SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended: March 31, 1994
Commission File Number: 1-5642
DRAVO CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0447860
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
One Oliver Plaza, Pittsburgh, Pennsylvania 15222
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 566-3000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares outstanding of each of the registrant's classes of common
stock as of April 30, 1994:
Title of Class Shares Outstanding
Common Stock, $1.00 par value 14,858,035
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
Page No.
Consolidated Balance Sheets at March 31, 1994
and December 31, 1993 3, 4
Consolidated Statements of Operations for the
Quarters ended March 31, 1994 and 1993 5
Consolidated Statements of Cash Flows for the
Quarters ended March 31, 1994 and 1993 6, 7
Notes to Consolidated Financial Statements 8 - 15
Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
-2-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000's)
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,268 $ 808
Accounts receivable, net 40,504 44,225
Notes receivable, net 3,207 3,318
Inventories 55,695 57,536
Other current assets 5,737 2,417
Total current assets 106,411 108,304
Advances to and equity in joint ventures 4,611 4,348
Notes receivable 6,489 6,870
Other assets 20,167 17,729
Deferred tax asset 24,853 24,853
Property, plant and equipment 314,193 311,822
Less: accumulated depreciation and
amortization 203,422 201,854
Net property, plant and equipment 110,771 109,968
Total assets $273,302 $272,072
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000's)
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
(unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term notes $ 4,486 $ 4,488
Accounts payable - trade 28,770 28,622
Income taxes -- 23
Accrued insurance 4,569 3,049
Accrued retirement contribution 2,659 2,101
Net liabilities of discontinued operations 1,354 2,006
Accrued loss on leases - discontinued
operations 2,399 2,448
Other current liabilities 6,853 6,113
Total current liabilities 51,090 48,850
Long-term notes 92,006 88,520
Other liabilities 3,092 3,033
Net liabilities of discontinued operations 13,493 14,276
Accrued loss on leases - discontinued
operations 7,328 7,854
Redeemable preference stock:
Par value $1, issued 200,000 shares:
Series D, $12.35 cumulative, convertible,
exchangeable (entitled in liquidation to
$20.0 million) 20,000 20,000
Shareholders' equity:
Preference stock, par value $1, authorized
1,878,870: Series B, $2.475 cumulative,
convertible; issued 31,386 and 32,386 shares
(entitled in liquidation to $1.7 million and
$1.8 million); 31 32
Series D, reported above
Common stock, par value $1, authorized
35,000,000 shares; issued 14,974,040
and 14,967,824 14,974 14,968
Other capital 63,278 63,260
Retained earnings 9,850 13,119
Treasury stock at cost: Common shares - 119,221 (1,840) (1,840)
Total shareholders' equity 86,293 89,539
Total liabilities and shareholders' equity $273,302 $272,072
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited, $ in 000's, except per share data)
<TABLE>
<CAPTION>
Quarters ended March 31,
1994 1993
<S> <C> <C>
Revenue $ 57,681 $ 61,811
Cost of revenue 50,107 51,514
Gross profit 7,574 10,297
Selling, general and administrative expenses 7,479 7,943
Earnings from operations 95 2,354
Other income (expense):
Equity in earnings of joint ventures 337 48
Other income 406 50
Interest income 132 307
Interest expense (2,241) (2,339)
Net other expense (1,366) (1,934)
Earnings (loss) before taxes (1,271) 420
Provision for income taxes -- 29
Earnings (loss) before cumulative effect of
accounting change (1,271) 391
Cumulative effect of accounting change, net
of tax (1,361) --
Net earnings (loss) (2,632) 391
Preference dividends 637 639
Net loss available for common stock $ (3,269) $ (248)
Loss per share:
Operations $ (0.13) $ (0.02)
Cumulative effect of accounting change (0.09) --
Total $ (0.22) $ (0.02)
Weighted average shares outstanding 14,852 14,826
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited, $ in 000's)
<TABLE>
<CAPTION>
Quarters ended March 31,
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (2,632) $ 391
Adjustments to reconcile net earnings (loss)
to net cash provided (used) by continuing
operations activities:
Depreciation and amortization 4,417 4,489
Cumulative effect of accounting change 1,361 --
Gain on sale of assets (406) (50)
Equity in joint ventures (263) (500)
Changes in assets and liabilities:
Decrease in accounts receivable 3,721 1,502
Decrease in notes receivable 92 37
Decrease in inventories 1,841 2,118
Increase in other current assets (3,320) (1,426)
Increase (decrease) in accounts payable
and accrued expenses 2,943 (5,235)
Increase in other assets (2,438) (1,572)
Increase (decrease) in other liabilities (1,302) 98
Net cash provided (used) by continuing
operations activities 4,014 (148)
Decrease in net liabilities of discontinued
operations (2,010) (2,704)
Proceeds from repayment of notes receivable
from sale of discontinued operations 400 792
Net cash used by discontinued operations
activities (1,610) (1,912)
Net cash provided (used) by operating
activities 2,404 (2,060)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 652 110
Additions to property, plant and equipment (5,466) (1,192)
Other, net 1 --
Net cash used by investing activities $ (4,813) $ (1,082)
</TABLE>
See accompanying notes to consolidated financial statements.
-6-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited, $ in 000's)
<TABLE>
<CAPTION>
Quarters ended March 31,
1994 1993
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing under revolving credit
agreements $ 4,000 $ 5,600
Principal payments under long-term notes (517) (499)
Proceeds from long-term notes -- (84)
Proceeds from issuance of common stock 23 --
Dividends on preference stock (637) (639)
Net cash provided by financing activities 2,869 4,378
Net increase in cash and cash equivalents 460 1,236
Cash and cash equivalents at beginning of
period 808 970
Cash and cash equivalents at end of period $ 1,268 $ 2,206
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 2,237 $ 2,264
Income tax 77 228
</TABLE>
See accompanying notes to consolidated financial statements.
