation of the LGE agreement (as described
above in Note 2) will create an "ownership change" of the Company for Federal
income tax purposes, with the effect that the Company's annual usage of
its NOLs will be limited to the product of (i) a tax-exempt rate of return
announced monthly by the Internal Revenue Service (for example, 5.88% for
ownership changes occurring in the month of August 1995) and (ii) the equity
value of the Company immediately before the ownership change as determined
under applicable tax regulations. This limitation, appropriately modified,
will also apply to the Company's utilization of most of its tax credit
carryovers. As a result, the Company's ability to utilize such carryovers
will be materially reduced by the proposed LGE transaction. The effect of
this reduction will depend upon the level of taxable income earned by the
Company during the carryover periods.
Note 6 - Earnings per share
Primary earnings per share are based upon the weighted average number of shares
outstanding and common stock equivalents, if dilutive. Fully diluted earnings
per share, assuming conversion of the 6-1/4% convertible subordinated
debentures and the 8.5% convertible senior subordinated debentures, are not
presented because the effect of the assumed conversion is antidilutive. The
weighted average number of shares was 46.9 million and 46.4 million for the
three and six months ended July 1, 1995, respectively, and 41.6 million and
39.6 million for the three and six months ended July 2, 1994, respectively.
Note 7 - Inventories
Inventories consisted of the following (in millions):
July 1, December 31, July 2,
1995 1994 1994
---------- ------------ ----------
Raw materials and work-in-process $ 185.8 $ 156.2 $ 183.0
Finished goods 107.8 97.8 130.0
---------- ------------ ----------
293.6 254.0 313.0
Excess of FIFO cost over LIFO cost (8.8) (8.8) (9.1)
---------- ------------ ----------
Total $ 284.8 $ 245.2 $ 303.9
========== ============ ==========
As of July 1, 1995, December 31, 1994 and July 2, 1994, $49.9 million, $25.0
million and $36.0 million, respectively, of inventories were valued using the
LIFO method.
An actual determination of inventory under the LIFO method can only be made
at the end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations are based on management's estimates of
expected year-end inventory levels and costs. Since these estimates are
subject to many factors beyond management's control, interim results are
subject to the final year-end LIFO inventory determination.
Note 8 - Short-term debt and credit arrangements; Long-term debt
During the second quarter of 1995 the Company entered into a First Amended and
Restated Credit Agreement dated as of May 10, 1995 (the "Credit Agreement")
among the Company, General Electric Capital Corporation, as agent for itself
and the other lenders named therein, replacing a similar credit agreement
with the same agent and group of lenders. The maximum commitment of funds
available for borrowing under the Credit Agreement is $110 million, increased
from $90 million, based upon a borrowing base formula related to eligible
accounts and eligible inventory (each as defined in the Credit Agreement).
On the same date, the Company entered into a Term Loan Agreement (the "Term
Loan") with the same agent and group of lenders. The Term Loan is in the
initial principal amount of $40 million, requiring scheduled quarterly
principal payments over the life of the Term Loan and additional mandatory
prepayment in certain events.
Both the Credit Agreement and Term Loan are scheduled to expire on June
30, 1998. Borrowings under the Credit Agreement, similar to the former credit
agreement, are secured by accounts receivable, inventory, general intangibles
and trademarks of the Company and certain of its domestic subsidiaries. The
borrowing under the Term Loan is secured by the tuning system patent license
agreements of the Company and a second security interest in the accounts
receivable, inventory, general intangibles and trademarks of the Company and
certain of its domestic subsidiaries. The Credit Agreement and the Term Loan
prohibit dividend payments on the Company's common stock and restrict dividend
payments on any of its preferred stock, if issued. In addition, both
agreements provide for identical restrictions regarding investments,
acquisitions, guaranties, transactions with affiliates, sales of assets,
mergers and additional borrowings, along with limitations on liens. Certain
material asset transactions are permitted under both agreements.
The Credit Agreement and Term Loan also contain identical financial covenants
that must be maintained as of the end of each fiscal quarter, including a
liabilities to net worth ratio and a minimum net worth amount. The ratio of
liabilities to net worth and minimum net worth amount varies from quarter to
quarter. As of July 1, 1995, the ratio of liabilities to net worth was
required to be not greater than 4.40 to 1.0 and was actually 2.89 to 1.0,
and net worth was required to be equal to or greater than $143.0 million and
was actually $168.4 million. As of September 30, 1995 and December 31, 1995,
the liabilities to net worth ratio is required to be not greater than 4.40
to 1.0 and 3.50 to 1.0, respectively. As of March 30, 1996, and through the
end of the agreement, the liabilities to net worth ratio is required to be
not greater than 4.00 to 1.0. As of September 30, 1995 and December 31, 1995,
net worth is required to be equal to or greater than $154.0 million and $166.0
million, respectively. As of March 30, 1996 and through the end of the
agreement, net worth is required to be equal to or greater than $160.0
million.
The Credit Agreement also restricts the amount of capital expenditures by the
Company in each fiscal year. For the fiscal year 1995, 1996, 1997, and each
fiscal year thereafter the Company is permitted to make capital expenditures
(as defined in the Credit Agreement) of up to $80.0 million, $142.0 million,
$87.0 million and $60.0 million, respectively.
Note 9 - Stockholders' equity
During the first six months of 1995, the Company sold 1.3 million shares of
authorized but unissued shares of common stock to investors under a shelf
registration statement registering 6.5 million shares of common stock. The
result of these stock sales was to increase equity by $10.1 million.
At the Company's Annual Meeting on April 25, 1995, the stockholder's of the
Company voted to amend the Company's Restated Certificate of Incorporation to
increase the authorized common stock of the Company from 100,000,000 shares
to 150,000,000 shares.
