<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the quarterly period ended July 3, 1999 Commission file No. 0-11201
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MERRIMAC INDUSTRIES, INC.
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(Exact name of small business issuer as specified in its charter)
New Jersey 22-1642321
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
41 Fairfield Place, West Caldwell, New Jersey 07006
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(Address of principal executive offices) (Zip code)
Registrant's telephone number including area code (973) 575-1300
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Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
---------------------------- -----------------------------------------
Common Stock American Stock Exchange
Common Stock Purchase Rights American Stock Exchange
Securities registered pursuant to Section 12(g) of the Exchange Act: None
----
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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
--- ---
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding at August 10, 1999
- ----------------------------- -------------------------------
Common Stock ($.50 par value) 1,741,533
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
---------------------------
(Unaudited)
-----------
July 3, January 2,
1999 1999
----------- -----------
ASSETS
- ------
Current assets:
Cash and cash equivalents ....................... $ 941,707 $ 1,852,666
Accounts receivable ............................. 3,632,530 3,755,131
Inventories ..................................... 3,483,035 3,101,256
Income tax refund receivable..................... 34,592 413,018
Other current assets ............................ 802,855 357,906
Deferred tax assets ............................. 900,600 899,600
----------- -----------
Total current assets ........................ 9,795,319 10,379,577
----------- -----------
Property, plant and equipment ..................... 19,953,309 16,539,251
Less accumulated depreciation ................... 12,744,039 10,322,958
----------- -----------
Net property, plant and equipment ............. 7,209,270 6,216,293
Other assets ...................................... 305,314 319,512
Goodwill .......................................... 2,849,598 -
----------- -----------
Total Assets ................................ $20,159,501 $16,915,382
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------
Current liabilities:
Current portion of long-term debt ............... $ 633,530 $ -
Accounts payable ................................ 1,667,042 1,479,284
Accrued liabilities ............................. 1,172,035 1,499,917
----------- -----------
Total current liabilities ................... 3,472,607 2,979,201
Long-term debt, net of current portion ............ 3,033,477 -
Deferred compensation ............................. 247,464 459,322
Deferred tax liabilities .......................... 54,600 54,600
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Total liabilities ........................... 6,808,148 3,493,123
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Shareholders' equity:
Common stock, par value $.50 per share:
Authorized: 5,000,000 shares
Issued: 2,697,066 and 2,690,405 shares ....... 1,348,533 1,345,203
Additional paid-in capital ...................... 11,249,844 11,220,873
Retained earnings ............................... 9,244,943 8,950,055
Translation adjustments ......................... (69,197) -
----------- -----------
21,774,123 21,516,131
Less treasury stock, at cost:
955,904 and 902,549 shares .................... (8,062,770) (7,733,872)
Less loan to officer-shareholder ................ (360,000) (360,000)
----------- -----------
Total shareholders' equity ................... 13,351,353 13,422,259
----------- -----------
Total Liabilities and Shareholders' Equity ... $20,159,501 $16,915,382
=========== ===========
See accompanying notes to consolidated financial statements.
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<PAGE>
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
----------------------- -------------------------
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
----------------------- -------------------------
<S> <C> <C> <C> <C>
Net sales ................................... $5,125,245 $5,573,659 $9,863,776 $11,366,266
---------- ---------- ---------- -----------
Cost and expenses:
Cost of sales ............................. 2,726,151 3,031,727 5,152,891 6,249,579
Selling, general and administrative ....... 1,671,153 1,661,518 3,232,143 3,358,213
Research and development .................. 552,058 252,145 946,318 463,401
---------- ---------- ---------- -----------
4,949,362 4,945,390 9,331,352 10,071,193
---------- ---------- ---------- -----------
Operating income ............................ 175,883 628,269 532,424 1,295,073
Interest and other expense (income), net .... 55,964 (16,573) 79,539 (29,315)
---------- ---------- ---------- -----------
Income before income taxes .................. 119,919 644,842 452,885 1,324,388
Provision for income taxes .................. 38,000 236,000 158,000 488,000
---------- ---------- ---------- -----------
Net income .................................. $ 81,919 $ 408,842 $ 294,885 $ 836,388
========== ========== ========== ===========
Net income per common share:
Basic...................................... $.05 $.23 $.17 $.48
Diluted.................................... $.05 $.22 $.17 $.46
==== ==== ==== ====
Weighted average number of
shares outstanding:
Basic...................................... 1,739,356 1,756,350 1,753,944 1,746,816
Diluted.................................... 1,769,389 1,845,263 1,781,981 1,834,423
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
-----------
Six Months Ended
-------------------------
July 3, July 4,
1999 1998
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Cash flows from operating activities:
Net income ........................................ $ 294,885 $ 836,388
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.................. 746,396 401,663
Amortization of goodwill ...................... 50,857 -
Deferred compensation ......................... 8,179 116,659
Stock-based compensation expense .............. - 67,300
Changes in operating assets and liabilities:
Accounts and income taxes receivable......... 1,273,879 (1,186,031)
Inventories.................................. (131,073) 1,075,572
Other current assets......................... (454,433) (134,767)
Deferred tax assets.......................... (1,000) 26,200
Other assets................................. 51,217 21,952
Accounts payable............................. 6,376 (81,358)
Accrued liabilities.......................... (396,328) (177,365)
Income taxes payable......................... 26,802 188,155
Deferred compensation........................ (220,037) (25,547)
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Net cash provided by operating activities............ 1,255,720 1,128,821
---------- ----------
Cash flows from investing activities:
Purchase of capital assets......................... (1,039,421) (1,595,299)
Proceeds from sales of capital assets.............. - 12,775
Acquisition of business, net of cash acquired ..... (4,046,646) -
---------- ----------
Net cash used in investing activities................ (5,086,067) (1,582,524)
---------- ----------
Cash flows from financing activities:
Borrowings under term loan facilities ............. 2,500,000 -
Borrowings under revolving credit facilities ...... 2,000,000 -
Repayment of borrowings under credit and
lease facilities ................................ (1,284,119) -
Proceeds from the issuance of common stock......... 32,405 98,708
Payment of dividends............................... - (1,009)
Repurchase of common stock for the treasury ....... (328,898) -
---------- ----------
Net cash provided by financing activities ........... 2,919,388 97,699
---------- ----------
Net decrease in cash and cash equivalents............ (910,959) (356,004)
Cash and cash equivalents at beginning of year....... 1,852,666 2,414,725
---------- ----------
Cash and cash equivalents at end of period........... $ 941,707 $2,058,721
========== ==========
Supplemental disclosures of cash flows information:
Cash paid during the period for:
Income taxes..................................... $ 139,000 $ 300,000
========= ==========
See accompanying notes to consolidated financial statements.
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MERRIMAC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Basis of presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and therefore, do
not include all information and footnote disclosures otherwise required by
Regulation S-B. The financial statements do, however, reflect all adjustments
which are, in the opinion of the management, necessary for a fair presentation
of the financial position of the Company as of July 3, 1999 and its results of
operations and cash flows for the periods presented.
B. Inventories
Inventories consist of the following:
July 3, January 2,
1999 1999
---------- ----------
Finished goods ...................... $ 735,637 $ 607,738
Work in process ..................... 1,692,373 1,597,215
Raw materials and purchased parts ... 1,055,025 896,303
---------- ----------
Total $3,483,035 $3,101,256
========== ==========
C. Net income per common share
Effective January 3, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 128, "Earnings per Share," which
establishes the new standard for computation and presentation of net income per
common share. Under the new requirements both basic and diluted net income per
common share are presented.
Basic net income per common share is calculated by dividing net income,
less dividends on preferred stock, if any, by the weighted average common shares
outstanding during the period.
The calculation of diluted net income per common share is similar to that
of basic net income per common share, except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if all potentially dilutive common shares, principally those
issuable under stock options, were issued during the reporting period.
D. Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"). SFAS 130 defines comprehensive income, which includes items in addition
to those reported in the statement of operations, and requires disclosures about
the components of comprehensive income. Comprehensive income includes all
changes in shareholders' equity during a period except those resulting from
investments by or distributions to shareholders. For the Company,
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<PAGE>
MERRIMAC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
comprehensive income for all periods presented consists solely of net
income and foreign currency translation adjustments pursuant to Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation," as
follows:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
-------------------- --------------------
July 3, July 4, JULY 3, JULY 4,
1999 1998 1999 1998
------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income ................................ $81,919 $408,842 $294,885 $836,388
Foreign currency translation adjustments .. (33,673) (35,735) (69,197) (35,735)
------- -------- -------- --------
Total comprehensive income $48,246 $373,107 $225,688 $800,653
======= ======== ======== ========
</TABLE>
E. Accounting period
The Company's fiscal year is the 52-53 week period ending on the Saturday
closest to December 31. The Company has quarterly dates that correspond with the
Saturday closest to the last day of each calendar quarter and each quarter
consists of 13 weeks in a 52-week year. Every fifth year, the additional week to
make a 53-week year (fiscal year 1997 was the latest and fiscal year 2002 will
be the next) is added to the fourth quarter, making such quarter consist of 14
weeks.
F. Dividends
The Board of Directors (the "Board") announced on May 5, 1998, the
declaration of a 10% stock dividend payable on June 5, 1998 to shareholders of
record on May 15, 1998. Fractional shares were cashed-out and payments were made
to shareholders in lieu of fractional shares on June 5, 1998. The basic and
diluted weighted average number of shares outstanding and net income per share
information for all prior reporting periods have been restated to reflect the
effects of the stock dividend.
G. Transactions with management and loan to officer-shareholder
On May 4, 1998, the Company sold 20,000 (22,000 after giving effect to the
Company's 10% stock dividend) shares of Common Stock from its treasury to Mason
N. Carter, Chairman, President and Chief Executive Officer of the Company, at a
price of $12.75 per share (the approximate average closing price of the
Company's Common Stock during the first quarter of 1998). The Company extended
Mr. Carter a loan of $255,000 in connection with the purchase of these shares
and amended a prior loan to Mr. Carter of $105,000. A new promissory note for a
total of $360,000, due May 4, 2003, with interest payments due quarterly (except
as provided below), calculated at a variable interest rate based on the prime
rate of the Company's lending bank, was executed by Mr. Carter in favor of the
Company. Payment of interest accrued from November 1998 until November 1999,
however, will be deferred until the end of the term of the new promissory note.
Payment of the loan is secured by the pledge of the 33,000 shares
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MERRIMAC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of Common Stock that were purchased by Mr. Carter with the proceeds of the
loans. The Company has recorded compensation expense of $52,000, which is being
charged to operations over the one-year period commencing on the date of the
transaction, as Mr. Carter is expected to perform services throughout this time
period. The sale of these shares of Common Stock was exempt from registration
under the Securities Act of 1933, as amended, as a transaction not involving a
public offering under Section 4 (2) of the Act.
H. Acquisition of Filtran Microcircuits Inc.
In February 1999, the Company completed the acquisition of all of the
outstanding stock of privately held Filtran Microcircuits Inc. ("FMI") of
Ottawa, Ontario, Canada. FMI, which had 1998 sales of approximately $3.2
million, is a manufacturer of microwave micro circuitry. The purchase price was
approximately $4.5 million, net of $203,000 cash acquired and including the
assumption of $451,000 existing indebtedness, and was financed by utilizing an
existing unused credit facility. The acquisition is being accounted for as a
purchase, and, accordingly, the purchase price has been allocated to the
underlying assets and liabilities based on their estimated fair values at the
date of the acquisition, with the excess cost of approximately $2.9 million
recorded as goodwill which is being amortized over 20 years.
The unaudited pro forma combined results for the comparative periods
presented for 1999 and 1998, as if FMI had been acquired at the beginning of
1998, are estimated to be as follows:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
---------------------- ------------------------
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales..................... $5,125,000 $6,284,000 $10,494,000 $13,084,000
Net income.................... 82,000 289,000 254,000 680,000
Diluted net income per share.. $.05 $.16 $.14 $.37
</TABLE>
The proforma results are based on various assumptions and are not
necessarily indicative of what would have actually occurred had the acquisition
and related financing transactions been completed at the beginning of last year,
nor are they necessarily indicative of future consolidated results.
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<PAGE>
MERRIMAC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
I. Debt
Long-term debt consists of the following:
Revolving credit facility, interest 1/2% below prime........ $1,000,000
Term loan, interest 1/2% below prime, due 2004.............. 2,250,000
Equipment loans, interest prime plus 1%, due July 1999
to May 2001................................................. 88,695
Capital leases, interest 6.9%, due November 2003............ 328,312
----------
3,667,007
Less current portion........................................ 633,530
----------
Long-term portion........................................... $3,033,477
==========
The term loan is secured by $2,500,000 of recently acquired tangible
personal property and the equipment loans are covered by a general security
agreement. The revolving credit facility is unsecured. Capital leases included
in property, plant and equipment have a depreciated cost of approximately
$200,000.
J. Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 133 ("Accounting for Derivative Instruments and Hedging
Activities"). This statement establishes accounting and reporting standards
requiring that all derivative instruments (including certain derivative
instruments embedded in other contracts) be recorded on the balance sheet as an
asset or liability and measured at its fair value. This statement is effective
for fiscal years beginning after June 15, 2000 but can be adopted earlier.
Management has not yet determined the timing of or method to be used in adopting
this statement. Management does not believe at this time that such adoption
would have a material impact on its consolidated financial statements.
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<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
STATEMENT OF OPERATIONS SUMMARY
-------------------------------
(Unaudited)
-----------
The following table displays line items in the Consolidated Statements of
Operations as a percentage of net sales.
<TABLE>
<CAPTION>
Percentage of Net Sales
-----------------------------------------
Second Quarter Year-to-date
-----------------------------------------
Quarter Ended Six Months Ended
----------------- -------------------
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales.................................... 100.0% 100.0% 100.0% 100.0%
------ ------ ----- ------
Costs and expenses:
Cost of sales.............................. 53.2 54.4 52.2 55.0
Selling, general and administrative........ 32.6 29.8 32.8 29.5
Research and development................... 10.8 4.5 9.6 4.1
------ ------ ----- ------
96.6 88.7 94.6 88.6
------ ------ ----- ------
Operating income............................. 3.4 11.3 5.4 11.4
Interest and other expense (income), net..... 1.1 (.3) .8 (.3)
------ ------ ----- ------
Income before income taxes................... 2.3 11.6 4.6 11.7
Provision for income taxes................... .7 4.2 1.6 4.3
------ ------ ----- ------
Net income................................... 1.6% 7.4% 3.0% 7.4%
====== ====== ===== ======
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Quarter and six months ended July 3, 1999 compared to the quarter and six
months ended July 4, 1998
Results of operations for the quarter reflect decreases in: net sales of
$448,000 or 8.0%; operating income of $452,000 or 72.0%; net income of $327,000
or 80.0%; and diluted net income per share of $.17 or 77.3%. Six months results
of operations reflect decreases in: net sales of $1,502,000 or 13.2%; operating
income of $763,000 or 58.9%; net income of $542,000 or 64.7%; and diluted net
income per share of $.29 or 63.0%.
The net sales decrease was primarily attributable to shipments against a
smaller firm order backlog that existed as of the beginning of the current
fiscal year, with the order release dates that coincided with production and
shipment schedules, partially offset by net sales of recently acquired Filtran
Microcircuits Inc. ("FMI").
Orders received for the second quarter of 1999 of $6,407,000 increased
$2,824,000 or 78.8% compared to that of the second quarter of 1998, and the
backlog of firm unfilled orders at July 3, 1999 increased $906,000 or 11.4% to
$8,857,000 for the same end of quarter comparisons, including $860,000 backlog
at recently acquired FMI. Orders received for the first six months of 1999 were
$11,656,000 and for the comparable six month time periods increased $2,104,000
or 22.3%. Compared to year-end 1998, backlog increased $2,689,000 or 43.6%,
including $860,000 backlog at recently acquired FMI. An extended continuation in
a delay of or reduction in new orders for Company products could have a material
financial impact on future sales and earnings. Customer requests for design work
have increased and are currently under development utilizing the Company's
proprietary Multi-Mix (TM) Microtechnology. This technology provides greater per
unit content and enables the Company's entry into new markets for increased
order opportunities.
As a result of the decreases in the quarter and six month net sales, cost
of sales decreased $306,000 or 10.1% for the quarter and $1,097,000 or 17.5% for
six months. Cost of sales as a percentage of net sales decreased 1.2% to 53.2%
for the quarter and 2.8% to 52.2% for six months. These decreases were primarily
attributable to the effects of the decrease in sales revenue on cost of sales
and a reduction in direct labor and manufacturing overhead costs partly related
to efficiency improvements resulting from last year's fourth quarter
restructuring. Depreciation expense increased $108,000 for the second quarter
and $170,000 for the first six months as a result of higher capital equipment
purchases in the current and prior years.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Selling, general and administrative expenses increased $10,000 or 0.6% for
the quarter and decreased $126,000 or 3.8% for six months, and when expressed as
a percentage of net sales increased 2.8% to 32.6% for the quarter and 3.3% to
32.8% for six months. Decreases in selling expenses were related to a reduction
in sales commissions due to the decrease in sales revenue. For the first six
months general and administrative expenses decreased partly due to a reduction
in compensation costs related to last year's fourth quarter restructuring which
was partially offset by additional marketing and administrative costs, higher
depreciation and amortization expense of $51,000 for the second quarter and
$86,000 for the first six months, including the amortization of goodwill
attributable to the acquisition of FMI.
Research and development expenses for new products, primarily the recently
introduced Multi-Mix (TM) Microtechnology were $552,000 for the second quarter
and $946,000 for the six months, increases of $300,000 or 119% and $483,000 or
104% compared to $252,000 and $463,000 for the prior year.
Interest expense was $56,000 for the second quarter and $80,000 for the
first six months of 1999 and was incurred on borrowings of $2,500,000 for
capital expenditures under the term loan facility, and borrowings under its
revolving credit facility in connection with the acquisition of FMI during the
first quarter of 1999, partially offset by interest income. During 1998, the
Company earned interest income on its invested cash balances of $17,000 and
$29,000 for the corresponding quarter and six-month periods, respectively.
Net income of $82,000 for the second quarter was $327,000 lower than net
income of $409,000 reported for the second quarter of 1998, a decrease of 80.0%.
Diluted net income per share was $.05, a decrease of 77.3% compared to diluted
net income per share of $.22 reported for the second quarter of last year. Net
income decreased $542,000 or 64.7% to $295,000 for the first six months of 1999
compared to $836,000 reported in 1998. Diluted net income per share was $.17, on
a 2.9% decrease in the number of weighted average diluted common shares
outstanding, compared to the diluted net income per share amount of $.46
reported for the first six months of the prior year.
Liquidity and Capital Resources
The Company had liquid resources comprised of cash and cash equivalents
totaling approximately $900,000 at the end of the second quarter of 1999
compared to approximately $2,000,000 at the end of the second quarter of 1998.
-10-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company's working capital was approximately $6,300,000 and its current ratio
was 2.8 at the end of the second quarter of 1999 compared to $8,600,000 and 4.7,
respectively, at the end of the second quarter of 1998.
The Company's operating activities provided cash flows of $1,256,000 in the
first six months of 1999 compared to $1,129,000 in the first six months of 1998.
The primary reasons for the increase in operating cash flows in the first six
months of 1999 are a decrease in accounts receivable as a result of lower net
sales and higher depreciation and amortization charges partially offset by
decreases in net income and payments made on accounts payable, accrued
liabilities and deferred compensation. The Company made net investments in
property, plant and equipment of $1,039,000 in the first six months of 1999
compared to $1,583,000 in the first six months of 1998. These capital
expenditures are related to new production and test equipment capabilities in
connection with the introduction of new products and enhancements to existing
products.
The cost to the Company for its acquisition of FMI, net of $203,000 cash
acquired and excluding indebtedness assumed of $451,000, was $4,047,000, which
was financed by borrowings under a previously unused credit facility.
The Company has a $7,000,000 revolving credit and term loan agreement with
Summit Bank, at one-half percent below the bank's floating prime rate. The
Company borrowed $2,500,000 for capital expenditures under the term loan
facility and $2,000,000 under its revolving credit facility in connection with
the acquisition of FMI during the first quarter of 1999. The Company repaid
$1,000,000 of the revolving credit facility during the second quarter 1999. The
unused portion of the revolving credit facility of $3,500,000 is available for
working capital and general corporate purposes.
Management believes that with the liquid resources and the remaining line
of credit available, along with cash flows expected to be provided by
operations, the Company will have sufficient resources for currently
contemplated operations in 1999.
The Company's capital expenditures for new projects and production
equipment are anticipated to exceed its depreciation and amortization expenses
in 1999. The Company has issued purchase order commitments to processing
equipment manufacturing vendors for approximately $400,000 of capital equipment
and building improvements. The Company anticipates that during 1999 such
equipment will be purchased and become operational and building improvements
will be completed.
-11-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company was authorized by its Board of Directors to repurchase up to
110,000 shares (adjusted for the 10% stock dividend) of its common stock, from
time to time, depending on market conditions, and has repurchased approximately
65,000 shares to date under such authorization. There were 8,000 shares of
common stock repurchased during fiscal 1998 and there were no share repurchases
during 1997. During the first quarter of 1999, the Company repurchased 53,000
shares of common stock at a cost of $329,000.
The Board of Directors approved the declaration of a 10% stock dividend to
shareholders of record on May 15, 1998, which was distributed on June 5, 1998
along with payments made for fractional shares.
Periodically, the Company explores the possibility of acquiring similar
manufacturers of electronic devices or companies in related fields. Management
believes that any such acquisitions and business operation expansion could be
financed through its liquid and capital resources currently available as
previously discussed and/or through additional borrowing or issuance of equity
or debt securities. The additional debt from any acquisitions, if consummated,
would increase the Company's debt-to-equity ratio and such debt or equity
securities might, at least in the near term, have a dilutive effect on net
income per share. In February 1999, the Company completed the acquisition of
Filtran Microcircuits Inc.
Year 2000 Readiness Disclosure
The Company recognizes the need to assure that its operations will not be
adversely impacted by Year 2000 software failures. The impact on operations has
been evaluated and plans were formulated to ensure complete Year 2000 compliance
by September 30, 1999. The Company's manufactured products do not contain
software of any kind and therefore are not subject to Year 2000 problems. All of
the Company's existing mission-critical manufacturing software and financial
computer applications were made Year 2000 compliant as of December 31, 1998. Key
suppliers have been contacted to obtain their Year 2000 compliance status and
the Company anticipates that these key suppliers will be Year 2000 compliant by
September 30, 1999.
Information Technology Systems
Without remediation, certain of the Company's internally developed order
processing and manufacturing support applications would not have been capable of
processing dates beyond December 31, 1999 properly. The Company has corrected
-12-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
the programs, and all business order processing and manufacturing support
operations applications should properly process dates beyond December 31, 1999.
The Company does not have any third-party software applications that are date
dependent. The Company's desktop computers and internal local area network have
been checked for Year 2000 problems and none have been found. All programs
purchased from third parties are believed to be Year 2000 compliant based on
certification received from the vendors.
Non-Information Technology Systems
Internal systems used in the Company's manufacturing processes are not date
dependent. Other support systems, such as security and HVAC, have been checked
and will not be adversely affected by dates beyond December 31, 1999.
Costs to Company to Address Year 2000 Issues
To date, the Company has expended approximately $70,000 (exclusive of
internal personnel compensation costs) to perform the program remediation to
non-compliant programs and for training and other consulting services. The
Company estimates remaining costs to project completion to be approximately
$50,000 to replace non-compliant systems that are not mission-critical.
Risks of the Company to Year 2000 Issues
The Company believes that the risks of the Year 2000 problem are moderately
low because its products are not date dependent and it has been utilizing its
Year 2000 compliant internal software applications since December 31, 1998. The
Company will be evaluating the Year 2000 readiness of its key suppliers
throughout 1999 and will find alternate sources for those suppliers that are not
Year 2000 compliant. The potential impact and related costs resulting from the
Company's failure to find alternate suppliers has not been determined. In
addition, the Company's customers are evaluating their own Year 2000 readiness
and have circulated questionnaires regarding the Company's level of compliance.
The Company will continue to update its customers with respect to Year 2000
readiness and will monitor the progress of its customers to assess the attendant
risks of inadequate Year 2000 compliance.
-13-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Contingency Plans
Currently, the Company does not have a contingency plan, since its products
are not date dependent. In addition, the Company's Year 2000 compliance program
is on schedule and nearly complete.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 133 ("Accounting for Derivative Instruments and Hedging
Activities"). This statement establishes accounting and reporting standards
requiring that all derivative instruments (including certain derivative
instruments embedded in other contracts) be recorded on the balance sheet as an
asset or liability and measured at its fair value. This statement is effective
for fiscal years beginning after June 15, 2000 but can be adopted earlier.
