FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 1999
-------------
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 0-362
FRANKLIN ELECTRIC CO., INC.
---------------------------
(Exact name of registrant as specified in its charter)
INDIANA 35-0827455
------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 EAST SPRING STREET
BLUFFTON, INDIANA 46714
----------------- -----
(Address of principal executive offices) (Zip Code)
(219) 824-2900
--------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
--------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS OF COMMON STOCK MAY 11, 1999
--------------------- ------------
$.10 par value 5,565,620 shares
<PAGE> 2
FRANKLIN ELECTRIC CO., INC.
Index
Page
PART I. FINANCIAL INFORMATION Number
- --------------------------------- ------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of April 3, 1999 (Unaudited)
and January 2, 1999........................... 3
Condensed Consolidated Statements of
Income for the Three Months Ended
April 3, 1999 and April 4, 1998 (Unaudited).. 4
Condensed Consolidated Statements of
Cash Flows for the Three Months Ended
April 3, 1999 and April 4, 1998 (Unaudited).. 5
Notes to Condensed Consolidated
Financial Statements (Unaudited).............. 6-8
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations......................... 9-10
PART II. OTHER INFORMATION
- -----------------------------
Item 4. Submission of Matters to a Vote of
Security Holders............................ 11
Item 6. Exhibits and Reports on Form 8-K.............. 11
Signatures................................................ 12
- ---------
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- -----------------------------
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands) April 3, January 2,
1999 1999
- ---- ----
ASSETS
Current assets:
Cash and equivalents.................... $ 30,218 $ 17,034
Marketable securities................... - 27,921
Receivables, less allowances of
$1,100 and $1,107, respectively....... 16,730 16,037
Inventories (Note 2).................... 44,806 35,330
Other current assets (including
deferred income taxes of $8,774)...... 10,195 9,961
------- -------
Total current assets.................. 101,949 106,283
Property, plant and equipment,
net (Note 3)............................ 51,938 51,461
Deferred and other assets (including
deferred income taxes of $1,296
and $1,362, respectively)............... 9,552 9,846
------- -------
Total assets.............................. $163,439 $167,590
======== ========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Current maturities of long-term
debt and short-term borrowings........ $ 3,685 $ 3,716
Accounts payable........................ 10,049 13,556
Accrued expenses........................ 21,776 24,539
Income taxes............................ 3,449 2,594
------- -------
Total current liabilities............. 38,959 44,405
Long-term debt............................ 18,082 18,089
Employee benefit plan obligations......... 10,983 10,167
Other long-term liabilities............... 3,277 3,332
Shareowners' equity:
Common stock (Note 5)................... 557 557
Additional capital...................... 14,283 14,105
Retained earnings....................... 83,258 81,872
Loan to ESOP Trust...................... (1,827) (2,059)
Accumulated other comprehensive
loss (Note 7)......................... (4,133) (2,878)
------- -------
Total shareowners' equity............. 92,138 91,597
------- -------
Total liabilities and shareowners' equity. $163,439 $167,590
======== ========
See Notes to Condensed Consolidated Financial Statements.
<PAGE> 4
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
------------------
April 3, April 4,
1999 1998
- ---- ----
Net sales................................. $58,014 $56,014
Costs and expenses:
Cost of sales........................... 42,576 40,834
Selling and administrative expenses..... 9,759 9,727
Interest expense........................ 326 314
Other income, net....................... (166) (875)
------ ------
52,495 50,000
Income before income taxes................ 5,519 6,014
Income taxes.............................. 2,042 2,354
------ ------
Net income................................ $ 3,477 $ 3,660
======= =======
Per share data (Note 6):
Basic earnings per share................ $ .63 $ .63
======= =======
Diluted earnings per share.............. $ .59 $ .58
======= =======
Dividends per common share.............. $ .17 $ .15
======= =======
See Notes to Condensed Consolidated Financial Statements.
<PAGE> 5
FRANKLIN ELECTRIC CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) Three Months Ended
------------------
April 3, April 4,
1999 1998
- ---- ----
Cash flows from operating activities:
Net income................................ $ 3,477 $ 3,660
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization........... 1,731 1,786
(Gain)/loss on disposals of plant
and equipment......................... - (9)
Changes in assets and liabilities:
Receivables........................... (1,052) (1,505)
Inventories........................... (10,872) (9,383)
Other assets.......................... (117) (864)
Accounts payable and other accrued
expenses............................ (4,937) (3,946)
Employee benefit plan obligations..... (36) 602
Other long-term liabilities........... 915 (5)
------- ------
Net cash flows from
operating activities.............. (10,891) (9,664)
------- ------
Cash flows from investing activities:
Additions to plant and equipment.......... (2,529) (1,679)
Proceeds from sale of plant and
equipment............................... - 10
Proceeds from maturities of marketable
securities ............................. 27,921 16,766
------ ------
Net cash flows from
investing activities.................. 25,392 15,097
------ ------
Cash flows from financing activities:
Repayment of long-term debt............... - (7)
Borrowing on line of credit............... 366 -
Repayment of line of credit............... (174) (174)
Proceeds from issuance of common stock.... 401 1,484
Purchase of common stock.................. (1,043) (1,728)
Proceeds/(reduction) from stock
subscriptions........................... (324) 352
Reduction of loan from ESOP Trust......... 232 233
Dividends paid............................ (948) (881)
------ -----
Net cash flows from
financing activities.................. (1,490) (721)
------ -----
Effect of exchange rate changes on cash..... 173 106
------ ------
Net change in cash and equivalents.......... 13,184 4,818
Cash and equivalents at
beginning of period....................... 17,034 23,191
------ ------
Cash and equivalents at end of period....... $30,218 $28,009
======= =======
See Notes to Condensed Consolidated Financial Statements.
<PAGE> 6
FRANKLIN ELECTRIC CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Condensed Consolidated Financial Statements
- ----------------------------------------------------
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three
months ended April 3, 1999 are not necessarily indicative of the results that
may be expected for the year ending
January 1, 2000. For further information, refer to the consolidated financial
statements and footnotes thereto included in Franklin Electric Co., Inc.'s
annual report on Form 10-K for the year ended January 2, 1999.
Note 2: Inventories
- --------------------
Inventories consist of the following:
(In thousands) April 3, January 2,
1999 1999
---- ----
Raw Materials........................ $12,714 $12,080
Work in Process...................... 5,718 5,281
Finished Goods....................... 35,956 27,439
LIFO Reserve......................... (9,582) (9,470)
------ ------
Total Inventory...................... $44,806 $35,330
======= =======
Note 3: Property, Plant and Equipment
- --------------------------------------
Property, plant and equipment, at cost, consists of the following:
(In thousands) April 3, January 2,
1999 1999
---- ----
Land and Buildings................... $ 21,741 $ 21,889
Machinery and Equipment.............. 105,703 104,317
------- -------
127,444 126,206
Allowance for Depreciation........... 75,506 74,745
------- -------
$ 51,938 $ 51,461
======== ========
<PAGE> 7
Note 4: Tax Rates
- ------------------
The effective tax rate on income before income taxes in 1999 and 1998 varies
from the United States statutory rate of 35 percent principally due to the
effect of state and foreign income taxes.
Note 5: Shareowners' Equity
- ----------------------------
The Company had 5,572,920 shares of common stock (25,000,000 shares
authorized, $.10 par value) outstanding as of April 3, 1999.
During the first quarter of 1999, pursuant to the stock repurchase program
authorized by the Company's Board of Directors, the Company repurchased a
total of 16,500 shares for $1.0 million. All repurchased shares were retired.
Note 6: Earnings Per Share
- ---------------------------
Following is the computation of basic and diluted earnings per share:
(In thousands, Three Months Ended
------------------
except per share amounts) April 3, April 4,
1999 1998
- ---- ----
Numerator:
Net Income.......................... $3,477 $3,660
====== ======
Denominator:
Basic
Weighted average common shares..... 5,553 5,818
Diluted
Effect of dilutive securities:
Employee and director incentive
stock options and awards........ 362 491
----- -----
Adjusted weighted average common
shares.......................... 5,915 6,309
====== ======
Basic earnings per share.............. $ .63 $ .63
====== ======
Diluted earnings per share............ $ .59 $ .58
====== ======
<PAGE> 8
Note 7: Other Comprehensive Income
- -----------------------------------
Comprehensive income is as follows:
(In thousands) Three Months Ended
------------------
April 3, April 4,
1999 1998
- ---- ----
Net income.................................. $ 3,477 $ 3,660
Other comprehensive loss:
Foreign currency translation adjustments.. (1,255) (411)
------ ------
Comprehensive income, net of tax............ $ 2,222 $ 3,249
======= =======
Accumulated other comprehensive loss consists of the following:
(In thousands) April 3, January 2,
1999 1999
- ---- ----
Cumulative translation adjustment........... $(3,469) $(2,214)
Minimum pension liability adjustment,
net of tax................................ (664) (664)
------ ------
$(4,133) $(2,878)
======= =======
<PAGE> 9
Item 2. Management's Discussion And Analysis Of Financial Condition And
- ------------------------------------------------------------------------
Results Of Operations
- ---------------------
Operations
- ----------
Net sales for the first quarter of 1999 were $58.0 million, a 3.6 percent
increase from 1998 first quarter net sales of $56.0 million. Net sales
increased due to higher volume in the submersible water systems motors and
changes in the mix of products sold. Net income for the first quarter of 1999
was $3.5 million, or $.59 per diluted share, compared to net income of $3.7
million, or $.58 per diluted share, for the same period a year ago. Since the
beginning of 1998 the Company has repurchased approximately 423,000 of its
outstanding common shares. Cost of sales as a percentage of net sales for the
first quarter of 1999 was 73.4 percent compared to 72.9 percent for the same
period in 1998.
Selling and administrative expenses as a percent of net sales for the first
quarter of 1999 was 16.8 percent compared to 17.4 percent for the same period
in 1998. Interest expense was $0.3 million for both the first quarter of 1999
and 1998. Included in other income, net, for the first quarter of 1999 was
$0.5 million of interest income and $0.3 million of foreign currency losses.
