<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d) of The Securities
Exchange Act of 1934
For the fiscal quarter ended March 4, 1995
------------------------------------------
Commission File Number 0-4173
-----------------------------
DMI FURNITURE, INC.
-------------------
(Exact name of registrant as specified in its charter)
DELAWARE 41-0678467
-------- ----------
(State of incorporation) (IRS employer ID number)
One Oxmoor Place, 101 Bullitt Lane, Louisville, Kentucky 40222
--------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number with area code: (502) 426-4351
--------------
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 Registrant's classes of
Common Stock as of the last practicable date.
Class - Common Stock, Par Value $.10 per Share
- - -----
Outstanding at March 4, 1995 - 2,970,026
- - ----------------------------
<PAGE>
INDEX
Part I. Financial Information Page
Consolidated Balance Sheets - March 4, 1995
and August 27, 1994 3, 4
Consolidated Statements of Income - Three and Six Months
Ended March 4, 1995 and February 26, 1994 5
Consolidated Statements of Cash Flows - Six
Months Ended March 4, 1995 and
February 26, 1994 6, 7
Notes to Consolidated Financial Statements 8-10
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11-13
Part II. Other Information 14-15
Index to Exhibits
3(i)4. Restated Certificate of Incorporation 16-42
11. Calculations of Earnings Per Share 43
27. Financial Data Schedule 44
<PAGE>
PART I. FINANCIAL INFORMATION
DMI FURNITURE, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
Unaudited
-------
ASSETS Mar. 4, Aug.27,
------ 1995 1994
------- -------
<S> <C> <C>
Current assets:
Cash $135 $202
Restricted cash for debt payments 120 244
Accounts receivable - net 9,393 9,873
Inventories (Note 4) 14,509 14,592
Other current assets 369 300
Current portion of deferred income taxes (Note 2) 938 1,310
------- -------
Total current assets 25,464 26,521
Notes receivable -- 107
Property, plant and equipment - at cost 21,203 20,923
Less accumulated depreciation 9,053 8,553
------- -------
Net property, plant and equipment 12,150 12,370
Other assets:
Intangible pension asset 532 532
Other 389 511
------- -------
921 1,043
------- -------
$38,535 $40,041
------- -------
------- -------
</TABLE>
See accompanying notes.
3
<PAGE>
DMI FURNITURE, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
(Amounts in thousands)
<TABLE>
<CAPTION>
Unaudited
-------
Mar. 4, Aug.27,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
- - ------------------------------------ ------- -------
<S> <C> <C>
Current liabilities:
Trade accounts payable $4,068 $5,393
Accrued liabilities 1,800 2,206
Accrued dividends on preferred
stock (Note 7) 417 505
Long-term debt due within one year 971 959
------- -------
Total current liabilities 7,256 9,063
Long-term liabilities:
Long-term debt 19,214 19,393
Accrued pension costs 948 994
Deferred compensation 494 534
Deferred income taxes (Note 2) 40 40
------- -------
20,696 20,961
Stockholders' equity:
Series C convertible preferred stock,
$2 par value, 2,020,000 authorized
and outstanding 4,040 4,040
Common stock 296 296
Additional paid-in capital 15,096 15,006
Retained deficit (8,803) (9,279)
Minimum pension liability (46) (46)
------- -------
Total stockholders' equity 10,583 10,017
------- -------
$38,535 $40,041
------- -------
------- -------
</TABLE>
See accompanying notes.
4
<PAGE>
DMI FURNITURE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ -----------------------
Mar. 4, Feb. 26, Mar. 4, Feb. 26,
1995 1994 1995 1994
------- -------- ------- --------
<S> <C> <C> <C> <C>
Net sales (Note 1) $17,451 $14,576 $36,174 $31,179
Cost of sales 14,509 12,020 29,666 25,238
------- -------- ------- --------
Gross profit 2,942 2,556 6,508 5,941
Selling, general and
administrative expenses 2,212 2,010 4,474 4,158
------- -------- ------- --------
Operating profit 730 546 2,034 1,783
Interest expense (net) (469) (282) (937) (601)
------- -------- ------- --------
Income before provision for income
taxes, cumulative effect of a change in
accounting principle 261 264 1,097 1,182
Provision for income taxes (Note 2) (108) (98) (406) (436)
------- -------- ------- --------
Income before cumulative effect of a change
in accounting principle 153 166 691 746
Cumulative effect of a change in
accounting for income taxes(Note 2) -- -- -- 1,795
------- -------- ------- --------
Net income $153 $166 $691 $2,541
------- -------- ------- --------
------- -------- ------- --------
Income per share before cumulative
effect of a change in accounting
principle $.03 $.03 $.12 $.13
Cumulative effect per share of a
change in accounting for income
taxes (Note 2) -- -- -- .31
------- -------- ------- --------
Earnings per common share (Note 3) $.03 $.03 $.12 $.44
------- -------- ------- --------
------- -------- ------- --------
</TABLE>
See accompanying notes.
5
<PAGE>
DMI FURNITURE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------
Mar. 4, Feb. 26,
1995 1994
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $691 $2,541
Adjustments to reconcile net income to
net cash provided (used) by
operating activities:
Depreciation and amortization 500 402
Deferred income taxes (Note 2) 372 (1,435)
Pension costs (46) --
Deferred compensation (40) (31)
Changes in assets and liabilities:
Accounts receivable 480 (1,602)
Inventories 83 (1,046)
Other assets 53 (135)
Trade accounts payable (1,325) 1,437
Accrued liabilities (406) (171)
------ ------
Total adjustments (329) (2,581)
------ ------
Net cash provided (used) by
operating activities 362 (40)
------ ------
Cash flows provided (used) by
investing activities:
Capital expenditures (Note 5) (280) (2,619)
Payments received on notes receivable 107 6
EDRB cash held in trust (Note 5) -- (985)
------ ------
Cash used by investing
activities (173) (3,598)
------ ------
</TABLE>
See accompanying notes.
6
<PAGE>
DMI FURNITURE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
Mar. 4, Feb. 26,
1995 1994
---------- ---------
<S> <C> <C>
Cash flows provided (used) by
financing activities:
Net borrowings under line-of-credit
agreement $350 $1,050
Payments on long term debt (517) (233)
Additions to long term debt (Note 5) -- 3,420
Cash dividends on preferred stock (303) (202)
Proceeds from stock options exercised 90 17
------- ------
Cash provided (used) by
financing activities (380) 4,052
------- ------
Increase (decrease) in cash (191) 414
Cash-beginning of period 446 42
------- ------
Cash-end of period $255 $456
------- ------
------- ------
Cash paid for:
Interest $917 $593
------- ------
------- ------
Income taxes $50 $50
------- ------
------- ------
</TABLE>
See accompanying notes.
7
<PAGE>
DMI FURNITURE, INC.
Notes to Consolidated Financial Statements
(1) FINANCIAL STATEMENTS AND ORGANIZATION
The consolidated financial statements include DMI Furniture, Inc. and
its wholly owned subsidiary, DMI Management, Inc. ("Company"). The financial
statements included herein at March 4, 1995 and for the three and six months
ended March 4, 1995 and February 26, 1994 are unaudited but include all
adjustments which are, in the opinion of management, necessary to a fair
presentation of the results of operations and financial position for the periods
covered herein. These financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's latest
annual report on 10-K.
The results of operations for the interim periods are not necessarily an
indication of the results to be expected for the full 1995 fiscal year. The
period ended March 4, 1995 included fourteen weeks as compared to thirteen weeks
for the period ended February 26, 1994.
(2) INCOME TAXES
During the first quarter of fiscal 1994, the Company adopted Statement
of Financial Accounting Standard No. 109, ACCOUNTING FOR INCOME TAXES ("SFAS No.
109"). SFAS 109 requires recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. In
accordance with this statement, the Company recognized deferred tax assets
reflecting the benefit expected to be realized from the utilization of net
operating loss carryforwards ("NOLs"), alternative minimum tax credits
carryforwards, and deductible temporary differences.
In adopting SFAS No. 109, as of August 29, 1993, the Company recorded
approximately $1,931,000 of deferred tax assets and $136,000 of deferred tax
liabilities, resulting in a net deferred tax asset of $1,795,000. Such amount
has been reflected during the first quarter of fiscal 1994 in the Consolidated
Statements of Income as the cumulative effect of an accounting change.
8
<PAGE>
Income tax expense consisted of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Mar. 4, Feb. 26, Mar. 4, Feb. 26,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Current $10 $18 $34 $76
Deferred 98 80 372 360
-- -- --- ---
Total $108 $98 $406 $436
---- ---- ---- ----
---- ---- ---- ----
</TABLE>
The deferred tax provision relates mainly to the utilization of the
Company's NOLs.
The provision for income taxes differs from that computed at the federal
statutory corporate tax rate as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Mar. 4, Feb. 26, Mar. 4, Feb. 26,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Tax at 34% statutory
rate $89 $90 $373 $387
State income taxes 19 8 33 49
-- -- -- --
Income Taxes $108 $98 $406 $436
---- ---- ---- ----
---- ---- ---- ----
</TABLE>
(3) EARNINGS PER COMMON SHARE
Earnings per common share are based on the weighted average number of common
and common equivalent shares outstanding during the period, and assumes the
conversion of the Series C Preferred Stock into common stock.
(4) INVENTORIES
Inventories were comprised of the following at March 4, 1995 and
August 27, 1994:
<TABLE>
<CAPTION>
March 4, 1995 August 27,1994
------------- --------------
<S> <C> <C>
Finished Products $6,877,000 $7,846,000
Work in Process 926,000 950,000
Raw Materials 6,706,000 5,796,000
--------- ---------
$14,509,000 $14,592,000
----------- -----------
----------- -----------
</TABLE>
9
<PAGE>
(5) ECONOMIC DEVELOPMENT REVENUE BOND FINANCING
On November 12, 1993, the Company completed a $3,420,000 City of
Huntingburg, Indiana Adjustable Rate Economic Development Revenue Bond Series
1993 financing through Bank One, Columbus, NA. The bonds mature annually over
ten years and are secured by an irrevocable letter of credit issued by Bank One,
Indianapolis, NA. The proceeds of the bond issue were used to finance the costs
of the acquisition, construction, and equipping of manufacturing and
distribution facilities in Huntingburg, Indiana.
(6) OTHER MATTERS
The Company has been identified as a potentially responsible party in
six government investigations and actions relating to waste disposal facilities
which may be subject to remedial action under Superfund. These proceedings are
based on allegations that the Company had hazardous waste substances disposed of
at the state permitted facilities in question. These proceedings under Superfund
involve many waste generators in addition to the Company and seek to allocate or
recover costs associated with site investigation and cleanup, which costs could
be substantial. The Company has a reserve of $150,000 against potential
liabilities under the above actions. Management does not believe there is a
reasonable likelihood that the potential liabilities the Company may incur in
connection with these environmental proceedings will have a material effect on
the Company's future financial condition or results of operations.
(7) DIVIDENDS
Dividends of $215,000 were charged to retained earnings for the six
months ended March 4, 1995. The dividends on Series C Preferred Stock accrued
in a fiscal year are not payable until the following fiscal year.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue - Net sales for the second quarter of fiscal 1995 increased $2,875,000
or 20% over the second quarter of fiscal 1994. This increase was the result of
increased sales of all of the Company's product lines. Office furniture sales
increased 26%; sales of residential desks, computer desks, accent furniture and
chairs increased 34%; bedroom furniture sales increased 8%; as well as sales
increases to outside trade customers of lumber and fabricated wood parts by the
Company's sawmill/dimension parts plant. These increases were primarily the
result of unit sales increases, and to a lesser extent, selling price increases
instituted in the fourth quarter of fiscal 1994. The second quarter of fiscal
1995 included 14 weeks as compared to 13 weeks the previous year.
