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 September 30, 1996
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 0-3855
LACLEDE STEEL COMPANY
(Exact name of Registrant as specified in its charter)
Delaware 43-0368310
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Metropolitan Square, St. Louis, Missouri 63102
(Address of principal executive offices)
(Zip code)
314-425-1400
(Registrant's telephone number, including area code)
(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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
As of October 31, 1996 there were 4,056,140 shares of
$0.01 par value common stock outstanding.<PAGE>
LACLEDE STEEL COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
(In Thousands Except Per Share Data)
Third Quarter EndedYear to Date
September 30, September 30,
1996 1995 1996 1995
Net sales 83,630 76,561 251,041 244,746
Costs and expenses:
Cost of products sold 80,836 70,568 240,139 217,492
Selling, general and administrative 3,658 3,516 10,538 10,647
Depreciation 1,924 2,118 5,830 6,121
Interest expense, net 2,740 2,607 8,336 7,308
Gain on sale of subsidiary stock -- -- -- (728)
Total costs and expenses 89,158 78,809 264,843 240,840
Earnings (loss) before income taxes (5,528) (2,248) (13,802) 3,906
Provision (credit) for income taxes (2,138) (900) (5,336) 1,378
Net earnings (loss) (3,390) (1,348) (8,466) 2,528
Retained earnings (deficit) at beginning (7,391) 11,698 (2,315) 7,822
Retained earnings (deficit) at end of per (10,781) 10,350 (10,781) 10,350
Net earnings (loss) per share (0.84) (0.34) (2.09) 0.62
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<PAGE>
LACLEDE STEEL COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands)
Sep. 30, Dec. 31,
1996 1995
Current Assets:
Cash and cash equivalents 143 161
Accounts receivable, less allowances 40,601 37,287
Prepaid expenses 427 744
Income taxes recoverable -- 1,479
Inventories:
Finished 52,307 56,377
Semi-finished 25,458 28,683
Raw materials 8,209 8,415
Supplies 14,786 13,807
Total inventories 100,760 107,282
Total Current Assets 141,931 146,953
Non-Current Assets:
Intangible pension asset 15,909 17,409
Other intangible assets 2,299 2,407
Bond funds in trust 2,385 2,385
Prepaid pension contributions 5,631 6,586
Deferred income taxes 49,468 44,062
Notes receivable 3,600 --
Other 3,655 3,785
Total Non-Current Assets 82,947 76,634
Plant and Equipment, at cost 245,335 243,573
Less - accumulated depreciation 122,709 117,382
Net Plant and Equipment 122,626 126,191
Total Assets 347,504 349,778
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<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Sep. 30, Dec. 31,
1996 1995
Current Liabilities:
Accounts payable 44,874 31,617
Accrued compensation 6,164 7,667
Current portion of long-term debt 2,484 2,459
Accrued costs of pension plans 13,327 15,449
Other 1,642 2,002
Total Current Liabilities 68,491 59,194
Non-Current Liabilities:
Accrued costs of pension plans 62,112 67,123
Accrued postretirement medical benefits 81,610 81,431
Other 6,158 6,721
Total Non-Current Liabilities 149,880 155,275
Long-Term Debt:
Bank revolving credit 82,870 84,541
Bank term loan 5,706 6,780
Revenue bonds 24,415 25,470
Other 2,000 2,000
Total Long-Term Debt 114,991 118,791
Stockholders' Equity:
Preferred stock, without par value, authorized
2,000,000 shares with 416,667 issued 83 --
Common stock, $13.33 par value, authorized
5,000,000 shares with 4,056,140 shares issued 54,081 54,081
Capital in excess of par value 6,254 247
Retained earnings (deficit) (10,781) (2,315)
Minimum pension liability adjustment (35,495) (35,495)
Total Stockholders' Equity 14,142 16,518
Total Liabilities and Stockholders' Equity 347,504 349,778
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LACLEDE STEEL COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
Net earnings (loss) (8,466) 2,528
Adjustments to reconcile net earnings (loss) to
net cash provided by (used in) operating activities:
Depreciation 5,830 6,121
Gain on sale of subsidiary stock -- (728)
Change in deferred income taxes (5,406) 191
Changes in assets and liabilities that
provided (used) cash:
Accounts receivable (3,314) 4,972
Inventories 6,522 (11,693)
Accounts payable and accrued expenses 12,589 (11,205)
Pension cost less than funding (4,678) (2,211)
Accrued postretirement medical benefits 179 320
Other assets and liabilities 354 181
Net cash provided by (used in) operating activi 3,610 (11,524)
Cash flows used in investing activities:
Capital expenditures (9,778) (8,947)
Proceeds from sale of equipment 4,000 --
Net cash used in investing activities (5,778) (8,947)
Cash flows from financing activities:
Net borrowings (repayments) under revolving cre (1,671) 19,785
Payments on long-term debt (2,104) (2,130)
Proceeds from long term debt -- 2,000
Proceeds from sale of subsidiary stock -- 1,000
Proceeds from issuance of preferred stock 6,090 --
Payment of financing costs (165) (181)
Net cash provided by financing activities 2,150 20,474
Cash and cash equivalents:
Net increase (decrease) during the period (18) 3
At beginning of year 161 159
At end of period 143 162
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
The accompanying unaudited consolidated financial statements
include the accounts of Laclede Steel Company and its wholly-owned
subsidiaries. All intercompany accounts and transactions
have been eliminated. The consolidated financial statements
reflect all adjustments (such adjustments are of a normal
recurring nature unless otherwise disclosed in these interim
financial statements) which are in the opinion of Management
necessary for a fair statement of the results for the interim
periods.
NOTE 2 - SALE OF STOCK OF SUBSIDIARY
In the second quarter of 1995 the Company completed the sale of
approximately 3% of the common stock of its subsidiary, Laclede
Mid America Inc. Accordingly a non-taxable gain of $728,000
was recognized, which represents the excess of the sales price
over the net book value of the stock sold.
NOTE 3 - EARNINGS PER SHARE
Earnings per share amounts have been calculated based on
weighted average shares outstanding of 4,056,140.
NOTE 4 - INCOME TAXES
The provision for income taxes represents an effective combined
federal and state tax rate of 39% for the nine months ended
September 30, 1996 and 35% for the nine months ended September
30, 1995. The lower effective rate in 1995 reflects the non-taxable gain
on sale of subsidiary stock.
NOTE 5 - CAPITAL STOCK
In July 1996 the Company issued 416,667 shares of Series A 6%
preferred stock to Ivaco Inc. and the executive officers of the
Company for $6,090,000, after expenses. This transaction
resulted in an increase in Capital in excess of par value of
$6,006,667. On October 28, 1996, at a special meeting of the
stockholders, an amendment was approved to the Company's
Certificate of Incorporation which reduced the par value of
each share of common stock from $13.33 per share to $0.01 per
- 5 -<PAGE>
share and increased the number of authorized common stock
shares from 5,000,000 shares to 25,000,000 shares. The
stockholders also approved the recapitalization of the
Company's Series A 6% preferred stock. At such time each share
of the preferred stock became convertible into common stock at
the option of the holder at a conversion price of $3.20 into
4.69 shares of common stock.
The financial results for 1996 are subject to annual audit.
- 6 -<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
In the first nine months of 1996 operating activities provided
$3.6 million in cash. Capital expenditures were $9.8 million,
and contributions to Company pension plans totaled $12.7 million.
