<PAGE>
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 AND
- ---
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---
AND EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission File No. 0-13059
CERADYNE, INC.
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 33-0055414
- -------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3169 Redhill Avenue, Costa Mesa, CA 92626
- -------------------------------------------------------------------------------
(Address of principal executive) (Zip Code)
Registrant's telephone number, including area code (714) 549-0421
----------------------------
N/A
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 30, 1996
- ------------------------ ----------------------------------
Common Stock, $.01 par value 7,815,196 Shares
Page 1 of 16 Pages
<PAGE>
CERADYNE, INC.
INDEX
-----
<TABLE>
<CAPTION>
PAGE NO.
--------
<C> <S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statement Regarding Financial Information............ 3
Consolidated Balance Sheets - June 30, 1996.......... 4-5
and December 31, 1995
Consolidated Statements of Income -.................. 6
Three months ended June 30, 1996 and 1995
Six months ended June 30, 1996 and 1995
Consolidated Statements of Cash Flow -............... 7-8
Six months ended June 30, 1996 and 1995
Condensed Notes to Consolidated Financial........... 9-11
Statements
Item 2. Management's Discussion and Analysis of............. 12-14
Financial Condition & Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................... 15
Item 6. Exhibits and Reports on Form 8-K....................... 16
</TABLE>
SIGNATURE........................................................ 16
2
<PAGE>
CERADYNE, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
The Financial Statements included herein have been prepared by Ceradyne, Inc.
(the "Company"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The Financial Statements reflect all
adjustments (which are of a normal recurring nature) which are, in the opinion
of management, necessary to a fair statement of the results for the interim
periods presented. Certain information normally included in the Financial
Statements prepared in accordance with generally accepted accounting principles
has been omitted pursuant to such rules and regulations. However, the Company
believes that the disclosures are adequate to make the information presented not
misleading. It is suggested that the Financial Statements be read in
conjunction with the Financial Statements and notes thereto included in the
Company's Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1995,
as filed with the Securities and Exchange Commission on March 31, 1996.
3
<PAGE>
=============================================================================
CERADYNE, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(AMOUNTS IN THOUSANDS)
=============================================================================
<TABLE>
<CAPTION>
6-30-1996 12-31-1995
(UNAUDITED) (AUDITED)
=============================================================================
<S> <C> <C>
CURRENT ASSETS:
Cash & cash equivalents $ 2,658 $ 6,219
Accounts receivable, net of allowances of $ 5,862 $ 3,759
approximately $132 & $150 for doubtful accts
at 6-30-1996 & 12-31-1995
Receivables from related parties $ 14 $ 12
Inventories $ 8,287 $ 6,749
Production Tooling $ 338 $ 366
Prepaid expenses and other $ 514 $ 323
---------- -----------
TOTAL CURRENT ASSETS $ 17,673 $ 17,428
---------- -----------
PROPERTY, PLANT & EQUIPMENT, AT COST:
Land $ 422 $ 422
Buildings & improvements $ 1,825 $ 1,825
Lease rights $ 2,659 $ 2,659
Machinery & equipment $ 15,455 $ 14,907
Leasehold improvements $ 1,236 $ 1,141
Office equipment $ 1,663 $ 1,383
Construction in progress $ 604 $ 134
---------- -----------
$ 23,864 $ 22,471
Less accumulated depreciation & amortization $ 18,314 $ 17,750
---------- -----------
$ 5,550 $ 4,721
COSTS IN EXCESS OF NET ASSETS ACQUIRED, $ 2,157 $ 2,233
net of accumulated amortization of $1,517
& $1,441 at 6-30 1996 & 12-31-1995
OTHER ASSETS, net of accumulated amortization $ 484 $ 498
of $571 and $539 at 6-30-1996 & 12-31-1995 ---------- -----------
TOTAL ASSETS $ 25,864 $ 24,880
========== ===========
=============================================================================
</TABLE>
SEE ACCOMPANYING CONDENSED NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
=============================================================================
CERADYNE, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
=============================================================================
<TABLE>
<CAPTION>
6-30-1996 12-31-1995
(UNAUDITED) (AUDITED)
=============================================================================
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 468 $ 1,601
Accounts payable $ 1,581 $ 1,642
Accrued expenses:
Payroll and payroll related $ 862 $ 588
Other $ 349 $ 381
---------- -----------
Total current liabilities $ 3,260 $ 4,212
---------- -----------
LONG-TERM DEBT $ 555 $ 555
---------- -----------
DEFERRED REVENUE $ 261 $ 261
---------- -----------
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value:
Authorized - 12,000,000 shares;
Outstanding - 7,766,574 shares &
7,715,624 shares at 3-31-1996 &
12-31-1995, respectively $ 36,810 $ 36,590
Accumulated deficit $ (15,022) $ (16,738)
---------- -----------
TOTAL SHAREHOLDERS' EQUITY $ 21,788 $ 19,852
---------- -----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 25,864 $ 24,880
========== ===========
=======================================================================
</TABLE>
SEE ACCOMPANYING CONDENSED NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
=============================================================================
CERADYNE, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED 6-30-1996 & 1995
AND SIX MONTHS ENDED 6-30-1996 & 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
=============================================================================
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
- ------------------------------------------------------------------------------
1996 1995 1996 1995
------ ------ ------- -------
UNAUDITED UNAUDITED
==============================================================================
<S> <C> <C> <C> <C>
NET SALES $6,991 $5,757 $13,320 $11,136
COST OF PRODUCT SALES $5,041 $4,229 $ 9,550 $ 8,224
------ ------ ------- -------
Gross Profit $1,950 $1,528 $ 3,770 $ 2,912
OPERATING EXPENSES:
Selling $ 391 $ 364 $ 824 $ 751
General & Administration $ 724 $ 624 $ 1,386 $ 1,197
------ ------ ------- -------
Income from operation $ 835 $ 540 $ 1,560 $ 964
------ ------ ------- -------
OTHER (INCOME) EXPENSE:
Other (income) expense $( 196) $ 1 $( 324) $( 2)
Interest expense $ 57 $ 86 $ 122 $ 162
------ ------ ------- -------
$( 139) $ 87 $( 202) $ 160
------ ------ ------- -------
Income (Loss) before provision $ 974 $ 453 $ 1,762 $ 804
for income taxes
PROVISION FOR INCOME $ 23 $ - $ 46 $ -
TAXES ------ ------ ------- -------
NET INCOME $ 951 $ 453 $ 1,716 $ 804
====== ====== ======= =======
NET INCOME (LOSS) PER
COMMON &
EQUIVALENT SHARE
Primary $ .12 $ .07 $ .22 $ .13
====== ====== ======= =======
==============================================================================
</TABLE>
SEE ACCOMPANYING CONDENSED NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
<TABLE>
<CAPTION>