Management has not yet determined the timing of or method to be used in adopting
this statement. Management does not believe at this time that such adoption
would have a material impact on its consolidated financial statements.
Forward-Looking Statements
This Form 10-QSB contains statements relating to future results of the
Company (including certain projections and business trends) that are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially from those projected as
a result of certain risks and uncertainties. These risks and uncertainties
include, but are not limited to: general economic and industry conditions;
slower than anticipated penetration into the satellite communications, defense
and wireless markets; the risk that the benefits expected from the acquisition
of Filtran Microcircuits Inc. are not realized; competitive products and pricing
pressures; risks relating to governmental regulatory actions in communications
and defense programs; and inventory risks due to technological innovation, as
well as other risks and uncertainties, including but not limited to those
detailed from time to time in the Company's Securities and Exchange Commission
filings. These forward-looking statements are made only as of the date hereof,
and the Company undertakes no obligation to update or revise the forward-looking
statements, whether as a result of new information, future events or otherwise.
-14-
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of matters to a Vote of Security Holders.
On June 10, 1999, the Company held its annual shareholders' meeting at
which the shareholders of the Company (i) elected six members to the Company's
Board of Directors, (ii) approved an amendment to the Certificate of
Incorporation of the Company providing for the classification of the Board of
Directors into three classes, with two directors in each class, serving
staggered terms and (iii) ratified the appointment of Arthur Andersen LLP as the
Company's independent auditors for the current fiscal year. The shareholders of
the Company elected Joel H. Goldberg and Eugene W. Niemiec as Class I directors
whose term expires at the 2000 annual shareholders' meeting, Edward H. Cohen and
Arthur A. Oliner as Class II directors whose term expires at the 2001 annual
shareholders' meeting and Mason N. Carter and Albert H. Cohen as Class III
directors whose term expires at the 2002 annual shareholders' meeting. At future
annual meetings of shareholders, directors will be elected for full terms of
three years to succeed those directors whose terms are then expiring.
The following sets forth the number of votes cast for, against or withheld,
as well as the number of abstentions and broker non-votes, as to the matters
voted upon at the Company's June 10, 1999 annual shareholders' meeting:
Election of Directors
Elected
------------------------
For Withheld
------------------------
Mason N. Carter 1,574,758 116,689
Albert H. Cohen 1,575,418 116,029
Edward H. Cohen 1,577,319 114,128
Joel H. Goldberg 1,577,319 114,128
Eugene W. Niemiec 1,574,700 116,747
Arthur A. Oliner 1,573,765 117,682
Amendment to the Company's Certificate of Incorporation
providing for a classified Board of Directors whose members
will serve staggered terms.
For Against Abstain Broker non-votes
------- ------- ------- ----------------
973,060 238,202 6,115 474,070
Ratification of Arthur Andersen LLP as the Company's
independent auditors.
For Against Abstain
--------- ------- -------
1,672,255 17,012 2,180
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<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit No.
- -----------
3(a)(1) Amendment dated June 10,1999 to the By-laws of the Company.
3(a)(2) By-laws of the Company, as amended on June 10, 1999.
3(b)(1) Amendment to the Certificate of Incorporation of the Company
filed on June 11, 1999.
3(b)(2) Restated Certificate of Incorporation of the Company filed
on June 14, 1999.
4(a) Shareholder Rights Agreement dated as of March 9, 1999 between
the Company and ChaseMellon Shareholder Services, L.L.C., as
rights agent, is hereby incorporated by reference to Exhibit 1
to the Company's Current Report on Form 8-K dated
March 9, 1999.
4(b) Amendment NO.1 dated as of June 9, 1999 to the Shareholder
Rights Agreement dated as of March 9, 1999 between the
Company and ChaseMellon Shareholder Services, L.L.C., as
rights agent, is hereby incorporated by reference to Exhibit 1
to the Company's Current Report on Form 8-K dated
June 9, 1999.
10 Shareholder's Agreement dated as of June 3, 1999 among the
Company, William D. Witter, Inc. and William D. Witter.
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule for the Second Quarter Ended
July 3, 1999.
(b) Reports on Form 8-K.
A Current Report on Form 8-K was filed on May 6, 1999 reporting the
Company's results of operations for the first quarter 1999.
A Current Report on Form 8-K was filed on June 9, 1999 announcing that
the Company's Board of Directors had amended the Company's Shareholder
Rights Plan.
A Current Report on Form 8-K/A was filed on June 18, 1999 amending and
restating the Current Report on Form 8K filed on March 1, 1999 that had
announced the completion of the Company's acquisition of Filtran
Microcircuits Inc.
A Current Report on Form 8-K was filed on August 5, 1999 reporting the
Company's results of operations for the second quarter 1999.
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
MERRIMAC INDUSTRIES, INC.
-------------------------
(Registrant)
Date: August 12, 1999 By: /s/ Mason N. Carter
-------------------------------------
Mason N. Carter
Chairman, President and
Chief Executive Officer
Date: August 12, 1999 By: /s/ Robert V. Condon
-------------------------------------
Robert V. Condon
Vice President, Finance, Treasurer,
Secretary and Chief Financial Officer
-17-
<PAGE>
EXHIBIT INDEX Sequentially
Exhibit Numbered Page
3(a)(1) Amendment dated June 10,1999 to the By-laws of the Company.
3(a)(2) By-laws of the Company, as amended on June 10, 1999.
3(b)(1) Amendment to the Certificate of Incorporation of the Company
filed on June 11, 1999.
3(b)(2) Restated Certificate of Incorporation of the Company filed
on June 14, 1999.
4(a) Shareholder Rights Agreement dated as of March 9, 1999 between
the Company and ChaseMellon Shareholder Services, L.L.C., as
rights agent, is hereby incorporated by reference to Exhibit 1
to the Company's Current Report on Form 8-K dated
March 9, 1999.
4(b) Amendment NO.1 dated as of June 9, 1999 to the Shareholder
Rights Agreement dated as of March 9, 1999 between the
Company and ChaseMellon Shareholder Services, L.L.C., as
rights agent, is hereby incorporated by reference to Exhibit 1
to the Company's Current Report on Form 8-K dated
June 9, 1999.
10 Shareholder's Agreement dated as of June 3, 1999 among the
Company, William D. Witter, Inc. and William D. Witter.
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule for the Second Quarter Ended
July 3, 1999.
-18-
Exhibit 3(a)(1)
Section 3 of the by-laws of the Company have been amended to read in their
entirety as follows:
Section 3. BOARD OF DIRECTORS
3.1. Number; Classes; Tenure. The business and affairs of the Corporation
shall be managed by or under the direction of a Board of Directors consisting of
not less than three (3) directors, the exact number of directors to be
determined from time to time exclusively by the Board of Directors by the
affirmative vote of a majority of the entire Board. The directors shall be
divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as may be possible, of one-third of the total
number of directors constituting the entire Board of Directors. At the 1999
Annual Meeting of Shareholders, Class I directors were elected for a one-year
term. Class II directors were elected for a two-year term and Class III
directors were elected for a three-year term. At each succeeding annual meeting
of shareholders beginning in 2000, successors to the class of directors whose
term expires at that annual meeting shall be elected for a three-year term. If
the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in each
class as nearly equal as possible, and any additional director of any class
elected to fill a vacancy resulting from an increase in such class shall hold
office for a term that shall coincide with the remaining term of that class, but
in no case will a decrease in the number of directors shorten the term of any
incumbent director. A director shall hold office until the annual meeting for
the year in which his term expires and until his successor shall be elected and
shall qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal for cause. Directors shall be at least eighteen
years of age but need not be shareholders.
Notwithstanding anything to the contrary contained herein, whenever the
holders of any one or more classes or series of stock issued by the Corporation
shall have the right, voting separately by class or series, to elect directors
at an annual or special meeting of shareholders, the election, term of office,
filling of vacancies and other features of such directorships shall be governed
by the provisions of the certificate of incorporation applicable thereto, unless
expressly provided otherwise by the resolutions of the Board of Directors
providing for the creation of such class or series.
3.2. Powers. The business and affairs of the Corporation shall be managed
under the direction of the Board of Directors who shall have and may exercise
all the powers of the Corporation and do all such lawful acts and things as are
not by law, the certificate of incorporation or these by-laws directed or
required to be exercised or done by the shareholders.
3.3. Vacancies. Any vacancy occurring on the Board of Directors, including
any vacancy resulting from an increase in the number of directors, may be filled
by a majority of the Board of Directors then in office, although less than a
quorum, or by a sole remaining director. Any director elected to fill a vacancy
not resulting from an increase in the number of directors shall have the same
remaining term as that of his predecessor. The directors shall have and may
exercise all their powers notwithstanding the existence of one or more vacancies
in their number, subject to any requirements of law or of the certificate of
incorporation or of these by-laws as to the number of directors required for a
quorum or for any vote or other actions.
<PAGE>
3.4. Committees. The Board of Directors may, by vote of a majority of the
entire board, (a) designate, change the membership of or terminate the existence
of any committee or committees, each committee to consist of three or more of
the directors; (b) designate one or more directors as alternate members of any
such committee who may replace any absent or disqualified member at any meeting
of the committee; and (c) determine the extent to which each such committee
shall have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the Corporation, including the power
to authorize the seal of the Corporation to be affixed to all papers which
require it and the power and authority to declare dividends or to authorize the
issuance of stock; excepting, however, such powers which by law, by the
certificate of incorporation or by these by-laws they are prohibited from so
delegating. In the absence or disqualification of any member of such committee
and his alternate, if any, the member or members thereof present at any meeting
and not disqualified from voting, whether or not constituting a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Committees
established by the Board of Directors may meet either regularly at stated times
or specially on notice given twenty-four hours in advance by any member thereof
by mail, telegram, telephone or in person to all the other members thereof; but
no notice of any regular meeting need be given; and no notice of any special
meeting need be given to members who shall be present or to absent members who
shall waive notice in writing before or after such meeting. Such committees may
make rules for the holding and conduct of their meetings and may appoint such
sub-committees and assistants as they from time to time may deem necessary. The
number of regular and alternate members present, if equal to at least a majority
of the regular members of a committee, shall constitute a quorum and the action
of a majority of those present at a meeting at which a quorum is present and
acting shall be the act of a committee.
3.5. Regular Meetings. Regular meetings of the Board of Directors may be
held without call or notice at such places within or without the State of New
Jersey and at such times as the board may from time to time determine, provided
that notice of the first regular meeting following any such determination shall
be given to absent directors. A regular meeting of the directors may be held
without call or notice immediately after and at the same place as the annual
meeting of shareholders.
3.6. Special Meetings. Special meetings of the Board of Directors may be
held at any time and at any place within or without the State of New Jersey
designated in the notice of the meeting, when called by the chairman of the
board, the president, or by one-third or more in number of the directors,
reasonable notice thereof being given to each director by the secretary or by
the chairman of the board, the president or any one of the directors calling the
meeting.
3.7. Notice. It shall be reasonable and sufficient notice to a director to
send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to him at his usual or last known
business or residence address or to give notice to him in person or by telephone
at least twenty-four hours before the meeting. Notice of a meeting need not be
given to any director if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any director
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
3.8. Quorum. Except as may be otherwise provided by law, by the certificate
of incorporation or by these by-laws, at any meeting of the directors a majority
of the directors then in office shall constitute a quorum; a quorum shall not in
any case be less than one-third of the total number of directors constituting
the whole board. Any meeting may be adjourned from time to time by a majority of
the votes cast upon the question, whether or not a quorum is present, and the
meeting may be held as adjourned without further notice.
-2-
<PAGE>
3.9. Action by Vote. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, when a quorum is present at
any meeting the vote of a majority of the directors present shall be the act of
the Board of Directors.
3.10. Action Without a Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or a committee thereof may be
taken without a meeting if all the members of the board or of such committee, as
the case may be, consent thereto in writing, and such writing or writings are
filed with the records of the meetings of the board or of such committee. Such
consent shall be treated for all purposes as the act of the board or of such
committee, as the case may be.
3.11. Participation in Meetings by Conference Telephone. Members of the
Board of Directors, or any committee designated by such board, may participate
in a meeting of such board or committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other or by any other means permitted by law. Such
participation shall constitute presence in person at such meeting.
3.12. Compensation. In the discretion of the Board of Directors, each
director may be paid such fees for his services as director and be reimbursed
for his reasonable expenses incurred in the performance of his duties as
director as the Board of Directors from time to time may determine. Nothing
contained in this section shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving reasonable
compensation therefor.