Increases in accounts receivable of $3.3 million were more than
offset by decreases in inventory of $6.5 million, while accounts
payable and accrued expenses increased by $12.6 million.
Proceeds from a sale-leaseback transaction increased cash flow by
$4.0 million in the second quarter. Net working capital
decreased by $14.3 million and the ratio of current assets to
current liabilities was 2.1 to 1.0 at September 30, 1996.
In July 1996, the Company issued a total of $6.25 million in
Series A Preferred Stock to its largest stockholder, Ivaco Inc.,
and to executive officers of the Company. On October 28, 1996,
at a special meeting of the stockholders, an amendment was
approved to the Company's Certificate of Incorporation which
reduced the par value of each share of common stock from $13.33
per share to $0.01 per share and increased the number of
authorized common stock shares from 5,000,000 shares to
25,000,000 shares. The stockholders also approved the
recapitalization of the Company's Series A 6% preferred stock to
convertible preferred stock. At such time each share of the
preferred stock became convertible into common stock at the
option of the holder at a conversion price of $3.20 into 4.69
shares of common stock. In connection with the sale of Series A
Preferred Stock to Ivaco Inc. and to executive officers of the
Company, the Company was required to use its best efforts to
obtain stockholder approval of the amendment to the Company's
Certificate of Incorporation. In addition such approval was
necessary in order for the Company to pursue a rights offering to
all of the Company's stockholders, entitling all such
stockholders to subscribe for Series A Preferred Stock (the
"Rights Offering").
The Company, however, has postponed the Rights Offering in
order to allow time to improve recent operating results. In this
regard the Company is studying a number of cost reduction and
productivity improvement programs. The Company currently
anticipates that a substantial number of its programs will be
implemented by the end of 1996. Cost reductions will include
areas which the Company does not usually review including
compensation and work force related issues and issues concerning
employee benefits. The Company does not presently intend to
proceed with the Rights Offering until these programs have been
implemented and operating results have reached satisfactory
levels. There can be no assurance, however, when or if the
Company will proceed with a Rights Offering.
- 7 -<PAGE>
At September 30, 1996, $82.9 million in borrowings were
outstanding under the Company's revolving credit facility.
Amounts available under this facility were utilized early in the
fourth quarter to cover outstanding short-term commitments,
primarily trade accounts payable.
The Company has reached an agreement with its principal lenders
to amend its Loan and Security Agreement effective September 30,
1996, obtaining waivers of financial covenants relating to
operating losses and net worth for the third quarter of 1996, and
modifying such covenants with regard to the year 1996. In the
event further amendment to financial covenants is necessary
because operating losses exceed the limits of the amended
covenants, there can be no assurance that the Company will be
able to obtain such amendment.
Under terms of the Loan and Security Agreement, amounts
available based on Company inventory levels will be reduced by
$3.8 million by December 31, 1996. The Company believes that
planned inventory reductions will equal or exceed the reduction
in revolving credit availability and, thus, this reduction should
not affect current availability. During the last three months of
1996 the Company anticipates capital expenditures of
approximately $1.2 million, and contributions to pension plans of
$2.3 million. Based on current sales prices and currently
anticipated productivity improvements, normal operating
activities will generate sufficient cash flow to finance these
expenditures. However, the Company may be required to extend
payment terms for certain suppliers, and is currently considering
the sale of certain assets in order to improve cash flow.
Results of Operations
Net sales increased by $6.3 million or 2.6% in the first nine
months of 1996 compared to the first nine months of 1995. This
reflects a 15.6% increase in steel shipments, offset by a 12.6%
decrease in average selling prices for steel products. Cost of
products sold increased by $22.6 million or 10.4% in the first
nine months of 1996 compared to the first nine months of 1995.
The increase in cost of products sold reflects the increase in
steel shipments and a change in the mix of products sold. The
overall decline in selling prices resulted in a significant
reduction in product margins and was the most significant reason
for the first nine months' operating losses.
Third quarter 1996 net sales increased by $7.1 million, or 9.2%
over the third quarter of 1995, reflecting a 19.5% increase in
steel shipments, partially offset by a decrease in average
selling prices of 9.1%. The higher shipping volume includes an
increase in shipments of semi-finished steel. The lower average
selling prices reflect both decreases in product selling prices
and the increase in shipments of semi-finished steel, sold at
lower prices than the Company's finished products.
- 8 -<PAGE>
Cost of products sold in the third quarter of 1996 increased by
$10.3 million or 14.6% over the comparable period of 1995. The
increase in cost of products sold was proportionately less than
the increase in shipments because of the change in product mix
and lower production and maintenance costs per ton in the third
quarter of 1996.
The increase in interest expense in the first nine months of
1996 is primarily the result of an increase in bank borrowings
and an increase in the average interest rate of approximately 70
basis points.
- 9 -<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
A special meeting of the stockholders was held on
October 28, 1996.
Proposals voted upon:
(1) Approving the amendment to the Certificate of
Incorporation of the company to provide for a
reduction of the par value per share of the Common
Stock from $13.33 per share to $0.01 per share.
For Against Abstention Withheld
3,421,556 101,281 33,381 --
(2) Approving the amendment to the Certificate of
Incorporation of the Company to provide for an
increase in authorized Common Stock from 5,000,000
shares to 25,000,000 shares.
For Against Abstention Withheld
3,321,982 87,750 35,919 110,567
(3) Approving the recapitalization of the Company's
Series A Preferred Stock, no par value per share,
such that the Series A Preferred Stock owned by
Ivaco Inc. and certain members of management of
the Company is convertible into Common Stock at
the option of the holder of such Series A
Preferred Stock; effective upon the amendment of
the Company's Certificate of Incorporation
provided for in Item 1 and Item 2 and pursuant to
Section 12 of the Company's Certificate of
Designation for Series A Preferred Stock filed
with the Secretary of State of the State of
Delaware on July 30, 1996.
For Against Abstention Withheld
2,713,417 97,173 38,721 706,907
- 10 -<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(3) Registrant's Restated Certificate of Incorporation
dated October 28, 1996.
(4)(a) Registrant's Loan and Security Agreement dated as of
September 7, 1994. (Incorporated by reference to
Exhibit (4)(a) in Registrant's quarterly report on Form
10-Q for September 30, 1994.)
(4)(b) First Amendment dated February 15, 1995 to Registrant's
Loan and Security Agreement. (Incorporated by
reference to Exhibit (4)(b) in Registrant's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994.)
(4)(c) Second Amendment dated May 10, 1995 to Registrant's
Loan and Security Agreement. (Incorporated by
reference to Exhibit (4)(c) in Registrant's Quarterly
Report on Form 10-Q for the period ended September 30,
1995.)
(4)(d) Third Amendment dated June 1, 1995 to Registrant's Loan
and Security agreement. (Incorporated by reference to
Exhibit (4)(c) in Registrant's Quarterly Report on Form
10-Q for the period ended September 30, 1995.)
(4)(e) Fourth Amendment dated December 7, 1995 to Registrant's
Loan and Security Agreement. (Incorporated by
reference to Exhibit (4)(e) in Registrant's Annual
Report on Form 10-K for the fiscal year ended December
31, 1995.)
(4)(f) Fifth Amendment dated January 26, 1996 to Registrant's
Loan and Security Agreement. (Incorporated by
reference to Exhibit (4)(f) in Registrant's Annual
Report on Form 10-K for the fiscal year ended December
31, 1995.)