Interest income was $1.0 million and foreign currency losses were $0.1 million
for the same period in 1998. Interest income was attributable to amounts
invested principally in short-term US treasury and agency securities.
Capital Resources and Liquidity
- -------------------------------
Cash, cash equivalents and marketable securities decreased $14.7 million
during the first quarter of 1999. The principal use of cash for operating
activities was the typical seasonal increase in inventories. Working capital
increased $1.1 million during the first quarter of 1999 and the current ratio
was 2.6 and 3.5 at the end of the first quarter of 1999 and 1998,
respectively.
Year 2000 Readiness
- -------------------
Many computer systems in use today were designed and developed using two
digits, rather than four, to specify the year. As a result, such systems may
not correctly recognize the year 2000 which could cause computer applications
to fail or to create erroneous results. The Company recognizes this as a
potential risk and has implemented a plan to address the Year 2000 issue.
THE COMPANY'S STATE OF READINESS -- In 1995, the Company began a project of
implementing a new, company-wide information system. This project was
initiated to replace existing computer software and hardware and to improve
strategic command and control to reduce the response time needed to meet
changing market conditions. The conversion to this new information system was
completed in 1998, which was on schedule with the original plan. The Company
has obtained verification from the developer that the new information system
is Year 2000 compliant.
<PAGE> 10
The Company also instituted an internally managed Year 2000 Plan to identify,
test and correct potential Year 2000 problems, including non-information
technology systems and impacts from external parties including suppliers,
customers, and service providers. The Company's efforts included obtaining
vendor certifications, direct inquiry with outside parties, and the
performance of internal testing on software products and controls.
THE COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES -- The costs incurred by
the Company related to the Year 2000 issue were the time spent by employees to
address this issue and the costs of replacing certain non-Year 2000 compliant
equipment. The total costs to address the Company's Year 2000 issues were not
material to the Company's financial position or results of operations.
THE RISKS OF THE COMPANY'S YEAR 2000 ISSUES -- The primary risk to the Company
with respect to the Year 2000 issue is the inability of external parties to
provide goods and services in a timely, accurate manner, resulting in
production delays and added costs while pursuing alternative sources. While
there can be no guarantee that the systems of other parties on which the
Company's operations rely will be Year 2000 compliant, the Company believes
that the performance of the Year 2000 plan and the development of contingency
plans will ensure that this risk will not have a material adverse impact to
the Company.
THE COMPANY'S CONTINGENCY PLANS -- The Company has completed contingency
plans that address recovery of its critical information systems. Ongoing
updates to these plans will continue throughout 1999, and will consider the
Company's ability to perform certain processes manually, repair or obtain
replacement systems, change suppliers and/or service providers, and work
around affected operations.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
- -----------------------------------------------------------------------------
1995
- ----
Any forward looking statements contained herein involve risks and
uncertainties, including but not limited to, general economic and currency
conditions, various conditions specific to the Company's business and
industry, market demand, competitive factors, supply constraints, technology
factors, government and regulatory actions, the Company's accounting policies,
future trends, and other risks which are detailed in the Company's Securities
and Exchange Commission filings. These risks and uncertainties may cause
actual results to differ materially from those indicated by the forward
looking statements.
<PAGE> 11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
The 1999 Annual Meeting of Shareholders of the Company was held on April
16, 1999 for the following purposes: 1) To elect three directors for terms
expiring at the 2002 Annual Meeting of Shareholders; 2) To approve an
amendment to the Restated Certificate of Incorporation with respect to
Preferred Stock; and 3) To ratify the appointment of Deloitte & Touche LLP as
independent auditors for the 1999 fiscal year.
The results were:
1) Nominees for Director For Withhold Authority
--------------------- --- ------------------
John B. Lindsay 5,122,570 14,569
Juris Vikmanis 5,123,983 13,156
Howard B. Witt 5,123,677 13,462
For Against Abstain
--- ------- -------
2) Amendment to the Restated
Certificate of Incorporation
with respect to Preferred
Stock 3,822,129 673,989 55,648
3) Ratification of
Deloitte & Touche LLP 5,128,169 1,685 7,285
Total shares represented at the Annual Meeting in person or by proxy were
5,137,139 of a total of 5,577,620 shares outstanding. This represented 92.1
percent of Company common stock and constituted a quorum. Total broker non-
votes related to the amendment to the Restated Certificate of Incorporation
with respect to Preferred Stock were 585,373 shares.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits (Filed with this quarterly report)
3(i) Amended and Restated Articles of Incorporation of Franklin
Electric Co., Inc.
3(ii) Amended and Restated By-Laws of Franklin Electric Co., Inc.
(b) Reports on Form 8-K
During the first quarter ended April 3, 1999, a Form 8-K was filed
by the Company dated January 6, 1999, to report the purchase of
certain operating and intangible assets from the Marley Company,
a wholly-owned subsidiary of United Dominion Industries, Inc.
<PAGE> 12
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this quarterly report to be signed on its behalf by
the undersigned thereunto duly authorized.
FRANKLIN ELECTRIC CO., INC.
---------------------------
Registrant
Date May 11, 1999 By /s/ William H. Lawson
--------------------- ---------------------------
William H. Lawson, Chairman
and Chief Executive Officer
(Principal Executive Officer)
Date May 11, 1999 By /s/ Gregg C. Sengstack
--------------------- ---------------------------
Gregg C. Sengstack, Vice
President and Chief Financial
Officer (Principal Financial
and Accounting Officer)
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q FOR THE PERIOD ENDED APRIL 3, 1999 AND IS QUALIFIED IN ITS ENTIRETY.
REFERENCE TO SUCH FINANCIAL STATMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> APR-03-1999
<CASH> 30218
<SECURITIES> 0
<RECEIVABLES> 17830
<ALLOWANCES> 1100
<INVENTORY> 44806
<CURRENT-ASSETS> 101949
<PP&E> 127444
<DEPRECIATION> 75506
<TOTAL-ASSETS> 163439
<CURRENT-LIABILITIES> 38959
<BONDS> 0
0
0
<COMMON> 557
<OTHER-SE> 91581
<TOTAL-LIABILITY-AND-EQUITY> 163439
<SALES> 58014
<TOTAL-REVENUES> 58180
<CGS> 42576
<TOTAL-COSTS> 52661
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 326
<INCOME-PRETAX> 5519
<INCOME-TAX> 2042
<INCOME-CONTINUING> 3477
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3477
<EPS-PRIMARY> .63
<EPS-DILUTED> .59
</TABLE>
<PAGE> 13
EXHIBIT 3(i)
FRANKLIN ELECTRIC CO., INC.
AMENDED AND RESTATED ARTICLES OF INCORPORATION
ARTICLE I
NAME
----
The name of the Corporation is Franklin Electric Co., Inc.
ARTICLE II
PURPOSES AND POWERS
-------------------
2.01. Purposes. The purposes for which the Corporation is formed are
(a) to engage in the general business of manufacturing production and selling
products, and (b) without limitation, to engage in any and all lawful business
or activity for which corporations may be incorporated under the Indiana
Business Corporation Law, as may be amended from time to time (the "IBCL").
2.02. Powers. The Corporation shall have (a) the same powers as an
individual to do all things necessary or convenient to carry out its business
and affairs, and (b) without limitation, all powers, rights and privileges
granted to corporations by the IBCL.
ARTICLE III
TERM OF EXISTENCE
-----------------
The period during which the Corporation shall continue is perpetual.
ARTICLE IV
REGISTERED OFFICE AND REGISTERED AGENT
--------------------------------------
The current street address of the Corporation's registered office is 400
East Spring Street, Bluffton, Indiana 46714, and the name of the Corporation's
registered agent at that office is Dean W. Pfister.
ARTICLE V
AMOUNT OF CAPITAL STOCK
-----------------------
The total number of shares into which the authorized capital stock of the
Corporation is divided is 30,100,000 shares, consisting of 5,100,000 shares
without par value and 25,000,000 shares with par value of $.l0 per share.
<PAGE> 14
ARTICLE VI
TERMS OF CAPITAL STOCK
----------------------
The shares of authorized capital stock are divided into classes as
follows:
1. 100,000 shares of Preference Stock, without par value (hereinafter
sometimes referred to as "Preference Stock");
2. 5,000,000 shares of Preferred Stock, without par value (hereinafter
sometimes referred to as "Preferred Stock"); and
3. 25,000,000 shares of Common Stock, par value $.10 per share
(hereinafter sometimes referred to as "Common Stock").
The preferences, limitations and relative rights of each class are as
follows:
A. Preference Stock.
Shares of Preference Stock may be issued from time to time in one or more
series, in such amounts and for such consideration as the Board of Directors
may determine and with such preferences, limitations and relative rights as
shall be determined and stated by the Board of Directors. Such preferences,
limitations and relative rights shall be determined and stated for each such
series of Preference Stock by resolution of the Board of Directors prior to
the issuance of each of such series, which resolution shall authorize the
issuance of such series and the authority for which is hereby granted to the
Board of Directors of the Corporation. Without limiting the generality of the
authority granted to the Board of Directors herein, the Board of Directors
shall have the power, right and authority to determine the following
preferences, limitations and relative rights:
(1) Designation. The designation of each series, which designation
shall be by distinguishing letter, number, title or combination thereof.
(2) Number. The number of shares of any series to be issued.
(3) Dividend Source, Rate and Dates. The source, rate and dates of
any dividends payable with respect to shares of any series; provided, however,
that no dividends shall be payable upon the shares of Preference Stock
to the extent that (i) the Corporation would not be able to pay its debts as
they become due in the usual course of business; or (ii) the Corporation's
total assets would be less than the sum of its total liabilities plus (unless
otherwise provided in these Articles of Incorporation) the amount that would
be needed, if the Corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of the
shareholders whose preferential rights are superior to those receiving the
distribution.
(4) Dividend Accumulations. Whether any dividends which may be
payable with respect to shares of any series shall be cumulative; and, if they
shall be cumulative, then the dates from which such dividends shall start to
cumulate.