Net sales for the first six months of fiscal 1995 increased $4,995,000
or 16% over the first six months of fiscal 1994. This increase was the result
of increased sales of all of the Company's product lines. Office furniture
sales increased 12%; sales of residential desks, computer desks, accent
furniture and chairs increased 47%; bedroom furniture sales increased 2%; as
well as sales increases to outside trade customers of lumber and fabricated wood
parts by the Company's sawmill/dimension parts plant. These increases were
primarily the result of unit sales increases, and to a lesser extent, selling
price increases instituted in the fourth quarter of fiscal 1994. The first six
months of fiscal 1995 included 27 weeks as compared to 26 weeks the previous
year.
Gross Margin - The Company's gross margin in the second quarter of fiscal 1995
was 16.9% compared to 17.5% in the second quarter of fiscal 1994. This decrease
in gross margin was primarily the result of higher lumber and related material
costs as well as promotional priced sales and lower margin product sales mix.
The Company's gross margin in the first six months of fiscal 1995 was
18.0% compared to 19.1% in the first six months of fiscal 1994. This decrease
in gross margin was primarily the result of higher lumber and related material
costs as well as promotional priced sales and lower margin product sales mix.
Selling, General and Administrative (S,G&A) Expense - For the second quarter of
fiscal 1995, S,G&A expense amounted to $2,212,000 or 12.7% of sales compared to
$2,010,000 or 13.8% of sales for the second fiscal quarter of 1994. This
decrease as a percentage of sales is the result of these expenses increasing at
a lower rate than sales increases due to the semi-fixed nature of many S,G&A
expenses.
For the first six months of fiscal 1995, S,G&A expense amounted to
$4,474,000 or 12.4% of sales compared to $4,158,000 or 13.3% of sales for the
first six months of fiscal 1994.
11
<PAGE>
This decrease as a percentage of sales is the result of these expenses
increasing at a lower rate than sales increases due to the semi-fixed nature of
many S,G&A expenses.
Interest Expense - For the second quarter of fiscal 1995, net interest was
$469,000 compared to $282,000 for the second quarter of fiscal 1994. This
increase was the result of a higher prime interest rate as well as higher bank
debt balances than in the previous year to finance the higher levels of accounts
receivable and inventories to support the Company's rapid growth during this
period.
For the first six months of fiscal 1995, net interest was $937,000 compared to
$601,000 for the first six months of fiscal 1994. This increase was the result
of a higher prime interest rate as well as higher bank debt balances than in the
previous year to finance the higher levels of accounts receivable and
inventories to support the Company's rapid growth during this period.
Cumulative effect of a change in accounting for income taxes - During the first
quarter of fiscal 1994, the Company adopted Statement of Financial Accounting
Standard No. 109, ACCOUNTING FOR INCOME TAXES ("SFAS No. 109"). In adopting
SFAS No. 109, the Company recorded a credit of $1,795,000 in the first quarter
of fiscal 1994. Such amount has been reflected in the Consolidated Statements
of Income as the cumulative effect of an accounting change. See Note 2 to the
consolidated financial statements.
Liquidity and Capital Resources - Demands for funds relate to payments for raw
materials and other operating costs, debt obligations, accrued preferred stock
dividends and capital expenditures. The Company's ability to generate cash
adequate to meet short and long term needs is dependent on the collection of
accounts receivable and from its ability to borrow funds. During the first
quarter of fiscal 1994, the Company completed a $3.4 million bond offering to
fund an expansion project. See Note 5 to the consolidated financial statements
for more information. The Company's days of sales outstanding of accounts
receivable averaged 53 days for the first six months of fiscal 1995 compared to
56 days for the first six months of fiscal 1994. This slight improvement in the
collection period is the result of more timely payments by a major customer.
The Company's average days of inventory on hand averaged 90 days for the first
six months of fiscal 1995 and fiscal 1994. The Company's order backlog at
March 4, 1995 was approximately $6,632,000, an 8% increase from approximately
$6,152,000 at the same time last year.
Key elements of the Consolidated Statements of Cash Flows: Six Months
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Net cash provided (used) by operating activities $362,000 $(40,000)
Cash used for investing activities (173,000) (3,598,000)
------- ---------
Net cash flows from operating and investing activities 189,000 (3,638,000)
Cash provided by financing activities (380,000) 4,052,000
------- ---------
Net change in cash and cash equivalents $(191,000) $414,000
--------- --------
--------- --------
</TABLE>
During the first six months of fiscal 1995, the Company provided cash
flows from operating activities of $362,000 compared to cash flows used of
$40,000 the previous year
12
<PAGE>
primarily due to a decrease in accounts receivable and inventories from the end
of the respective previous fiscal year offset somewhat by a decrease in accounts
payable. Investing activities required $173,000 during the first six months of
fiscal 1995 primarily for capital expenditures as compared to $3,598,000 the
previous year which was primarily for the Huntingburg expansion project.
Financing activities used $380,000 during the first six months of fiscal 1995 in
reduction of debt compared to provided $4,052,000 the same six months of the
previous year which was primarily from the Company's $3.4 million Economic
Development Revenue Bond.
The Company has been identified by the EPA or other parties as a potentially
responsible party ("PRP") in six government investigations and actions relating
to waste disposal facilities that may be subject to remedial action under
Superfund or similar state statutes. These proceedings are based on allegations
that hazardous substances from the Company's plants were disposed of at these
sites. At each site, many other parties have been named as PRPs or identified
as potentially responsible for remediation, and the group of PRPs undertaking
remediation includes many companies, including "Fortune 500" companies, believed
to have substantial financial resources. The Company has not determined to what
extent, if any, potential environmental liabilities may be covered by insurance.
The Company has paid a portion of the costs of preliminary investigation and
remediation at three sites, and has agreed to settle claims against it made by
PRPs at two sites. With respect to these six sites, the total amount paid by
the Company to date or subject to possible settlement is less than $22,000. The
Company has a reserve of $150,000 against potential liabilities under the above
actions. Management does not believe there is a reasonable likelihood that the
potential liabilities the Company may incur in connection with these
environmental proceedings will have a material effect on the Company's future
financial condition or results of operations.
The Company does not believe any events are probable which would materially
change its present liquidity position, which is adequate to satisfy known
demands for funds for operations and to pay bank and other debt.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in six environmental proceedings at this time.
Due to the limited nature of the Company's involvement in these proceedings, the
availability of certain defenses, and the involvement of other parties with
substantial financial resources in the proceedings, the Company does not believe
there is a reasonable likelihood that the potential liabilities the Company may
incur in connection with these proceedings will have a material adverse effect
on the Company's future financial condition or results of operations. For
further information regarding the Company's involvement in environmental
proceedings, see Item 3 to the Company's Annual Report on Form 10-K for the
fiscal year ended August 27, 1994.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of security holders on February 22,
1995 at which security holders; (a) elected six directors of the Company for
the ensuing year, (b) ratified the appointment of Arthur Andersen & Co. as
auditors for the year 1995, and, (c) approved an amendmant to the Corporation's
Certificate of Incorporation.
Results of the voting in connection with these items were as follows:
ELECTION OF DIRECTORS
For % Against % Abstain
--- -- ------- - -------
Donald D. Dreher 2,038,242 98 33,991 2 0
Joseph G. Hill 2,039,231 98 33,002 2 0
Joseph L. Ponce 2,039,231 98 33,002 2 0
Alexander N. Rubin, Jr. 2,039,631 98 32,602 2 0
William Schubert 2,039,331 98 32,902 2 0
Thomas M. Levine(1) 2,004,326 100 0 0 0
(1) Only Series C Preferred Stockholders vote for this Class II director.
RATIFICATION OF ACCOUNTANTS
Broker Nominee
For % Against % Abstain % Unvoted
--- -- ------- - ------- - -------
1,971,507 98 30,787 2 9,445 0 60,494
AMENDMENT TO THE CORPORATION'S CERTIFICATE OF INCORPORATION
Broker Nominee
For % Against % Abstain % Unvoted
--- -- ------- - ------- - -------
4,035,352 95 24,702 2 12,016 3 4,489
There were 2,072,233 shares of Common Stock represented present in
person at the meeting constituting 70% of the 2,976,426 shares of Common Stock
outstanding, therefore a quorum was present at the meeting.
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
3(i)4. Restated Certificate of Incorporation
11. Calculations of earnings per share.
27. Financial Data Schedule
(b) REPORTS ON FORM 8-K
None.
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.
DMI FURNITURE, INC.
(Registrant)
Date: April 13, 1995 /s/ Joseph G. Hill
-----------------
Joseph G. Hill
Vice President-Finance,
Chief Financial Officer,
Secretary & Treasurer
15
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED
CERTIFICATE OF "DMI FURNITURE, INC.," FILED IN THIS OFFICE ON THE TWENTY-THIRD
DAY OF MARCH, A.D. 1995, AT 10:30 A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THIS NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ EDWARD J. FREEL
Edward J. Freel, Secretary of State
AUTHENTICATION: 7449384
DATE: 03-24-95
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DMI FURNITURE, INC.
Pursuant to Sections 242 and 245 of the General Corporation Law of the State of
Delaware, DMI Furniture, Inc. (the "Corporation"), a Delaware corporation,
hereby certifies as follows:
1. The Corporation's present name is "DMI Furniture, Inc." The
Corporation was originally incorporated under the name "Dolmad Corporation."
The Corporation's original certificate of incorporation was filed with the
Secretary of State of the State of Delaware on January 29, 1969.
2. The Corporation's Certificate of Incorporation is hereby amended:
(a)to eliminate the 21,698 authorized shares of Series A Preferred Stock
par value $20 per share; and
(b)to delete all references to the Corporation's old Series A
Preferred Stock.
3. The amendments described in the preceding paragraph 2 (the
"Amendments") shall be effected by amending Article FOURTH of the Corporation's
Certificate of Incorporation to read in its entirety as set forth in paragraph 5
below.
4. The Corporation's Amended and Restated Certificate of Incorporation
restates and integrates all of the provisions of its Certificate of
Incorporation that are now in effect as a result of having previously been filed
with the Secretary of State.
5. The Certificate of Incorporation, amended as described in the
preceding paragraphs 2, 3 and 4, shall read in its entirety as follows:
FIRST: The name of the Corporation is DMI Furniture, Inc.
SECOND: The address of its registered office in the State of Delaware is
1209 Orange Street, in the City of Wilmington, County of New Castle. The name of
its registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
16
<PAGE>
FOURTH:
(a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 13,620,000 shares, consisting of
2,020,000 shares of Series C Preferred Stock, par value $2 per share (herein
called the "Series C Preferred Stock"); 2,000,000 shares of Series D Preferred
Stock, par value $10 per share (herein called the "Series D Preferred Stock");
and 9,600,000 shares of Common Stock, par value $0.10 per share (herein called
the "Common Stock"). Except as otherwise provided in this Article FOURTH,
including, without limitation, part I hereof, all shares of Preferred Stock of
any class or series shall rank pari passu with respect to each other, and senior
with respect to the Common Stock. All cross-references in each part of this
Article FOURTH refer to other paragraphs in such part unless otherwise
indicated.