(4)(g) Sixth Amendment dated June 26, 1996 to the Company's
Loan and Security Agreement. (Incorporated by
reference to Exhibit (4)(g) in Registrant's Quarterly
Report on Form 10-Q for the period ended June 30,
1996.)
(4)(h) Seventh Amendment dated July 30, 1996 to the Company's
Loan and Security Agreement. (Incorporated by
reference to Exhibit (4)(h) in Registrant's Quarterly
Report on Form 10-Q for the period ended June 30,
1996.)
- 11 -<PAGE>
Instruments with respect to long-term debt issues have
been omitted where the amount of securities authorized
under such instruments does not exceed 10% of the total
consolidated assets of the Registrant. Registrant
hereby agrees to furnish a copy of any such instrument
to the Commission upon its request.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the
quarter.
- 12 -<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
LACLEDE STEEL COMPANY
(Registrant)
/s/ Michael H. Lane
Michael H. Lane
Vice President - Finance
Treasurer and Secretary
Duly Authorized Officer and
Principal Financial Officer
Date: November 14, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> SEP-30-1996
<PERIOD-TYPE> 9-MOS
<CASH> 143
<SECURITIES> 0
<RECEIVABLES> 42,808
<ALLOWANCES> 2,207
<INVENTORY> 100,760
<CURRENT-ASSETS> 141,931
<PP&E> 245,335
<DEPRECIATION> 122,709
<TOTAL-ASSETS> 347,504
<CURRENT-LIABILITIES> 68,491
<BONDS> 114,991
0
83
<COMMON> 54,081
<OTHER-SE> (40,022)
<TOTAL-LIABILITY-AND-EQUITY> 347,504
<SALES> 251,041
<TOTAL-REVENUES> 251,041
<CGS> 240,139
<TOTAL-COSTS> 245,969
<OTHER-EXPENSES> 10,538
<LOSS-PROVISION> 83
<INTEREST-EXPENSE> 8,336
<INCOME-PRETAX> (13,802)
<INCOME-TAX> (5,336)
<INCOME-CONTINUING> (8,466)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,466)
<EPS-PRIMARY> (2.09)
<EPS-DILUTED> (2.09)
</TABLE>
RESTATED CERTIFICATE OF INCORPORATION
OF LACLEDE STEEL COMPANY
ARTICLE I.
The name of the corporation (hereinafter called the Corporation) is Laclede
Steel Company.
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 100 West 10th Street, City of Wilmington, County of New Castle. The name of
the Corporation's registered agent at such address is The Corporation Trust
Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is as
follows:
To engage in any lawful act or activity for which a corporation may be
organized under the General Corporation Law of the State of Delaware.
Without in any way limiting the generality of the foregoing, to engage
in any and every kind of business enterprise, venture or activity whether
manufacturing, importing, processing, distributing, selling, servicing, or
otherwise; to design, invest or develop; and to buy, sell, mortgage, lease,
construct, or otherwise acquire or otherwise dispose of, or otherwise deal
in and with real and personal property of every kind, character and
description, tangible and intangible.
ARTICLE IV
The total number of shares of capital stock which the Corporation shall
have the authority to issue is Twenty-Seven Million (27,000,000), of which
Twenty-Five Million (25,000,000) shares shall be Common Stock of the par value
of One Cent ($0.01) each and of which Two Million (2,000,000) shares shall be
Preferred Stock without par value.
The Board of Directors may authorize the issuance of Preferred Stock in one
or more series having such voting powers, full or limited, or no voting powers,
and such designations, preferences and relative, participating, optional or
other special rights and qualifications, limitations or restrictions thereof
(which may differ with respect to each series) as shall be stated and
1
<PAGE>
expressed in the resolution or resolutions of the Board of Directors providing
for the issue of such stock. The Board of Directors is expressly authorized to
adopt such resolution or resolutions and authorize the issuance of the Preferred
Stock from time to time as it may deem desirable. Different series of Preferred
Stock shall not be construed to constitute different classes of shares for the
purpose of voting by classes.
Except as may be otherwise provided by law or in this Restated Certificate
of Incorporation, as amended from time to time, or in the provisions of the
By-Laws of the Corporation, as amended from time to time, with respect to the
fixing of a record date for the determination of stockholders entitled to vote
or in the resolutions of the Board of Directors relating to any series of the
Preferred Stock, the holders of the Common Stock shall have full and exclusive
voting power.
The number of authorized shares of any class of stock of the Corporation
may be increased or decreased by a vote of the holders of a majority of the
outstanding shares of the Corporation entitled to vote.
Unless authorized by a vote of three-fourths of the whole Board of
Directors, the Corporation shall not (a) issue, or permit to remain outstanding,
any series of Preferred Stock of the Corporation if holders of such Preferred
Stock would have more than one vote with respect to each share of Preferred
Stock in connection with the election of directors, (b) authorize any reverse
stock split with respect to any security of the Corporation which generally
entitles its holder to vote for the election of directors at a meeting of
stockholders, or (c) authorize the issuance of any Voting Securities of the
Corporation in exchange for cash. As used herein, a "Voting Security" includes
(a) any security of the Corporation which generally entitles its holder to vote
for the election of directors at a meeting of stockholders and (b) any option,
warrant or right to purchase, or any security convertible into such a security.
SEE EXHIBIT A ATTACHED HERETO FOR CERTIFICATE OF DESIGNATIONS, PREFERENCES,
AND RIGHTS OF SERIES A PREFERRED STOCK ARTICLE V
The Corporation shall have perpetual existence.
ARTICLE VI
By-Laws of the Corporation may be made, amended, altered, or repealed
either (a) by the stockholders, (i) by vote of the holders of two-thirds (2/3)
of the outstanding shares entitled to vote at any annual meeting of the
stockholders or at any special meeting of the stockholders called for that
purpose in the case of an amendment, alteration or repeal of Article VIII or of
Section 1 of Article III of the By-Laws of the Corporation, and (ii) by a
2
<PAGE>
vote of the holders of a majority of the outstanding shares entitled to vote at
any annual meeting of the stockholders or at any special meeting of the
stockholders called for that purpose in any other case, or (b) by the Board of
Directors, by a vote of a three-fourths majority of the whole Board of Directors
of the Corporation except that the Board of Directors may not alter, amend or
repeal Article VIII or Section 1 of Article III of the By-Laws of the
Corporation.
ARTICLE VII
A. The Board of Directors shall consist of not less than three (3) nor more
than twelve (12) directors as may be provided in the By-Laws of the Corporation.
Each director shall hold office until the annual meeting next following his
election and until his successor is duly elected and qualified, unless earlier
removed as provided by law.
B. At all elections of directors of the Corporation each stockholder shall
be entitled to as many votes as shall equal the number of votes which (except
for this provision) he would be entitled to cast for the election of directors
with respect to his shares of stock, multiplied by the number of directors to be
elected, and he may cast all of such votes for a single director or may
distribute them among the number to be voted for, or any two or more of them, as
he may see fit.
ARTICLE VIII
A. To the fullest extent permitted by law, subject only to the express
prohibitions on limitation of liability set forth in Section 102(b)(7) of the
General Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended, a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. Further, the Corporation shall to the fullest extent
permitted by Section 145 of the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended, indemnify all persons
who it may indemnify pursuant thereto.