(5) Dividend Preferences. The preference or preferences, if any, to
be accorded dividends payable with respect to shares of any series.
<PAGE> 15
(6) Redemption. The redemption rights and prices, if any, with
respect to shares of any series.
(7) Sinking Fund The terms and amount of any sinking fund provided
for the redemption of shares of any series.
(8) Rights of Purchase. The rights, if any, of the Corporation to
purchase for retirement, other than by way of redemption, shares of any
series, and the terms and conditions of any such purchase rights.
(9) Conversion. Whether or not the shares of any series shall be
convertible into Common Stock or into shares of stock of any other series or
number of series or into any other security; and, if so, the conversion price
or prices, any adjustments thereof and/or any other terms and conditions upon
which such conversion may be effected.
(10) Liquidation. The preference or preferences, if any, with respect
to shares of any series entitled to receive the net assets of the Corporation
upon liquidation, dissolution or winding up of the Corporation.
(11) Voting. The voting rights, if any, to which the holders of the
shares of Preference Stock may be entitled.
B. Series I Junior Participating Preference Stock.
This Section B of this Article VI hereby creates a series of Preference
Stock and hereby states the designation and number of shares, and fixes the
relative powers, preferences and rights of such series.
(1) Designation and Amount. The shares of such series shall be
designated as "Series I Junior Participating Preference Stock" (the "Series I
Preference Stock") and the number of shares constituting the Series I
Preference Stock shall be 100,000. Such number of shares may be increased
or decreased by resolution of the Board of Directors; provided, that no
decrease shall reduce the number of Series I Preference Stock to a number less
than the number of shares then outstanding plus the number of shares reserved
for issuance upon the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities issued by the Corporation
convertible into Series I Preference Stock.
(2) Dividend Rights. Subject to the rights of the holders of any
shares of any series of Preference Stock (or any similar shares) ranking prior
and superior to the Series I Preference Stock with respect to dividends, the
holders of Series I Preference Stock, in preference to the holders of Common
Stock and of any other junior stock, shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the fifteenth day of
February, May, August and November in each year (each such date being referred
to herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series I Preference Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (i) $16.00 or (ii)
subject to the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in Common Stock or a subdivision
of the outstanding Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
<PAGE> 16
first issuance of any Series I Preference Stock or fraction of a Series I
Preference Stock. In the event the Corporation shall at any time declare or
pay any dividend on the Common Stock payable in Common Stock, or effect a
subdivision or combination or consolidation of the outstanding Common Stock
(by reclassification or otherwise than by payment of a dividend in Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount to which holders of Series I Preference Stock were
entitled immediately prior to such event under clause (ii) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
The Corporation shall declare a dividend or distribution on the Series I
Preference Stock as provided in this paragraph 2 immediately after it declares
a dividend or distribution on the Common Stock (other than a dividend payable
in Common Stock); provided that, in the event no dividend or distribution
shall have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $16.00 per share on the Series I Preference Stock
shall nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
Dividends shall begin to accrue and be cumulative on outstanding Series I
Preference Stock from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date,
in which case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of Series I Preference Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events
such dividends shall begin to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the Series I Preference Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for the
determination of holders of Series I Preference Stock entitled to receive
payment of a dividend or distribution declared thereon, which record date
shall be not more than 60 days prior to the date fixed for the payment
thereof.
(3) Redemption. The Series I Preference Stock shall not be redeemable.
(4) Conversion. The Series I Preference Stock shall not be convertible
into Common Stock or shares of any other series of any other class of
preferred stock of the Corporation ("Preferred Stock") or Preference Stock
unless the terms of any such series provide otherwise.
(5) Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made, (i) to the holders of stock ranking junior (either as to
dividends or upon liquidation) to the holders of Series I Preference Stock
unless, prior thereto, the holders of Series I Preference Stock shall have
received from the assets of the Corporation a preferential amount equal to
$5,000 per share plus all accrued and unpaid dividends thereon, whether or not
declared, to the date of payment, provided that the holders of Series I
Preference Stock shall be entitled to receive an aggregate amount per share,
<PAGE> 17
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of Common
Stock, or (ii) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series I
Preference Stock, except distributions made ratably on the Series I Preference
Stock and all such parity stock in proportion to the total amounts to which
the holders of all such stock are entitled upon such liquidation, dissolution
or winding up. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in Common Stock, or effect a
subdivision or combination or consolidation of the outstanding Common Stock
(by reclassification or otherwise than by payment of a dividend in Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of Series I Preference Stock
were entitled immediately prior to such event under the proviso in clause (i)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(6) Voting. Except as provided herein or as may be required by law,
holders of Series I Preference Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any
corporate action.
In addition to any other voting rights as a separate class or otherwise
to which the holders of Series I Preference Stock may be entitled by law and
subject to the provision for adjustment hereinafter set forth, each share of
Series I Preference Stock shall entitle the holder thereof to 100 votes on all
matters submitted to a vote of the shareholders of the Corporation. In the
event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in Common Stock, or effect a subdivision or combination
or consolidation of the outstanding Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the number of
votes per share to which holders of Series I Preference Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number
by a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
Except as otherwise provided herein, in any other provisions of the
Restated Articles of Incorporation of the Corporation creating a series of
Preferred Stock or Preference Stock or any similar stock, or by law, the
holders of Series I Preference Stock and the holders of Common stock and any
other capital stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of shareholders of
the Corporation.
If at the time of any annual meeting of shareholders for the election of
directors a "default in preference dividends," (as that term is hereinafter
defined), on the Series I Preference Stock shall exist, the number of
directors constituting the Board of Directors of the Company shall be
increased by two (2), and the holders of the Series I Preference Stock and any
other series of Preference Stock (whether or not the holders of such stock
would be entitled to vote for the election of directors if such default in
preference dividends did not exist) shall have the right at such meeting,
<PAGE> 18
voting together as a single class without regard to series, to the exclusion
of the holders of Common Stock, to elect two (2) directors of the Company to
fill such newly created directorships. Such right shall continue until there
are no dividends in arrears upon the Series I Preference Stock. Each director
elected by the holders of Series I Preference Stock and any other series of
Preference Stock (a "Preferred Director") shall continue to serve as such
director for the full term for which he shall have been elected,
notwithstanding that prior to the end of such term a default in preference
dividends shall cease to exist. Any Preferred Director may be removed by, and
shall not be removed except by, the vote of the holders of record of the
outstanding Series I Preference Stock and any other series of Preference Stock
voting together as a single class without regard to series, at a meeting of
the shareholders or of the holders of Series I Preference Stock and any other
series of Preference Stock called for the purpose. So long as a default in any
preference dividends on the Series I Preference Stock shall exist, (i) any
vacancy in the office of a Preferred Director may be filled (except as
provided in the following clause (ii)) by an instrument in writing signed by
the remaining Preferred Director and filed with the Company and (ii) in the
case of the removal of any Preferred Director, the vacancy may be filled by
the vote of the holders of the outstanding Series I Preference Stock and any
other series of Preference Stock voting together as a single class without
regard to series, at the same meeting at which such removal shall be voted.
Each director appointed as aforesaid by the remaining Preferred Director shall
be deemed, for all purposes hereof, to be a Preferred Director. Whenever the
term of office of the Preferred Directors shall end and a default in
preference dividends shall no longer exist, the number of directors
constituting the Board of Directors of the Company shall be reduced by two
(2). For the purposes hereof, a "default in preference dividends" on the
Series I Preference Stock shall be deemed to have occurred whenever the amount
of accrued dividends upon any series of the Series I Preference Stock shall be
equivalent to six (6) full quarterly dividends or more, and, having so
occurred, such default shall be deemed to exist thereafter until, but only
until, all accrued dividends on all Series I Preference Stock of each and
every series then outstanding shall have been paid to the end of the last
preceding quarterly dividend period.
(7) Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series I Preference Stock as provided in paragraph 2 of
this Section B are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on Series I
Preference Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on
any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series I Preference Stock;
(ii declare or pay dividends, or make any other distributions, on
any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series I Preference
Stock, except dividends paid ratably on the Series I Preference Stock
and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of
all such stock are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration any
stock ranking junior (either as to dividends or upon liquidation,
<PAGE> 19
dissolution or winding up) to the Series I Preference Stock, provided
that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for any shares of
the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series I Preference
Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any
Series I Preference Stock, or any stock ranking on a parity with the
Series I Preference Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of
Directors) to all holders of such stock upon such terms as the Board
of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any stock of the
Corporation unless the Corporation could, under paragraph 7(a) of this
Section B, purchase or otherwise acquire such stock at such time and in
such manner.
(8) Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
Common Stock is exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case each share of Series I
Preference Stock shall at the same time be similarly exchanged or changed into
an amount per share, subject to the provision for adjustment hereinafter set
forth, equal to 100 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into which or
for which each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in Common Stock, or effect a subdivision or combination or
consolidation of the outstanding Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of
Series I Preference Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(9) Priorities. So long as any Series I Preference Stock remains
outstanding, the Corporation shall not, without the affirmative vote or
written consent of the holders of at least two-thirds of the outstanding
Series I Preference Stock, voting together as a single class, amend, alter or
repeal any of the provisions of these Restated Articles of Incorporation so as
adversely to affect the preferences, limitations and relative rights of Series
I Preference Stock. So long as any Series I Preference Stock remains
outstanding, Series I Preference Stock shall rank, with respect to the payment
of dividends and the distribution of assets, junior to any other series of any
other class of Preference Stock, unless the terms of any such series shall
provide otherwise.
(10) Status of Reacquired Shares. The Corporation shall retire and
cancel any shares of Series I Preference Stock that it redeems, purchases or
otherwise acquires. All such shares shall upon their cancellation become
<PAGE> 20
authorized but unissued shares of Preference Stock and may be reissued as part
of a new series of Preference Stock subject to the conditions and restrictions
on issuance set forth in the restated Articles of Incorporation creating a
series of Preference Stock or as otherwise required by law.
