<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to __________________
Commission file number 1-278
EMERSON ELECTRIC CO.
(Exact name of registrant as specified in its charter)
Missouri 43-0259330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8000 W. Florissant Ave.
P.O. Box 4100
St. Louis, Missouri 63136
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 553-2000
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, and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
Common stock outstanding at March 31, 1997: 445,249,761 shares.
1
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PART I. FINANCIAL INFORMATION FORM 10-Q
Item 1. Financial Statements.
EMERSON ELECTRIC CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(Dollars in millions except per share amounts; unaudited)
Three Months Six Months
-------------------- -------------------
1997 1996 1997 1996
--------- -------- -------- --------
Net sales $ 3,103.5 2,819.8 5,934.1 5,385.6
--------- -------- -------- --------
Costs and expenses:
Cost of sales 1,987.4 1,821.1 3,792.8 3,471.5
Selling, general and
administrative expenses 612.2 544.0 1,195.5 1,061.0
Interest expense 29.8 33.9 57.3 64.0
Other deductions, net 28.4 18.4 37.5 24.8
--------- -------- -------- --------
Total costs and expenses 2,657.8 2,417.4 5,083.1 4,621.3
Income before income taxes 445.7 402.4 851.0 764.3
Income taxes 165.3 147.5 315.7 278.9
--------- -------- -------- --------
Net earnings $ 280.4 254.9 535.3 485.4
========= ======== ======== ========
Earnings per common share $ .63 .57 1.20 1.08
========= ======== ======== ========
Cash dividends per common share $ .27 .245 .54 .49
========= ======== ======== ========
Average number of shares used in
computing earnings per common
share (in thousands) 446,112 448,111 446,760 448,108
========= ======== ======== ========
See accompanying notes to consolidated financial statements.
2
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED BALANCE SHEETS
(Dollars in millions except per share amounts; unaudited)
March 31, September 30,
ASSETS 1997 1996
------ --------- -------
CURRENT ASSETS
Cash and equivalents $ 284.2 149.0
Receivables, less allowances of $56.8 and $50.3 2,254.6 1,979.8
Inventories 1,824.1 1,743.9
Other current assets 336.0 314.5
--------- --------
Total current assets 4,698.9 4,187.2
--------- --------
PROPERTY, PLANT AND EQUIPMENT, NET 2,538.0 2,450.8
--------- --------
OTHER ASSETS
Excess of cost over net assets of purchased
businesses 2,830.7 2,779.2
Other 851.9 1,063.8
--------- --------
Total other assets 3,682.6 3,843.0
--------- --------
$10,919.5 10,481.0
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Short-term borrowings and current maturities
of long-term debt $ 1,308.9 967.0
Accounts payable 725.9 791.3
Accrued expenses 1,092.1 1,063.3
Income taxes 177.6 199.5
--------- --------
Total current liabilities 3,304.5 3,021.1
--------- --------
LONG-TERM DEBT 783.8 772.6
--------- --------
OTHER LIABILITIES 1,413.6 1,333.9
--------- --------
STOCKHOLDERS' EQUITY
Preferred stock of $2.50 par value per share.
Authorized 5,400,000 shares; issued - none - -
Common stock of $.50 par value per share.
Authorized 1,200,000,000 shares; issued
476,677,006 shares 238.3 238.3
Additional paid in capital 5.3 12.3
Retained earnings 6,001.6 5,707.7
Cumulative translation adjustments (114.7) (29.2)
Cost of common stock in treasury, 31,427,245
shares and 29,237,152 shares (712.9) (575.7)
--------- --------
Total stockholders' equity 5,417.6 5,353.4
--------- --------
$10,919.5 10,481.0
========= ========
See accompanying notes to consolidated financial statements.
3
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(Dollars in millions; unaudited)
1997 1996
--------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 412.9 338.2
INVESTING ACTIVITIES
Capital expenditures (227.1) (218.8)
Purchases of businesses, net of cash and
equivalents acquired (22.7) (54.9)
Other, net .9 (37.1)
--------- -------
Net cash (used in) investing activities (248.9) (310.8)
--------- -------
FINANCING ACTIVITIES
Net increase in short-term borrowings 384.3 89.0
Proceeds from long-term debt 5.9 257.4
Principal payments on long-term debt (9.3) (16.7)
Dividends paid (241.3) (219.6)
Net purchases of treasury stock (152.4) (59.4)
--------- -------
Net cash provided by financing activities (12.8) 50.7
--------- -------
Effect of exchange rate changes on cash and equivalents (16.0) (.8)
--------- -------
INCREASE IN CASH AND EQUIVALENTS 135.2 77.3
Beginning cash and equivalents 149.0 117.3
--------- -------
ENDING CASH AND EQUIVALENTS $ 284.2 194.6
========= =======
See accompanying notes to consolidated financial statements.
4
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
Notes to Consolidated Financial Statements
1. The accompanying unaudited consolidated financial statements, in
the opinion of management, include all adjustments necessary for
a fair presentation of the results for the interim periods presented.
These adjustments consist of normal recurring accruals. The
consolidated financial statements are presented in accordance
with the requirements of Form 10-Q and consequently do not include
all the disclosures required by generally accepted accounting
principles. For further information refer to the consolidated
financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended September 30, 1996.
2. During the second quarter of fiscal 1997, Emerson began consolidating
the results of Astec (BSR) Plc into the Company's financial
statements. The increases in total assets and liabilities reflect
this consolidation.
3. On March 10, 1997 the Company consummated a two-for-one stock split
and stockholders of record February 21, 1997, received one additional
share of common stock for each share held. The accompanying
financial statements have been restated to give effect to the split.
4. Other Financial Information
(Dollars in millions; unaudited)
March 31, September 30,
Inventories 1997 1996
----------- --------- -------
Finished products $ 748.9 720.7
Raw materials and work in process 1,075.2 1,023.2
--------- -------
$ 1,824.1 1,743.9
========= =======
March 31, September 30,
Property, plant and equipment, net 1997 1996
---------------------------------- --------- -------
Property, plant and equipment, at cost $ 5,162.6 4,865.6
Less accumulated depreciation 2,624.6 2,414.8
--------- -------
$ 2,538.0 2,450.8
========= =======
5
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Results of Operations
Sales, net earnings and earnings per share for the second quarter and
first six months of fiscal 1997 were the highest for any quarter and
first six-month period in the Company's history.