-7-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Basis of Presentation
The accompanying consolidated financial statements include the accounts
of Dravo Corporation and its majority-owned subsidiaries (the company).
Significant intercompany balances and transactions have been eliminated
in the consolidation process.
These unaudited consolidated financial statements include all adjustments,
consisting only of normal, recurring accruals, which management considers
necessary for a fair presentation of the company's consolidated financial
position, results of operations, and cash flows for the interim periods
presented. Certain reclassifications of previously reported balances have
been made to conform to the current period's presentation.
(2) Inventories
Inventories are classified as follows:
<TABLE>
<CAPTION>
($ in 000's)
March 31, December 31,
1994 1993
<S> <C> <C>
Finished goods $38,574 $40,660
Work in process 2,785 3,092
Materials and supplies 14,336 13,784
Net inventories $55,695 $57,536
</TABLE>
Inventories are valued at average production cost or market, whichever is
lower. The cost of products produced includes raw materials, direct
labor, and operating overhead.
-8-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Contingent Liabilities
The company has been notified by the Federal Environmental Protection
Agency (EPA) that the EPA believes the company is a potentially
responsible party (PRP) for the clean-up of soil and groundwater
contamination at three subsites in Hastings, Nebraska, one of the EPA's
priority sites for taking remedial action under the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA).
At one of these subsites, a municipal landfill, the company, after a
limited investigation, has determined that it believes it disposed of no
hazardous substances at the particular site and has so informed the EPA.
On December 31, 1991, the EPA sent a formal demand to the company as well
as other PRPs at this subsite demanding that they reimburse the EPA for
already incurred response costs in the amount of $1.2 million, and
requesting that the PRPs submit a good faith proposal to perform soil and
groundwater remediation at this subsite. The company has rejected the
EPA's demand and decided not to submit the offer requested by the EPA.
No PRP at this subsite has agreed to pay the EPA's response costs. As a
result, statutory interest is being added to the EPA's response costs.
Other PRPs, including the local municipality, have agreed to perform the
remedial investigation and to design soil and groundwater remediation
remedies at this subsite, but no party has agreed to conduct the
remediation.
At the second subsite, the company, again after a limited investigation,
concluded that release of contaminants from this subsite is not sufficient
to warrant the taking of remedial action. In January, 1994 the EPA sent
a specific notice to the company that the EPA considered it and three
other parties PRPs at this subsite. The letter invited the company and
the other PRPs to make an offer to conduct a remedial investigation and
feasibility study (RI/FS) of this subsite and stated that the EPA was in
the process of preparing a workplan for the RI/FS.
With respect to the third subsite, the company, along with one other PRP,
has been served with administrative orders directing it to undertake soil
remediation and interim groundwater remediation at that subsite. The
company is currently complying with these orders while reserving its right
to seek reimbursement from the United States for its costs if it is
determined it is not liable for response costs or if it is required to
incur costs because of arbitrary, capricious or unreasonable requirements
imposed by the EPA. The issuance of the order concerning interim
groundwater remediation followed many months of unresolved negotiations
with the EPA, the other PRP and the company's insurers with respect to the
EPA's demands that the company and the other PRP either finance or
voluntarily undertake the interim groundwater remediation as well as their
liability to complete the soil remediation and to pay for past response
costs. The EPA has taken no legal action with respect to its demand that
the company and the other PRP pay its past response costs. A third PRP
has been notified by the EPA that the EPA regards it as potentially liable
-9-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Contingent Liabilities (continued)
under Section 107(a) of CERCLA for costs the EPA has incurred or will
incur in responding to the release and threat of release at this subsite.
A total of five parties have been named by the EPA as PRPs at this
subsite.
A contribution claim related to this subsite against two of the PRPs was
dismissed by the Nebraska District Court after they entered a de minimis
settlement with the EPA providing for, among other things, contribution
protection in return for access to their property. The Eighth Circuit
Court of Appeals recently affirmed the dismissal. The de minimis
settlement agreement does provide for the loss of contribution protection
if evidence is developed that these two PRPs contributed to contamination
at this subsite. The company has decided not to pursue this matter
further because it has concluded it may be able to utilize "reopener"
provisions in the de minimis settlement agreement to obtain withdrawal of
contribution protection from those other PRPs if the company is able to
provide the EPA with information which demonstrates that these PRPs were
responsible for disposing of hazardous substances at the subsite.
The company may proceed against other parties at the subsite who have not
been named by the EPA as PRPs or who have not contributed to the company's
cost in complying with the EPA's administrative orders.
The company, along with other PRPs from various other subsites, has
recommended that the EPA adopt area-wide institutional controls as the
permanent remedy at the site. No formal response to this proposal has
been received by the PRPs.
The company notified its primary and excess general liability insurance
carriers of the claims by the EPA at the first and third subsites.
Although one primary carrier agreed to pay for a part of the company's
defense, it has not done so and has refused to pay for expenses the
company has already incurred. The company's other primary carrier has
declined coverage altogether. On August 10, 1992 the company filed suit
in the Alabama District Court against its primary liability insurance
carriers seeking a declaratory judgment that the company is entitled to
a defense and indemnity under its contracts of insurance (including
certain excess policies provided by one of the primary carriers). This
complaint is limited to the EPA's claims at the third subsite. The suit
has been amended to include as a defendant the excess liability carrier
of the company's predecessor at the site. An investigation of the
coverage provided by the primary carrier of the company's predecessor is
also underway. An award of punitive damages is being sought against two
of these carriers for their bad faith in failing to investigate the
company's claim and/or denying the company's claim. The case is
proceeding in accordance with a case management order issued by the
District Court Magistrate assigned to handle pretrial matters. The
company has notified its primary and excess general liability carrier, as
well as the excess carrier of its predecessor, of the receipt of its
notice of potential liability at the second subsite.