(b) The following is a statement of the designations and the
powers, preferences and rights, and the qualifications, limitations or
restrictions thereof, in respect of each class of stock of the Corporation:
I
SERIES C PREFERRED STOCK
1. Dividends.
1A. General Dividend Obligation. When and as declared by the
board of directors of the Corporation, the Corporation shall pay to the holders
of the Series C Preferred Stock, out of the assets of the Corporation available
for the payment of dividends under the General Corporation Law of the State of
Delaware, dividends at the times and in the amounts provided for in this
paragraph 1, provided that the Series C Preferred Stock shall be entitled to the
dividend preferences set forth in paragraph 1E of this part I. Anything herein
to the contrary notwithstanding, the declaration of such dividends shall be in
the sole discretion of the board of directors and they shall have no obligation
to declare such dividends, but, in the event such dividends are not paid as and
when required under paragraph 1C of this part I, the holders of the Series C
Preferred Stock shall have and retain all the rights and remedies herein
contained arising from the failure to pay such dividends as and when due.
1B. Calculation of Dividends. Dividends on each share of Series
C Preferred Stock (each of which is referred to in this part as a "Share") shall
be calculated cumulatively (but shall not compound) on a daily basis at the rate
and in the manner prescribed herein from and including the date of issuance of
such Share to and including the date on which the Redemption Price of such Share
shall have been paid, whether or not such dividends shall have been declared and
whether or not there shall be (at the time such dividends are calculated or
become payable or at any other time) profits, surplus or other funds of the
Corporation legally available for the payment of dividends. For purposes of
this paragraph 1B and paragraph 1C, the date on which the shares of Series B
Preferred Stock are converted into shares of Series C Preferred Stock shall be
deemed to be their "date of issuance" regardless of the number of times transfer
of such Shares shall be made on the stock records maintained by or for the
Corporation and regardless of the number of certificates which may be issued to
evidence such Shares (whether by reason of transfer of such Shares or for any
other reason).
1C. Dividend Rate. Dividends shall be calculated cumulatively
on a daily basis on each Share beginning September 1, 1986. During each fiscal
year of the Corporation, beginning with the fiscal year ending August 31, 1987,
the annual dividend rate for each Share shall be the lower of (i) twenty cents
($.20) or (ii) the Corporation's Consolidated Net Income
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<PAGE>
(as defined below) in excess of $500,000 for the Corporation's next preceding
fiscal year divided by the number of Shares outstanding on the last day of that
next preceding fiscal year. Dividends shall be payable on the first day of
December, 1986, in the case of dividends to that date and the first day of each
March, June, September and December thereafter (or if such day is not a Business
Day, the immediately preceding Business Day) (the term "Dividend Reference Date"
shall mean December 1, 1986, and each of such payment dates thereafter). To the
extent not paid, all dividends which have been calculated on each Share then
outstanding during the period from and including the preceding Dividend
Reference Date (or from and including the original date of issuance of the
Series C Preferred Stock in the case of the initial Dividend Reference Date)
shall be added to the Liquidation Value of such Share and shall remain a part
thereof until (but only until) such dividends are paid. For the purposes of
this part I, "Consolidated Net Income" of the Corporation shall mean the
consolidated net income of the Corporation and its subsidiaries as set forth in
the financial statements included in its Annual Report to Stockholders which
shall also contain the report of the Corporation's independent certified public
accountants respecting those financial statements, and which shall be
conclusively binding upon the Corporation and all stockholders.
1D. Distribution of Partial Dividend Payments. If at any time
the Corporation shall pay less than the total amount of dividends then
calculated on the Series C Preferred Stock, such payment shall be distributed
among the holders of the Series C Preferred Stock so that an equal amount shall
be paid with respect to each outstanding Share.
1E. Priority. The Series C Preferred Stock shall rank senior to
the Common Stock in respect of dividend payments to the extent provided in this
paragraph 1E. So long as any Series C Preferred Stock shall remain outstanding,
no Junior Securities shall be acquired or redeemed by the Corporation or any
Subsidiary, nor shall any dividend be declared or paid, nor shall any
distribution be made, upon any Junior Securities by the Corporation; provided
that, so long as no Event of Noncompliance (including without limitation the
failure to pay dividends as contemplated by paragraph 5A(i)(a) of this part I)
or Potential Event of Noncompliance shall have occurred and be continuing, the
Corporation (a) may pay dividends and make distributions on Junior Securities if
the same are exclusively shares of Common Stock and, in addition, (b) may pay
cash dividends on any Junior Securities in an aggregate amount during any year
not greater than ten per cent (10%) of Consolidated Net Income for its prior
fiscal year as defined in paragraph 1C of this part I, from which Consolidated
Net Income shall first be deducted all dividends paid or required to be paid
(whether or not paid) on the Series C Preferred Stock.
2. Liquidation. Upon any liquidation (complete or partial),
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of the Series C Preferred Stock shall be entitled, before any
distribution or payment is made upon any Junior Securities of the Corporation,
to be paid out of the assets of the Corporation available for distribution to
its stockholders (whether from capital, surplus or earnings) an amount in cash
equal to the aggregate Liquidation Value of all Shares outstanding, and the
holders of the Series C Preferred Stock shall not be entitled to any further
payment. If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets of the Corporation to
be distributed among the holders of the Series C Preferred Stock shall be
insufficient to permit payment to the holders of Series C Preferred Stock of the
amount which they are entitled to be paid as aforesaid, then assets of the
Corporation shall be distributed to the holders of the Series C Preferred Stock
ratably based upon the aggregate Liquidation Value of the Shares held
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<PAGE>
by them. Upon any such liquidation, dissolution or winding up of the
Corporation, after the holders of the Series C Preferred Stock shall have been
paid in full the amounts to which they shall be entitled, the remaining assets
of the Corporation may be distributed to the holders of Junior Securities of the
Corporation. Written notice of such liquidation, dissolution or winding up,
stating a payment date, the amount of the payment and the place where the
amounts distributable shall be payable, shall be mailed by certified or
registered mail, return receipt requested, not less than sixty days prior to the
payment date stated therein, to each record holder of any Share at the address
for such record holder shown on the Corporation's records. Neither the
consolidation nor merger of the Corporation into or with any other corporation
or corporations, nor the sale or transfer by the Corporation of all or any part
of its assets, nor the reduction of the capital stock of the Corporation, shall
be deemed to be a liquidation, dissolution or winding up of the Corporation
within the meaning of any of the provisions of this paragraph 2.
3. Redemptions.
3A. Redemption Price. For each Share which is to be redeemed by
the Corporation at any time and for any reason in a redemption pursuant to this
paragraph 3, the Corporation shall be obligated on the Redemption Date,
regardless of whether the Corporation shall be able or legally permitted to make
such payment on the Redemption Date, to pay to the holder thereof (upon
surrender by each holder at the Corporation's principal office of the
certificate representing such Share duly endorsed in blank or accompanied by an
appropriate form of assignment) the amount set forth below (the "Redemption
Price" for such share), or such lesser amount per Share that the Corporation and
the holder(s) of the Shares to be redeemed may agree upon.
<TABLE>
<CAPTION>
<S> <C>
Redemption Date Redemption Price
Before 9-1-90 $2.50
On or after 9-1-90 and $2.75
before 9-1-91
On or after 9-1-91 $3.00
</TABLE>
Provided, that nothing herein shall be construed to require any actual payment
before such can be made without contravening applicable law.
3B. Redeemed or Otherwise Acquired Shares Not to be Reissued.
Any Shares redeemed pursuant to this paragraph 3 or otherwise acquired by the
Corporation in any manner whatsoever shall not under any circumstances be
reissued, sold or transferred by the Corporation.
3C. Redemption at the Corporation's Option. The Corporation may
from time to time redeem all or any portion of the Shares then outstanding at an
amount for each Share to be redeemed either (i) equal to the Redemption Price or
(ii) greater than the Redemption Price but less than the Lowest Common Stock
Equivalent Value per Share. Lowest Common Stock Equivalent Value per Share
shall equal the par value of the Shares (i) divided by the highest Purchase
Price of the Common Stock of any holder of Shares for purposes of the conversion
rights set forth in paragraph 15 (which may be set forth in a contract between
the Corporation and such holder) and (ii) multiplied by the Average Price of the
Common Stock. Average Price of the Common Stock shall mean the average of the
closing bid or sales prices (as the case may be) for the Common Stock quoted on
the NASDAQ System on each of the ten trading days
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<PAGE>
before the date of the notice of redemption required by paragraph 3D. If the
Corporation redeems fewer than all of the Shares then outstanding pursuant to
this paragraph 3C, the Corporation shall effect such redemption pro rata among
all holders of Shares. The number of Shares to be redeemed from each holder
thereof in any redemption pursuant to this paragraph 3C shall be determined by
multiplying the total number of Shares to be redeemed times a fraction, the
numerator of which shall be the total number of shares then held by such holder
and the denominator of which shall be the total number of Shares then
outstanding, provided that the Corporation shall not be required to redeem any
fractional shares and redeem from such holders only the whole number of shares
resulting from such calculation.
3D. Notice of Redemption at the Corporation's Option. The
Corporation shall mail notice of any redemption pursuant to paragraph 3C by
certified or registered mail, return receipt requested, to each holder of record
of Shares at the address for such holder shown on the Corporation's records, not
more than sixty nor less than thirty days before the date on which such
redemption is to be made. The notice shall also specify the number of Shares
and the certificate numbers thereof which are to be redeemed. Upon mailing any
notice of redemption pursuant to this paragraph 3D, the Corporation shall become
obligated to redeem at the time of redemption specified therein all Shares
therein specified. If fewer than all the Shares represented by any certificate
are redeemed, a new certificate representing the unredeemed Shares shall be
issued to the holder thereof without cost to such holder.
3E. Redemption Other Than at the Redemption Price. The
Corporation may from time to time redeem all or any portion of the Shares then
outstanding, at an amount less than the Redemption Price, from holders who
accept an offer to redeem their Shares made by the Corporation pursuant to this
paragraph 3E.
(a) To effect any redemption pursuant to this paragraph 3E, the
Corporation shall mail a written offer to redeem Shares by certified or
registered mail, return receipt requested, to each holder of Shares, at the
address for such holder shown on the Corporation's records, not more than ninety
nor less than sixty days before the date on which such redemption is to be made.
The offer shall specify the aggregate number of Shares proposed to be redeemed,
and the amount per Share to be paid for the Shares to be redeemed, and the time
and place of redemption.
(b) Each holder of Shares may then deliver to the Secretary of
the Corporation, not later than thirty days before the time of redemption
specified in the Corporation's offer to redeem, a written notice designating the
number of whole Shares that such holder (a "Redeeming Holder") wishes the
Corporation to redeem. The number of Shares that the Corporation shall redeem
from each Redeeming Holder shall be determined as follows:
First Step: Determine with respect to each Redeeming Holder the smaller
of
(a) The number of Shares the Redeeming Holder has designated as Shares
he wishes the Corporation to redeem, and
(b) A/B x C
Where:
A is the number of Shares owned by the Redeeming Holder making the
designation;
B is the number of Shares owned by all the Redeeming Holders who make
designations; and
C is the number of Shares the Corporation proposes to redeem.
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<PAGE>
Second Step: If the number of Shares the Corporation proposes to redeem exceeds
the aggregate number of Shares determined for all Redeeming Holders in the First
Step, the excess shall be allocated (proportionately according to their
ownership of Shares) among the Redeeming Holders for whom the First Step
produced fewer shares than they wished the Corporation to redeem, but in the
allocation no Redeeming Holder shall be allocated a number of Shares greater
than the number necessary to produce for him in the Third Step the number of
Shares that he designated as Shares he wished the Corporation to redeem.
Third Step: The number of Shares each Redeeming Holder is entitled to
have the Corporation redeem shall be determined by combining with respect to
each Redeeming Holder the number of Shares determined in the First Step and the
number of Shares allocated in the Second Step and then rounding that sum to the
nearest whole number.