============================================================================
CERADYNE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED 6-30-1996 & 1995
(Amounts in thousands)
============================================================================
SIX MONTHS ENDED
JUNE 30
- ----------------------------------------------------------------------------
1996 1995
UNAUDITED UNAUDITED
============================================================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,716 $ 804
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH PROVIDED FROM
(USED IN) OPERATING ACTIVITIES:
Depreciation and amortization $ 640 $ 741
(Increase) in accounts receivable, net $ (2,105) (793)
(Increase) in receivables from related parties $ (2) $ (4)
Increase in inventories $ (1,537) $ (696)
(Increase) decrease in production tooling $ 28 $ (67)
(Increase) in prepaid expenses & other assets $ (181) (128)
Increase (decrease) in accounts payable $ 9 (399)
Increase in accrued expenses $ 176 $ 669
(Decrease) in deferred revenue $ -0- $ (38)
--------- --------
NET CASH PROVIDED FROM (USED IN)
OPERATING ACTIVITIES $ (1,256) $ 89
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant & equipment $ (1,392) $ (555)
--------- --------
NET CASH USED IN INVESTING ACTIVITIES $ (1,392) $ (555)
--------- --------
============================================================================
</TABLE>
SEE ACCOMPANYING CONDENSED NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
7
<PAGE>
<TABLE>
<CAPTION>
===============================================================================
CERADYNE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED 6-30-1996 & 1995
(AMOUNTS IN THOUSANDS)
===============================================================================
<S> <C> <C>
SIX MONTHS ENDED
JUNE 30
- -------------------------------------------------------------------------------
1996 1995
UNAUDITED UNAUDITED
===============================================================================
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock, net $ 219 $ 9
Net (payments) on long-term debt $(1,133) $ (1)
------- -----
Net cash provided by (used in) financing activities $( 914) $ 8
------- -----
Decrease in cash and cash equivalents $(3,562) $ (42)
Cash & cash equivalents, beginning of period $ 6,219 $ 94
Cash & cash equivalents, end of period $ 2,657 $ 52
======= =====
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Interest paid $ 122 $ 139
Income taxes paid $ 92 $ -0-
------- =====
===============================================================================
</TABLE>
SEE ACCOMPANYING CONDENSED NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
8
<PAGE>
CERADYNE, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
1. Basis of Presentation
---------------------
The consolidated financial statements include the financial statements of
Ceradyne, Inc. (the Company) and its subsidiaries. All material
intercompany accounts and transactions have been eliminated.
2. Inventories
-----------
Inventories are valued at the lower of cost (first in, first out) or
market. Inventory costs include the cost of material, labor and
manufacturing overhead. The following is a summary of the inventory
components as of June 30, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
========================================================
JUNE 30, 1996 DECEMBER 31, 1995
========================================================
<S> <C> <C>
Raw Materials/ $3,167,000 $3,371,000
Finished Goods
Work-in-Process $5,120,000 $3,378,000
---------- ----------
Total Inventories $8,287,000 $6,749,000
========== ==========
========================================================
</TABLE>
3. Net Income (Loss) Per Share
---------------------------
The number of shares used in computing primary net income per share equals
the total of the weighted average number of shares outstanding during the
periods, plus common stock equivalents relating to options. Common stock
equivalents relating to options issued under the 1983 Stock Option Plan (as
amended), the 1994 Stock Incentive Plan, the 1985 Employee Stock Purchase
Plan and the 1995 Employee Stock Purchase Plan represent additional shares
which may be issued in connection with their exercise, reduced by the
number of shares which could be repurchased with the proceeds at the
average market price per share. Also, warrants to purchase common stock
(in connection with the underwriters from the December 1995 public
offering) have been computed as to common stock equivalents. Common stock
equivalents relating to options are not included when their effect is
antidilutive. The following is a summary of the number of shares entering
into the computation of net income per common and common equivalent share:
9
<PAGE>
<TABLE>
<CAPTION>
=============================================================================
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1996 1995 1996 1995
=============================================================================
<S> <C> <C> <C> <C>
Weighted average number of 7,796,000 6,263,000 7,762,000 6,253,000
shares outstanding
Common stock equivalents 182,000 208,000 176,000 136,000
--------- --------- --------- ---------
Number of shares 7,978,000 6,471,000 7,938,000 6,389,000
========= ========= ========= =========
=============================================================================
</TABLE>
4. Long-Term Debt and Bank Borrowing Arrangements
----------------------------------------------
<TABLE>
<CAPTION>
Long-term debt consisting of the following at June 30, 1996:
<S> <C>
Note payable to asset-based lender, bearing interest at the $1,000,000
institution's prime rate (8.50 percent at June 30, 1996), plus
2.0 percent.
Four contract capital leases, bearing interest between 5.38 $ 23,000
percent and 11.64 percent, payable in monthly installments of
$18,948 expiring September 1996, secured by the equipment.
----------
$1,023,000
Less - Current portion $ 468,000
----------
Long-term debt $ 555,000
==========
===============================================================================
</TABLE>
On January 30, 1996, the Company amended its revolving credit agreement set
forth above. The debt on the total facility has been reduced to
$1,000,000, which is the minimum borrowing requirement. The previous
minimum borrowing requirement was $2,000,000. The pay down of $1,000,000
was part of the stated use of the proceeds from the public offering in
October 1995. Additionally, the interest rate was decreased from 3.6% over
prime rate to 2.0% over prime rate and all financial loan covenants were
eliminated. Also, in computing interest charges, the loan account of
company maintained by lender will be credited with remittances and other
payments 2.5 business days after funds have been credited to lender's
account at lender's bank. The Company has delivered to the lender cash
collateral in the sum of $1,000,000 as security for the credit facility.
This collateral has been invested as a certificate of deposit at Sumitomo
Bank. All interest for this certificate of deposit is to be forwarded to
the Company. The credit facility shall be effective until November 29,
1997 and automatically renewed for successive terms of two years thereafter
unless terminated at the end of the initial term by either party giving the
other written notice at least sixty (60) days prior to the end of the then-
current term.