B. The affirmative vote of at least eighty percent (80%) of the outstanding
shares of the capital stock of the Corporation entitled to vote shall be
required (a) for the adoption of any agreement for the merger or consolidation
of the Corporation with or into any other corporation or the merger of any other
corporation into the Corporation, (b) to authorize any sale, lease or exchange
of all or substantially all of the assets of the Corporation to or with any
corporation, person or other entity, and (c) to authorize any sale, lease or
exchange to or with the Corporation (in exchange for its securities in a
transaction for which stockholder approval is required by law) of any assets of
any other corporation, person or other entity, if (as of the record date for the
determination of stockholders entitled to notice thereof and to vote thereon)
3
<PAGE>
such other corporation, person or entity referred to in clause (a), (b) or (c)
above is the beneficial owner, directly or indirectly, of more than ten percent
(10%) of the outstanding capital stock of the Corporation entitled to vote. For
the purposes hereof any corporation, person or other entity shall be deemed to
be the beneficial owner of any shares of capital stock of the Corporation
entitled to vote (i) which it has the right to acquire pursuant to any
agreement, or upon exercise of conversion rights, warrants or options, or
otherwise, or (ii) which are beneficially owned, directly or indirectly
(including shares deemed owned through application of clause (i) above), by any
other corporation, person or entity with which it has any agreement, arrangement
or understanding with respect to the acquisition, holding, voting or disposition
of stock of the Corporation, or which is its "affiliate" or "associate" as those
terms are defined in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934. Any determination made in good faith by the
Board of Directors of the Corporation, on the basis of information at the time
available to it, as to whether any corporation,, person or other entity is the
beneficial owner of more than ten percent (10%) of the outstanding capital stock
of the Corporation entitled to vote shall be conclusive and binding for all
purposes of this paragraph. The provisions of this paragraph shall not be
applicable to (1) any merger or consolidation of the Corporation with or into
any other corporation, or any merger of any other corporation into the
Corporation, or (2) any sale or lease of all or any substantial part of the
assets of the Corporation to, or (3) any sale or lease to the Corporation in
exchange for securities of the Corporation of any assets of any corporation,
person or other entity if the Board of Directors of the Corporation shall by
resolution have approved a memorandum of understanding with such other
corporation, person or other entity with respect to such transaction prior to
the time that such other corporation, person or other entity shall have become a
holder of more than ten percent (10%) of the capital stock of the Corporation
entitled to vote.
C. Any action required by law to be taken at any annual or special meeting
of stockholders of the Corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of not less than all of the
outstanding stock of the Corporation entitled to vote thereon.
D. Except where a greater vote is required pursuant to paragraph B of
Article VIII of this Restated Certificate of Incorporation, the affirmative vote
of at least two-thirds (2/3) of the outstanding shares of the capital stock of
the Corporation entitled to vote shall be required (a) for the adoption of any
agreement for the merger or consolidation of the Corporation (or of any other
corporation with respect to a merger or consolidation in which the Corporation's
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Voting Securities will be issued) with or into any other corporation (other than
a merger or consolidation between the Corporation and one or more of its
subsidiaries), (b) to authorize any sale, lease or exchange of all or
substantially all of the assets of the Corporation to or with any corporation,
person or other entity (other than its wholly-owned subsidiaries), and (c) to
authorize any sale, lease or exchange to or with the Corporation of any assets,
other than cash, of any other corporation, person or other entity in exchange
for the Voting Securities of the Corporation. As used herein, "Voting Security"
shall have the meaning set forth in Article IV of this Restated Certificate of
Incorporation.
ARTICLE IX
A. Except as specified in paragraph B of this Article IX, the Corporation
reserves the right, at any time and from time to time, to amend, alter, change
or repeal any provision contained in this Restated Certificate of Incorporation,
and other provisions authorized by the laws of the State of Delaware at the time
in force may be added or inserted in this Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by law; and all rights, powers,
preferences and privileges of whatsoever nature conferred upon stockholders,
Directors or any other persons whomsoever by and pursuant to this Restated
Certificate of Incorporation in its present form or as hereafter amended are
granted subject to the right reserved in this Article IX.
B. Anything herein to the contrary notwithstanding, the provisions of
Article VII, paragraphs B and C of Article VIII and this paragraph B of Article
IX may not be amended, altered, changed or repealed except upon the affirmative
vote of eighty percent (80%) of the outstanding stock of the Corporation
entitled to vote thereon.
C. Anything herein to the contrary notwithstanding, the provisions of
Article IV, of Article VI, or paragraph D of Article VIII and of this paragraph
C of Article IX of the Restated Certificate of Incorporation may not be amended,
altered, changed or repealed except upon the affirmative vote of two-thirds
(2/3) of the outstanding stock of the Corporation entitled to vote thereon.
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Exhibit A
CERTIFICATE OF DESIGNATIONS,
PREFERENCES, AND RIGHTS OF
SERIES A PREFERRED
STOCK OF LACLEDE STEEL COMPANY.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
RESOLVED, that the Board of Directors of the Company (the "Board") hereby
approves and authorizes the creation, issuance and sale, either in one or more
public offerings or private placements, of up to One Million Sixty Four Thousand
Thirty Six (1,064,036) shares of Series A Preferred Stock which shall be senior
to all other classes of equity securities of the Company; and
RESOLVED FURTHER, that in connection with the issuance of the Series A
Preferred Stock, the Board designates a committee (the "Committee") consisting
of John B. McKinney, a director of the Company, to fix the designations and any
of the preferences or rights ("Terms") of the shares of Series A Preferred Stock
relating to dividends, redemption, dissolution, any distribution of assets of
the Company or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Company or fix the number of shares of any series of
stock or authorize the increase or decrease of the shares of any series;
provided that the Committee shall fix the Terms of the Series A Preferred Stock
as outlined at this meeting, with each share of Series A Preferred Stock (a)
having no voting power, (b) having a dividend rate of 6% per annum, (c) to be
recapitalized upon stockholder approval (the "Recapitalization") such that such
shares would be convertible, at the option of the holders of such Series A
Preferred Stock, into Common Stock of the Company (with a conversion price equal
to 80% of the closing price of the Company's Common Stock for the ten trading
days prior to stockholder approval), (d) having a dividend rate of 8% per annum
if the Recapitalization is not approved by stockholders and (e) being redeemable
if the Recapitalization is not approved by the stockholders; and
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We, the undersigned, (i) President and Chief Executive Officer and (ii)
Vice President - Finance, Treasurer and Secretary, respectively, of the Company,
in accordance with Sections 141(f) and 151(g) of the General Corporation Law,
hereby certify that the Committee, at a meeting duly convened and held on July
19, 1996, pursuant to authority expressly vested in the Committee by the Board
of Directors, adopted the following resolution:
RESOLVED, that pursuant to the authority expressly granted to and vested in
the Committee by the Board of Directors of the Company and the provisions of the
Certificate of Incorporation of the Company, as amended, this Committee hereby
creates and authorizes the issuance of a series of One Million Sixty-Four
Thousand and Thirty-Six (1,064,036) shares of the Company's Series A Preferred
Stock, no par value per share, and hereby fixes the designation, dividend rate,
redemption provisions, voting powers, rights on liquidation or dissolution, and
other preferences and relative, participating, optional or other special rights,
and the qualifications, limitations, or restrictions thereof, as follows:
1. Designation; Rank.
(A) The series of preferred stock of the Company, no par value per
share (the "Preferred Stock"), created and authorized hereby shall be designated
as the "Series A Preferred Stock" (the "Series A Preferred Stock"). The number
of shares of Series A Preferred Stock shall be One Million Sixty-Four Thousand
and Thirty-Six (1,064,036).