(c) The Corporation shall mail notice of any redemption pursuant
to this paragraph 3E by certified or registered mail, return receipt requested,
to each Redeeming Holder not less than fifteen days before the date on which the
redemption is to be made. The notice shall specify the number of Shares to be
redeemed. Upon mailing any notice of redemption pursuant to this paragraph 3E,
the Corporation shall become obligated to redeem at the time of redemption
specified therein all Shares therein specified. If fewer than all the Shares
represented by any certificate are redeemed, a new certificate representing the
unredeemed Shares shall be issued to the Redeeming Holder thereof without cost
to such Redeeming Holder.
3F. Dividends after Redemption Date. No Share shall be entitled
to any dividends calculated after its Redemption Date, and on such Redemption
Date all rights of the holder of such Share as a stockholder of the Corporation
by reason of the ownership of such Share, shall cease, except the right to
receive the Redemption Price of such Share upon presentation and surrender of
the certificate representing such Share, and such Share shall not after such
Redemption Date be deemed to be outstanding.
3G. Other Redemptions or Acquisitions. The Corporation shall
neither redeem nor otherwise acquire any Series C Preferred Stock except as
expressly authorized in this part I.
3H. Calculated Dividends Must be Paid Prior to Any Redemption.
The Corporation must pay all dividends calculated on the Series C Preferred
Stock through the Redemption Date at the time of redemption thereof, or shall
not redeem any such shares.
4. Election of Directors.
(i) At each annual meeting of the stockholders of the
Corporation, the holders of Series C Preferred Stock, voting as a single class,
shall be entitled to elect the greatest integral number of directors that does
not exceed one-fifth (1/5) of the total number of directors, or two directors,
whichever is greater, and the number of members constituting the board of
directors shall be increased by such number, and the remaining members of the
board of directors shall (subject to the right of holders of any class or series
of stock or other securities of the Corporation other than the Series C
Preferred Stock to elect directors upon the happening of an event, such as a
default in the payment of dividends) be elected by the holders of the securities
of the Corporation entitled at the time to vote for the election of directors.
(ii) The directors elected by the holders of the Series C
Preferred Stock may be removed only by the vote of the holders of record of the
majority of Shares at a meeting of
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<PAGE>
the Stockholders or of the holders of Shares called for that purpose in the
manner set forth in paragraph 5B(iii). Any vacancy in the office of any of such
directors may be filled by designation to the Corporation in writing by the
remaining director or directors then in office elected by the holders of the
Series C Preferred Stock pursuant to this paragraph 4, or, if not so filled
within thirty days after the vacancy occurs, by the holders of the Series C
Preferred Stock at any meeting, annual or special, for the election of directors
held thereafter. A special meeting of the holders of shares of Series C
Preferred Stock may be called for the purpose of filling any such vacancy in the
manner set forth in paragraph 5B(iii). In the case of removal of any such
director, the vacancy may be filled at the same meeting at which such removal
was voted.
5. Events of Noncompliance.
5A. Definition.
(i) An Event of Noncompliance shall be deemed to have occurred
if:
(a) the Corporation fails for any reason to pay on any Dividend
Reference Date the full amount of dividends then calculated on the Shares but
unpaid;
(b) the Corporation fails for any reason to redeem on any date
specified in any notice of redemption mailed pursuant to paragraph 3E all of the
Shares specified in such notice to be redeemed on such date;
(c) the Corporation otherwise fails to perform or observe any
other covenant or agreement set forth in this part I or in any Warrant;
(d) the Corporation or any Subsidiary materially fails to
perform or observe any term, provision, covenant or agreement set forth in the
Purchase Agreement;
(e) any representation or warranty in writing furnished by the
Corporation, any Subsidiary or any Person to any holder of Series C Preferred
Stock is (or proves to have been) false or misleading in any material respect on
the date made or furnished;
(f) the Corporation or any Subsidiary makes an assignment for
the benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Corporation or any Subsidiary bankrupt or insolvent; or any
order for relief with respect to the Corporation or any Subsidiary is entered
under the Bankruptcy Act; or the Corporation or any Subsidiary petitions or
applies to any tribunal for the appointment of a trustee, receiver or liquidator
of the Corporation or any Subsidiary, or of any substantial part of the assets
of the Corporation or any Subsidiary, or commences any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a Subsidiary)
relating to the Corporation or any Subsidiary under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect; or any
such petition or application is filed, or any such proceedings are commenced
against the Corporation or any Subsidiary and the Corporation or any such
Subsidiary by any act indicates its approval thereof, consent thereto or
acquiescence therein, or an order, judgment or decree is entered appointing any
such trustee, receiver or liquidator, or approving the petition in any such
proceedings, and such order, judgment or decree remains unstayed and in effect
for more than sixty days; or any involuntary case is commenced under the
Bankruptcy Code with respect to the Corporation or any Subsidiary and is not
dismissed within sixty days; or any order, judgment or decree is entered in any
proceedings against the Corporation or any Subsidiary decreeing the dissolution
of the Corporation or such Subsidiary and such order, judgment or decree remains
unstayed and in
22
<PAGE>
effect for more than sixty days; or any order, judgment or decree is entered in
any proceedings against the Corporation or any Subsidiary decreeing a split-up
of the Corporation or such Subsidiary and such order, judgment or decree remains
unstayed and in effect for more than sixty days;
(g) the Corporation or any Subsidiary defaults in any payment of
principal of or interest on any obligation for money borrowed or received (or
any obligation under conditional sale or other title retention agreement or any
obligation issued or assumed as full or partial payment for property whether or
not secured by purchase money mortgage or any obligation under notes payable or
drafts accepted representing extensions of credit) beyond any period of grace
provided with respect thereto, or defaults in the performance of any other
agreement, term or condition contained in any agreement under which any such
obligation is created (or if any other default under any such agreement shall
occur and be continuing) if the effect of such default is to cause, or to permit
the holder or holders of such obligation (or a trustee on behalf of such holder
or holders) to cause, such obligation to become due prior to its stated
maturity; or
(h) a final judgment in an amount in excess of one million
dollars ($1,000,000) is rendered against the Corporation or any Subsidiary and,
within sixty days after entry thereof, such judgment is not discharged or
execution thereof stayed pending appeal, or within sixty days after the
expiration of any such stay, such judgment is not discharged.
(ii) The existence or continuation of any Event of Noncompliance shall
be irrespective of whether such event or the underlying facts shall have come
about voluntarily or involuntarily or shall be beyond the Corporation's or any
Subsidiary's control or shall have come about or been effected by operation of
law or pursuant to or in compliance with any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body or because of paragraph 3I of this part I.
(iii) The term "Potential Event of Noncompliance" means the occurrence
of any event which with the passage of time or the giving of notice or both
would become an Event of Noncompliance.
5B. Consequences of Certain Events.
(i) If and whenever (a) the Corporation shall have failed to earn
Consolidated Net Income of at least $769,500 for the preceding fiscal year, or
accrued dividends on the Series C Preferred Stock amounting to $269,500 or more
at any time shall not have been paid, or (b) any Event of Noncompliance other
than the failure to pay dividends on the Series C Preferred Stock shall occur,
then the holders of the Series C Preferred Stock until divested of such right as
hereinafter provided, shall be entitled, voting as a single class to elect a
majority of the members of the board of directors (which shall include the
directors elected as provided in paragraph 4), and each Share shall be entitled
to one vote. In the event that the holders of Series C Preferred Stock shall
become so entitled to elect a majority of the members of the board of directors,
a special meeting for the election of such directors (the "Special Meeting")
shall be called in the manner set forth in paragraph 5B(iii), and the holders of
the Series C Preferred Stock, voting as a single class, shall elect such
majority of the members of the board of directors, and the remaining members of
the board of directors shall (subject to the right of holders of any class or
series of stock or other securities of the Corporation other than the Series C
Preferred Stock to elect directors upon the happening of an event, such as a
default in the payment of dividends) be elected by the holders of the securities
of the Corporation entitled at the time to vote for the
23
<PAGE>
election of directors. Thereafter, at each annual meeting of the stockholders of
the Corporation, until divested as hereinafter provided of their right to elect
a majority of the members of the board of directors, the holders of the Series C
Preferred Stock, voting as a single class, shall elect a majority of the members
of the board of directors, and the remaining members of the board of directors
shall (subject to the right of holders of any class or series of stock or other
securities of the Corporation other than the Series C Preferred Stock to elect
directors upon the happening of an event, such as a default in the payment of
dividends) be elected by the holders of the securities of the Corporation
entitled at the time to vote for the election of directors.
(ii) The directors (other than those elected as provided in paragraph 4)
elected by the holders of the Series C Preferred Stock voting as a single class
pursuant to the aforesaid right or designated pursuant to the provisions of this
paragraph shall automatically cease to serve as such whenever (a) if the
Corporation's failure to earn Consolidated Net Income of $769,500 for a
preceding fiscal year or the non-payment of dividends on the Series C Preferred
Stock entitled the Series C Preferred Stock to elect a majority of the board of
directors, when the Corporation shall have earned Consolidated Net Income of at
least $769,500 for a subsequent fiscal year, and the unpaid accrued dividends on
the Series C Preferred Stock shall be less than $269,500, or (b) if an Event of
Noncompliance other than the failure to pay dividends on the Series C Preferred
Stock entitled the Series C Preferred Stock to elect a majority of the board of
directors, when all Events of Noncompliance, except the nonpayment of dividends,
are cured. Any such directors may otherwise be removed only by the vote of the
holders of record of the majority of Shares at a meeting of the stockholders or
of the holders of Shares called for that purpose. Any vacancy in the office of
any of such directors may be filled by designation to the Corporation in writing
by the remaining directors then in office who were elected by the holders of the
Series C Preferred Stock pursuant to this paragraph 5B, or, if not so filled
within thirty days after the vacancy occurs, by the holders of the Series C
Preferred Stock at any meeting, annual or special, for the election of directors
held thereafter. A special meeting of the holders of shares of Series C
Preferred Stock may be called for the purpose of filling any such vacancy. In
the case of removal of any such director, the vacancy may be filled at the same
meeting at which such removal was voted.
(iii) At any time when such special voting power shall have vested in the
holders of the Series C Preferred Stock as provided in paragraph 5B, and at
other times as provided in paragraph 4, a proper officer of the Corporation
shall, upon the written request of the holders of record of at least ten percent
(10%) of the Series C Preferred Stock, addressed to the Secretary of the
Corporation, call a Special Meeting of the holders of the Series C Preferred
Stock and the Common Stock for the purpose of electing the directors necessary
to constitute a majority of the board of directors in the manner provided by
paragraph 5B(iv). The Special Meeting shall be held at the earliest practicable
date at the principal office of the Corporation in the State of Delaware, as
shall be designated by such officer and specified in the notice of the Special
Meeting. If the Special Meeting shall not be called by the proper officers of
the Corporation within twenty days after personal service of said written
request upon the Secretary of the Corporation or within twenty days after
mailing the same within the United States of America, by registered mail
addressed to the Secretary of the Corporation at its principal office, then the
holders of record of at least ten percent (10%) of the Series C Preferred Stock
then outstanding may designate in writing one of their number to call the
Special Meeting at the expense of the Corporation; and the Special Meeting may
be called by such person so designated upon the
24
<PAGE>
notice required for annual meetings of stockholders and shall be held at the
principal office of the Corporation in the State of Delaware. Any holder of
Series C Preferred Stock so designated shall have access to the stock books of
the Corporation for the purpose of causing a Special Meeting of stockholders to
be called pursuant to these provisions. Notwithstanding the provisions of this
paragraph, no Special Meeting shall be called or held during the period within
ninety days immediately preceding the date fixed for the next annual meeting of
stockholders.