C. Preferred Stock.
Preferred Stock may be issued from time to time in one or more series as
may from time to time be determined by the Board of Directors. Each series
shall be distinctly designated. All shares of any one series of the Preferred
Stock shall be alike in every particular, except that there may be different
dates from which dividends thereon, if any, shall be cumulative, if made
cumulative. The powers, preferences and relative, participating, optional and
other rights of each such series, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any other series at any
time outstanding. Subject to the provisions of Section D of this ARTICLE VI,
the Board of Directors is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any shares of each
particular series of Preferred Stock, the designation, powers, preferences and
relative, participating, optional and other rights, and the qualifications,
limitations and restrictions thereof, if any, of such series, including, but
without limiting the generality of the foregoing, the following:
(a) the distinctive designation of, and the number of Preferred
Stock which shall constitute the series, which number may be increased
(except as otherwise fixed by the Board of Directors) or decreased (but
not below the number of shares thereof then outstanding) from time to
time by action of the Board of Directors;
(b) the rate and times at which, and the terms and conditions upon
which, dividends, if any, on shares of the series shall be paid, the
extent of preferences or relation, if any, of such dividends to the
dividends payable on any other class or classes of shares of the
Corporation, or on any series of Preferred Stock or of any other class
or classes of shares of the Corporation and whether such dividends shall
be cumulative or non-cumulative;
(c) the right, if any, of the holders of shares of the series to
convert the same into, or exchange the same for, shares of any other
class or classes of shares of the Corporation, or of any series of
Preferred Stock, and the terms and conditions of such conversion or
exchange;
(d) whether shares of the series shall be subject to a redemption
price or prices including, without limitation, a redemption price or
prices payable in Common Stock and the time or times at which, and the
terms and conditions upon which shares of the series may be redeemed;
(e) the rights, if any, of the holders of shares of the series upon
voluntary or involuntary liquidation, merger, consolidation,
distribution or sale of assets, dissolution or winding up of the
Corporation;
(f) the terms of the sinking fund or redemption or purchase account,
if any, to be provided for shares of the series; and
(g) the voting powers, if any, of the holders of shares of the
<PAGE> 21
series which may, without limiting the generality of the foregoing,
include (i) the right to more or less than one vote per share on any or
all matters voted upon by the shareholders and (ii) the right to vote,
as a series by itself or together with other series of Preferred Stock
or together with all series of Preferred Stock as a class, upon such
matters, under such circumstances and upon such conditions as the Board
of Directors may fix, including, without limitation, the right, voting
as a series by itself or together with other series of Preferred Stock
or together with all series of Preferred Stock as a class, to elect one
or more directors of this Corporation in the event there shall have been
a default in the payment of dividends on any one or more series of
Preferred Stock or under such other circumstances and upon such
conditions as the Board of Directors may determine.
No holder of any share of any series of Preferred Stock shall be entitled
to vote for the election of directors or in respect of any other matter except
as may be required by the Indiana Business Corporation Law, as amended, or as
is permitted by the resolution or resolutions adopted by the Board of
Directors authorizing the issue of such series of Preferred Stock.
D. Common Stock.
(1) Dividend Rights. Subject to the rights of all stock of the
Corporation ranking, as to dividends, senior to Common Stock, the holders of
Common Stock shall be entitled to receive such dividends, if any, as may be
declared by the Board of Directors of the Corporation from time to time and
paid on Common Stock out of any assets of the Corporation at the time legally
available for the payment of dividends.
(2) Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of the
shares of the Common Stock shall be entitled to share ratably in the assets of
the Corporation remaining after all distributions or payments shall have been
made to the holders of any class of stock (or series thereof) of the
Corporation ranking senior, as to liquidation rights, to Common Stock.
The merger or share exchange of the Corporation with any other
corporation, or a sale, lease or conveyance of all or substantially all of its
assets, shall not be regarded as a liquidation, dissolution or winding up of
the Corporation within the meaning of this section.
(3) Voting. Except as provided herein or as may be required by law,
all voting power shall vest exclusively in the holders of shares of Common
Stock. Each share of Common Stock shall be entitled to one vote on each matter
submitted to a vote of the shareholders of the Corporation.
E. Distributions to Shareholders.
The Board of Directors may authorize and the Corporation may make
distributions to its shareholders if, after giving the distribution effect,
(a) the Corporation would be able to pay its debts as they become due in the
usual course of business and, (b) the Corporation's total assets would be
greater than its total liabilities, without regard to any amount that would be
needed, if the Corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution.
<PAGE> 22
ARTICLE VII
VOTING RIGHTS OF COMMON STOCK
-----------------------------
7.01. Common Stock. Every holder of shares of common stock shall have
the right, at every shareholders' meeting, to one vote for each share of
common stock standing in his name on the books of the Corporation, except as
otherwise provided in the IBCL.
ARTICLE VIII
DIRECTORS
---------
8.01. Number. The number of Directors shall be not less than three (3)
nor more than eleven (11) and the exact number may from time to time be fixed
by the By-Laws. If the By-Laws do not fix the number of Directors, then the
number of Directors shall be five (5).
8.02. Classes of Director. The By-Laws may provide that the Directors
shall be divided into two (2) or three (3) classes, with each class containing
one-half (1/2) or one third (1/3) of the total, with an equal number of
Directors or as near equal as may be, and whose terms of office shall expire
at different times. If Directors are divided into classes, the terms of the
Directors in the first class shall expire at the first annual shareholders'
meeting after their election, the terms of the second class shall expire at
the second annual shareholders' meeting after their election, and the terms of
the third class, if any, shall expire at the third annual shareholders'
meeting after their election. At each annual shareholders' meeting thereafter,
Directors shall be chosen for a term of two (2) years or three (3) years, as
the case may be, to succeed those whose term expire. If the By-Laws provide
for a classified Board, then prior to the completion of their term of office,
a Director may be removed, with or without cause, only at a meeting of the
shareholders called and held for that purpose, by the affirmative vote of the
holders of outstanding shares of not less than two-thirds (2/3) of the shares
entitled to vote, by class, if applicable. Directors need not be shareholders.
A majority of the Directors at any time shall be citizens of the United
States.
8.03. Vacancies. Vacancies occurring in the Board of Directors shall
be filled in the manner provided in the By-Laws, or if the By-Laws do not
provide for the filling of vacancies then in the manner provided by Indiana
law. The By-Laws may also provide that in certain circumstances specified
therein, vacancies occurring in the Board of Directors may be filled by vote
of the shareholders at a special meeting called for that purpose or at the
next annual meeting of shareholders.
8.04. Removal of Directors. Prior to the completion of their term of
office, and subject to the provisions of Section 8.02, a Director may only be
removed by the shareholders, and in the manner as provided under the IBCL.
<PAGE> 23
ARTICLE IX
PROVISIONS FOR REGULATION OF BUSINESS AND
-----------------------------------------
CONDUCT OF AFFAIRS OF CORPORATION
---------------------------------
9.01. Shareholder Meetings and Board Meetings. Meetings of the
shareholders may be held either at the principal office of the Corporation in
the State of Indiana or at any other place, within or without the State of
Indiana, as provided by the By-Laws of the Corporation and the notices of such
meetings. Meetings of the Board of Directors may be held at such place, either
within or without the State of Indiana, as may be authorized by the By-Laws.
9.02. Powers of Board. In addition to the powers and authorities
hereinabove or by statute expressly conferred, the Board of Directors is
hereby authorized to exercise all such powers and do all such acts and things
as may be exercised or done by a corporation organized and existing under the
provisions of the IBCL. The Board of Directors shall have the exclusive power
to make, amend, repeal or waive By-Laws and the provisions thereof.
9.03. Nonliabilitv of Shareholders. Shareholders of the Corporation are
not personally liable for the acts or debts of the Corporation, nor is private
property of shareholders subject to the payment of corporate debt.
9.04. Interests of Directors.
(a) A conflict of interest transaction is a transaction with
the Corporation in which a Director of the Corporation has a direct or
indirect interest. A conflict of interest transaction is not voidable by
the Corporation solely because of the Director's interest in the
transaction if any one (1) of the following is true:
(1) The material facts of the transaction and the
director's interest were disclosed or known to the Board of
Directors or a Committee of the Board of Directors and the Board
of Directors or committee authorized, approved, or ratified the
transaction.
(2) The material facts of the transaction and the
Director's interest were disclosed or known to the shareholders
entitled to vote and they authorized, approved, or ratified the
transaction.
(3) The transaction was fair to the Corporation.
(b) For purposes of this Section 9.04, a Director of the
Corporation has an indirect interest in a transaction if:
(1) another entity in which the Director has a material
financial interest or in which the Director is a general partner
is a party to the transaction, or
(2) another entity of which the Director is a director,
officer, or trustee is a party to the transaction and the
transaction is, or is required to be, considered by the Board of
Directors of the Corporation.
<PAGE> 24
(c) For purposes of Section 9.04(a)(1), a conflict of interest
transaction is authorized, approved, or ratified if it receives the
affirmative vote of a majority of the Directors on the Board of
Directors (or on the committee) who have no direct or indirect interest
in the transaction, but a transaction may not be authorized, approved,
or ratified under this section by a single Director. If a majority of
the Directors who have no direct or indirect interest in the transaction
vote to authorize, approve, or ratify the transaction, a quorum shall be
deemed present for the purpose of taking action under this Section 9.04.
The presence of, or a vote cast by, a Director with a direct or
indirect interest in the transaction does not affect the validity of any
action taken under Section 9.04(a)(l), if the transaction is otherwise
authorized, approved, or ratified as provided in such subsection.
(d) For purposes of Section 9.04(a)(2), shares owned by or voted
under the control of a Director who has a direct or indirect interest in
the transaction, and shares owned by or voted under the control of an
entity described in Section 9.04(b), may be counted in a vote of
shareholders to determine whether to authorize, approve or ratify a
conflict of interest transaction.
(e) This Section 9.04 shall not be construed to require
authorization, ratification, or approval by the shareholders of any
transaction or to invalidate any transaction that would otherwise be
valid under common or statutory law.
ARTICLE X
AMENDMENT OR REPEAL
-------------------
10.01. Amendment or Repeal: Certain Provisions. Any amendment or repeal
of all or any part of this Article X and of Sections 8.01 and 8.02 of Article
VIII, shall require the affirmative vote of the holders of outstanding shares
of not less than two-thirds (2/3) of the shares entitled to vote, by class, if
applicable.
