SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 22, 1996
DMI Furniture, Inc.
(Exact name of registrant as specified in charter)
Delaware 0-4173 41-0678467
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
One Oxmoor Place, 101, Bullitt Lane
Louisville, Kentucky 40222
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (502)426-4351
Not Applicable
(Former name or former address,
if changed since last report.)
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events.
On April 22, 1996, DMI Furniture, Inc. issued a press release
to announce the retirement of James W. McCallister, Vice President-
Operations, and other management changes. The text of the press
release is included as Exhibit 99 to this report.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial statements of business acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
Exhibit 3 -- Amended and Restated Certificate of Incorporation.
Exhibit 10.1 -- Extension and Renewal of Employment
Agreement as of January 1, 1996 between DMI Furniture,
Inc. and Donald D. Dreher.
Exhibit 10.2 -- Extension and Renewal of Employment
Agreement as of April 1, 1995 between DMI Furniture, Inc.
and Joseph G. Hill.
Exhibit 99 -- Press Release dated April 22, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DMI FURNITURE, INC.
By /s/ Joseph G. Hill
Joseph G. Hill
Vice President Finance
Chief Financial Officer,
Secretary and Treasurer
Date: April 23, 1996
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 "Corpora-
tion"), 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.
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 cumu-
latively 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 (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 account-
ants 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 distri-
bution 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 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 Cor-
poration 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.
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
Provided, that nothing herein shall be construed to require any
actual payment before such can be made without contravening appli-
cable 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 Cor-
poration may from time to time redeem all or any portion of the
Shares then outstanding at an amount for each Share to be redeemed.
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 des-
ignated 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.
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 num-
ber 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 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 mate-
rially 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 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 Corpo-
ration 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 Noncom-
pliance.
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 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 enti-
tled 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 par-
agraph 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 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 Corpora-
tion'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 Pre-
ferred 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 incor-
poration 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 Corpora-
tion 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
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 Pre-
ferred 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 sur-
rendered 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 follow-
ing meanings, which meanings shall be equally applicable to the
singular and plural forms of such terms:
(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 particu-
lar 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 organi-
zation 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, how-
ever 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 (irre-
spective 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 con-
vertible 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 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 Subsidi-
aries.
12. No Sale, Lease or Exchange of Assets, Merger or Consoli-
dation, 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 provi-
sion of this part I shall extend to or affect any obligation not
expressly amended, modified or waived or impair any right conse-
quent 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 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 Pre-
ferred 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 Corpo-
ration 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 Secur-
ities; 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 con-
vertible 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 (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 con-
sideration, 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 sub-
scribe 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 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 Secu-
rities 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 Con-
vertible 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
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 subscrip-
tion 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 adjust-
ments 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 distri-
bution 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 propor-
tionately 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 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, reclas-
sification, 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 con-
summation 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 calcula-
tion is based. The Corporation will promptly mail a copy of such
accountants' certificate to the registered holders 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 Com-
mission.
(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 registra-
tion 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 non-necessity
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 Secur-
ities, the Holder of the Registrable Securities shall not be enti-
tled 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 Regis-
trable Securities then outstanding, the Corporation shall be obli-
gated 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 regis-
tration 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 Regis-
trable 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 cov-
ered 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 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 con-
ditions as applicable to the Corporation or other selling share-
holders 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 regis-
trations 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 regis-
tration, 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 simi-
larly 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.
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 Secur-
ities 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 Secur-
ities 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 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 registra-
tions 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 reg-
istration 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 deliv-
ered 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 Secu-
rities, 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 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 regis-
tration 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 sub-
series shall include, but not be limited to, the determination or
fixing of the following:
(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 sub-
ject 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 non-assessable.
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 wind-
ing 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 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 annu-
ally 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 author-
ized 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 Corpora-
tion shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Cor-
poration 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.
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
EXTENSION AND RENEWAL OF
EMPLOYMENT AGREEMENT
THIS AGREEMENT, as of this 1st day of January, 1996 by and
between DMI FURNITURE, INC., a Delaware corporation ("DMI" or the
"Corporation") and DONALD D. DREHER ("Employee").
WHEREAS, Employee and DMI have entered into an Employment
Agreement dated as of September 1, 1986, which has been amended
from time to time and extended and renewed for additional terms
through December 31, 1995;
WHEREAS, the Employment Agreement, as amended, extended and
renewed to date, is intended to complement the terms of the
Amendment to Employment Agreement and Officer Severance Agreement
dated as of May 19, 1988 between the Employee and DMI (the "Officer
Severance Agreement"), which provides for the payment of certain
benefits to Employee in certain circumstances following a "change
in control" of DMI (as defined in the Officer Severance Agreement).