(iv) Upon the calling of the Special Meeting as provided in paragraph
5B(iii), vacancies shall be created on the Corporation's board of directors in
accordance with the Corporation's bylaws. If the Corporation's bylaws do not
provide for such vacancies, all directors elected by holders of the
Corporation's securities other than Series C Preferred Stock shall cease to
serve except those directors specifically reelected at the Special Meeting in
accordance with this paragraph 5B(iv). At the Special Meeting, (a) holders of
Series C Preferred Stock shall elect the number of directors which, together
with the directors elected as provided in paragraph 4 constitutes a majority of
the Corporation's directors, and (b) remaining members of the board of directors
shall (subject to the right of holders of any class or series or other
securities of the Corporation other than the Series C Preferred Stock to elect
directors upon the happening of an event, such as default in the payment of
dividends) be elected by the holders of the securities of the Corporation
entitled at the time to vote for the election of directors. If for any reason
the remaining members of the board of directors are not elected at the Special
Meeting, the directors elected by Series C Preferred Stock may fill any
remaining vacancies on the board of directors.
(v) If any Event of Noncompliance shall exist, each holder of any
Shares shall have, in addition to the rights expressly provided in this
paragraph 5B, any other rights which such holder may have been afforded under
any contract or agreement at any time and any other rights which such holder may
have under applicable law, but no such right shall include the right to cause
redemption of the Series C Preferred Stock when it is prohibited by paragraph 3I
of this part I.
6. Restrictions.
(a) So long as any Series C Preferred Stock shall be
outstanding, the Corporation shall not create any class or series of stock
ranking, as to parity, payment of dividends or as to liquidation preference,
prior to, or equal to, the Series C Preferred Stock.
(b) So long as any Series C Preferred Stock shall remain
outstanding, the Corporation shall not, except with the prior written consent or
the affirmative vote of the holders of record of at least eighty percent of the
then outstanding shares of Series C Preferred Stock, (i) amend, alter or repeal
this part I, (ii) otherwise amend, alter or repeal the certificate of
incorporation or its by-laws, or file any directors' resolutions pursuant to the
General Corporation Law of the State of Delaware, adversely affecting any of the
powers, preferences and special rights set forth in this part I, or (iii) be a
party to or enter into any agreement which would prohibit or in any way restrict
the Corporation from declaring or paying dividends on, or redeeming, the Series
C Preferred Stock, or performing any other obligation to the holders of the
Series C Preferred Stock imposed on the Corporation by this part I, or permit
any Subsidiary to be a party to or to enter into any agreement which would by
its terms prohibit or in any way restrict such Subsidiary from declaring or
paying dividends to the Corporation (directly, or indirectly through one or more
other Subsidiaries) or the Corporation from declaring or paying
25
<PAGE>
dividends on, or redeeming the Series C Preferred Stock, or performing any other
obligation to the holders of the Series C Preferred Stock imposed on the
Corporation by this part I.
7. Voting Rights. Except as otherwise provided by law, or as
otherwise provided in this part I of Article FOURTH, Shares shall entitle the
holders thereof to no voting rights.
8. Closing of Books. The Corporation will not close its books against
the transfer of any Share.
9. Registration of Transfer. The Corporation shall keep at its
principal office (or such other place as the Corporation reasonably designates)
a register for the registration of Shares. Upon the surrender of any
certificate representing Series C Preferred Stock at such place, the Corporation
shall, at the request of the registered holder of such certificate, execute and
deliver a new certificate or certificates in exchange therefor representing in
the aggregate the number of Shares represented by the surrendered certificate
(and the Corporation forthwith shall cancel such surrendered certificate),
subject to the requirements of applicable securities laws. Each such new
certificate shall be registered in such name and shall represent such number of
Shares as shall be requested by the holder of the surrendered certificate and
shall be substantially identical in form to the surrendered certificate; and
dividends shall be calculated cumulatively on a daily basis on the Shares
represented by such new certificate from the date to which dividends have been
fully paid on the Shares represented by the surrendered certificate at the rate
and in the manner applicable to such surrendered certificate. The issuance of
new certificates shall be made without charge to the holders of the surrendered
certificates for any issuance tax in respect thereof or other cost incurred by
the Corporation in connection with such issuance; provided that the Corporation
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than that of the holder of the surrendered certificate.
10. Replacement.
(i) Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder, without bond, shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing one or more Shares and, in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the registered holder is an institution, its own
agreement of indemnity shall be satisfactory), or, in the case of any such
mutilation, upon surrender of such certificate, the Corporation shall (at its
expense) execute and deliver in lieu of such certificate a new certificate of
like kind representing the number of Shares represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate, on which dividends shall be calculated
cumulatively on a daily basis from the date to which dividends have been fully
paid on such lost, stolen, destroyed or mutilated certificate at the rate and in
the manner applicable to such certificate.
(ii) The term "outstanding" when used in this part I with
reference to Shares as of any particular time shall not include any Shares
represented by any certificate in lieu of which a new certificate has been
executed and delivered by the Corporation in accordance with paragraph 9 or this
paragraph 10, but shall include only those Shares represented by such new
certificate.
11. Definitions. The following terms shall have the following meanings,
which meanings shall be equally applicable to the singular and plural forms of
such terms:
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(i) "Business Day" means any day which is not a Saturday or a Sunday or
a bank holiday in New York, New York.
(ii) "Junior Security" means any equity security of any kind which the
Corporation or any Subsidiary shall at any time issue or be authorized to issue
other than the Series C Preferred Stock.
(iii) "Liquidation Value" of any Share as of any particular date shall be
equal to the sum of two dollars ($2.00), plus any unpaid dividends on such Share
added to the Liquidation Value of such Share on any Dividend Reference Date
pursuant to paragraph 1C of this part I and not thereafter paid; and, in the
event of any liquidation, dissolution or winding up of the Corporation, unpaid
dividends on such Share shall be added to the Liquidation Value of such Share on
the payment date under paragraph 2, calculated cumulatively to the close of
business on such payment date on a daily basis.
(iv) "Person" includes an individual, a partnership, a corporation, a
trust, a joint venture, an unincorporated organization and a government or any
department or agency thereof.
(v) "Purchase Agreement" means the Preferred Stock and Warrant Purchase
Agreement dated January 3, 1984, pursuant to which the Shares were issued as the
same shall from time to time be modified and amended.
(vi) "Redemption Date" as to any Share means the date specified in the
notice of redemption in the case of a redemption of such Share pursuant to
paragraph 3D, provided that for purposes of paragraph 3F no such date shall be a
Redemption Date unless on such date the applicable Redemption Price is actually
paid or funds as required to pay the applicable Redemption Price are set aside
by the Corporation, separate and apart from its other funds, in trust for the
pro rata benefit of holders of shares of Series C Preferred Stock to be
redeemed. Should those funds be thus set aside, then notwithstanding any
failure to surrender for cancellation any shares of Series C Preferred Stock
being redeemed, the shares represented thereby shall no longer be deemed
outstanding, the right to receive dividends thereon shall cease to accrue from
and after the Redemption Date, and all rights of the holders of such shares
shall terminate after that date save only the right of those holders to receive
the redemption price therefor without interest. Any funds thus set aside that
remain unclaimed for one year after the Redemption Date shall revert to the
Corporation's general funds, and thereafter the holders of redeemed shares shall
look only to the Corporation for payment of the redemption price although such
shares shall not be deemed outstanding.
(vii) "Subsidiary" means any corporation or other entity at least a
majority of the Voting Stock or capital or equity, however named, of which is,
at the time as of which any determination is being made, owned by the
Corporation either directly or indirectly through one or more Subsidiaries.
(viii) "Voting Stock" means any shares of stock having general voting
power in electing the board of directors (irrespective of whether or not at the
time stock of any other class or classes has or might have voting power by
reason of the happening of any contingency).
(ix) "Warrants" means the Warrants issued in conjunction with the
initial issuance of the Series B Preferred Stock.
(x) "Wholly-owned Subsidiary" means any Subsidiary all of the Voting
Stock or capital or equity, however named, of which (except directors'
qualifying shares) is, and all securities convertible into or exchangeable or
exercisable for any such Voting Stock or capital or equity of which are, and all
rights (contingent or otherwise) to subscribe for or to purchase
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any such capital stock or any such securities are, at the time as of which any
such determination is being made, owned by the Corporation either directly or
indirectly through one or more Wholly-owned Subsidiaries.
12. No Sale, Lease or Exchange of Assets, Merger or Consolidation, or
Certain Acquisitions without Consent of Holders of Series C Preferred Stock.
Without the prior written consent of the holders of at least 66.67 percent of
the Shares outstanding or the vote of such percentage of the holders thereof
after due and proper notice, the Corporation will not (a) sell, lease or
exchange all or substantially all of its properties or assets, whether or not in
the ordinary course of business and whether directly or through the sale or
exchange of stock of any Subsidiary or Subsidiaries, other than liquidation of a
Subsidiary existing on December 31, 1983, into the Corporation, (b) merge or
consolidate with or into any other entity other than a merger of a Wholly-owned
Subsidiary existing on December 31, 1983, into the Corporation, or (c) acquire
directly or indirectly any business, whether by purchase of assets, stock or
otherwise, (i) for a consideration, whether cash, notes, securities or
otherwise, in excess of $5,000,000, or (ii) which business has total liabilities
exceeding its shareholders equity, both determined in accordance with generally
accepted accounting principles.
13. Amendment and Waiver. (a) No amendment, modification or waiver
of any provision of this part I (or of the percentage of Shares required to
approve such amendment, modification or waiver) shall be binding or effective
without the prior written consent or the affirmative vote of the holders of at
least 80 per cent of the Shares outstanding at the time such change shall be
made.
(b) No amendment, modification or waiver of any provision of
this part I shall extend to or affect any obligation not expressly amended,
modified or waived or impair any right consequent thereon. No course of dealing,
and no failure to exercise or delay in exercising any right, remedy, power or
privilege under this part I, shall operate as a waiver, amendment or
modification of any provision of this part I.
14. Fully Paid and Non-Assessable. The Shares of the Series C
Preferred Stock shall be fully paid and non-assessable.
15. Conversion.
15A. Conversion Option. Subject to the provisions for
adjustment subsequently set forth in this paragraph 15, each Share of the Series
C Preferred Stock shall be convertible at the option of the holder thereof, upon
surrender to the Corporation of the certificate for the Share or Shares to be
converted, into fully paid and non-assessable shares of Common Stock on the
basis of treating the par value of the converted Shares as payment for the
purchase price of the Common Stock determined in accordance with the following
schedule (the "Purchase Price"):
Date Preferred Certificate Purchase Price of each Share Surrendered for
Conversion of Common Stock
Before 9-1-87 $2.25
On or after 9-1-87 and before 9-1-88 2.00
On or after 9-1-88 and before 9-1-89 1.75
On or after 9-1-89 and before 9-1-90 1.50
On or after 9-1-90 1.00
Any Shares so surrendered for conversion shall be duly endorsed, or accompanied
by proper instrument of transfer, to the Corporation or in blank, together with
a written notice to the
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Corporation of the election to make such conversion and of the name or names in
which the certificate or certificates to represent Shares of the Common Stock
shall be issued. The right to convert Shares of the Series C Preferred Stock
called for redemption shall terminate at the close of business on the date fixed
for such redemption or at the close of business on such earlier day, not earlier
than the fifth day prior to the date fixed for such redemption, as shall be
determined by the board of directors. Upon conversion of any Shares of the
Series C Preferred Stock, no allowance or adjustment shall be made for
accumulated unpaid dividends on the Series C Preferred Stock or for dividends on
the Common Stock issued upon such conversion. The Corporation shall pay all
taxes and other charges in respect of the issue of shares of the Common Stock
upon any such conversion; provided, however, that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of shares of the Common Stock in a name other than
that in which the Shares of the Series C Preferred Stock so converted were
registered.