-10-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Contingent Liabilities (continued)
Estimated total cleanup costs, including capital outlays and future
maintenance costs for soil and groundwater remediation of approximately
$17 million, are based on independent engineering studies. The company
has assumed that it will participate in 33 percent of the costs.
Included in the discontinued operations provision is the company's
estimate of its share of the likely cost of soil and groundwater
remediation at these three subsites. The company's estimated share of the
costs is based on its assessment of the total cleanup costs, its potential
exposure, and the viability of other named PRPs.
On May 27, 1993 the company was also notified by the EPA that the company
might be liable for costs incurred by the United States in responding to
a release or threatened release of hazardous substances at a non-operating
research facility in Golden, Colorado. The notice, which was received
without any advance indication that the EPA regarded the company as a
potentially liable party, gave the company seven days to express its
intent to conduct or participate in actions at the site.
The company, whose engineering and construction division dealt with the
research facility on specific projects from 1968 to 1980, is one of about
ninety non-governmental former clients of the research facility to receive
such notices. The United States has indicated it also regards a state
educational institution associated with the research facility and various
federal agencies as potentially liable for the clean-up.
On June 8, 1993 the company responded to the EPA's notice of potential
liability by stating that it does not believe it is a responsible party
at the site. The company has also declined to participate in remedial
actions at the site. In December, 1993, the company received a Waste-In
list for this subsite and Notice of Planned De Minimis Settlement Offer
for Eligible Parties Associated with the Subsite. On the basis of the
alleged volumetric contribution of waste attributed to the company by the
EPA, the company believes it will be offered a de minimis settlement at
this subsite.
There are no reliable estimates of the cost of remediation at this site.
The company has notified its insurance carriers of its receipt of the
EPA's notice of potential liability. The company's primary carriers have
notified the company of their intent to investigate the company's claim,
requested additional information and reserved all of their rights and
defenses.
<PAGE> -11-
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Contingent Liabilities (continued)
In 1990, the company filed an action now pending in Luzerne County,
Pennsylvania alleging breach of contract and unjust enrichment arising out
of the termination of a Turnkey Construction Contract for the Hazleton
Gasification Facility Expansion. The suit named as defendants Continental
Energy Associates (CEA), the project owner, Continental Cogeneration
Corporation (CCC), the general partner of CEA, and Swiss Bank Corporation,
the project lender. CEA and CCC filed a separate suit against the company
which, as amended, seeks damages for breach of contract, negligent design
and construction, negligent misrepresentation, fraud and tortious
interference with the contract of surety. The two suits, along with a
third action commenced by CEA and CCC against the company's surety, the
Insurance Company of North America, have been consolidated. Documents
produced by CEA and CCC during the course of discovery allege claims at
an amount from approximately $10 million to approximately $35 million.
However, the construction contract contains a provision limiting damages
to the value of the contract (a net of approximately $10 million) which
the company would seek to have specifically enforced. The company
continues to vigorously assert its claims and to deny any liability.
The company filed an action in 1981 to collect on a promissory note issued
by Meladuras Portuguesa, C.A. (Melaport) and its principal, Alberto
Caldera (Caldera). In 1985, Melaport and Caldera filed a counterclaim for
damages alleging the company breached a contract between Melaport and the
company relating to engineering and procurement services rendered between
1973 and 1978 for a sugar cane processing facility. A local Venezuelan
court ruled partially in favor of Melaport's counterclaim. The ruling was
upheld by a Venezuelan appeals court on September 25, 1992 and by the
Venezuelan Supreme Court on June 8, 1993. The court ruling does not
specify damages to be paid but does identify certain categories of damages
to which Caldera and Melaport are entitled: (1) the losses suffered by
Melaport from the time it commenced operations in 1974 to 1978; (2) the
value of certain equipment and other assets which had been pledged by
Melaport to secure borrowing in connection with the project; (3) the value
of approximately 540 acres of land which a corporation controlled by
Caldera had mortgaged to secure the borrowings. The amount of damages in
these three categories will be established by an appraisal process
conducted by the trial court. Damages will be adjusted for inflation
since the counterclaim was filed in 1985 and for interest at 12 percent
per year.
While the opposing counsel has asserted that the damages are in excess of
$35 million, the company at this time cannot predict the result of the
appraisal proceedings. The company has no assets in Venezuela and will
challenge the enforcement in the United States if a judgment is finally
issued by the Venezuelan courts. On November 2, 1993, the company filed
suit against Melaport and Caldera in the United States District court for
the Western District of Pennsylvania, seeking an injunction and a
declaratory judgment with respect to the proceedings in Venezuela. The
-12-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Contingent Liabilities (continued)
company is requesting a determination that any judgment in the Venezuelan
proceedings is not enforceable against the company and is also seeking
indemnification for all costs, expenses, losses and damages incurred and
which may be incurred by the company in the Venezuelan proceedings and the
costs and expenses of the United States District Court action. On
February 25, 1994, Melaport and Caldera filed a motion asking the Court
to dismiss the suit based on the lack of personal jurisdiction over the
defendants and based on the doctrines of forum non conveniens, res
judicata and judicial estoppel. It also asked the Court to dismiss, as
premature, the company's demand for injunction and declaratory relief.
If the ruling of the Venezuelan Courts is successfully enforced against
the company in the United States, the liability would be material to the
company.
If these lawsuits, claims and assertions, discussed above, are sustained
against the company, material charges would be recorded in the company's
financial statements. However, in some instances, it is not possible to
determine the outcome of these matters or to estimate with any degree of
certainty the range of potential costs which may be involved. In other
instances, based upon the knowledge the company has of these lawsuits,
claims and assertions, management believes the ultimate disposition of
these matters will not result in material charges to earnings in excess
of amounts recorded in the financial statements.
Other claims and assertions made against the company, will be resolved,
in the opinion of management, without material additional charges to
earnings.