WHEREAS, Employee and DMI desire to renew and extend the
Employment Agreement between them for an additional term expiring
on December 31, 1998; and
NOW, THEREFORE, intending to be legally bound hereby and in
consideration of the mutual undertakings hereinafter set forth, DMI
and Employee agree as follows, effective January 1, 1996;
1. Employment. DMI or its successors hereby employs
Employee and Employee hereby accepts employment as Chairman of the
Board, President, and Chief Executive Officer of DMI for a period
commencing January 1, 1996 and ending December 31, 1998.
2. Duties of Employee. Employee further agrees as follows:
(a) To perform well and faithfully all such duties as are
assigned to him by the Board of Directors of DMI; and
(b) To devote the time and attention to the performance
of all matters necessary and appropriate to the discharge of the
duties so assigned to him in the operation of DMI, it being the
intention of this provision to require that Employee serve as a
"full-time" employee of DMI, to devote his best efforts to the
performance of the duties required of him; and
(c) To refrain from investment or other involvement in
any business or other activity that competes with the business of
DMI other than nominal investments as a passive investor in
publicly traded companies.
3. Compensation. As compensation for his services pursuant
to this Agreement, Employee shall be paid as follows:
(a) Salary. A minimum salary of $275,000 per year
payable at the rate of $11,458.33 semi-monthly during the term of
this Agreement. Each year, on the anniversary date of this
Agreement, the Compensation Committee of the Corporation's Board of
Directors will review increases in the cost of living and may
negotiate upward revisions to salary with the Employee.
(b) Cash Bonus. For each of the Corporation's fiscal
years during the term of this Agreement, Employee shall receive an
incentive bonus based on the "adjusted net pre-tax income" for said
fiscal year. For the purposes of this subsection, "adjusted net
pre-tax income" shall mean the pre-tax income as reported to the
Securities and Exchange Commission on Form 10-K excluding as
expenses all dividends paid by the Corporation to the holders of
any class of its preferred stock, as well as all interest paid by
the Corporation in connection with any funds borrowed for the
redemption of 675,000 shares of preferred stock at $2.49 per share
or $1,680,750 on August 28, 1989 and any future redemptions of
preferred stock, and also excluding (i) any gains or losses
resulting from the sale, conversion or other disposition of capital
assets; (ii) accruals made in accordance with general accepted
accounting principles to recognize the costs associated with the
permanent closure of an operation and the carrying costs prior to
the sale of the assets of that operation; (iii) gain or loss
resulting from non-operational litigation; and (iv) charges or
credits resulting from the adoption of a change in accounting
principle.
Employee shall receive a fractional share of the adjusted
net pre-tax income calculated as follows: X = (.0325 + .0195 {Y})
* Z where X equals the bonus earned, Y equals the adjusted net pre-tax
income expressed in millions of dollars rounded to three decimal places
and Z equals the adjusted net pre-tax income.
Example:
Reported income before income tax $1,525,169
Add back: Interest on borrowing for
preferred stock redemption 201,500
Deduct: Gain on sale of building {156,000}
___________
Adjusted pre-tax income $1,570,369
then:
X = (.0325 + (.0195 X 1.570)) x $1,570,369
X = (.0325 + .0306) x $1,570,369
X = .0631 x $1,570,369
X = $ 99,090
(c) Stock Bonus. For each fiscal year during the term
of this Agreement, Employee shall be eligible to earn a stock bonus
as provided herein. All stock granted pursuant to this bonus shall
be granted as of the date upon which the cash bonus earned by
Employee is paid to him and shall be valued at the bid price of the
Corporation's common stock as listed by NASDAQ on the last day of
the fiscal year. To the extent feasible, stock (or other equity
securities of the Corporation) granted pursuant to this bonus shall
be issued under a plan meeting the terms and conditions of Rule
16b-3 under the Exchange Act.
Employee shall have the option to receive a grant of shares of
common stock with a value equal to 59.3% of Employee's Cash Bonus.
Employee may decline to exercise the right to receive any
stock grant by so advising the Corporation within 10 days of the
date upon which he is advised of his bonus. The grant of stock
referred to herein is subject to the Corporation's shareholders
having approved the issuance of sufficient shares of stock to
permit the grant of these shares. The Corporation agrees to seek
such approval, as and to the extent, required.
(d) Bonus Payments. Any bonus under this paragraph 3
shall be paid within one hundred thirty days of the end of the
fiscal year.