15B. Anti-Dilution Provisions; Adjustment of Purchase Price.
The Purchase Price shall be subject to adjustment from time to time as
hereinafter provided. Upon each adjustment of the Purchase Price, the holder of
each Share shall thereafter be entitled to acquire by conversion, at the
Purchase Price resulting from such adjustment, the number of shares of Common
Stock (calculated to the nearest whole share) obtained by multiplying the
Purchase Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Purchase Price resulting from such
adjustment.
15C. Adjustment Formulas for Purchase Price. If and whenever
after the effective date (as defined in Section (b) of Article FOURTH) the
Corporation shall issue or sell any shares of its Common Stock for a
consideration per share less than the Purchase Price in effect immediately prior
to such issue or sale, then forthwith such Purchase Price shall be reduced to a
price (calculated to the nearest $0.01) determined by dividing (1) an amount
equal to the sum of (aa) the number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by such then existing
Purchase Price, and (bb) the consideration, if any, received and deemed received
by the Corporation upon such issue or sale, by (2) the total number of shares of
Common Stock outstanding and deemed outstanding immediately after such issue or
sale. No adjustment of the Purchase Price, however, shall be made in an amount
less than $0.01 per share, but any such lesser adjustment shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment which together with any adjustments so carried forward shall amount
to $0.01 per share or more.
15D. Constructive Issuances of Stock; Convertible Securities;
Rights and Options; Stock Dividends. For the purposes of paragraph 15C, the
following provisions (1) to (7), inclusive, shall also be applicable.
(1) In case at any time the Corporation shall in any manner grant any rights
to subscribe for or to purchase, or any options for the purchase of, Common
Stock or any stock or securities convertible into or exchangeable for Common
Stock (such convertible or exchangeable stock of securities being herein called
"Convertible Securities"), whether or not such rights or options or the right to
convert or exchange any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable upon the exercise of
such rights or options or upon conversion or exchange of such Convertible
Securities (determined by dividing
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(a) the total amount, if any, received or receivable by the Corporation as
consideration for the granting of such rights or options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the exercise of such rights or options, plus, in the case of any such
rights or options which relate to such Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange thereof,
by (b) the total maximum number of shares of Common Stock issuable upon the
exercise of such rights or options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such rights or
options) shall be less than the Purchase Price in effect immediately prior to
the time of the granting of such rights or options, then the total maximum
number of shares of Common Stock issuable upon the exercise of such rights or
options or upon the conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such rights or options
shall (as of the date of granting of such rights or options) be deemed to be
outstanding and to have been issued for such price per share. Except as
provided in subdivision (3) below no further adjustments of the Purchase Price
shall be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such rights or options or upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible Securities.
(2) In case at any time the Corporation shall in any manner issue or
sell any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or exchange (determined by
dividing (a) the total amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by (b) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Purchase Price in effect
immediately prior to the time of such issue or sale, then the total maximum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall (as of the date of the issue or sale of such
Convertible Securities) be deemed to be outstanding and to have been issued for
such price per share; provided, that, except as otherwise specified in
subdivision (3) below, (x) no further adjustments of the Purchase Price shall be
made upon the actual issue of such Common Stock upon conversion or exchange of
such Convertible Securities, and (y) if any such issue or sale of such
Convertible Securities is made upon exercise of any rights to subscribe for or
to purchase or any option to purchase any such Convertible Securities for which
adjustments of the Purchase Price has been or is to be made pursuant to other
provisions of this paragraph 15D, no further adjustment of the Purchase Price
shall be made by reason of such issue or sale.
(3) If the purchase price provided for in any right or option
referred to in subdivision (1) of this paragraph 15D, or the rate at which any
Convertible Securities referred to in subdivisions (1) and (2) of this paragraph
15D are convertible into or exchangeable for Common Stock, shall change or a
different purchase price or rate shall become effective at any time or from time
to time (other than under or by reason of provisions designed to protect against
dilution) then, upon such change becoming effective, the Purchase Price then in
effect hereunder shall forthwith be increased (but not above the prices
scheduled in paragraph 15A for each relevant time period) or decreased to such
Purchase Price as would have obtained had the
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adjustments made upon the issuance of such rights or options or Convertible
Securities been made upon the basis of (and the total consideration received
therefor) (a) the issuance of the number of shares of Common Stock theretofore
actually delivered upon the exercise of such options or rights or upon the
conversion or exchange of such Convertible Securities, (b) the issuance of all
Common Stock and all other rights, options and Convertible Securities issued
after the issuance of such rights, options or Convertible Securities, and (c)
the original issuance at the time of such change of any such options, rights and
Convertible Securities then still outstanding. On the expiration of any such
option or right or the termination of any such right to convert or exchange such
Convertible Securities, the Purchase Price then in effect hereunder shall
forthwith be increased (but not above the prices scheduled in paragraph 15A for
each relevant time period) or decreased to such Purchase Price as would have
obtained (x) had the adjustments made upon the issuance of such rights or
options or Convertible Securities been made upon the basis of the issuance of
only the number of shares of Common Stock theretofore actually delivered (and
the total consideration received therefor) upon the exercise of such rights or
options or upon the conversion or exchange of such Convertible Securities and
(y) had adjustments been made on the basis of the Purchase Price as adjusted
under the immediately preceding clause (x) for all issues or sales of Common
Stock or rights, options or Convertible Securities made after the issuance of
such rights or options or Convertible Securities. If the purchase price provided
for in any right or option referred to in subdivision (1) of this paragraph 15D,
or the rate at which any Convertible Securities referred to in subdivisions (1)
and (2) of this paragraph 15D are convertible into or exchangeable for Common
Stock, shall decrease at any time to an amount below the Purchase Price then in
effect under or by reason of provisions with respect thereto designed to protect
against dilution and the dilutive event causing such decrease is one that did
not also require an adjustment in the Purchase Price under the provisions of
this paragraph 15, then in the case of the delivery of shares of Common Stock
upon the exercise of any such right or option or upon conversion or exchange of
any such Convertible Securities, the Purchase Price then in effect hereunder
shall forthwith be decreased to such Purchase Price as would have obtained had
the adjustments made upon issuance of such right or option or Convertible
Securities been made upon the basis of the issuance of (and the total
consideration received for) the shares of Common Stock delivered as aforesaid.
(4) In case at any time the Corporation shall declare a dividend or
make any other distribution upon any stock of the Corporation payable in Common
Stock or Convertible Securities, any Common Stock or Convertible Securities, as
the case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
(5) In case at any time any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such Common Stock or
Convertible Securities shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the amount payable to the Corporation
therefor, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts paid or allowed by the
Corporation in connection therewith. In case any shares of Common Stock or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash payable to the Corporation
shall be deemed to be the fair value of such consideration as reasonably
determined by the Board of Directors of the Corporation, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions or
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discounts paid or allowed by the Corporation in connection therewith. In case
any shares of Common Stock or Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible Securities shall be issued in
connection with any merger of another corporation into the Corporation, the
amount of consideration therefor shall be deemed to be the fair value as
reasonably determined by the Board of Directors of the Corporation of such
portion of the assets of such merged corporation as such Board shall determine
to be attributable to such Common Stock, Convertible Securities, rights or
options, as the case may be.
(6) In case at any time the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock or in Convertible
Securities, or (b) to subscribe for or purchase Common Stock or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(7) The number of shares of Common Stock outstanding at any given
time shall include shares owned or held by or for the account of the
Corporation, and the disposition of any such shares shall not be considered an
issue or sale of Common Stock for the purposes of paragraph 15C.
15E. Corporation to Prevent Dilution. In case at any time or from
time to time conditions arise by reason of action taken by the Corporation which
are not adequately covered by the provisions of this paragraph 15, and which
might materially and adversely affect the conversion rights of the holders of
the Shares under any provision of this paragraph 15, the Board of Directors
shall appoint a firm of independent certified public accountants of recognized
standing, who may be the firm regularly retained by the Corporation, who shall
give their opinion upon the adjustment, if any, on a basis consistent with the
standards established in the other provisions of this paragraph 15, necessary
with respect to the Purchase Price, so as to preserve, without dilution, the
exercise rights of the holders of the Shares. Upon receipt of such opinion, the
Board of Directors shall forthwith make the adjustments described therein.
15F. Effect of Certain Dividends. In case at any time the
Corporation shall declare a dividend upon the Common Stock (other than a
dividend payable in Common Stock) payable otherwise than out of net earnings
after taxes accumulated from and after August 31, 1985, the Purchase Price in
effect immediately prior to the declaration of such dividend shall be reduced by
an amount equal, in the case of a dividend in cash, to the amount thereof
payable per share of Common Stock or, in the case of any other dividend, to the
fair value thereof per share of Common Stock as determined by the Board of
Directors of the Corporation. Such reductions shall take effect as of the date
on which a record is taken for the purpose of such dividend, or, if a record is
not taken, the date as of which the holders of record of Common Stock of record
entitled to such dividend are to be determined. As used in this Paragraph 15F,
the term "dividend" shall mean any distribution to the holders of Common Stock
as such.
15G. Stock Splits and Reverse Splits. In case at any time the
Corporation shall subdivide its outstanding shares of Common Stock into a
greater number of shares, the Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Common
Stock into which a Share is convertible immediately prior to such subdivision
shall be proportionately increased, and conversely, in case at any time the
Corporation shall combine its outstanding shares of Common Stock into a smaller
number of
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shares, the Purchase Price in effect immediately prior to such combination shall
be proportionately increased and the number of shares of Common Stock into which
a Share is convertible immediately prior to such combination shall be
proportionately reduced. Except as provided in this paragraph 15G, no
adjustment in the Purchase Price and no change in the number of shares of Common
Stock into which a Share is convertible shall be made pursuant to this paragraph
15 as a result of or by reason of any such subdivision or combination.
15H. Effect of Reorganization and Asset Sales. If any capital
reorganization or reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with another corporation, or the sale
of all or substantially all of its assets to another corporation, shall be
effected in such a way that holders of Common Stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for Common Stock,
then as a condition of such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provision shall be made whereby each holder
of Shares shall thereafter have the right to receive, upon the terms and
conditions herein contained, in lieu of the shares of the Common Stock of the
Corporation immediately theretofore receivable upon conversion of such Shares,
such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such stock immediately theretofore so
receivable had such reorganization, reclassification, consolidation, merger or
sale not taken place, and in any such case appropriate provision shall be made
with respect to the rights and interests of such holder to the end that the
provisions hereof (including, without limitation, provisions for adjustment of
the Purchase Price and of the number of shares issuable upon conversion) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the conversion of such
Shares. The Corporation shall not effect any such consolidation, merger or sale
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Corporation) resulting from such consolidation or
merger or the corporation purchasing such assets shall assume by written
instrument executed and mailed or delivered to each holder of Shares, the
obligation to deliver to such holder such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such holder may be entitled to
receive, and containing the express assumption of such successor corporation of
the due and punctual performance and observance of each provision of this
paragraph 15 to be performed and observed by the Corporation and of all
liabilities and obligations of the Corporation under this paragraph 15.