10
<PAGE>
5. Income Tax
----------
Effective the first quarter of 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes." The new standard provides revised criteria for the recognition of
net deferred tax assets. The Company's deferred tax asset, which is
approximately $7,651,000, relates to its net operating loss carryforward
and has been offset with a valuation allowance since there is uncertainty
regarding the Company's ability to recognize this tax benefit.
11
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
Results of Operations for Quarter Ended June 30, 1996
- -----------------------------------------------------
Reference is made to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, for an analysis and detailed discussion of the
Company's financial condition and results of operations for the period covered
by that report.
Net Sales. Net sales for the quarter ended June 30, 1996 were $7.0 million,
which represents a 21% or $1.2 million increase in net sales for the
corresponding period of the prior year. For the six months ended June 30, 1996,
net sales were $13.3 million, for an increase of 20% or $2.2 million over the
same period last year. The increase in sales for the second quarter and first
half of 1996 ended June 30, 1996 were attributable to a well balanced product
mix all contributing to increased sales. Highlighting this product mix would be
lightweight ceramic armor, which accounted for 73% of the increase for the
second quarter, and 57% of the increase for the first six months compared to the
corresponding periods of last year. The remaining increases in sales were
spread over substantially all of the Company's other product lines.
Gross Profit. Ceradyne's gross profit was $2.0 million or 28% of net sales for
the quarter ended June 30, 1996, and this compares to $1.5 million of gross
profit or 27% of net sales for the same quarter as last year. For the first
half of 1996, the gross profit was $3.8 million or 28% of net sales and this
compares to $2.9 million or 26% of net sales for the first half of last year.
The increase in gross profit for the second quarter and first six months of 1996
as compared to 1995 is $.4 million or 28%, and $.9 million or 29%, respectfully.
As was stated above concerning net sales, the gross profit is attributable to an
across the board increase in mostly all product lines. The Company's sales
volume this period, versus the prior year period, had an impact on absorbing
fixed manufacturing overhead; and, as a result, the Company's gross profit, in
absolute dollars and as a percentage of net sales, is impacted in a positive
increase. The Company has also invested in equipment in the amount of $600,000
for the second quarter and $1,392,000 for the first six months of 1996, and this
compares to $555,000 of investments in the first six months of the prior year.
The new equipment has increased the Company's capacity, such as a CNC-machining
center for making end caps for glass tempering rolls which are now made "in
house" at the Thermo Materials division in Georgia. Also, the installation of a
high speed, precision pellet press and other automation dedicated to the
fabrication of ceramic dispenser cathodes was done at the Semicon Associates
division in Kentucky. This trend is continuing at the California division for
advanced ceramics by modifying facility and purchasing equipment for doubling
capacity for sintered reaction bonded silicon nitride (SRBSN).
12
<PAGE>
Operating Expense. Operating expenses were $1.1 million for the quarter ended
June 30, 1996, an increase of 13% from the comparable period of the prior year,
and represented 16% of net sales compared to 17% of net sales for the quarter
ended June 30, 1995. For the first half year of 1996, operating expenses were
$2.2 million, an increase of 13% from the comparable period of the prior year.
This represented 17% of net sales compared to 18% for the prior year. The
improvement as a percentage of net sales was due to increased sales for the
quarter and first six months ended June 30, 1996.
Selling expenses were $.4 million for the quarter and $.8 million for the six
months ended June 30, 1996. This represents an increase of 7% for the quarter
and 10% for the first half as compared to the prior year comparable periods.
Selling expenses, as a percentage of sales, were 6% for the quarter and first
half ended June 30, 1996, as compared to 6% and 7% for the quarter and first
half of last year's comparative periods. The betterment, as a percent to sales
for the first six months ended June 30, 1996, is because of an increase in
sales; however, the increase in real dollars for the quarter and year-to-date
over last year's comparable periods is mainly due to sales' commissions.
General and administrative expense was $.7 million for the second quarter and
$1.2 million for the six months ended June 30, 1996; and this was a 16% increase
for the quarter and six months period over the prior year periods. This
increase was primarily due to the payment of employee incentive bonuses indexed
to the Company's profitability during the quarter and six month year-to-date
periods ended June 30, 1996.
Other Income. Other income was $196,000 for the quarter and $324,000 for the
six months ended June 30, 1996; and this compares with expense of ($1,000) and
income of $2,000 for the same periods last year. The increase was mainly
attributable to interest income (from cash proceeds from the public offering of
December 1995), and the Ford Motor Company provision for joint development in
ceramic components for automobiles.
Interest Expense. Interest expense was $57,000 for the quarter and $122,000 for
the six months ended June 30, 1996; and this compares with $86,000 for the
quarter and $162,000 for the same periods last year. The decrease over the
comparable period of the prior year is primarily attributable to paying down the
debt in February 1996.
Income Taxes. The Company made a provision for the quarter of $23,000 and
$46,000 for the six months ended June 30, 1996. For both Federal and State tax
purposes, 90% of the Company's income, before income taxes, may be offset by the
available net operating loss carryforward of approximately $17.3 million due to
the assessment of alternative minimum income taxes.
Net Income. Reflecting all of the matters discussed above, net income was
$951,000 (or $.12 per share) and $1,716,000 (or $.22 per share) for the second
quarter and six months ended June 30, 1996, respectfully. This compares to
$453,000 (or $.07 per share) and $804,000 (or $.13 per share) for the same
periods last year.
13
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The Company generally meets its operating and capital requirements from cash
flow from operating activities and borrowings under its credit facilities. On
December 4, 1995, the Company completed a public offering of 1,380,000 shares of
its common stock at $5.00 per share. After commissions and other related
expenses, Ceradyne netted approximately $6 million cash from the offering. As
of June 30, 1996, the Company had cash and cash equivalents of $2.6 million.
On January 30, 1996, the Company amended its revolving credit agreement. The
debt with this lender was reduced from $2.1 million to $1.0 million. The
Company has delivered to the lender cash collateral, in the form of a bank
certificate of deposit, in the sum of $1.0 million as security for the credit
facility. The interest rate on the new debt of $1.0 million has decreased from
3.6% over prime rate to 2.0% over prime rate. The maximum overall credit
facility with this lender is $4.0 million and the Company is only utilizing $1.0
million in borrowing at present. The credit facility expires on November 29,
1997.