3.13. Interested Directors and Officers.
(a) No contract or transaction between the Corporation and one or more of
its directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of the
Corporation's directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if any one of
the following is true:
(1) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the board or committee in good faith authorizes the contract
or transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(2) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the shareholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the shareholders; or
(3) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the shareholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
-3-
<PAGE>
Exhibit 3(a)(2)
AMENDED AND RESTATED BY-LAWS
OF MERRIMAC INDUSTRIES, INC.
Section 1. LAW, CERTIFICATE OF INCORPORATION AND BY-LAWS
1.1. These by-laws are subject to the certificate of incorporation of
Merrimac Industries, Inc. (the "Corporation"). In these by-laws, references to
law, the certificate of incorporation and by-laws mean the law, the provisions
of the certificate of incorporation and the by-laws as from time to time in
effect.
Section 2. SHAREHOLDERS
2.1. Annual Meeting. The annual meeting of shareholders shall be held at
the principal office of the Corporation, or at such other place within or
without the State of New Jersey, and at such time, as shall be determined by the
Board of Directors, on the last Thursday in April of each year, or on such other
day as the Board of Directors may designate. Such annual meeting shall be held
for the purpose of electing directors, and for the transaction of such other
business as may be required by law or these by-laws or as may properly come
before the meeting.
2.2. Special Meetings. A special meeting of the shareholders may be called
at any time by the president or by a majority of the Board of Directors. It
shall also be the duty of the president, or in his absence, the duty of a vice
president, to call such special meetings whenever so requested in writing by
shareholders owning a majority of the shares of capital stock entitled to vote
at such meeting. At any such special meeting only such business may be
transacted which is related to the purpose or purposes set forth in the notice
thereof. Any such call shall state the place, date, hour, and purposes of the
meeting.
2.3. Place of Meeting. All meetings of the shareholders for the election of
directors or for any other purpose shall be held at such place within or without
the State of New Jersey as may be determined from time to time by the Board of
Directors. Any adjourned session of any meeting of the shareholders shall be
held at the place designated in the vote of adjournment.
2.4. Notice of Meetings. Except as otherwise provided by law, a written
notice of each meeting of shareholders stating the place, day and hour thereof
and, in the case of a special meeting, the purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
<PAGE>
meeting, to each shareholder entitled to vote thereat, and to each shareholder
who, by law, by the certificate of incorporation or by these by-laws, is
entitled to notice, by leaving such notice with him or at his residence or usual
place of business, or by depositing it in the United States mail, postage
prepaid, and addressed to such shareholder at his address as it appears in the
records of the Corporation (or at such other address as such shareholder
requests in writing to the secretary of the Corporation). If mailed, such notice
shall be deemed as given when deposited in the United States mail in the manner
provided above. Such notice shall be given by the secretary, or by an officer or
person designated by the Board of Directors, or in the case of a special meeting
by the officer calling the meeting. As to any adjourned session of any meeting
of shareholders, notice of the adjourned meeting need not be given if the time
and place thereof are announced at the meeting at which the adjournment was
taken except that if after the adjournment a new record date is set for the
adjourned session, notice of any such adjourned session of the meeting shall be
given in the manner heretofore described. No notice of any meeting of
shareholders or any adjourned session thereof need be given to a shareholder if
a written waiver of notice, executed before or after the meeting or such
adjourned session by such shareholder, in person or by proxy, is filed with the
records of the meeting or if the shareholder attends such meeting, in person or
by proxy, without objecting at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any meeting of the
shareholders or any adjourned session thereof need be specified in any written
waiver of notice.
2.5. Quorum of Shareholders. At any meeting of the shareholders a quorum as
to any matter shall consist of a majority of the votes entitled to be cast on
the matter, except where a larger quorum is required by law, by the certificate
of incorporation or by these by-laws. Any meeting may be adjourned from time to
time by a majority of the votes properly cast upon the question, whether or not
a quorum is present. If a quorum is present at an original meeting, a quorum
need not be present at an adjourned session of that meeting. Shares of its own
stock belonging to the Corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the Corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of any corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
2.6. Action by Vote. When a quorum is present at any meeting, a plurality
of the votes properly cast for election to any office shall elect to such office
-2-
<PAGE>
and a majority of the votes properly cast upon any question other than an
election to an office shall decide the question, except when a larger vote is
required by law, by the certificate of incorporation or by these by-laws. No
ballot shall be required for any election unless requested by a shareholder
present or represented at the meeting and entitled to vote in the election.
2.7. Proxy Representation. Every shareholder may authorize another person
or persons to act for him by proxy in all matters in which a shareholder is
entitled to participate, whether by waiving notice of any meeting, objecting to
or voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the shareholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after eleven months from
its date unless such proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and, if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the Corporation generally. The authorization of a proxy may but need
not be limited to specified action, provided, however, that if a proxy limits
its authorization to a meeting or meetings of shareholders, unless otherwise
specifically provided such proxy shall entitle the holder thereof to vote at any
adjourned session but shall not be valid after the final adjournment thereof.
2.8. Inspectors. The directors or the person presiding at the meeting may,
but need not, appoint one or more inspectors of election and any substitute
inspectors to act at the meeting or any adjournment thereof. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. On request of the person presiding at
the meeting, the inspectors shall make a report in writing of any challenge,
question or matter determined by them and execute a certificate of any fact
found by them.
2.9. List of Shareholders. The secretary shall prepare and make, at least
ten days before every meeting of shareholders, a complete list of the
shareholders entitled to vote at such meeting, arranged in alphabetical order
and showing the address of each shareholder and the number of shares registered
in his name. The stock ledger shall be the only evidence as to who are
shareholders entitled to examine such list or to vote in person or by proxy at
such meeting.
-3-
<PAGE>
2.10. Notice of Shareholder Business and Nominations.
(a) Annual Meetings of Shareholders. (1) 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 (i) pursuant to the Corporation's notice of meeting, (ii) by or
at the direction of the Board of Directors or (iii) by any shareholder of the
Corporation who was a shareholder of record at the time of giving of notice
provided for in this by-law, who is entitled to vote at the meeting and who
complies with the notice procedures set forth in this by-law.
(2) For nominations or other business to be properly brought before an
annual meeting by a shareholder pursuant to clause (iii) of paragraph (a)(1) of
this by-law, the shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation and such other business must otherwise be a
proper matter for shareholder action. To be timely, a shareholder's notice shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 60th day nor earlier
than the close of business on the 90th day 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 more than 30 days before or more than 60 days
after such anniversary date, notice by the shareholder to be timely must be so
delivered not earlier than the close of business on the 90th day prior to such
annual meeting and not later than the close of business on the later of the 60th
day prior to such annual meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made by the
Corporation. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a shareholder's
notice as described above. Such shareholder's notice shall set forth (i) 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 in an election
contest, or is otherwise required, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
14a-11 thereunder (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (ii) 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 (iii) as to the shareholder giving the
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<PAGE>
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.
(b) 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 (i) by or at the direction of the Board of Directors or (ii)
provided that the Board of Directors has determined that directors shall be
elected at such meeting, by any shareholder of the Corporation who is a
shareholder of record at the time of giving of notice provided for in this
by-law, who shall be entitled to vote at the meeting and who complies with the
notice procedures set forth in this by-law. In the event the Corporation calls a
special meeting of shareholders for the purpose of electing one or more
directors to the Board of Directors, any such shareholder may nominate a person
or persons (as the case may be), for election to such position(s) as specified
in the Corporation's notice of meeting, if the shareholder's notice required by
paragraph (a)(2) of this by-law shall be delivered to the Secretary at the
principal executive offices of the Corporation not earlier than the close of
business on the 90th day prior to such special meeting and not later than the
close of business on the later of the 60th day prior to such special meeting or
the 10th day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a new time period
for the giving of a shareholder's notice as described above.
(c) General. (1) Only such persons who are nominated in accordance with the
procedures set forth in this by-law 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 by-law. Except as otherwise provided by law, the Certificate of
Incorporation or these by-laws, the Chairman of 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 or proposed, as the case may be, in
accordance with the procedures set forth in this by-law and, if any proposed
nomination or business is not in compliance with this by-law, to declare that
such defective proposal or nomination shall be disregarded.
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(2) For purposes of this by-law, "public announcement" shall include,
without limitation, disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this by-law, 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
by-law. Nothing in this by-law 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 3. BOARD OF DIRECTORS
3.1. Number; Classes; Tenure. The business and affairs of the Corporation
shall be managed by or under the direction of a Board of Directors consisting of
not less than three (3) directors, the exact number of directors to be
determined from time to time exclusively by the Board of Directors by the
affirmative vote of a majority of the entire Board. The directors shall be
divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as may be possible, of one-third of the total
number of directors constituting the entire Board of Directors. At the 1999
Annual Meeting of Shareholders, Class I directors were elected for a one-year
term. Class II directors were elected for a two-year term and Class III
directors were elected for a three-year term. At each succeeding annual meeting
of shareholders beginning in 2000, successors to the class of directors whose
term expires at that annual meeting shall be elected for a three-year term. If
the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in each
class as nearly equal as possible, and any additional director of any class
elected to fill a vacancy resulting from an increase in such class shall hold
office for a term that shall coincide with the remaining term of that class, but
in no case will a decrease in the number of directors shorten the term of any
incumbent director. A director shall hold office until the annual meeting for
the year in which his term expires and until his successor shall be elected and
shall qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal for cause. Directors shall be at least eighteen
years of age but need not be shareholders.
Notwithstanding anything to the contrary contained herein, whenever the
holders of any one or more classes or series of stock issued by the Corporation
shall have the right, voting separately by class or series, to elect directors
at an annual or special meeting of shareholders, the election, term of office,
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filling of vacancies and other features of such directorships shall be governed
by the provisions of the certificate of incorporation applicable thereto, unless
expressly provided otherwise by the resolutions of the Board of Directors
providing for the creation of such class or series.
3.2. Powers. The business and affairs of the Corporation shall be managed
under the direction of the Board of Directors who shall have and may exercise
all the powers of the Corporation and do all such lawful acts and things as are
not by law, the certificate of incorporation or these by-laws directed or
required to be exercised or done by the shareholders.
3.3. Vacancies. Any vacancy occurring on the Board of Directors, including
any vacancy resulting from an increase in the number of directors, may be filled
by a majority of the Board of Directors then in office, although less than a
quorum, or by a sole remaining director. Any director elected to fill a vacancy
not resulting from an increase in the number of directors shall have the same
remaining term as that of his predecessor. The directors shall have and may
exercise all their powers notwithstanding the existence of one or more vacancies
in their number, subject to any requirements of law or of the certificate of
incorporation or of these by-laws as to the number of directors required for a
quorum or for any vote or other actions.
3.4. Committees. The Board of Directors may, by vote of a majority of the
entire board, (a) designate, change the membership of or terminate the existence
of any committee or committees, each committee to consist of three or more of
the directors; (b) designate one or more directors as alternate members of any
such committee who may replace any absent or disqualified member at any meeting
of the committee; and (c) determine the extent to which each such committee
shall have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the Corporation, including the power
to authorize the seal of the Corporation to be affixed to all papers which
require it and the power and authority to declare dividends or to authorize the
issuance of stock; excepting, however, such powers which by law, by the
certificate of incorporation or by these by-laws they are prohibited from so
delegating. In the absence or disqualification of any member of such committee
and his alternate, if any, the member or members thereof present at any meeting
and not disqualified from voting, whether or not constituting a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Committees
established by the Board of Directors may meet either regularly at stated times
or specially on notice given twenty-four hours in advance by any member thereof
by mail, telegram, telephone or in person to all the other members thereof; but
no notice of any regular meeting need be given; and no notice of any special
meeting need be given to members who shall be present or to absent members who
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shall waive notice in writing before or after such meeting. Such committees may
make rules for the holding and conduct of their meetings and may appoint such
sub-committees and assistants as they from time to time may deem necessary. The
number of regular and alternate members present, if equal to at least a majority
of the regular members of a committee, shall constitute a quorum and the action
of a majority of those present at a meeting at which a quorum is present and
acting shall be the act of a committee.
3.5. Regular Meetings. Regular meetings of the Board of Directors may be
held without call or notice at such places within or without the State of New
Jersey and at such times as the board may from time to time determine, provided
that notice of the first regular meeting following any such determination shall
be given to absent directors. A regular meeting of the directors may be held
without call or notice immediately after and at the same place as the annual
meeting of shareholders.
3.6. Special Meetings. Special meetings of the Board of Directors may be
held at any time and at any place within or without the State of New Jersey
designated in the notice of the meeting, when called by the chairman of the
board, the president, or by one-third or more in number of the directors,
reasonable notice thereof being given to each director by the secretary or by
the chairman of the board, the president or any one of the directors calling the
meeting.