For any fiscal year of DMI during which the period of
Employee's employment set forth in paragraph 1 (or any extension
thereof) expires before completion of the fiscal year, Employee
shall receive a cash bonus and a stock bonus equal to the bonuses
that would have been due Employee under paragraphs 3(b) and 3(c)
had Employee remained employed until the end of DMI's fiscal year
multiplied by a fraction, the numerator of which is the number of
complete calendar months during which Employee was employed during
the fiscal year and the denominator of which is 12.
4. Fringe Benefits. DMI will provide Employee with fringe
benefits as follows:
(a) DMI will maintain, without contribution by Employee,
life insurance with benefits payable as designated by Employee is
a face amount equal to three times Employee's annual base salary
rate hereunder provided however the face amount of life insurance
benefits are not to exceed $750,000.
(b) DMI will maintain health insurance at least as
comprehensive as provided to other key and executive employees.
(c) DMI will maintain, without contribution by Employee,
travel accident insurance with benefits payable as designated by
Employee in a face amount equal to $250,000 death benefits for
accidental death in the course of travel.
(d) DMI will provide Employee with an automobile
comparable to those furnished to other key executives, or its cash
equivalent of $675 per month for Employee's business related use.
(e) Employee shall receive reimbursement for expenses
incurred by him in connection with Medical Care for Employee, his
spouse and his dependents, provided, however, that the amount paid
by DMI to Employee pursuant to this subsection in any fiscal year
during the term of this Agreement shall not exceed $2,000. For the
purpose of this subsection the term "Medical Care" means amounts
paid for the diagnosis, care, medication, treatment, or prevention
of disease, or for the purpose of affecting any structure or
function of the body (including amounts paid for accident or health
insurance), or for transportation primarily for and essential to
Medical Care. Payments hereunder may be made from time to time as
requested by Employee with or without requiring proof of the
medical expenses in questions, in the discretion of the Board of
Directors, and it is not necessary that such medical expenses have
already been paid by Employee, his spouse, or his aforesaid
dependents, but merely that, if not yet paid, there exists an
obligation to pay them. Premiums paid by DMI under any group
accident or health insurance policy that may be maintained by DMI
covering or for the benefit of some or all of its employees, and
payments made by insurers pursuant to said policy, shall not to any
extent be regarded as payments made pursuant to this subsection.
(f) Employee shall receive annual reimbursement for
expenses incurred by him in connection with personal or tax
financial planning, not to exceed $2,000 per year.
(g) Employee shall be entitled to participate in any
benefit plan of a type not specifically covered by this Agreement
and established by DMI for key employees during the term of
Employee's employment hereunder on a basis consistent with his age,
position, responsibilities and level of compensation.
(h) Employee shall be reimbursed for his reasonable out-of-
pocket travel and business expenses, including but not limited
to, membership in private clubs for business purposes. All such
club memberships will be approved by a majority of outside members
of the Board of Directors.
(i) Employee shall designate a medical doctor as his
choice for annual physical examinations. DMI shall receive a
doctor's report on each annual examination. DMI shall bear the
reasonable travel and examination expense related with these
examinations so long as the examinations are performed in the
Continental United States.
5. Vacation. Employee shall be entitled to a six-week
vacation with pay in each 12-month period ending August 31. A
maximum of one week of annual paid vacation shall be cumulative and
will not be deemed waived if not taken during the applicable 12
month period. Employee's paid vacation shall be pro-rated based on
the number of months he has remained employed by DMI during any
fiscal year during which this Agreement expires or is terminated.
6. Other Board of Directors Action. Nothing in this
Agreement shall be deemed to prevent the Board of Directors of DMI
from taking any action it may deem, in its sole discretion, to be
desirable to make the terms and conditions of this Employment
Agreement more beneficial to Employee, or to add further benefits
to his employment with DMI, provided that Employee agrees to such
changes and additions.
7. Termination. This Agreement shall terminate and, except
to the extent previously accrued or as otherwise provided in the
Officer Severance Agreement, all rights and obligations of DMI and
Employee under this Agreement shall be void, upon the earliest to
occur of any of the following:
(a) Expiration of the period of employment set forth in
paragraph 1, unless the period of employment is extended by the
Board of Directors, in which event termination shall occur upon the
expiration of the period of employment as extended by the Board of
Directors;
(b) Death of Employee;
(c) Mental or physical illness or disability of Employee
that shall incapacitate him, for a period of 90 successive days or
for an aggregate period of 120 days during any 12 calendar months,
from fully performing the duties assigned to him hereunder in the
good faith determination of the Board of Directors and upon written
notice to Employee.