Note 10 - Reclassifications
Certain prior period amounts have been reclassified to conform with the
current period presentation.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Analysis of Operations
----------------------
The Company incurred a net loss of $45.3 million, or 97 cents per share, for
the second quarter of 1995, as compared with a net loss of $8.4 million, or
20 cents per share, for the second quarter of 1994. Second quarter net sales
declined about 5 percent to $284.6 million in 1995 from $299.0 million in
1994. Second quarter 1995 results included $18.0 million in special charges
for severance and other non-recurring items.
A number of negative factors impacted the quarter. Consumer electronics
selling prices were $12 million lower than in the second quarter a year ago.
The quarter also was affected by the expensing of significant deferred
overhead costs caused by inventory reductions, and inflationary cost increases
for materials.
During the quarter the Company recorded a charge of $18.0 million primarily
to restructure its core Consumer Electronics and Network Systems business. The
charge is primarily composed of provisions made in anticipation of cash
expenditures that will be paid out over the next twelve months. The major
elements of the restructuring related to (i) severance expenses ($9.6 million)
associated with employment reductions, primarily in the Company's U.S.
salaried workforce and (ii) costs associated with realigned distribution
activities ($2.7 million) as the Company changed to direct-to-retail
distribution on a nationwide basis. The remaining charges related to other
non-recurring items, including certain environmental, legal and other
regulatory matters, along with trade receivable write-offs (primarily for
accounts in Mexico as a result of the peso devaluation). The reductions in
the salaried workforce, together with other initiatives, are expected to
reduce annual costs by about $20 million.
The Company's consumer electronics revenues declined in the quarter,
reflecting the lower selling prices and reduced industry color TV sales to
dealers compared to the 1994 quarter, although the Company expects stronger
second-half industry sales. Sales of Network Systems products -- set-top
boxes and data modems sold primarily to the cable television industry -- were
up slightly in the quarter.
Major cost reductions from re-engineering programs, reduced cycle times and
improved efficiencies helped offset some of the negative factors in the
quarter. In addition, even with wage increases for employees in Mexico and
significantly lower TV sales there, the devaluation of the Mexican peso had
a positive impact on the second quarter.
Results for the second quarter include $5.3 million of accrued royalty
revenues from tuning system licenses. These revenues were $4.8 million in the
second quarter of 1994.
For the first six months of 1994, the Company reported a net loss of $69.6
million, or $1.50 per share, compared with a net loss of $20.3 million, or 51
cents per share for the first six months of 1994. First-half sales were
$546.7 million in 1995, compared with $596.1 million in 1994. Results for
the first six months of 1995 were impacted over the same period of 1994 as a
result of substantially the same factors as those described above for the
second quarter.
Liquidity and Capital Resources
-------------------------------
Cash decreased $8.9 million during the six months ended July 1, 1995. Uses
of cash consisted of $72.7 million used by operating activities and $30.2
million used to purchase fixed assets. These uses of cash were offset
by $94.0 million of cash provided from financing activities which included
$43.9 million of borrowings under the Credit Agreement, $40.0 million of cash
from the Term Loan and $10.1 million of sales of the Company's common stock.
During the six months ended July 1, 1995, the $72.7 million of cash used
by operating activities funded a $53.1 million net loss from operations as
adjusted for depreciation and an $18.3 million change in current accounts. The
change in current accounts was composed primarily of a $39.6 million increase
in inventories (mainly to support higher projected shipment schedules in the
second half of the year) and a $21.4 million decrease in accounts payable and
accrued expenses partially offset by a $40.7 million decrease in receivables.
During the six months ended July 1, 1995, investing activities used $30.2
million of cash for capital additions, compared to $28.0 million for the first
six months of 1994. Capital additions for the full year 1995 are expected to
be about $70 million, including a portion due to planned capital investment
projects in the Company's picture tube operations in Melrose Park, Illinois.
As of July 1, 1995, total interest-bearing obligations of the Company
consisted of $215.5 million of long-term debt, $43.9 million of borrowings
under the Credit Agreement, the current portion ($6.5 million) of the Term
Loan and $7.9 million of extended-term payables with a foreign supplier. The
Company's long-term debt is composed of $115.0 million of 6-1/4% convertible
subordinated debentures due 2011 that require annual sinking fund payments of
$5.8 million beginning in 1997, $55.0 million aggregate principal amount of
8.5% senior subordinated convertible debentures due 2000, $12.0 million
aggregate principal amount of 8.5% senior subordinated convertible debentures
due 2001 and the long-term portion of the Term Loan ($33.5 million). The
Term Loan requires scheduled quarterly principal payments over the life of
the loan with a balloon payment of $17.5 million due on June 30, 1998 (the
termination date of the loan).
The Company's Credit Agreement and Term Loan contain identical financial
covenants that must be maintained as of the end of each fiscal quarter,
including a liabilities to net worth ratio and a minimum net worth amount.
In addition, the Credit Agreement and the Term Loan restrict the amount of
capital expenditures by the Company in each fiscal year. (See Note 8 to
Condensed Consolidated Financial Statements for further discussion on the
financial covenants.)
Outlook
-------
The overall outlook for the Company (including its competitive condition and
business strategy) is essentially the same as described in the "Outlook" section
of "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in the Company's Form 10-K for the year ended
December 31, 1994. In addition, the third quarter of 1995 is expected to be
affected by many of the same pricing, cost and market factors that were
described in the above referenced "Outlook" section of the Company's Form
10-K for the year ended December 31, 1994.