3.7. Notice. It shall be reasonable and sufficient notice to a director to
send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to him at his usual or last known
business or residence address or to give notice to him in person or by telephone
at least twenty-four hours before the meeting. Notice of a meeting need not be
given to any director if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any director
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
3.8. Quorum. Except as may be otherwise provided by law, by the certificate
of incorporation or by these by-laws, at any meeting of the directors a majority
of the directors then in office shall constitute a quorum; a quorum shall not in
any case be less than one-third of the total number of directors constituting
the whole board. Any meeting may be adjourned from time to time by a majority of
the votes cast upon the question, whether or not a quorum is present, and the
meeting may be held as adjourned without further notice.
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3.9. Action by Vote. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, when a quorum is present at
any meeting the vote of a majority of the directors present shall be the act of
the Board of Directors.
3.10. Action Without a Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or a committee thereof may be
taken without a meeting if all the members of the board or of such committee, as
the case may be, consent thereto in writing, and such writing or writings are
filed with the records of the meetings of the board or of such committee. Such
consent shall be treated for all purposes as the act of the board or of such
committee, as the case may be.
3.11. Participation in Meetings by Conference Telephone. Members of the
Board of Directors, or any committee designated by such board, may participate
in a meeting of such board or committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other or by any other means permitted by law. Such
participation shall constitute presence in person at such meeting.
3.12. Compensation. In the discretion of the Board of Directors, each
director may be paid such fees for his services as director and be reimbursed
for his reasonable expenses incurred in the performance of his duties as
director as the Board of Directors from time to time may determine. Nothing
contained in this section shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving reasonable
compensation therefor.
3.13. Interested Directors and Officers.
(a) No contract or transaction between the Corporation and one or more of
its directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of the
Corporation's directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if any one of
the following is true:
(1) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the board or committee in good faith authorizes the contract
or transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
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(2) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the shareholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the shareholders; or
(3) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the shareholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
Section 4. OFFICERS AND AGENTS
4.1. Enumeration; Qualification. The executive officers of the Corporation
shall be a chairman, a president, one or more vice presidents, a treasurer, a
secretary and such other officers, if any, as the Board of Directors from time
to time may in its discretion elect or appoint. The Corporation may also have
such agents, if any, as the Board of Directors from time to time may in its
discretion choose. Any officer may be but none need be a director or
shareholder. Any two or more offices may be held by the same person, except that
the same person shall not serve both as President and Secretary. Any officer may
be required by the Board of Directors to secure the faithful performance of his
duties to the Corporation by giving bond in such amount and with sureties or
otherwise as the Board of Directors may determine.
4.2. Powers. Subject to law, to the certificate of incorporation and to the
other provisions of these by-laws, each officer shall have, in addition to the
duties and powers herein set forth, such duties and powers as are commonly
incident to his office and such additional duties and powers as the Board of
Directors may from time to time designate.
4.3. Election. The officers may be elected by the Board of Directors at
their first meeting following the annual meeting of the shareholders or at any
other time. At any time or from time to time the directors may delegate to any
officer their power to elect or appoint any other officer or any agents.
4.4. Tenure. Each officer shall hold office until the first meeting of the
Board of Directors following the next annual meeting of the shareholders and
until his respective successor is chosen and qualified unless a shorter period
shall have been specified by the terms of his election or appointment, or in
each case until he sooner dies, resigns, is removed or becomes disqualified.
Each agent shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or by the officer who then holds agent
appointive power.
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4.5. Chairman of the Board of Directors, President and Vice President. The
chairman of the board shall have such duties and powers as shall be designated
from time to time by the Board of Directors. Unless the Board of Directors
otherwise specifies, the chairman of the board, or if there is none the chief
executive officer, shall preside, or designate the person who shall preside, at
all meetings of the shareholders and of the Board of Directors. Unless the Board
of Directors otherwise specifies, the president shall be the chief executive
officer of the Corporation and shall have direct charge of all business
operations of the Corporation and, subject to the control of the directors,
shall have general charge and supervision of the business of the Corporation.
The vice presidents, one or more of whom may be designated executive vice
president or senior vice president, shall have such duties and powers as shall
be set forth in these by-laws or as shall be designated from time to time by the
Board of Directors or by the president. In the absence or inability to act of
the president, the duties of the president and chairman of the board shall be
performed by the vice presidents in the order of priority established by the
board unless and until the Board of Directors shall otherwise direct.
4.6. Treasurer and Assistant Treasurers. The treasurer shall be the chief
financial officer of the Corporation and shall be in charge of its books of
account, accounting records and accounting procedures. He shall be responsible
for the verification of all of the assets of the Corporation and the preparation
of all tax returns and other financial reports to governmental agencies by the
Corporation. He shall also have the care and custody of the funds and securities
of the Corporation, sign checks, drafts, notes and orders for the payment of
money, pay out and dispose of the funds and securities of the Corporation and in
general perform the duties customary to the office of treasurer. The treasurer
may have such additional duties and powers as may be designated from time to
time by the Board of Directors or the president. He shall be responsible to and
shall report to the Board of Directors but in the ordinary conduct of the
Corporation's business shall be under the supervision of the president or such
other officer as the Board of Directors shall designate.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the Board of Directors, the president or the
treasurer.
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4.7. Secretary and Assistant Secretaries. The secretary shall (a) keep the
minutes of the meetings of the Board of Directors, the shareholders and any
committee designated by the Board of Directors; (b) see that all required
notices of meetings of the directors, shareholders and members of such
committees are duly given in accordance with the provisions of these by-laws or
affix and attest the same to all instruments requiring the seal when authorized
by the Board of Directors or the president. He shall also have charge of the
corporate records and such books and papers as the Board of Directors may
specify and shall perform all other duties incident to the office of secretary
or which may be assigned to him from time to time by the Board of Directors or
the president. In the absence of the secretary from any meeting, an assistant
secretary, or if there be none or he is absent, a temporary secretary chosen at
the meeting, shall record the proceedings thereof. Unless a transfer agent has
been appointed the secretary shall keep or cause to be kept the stock and
transfer records of the Corporation, which shall contain the names and record
addresses of all shareholders and the number of shares registered in the name of
each shareholder. He shall have such other duties and powers as may from time to
time be designated by the Board of Directors or the president.
Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the Board of Directors, the president or the
secretary.
4.8. Salaries. The salaries of all officers shall be fixed or approved by
the Board of Directors and the fact that any officer is a director shall not
preclude him from receiving a salary as an officer.
Section 5. RESIGNATIONS AND REMOVALS
5.1. Any director or officer may resign at any time by delivering his
resignation in writing to the chairman of the board, the president, or the
secretary or to a meeting of the Board of Directors. Such resignation shall be
effective upon receipt unless specified to be effective at some other time, and
without in either case the necessity of its being accepted unless the
resignation shall so state. A director (including persons elected by directors
to fill vacancies in the board) may be removed from office with cause by the
vote of the holders of a majority of the shares issued and outstanding and
entitled to vote in the election of directors. The Board of Directors may at any
time remove any officer either with or without cause. The Board of Directors may
at any time terminate or modify the authority of any agent. No director or
officer resigning and (except where a right to receive compensation shall be
expressly provided in a duly authorized written agreement with the Corporation)
no director or officer removed shall have any right to any compensation as such
director or officer for any period following his resignation or removal, or any
right to damages on account of such removal, whether his compensation be by the
month or by the year or otherwise; unless, in the case of a resignation, the
directors, or, in the case of removal, the body acting on the removal, shall in
their or its discretion provide for compensation.
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Section 6. VACANCIES
6.1. If the office of the chairman, the president or the treasurer or the
secretary becomes vacant, the directors may elect a successor by vote of a
majority of the directors then in office. If the office of any other officer
becomes vacant, any person or body empowered to elect or appoint that officer
may choose a successor. Each such successor shall hold office for the unexpired
term, and in the case of the chairman, the president, the treasurer and the
secretary until his successor is chosen and qualified or in each case until he
sooner dies, resigns, is removed or becomes disqualified. Any vacancy of a
directorship shall be filled as specified in Section 3.3 of these by-laws.
Section 7. CAPITAL STOCK
7.1. Stock Certificates. Each shareholder shall be entitled to a
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
the certificate of incorporation and the by-laws, be prescribed from time to
time by the Board of Directors. Such certificate shall be signed by the chairman
or vice chairman of the board, if any, or the president or a vice president and
may be countersigned by the treasurer or an assistant treasurer or by the
secretary or an assistant secretary. Any of or all the signatures on the
certificate may be a facsimile. In case an officer, transfer agent, or registrar
who has signed or whose facsimile signature has been placed on such certificate
shall have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent, or registrar at the time of its
issue.
7.2. Loss of Certificates. In the case of the alleged theft, loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms, including receipt of a bond
sufficient to indemnify the Corporation against any claim on account thereof, as
the Board of Directors may prescribe.
Section 8. TRANSFER OF SHARES OF STOCK
8.1. Transfer on Books. Subject to the restrictions, if any, stated or
noted on the stock certificate, shares of stock may be transferred on the books
of the Corporation by the surrender to the Corporation or its transfer agent of
the certificate therefor properly endorsed or accompanied by a written
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assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
Board of Directors or the transfer agent of the Corporation may reasonably
require. Except as maybe otherwise required by law, by the certificate of
incorporation or by these by-laws, the Corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to receive notice
and to vote or to give any consent with respect thereto and to be held liable
for such calls and assessments, if any, as may lawfully be made thereon,
regardless of any transfer, pledge or other disposition of such stock until the
shares have been properly transferred on the books of the Corporation.
It shall be the duty of each shareholder to notify the Corporation of his
post office address.
8.2. Record Date and Closing Transfer Books. 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 to express consent to corporate
action in writing without a meeting, 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 stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days (or such longer period as may be required by law) before the date of such
meeting, nor more than sixty days prior to any other action.
If no record date is fixed:
(a) 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.
(b) The record date for determining shareholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is necessary, shall be the day on which the first
written consent is expressed.
(c) 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.
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A determination of shareholders of record entitled to notice of or to vote
at a meeting of shareholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 9. CORPORATE SEAL
9.1. Subject to alteration by the directors, the seal of the Corporation
shall consist of a flat-faced circular die with the word "New Jersey" and the
name of the Corporation cut or engraved thereon, together with such other words,
dates or images as may be approved from time to time by the directors.
Section 10. EXECUTION OF PAPERS
10.1. Except as the Board of Directors may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts or other obligations made,
accepted or endorsed by the Corporation shall be signed or endorsed in such
manner as shall be determined by the directors. The funds of the Corporation
shall be deposited in such banks or trust companies, and checks drawn against
such funds shall be signed in such manner as may be determined from time to time
by the directors.
Section 11. FISCAL YEAR
11.1. The fiscal year of the Corporation shall be the 52-week or 53-week
period beginning on or about the 1st day of January and ending on the Saturday
closest to the 31st day of December, or such other period as may be fixed by the
Board of Directors.
Section 12. INDEMNIFICATION
12.1. Indemnification of Directors and Officers. The Corporation shall, to
the fullest extent permitted by applicable law, indemnify any person (and the
heirs, executors and administrators thereof) who was or is made, or threatened
to be made, a party to an action, suit or proceeding, whether civil, criminal,
administrative or investigative, whether involving any actual or alleged breach
of duty, neglect or error, any accountability, or any actual or alleged
misstatement, misleading statement or other act or omission and whether brought
or threatened in any court or administrative or legislative body or agency,
including an action by or in the right of the Corporation to procure a judgment
in its favor and an action by or in the right of any other corporation of any
type or kind, domestic or foreign, or any partnership, joint venture, trust,
employee benefit plan or other enterprise, which any director or officer of the
Corporation is serving or has served in any capacity at the request of the
Corporation, by reason of the fact that he, his testator or intestate is or was
a director or officer of the Corporation, or is serving or has served such other
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corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise in any capacity, against judgments, fines, amounts paid in
settlement, and costs, charges and expenses, including attorneys' fees, incurred
therein or in any appeal thereof.
12.2. Indemnification of Others. The Corporation shall indemnify other
persons and reimburse the expenses thereof, to the extent required by applicable
law, and may indemnify any other person to whom the Corporation is permitted to
provide indemnification or the advancement of expenses, whether pursuant to
rights granted pursuant to, or provided by, the New Jersey Business Corporation
Act or otherwise.