Management believes that its current cash and cash equivalents funds generated
from operations and the ability to borrow under the existing credit facility
will be sufficient to finance anticipated capital and operating requirements for
at least the next 12 months.
14
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The Company is, from time to time, involved in various legal and other
proceedings that relate to the ordinary course of operating its business,
including, but not limited to, employment-related actions and workers'
compensation claims.
In October 1995 the Company was served with a complaint that was filed by four
persons, and the spouses of those persons, who are/were employed by one of the
Company's customers. The complaint, filed in the United States District Court,
Eastern District of Tennessee, alleges that the employees contracted chronic
beryllium disease as a result of their exposure, during the course of their
employment with the Company's customer, to beryllium-containing products sold by
Ceradyne. The complaint seeks compensatory damages in the amount of $3.0
million for each of the four plaintiffs who were employed by the Company's
customer, compensatory damages of $1.0 million each for the two spouses, and
punitive damages in the amount of $5.0 million. The case is in the early stages
of discovery. Based upon information currently available, the Company believes
that the plaintiffs' claims are without merit and that the resolution of this
matter will not have a material adverse effect on the financial condition or
operations of the Company.
Defense of this case has been tendered to the Company's insurance carriers, some
of whom are providing a defense subject to a reservation of rights. There can
be no assurance, however, that this claim or other claims related to exposure to
beryllium oxide will be covered by insurance, or that, if covered, the amount of
insurance will be sufficient to cover any potential judgment.
Currently, the Company is involved in an action filed by a current employee in
the Superior Court of the State of California, County of Orange. One of the
Company's previous landlords, who also was sued by the plaintiffs, filed a
cross-complaint against Ceradyne. The employee and his wife filed suit in
December 1994 alleging that he contracted chronic beryllium disease during the
course and scope of his employment. In March 1996, Ceradyne was dismissed by
the plaintiffs as a direct defendant. Although Ceradyne remains in the action
as a cross-defendant, the Company believes that the resolution of this matter
will not have a material adverse effect on the financial condition or operations
of the Company.
Defense of this case has been tendered to the Company's insurance carriers, all
of whom have denied coverage. The Company believes, however, that coverage was
improperly denied. The Company has initiated an action against certain
insurance carriers in order to resolve the dispute regarding coverage. There
can be no assurance, however, that this claim or other claims related to
exposure to beryllium oxide will be covered by insurance, or that, if covered,
the amount of insurance will be sufficient to cover any potential judgment.
15
<PAGE>
Items 2-5. Not applicable
<TABLE>
<CAPTION>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
<C> <S>
(a) Exhibits:
The following exhibits are filed as part of this report:
3.2(a) Bylaws of Registrant.
3.3(b) Amendments to Bylaws, adopted April 29, 1996.
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
</TABLE>
SIGNATURE
- ---------
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.
CERADYNE, INC.
By: /s/ HOWARD F. GEORGE
--------------------------------------------------------
Howard F. George
Vice President
Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: August 12, 1996
16
<PAGE>
EXHIBIT 3.2
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BYLAWS
OF
CERADYNE, INC.
--------------
A Delaware Corporation
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. OFFICES...................................................... 1
Section 1. Registered Office................................... 1
Section 2. Other Offices....................................... 1
Section 3. Books............................................... 1
ARTICLE II. MEETINGS OF STOCKHOLDERS.................................... 1
Section 1. Place of Meetings................................... 1
Section 2. Annual Meetings..................................... 1
Section 3. Special Meetings.................................... 1
Section 4. Notification of Business to be Transacted at Meeting 1
Section 5. Notice; Waiver of Notice............................ 2
Section 6. Quorum; Adjournment................................. 2
Section 7. Voting.............................................. 2
Section 8. Stockholder Action by Written Consent Without a
Meeting........................................ 2
Section 9. List of Stockholders Entitled to Vote............... 3
Section 10. Stock Ledger........................................ 3
Section 11. Inspectors of Election.............................. 3
Section 12. Organization........................................ 3
Section 13. Order of Business................................... 3
ARTICLE III. DIRECTORS.................................................. 4
Section 1. Powers.............................................. 4
Section 2. Number and Election of Directors.................... 4
Section 3. Resignation and Removal of Directors................ 4
Section 4. Vacancies........................................... 4
Section 5. Time and Place of Meetings.......................... 4
Section 6. Annual Meeting...................................... 4
Section 7. Regular Meetings.................................... 5
Section 8. Special Meetings.................................... 5
Section 9. Quorum; Vote Required for Action; Adjournment....... 5
Section 10. Action by Written Consent........................... 5
Section 11. Telephone Meetings.................................. 5
Section 12. Committees.......................................... 6
Section 13. Compensation........................................ 6
Section 14. Interested Directors................................ 6
ARTICLE IV. OFFICERS.................................................... 7
Section 1. Officers............................................ 7
Section 2. Appointment of Officers............................. 7
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 3. Subordinate Officers................................ 7
Section 4. Removal and Resignation of Officers................. 7
Section 5. Vacancies in Offices................................ 7
Section 6. Chairman of the Board............................... 7
Section 7. Vice Chairman of the Board.......................... 7
Section 8. Chief Executive Officer............................. 8
Section 9. President........................................... 8
Section 10. Vice President...................................... 8
Section 11. Secretary........................................... 8
Section 12. Chief Financial Officer............................. 8
ARTICLE V. STOCK........................................................ 9
Section 1. Form of Certificates................................ 9
Section 2. Signatures.......................................... 9
Section 3. Lost Certificates................................... 9
Section 4. Transfers........................................... 9
Section 5. Registered Owners................................... 9
ARTICLE VI. INDEMNIFICATION............................................. 10
Section 1. Right to Indemnification............................ 10
Section 2. Right of Indemnitee to Bring Suit................... 10
Section 3. Non-Exclusivity of Rights........................... 11
Section 4. Insurance........................................... 11
Section 5. Indemnification of Agents of the Corporation........ 11
Section 6. Indemnification Contracts........................... 11
Section 7. Effect of Amendment................................. 11
ARTICLE VII. GENERAL PROVISIONS.......................................... 12
Section 1. Dividends........................................... 12
Section 2. Disbursements....................................... 12
Section 3. Fiscal Year......................................... 12
Section 4. Corporate Seal...................................... 12
Section 5. Record Date......................................... 12
Section 6. Voting of Stock Owned by the Corporation............ 12
Section 7. Construction and Definitions........................ 12
Section 8. Amendments.......................................... 12
</TABLE>
ii
<PAGE>
BYLAWS
OF
CERADYNE, INC.