Net sales were $3,103.5 million for the quarter ended March 31, 1997,
up 10.1 percent over net sales of $2,819.8 million for the quarter ended
March 31, 1996, and $5,934.1 million for the six months ended March 31,
1997, up 10.2 percent over net sales of $5,385.6 for the same period a
year ago. The second quarter results reflect solid international and
modest domestic demand, and the impact of 1996 acquisitions and
consolidation of Astec (BSR) Plc. Excluding the negative impact of
currency, underlying international sales showed good improvement due to
very strong export sales and continued strength in the Asia-Pacific and
Latin American regions.
In the Commercial and Industrial segment, the electronics business
achieved very strong sales growth, driven by the success of new products
and contributions from all geographic areas and product lines.
Industrial motors and drives achieved moderate sales growth benefiting
from acquisitions and improving domestic demand. Sales of the process
business increased modestly as solid international sales growth was
substantially offset by weakening European currencies. Modest gains in
the industrial components and equipment business were due to solid
worldwide demand partially offset by currency translation.
In the Appliance and Construction-Related segment, the heating,
ventilating and air-conditioning business reported solid sales growth,
reflecting increased demand in international markets. The underlying
tools business reported a modest sales increase led by strong
international sales growth. Sales of the fractional motors and appliance
components business reflected solid international demand offset by
sluggish domestic sales of motors for room air-conditioning units and
fans due to customer inventory adjustments.
Cost of sales for the second quarter was $1,987.4 million or 64.0
percent of sales, compared with $1,821.1 million, or 64.6 percent of
sales, for the second quarter of 1996. Cost of sales for the six months
ended March 31, 1997 was $3,792.8 million or 63.9 percent of sales,
compared to $3,471.5 million or 64.5 percent of sales for the same period
a year ago. Selling, general and administrative expenses for the three
months ended March 31, 1997 were $612.1 million, or 19.8 percent of
sales, compared to $544.0 million, or 19.3 percent of sales for the same
period a year ago. For the first six months of 1997, selling, general
and administrative expenses were $1,195.5 million or 20.2 percent of
sales, compared to $1,061.0 million or 19.7 percent of sales for the same
period in 1996. Operating margins benefited from continuing cost
reduction efforts and productivity improvement programs.
6
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
Financial Condition
A comparison of key elements of the Company's financial condition at
the end of the second quarter as compared to the end of the prior
fiscal year follows:
March 31, September 30,
1997 1996
-------- --------
Working capital (in millions) $1,394.4 1,166.1
Current ratio 1.4 to 1 1.4 to 1
Total debt to total capital 27.9% 24.5%
Net debt to net capital 25.0% 22.9%
The Company's interest coverage ratio (earnings before income taxes
and interest expense, divided by interest expense) was 15.9 times for the
six months ended March 31, 1997 compared to 12.9 times for the same
period one year earlier. The increase in interest coverage ratio
reflects earnings growth and a reduction in interest rates.
Cash and equivalents increased by $135.2 million during the six months
ended March 31, 1997. Cash flow provided by operating activities of
$412.9 million and an increase in borrowings of $380.9 million were used
primarily to pay dividends of $241.3 million, fund capital expenditures
of $227.1 million and fund net purchases of treasury stock of $152.4
million.
The Company is in a strong financial position, continues to generate
strong operating cash flows, and has the resources available for
reinvestment in existing businesses, strategic acquisitions and managing
the capital structure on a short and long-term basis.
Statements in this report that are not strictly historical may be
"forward looking" statements which involve risks and uncertainties.
These include economic and currency conditions, market demand, pricing,
and competitive and technological factors, among others which are set
forth in the Company's Annual Report on Form 10-K for the year ended
September 30, 1996.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders on February 4, 1997, three
proposals described in the Notice of Annual Meeting of Stockholders dated
December 6, 1996, were voted upon.
1. The directors listed below were elected for terms ending in 2000
with voting for each as follows:
7
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EMERSON ELECTRIC CO. AND SUBSIDIARIES FORM 10-Q
DIRECTOR FOR WITHHELD
-------- ----------- ----------
L. L. Browning, Jr. 193,779,590 1,997,878
A. A. Busch III 193,748,853 2,028,615
R. B. Horton 194,074,997 1,702,471
G. A. Lodge 194,082,742 1,694,726
V. R. Loucks, Jr. 193,999,883 1,777,585
2. The proposal to amend the Restated Articles of Incorporation to
increase the authorized shares of common stock and decrease the par
value per share was approved by a vote of 160,613,755 in favor to
34,085,508 against, with 1,066,320 abstaining.
3. The proposal to approve the 1997 Incentive Shares Plan was approved
by a vote of 186,397,066 in favor to 7,989,414 against, with
1,390,988 abstaining.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits (Listed by numbers corresponding to the Exhibit Table
of Item 601 in Regulation S-K).
3(a) Restated Articles of Incorporation of Emerson Electric Co.,
filed herewith.
3(b) Bylaws of Emerson Electric Co., as amended through May 3,
1994, incorporated by reference to Emerson Electric Co. 1994
Form 10-K, Exhibit 3(b).
10(n) 1997 Incentive Shares Plan, incorporated by reference to
Emerson Electric Co. 1997 Proxy Statement dated December 6,
1996, Exhibit A.
27 Financial Data Schedule
(b) Reports on Form 8-K. The Company did not file any reports on
Form 8-K during the quarter ended March 31, 1997.
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.
EMERSON ELECTRIC CO.