10.02 Amendment or Repeal: Other Provisions. Except as is otherwise
expressly provided in Section 10.01, all other provisions of the Articles of
Incorporation, as amended, may be amended or repealed in the manner now or
hereafter permitted by law, and all rights conferred upon shareholders by
these Articles of Incorporation, as amended, are conferred subject to this
reservation.
5
<PAGE> 25
EXHIBIT 3 (ii)
Effective as of 4/16/99.
AMENDED AND RESTATED
BY-LAWS OF
FRANKLIN ELECTRIC CO., INC.
ARTICLE I.
OFFICES
-------
Section 1.1. Principal Office. The principal office of the Corporation
shall be in the City of Bluffton, County of Wells, State of Indiana.
Section 1.2. Other Offices. The Corporation may also have other offices
at such places within or without the State of Indiana as the Board of
Directors may from time to time determine.
Section 1.3. Registered Office and Agent. The Corporation shall maintain
a registered office and registered agent as required by the Indiana Business
Corporation Law, as now or hereafter in effect ("IBCL"). The registered office
need not be the same as the Corporation's principal office.
ARTICLE II.
SHAREHOLDERS
------------
Section 2.1. Annual Meeting. The annual meeting of the shareholders of
the Corporation shall be held annually on the third Friday in April of each
year 10:00 a.m., local time, at the principal office of the Corporation in
Bluffton, Indiana, or at such other place (either within or without the State
of Indiana) at a date and time as may be fixed by the Board of Directors and
designated in the notice or waiver of notice of such meeting. At the annual
meeting, the directors shall be elected, and all such other business as may
properly be brought before the meeting shall be transacted.
Section 2.2. Special Meetings. Special meetings of the shareholders may
be held at the principal office of the Corporation in Bluffton, Indiana, or at
such other place within or without the State of Indiana, as may be determined
by the Board of Directors and as may be designated in the notice or waiver of
notice of such meeting. Special meetings may be called, in writing, only by
the Chairman, the President, or a majority of the Board of Directors. Business
transacted at any special meeting shall be confined to the purpose or purposes
stated in the notice of such special meeting.
Section 2.3. Notice of Shareholders' Meetings. Notice of each meeting
of shareholders, stating the date, time and place, and, in the case of special
meetings, the purpose or purposes for which such meeting is called, shall be
given to each shareholder entitled to vote thereat not less than ten nor more
than sixty days before the date of the meeting unless otherwise prescribed by
the IBCL.
<PAGE> 26
Section 2.4. Record Dates.
(a) In order that the Corporation may determine the shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion or exchange of shares or
for the purpose of any other lawful action, the Board of Directors may
fix, in advance, a future date as the record date, which shall not be
more than seventy days nor less than ten days before the date of such
meeting or any other action requiring a determination by shareholders.
(b) If a record date has not been fixed as provided in preceding
subsection (a), then:
(i) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the
close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held;
and
(ii) The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
(c) Only those who shall be shareholders of record on the record
date so fixed as aforesaid shall be entitled to such notice of, and to
vote at, such meeting and any adjournment thereof, or to receive payment
of such dividend or other distribution, or to receive such allotment of
rights, or to exercise such rights, as the case may be, notwithstanding
the transfer of any shares on the books of the Corporation after the
applicable record date; provided, however, the Corporation shall fix a
new record date if a meeting is adjourned to a date more than one
hundred twenty days after the date originally fixed for the meeting.
Section 2.5. Quorum and Adjournment. At any meeting of the shareholders
the holders of a majority of the outstanding shares of the Corporation
entitled to vote who are present in person or represented by proxy shall
constitute a quorum for the transaction of business unless otherwise
prescribed by the IBCL or the Corporation's Articles of Incorporation, as
amended (the "Articles of Incorporation"). Once a share is represented for
any purpose at a meeting, it is deemed present for quorum purposes for the
remainder of the meeting and for any adjournment of that meeting unless a new
record date is set or is required to be set by the IBCL, the Articles of
Incorporation or these By-Laws.
Whether or not a quorum is present the Chairman of the meeting or
shareholders present in person or represented by proxy representing a majority
of the shares present or represented may adjourn the meeting from time to
time, without notice other than an announcement at the meeting. At any such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the original
meeting.
Section 2.6. Voting by Shareholders; Proxies. Every shareholder shall
have the right at every shareholders' meeting to one vote for each share
standing in his name on the books of the Corporation, except as otherwise
provided by the IBCL or the Articles of Incorporation, and except that no
<PAGE> 27
share shall be voted at any meeting upon which any installment is due and
unpaid, or which belongs to the Corporation. Election of directors at all
meetings of the shareholders at which directors are to be elected shall be by
ballot, and a plurality of the votes cast thereat shall be necessary to elect
any Director. Action on a matter (other than the election of directors)
submitted to shareholders entitled to vote thereon at any meeting shall be
approved if the votes cast favoring the action exceed the votes cast opposing
the action, unless a greater number of affirmative votes is required by the
IBCL or the Articles of Incorporation. A shareholder may vote either in person
or by proxy executed in writing by the shareholder or a duly authorized
attorney in fact. No proxy shall be valid after eleven months from the date of
its execution unless a longer time is expressly provided therein.
Section 2.7. Shareholder List. At lease five business days before each
shareholders' meeting, the Secretary of the Corporation shall make, or cause
to be made, an alphabetical list of the names of the shareholders entitled to
notice of and to vote at the meeting, arranged by voting group (and within
each voting group by class or series of shares) and showing the address of and
the number of shares held by each shareholder.
Beginning five business days before the date of the meeting and
continuing through the meeting, the list shall be on file at the principal
office of the Corporation (or at the place identified in the meeting notice in
the city where the meeting will be held) and shall be available for inspection
by any shareholder entitled to vote at the meeting for the purpose and to the
extent permitted by law. During this period a shareholder, or the
shareholder's agent or attorney authorized in writing, is entitled on written
demand to inspect and copy the list during regular business hours and at the
shareholder's expense.
Section 2.8. Conduct of Business.
(a) Presiding Officer. The Chairman of the Board of Directors, when
present, and in the absence of the Chairman the President, shall be the
presiding officer at all meetings of shareholders, and in the absence of
the Chairman and the President, the Board of Directors shall choose a
presiding officer. The presiding officer of the meeting shall have
plenary power to determine procedure and rules of order (including with
respect to the opening and the closing of the polls for each matter upon
which shareholders will vote at the meeting) and make definitive rulings
at meetings of the shareholders.
(b) Annual Meetings of Shareholders.
(i) Nominations of persons for election to the Board of
Directors of the Corporation and the proposal of business
to be considered by the shareholders may be made at an
annual meeting of shareholders (A) pursuant to the
Corporation's notice of meeting, (B) by or at the direction
of the Board of Directors or (C) by any shareholder of the
Corporation who was a shareholder of record at the time of
giving of notice provided for in this Section 2.8, who is
entitled to vote at the meeting and who complies with the
notice procedures set forth in this Section 2.8.
(ii) For director nominations or other business to be properly
brought before any annual meeting by a shareholder pursuant to
clause (C) of paragraph (b)(i) of this Section 2.8, the
shareholder must have given timely notice thereof in writing to
<PAGE> 28
the Secretary of the Corporation. To be timely, a shareholder's
notice shall be delivered to the Secretary at the principal
business office of the Corporation not later than ninety days
prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the
annual meeting is advanced by more than thirty days or delayed by
more than sixty days from such anniversary date, notice by the
shareholder to be timely must be so delivered not later than the
ninetieth day prior to such annual meeting or the tenth day
following the day on which public announcement of the date of such
meeting is first made. Such shareholder's notice shall set forth
(A) as to each person whom the shareholder proposes to nominate
for election or reelection as a director all information relating
to such person that is required to be disclosed in solicitations
of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such
person's written consent to being named in the proxy statement as
a nominee and to serving as a director if elected); (B) as to any
other business that the shareholder proposes to bring before the
meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at
the meeting and any material interest in such business of such
shareholder and the beneficial owner, if any, on whose behalf the
proposal is made; and (C) as to the shareholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination
or proposal is made (x) the name and address of such shareholder,
as they appear on the Corporation's books, and of such beneficial
owner and (y) the class and number of shares of the Corporation
which are owned beneficially and of record by such shareholder and
such beneficial owner.
(iii) The notice procedures of this Section 2.8 shall not apply to
any annual meeting if the Corporation shall not have set forth in
its proxy statement for the preceding annual meeting of
shareholders the date by which notice of nominations by
shareholders of persons for election as directors or of other
business proposed to be brought by shareholders at the next annual
meeting of shareholders must be received by the Corporation to be
considered timely pursuant to this Section 2.8.
(c) Special Meetings of Shareholders. Only such business shall be
conducted at a special meeting of shareholders as shall have been
brought before the meeting pursuant to the Corporation's notice of
meeting. Nominations of persons for election to the Board of Directors
may be made at a special meeting of shareholders at which directors are
to be elected pursuant to the Corporation's notice of meeting (A) by or
at the direction of the Board of Directors or (B) by any shareholder of
the Corporation who was a shareholder of record at the time of giving of
notice provided for in this Section 2.8, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this
Section 2.8. Nominations by shareholders of persons for election to the
Board of Directors may be made at such a special meeting of shareholders
if a shareholder's notice containing the information set forth in
paragraph (b)(ii) of this Section 2.8 shall be delivered to the
Secretary at the principal executive offices of the Corporation not
later than the 90th day prior to such special meeting or the tenth day
following the date on which public announcement is first made of the
<PAGE> 29
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
(d) General.
(i) Only such persons who are nominated in accordance with the
procedures set forth in this Section 2.8 shall be eligible to
serve as directors and only such business shall be conducted at
a meeting of shareholders as shall have been brought before the
meeting in accordance with the procedures set forth in this
Section 2.8. The presiding officer at the meeting shall have the
power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made in accordance
with the procedures set forth in this Section 2.8 and, if any
proposed nomination or business is not in compliance with this
Section 2.8, to declare that such defective proposal shall be
disregarded.