--------------
A Delaware Corporation
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation in
-----------------
the State of Delaware shall be in the City of Wilmington, County of New Castle.
Section 2. Other Offices. 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.
Section 3. Books. The books of the Corporation may be kept within or
-----
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. Place of Meetings. All meetings of the stockholders shall be
-----------------
held at such place either within or without the State of Delaware and on such
date and at such time as may be designated from time to time by the Board of
Directors, the Chairman of the Board of Directors or the Chief Executive
Officer.
Section 2. Annual Meetings. Annual meetings of stockholders shall be held
---------------
at a time and date designated by the Board of Directors for the purpose of
electing directors and transacting such other business as may properly be
brought before the meeting.
Section 3. Special Meetings. Special meetings of stockholders, for any
----------------
purpose or purposes, may be called by the Board of Directors, the Chairman of
the Board of Directors, the Chief Executive Officer or the holders of shares
entitled to cast not less than ten percent (10%) of the votes at such meeting.
Special meetings may not be called by any other person.
Section 4. Notification of Business to be Transacted at Meeting. To be
----------------------------------------------------
properly brought before a meeting, business must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a stockholder entitled to vote at the meeting.
<PAGE>
Section 5. Notice; Waiver of Notice. Whenever stockholders are required
------------------------
or permitted to take any action at a meeting, a written notice of the meeting
shall be given which shall state the place, date and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise required by law, such notice shall be given not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
Corporation. A written waiver of any such notice signed by the person entitled
thereto, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
Section 6. Quorum; Adjournment. Except as otherwise required by law, or
-------------------
provided by the Certificate of Incorporation or these Bylaws, the holders of a
majority of the capital stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at all meetings of the stockholders. A meeting
at which a quorum is initially present may continue to transact business,
notwithstanding the withdrawal of enough votes to leave less than a quorum, if
any action taken is approved by at least a majority of the required quorum to
conduct that meeting. 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 of the time and place of the adjourned 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 noticed. If the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder entitled to vote at the meeting.
Section 7. Voting. Except as otherwise required by law, or provided by
------
the Certificate of Incorporation or these Bylaws, any question brought before
any meeting of stockholders at which a quorum is present shall be decided by the
vote of the holders of a majority of the stock represented and entitled to vote
thereat. Unless otherwise provided in the Certificate of Incorporation, each
stockholder represented at a meeting of stockholders shall be entitled to cast
one vote for each share of the capital stock entitled to vote thereat held by
such stockholder. Such votes may be cast in person or by proxy, but no proxy
shall be voted on or after three (3) years from its date, unless such proxy
provides for a longer period. Elections of directors need not be by ballot
unless the Chairman of the meeting so directs or unless a stockholder demands
election by ballot at the meeting and before the voting begins.
Section 8. Stockholder Action by Written Consent Without a Meeting.
-------------------------------------------------------
Except as otherwise provided in the Certificate of Incorporation, any action
which may be taken at any annual or special meeting of stockholders may be taken
without a meeting and without prior notice, if a consent in writing, setting
forth the action so taken, is signed by the holders of all of the outstanding
shares of capital stock of the Corporation entitled to vote on that action. All
such consents shall be filed with the Secretary of the Corporation and shall be
maintained in the
2
<PAGE>
corporate records. Any stockholder giving a written consent, or the
stockholder's proxy holders, or a transferee of the shares or a personal
representative of the stockholder or their respective proxy holders, may revoke
the consent by a writing received by the Secretary of the Corporation before
written consents of the number of shares required to authorize the proposed
action have been filed with the Secretary.
Section 9. List of Stockholders Entitled to Vote. The officer who has
-------------------------------------
charge of the stock ledger of the Corporation shall prepare and make, at least
ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder 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 (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is present.
Section 10. Stock Ledger. The stock ledger of the Corporation shall be
------------
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 9 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 11. Inspectors of Election. In advance of any meeting of
----------------------
stockholders, the Board of Directors may appoint one or more persons (who shall
not be candidates for office) as inspectors of election to act at the meeting or
any adjournment thereof. If inspectors are not so appointed, or if an appointed
inspector fails to appear or fails or refuses to act at a meeting, the Chairman
of any meeting of stockholders may, and on the request of any stockholder or his
proxy shall, appoint inspectors of election at the meeting. The duties of such
inspectors shall include: determining the number of shares outstanding and the
voting power of each; the shares represented at the meeting; the existence of a
quorum; the authenticity, validity and effect of proxies; receiving votes,
ballots or consents; hearing and determining all challenges and questions in any
way arising in connection with the right to vote; counting and tabulating all
votes or consents; determining the result; and such acts as may be proper to
conduct the election or vote with fairness to all stockholders. In the event of
any dispute between or among the inspectors, the determination of the majority
of the inspectors shall be binding.
Section 12. Organization. At each meeting of stockholders the Chairman of
------------
the Board of Directors, if one shall have been elected, (or in his absence or if
one shall not have been elected, the President) shall act as Chairman of the
meeting. The Secretary (or in his absence or inability to act, the person whom
the Chairman of the meeting shall appoint secretary of the meeting) shall act as
secretary of the meeting and keep the minutes thereof.
Section 13. Order of Business. The order and manner of transacting
-----------------
business at all meetings of stockholders shall be determined by the Chairman of
the meeting.
3
<PAGE>
ARTICLE III
DIRECTORS
Section 1. Powers. Except as otherwise required by law or provided by the
------
Certificate of Incorporation, the business and affairs of the Corporation shall
be managed by or under the direction of the Board of Directors.
Section 2. Number and Election of Directors. The authorized number of
--------------------------------
directors of the Corporation shall be fixed from time to time by the Board of
Directors either by a resolution or an amendment to this Bylaw adopted by the
affirmative vote of a majority of the entire Board of Directors. Subject to the
foregoing, the number of directors presently authorized is six (6). Directors
shall be elected at each annual meeting of stockholders, except as provided in
Section 4 of this Article III, and each director elected shall hold office until
his successor is duly elected and qualified, or until his earlier death,
resignation or removal. Directors need not be stockholders.
Section 3. Resignation and Removal of Directors. Any director may resign
------------------------------------
at any time effective upon giving written notice to the Board of Directors,
unless the notice specifies a later time for such resignation to become
effective. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. If the resignation of
a director is effective at a future time, the Board of Directors may elect a
successor prior to such effective time to take office when such resignation
becomes effective.