(B) The Series A Preferred Stock, with respect to dividend rights and
rights upon liquidation, dissolution or winding up of the Company, shall rank
senior to the Common Stock and to all other classes and series of equity
securities of the Company. Except as contemplated in Section 4.B, no other
classes or series of equity securities of the Company subsequently issued shall
rank senior to or on a parity with the Series A Preferred Stock as to dividend
rights and rights upon liquidation, dissolution or winding up of the Company.
The Series A Preferred Stock shall be junior to indebtedness issued from time to
time, including debentures.
2. Dividends and Distributions.
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(A) Holders of shares of Series A Preferred Stock are entitled to
receive, if, when and as declared by the Board of Directors of the Company out
of assets of the Company legally available for payment, cumulative cash
dividends, payable quarterly, at the rate of 6% per annum, or $0.90 per share
per annum, from the date of issuance and for each quarterly dividend period
thereafter. Dividends on the Series A Preferred Stock are payable quarterly in
arrears to holders of record on the last day of March, June, September and
December of each year to be paid on the 10th day thereafter; provided, however,
that the first dividend will be payable to holders of record on December 31,
1996, prorated from the date of issuance, and there will be no dividend payable
on September 30, 1996. Each such dividend is payable to holders of record as
they appear on the books of the Company. Dividends on the Series A Preferred
Stock are cumulative and accrue on a daily basis from the date of original
issuance of the shares.
(B) The Company shall not declare or pay or set apart for payment any
dividends or other distribution on any series of its preferred stock, or any
other class of capital stock of the Company ranking, as to dividends or upon
liquidation, dissolution or winding up, on a parity with or junior to the Series
A Preferred Stock for any period (other than dividends payable in Common Stock
or another stock ranking junior to the Series A Preferred Stock as to dividends
and upon liquidation), unless full cumulative dividends have been paid or
declared and a sum sufficient for payment thereof is set apart for payment for
all dividends on the Series A Preferred Stock. When dividends are not paid in
full upon the Series A Preferred Stock and any other series of preferred stock
ranking on a parity therewith as to dividends with the Series A Preferred Stock,
all dividends declared upon shares of Series A Preferred Stock and any other
series of preferred stock ranking on a parity therewith as to dividends shall be
declared pro rata so that the amount of dividends declared per share on the
Series A Preferred Stock and such other series of preferred stock ranking on a
parity therewith shall in all cases bear to each other the same ratio that the
accrued dividends per share of the shares of Series A Preferred Stock and such
other series of preferred stock bear to each other. No interest shall be payable
in respect of any dividend payment on the Series A Preferred Stock in arrears.
Unless full cumulative dividends on the Series A Preferred Stock have been paid
for all past dividend payment periods or declared and set apart for payment, no
Common Stock or any other stock of the Company ranking junior to or on a parity
with the Series A Preferred Stock can be redeemed, purchased, retired or
otherwise acquired for consideration by the Company, except by conversion into
or exchange for stock of the Company ranking junior to the Series A Preferred
Stock as to dividends and upon liquidation, dissolution or winding up.
(C) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration any shares of stock of the
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Company unless the Company could, under paragraph (B) of this Section 2,
purchase or otherwise acquire such shares at such time and in such manner.
3. Optional Redemption. Subject to the approval by the Company's
stockholders of the Recapitalization as set forth in Section 11 hereof:
(A) (i) After September 15, 2005, the Company may, at its sole option,
redeem any or all of the outstanding shares of Series A Preferred Stock, at a
cash redemption price per share of $15.00, plus accrued and unpaid dividends
(whether or not earned or declared) thereon (the "Redemption Price"), subject to
the Common Stock having a Current Average Closing Price equal to at least 200%
of the Initial Average Closing Price. The term "Current Average Closing Price"
shall mean the average closing price for 20 consecutive trading days prior to
the date of notice of redemption on the principal national securities exchange
on which the Common Stock is listed or if such stock is not then so listed, the
closing price of the Common Stock as shown by the NASDAQ National Market System
or, if no such closing price is available, at the average of the representative
last bid and asked prices of such Common Stock in the over-the-counter market,
as shown by the NASDAQ System Level 1 (or comparable system). The term "Initial
Average Closing Price" shall mean the average closing price of the Common Stock
on the NASDAQ National Market System for the ten trading days prior to the date
on which the holders of shares of Common Stock of the Company approve and
authorize the Recapitalization. At least two (2) business days prior to
redemption, the Company shall deposit in escrow an amount sufficient to satisfy
the redemption obligation.
(ii) In the event that full dividends on the Series A Preferred
Stock have not been paid or declared and set apart for payment for all past
dividend periods, the Series A Preferred Stock may not be redeemed by the
Company.
(iii) The Company shall notify the holders of shares of the
Series A Preferred Stock to be redeemed, at their respective addresses as the
same appear upon the books of the corporation, not less than thirty (30) or more
than sixty (60) business days prior to the date fixed for redemption; provided,
however, that no defect in the notice to a holder shall affect the ability of
the Company to redeem the shares of Series A Preferred Stock pursuant to this
Section 3.(A). Payment of the redemption price of the shares of Series A
Preferred Stock redeemed shall be made at such place or places of redemption as
shall be determined by the Board of Directors of the Company and shall be made
against the surrender for cancellation of the certificates for the shares
redeemed. The notice of redemption provided for herein shall be irrevocable.
(iv) If less than all of the outstanding shares of the Series A
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Preferred Stock are to be redeemed pursuant to this Section 3.(A), the Company
will select the shares redeemed pro rata, provided that only whole shares shall
be selected for redemption.
(v) If the notice of redemption shall have been made as
hereinbefore provided and if on or before the redemption date specified in such
notice all funds necessary for such redemption shall have been set aside by the
Company pursuant to this Section 3.(A) so as to be available for the benefit of
the holders of the shares so called for such redemption, then from and after the
date fixed for redemption the shares of Series A Preferred Stock so called for
such redemption, notwithstanding that any certificate therefor shall not have
been surrendered or cancelled, shall no longer be deemed outstanding, dividends
thereon shall cease to accrue and all rights of the holders with respect to such
shares (including, without limitation, the conversion rights provided for in
Section 13) shall cease and terminate, except only the right of the holders
thereof to receive upon surrender of the certificates therefor the amount
payable upon redemption thereof, but without interest.
(B) The Company may not redeem any shares of Series A Preferred Stock
prior to September 15, 2005. Except as set forth in Section 11(A), a holder of
shares of Series A Preferred Stock has no right to cause the Company to redeem
such shares.
4. Voting Rights.
(A) The holders of the Series A Preferred Stock shall not, except as
otherwise required by law or as set forth herein, have any right or power to
vote on any matter or in any proceeding or to be represented on any matter or in
any proceeding or to be represented at, or to receive notice of, any meeting of
stockholders.
(B) Each holder of the Series A Preferred Stock shall be entitled to
one vote for each share standing in his name on the transfer books of the
Company as of the record date fixed for such purpose, on any matter as to which
they shall be entitled to vote. Without the vote of the holders of at least
two-thirds (2/3) of the number of shares of Series A Preferred Stock then
outstanding, the Company shall not (i) amend, alter or repeal any of the
preferences or rights of the holders of the Series A Preferred Stock so as to
adversely affect such preferences and rights, or (ii) issue any shares of
capital stock ranking senior to or on a parity with the Series A Preferred Stock
with respect to the payment of dividends and the distribution of assets upon the
liquidation, dissolution or winding-up of the Company.