On July 17, 1995, it was announced that LG Electronics Inc. (LGE), formerly
GoldStar Co. Ltd., and the Company signed a definitive agreement under which
LGE plans to acquire a controlling interest in the Company. Pursuant to the
agreement, LGE will purchase, for $10 per share, 16.5 million newly issued
shares of the Company's common stock and 18.619 million shares from the
Company's shareholders in a tender offer. LGE currently owns 1.45 million
shares of the Company's common stock, and upon successful completion of this
transaction, LGE will own approximately 57.7 percent of the outstanding common
stock of the Company. The transaction is subject to the completion of a
successful tender offer, the approval by the Company's shareholders of the
issuance and sale of the new shares, certain governmental and regulatory
approvals and the satisfaction of customary closing conditions. The estimated
net proceeds of $160 million to be received from the proposed sale of the 16.5
million shares would be used to support the $150 million expansion and
modernization of the Company's picture tube operations in Melrose Park,
Illinois, and to support the Company's growing Network System business.
The Company believes that the proceeds from the LGE transaction, its Credit
Agreement, Term Loan and extended-term payables expected to be available from
a foreign supplier will be adequate to meet its seasonal working capital,
capital expenditure and other requirements in 1995 and to support planned
capital investment projects in the Company's picture tube operations in 1996
and beyond. In the event the LGE transaction is not consummated, there can be
no assurance that the Company will not experience liquidity problems in the
future because of adverse market conditions or other unfavorable events
which would require the Company to seek other sources of liquidity, if
available. In addition, the expansion and modernization of the Company's
color picture tube plant would be dependent on obtaining alternate sources
of financing.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to "Item 3. Legal Proceedings" in the Company's Annual Report
on Form 10-K for the year ended December 31, 1994, for a description of a
lawsuit filed in April, 1993 by a group of 47 plaintiffs, individually and on
behalf of certain minors and decedents, in the District Court of Cameron
County, Texas against approximately 130 defendants, including the Company's
subsidiaries, Zenith Electronics Corporation of Texas and Electro Partes de
Matamoros, S.A. de C.V. The parties have reached a settlement and the case has
been dismissed. The settlement has been paid and the full cost has been
reflected in the Company's financial statements.
In July 1995, plaintiff Gwynne L. Horwits, SEP IRA, filed a purported class
action in the Court of Chancery of the State of Delaware in and for New Castle
County against the Company, its directors and LG Electronics Inc. (LGE)
alleging that the Company's directors breached their fiduciary duties and
failed to exercise loyalty, good faith, due care and complete disclosure
toward the Company and the stockholders of the Company in connection with
(i) the Company's 1995 annual meeting and (ii) the subsequent proposal by
LGE to acquire a controlling interest in the Company. The complaint seeks
(i) a declaration that the action may be maintained as a class action, (ii) a
declaration that the transaction with LGE is unfair, unjust and inequitable,
(iii) invalidation of the stockholder vote, including the election of
directors, at the Company's 1995 annual meeting, (iv) invalidation of the
Stock Purchase Agreement between the Company and LGE, (v) an order compelling
the Company's directors to conduct a proper process to explore the availability
of alternatives to maximize stockholder value and to disseminate completely
all material information relating to the transaction, (vi) to enjoin further
steps necessary to accomplish or implement the proposed transaction, (vii)
to compensate the plaintiff and members of the class for all losses and damages
allegedly suffered and to be suffered by them and (viii) to award plaintiff
costs, including reasonable attorneys', accountants' and experts' fees. The
Company believes that the complaint is without merit and intends to vigorously
defend against the alleged claims.
On June 27, 1995, the U.S. Environmental Protection Agency sent a letter
notifying the Company that it was one of the potentially responsible parties
under Section 107(a) of the Comprehensive Environmental Response, Compensation
and Liabilities Act with respect to the North Penn Area Seven Superfund Site in
Lansdale, Montgomery County, Pennsylvania. Hazardous substances consisting of
volatile organic compounds were discovered in the aquifer. The Company does
not believe that it has contributed to the contamination. At this time the
Company has no knowledge of the extent of the contamination or the cost of
cleanup.
During the three months ended July 1, 1995, no other reportable events or
material developments occurred with respect to the legal proceedings described
under Part II, Item 1 in the Company's Quarterly Report on Form 10-Q for the
Quarter ended April 1, 1995, and under Item 3 in the Company's Annual Report
on Form 10-K for the year ended December 31, 1994.
Item 2. Changes in Securities
(b) The Credit Agreement and the Term Loan prohibit dividend payments on the
Company's common stock, restrict dividend payments on any of its preferred
stock, if issued, and prohibit the redemption or repurchase of stock.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on April 25, 1995.
(c) At the meeting, the following matters were voted on by security holders:
1. Ten Directors were elected and received the following votes:
Broker
For Withheld Non-Votes
---------- ---------- ----------
Harry G. Beckner 40,291,509 1,034,167 0
T. Kimball Brooker 40,520,653 805,023 0
David H. Cohen 40,549,309 776,367 0
Ilene S. Gordon 40,533,935 791,741 0
Charles Marshall 40,517,245 808,431 0
Gerald M. McCarthy 40,432,675 893,001 0
Andrew McNally IV 40,532,646 793,030 0
Albin F. Moschner 40,456,736 868,940 0
Jerry K. Pearlman 40,115,046 1,210,630 0
Peter S. Willmott 40,524,157 801,519 0
2. A proposal by the Board of Directors to amend the Company's Restated
Certificate of Incorporation to increase the authorized common stock of
the Company from 100,000,000 shares to 150,000,000 shares, $1 par value, was
approved with 38,248,120 shares voted for, 2,730,009 shares voted against,
347,547 shares abstaining. There were no broker non-votes.