Except as may otherwise be required by law, any director or the entire
Board of Directors may be removed, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors.
Section 4. Vacancies. Vacancies in the Board of Directors resulting from
---------
death, resignation, removal or otherwise 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, although less than a quorum, or
by a sole remaining director. Each director so selected shall hold office for
the remainder of the full term of office of the former director which such
director replaces and until his successor is duly elected and qualified, or
until his earlier death, resignation or removal. No decrease in the authorized
number of directors constituting the Board of Directors shall shorten the term
of any incumbent directors.
Section 5. Time and Place of Meetings. The Board of Director shall hold
--------------------------
its meetings at such place, either within or without the State of Delaware, and
at such time as may be determined from time to time by the Board of Directors.
Section 6. Annual Meeting. The Board of Directors shall meet for the
--------------
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
place, either within or without the State of Delaware, on such date and at such
time as shall be
4
<PAGE>
specified in a notice thereof given as hereinafter provided in Section 8 of this
Article III or in a waiver of notice thereof.
Section 7. Regular Meetings. Regular meetings of the Board of Directors
----------------
may be held at such places within or without the State of Delaware at such date
and time as the Board of Directors may from time to time determine and, if so
determined by the Board of Directors, notices thereof need not be given.
Section 8. Special Meetings. Special meetings of the Board of Directors
----------------
may be called by the Chairman of the Board, the President, the Secretary or by
any two directors. Notice of the date, time and place of special meetings shall
be delivered personally or by telephone to each director or sent by first-class
mail or telegram, charges prepaid, addressed to each director at the director's
address as it is shown on the records of the Corporation. In case the notice is
mailed, it shall be deposited in the United States mail at least five (5) days
before the time of the holding of the meeting. In case the notice is delivered
personally or by telephone or telegram, it shall be delivered personally or by
telephone or to the telegraph company at least forty-eight (48) hours before the
time of the holding of the meeting. The notice need not specify the purpose of
the meeting. A written waiver of any such notice signed by the person entitled
thereto, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
Section 9. Quorum; Vote Required for Action; Adjournment. Except as
---------------------------------------------
otherwise required by law, or provided in the Certificate of Incorporation or
these Bylaws, a majority of the directors shall constitute a quorum for the
transaction of business at all meetings of the Board of Directors and the
affirmative vote of not less than a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors.
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.
A meeting at which a quorum is initially present may continue to transact
business, notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum to conduct that meeting.
When a meeting is adjourned to another time or place (whether or not a quorum is
present), notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken.
At the adjourned meeting, the Board of Directors may transact any business which
might have been transacted at the original meeting.
Section 10. Action by Written Consent. Unless otherwise restricted by the
-------------------------
Certificate of Incorporation, 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 the members of the Board of Directors 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 of Directors or committee.
Section 11. Telephone Meetings. Unless otherwise restricted by the
------------------
Certificate of Incorporation, members of the Board of Directors of the
Corporation, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or such committee, as the
case may be, by conference telephone or similar communications
5
<PAGE>
equipment by means of which all persons participating in the meeting can hear
each other. Participation in a meeting pursuant to this Section 11 shall
constitute presence in person at such meeting.
Section 12. Committees. The Board of Directors may, by resolution passed
----------
by a majority of the entire Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any such committee, who may replace any absent or disqualified member at any
meeting of the committee. In the event of absence or disqualification of a
member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the committee member or members present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
the absent or disqualified member. Any committee, to the extent allowed by law
and as provided in the resolution establishing such committee, shall have and
may exercise all the power and authority of the Board of Directors in the
management of the business and affairs of the Corporation, but no such committee
shall have the power or authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
Bylaws of the Corporation; and, unless the resolution or the Certificate of
Incorporation expressly so provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Each
committee shall keep regular minutes of its meetings and report to the Board of
Directors when required.
Section 13. Compensation. The directors may be paid such compensation for
------------
their services as the Board of Directors shall from time to time determine.
Section 14. Interested Directors. No contract or transaction between the
--------------------
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or the committee thereof
which authorizes the contract or transaction, or solely because his of their
votes are counted for such purpose if: (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
6
<PAGE>
ARTICLE IV
OFFICERS
Section 1. Officers. The officers of the Corporation shall be a
--------
President, a Secretary and a Chief Financial Officer. The Corporation may also
have, at the discretion of the Board of Directors, a Chairman of the Board, a
Vice Chairman of the Board, a Chief Executive Officer, one or more Vice
Presidents, one or more Assistant Financial Officers and Treasurers, one or more
Assistant Secretaries and such other officers as may be appointed in accordance
with the provisions of Section 3 of this Article IV.
Section 2. Appointment of Officers. The officers of the Corporation,
-----------------------
except such officers as may be appointed in accordance with the provisions of
Section 3 or Section 5 of this Article IV, shall be appointed by the Board of
Directors, and each shall serve at the pleasure of the Board, subject to the
rights, if any, of an officer under any contract of employment.
Section 3. Subordinate Officers. The Board of Directors may appoint,
--------------------
and may empower the Chief Executive Officer or President to appoint, such other
officers as the business of the Corporation may require, each of whom shall hold
office for such period, have such authority and perform such duties as are
provided in the Bylaws or as the Board of Directors may from time to time
determine.
Section 4. Removal and Resignation of Officers. Subject to the
-----------------------------------
rights of an officer under any contract, any officer may be removed at any time,
with or without cause, by the Board of Directors or, except in case of an
officer chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation shall be without prejudice to
the rights of the Corporation under any contract to which the officer is a
party.
Section 5. Vacancies in Offices. A vacancy in any office because of
--------------------
death, resignation, removal, disqualification or any other cause shall be filled
in the manner prescribed in these Bylaws for regular appointments to that
office.
Section 6. Chairman of the Board. The Chairman of the Board, if such
---------------------
an officer is elected, shall, if present, preside at meetings of the
stockholders and of the Board of Directors. He shall, in addition, perform such
other functions (if any) as may be prescribed by the Bylaws and Board of
Directors.
Section 7. Vice Chairman of the Board. The Vice Chairman of the
--------------------------
Board, if such an officer is elected, shall, in the absence or disability of the
Chairman of the Board, perform all duties of the Chairman of the Board and when
so acting shall have all the powers of and be subject to all of the restrictions
upon the Chairman of the Board. The Vice Chairman of the Board shall have such
other powers and duties as may be prescribed by the Board of Directors or the
Bylaws.