(d) If Employee (i) is found guilty of having committed
against DMI any criminal act, including criminal fraud, or (ii) is
found guilty of having committed any criminal act involving moral
turpitude, or (iii) the willful and continued failure by the
Employee to substantially perform the Employee's duties with DMI
after a written demand for substantial performance is delivered to
the Employee by the Board, which demand specifically identifies the
manner in which the Board believes that the Employee has not
substantially performed his duties; or (iv) the willful engaging by
the Employee in gross misconduct materially and demonstrably
injurious to the Corporation. For the purposes of this definition,
no act, or failure to act on the Employee's part shall be
considered "willful" unless done or omitted to be done by the
Employee other than in good faith and without reasonable belief
that the Employee's action or omission was in the best interests of
DMI. The Employee shall not be deemed to have been terminated for
Cause (as defined in the Officer Severance Agreement) unless and
until DMI has delivered a Notice of Termination, as provided
therein.
(e) Voluntary cessation by Employee of his duties and
responsibilities under this Agreement.
If DMI terminates Employee's employment other than for Cause
(as defined in the Officer Severance Agreement), and a change in
control (as defined in the Officer Severance Agreement) occurs
within 9 months thereafter, then Employee shall be entitled to all
benefits provided under the Officer Severance Agreement.
Otherwise, if Employee's employment hereunder is terminated
for any other reason than those specified in subparagraphs (a)
through (e) of this paragraph 7, then DMI shall remain liable to
Employee and shall pay Employee in full settlement of DMI's
obligations hereunder: (i) the full amount of the balance of his
base salary as provided in subparagraph 3(a) above, to the
expiration date of this Agreement or to such expiration date as may
have been extended by action of the Board of Directors pursuant to
subparagraph 7(a), in a lump sum; plus (ii) an amount equal to the
cash bonus and the stock bonus that would have been payable to
Employee pursuant to subparagraphs 3(b) and 3(c) above had Employee
remained employed until the end of DMI's fiscal year, multiplied by
a fraction, the numerator of which is the number of complete
calendar months during which Employee was employed during the
fiscal year and the denominator of which is 12. The payments based
upon the cash bonus and the stock bonus shall be paid within 130
days of the delivery to DMI of the financial statements upon which
they shall be based.
8. Directorship. Employee shall be nominated for election
to the Board of Directors of DMI at each annual meeting of DMI's
stockholders. If duly elected or appointed, Employee agrees to
serve on the Board and shall be designated as Chairman of the
Board.
9. Coordination with Officer Severance Agreement. For the
purposes of the Officer Severance Agreement, this Agreement shall
constitute a renewal and extension of the Employment Agreement
dated as of September 1, 1986 between Employee and DMI. If any
provision of this Agreement may be viewed as conflicting with a
provision of the Officer Severance Agreement, and the provision at
issue does not specifically state that it is intended to supersede
the Officer Severance Agreement, the Officer Severance Agreement
shall control.
10. Non-competition. If this Agreement is terminated for any
reason specified in subparagraphs (a) through (e) of Paragraph 7,
Employee shall refrain, for a period of one year after the
termination of this Agreement, from carrying on a business that
competes with a business conducted by DMI within the geographic
area described as follows:
The 50 states of the United States of America and Puerto
Rico, except for the states of Washington, Oregon,
Idaho, Colorado, Wyoming, North Dakota and South Dakota.
For the purposes of this paragraph, a business shall be deemed
carried on by Employee if carried on by a proprietorship,
partnership, association or corporation, or other business entity
with which Employee is connected, except that Employee shall not be
deemed to be connected with a business competitive to that
conducted by DMI to the extent that Employee is merely a passive
investor therein or not engaged in the business operations thereof
as an officer, director, employee, agent, consultant, sales
representative, or other provider of personal services in a
capacity that would enable him to use his knowledge or DMI's trade
secrets, customer lists or unique business methods to compete
against DMI. It is agreed that in the event of a breach or a
threatened breach of the foregoing, no adequate remedy exists at
law to protect DMI's interests and that DMI shall be entitled to
appropriate injunctive relief. Should the foregoing covenant be
adjudged to any extent invalid by any court of competent
jurisdiction, such covenant shall be deemed modified to the extent
necessary to make if enforceable.
11. Place of Employment. DMI agrees that the principal
location at which Employee is to render his services hereunder will
continue to be Louisville, Kentucky.
12. Notices. Any notice to DMI or Employee hereunder may be
given by delivering it to, or by depositing it in the United States
mail, postage pre-paid, addressed to the parties at the following
addresses:
DMI:
Mr. Joseph G. Hill
DMI Furniture, Inc.