The company has asserted claims, both in lawsuits and in administrative
proceedings for contract adjustments under various contracts, which
management believes to be meritorious, but no estimate can be made at
present of the timing or the amount of recovery.
-13-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Discontinued Operations
In December, 1987, Dravo's Board of Directors approved a major
restructuring program which concentrated the company's future direction
exclusively on opportunities involving its natural resources business.
The plan included the sale or other disposition of the former Engineering
and Construction segment.
In 1985, the company contracted with a governmental authority to design,
construct and operate a resource recovery facility in Long Beach,
California. A dispute arose with the authority as to whether the design
and construction contract was, in fact, properly completed and whether
certain retainers and escrows were owed to the company. The company's
sale of its contractual interest to operate the Long Beach resource
recovery facility spawned a lawsuit filed by the purchaser seeking to
avoid payments of the purchase price. In March 1994, the company reached
a Settlement Agreement with the facility's owner and its operator that
resolved all litigation between the parties. The Settlement Agreement has
been approved by the United States District Court for the Central District
of California. The payments the company will make under the terms of the
settlement are identical to the Memorandum of Intent discussed in Note 2,
Discontinued Operations, of the Notes to Consolidated Financial Statements
in the company's 1993 Form 10-K. The estimated present value of the
payments, or $4.7 million, is included in the discontinued operations
provision.
No provision has been made, except as noted, for the ultimate outcome of
the matters in litigation which are disclosed in Note 3: Contingent
Liabilities, because the outcome of these matters cannot be predicted or
reasonably estimated. A ruling by the courts or a settlement of the
disputes that is adverse to Dravo's position, or other unforeseen
developments, could require a future additional provision for losses on
discontinued operations.
-14-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Discontinued Operations (continued)
The remaining assets and liabilities at March 31, 1994 and December 31,
1993 of the discontinued operations relate to certain remaining unresolved
construction contracts, accrued losses on leases and various insurance,
environmental, and other matters associated with exiting the engineering
and construction business and are presented below:
<TABLE>
<CAPTION>
($ in 000's) March 31, December 31,
<S> <C> <C>
1994 1993
Current assets:
Accounts and retainers receivable $ 24 $ 23
Other 3,512 3,512
Total current assets 3,536 3,535
Accounts and retainers receivable 444 472
Other 309 309
Total assets $ 4,289 $ 4,316
Current liabilities:
Accounts and retainers payable $ 148 $ 178
Accrued loss on leases 2,399 2,448
Other 4,742 5,363
Total current liabilities 7,289 7,989
Accounts and retainers payable 24 45
Accrued loss on leases 7,328 7,854
Other 14,222 15,012
Total liabilities $ 28,863 $ 30,900
Net liabilities and accrued loss
on leases of discontinued operations $(24,574) $(26,584)
</TABLE>
(5) Change in Accounting Principle - Postemployment Benefits
The company adopted the provisions of Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits"
(SFAS 112) effective January 1, 1994. SFAS 112 requires accrual of the
estimated cost of benefits provided by the employer to former or inactive
employees, including their beneficiaries and covered dependents, after
employment but before retirement. An after-tax charge of $1.4 million was
recorded in the first quarter as a cumulative effect for a change in
accounting principle to recognize the company's estimated liability for
postemployment benefits covered by SFAS 112.
-15-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Revenue for the quarter of $57.7 million was down $4.1 million, or nearly seven
percent, from the same period last year. The lower revenue contributed to a
loss before a cumulative change in accounting principle of $1.3 million versus
a $391,000 profit last year. The first quarter is typically the weakest for
the company in terms of revenue and profitability as a significant number of
its customers are in the construction industry. This year's results were
especially hard hit by the number and strength of winter storms which buffeted
the company's Ohio River Valley aggregate and lime operations. In addition,
a major electric utility customer had an unplanned outage for approximately
seven weeks at one of its generating stations.
The company adopted Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits" (SFAS 112) during the first
quarter. A $1.4 million charge for the cumulative effect of a change in
accounting principle was taken to recognize the company's liability under SFAS
112.
Changes in the company's balance sheet since December 31, 1993 are immaterial
and are primarily seasonal fluctuations. Decreases in accounts receivable and
inventories are typical as sales and production levels are low in the first
quarter. Accounts payable levels at March 31, 1994 are higher than normal
because of construction activity associated with a $62 million expansion at the
company's Black River lime facility. The company is still negotiating the
final terms of a leveraged operating lease to be used to finance the project.
Finalization of the lease is expected in June. In the meantime, the company is
financing the project through internally generated funds and has negotiated a
temporary $10 million increase in its $59 million revolving credit/letter of
credit facility. At March 31, 1994, $40.5 million of revolver debt and $10
million in letters of credit were borrowed against the credit facility.
In 1985, a discontinued unit of the company contracted with a governmental
authority to design, construct and operate a resource recovery facility in Long
Beach, California. In March, 1994, the company reached a Settlement Agreement
with the facility's owner and its operator that resolved all litigation between
the parties. The charge resulting from the settlement was recognized in the
company's 1993 financial results.
The company is currently negotiating the extension of two long-term lime supply
contracts that are approaching expiration. The company expects to lower the
current sales price in exchange for contract extensions of 10 years or more.
Future sales prices will be subject to escalation. The total income derived
from extending the contracts will far outweigh the impact lower prices will have
on profit margins. Successful extension of the contracts will assure
operation of the company's Maysville facility at or near full production
capacity well into the next decade.
-16-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
PART II - Other Information
Item 1. Legal Proceedings
On April 11, 1994, the U. S. District Court for the Central District
of California issued an order approving the Settlement Agreement
executed by the parties to the litigation involving the Southeast
Resource Recovery Facility and dismissing with prejudice all claims,
counter-claims, cross-claims and third party claims. Information
concerning the settlement is set forth under the caption "Discontinued
Operations" in the 1993 Annual Report to Shareholders which
accompanied the December 31, 1993 Form 10-K of the company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Page No.