7
<PAGE>
Section 8. Chief Executive Officer. The Chief Executive Officer of
-----------------------
the Corporation shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers of
the Corporation. He shall exercise the duties usually vested in the chief
executive officer of a corporation and perform such other powers and duties as
may be assigned to him from time to time by the Board of Directors or prescribed
by the Bylaws. In the absence of the Chairman of the Board and any Vice
Chairman of the Board, the Chief Executive Officer shall preside at all meetings
of the stockholders and of the Board of Directors.
Section 9. President. The President of the Corporation shall,
---------
subject to the control of the Board of Directors and the Chief Executive Officer
of the Corporation, if there be such an officer, have general powers and duties
of management usually vested in the office of president of a corporation and
shall have such other powers and duties as may be prescribed by the Board of
Directors or the Bylaws or the Chief Executive Officer of the Corporation. In
the absence of the Chairman of the Board, Vice Chairman of the Board and Chief
Executive Officer, the President shall preside at all meetings of the Board of
Directors and stockholders.
Section 10. Vice President. In the absence or disability of the
--------------
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a Vice President designated by the Board
of Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of, and subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or the Bylaws, and the President, or the Chairman of the
Board.
Section 11. Secretary. The Secretary shall keep or cause to be kept,
---------
at the principal executive office or such other place as the Board of Directors
may direct, a book of minutes of all meetings and actions of Directors,
committees of Directors, and stockholders, with the time and place of holding,
whether regular or special, and, if special, how authorized, the notice given,
the names of those present at Directors' meetings or committee meetings, the
number of shares present or represented at stockholders' meetings, and a summary
of the proceedings.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer agent or
registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required by the Bylaws or by
law to be given, and he shall keep or cause to be kept the seal of the
Corporation if one be adopted, in safe custody, and shall have such powers and
perform such other duties as may be prescribed by the Board of Directors or by
the Bylaws.
Section 12. Chief Financial Officer. The Chief Financial Officer
-----------------------
shall keep and maintain, or cause to be kept and maintained, adequate and
correct books and records of accounts of the properties and business
transactions of the Corporation. The Chief Financial Officer shall
8
<PAGE>
deposit all moneys and other valuables in the name and to the credit of the
Corporation with such depositories as may be designated by the Board of
Directors. He shall make such disbursements of the funds of the Corporation as
are authorized and shall render from time to time an account of all of his
transactions as Chief Financial Officer and of the financial condition of the
Corporation. The Chief Financial Officer shall also have such other powers and
perform such other duties as may be prescribed by the Board of Directors or the
Bylaws.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
--------------------
Corporation shall be entitled to have a certificate signed by, or in the name of
the Corporation (i) by the Chairman or Vice Chairman of the Board of Directors,
or the President or a Vice President and (ii) by the Chief Financial Officer or
the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares owned by such
stockholder in the Corporation.
Section 2. Signatures. Any or all of the signatures on the
----------
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
Section 3. Lost Certificates. The Corporation may issue a new
-----------------
certificate to be issued in place of any certificate theretofore issued by the
Corporation, alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. The Corporation may, in the discretion of the Board of
Directors and as a condition precedent to the issuance of such new certificate,
require the owner of such lost, stolen, or destroyed certificate, or his legal
representative, to give the Corporation a bond (or other security) sufficient to
indemnify it against any claim that may be made against the Corporation
(including any expense or liability) on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
Section 4. Transfers. Stock of the Corporation shall be transferable
---------
in the manner prescribed by law and in these Bylaws or in any agreement with the
stockholder making the transfer. Transfers of stock shall be made on the books
of the Corporation only by the person named in the certificate or by his
attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be cancelled before a new certificate shall be
issued.
Section 5. Registered Owners. The Corporation shall be entitled to
-----------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise required by
law.
9
<PAGE>
ARTICLE VI
INDEMNIFICATION
Section 1. Right to Indemnification. Each person who was or is made
------------------------
a party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
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 corporation or of
a partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a
director, officer or employee or in any other capacity while serving as a
director, officer or employee, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than such law permitted the
Corporation to provide prior to such amendment), against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered by
such indemnitee in connection therewith and such indemnification shall continue
as to an indemnitee who has ceased to be a director, officer, employee or agent
and shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that, except as provided in Section 2 of this
Article VI with respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation. The right
to indemnification conferred in this Section shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal that such indemnitee is not entitled to be indemnified for such expenses
under this Article VI or otherwise (hereinafter an "undertaking").
Section 2. Right of Indemnitee to Bring Suit. If a claim under
---------------------------------
Section 1 of this Article VI is not paid in full by the Corporation within sixty
(60) days after a written claim has been received by the Corporation, except in
the case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty (20) days, the indemnitee may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim.
If successful in whole or part in any such suit or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (i) any suit brought by the indemnitee
to enforce a right to indemnification hereunder (but not in a suit brought by
the indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (ii) any suit by the Corporation to recover an advancement of
expenses pursuant to the terms of an
10
<PAGE>
undertaking the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met the applicable standard of
conduct set forth in the Delaware General Corporation Law. Neither the failure
of the Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) to have made a determination prior to the commencement of
such suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right hereunder, or by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified or to such advancement of expenses
under this Article VI or otherwise shall be on the Corporation.
Section 3. Non-Exclusivity of Rights. The rights of indemnification
-------------------------
and to the advancement of expenses conferred in this Article VI shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of the Certificate of Incorporation, bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 4. Insurance. The Corporation may maintain insurance, at its
---------
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
Section 5. Indemnification of Agents of the Corporation. The
--------------------------------------------
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses,
to any agent of the Corporation to the fullest extent of the provisions of this
Article VI with respect to the indemnification and advancement of expenses of
directors and officers of the Corporation.
Section 6. Indemnification Contracts. The Board of Directors is
-------------------------
authorized to enter into a contract with any director, officer, employee or
agent of the Corporation, or any person serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including employee
benefit plans, providing for indemnification rights equivalent to or, if the
Board of Directors so determinates, greater than, those provided for in this
Article VI.
Section 7. Effect of Amendment. Any amendment, repeal or
-------------------
modification of any provision of this Article VI by the stockholders or the
directors of the Corporation shall not adversely affect any right or protection
of a director or officer of the Corporation existing at the time of such
amendment, repeal or modification.