Date: May 14, 1997 By /s/ Walter J. Galvin
-----------------------
Walter J. Galvin
Senior Vice President - Finance
and Chief Financial Officer
(on behalf of the registrant and
as Chief Financial Officer)
8
<TABLE> <S> <C>
<ARTICLE> 5 EXHIBIT 27
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE EMERSON
ELECTRIC CO. CONSOLIDATED STATEMENT OF EARNINGS AND CONSOLIDATED BALANCE SHEET
AS OF AND FOR THE SIX MONTHS ENDED MARCH 31, 1997 FILED WITH THE COMPANY'S
1997 SECOND QUARTER FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 284,200
<SECURITIES> 0
<RECEIVABLES> 2,311,400
<ALLOWANCES> 56,800
<INVENTORY> 1,824,100
<CURRENT-ASSETS> 4,698,900
<PP&E> 5,162,600
<DEPRECIATION> 2,624,600
<TOTAL-ASSETS> 10,919,500
<CURRENT-LIABILITIES> 3,304,500
<BONDS> 783,800
<COMMON> 238,300
0
0
<OTHER-SE> 5,179,300
<TOTAL-LIABILITY-AND-EQUITY> 10,919,500
<SALES> 5,934,100
<TOTAL-REVENUES> 5,934,100
<CGS> 3,792,800
<TOTAL-COSTS> 3,792,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,300
<INCOME-PRETAX> 851,000
<INCOME-TAX> 315,700
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 535,300
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 0
<FN>
<F1> EPS REFLECTS A TWO-FOR-ONE STOCK SPLIT EFFECTIVE MARCH 10, 1997. EPS FOR
THE THREE MONTHS ENDED DECEMBER 31, 1996 WOULD HAVE BEEN .57 ASSUMING
RETROACTIVE APPLICATION OF THE SPLIT.
</FN>
</TABLE>
<PAGE>
EXHIBIT 3(a)
RESTATED ARTICLES OF INCORPORATION
OF
EMERSON ELECTRIC CO.
ARTICLE 1
The name of the corporation is "Emerson Electric Co."
ARTICLE 2
The registered office of the corporation in Missouri is 8000 W. Florissant
Avenue, St. Louis, Missouri 63136, and the name of its registered agent at such
address is W. W. Withers.
ARTICLE 3
The original Articles of Incorporation, filed with the Secretary of State
of the State of Missouri on September 24, 1890 provided for three initial
shareholders, all residents of the City of St. Louis, Missouri, who are
named below and who subscribed for shares of the original capital stock of
the corporation as follows:
J.W. Emerson 30 shares
A.W. Meston 465 shares
C.P. Meston 5 shares
ARTICLE 4
The authorized capital stock of the Company shall consist of 5,400,000
shares of Preferred Stock each of the par value of $2.50 per share (herein
called the "Preferred Stock") and 1,200,000,000 shares of Common Stock each of
the par value of $.50 per share (herein called the "Common Stock").
All of the shares of Common Stock and Preferred Stock shall be voting
stock and the holders thereof shall be entitled to one vote for each share of
stock standing in their names respectively, except as otherwise provided by law
and except as set forth hereinbelow in Paragraph 8 of the terms of the
Preferred Stock, without distinction between the Common Stock and Preferred
Stock, or between any series of the Preferred Stock.
THE PREFERRED STOCK
1. Subject to the limitations hereinafter contained and to the
requirements of the laws of the State of Missouri, authority is hereby vested
in the Board of Directors of the Company from time to time to issue said five
million four hundred thousand (5,400,000) shares of the Preferred Stock in one
or more series and by resolution or resolutions (any such resolution being
hereinafter called the "authorizing resolution"):
(a) To fix the distinctive serial designation of the shares of any
such series;
1
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(b) To fix the rate or amount per annum at which the holders of the
shares of any series shall be entitled to receive dividends, the
dates on which such dividends shall be payable, and the date or
dates from which such dividends shall be cumulative;
(c) To fix the price or prices at which, the times during which, and
the other terms upon which the shares of any such series may be
redeemed;
(d) To fix the amounts payable on the shares of any series in the
event of dissolution or liquidation of the Company;
(e) From time to time to include additional shares of Preferred Stock
which the Company is authorized to issue in any such series;
(f) To determine whether or not the shares of any such series shall
be made convertible into or exchangeable for other securities of
the Company, including shares of the Common Stock of the Company
or shares of any other series of the Preferred Stock of the
Company, now or hereafter authorized, or any new class of
Preferred Stock of the Company hereafter authorized, the
conversion price or prices, or the rate or rates of exchange at
which such conversion or exchange may be made, and the terms and
conditions upon which any such conversion right shall be
exercised;
(g) To fix such other preferences and rights, privileges and
restrictions applicable to any such series as may be permitted by
law;
(h) To determine if a Sinking Fund shall be provided for the purchase
or redemption of shares of any series and, if so, to fix the
terms and amount or amounts of such Sinking Fund.
2. Except as may be otherwise specified by the Board of Directors in
accordance with the provisions of Paragraph 1 of these terms of the Preferred
Stock, each share of Preferred Stock shall be identical with each other share
of said stock. If the amount determined by the Board of Directors to be
declared and paid as dividends on the Preferred Stock shall be insufficient to
pay the full dividend, including accumulations, on all outstanding shares of
each series, such amount may be declared and paid on the shares of each series
only in the ratio which the full dividend, including accumulations, on all
outstanding shares of such series would bear to the full dividend, including
accumulations, on all outstanding shares of all series. If the amount
available for payment to the holders of Preferred Stock upon liquidation or
upon any of the other events specified in Paragraph 5 hereof shall be
insufficient to pay the maximum amount to which the holders of then outstanding
shares of all series of the Preferred Stock would be entitled, the amount
available shall be distributed on the outstanding shares of each series in the
ratio which the maximum amount payable on the outstanding shares of such series
bears to the maximum amount payable on the outstanding shares of all series.
2
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3. The holders of Preferred Stock of each series shall be entitled to
receive, when and as declared by the Board of Directors, out of any funds
legally available for that purpose, cumulative dividends in cash at the rate or
amount per annum and payable on the dates fixed for such series in the
authorizing resolution establishing such series. Such dividends shall be
cumulative, in the case of each series, from the date or dates fixed by the
Board of Directors.
4. So long as any of the Preferred Stock is outstanding, no dividend
shall be declared or paid and no distribution shall be made on the Common Stock
of the Company (other than a dividend payable in said Common Stock of the
Company) until the full cumulative dividends on the Preferred Stock of all
series up to the end of the then quarterly dividend period shall have been
declared and paid or shall have been declared and a sum sufficient for the
payment thereof appropriated and set aside for the payment thereof by the Board
of Directors.