3. Arthur Andersen LLP was approved as independent public accountants to
examine the consolidated financial statements of the Company for the year
1995 with 39,523,268 shares voted for, 1,531,653 shares voted against and
270,755 shares abstaining. There were no broker non-votes
4. A stockholder proposal requesting the Board of Directors to take the
steps necessary to provide for cumulative voting in the election of
directors was defeated with 5,833,827 shares voted for, 16,595,710 shares
voted against, 4,691,633 shares abstaining and 14,204,506 broker non-votes.
5. A stockholder proposal requesting the Board of Directors to provide a
comprehensive report describing the Company's maquiladora operations as
well as a forecast of operations under the North American Free Trade
Agreement was defeated with 3,532,446 shares voted for, 18,408,149 shares
voted against, 5,180,575 shares abstaining and 14,204,506 broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(2) Stock Purchase Agreement dated July 17, 1995 between Zenith
Electronics Corporation and LG Electronics Inc. (incorporated
by reference to Exhibit 2 of the Company's Current Report on
Form 8-K dated July 17, 1995)
(3) By-Laws of the Company, as amended
(4a) Indenture dated as of April 1, 1986, between Zenith Electronics
Corporation and The First National Bank of Boston as Trustee with
respect to the 6-1/4% Convertible Subordinated Debentures due 2011
(incorporated by reference to Exhibit 1 of the Company's Quarterly
Report on Form 10-Q for the quarter ended March 30, 1991)
(4b) Debenture Purchase Agreement dated as of November 19, 1993, with the
institutional investors named therein (incorporated by reference to
Exhibit 4(a) of the Company's Current Report on Form 8-K dated
November 19, 1993)
(4c) Amendment No. 1 dated November 24, 1993, to the Debenture Purchase
Agreement dated as of November 19, 1993, with the institutional
investor named therein (incorporated by reference to Exhibit 4 (a) of
the Company's Current Report on Form 8-K dated November 24, 1993)
(4d) Amendment No. 2 dated January 11, 1994, to the Debenture Purchase
Agreement dated as of November 19, 1993, (incorporated by reference
to Exhibit 4(c) of the Company's Current Report on Form 8-K dated
January 11, 1994)
(4e) Debenture Purchase Agreement dated as of January 11, 1994, with the
institutional investors named therein (incorporated by reference to
Exhibit 4(a) of the Company's Current Report on Form 8-K dated
January 11, 1994)
(4f) First Amended and Restated Credit Agreement, dated as of May 10, 1995,
with General Electric Capital Corporation, as agent and lender, and
the other lenders named therein (incorporated by reference to Exhibit
4(f) of the Company's Quarterly Report on Form 10-Q for the quarter
ended April 1, 1995)
(4g) Term Loan Agreement, dated as of May 10, 1995, with General Electric
Capital Corporation, as agent and lender, and the other lenders named
therein (incorporated by reference to Exhibit 4(g) of the Company's
Quarterly Report on Form 10-Q for the quarter ended April 1, 1995)
(4h) Stockholder Rights Agreement, dated as of October 3, 1986 (incorporated
by reference to Exhibit 4(c) of the Company's Quarterly Report on Form
10-Q for the quarter ended September 28, 1991)
(4i) Amendment, dated April 26, 1988, to Stockholder Rights Agreement
(incorporated by reference to Exhibit 4(d) of the Company's Quarterly
Report on Form 10-Q for the quarter ended April 3, 1993)
(4j) Amended and Restated Summary of Rights to Purchase Common Stock
(incorporated by reference to Exhibit 4(e) of the Company's Quarterly
Report on Form 10-Q for the quarter ended July 3, 1993)
(4k) Amendment, dated July 7, 1988, to Stockholder Rights Agreement
(incorporated by reference to Exhibit 4(f) of the Company's Quarterly
Report on Form 10-Q for the quarter ended July 3, 1993)
(4l) Agreement, dated May 23, 1991, among Zenith Electronics Corporation,
The First National Bank of Boston and Harris Trust and Savings Bank
(incorporated by reference to Exhibit 1 of Form 8, dated May 30, 1991)
(4m) Amendment, dated May 24, 1991, to Stockholder Rights Agreement
(incorporated by reference to Exhibit 2 of Form 8, dated May 30, 1991)
(4n) Amendment to Rights Agreement dated as of July 17, 1995 (incorporated
by reference to Exhibit 4 of the Company's Current Report on Form
8-K dated July 17, 1995)
(4o) Agreement, dated as of February 1, 1993, among Zenith Electronics
Corporation, The Bank of New York and Harris Trust and Savings Bank
(incorporated by reference to Exhibit 1 of Form 8 dated March 25, 1993)
(27) Financial Data Schedule for the six months ended July 1, 1995
(b) Reports on Form 8-K:
A report on Form 8-K dated April 20, 1995, was filed by the Company stating
under Item 5 that on April 20, 1995, the Company issued a press release
announcing first quarter 1995 results.
A report on Form 8-K dated May 23, 1995, was filed by the Company stating
under Item 5 that on May 23, 1995, the Company issued a press release
announcing that the second-quarter 1995 results will include a charge of about
$9 million for severance costs related to employment reductions, primarily in
its U.S. salaried workforce, and that these moves, together with other
initiatives, are expected to reduce annual costs by about $20 million.
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.
ZENITH ELECTRONICS CORPORATION
(Registrant)
Date: August 14, 1995
By: /s/ Kell B. Benson
----------------------------------
Kell B. Benson
Senior Vice President-Finance
and Chief Financial Officer
(Principal Financial Officer)
INDEX TO EXHIBITS
Exhibits:
(3a) By-Laws of the Company, as amended
(27) Financial Data Schedule for the six months ended July 1, 1995
EXHIBIT 3a
----------
Effective 4/25/95
ZENITH ELECTRONICS CORPORATION
BY-LAWS
______________________________
ARTICLE I
OFFICES
Section l. The registered office in the State of Delaware
shall be in the City of Wilmington, County of New Castle,
State of Delaware.