(ii) For purposes of this Section 2.8, "public announcement"
shall mean disclosure in a press release reported by the Dow
Jones News Service, Associated Press or comparable national news
service or a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Sections 13, 14
or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this Section
2.8, a shareholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Section
2.8. Nothing in this Section 2.8 shall be deemed to affect any
rights of shareholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
Section 2.9. Organization of Meetings. The Secretary, who may call on any
officer or officers of the Corporation for assistance, shall make all
necessary and appropriate arrangements for all meetings of shareholders,
receive all proxies and ascertain and report to each meeting of shareholders
the number of shares present, in person and by proxy. The certificate and
report of the Secretary, as to the regularity of such proxies and as to the
number of shares present, in person and by proxy, shall be received as prima
facie evidence of the number of shares present in person and by proxy for the
purpose of establishing the presence of a quorum at such meeting and for
organizing the same, and for all other purposes.
Section 2.10. Inspectors. At every meeting of shareholders there shall be
appointed by the Board of Directors three inspectors of election to receive
and count the votes of shareholders. Each inspector shall take an oath to
fairly and impartially perform the duties of an inspector of the election and
to honestly and truly report the results thereof. Such inspectors shall be
responsible for tallying and certifying the vote taken on any matter at each
meeting which is required to be tallied and certified by them in the
resolution of the Board of Directors appointing them or the appointment of the
presiding officer at such meeting as the case may be. Except as otherwise
provided by these By-Laws or by law, such inspectors shall also decide all
questions touching upon the qualification of voters, the validity of proxies
and ballots, and the acceptance and rejection of votes. The Board of Directors
shall have the authority to make rules establishing presumptions as to the
validity and sufficiency of proxies.
<PAGE> 30
ARTICLE III.
DIRECTORS
---------
Section 3.1. Number and Classes. The Board of Directors shall consist of
nine members. Subject to the rights of the holders of any series of Preferred
Stock outstanding, the directors shall be divided into three classes,
designated as Class I, Class II and Class III, respectively, which at all
times shall be as nearly equal in number as possible. One class of directors
shall be elected annually to serve for a term of three years or until their
successors shall have been elected and qualified.
Section 3.2. Resignation, Vacancies and Removal of Directors. Any
director may resign his office at any time by delivering his resignation in
writing to the Board of Directors, its Chairman, or the Secretary of the
Corporation, and the acceptance of such resignation, unless required by the
terms thereof, shall not be necessary to make such resignation effective. The
resignation shall be effective when the notice is delivered unless the notice
specifies a later effective date. If any vacancy occurs on the Board of
Directors caused by resignation, death, or other incapacity, or increase in
the number of directors, then (a) the Board of Directors may fill the vacancy;
or (b) if the directors remaining in office constitute fewer than a quorum of
the Board, they may fill the vacancy by the affirmative vote of a majority of
all directors remaining in office; or (c) if a majority of the directors
remaining in office are unable to agree on a person to fill the vacancy, then
the remaining directors may call a special shareholders' meeting to fill the
vacancy. The term of a director elected to fill a vacancy expires at the end
of the term for which the director's predecessor was elected. Prior to the
completion of their term of office, a director may only be removed in the
manner as provided in the Articles of Incorporation.
Section 3.3. Regular Meetings. A regular meeting of the Board of
Directors will be held at the place of (or reasonably near thereto) and
promptly following the annual meeting of the shareholders. At the annual
meeting, the Board shall elect the officers of the Corporation for the ensuing
year and transact such other business as may properly come before the meeting.
Other regular meetings may be held at the principal office of the Corporation
or at any other place and at such times as the Board may fix from time to
time. Notice shall be given in accordance with Article IV of these By-Laws.
Section 3.4. Special Meetings. Special meetings of the Board of Directors
shall be held at the principal office of the Corporation or at any other place
reasonably convenient for directors to attend whenever called by the Chairman
or the President or a majority of the Board of Directors. Notice shall be
given in accordance with the Article IV of these By-Laws.
Section 3.5. Quorum and Voting. Except as provided in Section 3.2, a
majority of the actual number of directors elected and qualified from time to
time shall be necessary to constitute a quorum for the transaction of any
business at any meeting of the Board of Directors. The affirmative vote of a
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors, unless the act of a greater number
is expressly required by the IBCL, the Articles of Incorporation, or these By-
Laws. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present may adjourn the meeting from time to time,
without notice other than an announcement at the meeting, until a quorum is
present.
<PAGE> 31
Section 3.6. Compensation. Each member of the Board of Directors shall
be paid such compensation as shall be fixed by the Board of Directors,
provided, that nothing herein contained shall be construed to preclude any
director from serving in any other capacity and receiving compensation
therefore.
Section 3.7. Qualification. No person age seventy or older shall be
eligible for election, re-election, or appointment as a member of the Board of
Directors of the Corporation. In addition, if an officer serving as a director
retires before age seventy, only the President or Chairman will be eligible to
stay on as a director. All other officers may remain as a director until the
next shareholders' meeting, but such officers will not be eligible for re-
election to the Board of Directors.
Section 3.8. Committees.
(a) The Board of Directors may from time to time, in its
discretion, by resolution passed by a majority of the Board,
designate, and appoint, from the directors, committees of one or more
persons which shall have and may exercise such lawfully delegable
powers and duties conferred or authorized by the resolutions of
designation and appointment. The Board of Directors shall have power
at any time to change the members of any such committee, to fill
vacancies, and to discharge any such committee.
(b) Unless the Board of Directors shall provide otherwise, the
presence of one-half of the total membership of any committee of the
Board of Directors shall constitute a quorum for the transaction of
business at any meeting of such committee and the affirmative vote of
a majority of those present shall be necessary and sufficient for the
taking of any action thereat.
Section 3.9. Directors' or Committee Action by Consent in Lieu of
Meeting. Any action required or permitted to be taking at any meeting of the
Board of Directors or any committee thereof may be taken without a meeting if
the action is taken by all members of the Board or such committee as the case
may be. The action shall be evidenced by one or more written consents
describing the action taken, signed by each director, and included in the
minutes or filed with the Corporation's records reflecting the action taken.
Any such written consent is effective when the last director signs the
consent, unless the consent specifies a different prior or subsequent
effective date.
Section 3.10. Meetings by Telephone or Other Communications. Members of
the Board of Directors, or any committee of the Board, may participate in a
meeting of the Board or such committee by means of telephone or other
communication by which all directors participating may simultaneously hear
each other during the meeting. A director participating in a meeting by this
means is deemed to be present in person at the meeting.
Section 3.11. Assent by Director to Action Taken at a Meeting. A director
who is present at a meeting of the Board of Directors or a committee of the
Board at which action on any corporate matter is taken is deemed to have
assented to the action taken unless:
(a) The director objects at the beginning of the meeting (or promptly
upon the director's arrival) to holding it or transacting business at
the meeting;
<PAGE> 32
(b) The director's dissent or abstention from the action taken is
entered in the minutes of the meeting; or
(c) The director delivers written notice of the director's dissent or
abstention to the presiding officer of the meeting before its
adjournment or to the Secretary of the Corporation immediately after
adjournment of the meeting.
The right of dissent or abstention is not available to a director who
votes in favor of the action taken.
ARTICLE IV.
NOTICES
-------
Section 4.1. Notices. Notices to directors and shareholders shall be in
writing and delivered personally or mailed to their addresses appearing on the
records of the Corporation or, with respect to directors only, by telegram,
cable, telephone, telecopy, facsimile or a nationally recognized overnight
delivery service. Notice to directors of special meetings by mail shall be
given at least two days before the meeting. Notice to directors of special
meetings by personal delivery, telegram, cable, telephone, telecopy or
facsimile shall be given a reasonable time before the meeting, but in no event
less than one hour before the meeting. Notice by mail or recognized overnight
delivery service shall be deemed to be given when sent to the director at his
or her address appearing on the records of the Corporation. Notice by telegram
or cable shall be deemed to be given when the telegram or cable addressed to
the director at his or her address appearing on the records of the Corporation
is delivered to the telegraph company. Notice by telephone, telecopy or
facsimile shall be deemed to be given when transmitted by telephone, telecopy
or facsimile to the telephone, telecopy or facsimile number appearing on the
records of the Corporation for the director (regardless of whether the
director shall have personally received such telephone call or telecopy or
facsimile message).
Section 4.2. Waiver of Notice. Whenever any notice is required, a waiver
thereof signed by the person entitled to such notice, whether before or after
the time stated therein, and filed with the minutes or corporate records,
shall be deemed equivalent to the giving of notice. Attendance of any person
at any meeting of shareholders or directors shall constitute a waiver of
notice of such meeting, except when such person attends only for the express
purpose of objecting, at the beginning of the meeting (or in the case of a
director's meeting, promptly upon such director's arrival), to the transaction
of any business at the meeting and does not thereafter vote for or assent to
action taken at the meeting.
ARTICLE V.
OFFICERS
--------
Section 5.1. Officers (Including Removal). The officers of the
Corporation may consist of a Chairman of the Board, a President, one or more
Vice Presidents, a Treasurer, and a Secretary, all of whom shall be elected by
the Board of Directors of the Corporation at the first meeting thereof
immediately following the annual meeting of the shareholders (or at such other
time as the Board deems appropriate), and shall hold office until their
successors are elected and qualify. One person may hold more than one office.
<PAGE> 33
The Board of Directors shall have the power from time to time to appoint such
other officers as may be necessary for the proper conduct of the business of
the Corporation. Any officer elected or appointed by the Board of Directors
may be removed at any time with or without cause by the affirmative vote of a
majority of the whole Board of Directors.
Section 5.2. Compensation. The compensation of the officers of the
Corporation elected or appointed by the Board of Directors, shall be fixed by
the Board of Directors or a committee of the Board.