5. The Preferred Stock shall be preferred as to both earnings and assets,
and in the event of any liquidation, dissolution or winding up of the
corporation, the holders of the shares of each series of Preferred Stock shall
be entitled to receive, before any distribution shall be made on the Common
Stock of the Company, the amount or amounts which shall be fixed in the
authorizing resolution establishing such series, plus in every such case a sum
equal to all accumulated and unpaid dividends which shall have accrued on the
Preferred Stock up to the date of payment of the final amount due thereon.
Such sum shall be payable without interest out of the capital and surplus of
the Company. The rights of the Preferred Stock in the event of the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company as provided for in any Series thereof shall not, at any time prior to
the occurrence or authorization of any of said events, restrict or prevent the
Company from paying, from retained earnings or any other funds legally
available therefor, dividends on its Common Stock or any other class of its
capital stock, in such amounts as the Board of Directors may, from time to
time, determine, if the payment of such dividends at the time of payment
thereof is not restricted by any other of the terms or provisions of the
Preferred Stock or of any Series thereof.
6. Subject to the terms of the authorizing resolution establishing each
series of the Preferred Stock, the whole or any part of any series of Preferred
Stock may, at the option of the Board of Directors of the Company, be redeemed
at any time or from time to time, at the redemption price or prices fixed by
the authorizing resolution establishing such series, which in every such case
shall include an amount equal to all accumulated and unpaid dividends which
shall have accrued on the shares to be redeemed up to the redemption date. No
shares of Preferred Stock shall be redeemed unless at or prior to the date
fixed for the redemption thereof all cumulative dividends on all other
outstanding shares of Preferred Stock up to the quarterly dividend date next
preceding the date fixed for redemption shall have been paid or declared and a
sum sufficient for the payment thereof set apart for such payment. If less
than the whole of any series of Preferred Stock shall be redeemed at any time,
the stock so to be redeemed shall be selected by the Board of Directors by lot
in such manner as it may determine; provided, however, the Board of Directors
may select which series may be redeemed in whole or in part.
3
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7. The preferences, priorities, special rights and special powers given
to the Preferred Stock by the terms hereof, or to any series of the Preferred
Stock by any authorizing action of the Board of Directors of the Company
adopted pursuant hereto, may be altered, modified, changed or terminated, in
such manner as provided by law, upon the affirmative vote of the holders of
two-thirds (2/3) of each series of Preferred Stock issued and outstanding whose
rights will be affected by such proposed alteration, modification, change or
termination. No additional shares of the Preferred Stock except the shares
provided for herein shall be authorized, and no additional shares of any other
class of Preferred Stock having a priority over, or entitled to participate on
a parity with, the Preferred Stock shall be authorized, except upon the
affirmative vote of the holders of a majority of each series of the Preferred
Stock issued and outstanding; provided, however, that the authorizing
resolution with respect to any series of the Preferred Stock may provide that
the affirmative vote of the holders of a greater percentage of the shares of
such series shall be required in order to authorize shares of any other class
of Preferred Stock having priority over the shares of such series of the
Preferred Stock.
8. In addition to the voting rights set forth above in this Article 4,
if, and whenever, six (6) or more quarterly dividends, whether or not
consecutive, on the Preferred Stock shall be in arrears, in whole or in part,
the holders of the Preferred Stock, including all series thereof, voting as a
single class, shall have the right to elect a number of the members of the
Board of Directors of the Company equal to the whole number obtained by
dividing four (4), until such time as no shares of the $1.00 Cumulative
Convertible Preferred Stock, Series A, established by Directors resolution at a
meeting held August 2, 1963 shall be outstanding, and thereafter seven (7),
into the number of Directors of the Company authorized at such time by the
Articles of Incorporation of the Company, but not less than two (2) Directors.
In such event, the remainder of the Directors shall be elected by the holders
of the Common Stock and Preferred Stock, voting as a single class.
Whenever all arrears in dividends on the Preferred Stock then outstanding
shall have been paid and dividends thereon for the current quarterly period
shall have been paid or declared and a sum sufficient for the payment thereof
set aside, then the right of the holders of the Preferred Stock to elect such
number of Directors shall cease, but subject always to the same provisions for
the vesting of such voting rights in the case of any similar future arrearages
in dividends.
At any time after such voting power shall have so vested in the Preferred
Stock, the Secretary of the Corporation may, and upon the written request of
the holders of record of ten percent (10%) or more in number of shares of the
Preferred Stock then outstanding, addressed to him at the principal office of
the Company in the State of Missouri shall call a special meeting of the
holders of the Preferred Stock for the election of the Directors to be elected
by them as herein provided, to be held within thirty (30) days after such call
and at the place and upon the notice provided by law and in the By-laws for the
holding of meetings of stockholders; provided, however, that the Secretary
shall not be required to call such special meeting in the case of any such
request received less than ninety (90) days before the date fixed for any
annual meeting of stockholders. If any such special meeting required to be
called as above provided shall not be called by the Secretary within thirty
(30) days after receipt of any such request, then the holders of record of ten
4
<PAGE>
percent (10%) or more in number of shares of the Preferred Stock then
outstanding may designate in writing one of their number to call such meeting,
and the person so designated may call such meeting to be held at the place and
upon the notice above provided, and for that purpose shall have access to the
stock ledger of the Company. No such special meeting and no adjournment
thereof shall be held on a date later than thirty (30) days before the annual
meeting of the stockholders or a special meeting held in place thereof next
succeeding the time when the holders of the Preferred Stock become entitled to
elect Directors as above provided.
In case (i) the authorized number of shares of the Preferred Stock shall
be increased, and such additional shares issued, or in case (ii) a class of
Preferred Stock other than the Preferred Stock, ranking prior to or on a parity
with the Preferred Stock as to dividends or, in liquidation, shall be created
and issued, nothing herein contained shall prevent any such additional shares
of the Preferred Stock or the shares of such other class of Preferred Stock,
from being given the right, in case dividends thereon or sinking fund
requirements, if any, thereof shall be in arrears, to vote as part of the same
class as and equally with the Preferred Stock and to have an exercise pari
passu with the shares of Preferred Stock entitled to vote on any matters, any
and all the voting rights and powers hereinbefore set forth with respect to the
Preferred Stock, and nothing herein contained shall prevent the giving of
additional voting power, not inconsistent with that granted herein to the
Preferred Stock, to any class of Preferred Stock other than the Preferred
Stock.