11
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Subject to limitations contained in the
---------
General Corporation Law of the State of Delaware and the Certificate of
Incorporation, the Board of Directors may declare and pay dividends upon the
shares of capital stock of the Corporation, which dividends may be paid either
in cash, securities of the Corporation or other property.
Section 2. Disbursements. 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.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
-----------
fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The Corporation shall have a corporate
--------------
seal in such form as shall be prescribed by the Board of Directors.
Section 5. Record Date. 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 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 (60) days nor less than ten
(10) days before the date of such meeting, nor more than sixty (60) 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. Stockholders on the record date are
entitled to notice and to vote or to receive the dividend, distribution or
allotment of rights or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the Corporation after
the record date, except as otherwise provided by agreement or by applicable law.
Section 6. Voting of Stock Owned by the Corporation. The Chairman of
----------------------------------------
the Board, the Chief Executive Officer, the President and any other officer of
the Corporation authorized by the Board of Directors shall have power, on behalf
of the Corporation, to attend, vote and grant proxies to be used at any meeting
of stockholders of any corporation (except this Corporation) in which the
Corporation may hold stock.
Section 7. Construction and Definitions. Unless the context requires
----------------------------
otherwise, the general provisions, rules of construction and definitions in the
General Corporation Law of the State of Delaware shall govern the construction
of these Bylaws.
Section 8. Amendments. Subject to the General Corporation Law of the
----------
State of Delaware, the Certificate of Incorporation and these Bylaws, the Board
of Directors may by the affirmative vote of a majority of the entire Board of
Directors amend or repeal these Bylaws, or adopt other Bylaws as in their
judgment may be advisable for the regulation of the conduct of the affairs of
the Corporation. Unless otherwise restricted by the Certificate of
Incorporation, these
12
<PAGE>
Bylaws may be altered, amended or repealed, and new Bylaws may be adopted, at
any annual meeting of the stockholders (or at any special meeting thereof duly
called for that purpose) by a majority of the combined voting power of the then
outstanding shares of capital stock of all classes and series of the Corporation
entitled to vote generally in the election of directors, voting as a single
class, provided that, in the notice of any such special meeting, notice of such
purpose shall be given.
13
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT OF BYLAWS
OF
CERADYNE, INC.
--------------
A Delaware Corporation
The following amendments to the Bylaws of Ceradyne, Inc. a Delaware
corporation, were adopted by the Board of Directors at a meeting duly held on
April 29, 1996:
(a) Section 3 of Article II of the Bylaws of the Corporation is
amended and restated in its entirety to read as follows:
Section 3. Special Meetings. Special meetings of stockholders,
----------------
for any purpose or purposes, may be called by the Board of Directors,
the Chairman of the Board of Directors or the Chief Executive Officer.
Special meetings may not be called by any other person.
(b) Section 4 of Article II of the Bylaws of the Corporation is
amended and restated in its entirety to read as follows:
Section 4. Notification of Nominations and Business to be
----------------------------------------------
Transacted at Meeting. To be properly brought before a meeting of
---------------------
stockholders, nominations for the election of directors and any other
business proposed to be brought before the meeting must be (a)
specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors, (b) otherwise
properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before the
meeting by a stockholder entitled to vote at the meeting where the
stockholder complies with the requirements of this Section. Any
stockholder of record entitled to vote at the meeting may nominate one
or more persons for election as directors at a meeting or propose
business to be brought before a meeting, or both, only if such
stockholder has given timely notice in proper written form of his
intent to make such nomination or nominations or to propose such
business. To be timely, a stockholder's notice must be delivered to
or mailed and received by the Secretary of the Corporation not later
than sixty (60) days nor more than ninety (90) days prior to such
meeting; provided, however, in the event that less than seventy (70)
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
(10th) day following the date of which such notice of the date of the
meeting was mailed or such public disclosure was made. To be in
proper written form, a stockholder's notice to the Secretary shall set
forth:
<PAGE>
(A) the name and address of the stockholder who intends to
make the nominations or propose the business and, as the case may
be, of the person or persons to be nominated or of the business
to be proposed;
(B) a representation that the stockholder is a record or
beneficial owner of stock of the Corporation entitled to vote at
such meeting and the number of shares so owned, and, if the
stockholder claims to be a beneficial owner, the stockholder
shall also provide with his notice to the Secretary documentary
support of a claim of beneficial ownership;
(C) a representation that the stockholder intends to appear
in person or by proxy at the meeting to nominate the person or
persons or propose the business, as the case may be, specified in
the notice;
(D) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the
stockholder;
(E) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to
the proxy rules of the Securities and Exchange Commission had the
nominee been nominated, or intended to be nominated, or the
matter been proposed, or intended to be proposed by the Board of
Directors; and
(F) if applicable, the consent of each nominee to serve as
director of the Corporation if so elected.
If the Chairman of the meeting shall determine that a nomination
or proposal was not made in accordance with the procedures prescribed
in this Section, he shall so declare to the meeting and the defective
nomination or proposal shall be disregarded. Notwithstanding the
foregoing provisions of this Section, a stockholder who complies with
all applicable
2
<PAGE>
requirements of Rule 14a-8 of Regulation 14A (or any successor rule or
regulation) under the Securities Exchange Act of 1934, as amended, may
submit a proposal or proposals for inclusion in the Corporation's
proxy statement for such meeting.
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10Q - FIRST
AND SECOND QUARTER 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1996 APR-01-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996
<CASH> 4,496 2,658
<SECURITIES> 0 0
<RECEIVABLES> 4,373 6,008
<ALLOWANCES> 134 132
<INVENTORY> 7,589 8,287
<CURRENT-ASSETS> 17,329 17,673
<PP&E> 23,254 23,864
<DEPRECIATION> 18,030 18,314
<TOTAL-ASSETS> 25,240 25,864
<CURRENT-LIABILITIES> 3,686 3,260
<BONDS> 0 0
0 0
0 0
<COMMON> 36,712 36,810
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 25,240 25,864
<SALES> 6,329 6,991
<TOTAL-REVENUES> 6,329 6,991
<CGS> 4,510 5,041
<TOTAL-COSTS> 969 919
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 62 57
<INCOME-PRETAX> 788 974
<INCOME-TAX> 23 23
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 765 951
<EPS-PRIMARY> .10 .12
<EPS-DILUTED> .10 .12
</TABLE>