5. Liquidation Rights.
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(A) In the event of any liquidation, dissolution or winding-up of the
Company, the holders of the shares of the Series A Preferred Stock shall be
entitled to receive out of the assets of the Company available for distribution
to stockholders, before any distribution of assets is made to holders of Common
Stock or any other stock of the Company ranking junior to the Series A Preferred
Stock as to liquidation, dissolution or winding-up of the Company, distributions
in an amount equal to $15.00 per share (the "Liquidation Preference"), plus an
amount equal to the accrued and unpaid dividends thereon.
(B) If upon the voluntary or involuntary liquidation, dissolution or
winding-up of the Company, the amounts available with respect to the Series A
Preferred Stock and any other shares or series of capital stock of the Company
(the "Liquidation Parity Shares") ranking as to any distribution upon the
voluntary or involuntary liquidation, dissolution or winding-up of the Company
on a parity with the Series A Preferred Stock are insufficient to pay in full
the respective preferential amounts to which holders of shares of the Series A
Preferred Stock and the Liquidation Parity Shares are entitled upon such
liquidation, dissolution or winding-up, the holders of the Series A Preferred
Stock and the Liquidation Parity Shares shall share ratably in any distribution
of assets of the Company in proportion to the full respective preferential
amounts to which they are entitled upon such liquidation, dissolution, or
winding-up.
(C) Neither the consolidation of nor merging of the Company with or
into any other corporation or corporations, nor the sale of all or substantially
all of the assets of the Company shall be deemed to be a liquidation,
dissolution or a winding-up of the Company within the meaning of any of the
provisions of this Section 5.
6. "Common Stock" Defined. References to "Common Stock" in Sections other
than Sections 12.(A) and 12.(B) hereof shall mean any stock of any class of the
Company which has no preference in respect of dividends or of amounts payable in
the event of any voluntary or involuntary liquidation, dissolution or winding-up
of the Company and which is not subject to redemption by the Company. References
to "Common Stock" in Sections 12.(A) and 12.(B) hereof shall include only shares
of the class designated as Common Stock as of the date of the original issuance
of shares of the Series A Preferred Stock, or shares of the Company of any class
or classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding-up of
the Company and which are not subject to redemption by the Company; provided
that if at any time there shall be more than one such resulting class, the
shares of each such class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from such
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reclassification bears to the total number of shares of all classes resulting
from all such reclassifications.
7. No Preemptive Rights. The holders of the Series A Preferred Stock shall
not have any preemptive rights.
8. Holders. The term "holders" as used herein shall mean, in all cases,
holders of record.
9. Extension of Time Periods. To the extent there are any time periods
specified for action by the Company or the holders of Series A Preferred Stock,
such time periods shall be extended to the extent required by applicable law,
rule or regulatory requirement.
10. Reacquired Shares. Any shares of Series A Preferred Stock converted,
redeemed, purchased or otherwise acquired by the Company in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation, and upon the filing of
an appropriate certificate with the Secretary of State of the State of Delaware,
become authorized but unissued shares of Preferred Stock, no par value, of the
Company subject to the conditions or restrictions on issuance set forth herein.
11. Recapitalization of Shares of Series A Preferred Stock.
(A) If the requisite holders of shares of Common Stock of the Company
do not approve and authorize, on or before October 31, 1996, (i) in order to
comply with NASD requirements regarding stockholder approval, the terms and
conditions of Section 12 hereof (whether at a stockholders meeting or by written
consent or otherwise), (ii) an increase in the number of authorized shares of
the Company's Common Stock from 5,000,000 to 25,000,000, and (iii) a reduction
of the par value per share of Common Stock from $13.33 per share to $0.01 per
share (collectively, the "Recapitalization"), then (1) the per annum dividend
rate of the Series A Preferred Stock shall automatically be increased by 2%
percent to 8% per annum, or $1.20 per share per annum, from January 1, 1997 and
for each quarterly dividend period thereafter and (2) each holder of shares of
Series A Preferred Stock shall automatically be granted the right to have the
Company redeem all of its shares of Series A Preferred Stock upon 30 days prior
notice to the Company at the Redemption Price.
(B) If the holders of shares of Common Stock of the Company approve
and authorize, on or before December 31, 1996, the Recapitalization, each share
of the Series A Preferred Stock owned by such holder shall, without any further
action by the Company or such holder, be automatically recapitalized and, in
addition to the designations, rights, qualifications, limitations and/or
restrictions set forth above, the Series A Preferred Stock shall be subject to
the additional terms set forth in Section 12 hereof.
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(C) The term "Recapitalization Approval Date" shall mean the date on
which the holders of shares of Common Stock of the Company approve and authorize
the Recapitalization.
12. Conversion into Common Stock.
(A) Upon the Recapitalization Approval Date, each share of Series A
Preferred Stock shall be immediately convertible, at the option of the holders
thereof, at the office of the Company or any transfer agent for the Series A
Preferred Stock, into the number of shares of Common Stock determined by
dividing 15 by the Conversion Price. The term "Conversion Price" shall mean 80
percent of the Initial Average Closing Price. The Conversion Price is subject to
adjustment as provided in this Section 12. Upon the conversion of any shares of
Series A Preferred Stock into shares of Common Stock, all declared, accrued but
unpaid dividends on shares of converted Series A Preferred Stock shall be paid
in cash by the Company to the holders of such converted Series A Preferred
Stock, subject to adjustment as provided in this Section 12.
(B) If the Company
(i) pays a dividend or makes a distribution on its outstanding
shares of Common Stock, in shares of its Common Stock;
(ii) subdivides its outstanding shares (by reclassification or
otherwise) of Common Stock into a greater number of shares;
(iii) combines, consolidates, or reclassifies its outstanding
shares of Common Stock into a smaller number of shares; or
(iv) issues by reclassification of its Common Stock any shares of
its capital stock;
then the Conversion Price in effect immediately before such action shall be
adjusted so that the holder of the Series A Preferred Stock thereafter exchanged
will be entitled to receive, upon the exchange thereof, the number of shares of
capital stock of the Company which he would have been entitled to receive
immediately prior to such action if the Series A Preferred Stock had been
exchanged immediately before the record date (or, if no record date, the
effective date) for such action.
The adjustment shall become effective immediately after the close
of business on the record date in the case of a dividend or distribution and
immediately after the close of business on the effective date in the case of a
subdivision, combination or reclassification.
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If as a result of an adjustment, a holder of the Series A
Preferred Stock upon exchange of the Series A Preferred Stock may receive shares
of two or more classes of capital stock of the Company, the Company shall
determine the allocation of the adjusted Conversion Price between the classes of
capital stock. After such allocation, the Conversion Price of each class of
capital stock shall thereafter be subject to adjustment on terms comparable to
those applicable to Common Stock contained in this Section 12.