12.3. Advances or Reimbursement of Expenses. The Corporation shall, from
time to time, reimburse or advance to any person referred to in Section 12.1 the
funds necessary for payment of expenses, including attorneys' fees, incurred in
connection with any action, suit or proceeding referred to in Section 12.1, upon
receipt of a written undertaking by or on behalf of such person to repay such
amount(s) if a judgment or other final adjudication adverse to the director or
officer establishes that his acts or omissions (i) constitute a breach of his
duty of loyalty to the Corporation or its shareholders, (ii) were not in good
faith, (iii) involved a knowing violation of law, (iv) resulted in his receiving
an improper personal benefit, or (v) were otherwise of such a character that New
Jersey law would require that such amount(s) be repaid.
12.4. Service of Certain Entities Deemed Requested. Any director or officer
of the Corporation serving (i) another corporation, of which a majority of the
shares entitled to vote in the election of its directors is held by the
Corporation, or (ii) any employee benefit plan of the Corporation or any
corporation referred in clause (i), in any capacity shall be deemed to be doing
so at the request of the Corporation.
12.5. Interpretation. Any person entitled to be indemnified or to the
reimbursement or advancement of expenses as a matter of right pursuant to this
Article may elect to have the right to indemnification (or advancement of
expense) interpreted on the basis of the applicable law in effect at the time of
the occurrence of the event or events giving rise to the action, suit or
proceeding, to the extent permitted by applicable law, or on the basis of the
applicable law in effect at the time indemnification is sought.
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12.6. Indemnification Right. The right to be indemnified or to the contract
right pursuant to which the person entitled thereto may bring suit as if the
provisions hereof were set forth in a separate written contract between the
Corporation and the director or officer, (ii) is intended to be retroactive and
shall be available with respect to events occurring prior to the adoption
hereof, (iii) shall continue to exist after any elimination of or amendment to
this Article 12 hereof with respect to events occurring prior thereto, and (iv)
and shall not be deemed exclusive of any other rights to which any person
claiming indemnification hereunder may be entitled.
12.7. Indemnification Claims. If a request to be indemnified or for the
reimbursement or advancement of expenses pursuant hereto is not paid in full by
the Corporation within thirty days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled also to be paid the expenses of
prosecuting such claim. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel, or its shareholders) to have made
a determination prior to the commencement of such action that indemnification of
or reimbursement or advancement of expenses to the claimant is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel, or its shareholders) that the
claimant is not entitled to indemnification or to the reimbursement or
advancement of expenses, shall be a defense to the action or create a
presumption that the claimant is not so entitled.
12.8. Insurance. The Corporation may maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
whether or not the Corporation would have the power to provide indemnification
to such person.
Section 13. AMENDMENTS
13.1. These by-laws may be adopted, amended or repealed by vote of a
majority of the stock outstanding at the time entitled to vote in the election
of directors. Provided that notice of the proposed alteration, amendment or
repeal of these by-laws has been stated in the notice of the meeting, such
by-laws may also be adopted, amended or repealed by the Board of Directors by
vote of a majority of the entire Board of Directors, but any by-laws adopted by
the Board of Directors may be amended or repealed by the shareholders entitled
to vote thereon as herein provided. Any by-law, whether adopted, amended or
repealed by the shareholders or directors, may be amended or reinstated by the
shareholders or the directors.
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Exhibit 3(b)(1)
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF INCORPORATION
OF
MERRIMAC INDUSTRIES, INC.
To: The Secretary of State
State of New Jersey
Pursuant to the provisions of Sections 14A:9-2(4) and 14A:9-4(3) of the New
Jersey Business Corporation Act, the undersigned corporation executes the
following Certificate of Amendment to its Certificate of Incorporation filed
with the Secretary of State on March 8, 1994:
1. The name of the corporation (hereinafter called the "Corporation") is
Merrimac Industries, Inc.
2. The following amendment to the Certificate of Incorporation (the
"Amendment") was approved by the Board of Directors of the Corporation on March
5, 1999 and thereafter was duly adopted by the shareholders of the Corporation
on June 10, 1999 at the 1999 annual meeting of shareholders of the Corporation:
RESOLVED, that the Certificate of Incorporation of the Corporation be and
it is hereby amended by changing Article III thereof so that, as amended, such
Article shall be and shall be read in its entirety as follows:
ARTICLE III
Classified Board of Directors
The business and affairs of the Corporation shall be managed by or under
the direction of a Board of Directors consisting of not less than three (3)
directors, the exact number of directors to be determined from time to time
exclusively by the Board of Directors by the affirmative vote of a majority of
the entire Board. The directors shall be divided into three classes, designated
Class I, Class II and Class III. Each class shall consist, as nearly as may be
<PAGE>
possible, of one-third of the total number of directors constituting the entire
Board of Directors. At the 1999 Annual Meeting of Shareholders, Class I
directors shall be elected for a one-year term. Class II directors shall be
elected for a two-year term and Class III directors shall be elected for a
three-year term. At each succeeding annual meeting of shareholders beginning in
2000, successors to the class of directors whose term expires at that annual
meeting shall be elected for a three-year term. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as possible,
and any additional director of any class elected to fill a vacancy resulting
from an increase in such class shall hold office for a term that shall coincide
with the remaining term of that class, but in no case will a decrease in the
number of directors shorten the term of any incumbent director. A director shall
hold office until the annual meeting for the year in which his term expires and
until his successor shall be elected and shall qualify, subject, however, to
prior death, resignation, retirement, disqualification or removal for cause. Any
vacancy occurring on the Board of Directors, including any vacancy resulting
from an increase in the number of directors, may be filled by a majority of the
Board of Directors then in office, although less than a quorum, or by a sole
remaining director. Any director elected to fill a vacancy not resulting from an
increase in the number of directors shall have the same remaining term as that
of his predecessor.
Notwithstanding anything to the contrary in the foregoing, whenever the
holders of any one or more classes or series of stock issued by the Corporation
shall have the right, voting separately by class or series, to elect directors
at an annual or special meeting of shareholders, the election, term of office,
filling of vacancies and other features of such directorships shall be governed
by the provisions of this Certificate of Incorporation applicable thereto,
unless expressly provided otherwise by the resolutions of the Board of Directors
providing for the creation of such class or series.
3. The total number of shares entitled to vote on the adoption of the
Amendment at the 1999 annual meeting of shareholders of the Corporation was
1,736,550.
4. The number of shares voting for and against such Amendment was as
follows:
Number of Shares Voting Number of Shares Voting
For Amendment Against Amendment
972,950 238,312
Dated: June 11, 1999
MERRIMAC INDUSTRIES, INC.
By: /s/ Mason N.Carter
------------------
Name: Mason N. Carter
Title: Chairman of the Board, President
and Chief Executive Officer
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Exhibit 3(b)(2)
RESTATED CERTIFICATE OF INCORPORATION
OF
MERRIMAC INDUSTRIES, INC.
To: The Secretary of State
State of New Jersey
Pursuant to the provisions of Section 14A:9-5, including Section
14A:9-5(5), of the New Jersey Business Corporation Act, the undersigned
corporation executes the attached Restated Certificate of Incorporation and
hereby certifies as follows:
1. The name of the corporation (hereinafter called the "Corporation") is
Merrimac Industries, Inc.
2. The Restated Certificate of Incorporation was adopted by the Board of
Directors of the Corporation on June 10, 1999 following the 1999 annual meeting
of shareholders of the Corporation. The original Certificate of Incorporation
was filed with the Secretary of State of the State of New Jersey on March 8,
1994.
3. The Restated Certificate of Incorporation only restates and integrates
and does not further amend the provisions of the Certificate of Incorporation of
this Corporation as heretofore amended or supplemented, and there is no
discrepancy between those provisions and the provisions of the Restated
Certificate of Incorporation attached hereto.
Dated: June 15, 1999
MERRIMAC INDUSTRIES, INC.
By: /s/ Mason N.Carter
------------------
Name: Mason N. Carter
Title: Chairman of the Board, President
and Chief Executive Officer
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
MERRIMAC INDUSTRIES, INC.
Pursuant to the provisions of Section 14A:9-5 of the New Jersey Business
Corporation Act, the undersigned corporation executes the following Restated
Certificate of Incorporation:
ARTICLE I
Corporate Name
The name of the Corporation is Merrimac Industries, Inc.
ARTICLE II
Registered Office and Registered Agent
The address of the Corporation's registered office is:
41 Fairfield Place
West Caldwell, New Jersey 07006
The name of the registered agent at that address is:
Robert V. Condon
ARTICLE III
Classified Board of Directors
The business and affairs of the Corporation shall be managed by or under
the direction of a Board of Directors consisting of not less than three (3)
directors, the exact number of directors to be determined from time to time
exclusively by the Board of Directors by the affirmative vote of a majority of
the entire Board. The directors shall be divided into three classes, designated
Class I, Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors constituting the entire
Board of Directors. At the 1999 Annual Meeting of Shareholders, Class I
directors shall be elected for a one-year term. Class II directors shall be
elected for a two-year term and Class III directors shall be elected for a
three-year term. At each succeeding annual meeting of shareholders beginning in
2000, successors to the class of directors whose term expires at that annual
meeting shall be elected for a three-year term. If the number of directors is
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<PAGE>
changed, any increase or decrease shall be apportioned among the classes so
as to maintain the number of directors in each class as nearly equal as
possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal for cause. Any vacancy occurring on the Board of Directors, including
any vacancy resulting from an increase in the number of directors, may be filled
by a majority of the Board of Directors then in office, although less than a
quorum, or by a sole remaining director. Any director elected to fill a vacancy
not resulting from an increase in the number of directors shall have the same
remaining term as that of his predecessor.
Notwithstanding anything to the contrary in the foregoing, whenever the
holders of any one or more classes or series of stock issued by the Corporation
shall have the right, voting separately by class or series, to elect directors
at an annual or special meeting of shareholders, the election, term of office,
filling of vacancies and other features of such directorships shall be governed
by the provisions of this Certificate of Incorporation applicable thereto,
unless expressly provided otherwise by the resolutions of the Board of Directors
providing for the creation of such class or series.
The names and addresses of the current Board of Directors are as follows:
Class I:
Joel H. Goldberg
c/o C.C.I. / SK Associates, Inc.
1767 Morris Avenue
Union, NJ 07083
Eugene W. Niemiec
66 Skytop Road
Cedar Grove, NJ 07009
Class II:
Edward H. Cohen
c/o Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
Arthur A. Oliner
11 Dawes Road
Lexington, MA 02173
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<PAGE>
Class III:
Mason N. Carter
c/o Merrimac Industries, Inc.
41 Fairfield Place
West Caldwell, NJ 07006
Albert H. Cohen
7 Pine Court
Westfield, NJ 07090
ARTICLE IV
Corporate Purpose
The purpose for which the Corporation is organized is to engage in any
activities for which corporations may be organized under the New Jersey Business
Corporation Act.
ARTICLE V
Capital Stock
The total number of shares of capital stock which the Corporation shall
have authority to issue is 5,000,000 shares of the par value of $.50 per share,
all of the same class designated common stock.
ARTICLE VI
Limitation of Liability
Subject to the following, a director or officer of the Corporation shall
not be personally liable to the Corporation or its shareholders for damages for
breach of any duty owed to the Corporation or its shareholders. The preceding
sentence shall not relieve a director or officer from liability for any breach
of duty based upon an act or omission (i) in breach of such person's duty of
loyalty to the Corporation or its shareholders, (ii) not in good faith or
involving a knowing violation of law, or (iii) resulting in receipt by such
person of an improper personal benefit. If the New Jersey Business Corporation
Act is amended to authorize corporate action further eliminating or limiting the
personal liability of directors or officers, then the liability of a director or
officer or both of the Corporation shall be eliminated or limited to the fullest
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<PAGE>
extent permitted by the New Jersey Business Corporation Act as so amended. Any
amendment to this Certificate of Incorporation, or change in law which
authorizes this paragraph shall not adversely affect any then existing right or
protection of a director or officer of the Corporation.
ARTICLE VII
Prohibition Against Removal of Directors Without Cause
None of the present or future directors of the Corporation may be removed
without cause by the shareholders of the Corporation.
ARTICLE VIII
Certain Required Votes of Shareholders
Any proposed merger or consolidation of the Corporation with any other
corporation or other entity shall require the affirmative votes, cast in person
or by proxy, of the holders of record of eighty percent (80%) of the outstanding
shares of the capital stock of the Corporation entitled to vote thereon.
Dated: June 15, 1999
MERRIMAC INDUSTRIES, INC.