9. No holder of the Preferred Stock of any series shall be entitled as of
right to subscribe for, purchase, or receive any part of any new or additional
issue of stock, of any class or series, whether now or hereafter authorized, or
of any bonds, debentures or other securities convertible into stock, of any
class or series; and any and all such preemptive rights are hereby expressly
denied to the Preferred Stock.
THE COMMON STOCK
1. Subject to the provisions of Paragraph 4 of the terms of the Preferred
Stock hereinabove, dividends, payable in cash, in the Common Stock of the
Company, or otherwise, may be declared and paid on the shares of the Common
Stock of the Company from time to time out of any funds or property legally
available therefor, and in the event of any such declaration or payment the
holders of Common Stock of the Company shall be entitled, to the exclusion of
the holders of the Preferred Stock, to share therein.
2. In the event of any liquidation, dissolution or winding up of the
corporation, after distribution and payment in full shall have been made to the
holders of the Preferred Stock in accordance with the terms of Paragraph 5 of
the Preferred Stock hereinabove, the remainder of the assets, if any, of the
Company shall be distributed pro rata among the holders of the Common Stock of
the Company.
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3. No holder of the Common Stock shall be entitled as of right to
subscribe for, purchase or receive any part of any new or additional issue of
the Common Stock of the Company or of any other class or series of the capital
stock of the Company, whether now or hereafter authorized and whether or not
the same shall be convertible into the Common Stock of the Company, or of any
bonds, debentures or other securities convertible into the capital stock of any
class or series of the Company; and any and all such pre-emptive rights are
hereby expressly denied to the Common Stock.
ARTICLE 5
1. Board of Directors
The property and business of the Corporation shall be controlled and
managed by its Board of Directors. Qualifications of Directors may be
prescribed in the By-laws of the Corporation. The number of Directors shall be
fixed by, or in the manner provided in, the By-laws; provided that the By-laws
shall provide for three or more Directors and provided further that the
Corporation shall give written notice to the Secretary of State of the State of
Missouri of any change in the number of Directors within thirty (30) calendar
days of the date of such change. The Board of Directors shall be divided into
three classes, as nearly equal in number as possible, with the mode of such
classification to be provided for in the By-laws. Except as otherwise provided
in the By-laws with respect to the implementation of this Article 5, Directors
shall be elected to hold office for a term of three years, with the term of
office of one class expiring each year.
2. Removal of Directors
Subject to any limitation imposed by law, Directors may be removed, with
or without cause, only (a) by the Board of Directors, as provided by law, in
the event a Director fails to meet the qualifications stated in the By-laws for
election as a Director or in the event such Director is in breach of any
agreement between such Director and the Corporation relating to such Director's
service as a Director or employee of the Corporation, or (b) by a vote of the
holders of eighty-five percent (85%) of the shares then entitled to vote at an
election of Directors, voting as a single class. Any such vote by the
shareholders shall be in addition to the separate vote of any particular class
or series of capital stock of the Corporation required by or pursuant to law,
the Articles of Incorporation or otherwise.
3. Amendment of By-Laws
The power to make, alter, amend or repeal the By-laws of the Corporation
shall be vested solely in the Board of Directors. The By-laws may contain any
provisions for the regulation and management of the affairs of the Corporation
not inconsistent with law or the Articles of Incorporation.
4. Special Meetings of Shareholders
Special meetings of the shareholders may be called only by the Board of
Directors, by the holders of not less than eighty-five percent (85%) of all of
the outstanding shares entitled to vote at such meeting or by such officers of
the Corporation or other persons as may be provided in the By-laws.
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5. Amendment
The provisions of this Article 5 shall not be amended, altered, changed or
repealed nor may any provision inconsistent with any of such provisions be
added to the Articles of Incorporation unless approved by the affirmative vote
of the holders of not less than eighty-five percent (85%) of the total voting
power of all outstanding shares of voting stock of the Corporation, voting as a
single class. Such vote shall be required in addition to any affirmative vote
of the holders of any particular class or series of the capital stock of the
Corporation required by or pursuant to law, the Articles of Incorporation or
otherwise.
ARTICLE 6
The Corporation shall have perpetual existence.
ARTICLE 7
The purposes and powers of the Corporation are as follows:
1. The manufacture of any and all kinds of machinery, equipment, articles
and things of any and all kinds and of whatever nature and character.
2. The sale, lease, conveyance, or other disposition of or dealing in,
any and all kinds of personal property, whether manufactured by the Company or
by someone else.
3. The conduct of research and the owning and acquisition of patents for
the manufacture of personal property of any kind or character.
4. The purchase, sale, lease, dealing in, and disposition of any manner
of real property or any interest therein and the owning and holding of such
real property or any interest therein and the construction of improvements of
any kind on real property.
5. The transaction of any lawful business in aid of the United States or
any instrumentality thereof or any political subdivision thereof, or any
country from time to time in alliance therewith, the making of donations to
associations organized for aiding the activities of the United States or any
instrumentality thereof, or any political subdivision thereof or any country
from time to time in alliance therewith and the lending of money to the United
States, any instrumentality thereof or any political subdivision thereof.
6. The making of contributions to any corporation organized for civic,
charitable or benevolent purposes, or to any incorporated or unincorporated
association, community chest or community fund or trust, not operated or used
for profit to its members but operated for the purpose of raising funds for and
distributing funds to other civic, charitable or benevolent organizations or
agencies.
In order to carry out any or all of the foregoing purposes, the Company
shall have the following powers, together with such other powers as may from
time to time be granted to or conferred on corporations by the laws of the
State of Missouri from time to time enacted:
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(1) To have succession by its corporate name perpetually.
(2) To sue and be sued, complain and defend in any court of law or
equity.
(3) To have a corporate seal which may be altered at pleasure and to
use the same by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
(4) To hold, purchase, mortgage or otherwise convey such real and
personal estate as the purposes of the Company shall require,
and also to take, hold and convey such other property, real,
personal or mixed as shall be necessary or requisite for the
Company to acquire in order to obtain or secure the payment of
any indebtedness or liability belonging to the Company;
provided, however, that the Company shall not hold any real
estate for any period longer than six (6) years except such as
may be necessary for carrying on its legitimate business.