One Oxmoor Place
101 Bullitt Lane
Louisville, KY 40222
with a required copy to:
Mr. Alexander N. Rubin, Jr., Esquire
1141 Wisteria Drive
Malvern, PA 19355
Employee
Mr. Donald D. Dreher
9007 Laughton Lane
Louisville, KY 40222
13. Entire Agreement. This Agreement and the Officer
Severance Agreement (a) contain the complete and entire
understanding and agreement of DMI and Employee respecting the
subject matter hereof (b) supersede and cancel all understandings
or agreement, oral or written, respecting the employment of
Employee in connection with the business of DMI; and (c) may not be
modified except by an instrument in writing executed by DMI and
Employee.
14. Waiver of Breach. The waiver by either party, of a
breach of any provision of this Agreement by the other party shall
not operate or be construed as a waiver of any subsequent breach by
either party.
15. Assignment. Employee may not assign his rights or
obligations under this Agreement. The rights and obligations of
DMI shall inure to the benefit of and shall be binding upon the
successors and assigns of DMI.
16. Captions. All captions and headings used herein are for
convenient reference only and do not form part of this Agreement.
IN WITNESS WHEREOF, DMI and Employee have caused this
Agreement to be duly executed and delivered on the day and first
above written, but effective January 1, 1996.
DMI FURNITURE, INC.
ATTEST: By /s/ Joseph G. Hill
Joseph G. Hill
Vice President Finance,
Chief Financial Officer,
Secretary and Treasurer
/s/Donald D. Dreher
Donald D. Dreher
EXTENSION AND RENEWAL OF
EMPLOYMENT AGREEMENT
THIS AGREEMENT, as of this 1st day of April 1995 by and
between DMI FURNITURE, INC., a Delaware corporation ("DMI" or the
"Corporation") and JOSEPH G. HILL ("Employee").
WHEREAS, Employee and DMI have entered into an Employment
Agreement dated as of September 1, 1986, which has been amended
from time to time and extended and renewed for additional terms
through March 31, 1995;
WHEREAS, the Employment Agreement, as amended, extended and
renewed to date, is intended to complement the terms of the
Amendment to Employment Agreement and Officer Severance Agreement
dated as of May 19, 1988 between the Employee and DMI (the "Officer
Severance Agreement"), which provides for the payment of certain
benefits to Employee in certain circumstances following a "change
in control" of DMI (as defined in the Officer Severance Agreement).
WHEREAS, Employee and DMI desire to renew and extend the
Employment Agreement between them for an additional term expiring
on March 31, 1997; and
NOW, THEREFORE, intending to be legally bound hereby and in
consideration of the mutual undertakings hereinafter set forth, DMI
and Employee agree as follows, effective April 1, 1995;
1. Employment. DMI or its successors hereby employs
Employee and Employee hereby accepts employment as Vice President-Finance
and Chief Financial Officer of DMI for a period commencing April 1, 1995
and ending March 31, 1997.
2. Duties of Employee. Employee further agrees as follows:
(a) To perform well and faithfully all such duties as are
assigned to him by the Board of Directors or the Chief Executive
Officer of DMI; and
(b) To devote the time and attention to the performance
of all matters necessary and appropriate to the discharge of the
duties so assigned to him in the operation of DMI, it being the
intention of this provision to require that Employee serve as a
"full-time" employee of DMI, to devote his best efforts to the
performance of the duties required of him; and
(c) To refrain from investment or other involvement in
any business or other activity that competes with the business of
DMI other than nominal investments as a passive investor in
publicly traded companies.
3. Compensation. As compensation for his services pursuant
to this Agreement, Employee shall be paid as follows:
(a) Salary. A minimum salary of $155,000 per year
payable at the rate of $6,458.33 semi-monthly during the term of
this Agreement. Each year, on the anniversary date of this
Agreement, the Compensation Committee of the Corporation's Board of
Directors will review increases in the cost of living and may
negotiate upward revisions to salary with the Employee.
(b) Cash Bonus.
(i) Adjusted Net Pre-Tax Income. For each of the
Corporation's fiscal years during the term of this Agreement,
Employee shall receive an incentive bonus based on the "adjusted
net pre-tax income" for said fiscal year. For the purposes of this
subsection, "adjusted net pre-tax income" shall mean the pre-tax
income as reported to the Securities and Exchange Commission on
Form 10-K excluding as expenses all dividends paid by the
Corporation to the holders of any class of its preferred stock, as
well as all interest paid by the Corporation in connection with any
funds borrowed for the redemption of 675,000 shares of preferred
stock at $2.49 per share or $1,680,750 on August 28, 1989 and any
future redemptions of preferred stock, and also excluding (i) any
gains or losses resulting from the sale, conversion or other
disposition of capital assets; (ii) accruals made in accordance
with general accepted accounting principles to recognize the costs
associated with the permanent closure of an operation and the
carrying costs prior to the sale of the assets of that operation;
(iii) gain or loss resulting from non-operational litigation; and
(iv) charges or credits resulting from the adoption of a change in
accounting principle.