By: /s/ Mason N.Carter
------------------
Name: Mason N.Carter
Title: Chairman of the Board, President
and Chief Executive Officer
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Exhibit 10
SHAREHOLDER'S AGREEMENT
SHAREHOLDER'S AGREEMENT dated as of June 3, 1999 (this "Agreement") by and
among Merrimac Industries, Inc., a New Jersey corporation (the "Company"),
William D. Witter, Inc., a New York corporation registered as an investment
advisor under the Investment Advisers Act of 1940 ("Witter, Inc."), and William
D. Witter.
WHEREAS, Witter, Inc. is the record owner of the Witter Shares (as defined
herein) and Witter, Inc., together with William D. Witter, are the beneficial
owners of the Witter Shares; and
WHEREAS, as a condition to amending the Company's shareholder rights plan
to allow Witter, Inc., together with its Affiliates and Associates (as such
terms are defined herein), to purchase up to a total of 15% of the outstanding
shares of capital stock of the Company, the parties agree to the transfer
provisions relating to the Covered Securities (as defined herein) as set forth
in this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants and agreements herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated:
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such first Person. The term "affiliated" (whether or not
capitalized) shall have a correlative meaning. For the purposes of this
definition, "control," as used with respect to any Person, shall mean the
possession, directly or indirectly through or with one or more intermediaries,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise. The terms "controlled by" and "under common control with" shall have
correlative meanings.
<PAGE>
"Agreement" means this Shareholder's Agreement and any schedules and
exhibits attached hereto, as the same may be amended, supplemented or modified
from time to time in accordance with the terms hereof.
"Associate" means, with respect to any Person, (a) any Entity of which such
Person is an officer or partner or is, directly or indirectly, the beneficial
owner of 10% or more of any equity securities of any Class, (b) any trust or
other estate in which such Person has a substantial beneficial interest or as to
which such Person serves as trustee or in a similar fiduciary capacity, (c) any
relative or spouse of such Person, or any relative of such spouse, who has the
same home as such Person and (d) any Associates thereof. For purposes of this
Agreement, William D. Witter shall be deemed an Associate of Witter, Inc. and
Charles F. Huber, II shall not be deemed an Associate of Witter, Inc.
"beneficial owner" or "beneficial ownership" shall have the meaning set
forth in Rule 13d-3 under the Exchange Act.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions in New York, New York are not open for business.
"Class" shall have the meaning set forth in the definition of Covered
Securities.
"Common Stock" shall have the meaning set forth in the definition of Witter
Shares.
"Company" shall have the meaning set forth in the preamble to this
Agreement.
"Contract" means any agreement, contract, obligation, commitment,
indenture, lease, license, instrument, note, bond, security, agreement in
principle, letter of intent, undertaking, promise, covenant, arrangement or
understanding, whether written or oral.
"Covered Securities" means (i) any and all shares (or other units) of
capital stock of the Company, however denominated, of any class, series, issue
or other type ("Class"), including shares of capital stock into which any such
Class may be changed, and (ii) any and all Rights with respect to any such
shares of capital stock of the Company of any Class. If, at any time, any
Covered Securities of any Class are changed into shares of capital stock of any
other Class or other securities of any Class, whether by reason of a
reclassification, reorganization, recapitalization, consolidation, merger,
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<PAGE>
exchange or any other event or transaction of any nature whatsoever, then such
shares of capital stock or other securities into which such Covered Securities
are changed shall also be "Covered Securities", and this sentence shall apply
successively on each and every occasion on which any event or transaction of any
kind referred to shall occur. If, in connection with any consolidation, merger,
binding share exchange or reorganization to which the Company is a party and in
which the Company is not the surviving or continuing corporation or any sales,
conveyance, transfer or lease to another Entity of the properties and assets of
the Company as an entirety or substantially as an entirety, capital stock or
other securities of any Class of the successor or acquiring Entity are issued or
issuable in respect of any Covered Securities on any Class, then such shares of
capital stock or other securities of such successor or acquiring Entity shall
also be "Covered Securities". The term "Covered Securities" also includes all
shares or other appropriate units of capital stock or other securities of any
Class issued as a dividend or distribution on any other shares or other units of
Covered Securities.
"Entity" means any corporation, limited liability company, general or
limited partnership, joint venture, association, joint stock company, trust,
other unincorporated business or organization or other Person which is not
either a natural person or a governmental authority.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Liens" means any liens, claims, charges, conditions, equitable interests,
commitments (fixed or contingent), encumbrances, options, pledges, security
interests, mortgages, retention of title agreements, defects of title, rights of
interest or restrictions of any kind or nature, including any restriction on
use, voting, transfer, receipt of income or exercise of any other attribute of
ownership.
"Person" means any individual, corporation, limited liability company or
entity, general or limited partnership, joint venture, association, joint stock
company, trust, unincorporated business or organization, Governmental Authority
or other entity or legal person, whether acting in an individual, fiduciary or
other capacity.
"Reports" shall have the meaning set forth in Section 4.1(d) of this
Agreement.
"Rights" means options, warrants, convertible or exchangeable securities or
other rights, however denominated, to subscribe for, purchase or otherwise
acquire any equity interest or other security of any Class, with or without
payment of additional consideration in cash or property, either immediately or
upon the occurrence of a specified date or a specified event or the satisfaction
or happening of any other condition or contingency.
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<PAGE>
"SEC" shall have the meaning set forth in Section 4.1(d) of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Total Voting Power" means the aggregate number of votes which may be cast
by holders of issued and outstanding Covered Securities.
"Transfer" means, when used with reference to any Covered Securities or
other securities, to directly or indirectly, voluntarily or involuntarily, (i)
to offer for sale, sell, assign, make a gift of, exchange, tender, dispose of,
pledge, hypothecate, grant an option or other Right for or otherwise transfer
(whether by merger or otherwise) or permit any sale or transfer to satisfy a
margin call or other obligation relating to Covered Securities held as
collateral, encumber or subject to any claim, Lien or restriction any such
Covered Securities or other securities or any interest therein, (ii) grant any
proxy, voting or other rights with respect to any such Covered Securities or
other securities or deposit any Covered Securities into a voting trust or (iii)
enter into any agreement or arrangement regarding the transfer, acquisition,
holding, disposition or voting of such Covered Securities. The terms
"Transferred", "Transferee" and similar variants shall have correlative
meanings.
"Voting Covered Securities" means all Covered Securities entitled to vote
in annual or special meetings of the Company and which would be entitled to vote
in annual or special meetings of the Company if it were assumed that Rights with
respect to Covered Securities then held were duly exercised and converted in
full (whether or not then exercisable or convertible).
"Witter, Inc." shall have the meaning set forth in the preamble to this
Agreement.
"Witter Shares" means (i) the 171,899 shares of issued and outstanding
Common Stock, par value $.50 per share (the "Common Stock"), of the Company
owned beneficially or of record or held by Witter, Inc. and William D. Witter
(for themselves or on behalf of their various clients) on the date hereof, (ii)
all shares of Common Stock and Covered Securities of the Company hereafter
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<PAGE>
acquired by Witter, Inc. or any of its Affiliates and Associates (held by them
or on behalf of their various clients) pursuant to the exercise of Rights with
respect to Covered Securities of the Company hereafter acquired or held by
Witter, Inc. or any of its Affiliates and Associates with the written consent of
the Company, and (iii) all Rights with respect to shares of Common Stock or
Covered Securities of the Company hereafter acquired or held by Witter, Inc. or
any of its Affiliates and Associates (for themselves or on behalf of their
various clients) with the written consent of the Company.
Section 1.2 Terms Generally; Certain Rules of Construction. The definitions
in Section 1.1 shall apply equally to both the singular and plural forms of the
terms defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation." The words "herein", "hereof" and "hereunder" and words of similar
import refer to this Agreement in its entirety and not to any part hereof unless
the context shall otherwise require. The word "or" is not exclusive and means
"and/or." All references herein to Sections, Exhibits and Schedules shall be
deemed references to and Sections of, and Exhibits and Schedules to (if any),
this Agreement unless the context shall otherwise require. Unless otherwise
expressly provided herein or unless the context shall otherwise require, any
references as of any time to any agreement (including this Agreement) or other
Contract, instrument or document or to any statute or regulation or any specific
section or other provision thereof are to it as amended and supplemented through
such time (and, in the case of a statute or regulation or specific section or
other provision thereof, to any successor of such statute, regulation, section
or other provision). Any reference in this Agreement to a "day" or number of
"days" (without the explicit qualification of "Business") shall be interpreted
as a reference to a calendar day or number of calendar days. If any action or
notice is to be taken or given on or by a particular calendar day, and such
calendar day is not a Business Day, then such action or notice shall be deferred
until, or may be taken or given on, the next Business Day. Unless otherwise
expressly provided herein or unless the context shall otherwise require, any
provision of this Agreement using a defined term which is based on a specified
characteristic, qualification, feature or status shall, as of any time, refer
only to such Persons who have the specified characteristic, qualification,
feature or status as of that particular time.
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<PAGE>
ARTICLE II
STANDSTILL AND TRANSFER MATTERS
Section 2.1 Acquisitions. Without the prior written consent of the Company,
each of Witter, Inc. and its Affiliates and Associates will not purchase or
otherwise acquire, or agree or offer to purchase or otherwise acquire, record or
beneficial ownership of any Covered Securities if, after giving effect to such
purchase or acquisition, Witter, Inc., together with its Affiliates and
Associates, are the beneficial owners of Covered Securities representing in the
aggregate more than 15% of Total Voting Power (it being understood that for
purposes of this Section 2.1, a dividend or a distribution of Covered Securities
pursuant to a reorganization, recapitalization, consolidation, merger or
exchange shall not be deemed a purchase or an acquisition). If Witter, Inc. or
any of its Affiliates or Associates purchases or otherwise acquires Covered
Securities in violation of the immediately preceding sentence, such Covered
Securities shall immediately be Transferred as permitted by Section 2.2.
Notwithstanding the foregoing, the Company may also pursue any other available
remedy to which it may be entitled to as a result of such violation.
Section 2.2 Transfer Restrictions. Each of Witter, Inc. and its Affiliates
and Associates will not Transfer or permit any Person to Transfer on its or his
behalf any Covered Securities, except:
(a) to any Person or "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) who, after giving effect to such Transfer, would beneficially own
Voting Covered Securities representing in the aggregate less than 3% of Total
Voting Power;
(b) pursuant to a tender or exchange offer made by the Company or
recommended by the Board of Directors of the Company to the Company's
shareholders; or
(c) to William D. Witter or any wholly owned subsidiary of Witter, Inc.;
provided that such subsidiary agrees in writing to be bound by the terms of this
Agreement.
ARTICLE III
VOTING REQUIREMENTS
Section 3.1. Agreement to Vote. Witter, Inc. hereby agrees to vote, and
William D. Witter hereby agrees to cause Witter, Inc. to vote, the Witter Shares
at the Company's 1999 annual meeting of shareholders scheduled for June 10, 1999
(the "Annual Meeting") (i) in favor of the adoption of the amendment to the
Company's Certificate of Incorporation creating a classified Board of Directors,
(ii) for each of the nominees for director of the Company as set forth in the
proxy statement relating to the Annual Meeting (the "Proxy Statement"), (iii)
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for such other proposals and items as recommended by the Company's Board of
Directors in the Proxy Statement and (iv) for or against any other items or
business that may properly come before the Annual Meeting (or any adjournment or
postponement thereof) as directed by the appointed proxies at the Annual
Meeting.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties.
(a) Each party to this Agreement hereby represents and warrants to each
other party that (i) such party has the right, power and authority or legal
capacity, as the case may be, to enter into this Agreement and perform its or
his obligations hereunder, (ii) this Agreement has been duly authorized by all
necessary corporate or other action prerequisite to the execution and delivery
thereof by such party and is a legally valid and binding obligation of such
party enforceable in accordance with its terms and (iii) the execution, delivery
and performance of this Agreement by such party and the transactions
contemplated hereby do not, with or without the giving of notice or the passage
of time or both, (x) violate any law, ordinance, rule or regulation or any
judgment, writ, injunction or order of any court, arbitrator or governmental,
administrative or self-regulatory body or agency, applicable to such party,
(y) require the consent or authorization of or waiver by or filing with any
governmental, administrative, self-regulatory body or agency or any other Person
or (z) conflict with, result in the breach of any provision of, result in the
modification or termination of, require the consent or authorization of or
waiver by or filing with any other Person (other than such as has been obtained
prior to the date hereof) to, or result in the creation or imposition of any
Lien or constitute a default under any material Contract to which such party is
a party.