15I. Accountants' Certificate. Upon each adjustment of the Purchase
Price and upon each change in the number of shares of Common Stock issuable upon
the conversion of a Share, and in the event of any change in the rights of the
holders of Shares under this paragraph 15 by reason of other events herein set
forth, then and in each such case, the Corporation will promptly obtain a
certificate of a firm of independent certified public accountants of recognized
standing selected by the Corporation's Board of Directors (who may be the
regular auditors of the Corporation), stating the adjusted Purchase Price and
the new number of shares of Common Stock issuable, or specifying the other
shares of stock, securities or assets and the amount thereof receivable as a
result of such change in rights, and setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based. The
Corporation will promptly mail a copy of such accountants' certificate to the
registered holders
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of all Shares. The certificate of such firm of independent public accountants
shall be conclusive evidence of the correctness of the computation with respect
to any such adjustment of the Purchase Price and any such change in the number
of such shares so issuable.
15J. The Corporation shall at all times reserve and keep
available out of its authorized but unissued Common Stock the full number of
shares of Common Stock into which all shares of the Series C Preferred Stock
from time to time outstanding are convertible.
15K. Shares of the Series C Preferred Stock surrendered for
conversion shall not under any circumstances be reissued, sold or transferred
by the Corporation.
16. Registration Rights.
16A. Definitions. For purposes of this paragraph 16 of Part I,
the following terms shall have the following meanings:
(1) "Commission" shall mean the Securities and Exchange Commission.
(2) "Holders" shall mean any holder or holders of Registrable
Securities.
(3) The terms "register," "registered," and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such registration statement.
(4) "Registrable Securities" shall mean all shares of (a) Series C
Preferred Stock which are issued and outstanding from time to time, (b) Common
Stock which were received by the holders of the Old Series B Preferred Stock as
a result of the change of the Old Series B Preferred Stock into shares of Common
Stock and of Series C Preferred Stock, and (c) Common Stock which are issued
upon conversion of shares of the Series C Preferred Stock in accordance with
paragraph 15A of this Part I.
(5) "Securities Act" shall mean the Securities Act of 1933, as
amended.
B. Notice of Intention to Transfer; Opinion of Counsel. Before
any transfer of Registrable Securities, the Holder of such securities shall give
written notice to the Corporation of its intention to effect such transfer
describing such intended transfer as set forth in subdivision (1) of this
paragraph 16B, and shall deliver to the Corporation an opinion of counsel for
the Corporation or an opinion, reasonably satisfactory to counsel for the
Corporation, of Eaton & Van Winkle or other counsel skilled in securities
matters (selected by such Holder and reasonably satisfactory to the Corporation)
as to the necessity or nonnecessity of registration under the Securities Act, or
an interpretative letter from the Commission to the effect that the proposed
transfer may be made without registration under the Securities Act; provided,
however, that the foregoing shall not apply with respect to any Registrable
Securities as to which there is a registration statement in effect under the
Securities Act at the time of the proposed transfer. In the case of such
opinion of counsel, the following provisions shall apply:
(1) If in such opinion of such counsel, the proposed transfer of the
Registrable Securities may be effected without registration under the Securities
Act of the Registrable Securities, the Holder of the Registrable Securities
shall be entitled to transfer the Registrable Securities in accordance with the
intended method of disposition specified in the notice delivered by such Holder
to the Corporation.
(2) If in such opinion of such counsel the proposed transfer of the
Registrable Securities may not be effected without registration under the
Securities Act of the Registrable Securities, the Holder of the Registrable
Securities shall not be entitled to transfer the Registrable Securities until
completion of such registration, but, upon the written request of Holders
representing in the aggregate at least 25 percent of the Registrable Securities
then
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outstanding, the Corporation shall be obligated to prepare and file and to use
its best efforts to effect the registration under the Securities Act of such
Registrable Securities as requested by such Holders, all in accordance with the
following provisions of this paragraph 16; provided, that the Corporation shall
only be obligated to effect a total of one such free registration pursuant to
this subdivision (2) of this paragraph 16B.
Each Holder agrees to indemnify the Corporation against and hold it harmless
from all damages, losses, liabilities (including liability for rescission),
costs and expenses which the Corporation may incur under the Securities Act or
otherwise by reason of any misrepresentation by it of facts concerning it or any
proposed transfer of the Registrable Securities which are material with respect
to the availability of any exemption from registration under the Securities Act.
C. Free Registration Right. Whenever the Corporation shall be
required by the Holders of Registrable Securities pursuant to subdivision (2) of
paragraph 16B to effect the registration of any of the Registrable Securities,
the Corporation shall promptly give written notice of such proposed registration
to all other Holders of Registrable Securities and thereupon shall, as
expeditiously as possible, file a registration statement and use its best
efforts within 120 days after the giving of such written request (or, in the
case of a request made within 60 days prior to the end of the Corporation's then
current fiscal year, 210 days after the giving of such written request) to
effect the registration under the Securities Act of
(1) the Registrable Securities which the Corporation has been
requested to register pursuant to subdivision (2) of paragraph 16B; and
(2) all other Registrable Securities which the Holders have, within
30 days after the Corporation has given such written notice, requested the
Corporation to register; all to the extent requisite to permit the disposition
by the Holders of the Registrable Securities so registered of such Registrable
Securities. No other outstanding securities of the Corporation shall be
included in such registration statement without the consent of the underwriter
selected by the Holders to sell the Registrable Securities so registered, which
underwriter shall be a member firm of the New York Stock Exchange of national
standing with a net capital of at least $10,000,000.
16D. Piggy-back Registration Rights. If the Corporation proposes
to register any shares of its capital stock under the Securities Act, and if the
registration statement is to be filed in a form of the Commission which can
include, or is at any time amended or changed to such a form which can include,
the Registrable Securities, the Corporation will at each such time give written
notice to all Holders of its intention to do so at least 30 days prior to the
filing of said registration statement.
(1) If the representative of the underwriters participating in the
sale and distribution of the Corporation's securities covered by said
registration statement agrees that a number of shares of Registrable Securities
may be included in the registration statement (the "Permissible Secondary
Shares"), the Corporation's notice shall afford the Holders an opportunity to
elect within 30 days after receipt thereof to include in such filing their
Registrable Securities. If the aggregate number of Registrable Securities which
the Holders thereof desire to include in such filing exceeds the number of
Permissible Secondary Shares, then each such Holder shall be entitled to include
that number of Registrable Securities which bears the same ratio to the number
of Permissible Secondary Shares as the number of Registrable Securities such
Holder
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desires to include bears to the number of Registrable Securities all such
Holders desire to include.
(2) The Corporation agrees that it will not without the consent of
the Holders of two-thirds or more of the Registrable Securities hereafter grant
to any present or future shareholder any contractual "piggy-back" registration
rights covering in the aggregate (for all such rights granted after the
effective date (as defined in section (b) of Article FOURTH)) 125,000 shares of
Common Stock (as presently constituted), and also agrees that any Holder
entitled to include a given number of Registrable Securities in a filing as
provided in subdivision (1) of this paragraph l6D may assign or transfer such
right of inclusion to any other Holder.
(3) The inclusion of Registrable Securities in such filing shall be
upon the condition that the Holders thereof have their shares sold through the
underwriters on the same terms and conditions as applicable to the Corporation
or other selling shareholders of the Corporation.
(4) The Corporation shall be obligated under this subdivision (4) of
paragraph l6D to afford the Holders the right to participate in each such
registration until they have had an opportunity (whether or not availed of) to
participate in at least two registrations which become effective and such
additional registrations as become effective or may be necessary to have
afforded them the opportunity to include in such registrations and sell, in the
aggregate, a number of Registrable Shares equal to three times the maximum
number of Registrable Securities at any time held by them.
16E. Conditions to Registration. The obligations of the
Corporation under this paragraph 16 are subject to the conditions that each
Holder of Registrable Shares which are to be included in any registration:
(1) Cooperates with the Corporation in preparing such registration,
and executes such agreements as may be reasonably necessary in favor of any
underwriter selected by the Corporation,
(2) Promptly supplies the Corporation with all information,
documents, representations and agreements reasonably necessary in connection
with the registration of such Holder's Registrable Securities, and
(3) Agrees in writing not to sell or transfer any Registrable
Securities not included in such registration for a period of 90 days after the
effective date of such registration statement without the underwriters' consent,
but no such Holder shall be required to make such agreement unless all other
Holders of Permissible Secondary Shares included in such registration similarly
agree.
16F. Opinion of Counsel as Alternative to Registration. The
registration rights granted to the Holders under this paragraph 16 shall be
subject to the condition that any registration of Registrable Securities
proposed to be effected need not be effected if the Corporation shall deliver to
the Holders requesting such registration an opinion reasonably satisfactory to
such Holders and their counsel of counsel reasonably satisfactory to such
Holders to the effect that such proposed sale or disposition for which
registration was requested does not require registration under the Securities
Act. The Corporation hereby indemnifies such Holders, and each of them, against
and holds them harmless from all damages, losses, liabilities (including
liability for rescission), costs and expenses which they may incur under the
Securities Act or otherwise by reason of their proceeding in accordance with
such opinion of counsel.
36
<PAGE>
16G. Corporation's Registration Obligations. If and whenever the
Corporation is obligated by the provisions of this paragraph 16 to effect the
registration of any Registrable Securities under the Securities Act, as
expeditiously as possible the Corporation will, or will use its best efforts to,
as the case may be:
(1) Prepare and file with the Commission a registration statement
with respect to such Registrable Securities and cause such registration
statement to become and remain effective for a period of at least 90 days.
(2) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
until the earlier of the sale of all Registrable Securities covered thereby or
the expiration of a period of nine months from the date it became effective, and
to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such registration
statement. In the event that any Registrable Securities included in a
registration statement subject to, or required by, this paragraph 16 remain
unsold at the end of the period during which the Corporation is obligated to use
its best efforts to maintain the effectiveness of such registration statement,
the Corporation, if and when a further amendment or supplement would be required
to comply with Section 10 of the Securities Act, may file a post-effective
amendment to the registration statement for the purpose of removing such
Registrable Securities from registered status.
(3) Furnish to Holders of Registrable Securities for whom such shares
are registered or are to be registered such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents, as such Holders may reasonably request
in order to facilitate the disposition of such shares.
(4) Register or qualify the Registrable Securities covered by such
registration statement under such other securities or blue sky laws of such
jurisdictions (not exceeding 10 in number for all Holders of Registrable
Securities participating in such offering and subject to the approval of any
managing underwriter involved) as the Holders for whom such Registrable
Securities are registered shall request, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such Holders to
consummate the disposition in such jurisdictions of such Registrable Securities;
provided, however, that the Corporation shall not be obligated, by reason
thereof, to qualify as a foreign corporation or file any general consent to
service of process under the laws of any such jurisdiction or subject itself to
taxation as doing business in any such jurisdiction.
(5) Furnish to the Holders of Registrable Securities for whom such
shares are registered or are to be registered at the time of disposition an
opinion of counsel for the Corporation acceptable to such Holders and their
counsel to the effect that a registration statement covering such shares has
been filed with the Commission under the Securities Act and has been made
effective by order of the Commission, that a prospectus complying as to form
with the requirements of the Securities Act is available for delivery, that no
stop order has been issued by the Commission suspending the effectiveness of
such registration statement and that, to the best of such counsel's knowledge,
no proceedings for the issuance of such a stop order are threatened or
contemplated, and that the shares have been registered or qualified under the
securities or blue sky laws of each state in which the Corporation has been
advised by the representatives of the underwriters that they intend to sell such
shares, if a firm offering or, if
37
<PAGE>
not, as the Corporation shall be required to register or qualify such shares as
contemplated in subdivision (4) of this paragraph 16G.
(6) Notify the holders of Registrable Securities for whom such
Registrable Securities are registered or are to be registered and their counsel
promptly after the Corporation shall receive notice that any registration
statement, supplement or amendment has become effective, any registration
statement is required to be amended or supplemented, or any stop order has been
issued.