Section 2. The corporation may also have offices at such
other places both within and without the State of Delaware
as the board of directors may from time to time determine or
the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election
of directors shall be held at such place, either within or
without the State of Delaware, as may be fixed from time
to time by the board of directors. Meetings of stockholders
for any other purpose may be held at such time and place, within
or without the State of Delaware, as shall be stated in the
notice of the meeting or in a duly executed waiver of
notice thereof.
Section 2. Annual meetings of stockholders shall be held
on such business day as the Board of Directors shall, by
resolution, designate. At annual meetings, the stockholders
shall elect by a plurality vote a board of directors and shall
transact such other business as may properly be brought before
the meeting.
Section 3. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be
given to each stockholder entitled to vote thereat not less
than twenty nor more than sixty days before the date of the
meeting. At an annual meeting of the stockholders, only
such business shall be conducted as shall have been
brought before the meeting (a) by or at the direction of the
board of directors or (b) by any stockholder of the
corporation who complies with the notice procedures set
forth in this Section 3. For business to be properly brought
before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the
secretary of the corporation. Except as otherwise provided
in Regulation 14A under the Securities Exchange Act of
1934, as amended, to be timely, a stockholder's notice must
be delivered to or mailed and received at the principal
executive offices of the corporation not less than sixty days
nor more than ninety days prior to the meeting; provided,
however, that in the event that less than seventy-five days'
notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to
be timely must be received not later than the close of
business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or such
public disclosure was made. A stockholder's notice to the
secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the
annual meeting and the reasons for conducting such
business at the annual meeting, (b) the name and address,
as they appear on the corporation's books, of the
stockholder proposing such business, (c) the number of
shares of common stock of the corporation which are
beneficially owned by the stockholder and (d) any material
interest of the stockholder in such business.
Notwithstanding anything in these by-laws to the contrary,
no business shall be conducted at an annual meeting except
in accordance with the procedures set forth in this Section 3.
The Chairman of an annual meeting shall, if the facts
warrant, determine and declare to the meeting that business
was not properly brought before the meeting and in
accordance with the provisions of this Section 3, and if he
should so determine, he shall so declare to the meeting and
any such business not properly brought before the meeting
shall not be transacted.
Section 4. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least
ten days before every meeting of stockholders a complete
list of the stockholders entitled to vote at said meeting,
arranged in alphabetical order, showing the address of and
the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of
any stockholder for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten
days prior to the meeting, either at a place within the city,
town or village where the meeting is to be held and which
place shall be specified in the notice of the meeting, or, if
not specified, at the place where said meeting is to be held,
and the list shall be produced and kept at the time and place
of the meeting during the whole time thereof, and subject to
the inspection of any stockholder who may be present.
Section 5. Special meetings of the stockholders,
for any purpose or purposes, unless otherwise prescribed by
statute or by the certificate of incorporation, may be called
by the Chairman or president or a majority of the board of
directors.
Section 6. Written notice of a special meeting of
stockholders, stating the place, date and hour of the meeting
and the purpose or purposes for which the meeting is called,
shall be given to each stockholder entitled to vote thereat,
not less than ten nor more than sixty days before the date
fixed for the meeting.
Section 7. Business transacted at any special
meeting of stockholders shall be limited to the purposes
stated in the notice.
Section 8. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present
in person or represented by proxy, shall constitute a quorum
at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall
not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power
to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which
a quorum shall be present or represented any business may
be transacted which might have been transacted at the
meeting as originally notified. If the adjournment is for more
than thirty days, or if after adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled
to vote at the meeting.
Section 9. When a quorum is present at any
meeting, the vote of the holders of a majority of the stock
having voting power present in person or represented by
proxy shall decide any question brought before such
meeting, unless the question is one upon which by express
provision of the statutes or of the certificate of incorporation,
a different vote is required in which case such express
provision shall govern and control the decision of such
question.
Section 10. Unless otherwise provided in the
certificate of incorporation and subject to statutory
provisions relating to the fixing of record dates, each
stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of
the capital stock having voting power held by such
stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period.
Section 11. (a) Any action which is required to be or
may be taken at any annual or special meeting of
stockholders of the corporation may be taken without a
meeting, without prior notice to stockholders and without a
vote if a consent or consents in writing, setting forth the
action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number
of votes that would be necessary to authorize or to take
such action at a meeting at which all shares entitled to vote
thereon were present and voted and shall be delivered to
the corporation by delivery to its registered office in the
State of Delaware, its principal place of business, or an
officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered
office in the State of Delaware shall be by hand or by
certified or registered mail, return receipt requested.
(b) Every written consent to corporate action shall
bear the date of signature of each stockholder who signs the
consent. Consents to corporate action shall be valid for a
maximum of sixty (60) days after the date of the earliest
dated consent delivered to the corporation in the manner
provided in Section 228(c) of the General Corporation Law
of the State of Delaware. Consents may be revoked by
written notice (i) to the corporation, (ii) to the stockholder or
stockholders soliciting consents or soliciting revocations in
opposition to action by consent proposed by the Corporation
(the "Soliciting Stockholders"), if any, or (iii) to a proxy
solicitor or other agent designated by the corporation or the
Soliciting Stockholders.
(c) Within three (3) business days after receipt of the
earliest dated consent delivered to the corporation in the
manner provided in Section 228(c) of the General
Corporation Law of the State of Delaware or the
determination by the Board that the corporation should seek
corporate action by written consent, as the case may be, the
Secretary shall engage nationally recognized independent
inspectors of elections for the purpose of performing a
ministerial review of the validity of the consents and
revocations. The cost of retaining inspectors of election
shall be borne by the corporation.