(b) Witter, Inc. and William D. Witter hereby represent and warrant to the
Company that Witter, Inc. has good and valid title to, and is the record and,
together with William D. Witter, his associates and the various clients of
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Witter, Inc., the beneficial owner of, the Witter Shares free and clear of any
Liens, and that Witter, Inc., together with William D. Witter pursuant to his
ownership of a majority of the capital stock of Witter, Inc., have voting
control of such Witter Shares. Witter, Inc. and William D. Witter hereby
represent and warrant to the Company that the Witter Shares constitute all
Covered Securities of the Company owned of record or beneficially by Witter,
Inc. and William D. Witter and their Affiliates and Associates and the various
clients of Witter, Inc. and all such Covered Securities of the Company as to
which Witter, Inc. and its Affiliates and Associates have (on behalf of
themselves or their various clients) voting control.
(c) Witter, Inc. and William D. Witter hereby represent and warrant to the
Company that Witter, Inc. has the sole right to vote or direct the vote of and
dispose or direct the disposition of the Witter Shares in its sole discretion
(it being understood that William D. Witter, by virtue of his ownership of a
majority of the capital stock of Witter, Inc., has the sole power to control
Witter, Inc.) and none of the Witter Shares is subject to any voting trust or
other agreement, arrangement, or restriction with respect to the voting thereof
and there are no Rights or Contracts to which Witter, Inc. or any of its
Affiliates or Associates is a party, or by which Witter, Inc. or any of its
Affiliates or Associates is bound or affected, that provides for the Transfer of
any Covered Securities or any interest therein or any Rights with respect
thereto (other than the rights held by the various clients of Witter, Inc. to
receive or direct the receipt of dividends from, or the proceeds from the sale
of, the Witter Shares), relates to the voting, Transfer or control of any
thereof, or obligates Witter, Inc. or any of its Affiliates or Associates to
grant, offer or enter into any of the foregoing.
(d) Witter, Inc. and William D. Witter hereby represent and warrant to the
Company that Witter, Inc. and its Affiliates and Associates have filed all
required reports, schedules, forms, statements and other documents
(collectively, "Reports") concerning the Witter Shares with the Securities and
Exchange Commission ("SEC") as required by the Securities Act and the Exchange
Act, and that none of such Reports contained any untrue statement of a material
fact or omitted to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
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ARTICLE V
CERTAIN COVENANTS
Section 5.1 Certain Actions. Witter, Inc. and William D. Witter, except as
otherwise permitted by this Agreement, will not, and will not permit their
Affiliates and Associates to:
(a) make, or take any action to solicit, initiate or encourage, any offer
or proposal for, or any indication of interest in, a merger or other business
combination involving the Company or any subsidiary of the Company or the
acquisition of any equity interest in, or a substantial portion of the assets
of, the Company or any subsidiary of the Company;
(b) "solicit", or become a "participant" in any "solicitation" of, any
"proxy" (as such terms are defined in Regulation 14A under the Exchange Act) or
written consent from any holder of Covered Securities in connection with any
vote on any matter, or agree or announce his or its intention to vote with any
Person undertaking a "solicitation" or communicate with or seek to advise or
influence any Person with respect to the voting of any Covered Securities;
(c) form, join or in any way participate in a "group" (within the meaning
of Section 13(d)(3)of the Exchange Act) with respect to any Covered Securities;
(d) call or seek to have called any meeting of the shareholders of the
Company or seek election of any representative to the Board of Directors of the
Company or the removal of any member of the Board of Directors of the Company;
(e) otherwise act to seek to control, disrupt or influence the management,
policies or affairs, of the Company or its Affiliates;
(f) without the prior written consent of the Company, issue or make any
announcement or public statement concerning the Company or its Affiliates, any
policies of the Company or its Affiliates or any director, officer, employee or
shareholder of the Company or its Affiliates; or
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<PAGE>
(g) instigate or encourage any third party to do any of the foregoing.
Section 5.2 SEC Reports. Upon the Company's request, Witter, Inc. and its
Affiliates and Associates will deliver to the Company (i) true and complete
copies of all Reports required to be filed by Witter, Inc. and its Affiliates
and Associates with the SEC concerning the Covered Securities of the Company
owned beneficially or of record or held by Witter, Inc. or William D. Witter or
their Affiliates or Associates and (ii) true and complete copies of all Reports
that would have been required to be filed by Witter, Inc. and its Affiliates and
Associates with the SEC concerning the Covered Securities of the Company owned
beneficially or of record or held by Witter, Inc. or William D. Witter or any of
their Affiliates or Associates if Witter, Inc. or William D. Witter or any of
their Affiliates or Associates owned beneficially or of record or held a
sufficient number of such Covered Securities to require filing of Reports with
the SEC.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Binding Effect; Assignability. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. No party to this
Agreement will assign or delegate this Agreement or any rights, interests or
obligations hereunder, except that the Company may assign this Agreement and its
rights, interest or obligations to any Affiliate of the Company.
Section 6.2 Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers of or consents to departures from the provisions
hereof may not be given unless approved in writing by the parties hereto.
Section 6.3 Governing Law. This Agreement and the validity, interpretation
and performance of the terms and provisions hereof shall be governed by, and
construed in accordance with, the laws of the State of New Jersey, without
regard to the provisions thereof relating to choice or conflict of laws.
Section 6.4 Interpretation. The headings of the articles and sections
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not affect the meaning or
interpretation of this Agreement.
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<PAGE>
Section 6.5 Notices. All notices, requests, consents, demands, elections
and other communications required or permitted hereunder shall be in writing and
shall be given to the intended recipient at:
If to the Company:
Merrimac Industries, Inc.
41 Fairfield Place
West Caldwell, New Jersey 07006
Facsimile: (973) 575-0531
Attention: President and
Chief Executive Officer
with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, NY 10112
Facsimile: (212) 541-5369
Attention: Thomas C. Meriam, Esq.
If to Witter, Inc. or William D. Witter:
William D. Witter, Inc.
153 East 53rd Street, 51st Floor
New York, New York 10022
Facsimile: (212) 486-7697
Attention: William D. Witter
Any such notice, request, consent, demand, election or other communication
shall be deemed to have been duly given if personally delivered or sent by
registered or certified mail, return receipt requested, Express Mail, Federal
Express or similar overnight delivery service for next Business Day delivery or
by telegram, telex or facsimile transmission and will be deemed given, unless
earlier received: (1) if sent by certified or registered mail, return receipt
requested, five calendar days after being deposited in the United States mail,
postage prepaid; (2) if sent by Express Mail, Federal Express or similar
overnight delivery service for next Business Day delivery, the next Business Day
after being entrusted to such service, with delivery charges prepaid or charged
to the sender's account; (3) if sent by telegram or telex or facsimile
transmission, on the date sent; and (4) if delivered by hand, on the date of
delivery.
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<PAGE>
Section 6.6 No Implied Waivers. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained herein or made
pursuant hereto. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any preceding or
succeeding breach and no failure by any party to exercise any right or privilege
hereunder shall be deemed a waiver of such party's rights or privileges
hereunder or shall be deemed a waiver of such party's rights to exercise the
same at any subsequent time or times hereunder.
Section 6.7 Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the specific subject matter hereof, and
supersedes all prior agreements and undertakings, both written and oral, among
the parties with respect to such specific subject matter.
Section 6.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to constitute one and the same agreement.
Section 6.9 Further Assurances. Each party shall cooperate and take such
actions as may be reasonably requested by the other party in order to carry out
the provisions and purposes of this Agreement and the transactions contemplated
hereby.
Section 6.10 Specific Performance; Injunctive Relief. In addition to any
other rights or remedies which may be available at law, in equity or by
Contract, the Company shall be entitled to obtain in any court of competent
jurisdiction specific performance of, or an injunction or other order
restraining any act or proposed act which would result in a violation of, any of
the terms or provisions of any of the covenants, agreements or obligations of
Witter, Inc. or William D. Witter hereunder, it being agreed by the parties that
the remedy at law, including monetary damages, for breach of such provision will
be inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived. The
rights and remedies herein expressly provided are cumulative and not exclusive
of any other rights or remedies which any party would otherwise have pursuant to
this Agreement, at law, in equity, by statute or otherwise.
Section 6.11 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or
-12-
<PAGE>
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby; provided, that if any provision
hereof or the application thereof shall be so held to be invalid, void or
unenforceable by a court of competent jurisdiction, then the parties shall
negotiate in good faith in an effort to agree upon a suitable and equitable
substitute provision therefor and, if the parties shall fail to negotiate and
agree upon such a provision, such court of competent jurisdiction may substitute
for such invalid, void or unenforceable provision a suitable and equitable
provision in order to carry out, so far as may be valid and enforceable, the
intent and purpose of the invalid, void or unenforceable provision.
Section 6.12 Consent to Jurisdiction; Service of Process. To the fullest
extent permitted by applicable law, each party hereto hereby irrevocably and
unconditionally (i) submits, for himself and his property or itself and its
property, to the nonexclusive jurisdiction of the courts of the States of New
York and New Jersey and any court of the United States sitting in New York City
(and of any appellate court to which an appeal of any judgment, order, decree or
decision of any such court may be taken) in any suit, action or proceeding
arising out of or relating to this Agreement or for recognition or enforcement
of any judgment rendered in any such suit, action or proceeding, (ii) waives any
objection which he or it may now or hereafter have to the laying of venue of any
such suit, action or proceeding in any such court, including any claim that any
such suit, action or proceeding has been brought in an inconvenient forum, (iii)
waives all rights to a trial by jury in any such suit, action or proceeding,
(iv) waives personal service of any summons, complaint or other process by any
means, manner or method other than in the manner provided for the giving of
notices to such party in Section 6.5, and agrees that any process served upon
such party in such manner provided for in Section 6.5 shall have the same
validity and legal force and effect as if served upon such party personally
within the State of New York or New Jersey, as the case may be and (v) if any
such party at any time is not a resident of the State of New York or New Jersey,
agrees to appoint and maintain the appointment of an agent in the State of New
York and New Jersey as such party's agent for service and acceptance of legal
process in connection with any such action, suit or proceeding with the same
validity and legal force and effect as if served upon such party personally,
within the State of New York or New Jersey, as the case may be, and to notify
promptly each other such party of the name and address of such agent.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Shareholder's Agreement
as of the date first above written.
Merrimac Industries, Inc.
By: /s/ Mason N. Carter
-------------------
Name: Mason N. Carter
Title: Chairman, President and
Chief Executive Officer
WILLIAM D. WITTER, INC.
By: /S/ William D. Witter
---------------------
Name: William D. Witter
Title: President
/S/ William D. Witter
---------------------
William D. Witter
-14-
Exhibit 11
MERRIMAC INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
---------------------------------
(Unaudited)
-----------
Quarter Six Months
-----------------------
Ended July 3, 1999
-----------------------
Numerator:
Net income available to common shareholders........... $ 81,919 $ 294,885
========= =========
Basic earnings per share
- ------------------------
Weighted average number of shares outstanding for
basic net income per share
Common stock.......................................... 1,739,356 1,753,944
========= =========
Net income per common share - basic................... $.05 $.17
==== ====
Diluted earnings per share
- --------------------------
Weighted average number of shares outstanding for
diluted net income per share
Common stock ......................................... 1,739,356 1,753,944
Effect of dilutive securities - stock options (1) .... 30,033 28,037
--------- ---------
Weighted average number of shares outstanding for
diluted net income per share.......................... 1,769,389 1,781,981
========= =========
Net income per common share - diluted.................. $.05 $.17
==== ====
(1) Represents additional shares resulting from assumed conversion of
stock options less shares purchased with the proceeds therefrom.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-1-2000
<PERIOD-END> Jul-3-1999
<CASH> 941,707
<SECURITIES> 0
<RECEIVABLES> 3,632,530
<ALLOWANCES> 0
<INVENTORY> 3,483,035
<CURRENT-ASSETS> 9,795,319
<PP&E> 19,953,309
<DEPRECIATION> 12,744,039
<TOTAL-ASSETS> 20,159,501
<CURRENT-LIABILITIES> 3,472,607
<BONDS> 0
0
0
<COMMON> 1,348,533
<OTHER-SE> 12,002,820
<TOTAL-LIABILITY-AND-EQUITY> 20,159,501
<SALES> 9,863,776
<TOTAL-REVENUES> 9,863,776
<CGS> 5,152,891
<TOTAL-COSTS> 5,152,891
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 452,885
<INCOME-TAX> 158,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 294,885
<EPS-BASIC> .17
<EPS-DILUTED> .17
</TABLE>