(5) To sell and convey, mortgage, pledge, lease as lessor, or
otherwise dispose of, all or any part of its property and
assets.
(6) To purchase, take, receive, subscribe for, or otherwise acquire,
own, hold, vote, use, employ, sell, mortgage, loan, pledge, or
otherwise dispose of, and otherwise use and deal in and with,
shares or other interests in, or obligations of, other domestic
or foreign corporations, associations, partnerships, or
individuals.
(7) To make contracts and incur liabilities which may be appropriate
to enable it to accomplish any or all of its purposes; to borrow
money for its corporate purposes at such rates of interest as
the Company may determine without regard to the restrictions of
any usury law of the State of Missouri; to issue its notes,
bonds, or other obligations; to issue notes or bonds, secured or
unsecured, which by their terms are convertible into shares of
stock of any class, upon such terms and conditions and at such
rates or prices as may be provided in such notes or bonds and
the indenture or mortgage under which they are issued; and to
secure any of its obligations by mortgage, pledge or deed of
trust of all or any of its property, franchises or income.
(8) To invest its surplus funds from time to time and to lend money
for its corporate purposes, and to take and hold real and
personal property as security for the payment of funds so
invested.
(9) To conduct its business, carry on its operations, and have
offices within and without the State of Missouri, and to
exercise in any other state, territory, district, or possession
of the United States, or in any foreign country, the powers
granted to it by these Articles of Association as amended from
time to time and by the statutes of the State of Missouri as
from time to time enacted.
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(10) To elect or appoint officers and agents of this Company, and to
define their duties and fix their compensations.
(11) To make and alter, by action of the Board of Directors, By-laws,
not inconsistent with its Articles of Association as from time
to time amended or the laws of the State of Missouri from time
to time enacted, which By-laws shall regulate the administration
of the affairs of the Company.
(12) To purchase, take, receive, or otherwise acquire, hold, own,
pledge, transfer or otherwise dispose of its own shares,
subject, however, to any statutory restrictions from time to
time imposed by the laws of the State of Missouri from time to
time enacted.
(13) To amend these Articles of Association in such manner and as to
such subjects as may be allowed by the laws of the State of
Missouri from time to time enacted.
(14) To merge with or consolidate into any other corporation
organized under the laws of the State of Missouri or any other
state of the United States, or of the United States, or any of
its possessions in such manner as may be allowed by the laws of
the State of Missouri from time to time enacted.
(15) To have and exercise all powers necessary and convenient to
effect any or all of the purposes for which the Company is
organized as they may from time to time set forth in the
Articles of Association as from time to time amended.
The Board of Directors and the Officers of the Company shall have all
powers granted to the Board of Directors and Officers of corporations organized
under general laws of the State of Missouri as such general laws may be from
time to time enacted and amended.
ARTICLE 8
The corporation pursuant to Certificate of Acceptance filed January 30,
1958 with the Secretary of State of the State of Missouri has accepted the
provisions of The General and Business Corporation Act of Missouri, as amended.
ARTICLE 9
1. Vote Required for Business Combinations
a. In addition to any affirmative vote required by law, the Articles of
Incorporation, any agreement with any national securities exchange or
otherwise, any "Business Combination" (as hereinafter defined) involving the
Corporation shall be subject to approval in the manner set forth in this
Article 9.
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b. Except as otherwise expressly provided in paragraph 2 of this Article
9, no Business Combination shall be consummated or effected unless such
Business Combination shall have been approved by the affirmative vote of the
holders of not less than eighty-five percent (85%) of the total voting power of
all outstanding shares of voting stock of the Corporation, voting as a single
class. Such vote shall be required notwithstanding the fact that no vote for
such transaction may be required by law or that approval by some lesser
percentage of shareholders may be specified by or pursuant to law, the Articles
of Incorporation, any agreement with any national securities exchange, or
otherwise. Such vote shall be required in addition to any affirmative vote of
the holders of any particular class or series of the capital stock of the
Corporation required by or pursuant to law, the Articles of Incorporation or
otherwise.
2. Situations in Which Higher Vote is Not Required For Business Combination
The vote provided for in paragraph l of this Article 9 shall not be
required and the provisions otherwise relating to the vote required for
shareholder approval, if any, shall apply to any Business Combination, if the
conditions specified in the following paragraph 2(a) are satisfied as to any
Business Combination which does not involve the receipt of any cash or other
consideration by the shareholders of the Corporation, in their capacity as such
shareholders, or if the conditions specified in either of the following
paragraphs 2(a) or 2(b) are satisfied as to any other Business Combination.
a. Such Business Combination shall have been expressly approved by
a majority of the "Continuing Directors" (as hereinafter defined) either in
advance of or subsequent to the acquisition of outstanding shares of capital
stock of the Corporation that caused the "Interested Person" (as hereinafter
defined) involved to become an Interested Person.
b. All of the following five conditions have been met:
i. The aggregate amount of the cash and the "Fair Market Value"
(as hereinafter defined) as of the "Consummation Date" (as hereinafter defined)
of all property, securities or other consideration to be received per share of
capital stock of the Corporation incident to the consummation of such Business
Combination by any holder of such stock, other than the Interested Person
involved in such Business Combination, is not less than the highest of the
following (the requirements of this paragraph 2(b)(i) to be met with respect to
all outstanding shares of all classes of the capital stock of the Corporation,
whether or not the Interested Person has previously acquired shares of each
particular class of such stock):
A. The "Highest Per Share Price" (as hereinafter defined)
or the "Highest Equivalent Price" (as hereinafter defined) paid by such
Interested Person in acquiring any holdings of the Corporation's capital stock,
plus an amount equivalent to interest compounded annually from the date of such
purchase through the Consummation Date at the prime rate of interest as
announced from time to time by Centerre Bank N.A. (or such other bank
headquartered in St. Louis, Missouri as may be selected by a majority of the
Continuing Directors), less the aggregate amount of any cash dividends paid and
the Fair Market Value as of the date paid of any dividends paid in other than
cash on each share of capital stock of the class in question from the date of
such purchase through the Consummation Date in an amount up to but not
exceeding the amount equivalent to interest as so calculated;
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B. The highest preferential amount per share to which the
holders of shares of any class or series of preferred stock are entitled in the
event of dissolution or liquidation of the Corporation; or
C. The Fair Market Value of such shares as of the
"Announcement Date" (as hereinafter defined).