The following is filed as an exhibit to Part I of
this Form 10-Q:
Exhibit No. 11 - Statement re computation of
per share earnings. 19, 20
The following is filed as an exhibit to Part II of
this Form 10-Q:
Exhibit No. 3 - Articles of Incorporation and By-laws.
By-laws of the Registrant, as amended March 31, 1994,
is filed herein under separate cover. (9 pages) 21
(b) Reports on Form 8-K
The company filed no Reports on Form 8-K for the quarter ended
March 31, 1994.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DRAVO CORPORATION
(Registrant)
Date: May 11, 1994 /s/ERNEST F. LADD III
Ernest F. Ladd III
Executive Vice President,
Finance and Administration
Date: May 11, 1994 /s/LARRY J. WALKER
Larry J. Walker
Controller
(Principal Accounting Officer)
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<PAGE>
Exhibit 11. Statement Re Computation of Per Share Earnings
<TABLE>
<CAPTION>
(In 000's, except per share data)
Quarters ended March 31,
1994 1993
<S> <C> <C>
Primary
Earnings:
Earnings (loss) before cumulative effect
of accounting change $(1,271) $ 391
Deduct dividends on preference stock 637 639
Loss before cumulative effect of accounting
change applicable to common stock (1,908) (248)
Cumulative effect of accounting change (1,361) --
Net loss applicable to common stock $(3,269) $ (248)
Shares:
Weighted average number of common
shares outstanding 14,852 14,826
Dilutive effect of outstanding
options and rights (as determined
by the application of the treasury
stock method at the average market
price for the period) (1) -- --
Weighted average number of shares
outstanding, as adjusted 14,852 14,826
Primary loss per share:
Operations $ (0.13) $ (0.02)
Cumulative effect of accounting change (0.09) --
Net loss per share $ (0.22) $ (0.02)
Fully diluted
Earnings:
Net earnings (loss) $(2,632) $ 391
Deduct dividends on preference stock (2) 637 639
Net loss applicable to common stock $(3,269) $ (248)
Shares:
Weighted average number of common
shares outstanding 14,852 14,826
Dilutive effect of outstanding
options and rights (as determined
by the application of the treasury
stock method at the higher of the
closing or the average market price
for the period) (1) -- --
Weighted average number of shares
outstanding, as adjusted 14,852 14,826
</TABLE>
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<PAGE>
Exhibit 11. Statement Re Computation of Per Share Earnings (continued)
<TABLE>
<CAPTION>
(In 000's, except per share data)
Quarters ended March 31,
1994 1993
<S> <C> <C>
Fully diluted loss per share:
Operations $ (0.13) $ (0.02)
Cumulative effect of accounting change (0.09) --
Net loss per share $ (0.22) $ (0.02)
Additional Fully Diluted Computation (3)
Earnings:
Net earnings (loss) $(2,632) $ 391
Shares:
Weighted average number of common shares
outstanding 14,852 14,826
Dilutive effect of outstanding options and
rights (as determined by the application of
the treasury stock method at the higher of
the closing or average market price for
the period) 83 31
Shares issuable from assumed exercise of
convertible preference stock 1,702 1,714
Weighted average number of shares
outstanding, as adjusted 16,637 16,571
Fully diluted earnings (loss) per share $ (0.16) $ 0.02
</TABLE>
(1) The inclusion of outstanding options and rights in the computation would
have an anti-dilutive effect on earnings per share.
(2) The inclusion of preference stock in the fully dilutive computation would
have an anti-dilutive effect on earnings per share.
(3) This calculation is submitted in accordance with Securities Exchange Act
of 1934, Regulation S-K, paragraph 229.601 (b)(11) although it is
contrary to paragraph 40 of APB Opinion No. 15 because it produces an
anti-dilutive result.
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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
============================================================================
Exhibit 3
Filed with Form 10-Q
of
DRAVO CORPORATION
Commission file number 1-5642
============================================================================
For the Quarter Ended
March 31, 1994
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<PAGE>
DRAVO CORPORATION
BY-LAWS
As Amended March 31, 1994
ARTICLE I
Board of Directors
SECTION 1. The Board of Directors shall consist of not less than seven and
not more than twelve persons to be elected by the shareholders as herein
provided, the exact number to be determined from time to time by proper
resolution of the Board of Directors. The Directors shall be classified with
respect to the time during which they shall severally hold office, by dividing
them into three classes, each consisting as nearly as possible of the same
number of Directors. At each annual meeting of the shareholders, Directors in
the number for those whose terms then expire shall be elected to serve for
terms of three years, except that the number of Directors to be elected to such
terms shall be adjusted if the number of Directors shall have been decreased
as provided herein so as to eliminate the place of a Director whose term then
expires.
Nominations for election to the Board of Directors may be made by the
Board of Directors or by any shareholder of the Corporation entitled to notice
of, and to vote at, any meeting called for the election of Directors.