Employee shall receive a fractional share of the
adjusted net pre-tax income calculated as follows: X = (.0075 + .0045 (Y))
x Z, where X equals the bonus earned, Y equals the adjusted net pre-tax
income expressed in millions of dollars rounded to three decimal places and
Z equals the adjusted net pre-tax income. Example:
Reported income before income tax $1,525,169
Add back: Interest on borrowing for
preferred stock redemption 201,500
Deduct: Gain on sale of building (156,000)
___________
Adjusted pre-tax income $1,570,369
then:
X = (.0075 + (.0045 x 1.570)) x $1,570,369
X = (.0075 + .0071) x $1,570,369
X = .0146 x $1,570,369
X = $22,927
(ii) Cash Bonus Premium. In lieu of a cash bonus
plan for asset management as provided by prior Employment
Agreements between Employee and the Corporation, Employee shall be
paid a 33.33% cash premium of amounts earned under Section 3(b)(i)
of this Agreement.
(c) Stock Bonus. For each fiscal year during the term
of this Agreement, Employee shall be eligible to earn a stock bonus
as provided herein. All stock granted pursuant to this bonus shall
be granted as of the date upon which the cash bonus earned by
Employee is paid to him and shall be valued at the bid price of the
Corporation's common stock as listed by NASDAQ on the last day of
the fiscal year. To the extent feasible, stock (or other equity
securities of the Corporation) granted pursuant to this bonus shall
be issued under a plan meeting the terms and conditions of Rule
16b-3 under the Exchange Act.
Employee shall have the option to receive a grant of shares of
common stock with a value equal to 45.45% of Employee's Cash Bonus,
and Cash Bonus Premium to a maximum Stock Bonus of 25 percent of
Employee's weighted average base salary.
Employee may decline to exercise the right to receive any
stock grant by so advising the Corporation within 10 days of the
date upon which he is advised of his bonus. The grant of stock
referred to herein is subject to the Corporation's shareholders
having approved the issuance of sufficient shares of stock to
permit the grant of these shares. The Corporation agrees to seek
such approval, as and to the extent, required.
(d) Bonus Payments. Any bonus under this paragraph 3
shall be paid within one hundred thirty days of the end of the
fiscal year.
For any fiscal year of DMI during which the period of
Employee's employment set forth in paragraph 1 (or any extension
thereof) expires before completion of the fiscal year, Employee
shall receive a cash bonus and a stock bonus equal to the bonuses
that would have been due Employee under paragraphs 3(b) and 3(c)
had Employee remained employed until the end of DMI's fiscal year
multiplied by a fraction, the numerator of which is the number of
complete calendar months during which Employee was employed during
the fiscal year and the denominator of which is 12.
4. Fringe Benefits. DMI will provide Employee with fringe
benefits as follows:
(a) DMI will maintain, without contribution by Employee,
life insurance with benefits payable as designated by Employee is
a face amount equal to three times Employee's annual base salary
rate hereunder provided however the face amount of life insurance
benefits are not to exceed $750,000.
(b) DMI will maintain health insurance at least as
comprehensive as provided to other key and executive employees.
(c) DMI will maintain, without contribution by Employee,
travel accident insurance with benefits payable as designated by
Employee in a face amount equal to $250,000 death benefits for
accidental death in the course of travel.
(d) DMI will provide Employee with an automobile
comparable to those furnished to other key executives, or its cash
equivalent of $675 per month for Employee's business related use.
(e) Employee shall receive reimbursement for expenses
incurred by him in connection with Medical Care for Employee, his
spouse and his dependents, provided, however, that the amount paid
by DMI to Employee pursuant to this subsection in any fiscal year
during the term of this Agreement shall not exceed $2,000. For the
purpose of this subsection the term "Medical Care" means amounts
paid for the diagnosis, care, medication, treatment, or prevention
of disease, or for the purpose of affecting any structure or
function of the body (including amounts paid for accident or health
insurance), or for transportation primarily for and essential to
Medical Care. Payments hereunder may be made from time to time as
requested by Employee with or without requiring proof of the
medical expenses in questions, in the discretion of the Board of
Directors, and it is not necessary that such medical expenses have
already been paid by Employee, his spouse, or his aforesaid
dependents, but merely that, if not yet paid, there exists an
obligation to pay them. Premiums paid by DMI under any group
accident or health insurance policy that may be maintained by DMI
covering or for the benefit of some or all of its employees, and
payments made by insurers pursuant to said policy, shall not to any
extent be regarded as payments made pursuant to this subsection.