Section 5.3. Chairman. The Chairman shall be the chief executive officer
of the Corporation and shall have general authority and supervision over the
management and direction of the affairs of the Corporation and supervision of
all departments and of all officers of the Corporation. The Chairman shall,
subject to the other provisions of these By-Laws, have such other powers and
perform such other duties as usually devolve upon the chief executive officer
of a corporation or as may be prescribed by the Board of Directors, and shall,
when present, preside at all meetings of the shareholders and of the Board of
Directors. In case of the absence, disability, death, resignation or removal
from office of the Chairman, the powers and duties of the Chairman shall, for
the time being, devolve upon and be exercised by the President, unless
otherwise ordered by the Board of Directors.
Section 5.4. President. The President shall be the chief operating
officer of the Corporation and shall have such general authority and
supervision over the management and direction of the affairs of the
Corporation, subject to the authority of the Chairman. The President shall,
subject to the other provisions of these By-Laws, have such other powers and
perform such other duties as usually devolve upon the President of a
corporation, and such further duties as may be prescribed by the Chairman or
the Board of Directors. In case of the absence, disability, death, resignation
or removal from office of the President, the powers and duties of the
President shall, for the time being, devolve upon and be exercised by the
Chairman, and in case of the absence, disability, death, resignation, or
removal from office of both the Chairman and the President, the powers and
duties of the President shall, for the time being, devolve upon and be
exercised by the Vice President so appointed by the Board of Directors.
Section 5.5. Vice Presidents. Each of the Vice Presidents shall have such
powers and duties as may be prescribed by the Board of Directors, the Chairman
or the President. The Board of Directors, the Chairman or the President may
designate one or more of such Vice Presidents as Executive Vice President,
Senior Vice President or Assistant Vice President.
Section 5.6. Secretary. The Secretary shall attend and keep the minutes
of all meetings of the Board of Directors and of the shareholders. The
Secretary shall have charge and custody of the corporate records and corporate
seal of the Corporation, and shall in general perform all duties incident to
the office of secretary of a corporation, subject at all times to the
direction and control of the Board of Directors, the Chairman and the
President.
Section 5.7. Treasurer. The Treasurer shall have charge of, and shall be
responsible for, the collection, receipt, custody and disbursement of the
funds of the Corporation, and shall also have the custody of all securities
belonging to the Corporation. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, taking proper
receipts or making proper vouchers for such disbursements, and shall at all
times preserve the same during the term of office. When necessary or proper,
<PAGE> 34
the Treasurer shall endorse, on behalf of the Corporation, all checks, notes,
or other obligations payable to the Corporation or coming into possession of
the Treasurer for and on behalf of the Corporation, and shall deposit the
funds arising therefrom, together with all other funds of the Corporation
coming into possession of the Treasurer, in the name and to the credit of the
Corporation in such bank or banks as the Board of Directors shall from time to
time by resolution direct. The Treasurer shall perform all duties incident to
the office of treasurer of a corporation, subject at all time to the direction
and control of the Board of Directors, the Chairman and the President.
ARTICLE VI.
CAPITAL STOCK
-------------
Section 6.1. Certificates for Shares. Unless the Articles of
Incorporation provide otherwise, all shares of stock of the Corporation shall
be represented by a certificate. The certificates for shares of the
Corporation shall be in such form not inconsistent with the Articles of
Incorporation and the IBCL and as shall be approved by the Board of Directors.
At a minimum, each certificate for shares must state on its face:
a) The name of the Corporation and that it is organized under the law
of the State of Indiana;
(b) The name of the person to whom issued; and
(c) The number and class of shares and the designation of the series, if
any, the certificate represents.
Each certificate must be signed (either manually or in facsimile) by the
Chairman or the President and Secretary or such other two officers as may be
designated by the Board. Share certificates which have been signed (whether
manually or in facsimile) by officers may be used and shall continue to be
valid even though any individual whose signature appears on a certificate
shall no longer be an officer of the Corporation at the time of the issue of
the certificate.
Section 6.2. Registration of Transfer and Registered Shareholders.
Registration of transfer of shares and issuance of a new certificate or
certificates therefor shall be made only upon surrender to the Corporation or
its transfer agent and cancellation of a certificate or certificates for a
like number of shares of the same class, properly endorsed for transfer,
accompanied by (a) such assurance as the Corporation or transfer agent may
require as to the genuineness and effectiveness of each necessary endorsement,
(b) satisfactory evidence of compliance with all laws relating to collection
of taxes, and (c) satisfactory evidence of compliance with or removal of any
restriction on transfer of which the Corporation or transfer agent may have
notice.
As respects the Corporation, its stock record books shall be conclusive
as to the ownership of its shares for all purposes and the Corporation shall
not be bound to recognize adverse claims.
Section 6.3. Consideration for Issue of Shares. The shares of the capital
stock of the Corporation may be issued by the Corporation from time to time
for such an amount of consideration as may be fixed by the Board of Directors
and consisting of any tangible or intangible property or benefit to the
Corporation, including cash, promissory notes, services performed, contracts
<PAGE> 35
for services to be performed, or other securities of the Corporation. When
payment of the consideration for which any share was authorized to be issued
shall have been received by the Corporation, the shares issued therefor shall
be fully paid and nonassessable. Shares may be issued to the Corporation's
shareholders without consideration to the extent permitted by the IBCL and
shares so issued shall be fully paid and nonassessable. If the Corporation
authorizes the issuance of shares for promissory notes or for promises to
render services in the future, the Corporation shall report in writing to the
shareholders the number of shares authorized to be issued with or before the
notice of the next shareholders' meeting. The Board may (but is not required)
to place in escrow shares issued for a contract for future services or
benefits or a promissory note or may make such other arrangements or
conditions or place such other restrictions on the transfer of the shares
until the services are performed, the note is paid, or the benefits are
received.
Section 6.4. Lost, Stolen or Destroyed Certificates. No certificate for
shares of the capital stock of the Corporation shall be issued in place of any
certificate alleged to have been lost, stolen or destroyed except upon proper
evidence to the satisfaction of the Board of Directors of such loss, theft, or
destruction, and (unless waived by the Board of Directors) except upon
delivery to the Corporation of a bond of indemnity in such amount as may be
fixed by the Board of Directors, executed by the person to whom the new
certificate or certificates should be issued and also by a surety company
approved by the Board of Directors, indemnifying the Corporation against any
claim upon or in respect of such lost, stolen, or destroyed certificate;
provided, however, that whenever this Corporation has a duly appointed,
qualified and acting transfer agent for its said shares, the Board of
Directors may delegate to said transfer agent the authority to determine the
sufficiency of the proof of such loss, theft or destruction and to issue a new
certificate or certificates in replacement thereof, and the Board of Directors
may waive the necessity of obtaining a separate bond of indemnity in
connection with the issuance of each certificate replacing such lost, stolen
or destroyed certificates and in lieu thereof may authorize such transfer
agent to obtain a blanket lost original instruments bond naming this
Corporation and such transfer agent as the obligees therein.
Section 6.5. Transfer Agents and Registrars. The Board of Directors may
from time to time appoint a transfer agent and a registrar in one or more
cities, may require all certificates evidencing shares of the Corporation to
bear signatures of a transfer agent and a registrar, may provide that such
certificates shall be transferable in more than one city, and may provide for
the functions of transfer agent and registrar to be combined in one agency.
ARTICLE VII.
CONDUCT OF BUSINESS
-------------------
Section 7.1. Contracts, Deeds and Other Instruments. All agreements
evidencing obligations of the Corporation, including but not limited to
contracts, trust deeds, promissory notes, sight drafts, time drafts and
letters of credit (including applications therefor), may be signed by any one
of the Chairman, the President, any Vice President, the Treasurer, the
Secretary, and any person authorized by a resolution of the Board of
Directors.
A certified copy of these By-Laws and/or any authorization given
hereunder may be furnished as evidence of the authorities herein granted, and
<PAGE> 36
all persons shall be entitled to rely on such authorities in the case of a
specific contract, conveyance or other transaction without the need of a
resolution of the Board of Directors specifically authorizing the transaction
involved.
Section 7.2. Checks. Checks and other negotiable instruments for the
disbursement of Corporation funds may be signed by any one of the Chairman,
the President, any Vice President and the Treasurer. In addition to the
foregoing, other persons may sign instruments for the disbursement of
Corporation funds under written authorization signed by any two of the
foregoing officers acting jointly. Electronic or wire transfers of funds may
be authorized by any officer of the Corporation who is authorized pursuant to
this Section 7.2 to disburse Corporation funds by check or other negotiable
instrument.
Section 7.3. Deposits. Securities, notes and other evidences of
indebtedness shall be kept in such places, and deposits of checks, drafts and
funds shall be made in such banks, trust companies or depositories, as shall
be recommended and approved by any two of the Chairman, the President, any
Vice President and the Treasurer.
Section 7.4. Voting of Stock. Unless otherwise ordered by the Board of
Directors, the Chairman, the President or any Vice President shall have the
power to execute and deliver on behalf of the Corporation proxies on stock
owned by the Corporation appointing a person or persons to represent and vote
such stock at any meeting of stockholders, with full power of substitution,
and shall have power to alter or rescind such appointment. Unless otherwise
ordered by the Board of Directors, the Chairman, the President or any Vice
President shall have the power on behalf of the Corporation to attend and to
act and vote at any meeting of stockholders of any corporation in which the
Corporation holds stock and shall possess and may exercise any and all rights
and powers incident to the ownership of such stock, which, as the owner
thereof, the Corporation might have possessed and exercised if present. The
Board of Directors may confer like powers upon any other person or persons.
Section 7.5. Transfer of Stock. Such form of transfer or assignment
customary or necessary to effect a transfer of stocks or other securities
standing in the name of the Corporation shall be signed by the Chairman, the
President, any Vice President or the Treasurer, and the Secretary shall sign
as witness if required on the form. A corporation or person transferring any
such stocks or other securities pursuant to a form of transfer or assignment
so executed shall be fully protected and shall be under no duty to inquire
whether the Board of Directors has taken action in respect thereof.
ARTICLE VIII.