ii. The consideration to be received by holders of
outstanding capital stock shall be paid in cash or in the same form as was
previously paid in order to acquire such shares of such class of capital stock
as are beneficially owned by the Interested Person. If the Interested Person
beneficially owns shares of any class of capital stock of the Corporation which
were acquired with varying forms of consideration, the form of consideration to
be received by holders of such class of capital stock shall be either cash or
the form used to acquire the largest number of shares of such class of capital
stock beneficially owned by the Interested Person.
iii. After such Interested Person has become an Interested
Person and prior to the consummation of the Business Combination: (A) except as
approved by a majority of the Continuing Directors, there shall have been no
failure to declare and pay at the regular date therefor any full quarterly
dividends (whether or not cumulative) on any outstanding preferred stock; (B)
there shall have been (I) no reduction in the annual rate of dividends paid on
the Common Stock (except as necessary to reflect any subdivision of the Common
Stock), except as approved by a majority of the Continuing Directors, and (II)
such increase in such annual rate of dividends as is necessary to prevent any
such reduction in the event of any reclassification (including any reverse
stock split), recapitalization, reorganization or any similar transaction which
has the effect of reducing the number of outstanding shares of the Common
Stock, unless the failure so to increase such annual rate is approved by a
majority of the Continuing Directors; and (C) such Interested Person shall not
have become the beneficial owner of any additional shares of voting capital
stock of the Corporation except as part of the transaction in which it became
an Interested Person.
iv. After such Interested Person has become an Interested
Person, such Interested Person shall not have received the benefit, directly or
indirectly (except proportionately solely in such Interested Person's capacity
as a shareholder of the Corporation), of any loans, advances, guarantees,
pledges or other financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
v. A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the "Exchange Act"
(as hereinafter defined) and the rules and regulations thereunder (or any
subsequent provisions replacing the Exchange Act or such rules and
regulations), shall have been mailed to all shareholders of the Corporation at
least 30 days prior to the Consummation Date. Such statement shall contain at
the front thereof, in a prominent place, a statement by the Continuing
Directors of their position on the advisability (or inadvisability) of the
proposed Business Combination. Such proxy or information statement shall be
required for purposes of this paragraph 2(b)(v) whether or not it is required
to be mailed pursuant to the provisions of the Exchange Act (or any subsequent
provisions).
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3. Definitions
For the purposes of this Article 9:
a. The term "Business Combination" shall mean (i) any merger,
consolidation or exchange of shares of capital stock of the Corporation or any
of its subsidiaries (as hereinafter defined) with or into an Interested Person,
in each case irrespective of which corporation or company is to be the
surviving entity; (ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition to or with an Interested Person (in a single transaction or a
series of related transactions) other than in the ordinary course of business,
of all or a substantial part of the assets of the Corporation (including
without limitation any securities or assets of a subsidiary of the Corporation)
or all or a substantial part of the assets of any of its subsidiaries; (iii)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition to
or with the Corporation or to or with any of its subsidiaries (in a single
transaction or a series of related transactions) other than in the ordinary
course of business, of all or a substantial part of the assets of an Interested
Person; (iv) the issuance or transfer by the Corporation or any of its
subsidiaries of any securities of the Corporation or any of its subsidiaries to
an Interested Person (other than an issuance or transfer of securities which is
effected on a pro rata basis to all shareholders of the Corporation); (v) the
acquisition by the Corporation or any of its subsidiaries from an Interested
Person of any securities issued by an Interested Person (other than an issuance
or transfer of securities which is effected on a pro rata basis to all
shareholders of the Interested Person); (vi) any recapitalization or
reclassification of shares of any class of capital stock of the Corporation or
any merger or consolidation of the Corporation with any of its subsidiaries
which would have the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of capital stock of
the Corporation (or any securities convertible into any class of such capital
stock) owned by any Interested Person; (vii) any merger or consolidation of the
Corporation with any of its subsidiaries after which the provisions of this
Article 9 and of Article 5 of the Articles of Incorporation shall not appear in
the Articles of Incorporation of the surviving entity; (viii) a plan of partial
or complete liquidation or dissolution of the Corporation or spin-off or sale
of a substantial part of the assets of the Corporation or any of its
subsidiaries proposed by or on behalf of an Interested Person; and (ix) any
agreement, contract, plan, proposal or other arrangement providing for any of
the foregoing.
b. The term "Continuing Director" shall mean any Director of the
Corporation who is not an "Affiliate", "Associate" or nominee of or member of a
"Group" with the Interested Person (as such terms are hereinafter defined) and
who either (i) held the office of Director prior to the date on which the
Interested Person became an Interested Person, or (ii) is designated as a
Continuing Director by a majority of the then Continuing Directors.
c. The term "Interested Person" shall mean any individual,
corporation, partnership or other person or entity which, at any time during
the period commencing two (2) years prior to the Announcement Date through and
including the Consummation Date, is or was a "Beneficial Owner" (as defined in
Rule 13d-3 of the General Rules and Regulations under the Exchange Act as in
effect on February 4, 1986) of shares of capital stock of the Corporation
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which, when combined with the shares of capital stock beneficially owned by any
"Affiliates" or "Associates" (as defined in Rule 12b-2 of the Exchange Act as
in effect on February 4, 1986) of such Interested Person or by other members of
a "Group" (as defined in Section 13(d)(3) of the Exchange Act as in effect on
February 4, 1986) of which such Interested Person is a member, collectively
amount to ten percent (10%) or more of the total voting power of all
outstanding shares of voting stock of the Corporation. The term Interested
Person shall also mean any Affiliate or Associate of any such Interested Person
and any other member of a Group of which such Interested Person is a member,
and shall also mean any person or entity which, upon consummation of a Business
Combination, would be such an Affiliate, Associate or Group member. The term
Interested Person shall not include the Corporation, any subsidiary of the
Corporation, any employee benefit plan of the Corporation or of a subsidiary of
the Corporation, or any trustee of or fiduciary with respect to any such plan
acting in such capacity.