Nominations, other than those made by or on behalf of the Board of Directors
of the Corporation, shall be noticed in writing and shall be received by the
Secretary of the Corporation not later than (i) with respect to an election of
directors to be held at an annual meeting of shareholders, ninety (90) days
prior to the anniversary date of the immediately preceding annual meeting, and
(ii) with respect to an election of directors to be held at a special meeting
of shareholders, the close of business on the fifteenth (15th) day following
the date on which notice of such meeting is first given to shareholders or
public disclosure of the meeting is made. Such notification shall contain the
following information to the extent known to the notifying shareholder: (a) the
name and residence address of each proposed nominee and of the notifying
shareholder; (b) the principal occupation of each proposed nominee; (c) a
representation that the notifying shareholder intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (d) the total number of shares of the Corporation that will be voted
for each proposed nominee; (e) the total number of shares of the Corporation
owned by the notifying shareholder; (f) a description of all arrangements or
understandings between the notifying shareholder and each nominee and any other
person or persons (naming such person or persons) relating to such nomination
or nominations by the notifying shareholder; (g) such other information
regarding each nominee proposed by such shareholder as would be required to be
included in a proxy statement filed with the Securities and Exchange
Commission; and (h) the consent of each nominee to serve as a director of the
Corporation if so elected. If the information submitted to the Corporation
within the time prescribed above is determined by the Chairman of the Board of
the Corporation to be deficient in any manner, the Chairman shall advise the
notifying shareholder in writing of such deficiencies not later than the close
of business on the fifth (5th) day following the date that the Corporation
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<PAGE>
first received written notice of the nomination made by the notifying
shareholder. The notifying shareholder must thereafter cure such deficiencies
by sending a revised notification to the Secretary of the Corporation setting
forth the required information which must be received by the Secretary in
writing not later than the fifth (5th) day following the date that the
notifying shareholder received notice from the Corporation of the deficiencies
in the notifying shareholder's written nomination. Notwithstanding the above,
these nominating procedures shall not apply to any special meeting of the
shareholders of the Corporation called for the election of directors for which
notice of the meeting was not given to shareholders at least (20) days
prior to the meeting. The chairman may disregard and refuse to recognize
any nomination determined by him not to have been made in accordance with the
foregoing procedures.
If a vacancy occurs in the Board of Directors from any cause, including
any increase in the number of Directors in the manner prescribed in this
Section, a majority of the remaining members of the Board of Directors, though
less than a quorum, shall have the power to elect a Director to fill such
vacancy to serve for the balance of the unexpired term of the vacating director
and until his or her successor has been elected and qualified.
In the case of an increase in the number of Directors in the manner
specified in this Section, the additional offices so created shall be assigned
by the Board of Directors to the appropriate class so that the three classes
shall continue to consist, as nearly as possible, of the same number of
Directors.
At any shareholders' meeting at which Directors are to be elected,
separate elections shall be held for the Directors of each class then to be
elected.
The Directors shall hold office during the terms for which they have been
elected and until their successors are elected and qualified.
SECTION 2. The Board of Directors may, by resolution adopted by a majority
of the whole Board, designate one or more committees, each committee to consist
of two or more of the Directors of the Corporation. Standing committees shall
include the Audit and Finance Committee and the Compensation and Nominating
Committee, each of which shall be comprised exclusively of Directors who are
not current employees of the Corporation.
SECTION 3. The Board of Directors, as soon as reasonably possible after
each annual meeting of shareholders, shall hold a meeting to organize, elect
officers of the Corporation and transact other business.
Regular meetings of the Board of Directors may be held without notice at
such time and place as shall from time to time be determined by the Board of
Directors and may be adjourned by the members present to any other time and
place.
Special meetings may be called at any time by the chief executive officer
or any two members of the Board of Directors upon at least 24 hours' notice,
which need not be in writing.
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<PAGE>
A majority of the Directors in office shall constitute a quorum for the
transaction of business.
If all the Directors shall severally or collectively consent in writing
to any action to be taken by the Corporation, such action shall be as valid
corporate action as though it had been authorized at a meeting of the Board of
Directors.
One or more Directors may participate in a meeting of the Board of
Directors, or of a committee thereof, by means of conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other.
SECTION 4. The Board of Directors shall have the right to adopt such rules
and regulations for the conduct of business, and from time to time alter and
amend the same, as to them may seem proper.
SECTION 5. The Board of Directors (or the Compensation Committee by
delegation from the Board), shall fix the compensation of the officers of the
Corporation and such other employees who are designated by the Board of
Directors as holding major positions of authority in the Corporation.
ARTICLE III
Officers
SECTION 1. The officers of the Corporation to be elected by the Board of
Directors shall consist of a Chairman, one or more Vice Chairman (any one or
more of whom may have added to his title another word or words specially
designating the further powers and duties assigned to that officer), a
President, one or more Vice Presidents (any one or more of whom may be
designated an Executive Vice President, Senior Vice President, Group Vice
President or have added to his title another word or words specially
designating the further powers and duties assigned to that officer), a
Treasurer, a Controller and a Secretary, who shall hold office until their
respective successors are duly elected and qualified or until the earlier
death, resignation or removal from office of any of them.
SECTION 2. Subordinate officers to be appointed by the Board of Directors
shall include one or more assistant secretaries and one or more assistant
treasurers.
ARTICLE III
Duties of the Chairman
SECTION 1. The Chairman, who shall be elected from among the Directors,
shall preside at all meetings of the shareholders and of the Board of Directors
at which he shall be present. The Chairman shall be the chief executive officer
of the Corporation and, subject to the control of the Board of Directors, shall
have general management and supervision over the business and affairs of the
Corporation. In the absence or inability to act of the Chairman, the officer
or officers designated from time to time by the Board of Directors shall
perform the duties pertaining to the office of Chairman.
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<PAGE>
ARTICLE IV
Duties of the Vice Chairmen
SECTION 1. The Vice Chairmen, who shall be elected from among the
Directors, shall perform such duties as shall be prescribed time to time by the
Board of Directors or the chief executive officer.
ARTICLE V
Duties of the President
SECTION 1. The President shall be the chief operating officer of the
Corporation and, subject to the control of the Board of Directors and the
Chairman, shall be in direct and active charge of the business and affairs of
the Corporation. In the absence or inability to act of the President, the
officer or officers designated from time to time by the Board of Directors
shall perform the duties pertaining to the office of President.
ARTICLE VI
Duties of the Vice Presidents
SECTION 1. The Vice Presidents shall perform such duties as shall be
prescribed from time to time by the Board of Directors or the chief executive
officer.
ARTICLE VII
Duties of the Secretary
SECTION 1. The Secretary shall, under the direction of the chief executive
officer, record the proceeding of all meetings of the Board of Directors and
of the shareholders for presentation in a suitable book. The Secretary shall
notify the shareholders of all annual and special meetings and the members of
the Board of Directors of all special meetings, have charge of the corporate
seal and perform all the duties which are customary and incident to the office
of Secretary of like companies.