INDEMNIFICATION
---------------
Section 8.1. Definitions. As used in this Article VIII:
(a) "Director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the Corporation,
is or was serving at the Corporation's request as a director, officer,
partner, member, manager, trustee, employee, or agent of another foreign
or domestic corporation, partnership, limited liability company, joint
venture, trust, employee benefit plan, or other enterprise, whether for
profit or not. A director is considered to be serving an employee
benefit plan at the Corporation's request if the director's duties to
<PAGE> 37
the Corporation also impose duties on, or otherwise involve services by,
the director to the plan or to participants in or beneficiaries of the
plan. "Director" includes, unless the context requires otherwise, the
estate or personal representative of a director.
(b) "Expenses" include counsel fees.
(c) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an
employee benefit plan), or reasonable expenses incurred with respect to
a proceeding.
(d) "Officer" means an individual who is or was an officer of the
Corporation or an individual who, while an officer of the Corporation,
is or was serving at the Corporation's request as a director, officer,
partner, member, manager, trustee, employee, or agent of another foreign
or domestic corporation, partnership, limited liability company, joint
venture, trust, employee benefit plan, or other enterprise, whether for
profit or not. An officer is considered to be serving an employee
benefit plan at the Corporation's request if the officer's duties to the
Corporation also impose duties on, or otherwise involve services by, the
officer to the plan or to participants in or beneficiaries of the plan.
"Officer" includes, unless the context requires otherwise, the estate or
personal representative of an officer.
(e) "Official capacity" means:
(1) When used with respect to a director, the office of director
in the Corporation;
(2) When used with respect to an officer, the office of the
Corporation held by the officer; and
(3) When used with respect to an individual other than an officer
or director, the employment or agency relationship undertaken by
the employee or agent on behalf of the Corporation.
"Official capacity" does not include service for any other foreign or
domestic corporation or any partnership, limited liability company, joint
venture, trust, employee benefit plan, or other enterprise, whether for profit
or not.
(e) "Party" includes an individual who was, is, or is threatened to
be made a named defendant or respondent in a proceeding.
(f) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
Section 8.2. Indemnification.
(a) The Corporation shall indemnify an individual made a party to a
proceeding because the individual is or was a director or officer
against any liability incurred in the proceeding if:
(1) The individual's conduct was in good faith; and
<PAGE> 38
(2) The individual reasonably believed:
(A) In the case of conduct in the individual's official
capacity with the Corporation, that the individual's conduct
was in the Corporation's best interest; and
(B) In all other cases, that the individual's conduct was at
least not opposed to the Corporation's best interest; and
(3) In the case of any criminal proceeding, the individual either:
(A) Had reasonable cause to believe the individual's conduct
was lawful; or
(B) Had no reasonable cause to believe the individual's
conduct was unlawful.
(b) A director's or officer's conduct with respect to an employee
benefit plan for a purpose the director or officer reasonably believed
to be in the interests of the participants in and beneficiaries of the
plan is conduct that satisfies the requirement of subsection (a)(2)(B)
of this Section 8.2.
(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not,
of itself, determinative that the director or officer did not meet the
standard of conduct described in this Section 8.2.
Section 8.3. Additional Indemnification. In addition to the
indemnification to which a director or officer may be entitled pursuant to
Section 8.2, the Corporation shall indemnify a director or officer who was
wholly successful, on the merits or otherwise, in the defense of any
proceeding to which the director or officer was a party because the director
or officer was a director or officer of the Corporation against reasonable
expenses incurred by the director or officer in connection with the
proceeding.
Section 8.4. Advance Indemnification.
(a) The Corporation shall pay for or reimburse the reasonable expenses
incurred by a director or officer who is a party to a proceeding in
advance of final disposition of the proceeding if:
(1) The director or officer furnishes the Corporation a written
affirmation of the director's or officer's good faith belief that
the director or officer has met the standard of conduct described
in Section 8.2.
(2) The director or officer furnishes the Corporation a written
undertaking, executed personally or on the director's or officer's
behalf, to repay the advance if it is ultimately determined that
the director or officer did not meet the standard of conduct; and
(3) A determination is made that the facts then known to those
making the determination would not preclude indemnification
under this Article VIII.
<PAGE> 39
(b) The undertaking required by subsection (a)(2) of this Section 8.4
must be an unlimited general obligation of the director or officer but
need not be secured and may be accepted without reference to financial
ability to make repayment.
(c) Determinations and authorizations of payments under this section
shall be made in the manner specified in Section 8.5 below.
Section 8.5. Procedure for Determining Indemnification.
(a) The Corporation may not indemnify a director or officer under
Section 8.2 of this Article VIII unless authorized in the specific case
after a determination has been made that indemnification of the director
or officer is required in the circumstances because the director or
officer has met the standard of conduct set forth in Section 8.2 of this
Article VIII.
(b) The determination shall be made by any one of the following
procedures:
(1) By the Board of Directors by majority vote of a quorum
consisting of directors not at the time parties to the proceeding.
(2) If a quorum cannot be obtained under subdivision (1), by
majority vote of a committee duly designated by the Board of
Directors (in which designation directors who are parties may
participate), consisting solely of two or more directors not at
the time parties to the proceeding.
(3) By special legal counsel:
(A) Selected by the Board of Directors or its committee in
the manner prescribed in subdivision (1) or (2); or
(B) If a quorum of the Board of Directors cannot be obtained
under subdivision (1) and a committee cannot be designated
under subdivision (2), selected by majority vote of the full
Board of Directors (in which selection directors who are
parties may participate).
(4) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding
may not be voted on the determination.
(c) Authorization of indemnification and evaluation as to reasonableness
of expenses shall be made in the same manner as the determination that
indemnification under Section 8.2 is required, except that if the
determination is made by special legal counsel, authorization of
indemnification and evaluation as to reasonableness of expenses shall be
made by those entitled under subsection (b)(3) of this Section 8.5 to
select counsel.
Section 8.6. Indemnification of Agents and Employees.
(a) The Corporation may indemnify and advance expenses under this
Article VIII to an employee, or agent of the Corporation, whether or not
an officer or director, to the same extent as to a director or officer;
and
<PAGE> 40
(b) The Corporation may also indemnify and advance expenses to an
officer, employee or agent, whether or not a director, to the extent,
consistent with public policy, that may be provided by the Articles of
Incorporation, general or specific action of the Board of Directors, or
contract.
Section 8.7. Indemnification Not Exclusive.
(a) The indemnification and advance for expenses provided for or
authorized by this Article VIII does not exclude any other rights to
indemnification and advance for expenses that a person may have under:
(1) the IBCL;
(2) the Corporation's Article of Incorporation or By-Laws;
(3) a resolution of the Board of Directors or of the shareholders;
(4) any contract or policy of insurance; or
(5) any other authorization, whenever adopted, after notice, by a
majority vote of all the voting shares then issued and
outstanding.
(b) Without limiting the foregoing subsection (a), nothing contained in
this Article VIII shall be construed to limit in any manner the
indemnification or advance for expenses that may be permitted or
required, in the absence of the provisions of this Article VIII,
pursuant to the IBCL.
(c) This Article VIII does not limit the Corporation's power to pay or
reimburse expenses incurred by a director, officer, employee, or agent
in connection with the person's appearance as a witness in a proceeding
at a time when the person has not been made a named defendant or
respondent to the proceeding.
Section 8.8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation or who while a director, officer, employee or
agent of the Corporation is or was serving at the request of the Corporation
as a director, officer, partner, member, manager, trustee, employee, or agent
of another foreign or domestic corporation, partnership, limited liability
company, joint venture, trust, employee benefit plan, or other enterprise,
against any liability asserted against him or her and incurred by him or her
in any such capacity, or arising out of his or her status as such, whether or
not the Corporation would have the power to indemnify him or her against such
liability under the provisions of this Article VIII or under the IBCL.
Section 8.9. Contract With The Corporation. The provisions of this
Article VIII shall be deemed to be a contract between the Corporation and each
director or officer who serves in any such capacity at any time while this
Article VIII is in effect, and any repeal or modification of any provisions of
this Article VIII shall not affect any rights or obligations theretofore
accruing under this Article VIII with respect to any state of facts then or
theretofore existing or any claim, action, suit or proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such state
of facts.
<PAGE> 41
ARTICLE IX.
SEAL
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If a corporate seal is used, it shall have inscribed thereon the name
"Franklin Electric Co., Inc." around the circumference thereof and the word
"Seal" in the center thereof. The seal can be used by causing it or a
facsimile thereof to be impressed, affixed, reproduced or otherwise.
ARTICLE X.
FISCAL YEAR
-----------
The fiscal year of the Corporation shall end with the Saturday nearest to
December 31 and begin with the Sunday following the Saturday nearest to
December 31.
ARTICLE XI.
AMENDMENT
---------
These By-Laws may be amended by the Board of Directors, by the
affirmative vote of a majority of all the members of the Board of Directors,
at any regular or special meeting, notice of which contains the proposed
amendment or a digest thereof; or at any meeting, regular or special, at which
all directors are present, or by the written consent of all directors pursuant
to Section 3.2 of Article III of these By-Laws.
ARTICLE XII.
CONTROL SHARES
--------------
The terms "control shares" and "control share acquisition" used in this
Article XII shall have the meanings set forth in Indiana Business Corporation
Law Section 23-1-42-1, et seq. (the "Act"). Control shares of the Corporation
acquired in a control share acquisition shall have only such voting rights as
are conferred by the Act.
Control shares of the Corporation acquired in a control share acquisition
with respect to which the acquiring person has not filed with the Corporation
the acquiring person statement required by the Act may, at any time during the
period ending sixty days after the last acquisition of control shares by the
acquiring person, be redeemed by the Corporation at the fair value thereof
pursuant to procedures authorized by a resolution of the Board of Directors.
Such authority may be exercised generally or confined to specific instances.
Control shares of the Corporation acquired in a control share acquisition
with respect to which the acquiring person was not granted full voting rights
by the shareholders as provided in the Act may, at any time after the
shareholder vote required by the Act, be redeemed by the Corporation at the
fair value thereof pursuant to procedures authorized by a resolution of the
Board of Directors. Such authority may be exercised generally or confined to
specific instances.
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