H. Expenses of Registration. The costs and expenses (other
than underwriting discount or commission) of all registrations and
qualifications under the Securities Act, and of all other actions, which the
Corporation is required to take or effect pursuant to this paragraph 16 shall be
paid by the Corporation (including, without limitation, all registration and
filing fees, printing expenses, costs of special audits incident to or required
by any such registration, fees and disbursements of counsel for the Corporation
and up to $50,000 of fees and disbursements of one special counsel acting for
the Holders of Registrable Securities requesting any registration) except that
all such expenses in connection with any amendment or supplement to the
registration statement or the prospectus used in connection therewith required
to be filed more than ninety days after the date on which such registration
statement becomes effective under the Securities Act because any Holder has not
effected the disposition of shares covered by such registration statement shall
be borne by such Holder or Holders, in such proportions as they may agree.
I. Notices To Be Complete. Notices and requests delivered by
Holders to the Corporation pursuant to this paragraph 16 shall contain such
information regarding the Registrable Securities and the intended method of
disposition thereof as reasonably shall be required in connection with the
action to be taken.
J. Indemnity of Corporation. In the event of any registration
under the Securities Act of any Registrable Securities, the Corporation hereby
indemnifies and holds harmless each Holder disposing of such shares and each
other person, if any, who controls such Holder within the meaning of the
Securities Act and each other person (including each underwriter, and each other
person, if any who controls such underwriter) who participates in the offering
of such Registrable Securities, against any losses, claims, damages or
liabilities, joint or several, to which such Holder or controlling person or
participating person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or proceedings in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained, on the effective date thereof,
in any registration statement under which such Registrable Securities were
registered under the Securities Act, in any preliminary prospectus or final
prospectus contained therein, or in any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse such Holder and each such
controlling person or participating person for any legal or other expenses
reasonably incurred by such Holder or such controlling person or participating
person in connection with investigating or defending any such loss, claim,
damage, liability or proceeding; provided, that the Corporation will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
said preliminary or final prospectus or
38
<PAGE>
said amendment or supplement in reliance upon and in conformity with written
information furnished to the Corporation by an instrument duly executed by such
Holder or such controlling or participating person, as the case may be,
specifically for use in the preparation thereof.
K. Indemnity of Holder. In the event of any registration under
the Securities Act of any Registrable Securities, each Holder thereof hereby
severally indemnifies and holds harmless the Corporation, each other Holder
disposing of such shares (the "Indemnified Holders"), each other person, if any,
who controls such Indemnified Holders within the meaning of the Securities Act
and each other person (including each underwriter, and each other person, if
any, who controls each underwriter) who participates in the offering of such
Registrable Securities, against any losses, claims, damages or liabilities,
joint or several, to which the Corporation, such Indemnified Holders or
controlling persons or participating persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or proceedings in respect thereof) arise out of or based upon any
untrue statement or alleged untrue statement of any material fact contained, on
the effective date thereof, in any registration statement under which such
Indemnified Holders were registered under the Securities Act, in any preliminary
prospectus or final prospectus contained therein, or in any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Corporation, such Indemnified Holders and each of such controlling persons or
participating persons for any legal or other expenses reasonably incurred by the
Corporation, each Indemnified Holder or such controlling persons or
participating persons in connection with investigating or defending any such
loss, claim, damage, liability or proceeding; provided, that such Holder will be
liable in any such case to the extent, and only to the extent that such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, said preliminary or final prospectus or said amendment
or supplement in reliance upon and in conformity with written information
furnished to the Corporation in an instrument duly executed by such Holder
specifically for use in the preparation thereof.
II
SERIES D PREFERRED STOCK
1. The Series D Preferred Stock may be issued from time to time in
one or more subseries, the shares of each subseries to have such voting powers,
full or limited, and such designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
thereof as are stated and expressed herein or in the resolution or resolutions
providing for the issue of such subseries adopted by the Board of Directors as
hereinafter provided.
2. Authority is hereby granted to the Board of Directors of the
Corporation, subject to the provisions of this Article FOURTH and to the
limitations prescribed by law, to authorize the issue of one or more subseries
of Series D Preferred Stock and with respect to each subseries to fix by
resolution or resolutions providing for the issue of such subseries the voting
powers, full or limited, if any, of the shares of such subseries and the
designations, preferences and relative, participating, optional or other special
rights and the qualifications, limitations or restrictions thereof. The
authority of the Board of Directors with respect to each subseries shall
include, but not be limited to, the determination or fixing of the following:
39
<PAGE>
(i) The designation of such subseries.
(ii) The dividend rate of such subseries, the conditions and dates
upon which such dividends shall be payable, the relation which such dividends
shall bear to the dividends payable on any other class or classes of stock, and
whether such dividends shall be cumulative or noncumulative.
(iii) Whether the shares of such subseries shall be subject to
redemption by the Corporation and, if made subject to such redemption, the
times, prices and other terms and conditions of such redemption.
(iv) The terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such subseries.
(v) Whether or not the shares of such subseries shall be convertible
into or exchangeable for shares of any other class or classes or of any other
series of any class or classes of stock of the Corporation, and, if provision be
made for conversion or exchange, the times, prices, rates, adjustments, and
other terms and conditions of such conversion or exchange.
(vi) The extent, if any, to which the holders of the shares of such
subseries shall be entitled to vote with respect to the election of directors or
otherwise.
(vii) The restrictions, if any, on the issue or reissue of any
additional Series D Preferred Stock, and subseries thereof.
(viii) The rights of the holders of the shares of such series and
subseries thereof upon the dissolution of, or upon the distribution of assets
of, the Corporation.
3. Except as otherwise required by law and except for such voting
powers with respect to the election of directors or other matters as may be
stated in the resolution or resolutions of the Board of Directors providing for
the issue of any subseries of Series D Preferred Stock, the holders of any such
subseries shall have no voting power whatsoever.
4. The Corporation may from time to time issue and dispose of any of
the authorized and unissued shares of Series D Preferred Stock for such
consideration, not less than its par value, as may be fixed from time to time by
the Board of Directors, without action by the Stockholders. The Board of
Directors may provide for payment thereof to be received by the Corporation in
cash, property or services. Any and all such shares of the Series D Preferred
Stock of the Corporation the issuance of which has been so authorized, and for
which consideration so fixed by the Board of Directors has been paid or
delivered, shall be fully paid and nonassessable.
III
COMMON STOCK
1. Dividends. Subject to all prior rights of holders of the
Corporation's Preferred Stock of any class or series, holders of shares of
Common Stock shall be entitled to dividends when, as and if declared by the
Corporation's Board of Directors out of funds legally available therefor.
2. Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation, after (a) the payment to holders of Series C Preferred Stock
shall have been made as provided by paragraph 2 of part I of this Article
FOURTH, and (b) any other payments required by the provisions of this Article
FOURTH to be made to holders of securities of the Corporation ranking senior to
the Common Stock, shall have been made, the holders of Common Stock shall be
entitled equally on a share-for-share basis to receive any and all assets
remaining to be
40
<PAGE>
paid or distributed to stockholders of the Corporation, and holders of Preferred
Stock of any class or series shall not be entitled to shares therein.
3. Voting. Except as otherwise provided by law or by express
provision of this Certificate of Incorporation, each share of Common Stock shall
be entitled to one vote on any matter submitted for the vote or written consent
of stockholders of the Corporation, including the election of directors.
4. Fully Paid and Non-Assessable. Shares of Common Stock shall be
fully paid and non-assessable.
FIFTH: The number of directors which shall constitute the whole board of
directors shall be no less than five (5) and no more than nine (9), all of whom
shall be elected by the holders of the voting stock of the Corporation.
SIXTH: The Corporation shall make, not less than once annually in
advance of its annual meeting of stockholders, periodic reports to its
stockholders which shall include balance sheets and profit and loss statements
of the Corporation prepared in accordance with sound business and accounting
practice. Any such annual reports shall be certified by a firm of certified
public accountants of good standing.
SEVENTH: In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to adopt, amend or
repeal the by-laws of the Corporation.
EIGHTH: Election of directors need not be by written ballot.
NINTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. Any repeal or modification of this paragraph by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
6. In accordance with Section 228 of the General Corporation Law of
the State of Delaware and the Corporation's Certficate of Incorporation, the
Amendments were approved at the Corporation's 1995 Annual Meeting of
Stockholders by the affirmative vote of the holders of (a) more than eighty
percent (80%) of all of the issued and outstanding shares of the Corporation's
Series C Preferred Stock and (b) a majority of all of the issued and outstanding
shares of the Corporation's stock entitled to vote thereon (i.e., Common Stock
and Series C Preferred Stock).
7. This Amended and Restated Certificate of Incorporation of the
Corporation was duly adopted in accordance with the provisions of Sections 242
and 245 of the General Corporation Law of the State of Delaware.
8. This Amended and Restated Certificate of Incorporation shall be
known as the "1995 Restated Certificate of Incorporation of DMI Furniture, Inc."
IN WITNESS WHEREOF, DMI Furniture, Inc., has caused its Chairman and its
Secretary to sign and attest this Amended and Restated Certificate of
Incorporation on March 21, 1995.
DMI FURNITURE, INC.
41
<PAGE>
By /s/ DONALD D. DREHER Donald D. Dreher, Chairman of the Board, President
and Chief Executive Officer
ATTEST:
/s/ JOSEPH G. HILL Joseph G. Hill, Secretary
42
<PAGE>
EXHIBIT 11.
DMI FURNITURE, INC.
CALCULATIONS OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------- ------------------------
Mar. 4, Feb. 26, Mar. 4, Feb. 26,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income before cumulative effect of a
change in accounting principle $153,000 $166,000 $691,000 $746,000
Cumulative effect of a change in
accounting for income taxes -- -- -- 1,795,000
---------- ---------- ---------- ----------
Net income $153,000 $166,000 $691,000 $2,541,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Average shares of common stock
and common equivalents
outstanding:
Average common shares
outstanding 2,970,026 2,940,997 2,970,026 2,937,297
Common stock equivalents--
dilutive options and convertible
preferred stock 2,724,169 2,907,106 2,757,626 2,850,266
---------- ---------- ---------- ----------
Average shares of common
stock and common stock
equivalents outstanding 5,694,195 5,848,103 5,727,652 5,787,563
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Income per share before cumulative
effect of a change in accounting
principle $.03 $.03 $.12 $.13
Cumulative effect per share of a
change in accounting for income taxes -- -- -- .31
----- ----- ----- -----
Earnings per common share $.03 $.03 $.12 $.44
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
43
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-27-1994
<PERIOD-START> AUG-28-1994
<PERIOD-END> MAR-04-1995
<CASH> 255
<SECURITIES> 0
<RECEIVABLES> 9612
<ALLOWANCES> 219
<INVENTORY> 14509
<CURRENT-ASSETS> 25464
<PP&E> 21203
<DEPRECIATION> 9053
<TOTAL-ASSETS> 38535
<CURRENT-LIABILITIES> 7256
<BONDS> 19214
<COMMON> 15392
0
4040
<OTHER-SE> (8849)
<TOTAL-LIABILITY-AND-EQUITY> 38535
<SALES> 35706
<TOTAL-REVENUES> 36174
<CGS> 29223
<TOTAL-COSTS> 29666
<OTHER-EXPENSES> 4366
<LOSS-PROVISION> 108
<INTEREST-EXPENSE> 937
<INCOME-PRETAX> 1097
<INCOME-TAX> 406
<INCOME-CONTINUING> 691
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 691
<EPS-PRIMARY> $.12
<EPS-DILUTED> $.12
</TABLE>