(f) Employee shall receive annual reimbursement for
expenses incurred by him in connection with personal or tax
financial planning, not to exceed $2,000 per year.
(g) Employee shall be entitled to participate in any
benefit plan of a type not specifically covered by this Agreement
and established by DMI for key employees during the term of
Employee's employment hereunder on a basis consistent with his age,
position, responsibilities and level of compensation.
(h) Employee shall be reimbursed for his reasonable out-of-
pocket travel and business expenses, including but not limited to,
membership in private clubs for business purposes. All such club
memberships will be approved by a majority of outside members of the
Board of Directors.
5. Vacation. Employee shall be entitled to a four-week
vacation with pay in each 12-month period ending August 31. A
maximum of one week of annual paid vacation shall be cumulative and
will not be deemed waived if not taken during the applicable 12
month period. Employee's paid vacation shall be pro-rated based on
the number of months he has remained employed by DMI during any
fiscal year during which this Agreement expires or is terminated.
6. Other Board of Directors Action. Nothing in this
Agreement shall be deemed to prevent the Board of Directors of DMI
from taking any action it may deem, in its sole discretion, to be
desirable to make the terms and conditions of this Employment
Agreement more beneficial to Employee, or to add further benefits
to his employment with DMI, provided that Employee agrees to such
changes and additions.
7. Termination. This Agreement shall terminate and, except
to the extent previously accrued or as otherwise provided in the
Officer Severance Agreement, all rights and obligations of DMI and
Employee under this Agreement shall be void, upon the earliest to
occur of any of the following:
(a) Expiration of the period of employment set forth in
paragraph 1, unless the period of employment is extended by the
Board of Directors, in which event termination shall occur upon the
expiration of the period of employment as extended by the Board of
Directors;
(b) Death of Employee;
(c) Mental or physical illness or disability of Employee
that shall incapacitate him, for a period of 90 successive days or
for an aggregate period of 120 days during any 12 calendar months,
from fully performing the duties assigned to him hereunder in the
good faith determination of the Board of Directors and upon written
notice to Employee.
(d) If Employee (i) is found guilty of having committed
against DMI any criminal act, including criminal fraud, or (ii) is
found guilty of having committed any criminal act involving moral
turpitude, or (iii) the willful and continued failure by the
Employee to substantially perform the Employee's duties with DMI
after a written demand for substantial performance is delivered to
the Employee by the Board, which demand specifically identifies the
manner in which the Board believes that the Employee has not
substantially performed his duties; or (iv) the willful engaging by
the Employee in gross misconduct materially and demonstrably
injurious to the Corporation. For the purposes of this definition,
no act, or failure to act on the Employee's part shall be
considered "willful" unless done or omitted to be done by the
Employee other than in good faith and without reasonable belief
that the Employee's action or omission was in the best interests of
DMI. The Employee shall not be deemed to have been terminated for
Cause (as defined in the Officer Severance Agreement) unless and
until DMI has delivered a Notice of Termination, as provided
therein.
(e) Voluntary cessation by Employee of his duties and
responsibilities under this Agreement.
If DMI terminates Employee's employment other than for Cause
(as defined in the Officer Severance Agreement), and a change in
control (as defined in the Officer Severance Agreement) occurs
within 9 months thereafter, then Employee shall be entitled to all
benefits provided under the Officer Severance Agreement.
Otherwise, if Employee's employment hereunder is terminated
for any other reason than those specified in subparagraphs (a)
through (e) of this paragraph 7, then DMI shall remain liable to
Employee and shall pay Employee in full settlement of DMI's
obligations hereunder: (i) the full amount of the balance of his
base salary as provided in subparagraph 3(a) above, to the
expiration date of this Agreement or to such expiration date as may
have been extended by action of the Board of Directors pursuant to
subparagraph 7(a), in a lump sum; plus (ii) an amount equal to the
cash bonus and the stock bonus that would have been payable to
Employee pursuant to subparagraphs 3(b) and 3(c) above had Employee
remained employed until the end of DMI's fiscal year, multiplied by
a fraction, the numerator of which is the number of complete
calendar months during which Employee was employed during the
fiscal year and the denominator of which is 12. The payments based
upon the cash bonus and the stock bonus shall be paid within 130
days of the delivery to DMI of the financial statements upon which
they shall be based.
8. Coordination with Officer Severance Agreement. For the
purposes of the Officer Severance Agreement, this Agreement shall
constitute a renewal and extension of the Employment Agreement
dated as of September 1, 1986 between Employee and DMI. If any
provision of this Agreement may be viewed as conflicting with a
provision of the Officer Severance Agreement, and the provision at
issue does not specifically state that it is intended to supersede
the Officer Severance Agreement, the Officer Severance Agreement
shall control.