Consents and/or revocations shall be delivered to the
inspectors promptly upon receipt by the corporation, the
Soliciting Stockholders, if any, or their proxy solicitors or
other designated agents. As soon as consents and
revocations are received, the inspectors shall review the
consents and revocations and shall maintain a count of the
number of valid and unrevoked consents. The inspectors
shall keep such count confidential and shall not reveal the
count to the corporation, the Soliciting Stockholders, if any,
their respective representatives or any other entity. As soon
as practicable after the earlier of (i) a written request
therefor by the corporation or the Soliciting Stockholders
sixty (60) days after the date of the earliest dated consent
delivered to the corporation in the manner provided in
Section 228(c) of the General Corporation Law of the State
of Delaware or (ii) a written request therefor by the
corporation or the Soliciting Stockholders (whichever is
soliciting consents), notice of which request shall be given
to the party opposing the solicitation of consents, if any,
which request shall state that the corporation or Soliciting
Stockholders, as the case may be, have a good faith belief
that the requisite number of valid and unrevoked consents to
authorize or take the action specified in the consents has
been received in accordance with these By-Laws, the
inspectors shall issue a preliminary report to the corporation
and the Soliciting Stockholders stating: (i) the number of
valid consents; (ii) the number of valid revocations; (iii) the
number of valid and unrevoked consents; (iv) the number of
invalid consents; (v) the number of invalid revocations; and
(vi) whether, based on their preliminary count, the requisite
number of valid and unrevoked consents has been obtained
to authorize or take the action specified in the consents.
Unless the corporation and the Soliciting
Stockholders, if any, shall agree to a shorter or longer
period, the corporation and the Soliciting Stockholders, if
any, shall have 48 hours to review the consents and
revocations and to advise the inspectors and the opposing
party, if any, in writing as to whether they intend to
challenge the preliminary report of the inspectors. If no
written notice of an intention to challenge the preliminary
report is received within 48 hours after the inspectors'
issuance of the preliminary report, the inspectors shall issue
to the corporation and the Soliciting Stockholders, if any,
their final report containing the information from the
inspectors' determination with respect to whether the
requisite number of valid and unrevoked consents was
obtained to authorize and take the action specified in the
consents. If the corporation or the Soliciting Stockholders, if
any, issue written notice of an intention to challenge the
inspectors' preliminary report within 48 hours after the
issuance of that report, a challenge session shall be
scheduled by the inspectors as promptly as practicable. A
transcript of the challenge session shall be recorded by a
certified court reporter. Following completion of the
challenge session, the inspectors shall as promptly as
practicable issue their final report to the Soliciting
Stockholders, if any, and the corporation, which report shall
contain the information included in the preliminary report,
plus all changes in the vote totals as a result of the
challenge and a certification of whether the requisite number
of valid and unrevoked consents was obtained to authorize
or take the action specified in the consents. A copy of the
final report of the inspectors shall be included in the book in
which the proceedings of meetings of stockholders are
recorded.
The corporation shall give prompt notice to the
stockholders of the taking of corporate action without a
meeting and by less than unanimous written consent.
ARTICLE III
DIRECTORS
Section 1. The number of Directors which shall
constitute the whole Board shall be ten. Directors need not
be stockholders. Each Director shall hold office until his
successor is elected and qualified. Only persons who are
nominated in accordance with the procedures set forth in
these by-laws shall be eligible for election as directors.
Nominations of persons for election to the board of directors
of the corporation may be made at a meeting of
stockholders (a) by or at the direction of the board of
directors or (b) by any stockholder of the corporation entitled
to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section
1. Such nominations, other than those made by or at the
direction of the board of directors, shall be made pursuant to
timely notice in writing to the secretary of the corporation.
To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the
corporation not less than sixty days nor more than ninety
days prior to the meeting; provided however, that in the
event that less than seventy-five days' notice or prior public
disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the tenth
day following the day on which such notice of the date of the
meeting was mailed or such public disclosure was made.
Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for
election or re-election as a director, all information relating
to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation
14A under the Securities Exchange Act of 1934, as
amended (including such person's written consent to being
named in the proxy statement as a nominee and to serving
as a director if elected); and (b) as to the stockholder giving
the notice (i) the name and address, as they appear on the
corporation's books, of such stockholder and (ii) the number
of shares of common stock of the corporation which are
beneficially owned by such stockholder. At the request of
the board of directors any person nominated by the board of
directors for election as a director shall furnish to the
secretary of the corporation that information required to be
set forth in a stockholder's notice of nomination which
pertains to the nominee. No person shall be eligible for
election as a director of the corporation unless nominated in
accordance with the procedures set forth in these by-laws.
The Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was
not made in accordance with the procedures prescribed by
these by-laws, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be
disregarded. Anything in this Section 1 to the contrary
notwithstanding, except as provided in the first three
sentences of this Section 1, this Section 1 shall not apply to
or in any way restrict the rights of stockholders to elect
directors by written consents without a meeting as provided
in Section 228 of the General Corporation Law of the State
of Delaware.
Section 2. Vacancies and newly created
directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the
directors then in office, though less than a quorum, and the
directors so chosen shall hold office until their successors
are duly elected and shall qualify, unless sooner displaced.
Section 3. The business of the corporation shall be
managed by or under the direction of its board of directors
which may exercise all such powers of the corporation and
do all such lawful acts and things as are not by statute or by
the certificate of incorporation or by these by-laws directed
or required to be exercised or done by the stockholders.
Section 4. The board of directors at its first
meeting after each annual meeting of stockholders shall
choose a Chairman from among the directors. The
Chairman shall act as Chairman of all meetings of
stockholders and of the board of directors. The Chairman
shall from time to time report to the board of directors all
matters within his knowledge which the interest of the
corporation may require be brought to its notice.