ARTICLE VIII
Duties of the Treasurer
SECTION 1. The Treasurer shall, under the direction of the Vice President
in charge of financial affairs, have general charge of the funds of the
Corporation and shall make such reports of the receipts and disbursements in
such form and manner as the Board of Directors may direct. He shall if so
directed by the chief executive officer, attend any or all meetings of the
Board of Directors and report on his activities as the chief executive officer
may prescribe.
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<PAGE>
ARTICLE IX
Duties of the Controller
SECTION 1. The Controller shall, under the direction of the Vice President
in charge of financial affairs, maintain adequate records of all assets,
liabilities and transactions of the Corporation; cause adequate audits to be
currently and regularly made; prepare financial, cost and tax reports and other
reports of a financial and accounting nature required by governmental agencies;
and in conjunction with other officers and heads of departments initiate and
enforce controls and procedures whereby the business of the Corporation shall
be conducted with the maximum of efficiency and economy. He shall, if so
directed by the chief executive officer, attend any or all meetings of the
Board of Directors and report on his activities as the chief executive officer
may prescribe.
ARTICLE X
Checks, Notes and Contracts
SECTION 1. All checks drawn upon the funds of the Corporation and all
promissory notes, drafts, bills of exchange or other negotiable instruments
shall be signed in the name of the Corporation by such person or persons as the
Board of Directors may from time to time designate.
SECTION 2. All written contracts other than those mentioned in Section
1 of this Article shall be signed in the name of the Corporation by the
Chairman or a Vice Chairman or the President or a Vice President, unless
otherwise directed by the Board of Directors.
ARTICLE XI
Elections
SECTION 1. In elections of directors by shareholders, voting need not be
by ballot unless required by vote of the shareholders before the voting for
election of directors begins.
Election of officers shall be in such manner as a majority of the
Directors present and voting at a duly organized meeting may determine.
ARTICLE XII
Offices
SECTION 1. The registered office of the Corporation shall be in the City
of Pittsburgh, County of Allegheny, State of Pennsylvania, but the Board of
Directors may establish another office or other offices at any place or places
in the state of Pennsylvania or elsewhere.
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<PAGE>
ARTICLE XIII
Seal
SECTION 1. The seal of the Corporation shall have inscribed thereon the
name of the Corporation, the year of its creation, the name of the State under
whose laws it was created and the words "Corporate Seal".
ARTICLE XIV
Meetings of the Shareholders
SECTION 1. Meetings of the shareholders may be held at such places within
or without the State of Pennsylvania as may be fixed by the Board of Directors.
The annual meeting of the shareholders of the Corporation for the election
of Directors shall be held on such date and at such time and place as may be
fixed from time to time by the Board of Directors, provided, however, that in
fixing the date, time and place of said meeting the Board of Directors shall
comply with all applicable statutes and regulations as well as the rules of the
New York Stock Exchange.
SECTION 2. Special meetings of the shareholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President of the
Corporation. Notice shall be given by the Secretary of the time and place of
holding the annual and any special meeting of the shareholders by mailing such
notice to the addresses of said shareholders, as shown by the share register
or the records of the Corporation, at least five days prior to the date of the
meeting, except when a longer period of notice is required by law.
SECTION 3. Unless otherwise provided in a resolution of the Board of
Directors with respect to any meeting of shareholders and stated in the notice
of the meeting, the presence of shareholders entitled to cast at least a
majority of the votes that all shareholders are entitled to cast on a
particular matter to be acted upon at the meeting shall constitute a quorum for
purposes of consideration and action on the matter. If no quorum be present at
any meeting so called, the holders of less than a majority of said shares may
meet and adjourn the meeting from time to time until a quorum be present or
until action may be taken in the absence of a quorum in the manner prescribed
by law.
ARTICLE XV
Share Certificates
SECTION 1. Share certificates shall be issued to the shareholders and
transfers thereof shall be made by a transfer agent, if one or more transfer
agents are appointed by the Board of Directors, otherwise by the Secretary or
Assistant Secretary. Transfers shall be made in person or by power of attorney
on the books of the Corporation on the surrender of the certificates. The share
certificates shall be signed by the Chairman, the President or a Vice President
or other officer designated by the Board of Directors, countersigned by the
Treasurer or Assistant Treasurer or other officers designated by the Board of
Directors and sealed with the seal of the Corporation.
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<PAGE>
One or more transfer agents and registrars of the shares of stock of the
Corporation may be appointed by the Board of Directors. The signatures,
countersignatures, and seal, or any of them on the share certificates may be
executed in facsimile, engraved or printed, provided that the share
certificates are signed or countersigned by a corporate transfer agent or by
a corporate registrar other than the Corporation itself, appointed by the Board
of Directors.
ARTICLE XVI
Resignations
SECTION 1. Any Director or officer may resign his office at any time, such
resignation to be in writing and to take effect from the time of its receipt
by the corporation, unless some time be fixed in the said resignation, and then
from that time. The acceptance of a resignation shall not be required to make
it effective.