9. Non-competition. If this Agreement is terminated for any
reason specified in subparagraphs (a) through (e) of Paragraph 7,
Employee shall refrain, for a period of one year after the
termination of this Agreement, from carrying on a business that
competes with a business conducted by DMI within the geographic
area described as follows:
The 50 states of the United States of America and Puerto
Rico, except for the states of Washington, Oregon, Idaho,
Colorado, Wyoming, North Dakota and South Dakota.
For the purposes of this paragraph, a business shall be deemed
carried on by Employee if carried on by a proprietorship,
partnership, association or corporation, or other business entity
with which Employee is connected, except that Employee shall not be
deemed to be connected with a business competitive to that
conducted by DMI to the extent that Employee is merely a passive
investor therein or not engaged in the business operations thereof
as an officer, director, employee, agent, consultant, sales
representative, or other provider of personal services in a
capacity that would enable him to use his knowledge or DMI's trade
secrets, customer lists or unique business methods to compete
against DMI. It is agreed that in the event of a breach or a
threatened breach of the foregoing, no adequate remedy exists at
law to protect DMI's interests and that DMI shall be entitled to
appropriate injunctive relief. Should the foregoing covenant be
adjudged to any extent invalid by any court of competent
jurisdiction, such covenant shall be deemed modified to the extent
necessary to make if enforceable.
10. Place of Employment. DMI agrees that the principal
location at which Employee is to render his services hereunder will
continue to be Louisville, Kentucky.
11. Notices. Any notice to DMI or Employee hereunder may be
given by delivering it to, or by depositing it in the United States
mail, postage pre-paid, addressed to the parties at the following
addresses:
DMI:
Mr. Donald D. Dreher
DMI Furniture, Inc.
One Oxmoor Place
101 Bullitt Lane
Louisville, KY 40222
with a required copy to:
Mr. Alexander N. Rubin, Jr., Esquire
1141 Wisteria Drive
Malvern, PA 19355
Employee
Mr. Joseph G. Hill
5506 Apache Road
Louisville, KY 40207
12. Entire Agreement. This Agreement and the Officer
Severance Agreement (a) contain the complete and entire
understanding and agreement of DMI and Employee respecting the
subject matter hereof (b) supersede and cancel all understandings
or agreement, oral or written, respecting the employment of
Employee in connection with the business of DMI; and (c) may not be
modified except by an instrument in writing executed by DMI and
Employee.
13. Waiver of Breach. The waiver by either party, of a
breach of any provision of this Agreement by the other party shall
not operate or be construed as a waiver of any subsequent breach by
either party.
14. Assignment. Employee may not assign his rights or
obligations under this Agreement. The rights and obligations of
DMI shall inure to the benefit of and shall be binding upon the
successors and assigns of DMI.
15. Captions. All captions and headings used herein are for
convenient reference only and do not form part of this Agreement.
IN WITNESS WHEREOF, DMI and Employee have caused this
Agreement to be duly executed and delivered on the day and first
above written, but effective April 1, 1995.
DMI FURNITURE, INC.
ATTEST: By /s/ Donald D. Dreher
Donald D. Dreher
Chairman and President
/s/ Joseph G. Hill
JOSEPH G. HILL
Louisville, Kentucky, April 22, 1996 -- DMI Furniture, Inc.
(NASDAQ:DMIF), announced several management changes today.
Effective July 1, 1996, Jim McCallister will retire as V. P. of
Operations after a career with DMI spanning 47 years. For the past
17 years, Mr. McCallister has served in various senior management
positions and will assist in ongoing projects over the next year on
a consulting basis.
Richard Rosbottom, currently the General Manager of DMI Desk Plant
#4 in Ferdinand, Indiana, will assume the position of V. P. of
Operations on July 1, 1996. Mr. Rosbottom is an Industrial
Engineering graduate of Purdue University and has spent 20 years
with DMI.
John Rothgerber will assume the position of General Manager,
Ferdinand Desk Plant #4 effective June 1, 1996. Mr. Rothgerber had
been General Manager of DMI operations in Gettysburg, Pennsylvania
prior to their recent closing and has been with DMI for 31 years.
Effective April 5, 1996, Mark Gogel assumed the position of General
Manager, Fabricator Plant #35. Mr. Gogel has held various
manufacturing positions with DMI over the past 18 years.
DMI is a leading manufacturer and marketer of home office and
computer workstations, wood office furniture and promotionally-priced
bedroom furniture.
CONTACT:
Joseph G. Hill
502/426-4351 Ext. 227