MEETING OF THE BOARD OF DIRECTORS
Section 5. The board of directors of the
corporation may hold meetings, both regular and special,
either within or without the State of Delaware.
Section 6. The first meeting of each newly elected
board of directors shall be held immediately following and at
the place of the annual meeting of stockholders and no
notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting,
provided a quorum shall be present. In the event such
meeting is not held at such time and place, the meeting may
be held at such other time and place as shall be specified in
a notice given as hereinafter provided for special meetings
of the board of directors, or as shall be specified in a written
waiver signed by all of the directors.
Section 7. Regular meetings of the board of
directors may be held without notice at such time and at
such place as shall from time to time be determined by the
board.
Section 8. Special meetings of the board and
meetings of any committee of the board may be called by
the Chairman on one day notice to each director or
committee member, either by telephone or by mail or by
telegram; special meetings of the board of directors shall be
called by the Chairman or secretary in like manner and on
like notice on the written request of two directors.
Section 9. At all meetings of the board a majority
shall constitute a quorum for the transaction of business and
the act of a majority of the directors present at any meeting
at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided
by statute or by the certificate of incorporation. If a quorum
shall not be present at any meeting of the board of directors
the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 10. Any action required or permitted to be
taken at any meeting of the board of directors or of any
committee thereof may be taken without a meeting, if all
members of the board or committee, as the case may be,
consent thereto in writing, and the writing, or writings are
filed with the minutes of proceedings of the board or
committee.
Section 11. Members of the board of directors, or
any committee designated by the board of directors, may
participate in a meeting of the board of directors, or any
committee, by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in
person at the meeting.
COMMITTEES OF DIRECTORS
Section 12. The board of directors may, by
resolution passed by a majority of the whole board,
designate one or more committees, each committee to
consist of two or more of the directors of the corporation,
which, to the extent provided in the resolution and to the
extent permitted by Delaware Law, shall have and may
exercise the powers of the board of directors in the
management of the business and affairs of the corporation
and may authorize the seal of the corporation to be affixed
to all papers which may require it. Such committee or
committees shall have such name or names as may be
determined from time to time by resolution adopted by the
board of directors.
Section 13. Each committee shall report to the
board of directors on the actions taken at its meetings, but
need not keep regular minutes thereof unless required to do
so by the board of directors.
Section 14. There shall be an Executive Committee
of the board of directors of the Company. The board of
directors shall, at its first meeting after the annual meeting of
stockholders in each year, elect a Chairman and other
members of the Committee. The directors elected as
members of the Executive Committee shall serve as such for
one year and until their respective successors, willing to
serve, shall have been elected. The Executive Committee
shall, when the board is not in session, have and may
exercise all of the authority of the board of directors in the
management of the Company; provided, however, that the
Executive Committee shall not have the authority of the
board of directors in reference to (1) amending the articles
of incorporation, (2) adopting a plan of merger or adopting a
plan of consolidation with another corporation or
corporations, (3) recommending to the stockholders the
sale, lease, exchange, mortgage, pledge or other disposition
of all or substantially all of the property and assets of the
Company, (4) recommending to the stockholders a voluntary
dissolution of the Company or a revocation thereof, (5)
amending, altering or repealing the by-laws of the Company,
(6) electing or removing officers of the Company or
members of the Executive Committee, (7) fixing the
compensation of any member of the Executive Committee,
(8) declaring dividends, (9) authorizing the issuance of
stock, or (10) amending, altering or repealing any resolution
of the board of directors which by its terms provides that it
shall not be amended, altered or repealed by the Executive
Committee; provided further, that in the event of the death,
disability or refusal to act of the chief executive officer or the
Chairman, the Executive Committee shall appoint a chief
executive officer or a Chairman who shall serve until the
next meeting of the board of directors. Vacancies in the
regular membership of the Executive Committee shall be
filled by the board of directors.
COMPENSATION OF DIRECTORS
Section 15. The board of directors shall have the authority
to fix the compensation of directors.
ARTICLE IV
NOTICES
Section 1. Notices to stockholders shall be in
writing and delivered personally or mailed to the
stockholders at their addresses appearing on the books of
the corporation. Notice by mail shall be deemed to be given
at the time when the same shall be mailed.
Section 2. Whenever any notice is required to be
given under the provisions of the statutes or of the certificate
of incorporation or of these by-laws, a waiver thereof in
writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be
chosen by the board of directors and shall be a chief
executive officer, a president, a vice president, a secretary
and a treasurer. The board of directors may also choose
additional vice presidents, executive vice presidents, senior
vice presidents, assistant secretaries and assistant
treasurers. Two or more offices may be held by the same
person.
Section 2. The board of directors at its first
meeting after each annual meeting of stockholders shall
choose a chief executive officer, a president and one or
more vice presidents, a secretary and a treasurer, none of
whom need be a member of the Board.
Section 3. The board of directors may appoint such
other officers and agents as it shall deem necessary who
shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be
determined from time to time by the board.
Section 4. The salaries of all officers of the
corporation shall be fixed by a committee appointed by the
board of directors.
Section 5. The officers of the corporation shall hold
office until their successors are chosen and qualify. Any
officer elected or appointed by the board of directors may be
removed at any time by the affirmative vote of a majority of
the board of directors. Except as otherwise provided in
Section 13 of Article III, any vacancy occurring in any office
of the corporation shall be filled by the board of directors.
CHIEF EXECUTIVE OFFICER
Section 6. The chief executive officer of the
corporation shall have, under the direction of the board of
directors, general charge of the affairs of the corporation.