d. The term "Consummation Date" shall mean the date on which the
Business Combination in question is consummated or effected.
e. The term "Fair Market Value" shall mean (i) in the case of
stock, the highest closing sale price during the 30-day period immediately
preceding the date in question of a share of such stock on the Composite Tape
for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on
the Composite Tape, on the New York Stock Exchange, or if such stock is not
listed on such Exchange, on the principal United States securities exchange
registered under the Exchange Act on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation
with respect to a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or if no such quotations
are available, the fair market value on the date in question of a share of such
stock as determined by a majority of the Continuing Directors, and (ii) in the
case of property other than cash or stock, the fair market value of such
property on the date in question as determined by a majority of the Continuing
Directors.
f. The terms "Highest Per Share Price" and "Highest Equivalent
Price" shall mean the following. The Highest Per Share Price shall mean the
highest price that can be determined to have been paid during the relevant time
period by the Interested Person involved for any share or shares of the class
or series of capital stock in question. If the Interested Person has not
purchased any shares of such class or series of capital stock of the
Corporation during the relevant time period, the Highest Equivalent Price shall
mean with respect to each class and series of capital stock of the Corporation,
the amount determined by a majority of the Continuing Directors, on whatever
basis they believe to be appropriate, to be the highest per share price
equivalent of the highest price that can be determined to have been paid during
the relevant time by the Interested Person involved for any share or shares of
any other class or series of capital stock of the Corporation. In determining
the Highest Per Share Price and Highest Equivalent Price, all purchases by such
Interested Person or any Affiliate, Associate or Group member shall be taken
into account regardless whether the shares were purchased before or after such
Interested Person became an Interested Person. The Highest Per Share Price and
the Highest Equivalent Price shall include any brokerage commissions, transfer
taxes and soliciting dealers' fees paid by such Interested Person or any such
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Affiliate, Associate or Group member with respect to the shares of capital
stock of the Corporation, and shall be appropriately adjusted to take into
account any subsequent recapitalization, stock split, stock dividend or similar
distribution. In the event any Business Combination involving an Interested
Person shall be proposed, the Continuing Directors shall determine the Highest
Equivalent Price for each class and series of the capital stock of the
Corporation of which there are shares issued and outstanding.
g. The term "Announcement Date" shall mean the earlier of the date
on which a Business Combination is first publicly proposed or announced or the
Consummation Date of such Business Combination.
h. The term "Exchange Act" shall mean the Securities Exchange Act
of l934, as amended.
i. Any corporation of which the Corporation owns, directly or
indirectly, fifty percent (50%) or more of its voting stock shall be deemed to
be a "subsidiary" of the Corporation.
j. For the purposes of paragraph 2(b)(i) of this Article 9, the
term "other consideration to be received" shall include, without limitation,
Common Stock or other capital stock of the Corporation retained by shareholders
of the Corporation (other than Interested Persons or other parties to such
Business Combination) in the event of a Business Combination in which the
Corporation is the surviving entity.
k. Whether or not any proposed sale, lease, exchange, mortgage,
pledge, transfer or other disposition of part of the assets of any entity
involves a "substantial part" of the assets of such entity shall be
conclusively determined by a majority of the Continuing Directors; provided
that assets involved in any single transaction or series of related
transactions having an aggregate Fair Market Value of more than fifteen percent
(15%) of the total consolidated assets of an entity and the other members of
the consolidated group, if any, of which it is a part as at the end of such
entity's last full fiscal year prior to such determination shall always be
deemed to constitute a "substantial part".
l. An Interested Person shall be deemed to have acquired a share of
the capital stock of the Corporation at the time when such Interested Person
became the Beneficial Owner thereof.
m. A majority of the then Continuing Directors shall have the right
and power to make, in good faith, any determinations required under this
Article 9, including without limitation (i) whether a transaction is a Business
Combination, (ii) whether a person is an Interested Person, or (iii) whether
the conditions set out in paragraph 2(b) of this Article 9 have been satisfied
with respect to any Business Combination.
4. Fiduciary Obligations
Nothing contained in this Article 9 shall be construed to relieve any
Interested Person from any fiduciary obligation imposed by law.
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5. Deliberation by Directors
The Directors of the Corporation, when evaluating any proposal or
offer which would involve a Business Combination or the merger or consolidation
of the Corporation or any of its subsidiaries with another corporation, the
sale of all or substantially all of the assets of the Corporation or any of its
subsidiaries, a tender offer or exchange offer for any capital security of the
Corporation or any of its subsidiaries or any similar transaction shall give
due consideration to all factors they may consider relevant. Such factors may
include, without limitation, (a) the financial and managerial resources and
future prospects of the other party(s), the legal, economic, environmental,
national security and social effects of the proposed transaction on the
Corporation's and its subsidiaries' employees, customers, suppliers and other
affected persons and entities and on the communities and geographic areas in
which the Corporation and its subsidiaries operate or are located, and the
effect on any of the businesses and properties of the Corporation and its
subsidiaries, and (b) the adequacy, both in amount and form, of the
consideration offered in relation not only to the current market price of the
Corporation's outstanding securities, but also the current value of the
Corporation in a freely negotiated transaction and the Continuing Directors'
estimate of the Corporation's future value (including the unrealized value of
its properties, assets and prospects) as an independent going concern.
6. Amendment
The provisions of this Article 9 shall not be amended, altered,
changed or repealed nor may any provision inconsistent with any of such
provisions be added to the Articles of Incorporation unless approved by the
affirmative vote of the holders of not less than eighty-five percent (85%) of
the total voting power of all outstanding shares of voting stock of the
Corporation, voting as a single class; provided, however, that this Article 9
or any provision hereof may be amended, altered, changed or repealed and any
such new provision may be added upon the affirmative vote of the holders of not
less than a majority of the total voting power of all outstanding shares of the
voting stock of the Corporation, voting as a single class, if such amendment,
change, alteration, repeal or addition shall first have been approved and
recommended by a majority of the Continuing Directors. The vote provided for
in this paragraph 6 of this Article 9 shall be required in addition to any
affirmative vote of the holders of any particular class or series of the
capital stock of the Corporation required by or pursuant to law, the Articles
of Incorporation or otherwise.
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