(C) Other than in situations provided for in Section 12(A), if the
Company issues or sells (or in accordance with this Section 12 is deemed to have
issued or sold) any shares of its Common Stock for a consideration per share
less than the Conversion Price in effect immediately prior to the time of such
issue or sale and/or the Company issues or sells (or in accordance with this
Section 12 is deemed to have issued or sold) any shares of its Common Stock for
a consideration per share less than the then current market price on the date of
such issue or sale, then, forthwith upon such issue or sale, the Conversion
Price shall be reduced to the lower of the prices (calculated to the nearest
cent) determined as follows:
(I) by dividing (i) an amount equal to the sum of (a) the number
of shares of Common Stock outstanding immediately prior to such issue or sale
(including as outstanding all shares of Common Stock issuable upon exchange of
the then outstanding shares of Series A Preferred Stock) multiplied by the then
existing Conversion Price, and (b) the consideration, if any, received by the
Company upon such issue or sale, by (ii) the total number of shares of Common
Stock outstanding immediately after such issue or sale (including as outstanding
all shares of Common Stock issuable upon exchange of the then outstanding shares
of Series A Preferred Stock); and
(II) by multiplying the Conversion Price in effect immediately
prior to the time of such issue or sale by a fraction, the numerator of which
shall be the sum of (i) the number of shares of Common Stock outstanding
immediately prior to such issue or sale (including as outstanding all shares of
Common Stock issuable upon exchange of the then outstanding shares of Series A
Preferred Stock) multiplied by the then current market price immediately prior
to such issue or sale plus (ii) the consideration received by the Company upon
such issue or sale, and the denominator of which shall be the product of (iii)
the total number of shares of Common Stock outstanding immediately after such
issue or sale (including as outstanding all shares of Common Stock issuable upon
exchange of the then outstanding shares of Series A Preferred Stock), multiplied
by (iv) the then current market price immediately prior to such issue or sale.
(D) If the Company in any manner grants, issues or sells (whether
directly or by assumption in a merger or otherwise) any rights to
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subscribe for or to purchase, or any options or warrants for the purchase of,
Common Stock or any stock or securities convertible into or exchangeable for
Common Stock (such rights or options or warrants being herein called "Options"
and such convertible or exchangeable stock or securities being herein called
"Convertible Securities") whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable, and the
price per share for which Common Stock is issuable upon the exercise of such
Options or upon conversion or exchange of such Convertible Securities
(determined by dividing (I) the total amount, if any, received or receivable by
the Company as consideration for the granting, issuance or sale of such Options,
plus the minimum aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus, in the case of such Options
which relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (II) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less than the
Conversion Price in effect immediately prior to the time of the granting,
issuance or sale of such Options (or less than the then current market price per
share of Common Stock, determined as of the date of granting, issuance or sale
of such Options, as the case may be), then the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities issuable
upon the exercise of such Options shall be deemed to have been issued for such
price per share as of the date of granting, issuance or sale of such Options and
thereafter shall be deemed to be outstanding. Except as otherwise provided in
Section 12(F), no adjustment of the Conversion Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
(E) If the Company in any manner issues (whether directly or by
assumption in a merger or otherwise) or sells any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (I) the total amount
received and receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (II) the total maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities) shall be
less than the Conversion Price in effect immediately prior to the time of such
issue or sale (or less than the then current market price, determined as of the
date of such issue or sale of such Convertible Securities, as the case may be),
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then the total maximum number of shares of Common Stock issuable upon conversion
or exchange of all such Convertible Securities shall be deemed to have been
issued for such price per share as of the date of the issue or sale of such
Convertible Securities and thereafter shall be deemed to be outstanding,
provided that except as otherwise provided in Section 12(F) below, no adjustment
of the Conversion Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities, and if any such
issue or sale of such Convertible Securities is made upon exercise of any Option
to purchase any such Convertible Securities for which adjustments of the
Conversion Price have been or are to be made pursuant to other provisions of
this Section 12, no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.
(F) Upon the happening of any of the following events, namely, if the
purchase price provided for in any Option referred to in Section 12(D), the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in Section 12(D) or Section 12(E), or the
rate at which any Convertible Securities referred to in Section 12(D) or Section
12(E) are convertible into or exchangeable for Common Stock shall change at any
time (other than under or by reason of provisions designed to protect against
dilution), the Conversion Price in effect at the time of such event shall
forthwith be readjusted to the Conversion Price which would have been in effect
at the time of such event had such Options or Convertible Securities remaining
outstanding at the time of such event provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold: and on the expiration of any such Option or
the termination of any such right to convert or exchange such Convertible
Securities, the Conversion Price then in effect hereunder shall forthwith be
increased to the Conversion Price which would have been in effect at the time of
such expiration or termination had such Option or Convertible Security, to the
extent outstanding immediately prior to such expiration or termination, never
been issued, and the Common Stock issuable thereunder shall no longer be deemed
to be outstanding. If the purchase price provided for in any such Option
referred to in Section 12(D) or the rate at which any Convertible Securities
referred to in Section 12(D) or 12(E) are convertible into or exchangeable for
Common Stock shall be reduced at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then in case of the
delivery of Common Stock upon the exercise of any such Option or upon conversion
or exchange of any such Convertible Security, the Conversion Price then in
effect hereunder shall forthwith be adjusted to such respective amount as would
have been obtained had such Option or Convertible Security never been issued as
to such Common Stock and had adjustments been made upon the issuance of the
shares of Common Stock delivered as aforesaid (provided that the current market
price used in such determination shall be the current market price
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on the date of issue of such Option or Convertible Security), but only if as a
result of such adjustment the Conversion Price then in effect hereunder is
thereby reduced.
(G) Other than in situations provided for in Section 12(B), if the
Company declares a dividend, or makes any other distribution, upon any stock of
the Company payable in Common Stock, Options or Convertible Securities, any
Common Stock, Options or Convertible Securities, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to have been issued or
sold without consideration.
(H) If any shares of Common Stock, Options or Convertible Securities
are issued or sold for cash, the consideration received therefor shall be deemed
to be the amount received by the Company therefor, without deduction therefrom
of any expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. If any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration as determined
by the Board of Directors of the Company, without deduction of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Company in connection therewith. In case any Options shall be issued in
connection with the issue and sale of other securities of the Company, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be deemed
to have been issued without consideration. In case any shares of Common Stock,
Options or Convertible Securities shall be issued in connection with any merger
or consolidation in which the Company is the surviving corporation and the
rights of the holders of Common Stock are not affected, the amount of
consideration therefor shall be deemed to be the fair value as determined by the
Board of Directors of the Company of such portion of the assets and business of
the non-surviving corporation as such Board shall determine to be attributable
to such Common Stock, Options or Convertible Securities, as the case may be.
(I) In case the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in Common Stock, Options or Convertible Securities,
or (ii) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(J) The number of shares of Common Stock outstanding at any given time
shall not include shares owned or held by or for the account or in
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the treasury of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purposes of this Section 12.
(K) In case of any consolidation or merger of the Company (other than
a merger or consolidation in which the Company is the surviving corporation and
the rights of the holders of Common Stock are not affected) or in the event of
any sale of all or substantially all of the assets of the Company, the holder of
each share of the Series A Preferred Stock then outstanding shall have the right
thereafter, subject to the terms and conditions of this Section 12, to exchange
such share into the kind and amount of shares of stock and other securities and
property receivable upon such consolidation, merger, or sale by a holder of the
number of shares of Common Stock into which such share of Series A Preferred
Stock would have been entitled to be exchanged into immediately prior to such
consolidation, merger, or sale; and effective provision shall be made in the
Certificate of Incorporation or Charter of the resulting or surviving
corporation or otherwise so that the provisions set forth in this Section 12
shall thereafter be applicable, as nearly as practicable, to any such other
shares of stock and other securities and property deliverable upon exchange of
the Series A Preferred Stock remaining outstanding or other exchangeable or
convertible preferred stock received by the holders in place thereof; and any
such resulting or surviving corporation shall expressly assume the obligation to
deliver, upon the exercise of the exchange privilege, such shares, securities or
property as the holders of the Series A Preferred Stock remaining outstanding,
or other exchangeable or convertible preferred stock received by the holders in
place thereof, may be entitled to, and to make provisions for the protection of
the exchange right as provided (unless such resulting or surviving corporation
assumes such obligation). In case securities or property other than shares of
Common Stock shall be issuable or deliverable upon exchange as aforesaid, then
all reference in this Section (K) shall be deemed to apply, so far as
appropriate and as nearly as practicable, to such other securities or property.