He shall see that all orders and resolutions of the board of
directors are carried into effect. He may execute all
contracts and agreements authorized by the board of
directors and shall vote all shares of stock in other
corporations standing in the name of the corporation. He
may sign bonds, mortgages, certificates for shares of stock
and all other contracts and documents whether or not under
the seal of the corporation except in cases where the
signing and execution thereof shall be expressly delegated
by law, by the board of directors, or by these by-laws, to
some other officer or agent of the corporation. He shall from
time to time report to the board of directors all matters within
his knowledge which the interest of the corporation may
require be brought to its notice. He shall have the general
powers of supervision and shall be the final arbiter in all
differences between all officers of the corporation and his
decision as to any matter affecting the corporation shall be
final and binding as between officers of the corporation
subject only to the board of directors;.
THE PRESIDENT
Section 7. The president shall have the direction
and active management of the business of the corporation
under the general supervision of the chief executive officer.
He shall have concurrent power with the chief executive
officer to execute all contracts and agreements authorized
by the board of directors and shall have concurrent power
with the chief executive officer to vote all shares of stock in
other corporations standing in the name of the corporation.
He may sign bonds, mortgages, certificates for shares of
stock and all other contracts and documents whether or not
under the seal of the corporation except in cases where the
signing and execution thereof shall be expressly delegated
by law, by the board of directors, or by these by-laws, to
some other officer or agent of the corporation.
THE VICE PRESIDENTS
Section 8. The executive vice presidents, senior
vice presidents and vice presidents shall perform such
duties and have such powers as may be prescribed by the
board of directors.
THE SECRETARY
Section 9. The secretary shall keep the minutes of
all meetings of the board of directors, the minutes of all
meetings of the stockholders, the minutes of all meetings of
the committees, which from time to time may be appointed
under authority of these by-laws, in books provided by the
corporation for such purpose. He shall attend to the giving
and serving of all notices of the corporation whereby
meetings of the board of directors, stockholders and
committees are assembled. He shall prepare all lists of
stockholders and their addresses required to be prepared by
the provisions of any present or future statute of the State of
Delaware. He may sign, with the chief executive officer or
the president or a vice president, in the name of the
corporation, when authorized by the board of directors so to
do, all contracts or other instruments requiring the seal of
the corporation and may affix the seal thereto. He shall
have concurrent power, acting alone or jointly, with the chief
executive officer, or the president to vote all shares of stock
in other corporations the majority of the voting stock of
which is owned by the corporation. He shall have charge of
such books and such papers as the board of directors may
direct. He shall, in general, perform all of the duties which
are incident to the office of secretary of a corporation,
subject at all times, to the direction and control of the board
of directors.
THE TREASURER
Section 10. The treasurer shall have custody of all
funds and securities of the corporation. When necessary or
proper he shall endorse for collection checks, drafts and
other instruments for the payment of money and shall
deposit them to the credit of the corporation in an authorized
bank or depository. Whenever required by the board of
directors, he shall render an account of his transactions. He
shall perform all acts incident to the position of treasurer,
subject to the control of the board of directors. He shall
have such powers and perform such duties as may be
assigned to him by the board of directors. He shall submit
such reports and records to the board of directors as may be
requested by them.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. The shares of the corporation shall be
represented by certificates signed by the chief executive
officer or the Chairman or the president or a vice president
and by the treasurer or an assistant treasurer or the
secretary or an assistant secretary and may be sealed with
the seal, or a facsimile of the seal of the corporation. In
case the seal of the corporation is changed after the
certificate is sealed with the seal or a facsimile of the seal of
the corporation, but before it is issued, the certificate may be
issued by the corporation with the same effect as if the seal
had not been changed. Any or all signatures on the
certificate may be a facsimile. In case any officer of the
corporation, transfer agent or registrar, or any officer or
employee of the transfer agent or registrar who has signed
or whose facsimile signature has been placed upon such
certificate ceases to be an officer of the corporation, transfer
agent or registrar before such certificate is issued, the
certificate may be issued by the corporation with the same
effect as if the officer of the corporation, transfer agent or
registrar had not ceased to be such at the date of its issue.
LOST CERTIFICATES
Section 2. The board of directors may by
resolution adopt such procedures as it deems appropriate
for the issuance of certificates to replace certificates which
have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 3. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the
person entitled thereto, cancel the old certificate and record
the transaction upon its books.
FIXING RECORD DATE
Section 4. In order that the corporation may
determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or
to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record
date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty
days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of
the meeting: provided, however, that the board of directors
may fix a new record date for the adjourned meeting.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of
incorporation, if any, may be declared by the board of
directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the provisions of the certificate
of incorporation.
Section 2. The board of directors may set apart out
of any of the funds of the corporation available for dividends
a reserve or reserves for any proper purpose and may
abolish any such reserve.
ANNUAL STATEMENT
Section 3. The chief executive officer shall present
at each annual meeting, and at any special meeting of the
stockholders when called for by vote of the stockholders, a
full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and
notes of the corporation shall be signed by such officer or
officers or such other person or persons as the board of
directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall
be fixed by resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed
thereon the name of the corporation and the words
"Corporate Seal, Delaware". The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Each person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, and whether or not the action
is by or in the right of the corporation, by reason of the fact
that he is or was a director or officer of the corporation, or is
or was serving at the request of the corporation as a director
or officer of another enterprise, shall be indemnified by the
corporation against expenses, (including attorney's fees),
judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such
action, suit or proceeding in accordance with, and to the
fullest extent authorized by, the General Corporation Law of
the State of Delaware as it may be in effect from time to
time.
ARTICLE IX
AMENDMENTS
Section 1. These by-laws may be altered or
repealed at any regular meeting of the stockholders or of the
board of directors or at any special meeting of the
stockholders or of the board of directors if notice of such
alteration or repeal be contained in the notice of such
special meeting.
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