ARTICLE XVII
Indemnification
SECTION 1. The Corporation shall indemnify every person who is or was a
party or is threatened to be made a party to or is involved (as a witness or
otherwise) in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative and whether or not by
or in the right of the Corporation or otherwise (hereafter a "proceeding"), by
reason of the fact that he or she is or was a Director or officer or employee
of the Corporation, or is or was serving at the request of the Corporation as
a Director, officer or trustee or employee of another corporation, partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan, or by reason of any action alleged to have been taken
or not taken by him or her while acting in any such capacity, against expenses
(including attorneys' fees) and all liability and loss, including judgments,
fines, ERISA excise taxes and penalties and amounts paid or to be paid in
settlement (whether with or without court approval), actually and reasonable
incurred by him or her in connection with such threatened, pending or
completed action, suit or proceeding, except to the extent prohibited by law
as the same exists or may hereafter be amended (except in the case of any such
amendment which has the effect of narrowing indemnification rights that the
Corporation was permitted to provide prior to such amendment); provided,
however, that except with respect to claims described in Section 2 hereof, the
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof), initiated by such person only
if such proceeding (or part thereof) was authorized by the Board of Directors
of the Corporation. Subject to the foregoing indemnification, the right to
indemnification conferred in this Section shall include the right to be paid
by the Corporation expenses incurred; provided, however, that to the extent
required by law, the payment of such expenses in advance of the final
disposition of a proceeding shall be made only upon receipt of an undertaking
by or on behalf of such person to repay such amounts if it shall ultimately be
determined that he or she is not entitled to be indemnified under this Article
or otherwise.
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<PAGE>
SECTION 2. If a claim under Section 1 is not paid in full by the
Corporation within forty-five (45) days after a written claim has been received
by the Corporation, the claimant may, at any time thereafter, bring suit
against the Corporation to recover the unpaid amount of the claim. The claimant
shall also be entitled to be paid the expenses of prosecuting such claim to the
extent he or she is successful in whole or in part on the merits or otherwise
in establishing his or her right to indemnification or to the advancement of
expenses.
SECTION 3. The right to indemnification, including the right to the
advancement of expenses, conferred in this Article shall not be exclusive of
any other rights to which a person seeking indemnification or advancement of
expenses hereunder may be entitled under any by-law, agreement, vote of
shareholders, or directors or otherwise, both as to action in his or her
official capacity and as to action in any other capacity while holding that
office.
SECTION 4. The Corporation may create a fund of any nature, which may, but
need not be, under the control of a trustee, or otherwise secure or insure in
any manner its indemnification obligations, including its obligation to advance
expenses, whether arising under or pursuant to this Article or otherwise.
SECTION 5. The Corporation shall have the express authority to enter into
such agreements as the Board of Directors deem appropriate for the
indemnification of, including the advancement of expenses to, present or future
Directors, officers and employees of the Corporation in connection with their
service to, or status with, the Corporation or any other corporation,
partnership, joint venture, trust or other enterprise, including any employee
benefit plan, for whom such person is serving at the request of the
Corporation.
SECTION 6. The right to indemnification, including the right to the
advancement of expenses provided herein, shall be a contract right, shall
continue as to a person who has ceased to be a director, officer, employee, or
to serve in any other of the capacities described herein, and shall inure to
the benefit of the heirs, executors and administrators of such person.
Notwithstanding any amendment, alteration or repeal of this Article or any of
its provisions or the adoption of any provision inconsistent with this Article
or any of its provisions, any person who is or was a director, officer or
employee or is or was serving at the request of the Corporation as a director,
officer, employee, or trustee of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, shall be entitled to indemnification, including the right to the
advancement of expenses, in accordance with the provisions hereof and thereof
with respect to any action taken or omitted prior to such amendment, alteration
or repeal or the adoption of such inconsistent provision except to the extent
such amendment, alteration, repeal or inconsistent provisions provides broader
rights with respect to indemnification, including the advancement of expenses,
than the Corporation was permitted to provide prior to the amendment,
alteration, repeal, or the adoption of such inconsistent provision or to the
extent otherwise prescribed by law.
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<PAGE>
ARTICLE XVIII
By-Laws--Adoption, Alteration, Amendment and Repeal
SECTION 1. The By-Laws of the Corporation may be adopted, altered, amended
or repealed by a majority vote of the shareholders present and voting at any
regular or special meeting duly convened after notice to the shareholders of
that purpose or by a majority vote of the members of the Board of Directors
present and voting at any regular or special meeting, subject always to the
power of the shareholders to change any such action taken by the Board of
Directors.
ARTICLE XIX
Limitation on Director Liability
SECTION 1. A director of the Corporation shall not be personally liable
for monetary damages for any action taken or failure to take any action unless
the director has breached or failed to perform the duties of his office under
Section 8363 of the Directors' Liability Act and such breach or failure to
perform constitutes self-dealing, willful misconduct or recklessness; provided,
however, that the foregoing provision shall not eliminate or limit the
liability of a director (i) for any responsibility or liability of such
director pursuant to any criminal statute, or (ii) for any liability of a
director for the payment of taxes pursuant to local, State or Federal law. This
Article XIX shall not apply to any actions filed prior to January 27, 1987 or
to any breach of performance of duty or any failure of performance of duty by
any director occurring prior to January 27, 1987.
SECTION 2. Notwithstanding any other provision of law, the Articles of
Incorporation or the By-Laws of the Corporation, the affirmative vote of
shareholders entitled to cast at least a majority of the votes which all
shareholders would be entitled to cast in an annual election of directors (or
such greater percentage of votes as shall be required by law) shall be required
to adopt any amendment, alteration or repeal of, or to adopt any provision
inconsistent with, this Article XIX or any of its provision, including this
Section 2. Neither the repeal or modification of this Article XIX or any of its
provisions nor the adoption of any provision inconsistent with this Article XIX
or any of its provisions shall adversely affect any limitation on the personal
liability of a director of the Corporation existing at the time of such repeal
or modification or the adoption of such inconsistent provision.
ARTICLE XX
Applicability of Certain provisions of the Pennsylvania Business
Corporation Law
SECTION 1. Subchapters G (relating to Control Share Acquisitions), H
(relating to Disgorgement by Certain Controlling Shareholders Following
Attempts to Acquire Control), I (relating to Severance Compensation for
Employees Terminated Following Certain Control-Share Acquisitions), and J
(relating to the Status of Labor Contracts Following Certain Business
Combination Transactions) of Chapter 25 of the Pennsylvania Business
Corporation Law shall not be applicable to the Corporation.
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<PAGE>