The provisions of this Section (K) shall similarly apply to successive
consolidations, mergers, or sales.
(L) For the purpose of any computation under this Section 12, the
current market price per share of Common Stock at any date shall be deemed to be
the average closing price of the Company's Common Stock for any 30 consecutive
trading days within the 45 trading days immediatley prior to the date in
question. The closing price for each day shall be the last reported sale of
Common Stock on the principal national securities exchange on which the Common
Stock may be listed or if such stock is not then so listed, the closing price of
the Common Stock as shown by the NASDAQ National Market System or, if no such
closing price is available, at the average of the representative last bid and
asked prices of such Common Stock in the over-the-counter market, as shown by
the NASDAQ System Level 1 (or comparable system) or in the absence of any
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of the foregoing, the fair market value as determined by the Board of Directors
(whose determination made in good faith shall be conclusive).
(M) The Company may at its option elect not to issue fractional shares
of Common Stock upon any exchange, in which case, the Company shall pay in cash
an amount equal to the current market price per share plus all accrued but
unpaid dividends multiplied by such fractional interest. Any determination that
the Company or the Board of Directors makes regarding fractional shares is
conclusive.
(N) (a) Notwithstanding the provisions of this Section 12,
(i) no adjustment of the Conversion Price shall be required
for three years after the Recapitalization Approval Date unless such adjustment
would require an increase or decrease of at least 1% in the Conversion Price
then in effect, but in such case any adjustment that would otherwise be required
then to be made shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment. All calculations under this
Section 12 shall be made and rounded to the nearest one-hundredth of a share or
the nearest one ten- millionth of a fraction in the case of the Conversion
Price, as the case may be:
(ii) no adjustment need be made for sales of Common Stock
pursuant to a plan for reinvestment of dividends or interest and no adjustment
need be made for a change in the par value of the Common Stock;
(iii) no adjustment need be made in connection with the
issuance of shares of Common Stock upon exchange of the Series A Preferred
Stock;
(iv) no adjustment need be made in connection with the
issuance of any rights or shares of Common Stock in connection with the
Company's rights offering pursuant to which rights to purchase Series A
Preferred Stock will be distributed to the Company's stockholders;
(v) no adjustment need be made by virtue of the issue of any
additional securities of the Company in accordance with the terms of such
securities (by way of dividend or otherwise); and
(vi) no adjustment need be made by virtue of the exercise of
presently outstanding employee stock options which are exercisable at a cash
price per share equal to or greater than the then current market price per share
of Common Stock at the date of issuance of such options.
(b) The Board of Directors shall have the power to resolve any
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ambiguity or correct any error in this Section 12 and its action in so doing, as
evidenced by a Board resolution, shall be final and conclusive.
(c) The certificate of any independent firm of public accountants
of recognized national standing selected by the Board of Directors shall be
satisfactory evidence of the correctness of any computation made in this Section
12.
(O) Whenever there is an adjustment requiring a change in the
Conversion Price, a statement signed by the Secretary of the Company describing
specifically the event giving rise to such adjustment and stating the adjustment
which shall be made to the Conversion Price shall be filed at the principal
office of the Company. The statement so filed shall be open to inspection by any
holder of record of shares of the Series A Preferred Stock. The Company shall at
the time of filing any such statement mail notice to the same effect to holders
of shares of the Series A Preferred Stock at their addresses appearing on the
books of the Company or supplied by them to the Company for the purpose of
notice. In addition, the Company shall include a notice of Conversion Price with
each dividend payment on the Series A Preferred Stock or otherwise give notice
thereof promptly after the due date for each such dividend, whenever there has
been a change in the Conversion Price since the last previous dividend due date.
(P) In order to convert any shares of Series A Preferred Stock, a
holder shall deliver to the Company at the office of the Company, or at such
other place or places, if any, as the Board of Directors of the Company may
determine (after giving written notice thereof to all holders), certificates,
duly endorsed to the Company or in blank, of the shares of Series A Preferred
Stock to be converted, together with appropriate evidence of the payment of any
transfer or similar tax, if required to be paid by the holder thereof pursuant
to the last sentence of this paragraph, and instructions in writing to the
Company to exchange such shares and specifying the name and address of the
person, corporation, firm or other entity to whom such shares are to be issued,
whereupon the Company will issue (i) the number of shares of Common Stock
issuable on exchange thereof as of the time of such surrender and as promptly as
practicable thereafter will deliver certificates for such shares of Common
Stock, (ii) cash for any remaining fraction of a share if the Company so elects,
as provided in Section 12(M) above, and (iii) cash in an amount equal to all
accrued but unpaid dividends, with respect to each share of Series A Preferred
Stock exchanged. The Company shall pay any documentary, stamp or similar issue
or transfer tax due on the issue of shares of Common Stock upon exchange;
provided, however, that the holder shall pay any such tax which is due because
such shares are to be issued in a name other than that of such holder.
If for any reason the Company is unable to pay any unpaid dividends on
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the shares of Series A Preferred Stock being exchanged, the Company will pay
such unpaid dividends to the exchanging holder as soon thereafter as funds of
the Company are legally available for such payment. At the request of any such
exchanging holder, the Company will provide such holder with written evidence of
its obligation to such holder.
The Company shall from and after the Recapitalization Approval Date
take all necessary corporate action to reserve for issuance upon exchange of the
Series A Preferred Stock a sufficient number of shares out of the authorized
Common Stock for the exchange of each outstanding share of Series A Preferred
Stock in accordance with its terms.
(Q) If
(i) the Company takes any action that would require an adjustment
in the Conversion Price pursuant to this Section 12; or
(ii) there is a voluntary or involuntary liquidation, dissolution
or winding-up of the Company;
the Company shall provide notice of such action in the manner set forth in
Section 12(O), stating therein the proposed record date for a distribution or
the effective date of a reclassification, consolidation, merger, lease,
transfer, liquidation, dissolution or winding-up, at least fifteen (15) days in
advance of such date. Failure to mail the notice or any defect therein shall not
affect the validity of the transaction.
(R) Before taking any action which would cause an adjustment reducing
the Conversion Price below the then par value (if any) of the Common Stock
deliverable upon exchange of the Series A Preferred Stock, the Company will take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
non-assessable shares of Common Stock at such adjusted Conversion Price.
(S) The Company from time to time may decrease the Conversion Price by
an amount for any period of time if the period is at least 20 days and if the
decrease is irrevocable during the period. Whenever the Conversion Price is
decreased, the Company shall give notice of the decrease at least 15 days prior
to the date the decreased Conversion Price takes effect, in the manner set forth
in Section 12(O) above, which notice shall state the decreased Conversion Price
and the period it will be in effect. A decrease in the Conversion Price pursuant
to this Section 12(S) shall not otherwise change or adjust the Conversion Price
otherwise in effect for purposes of this Section 12.
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