UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-13365
OshKosh B'Gosh, Inc.
(Exact name of registrant as specified in charter)
Delaware 39-0519915
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
112 Otter Avenue, Oshkosh, Wisconsin 54901
(Address of principal executive offices) (Zip Code)
(920) 231-8800
(Registrant's telephone number)
Effective January 1, 1998, the Company changed its fiscal year
from a calendar year to a 52/53-week year ending on the Saturday
closest to December 31 (January 2, 1999 for fiscal 1998).
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of July 4, 1998, there were outstanding 8,439,579 shares of
Class A Common Stock and 1,176,607 shares of Class B Common Stock.
FORM 10-Q
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-July
4, 1998 and December 31, 1997 3
Unaudited Condensed Consolidated Statements
of Income-Three Month and Six Month Periods
Ended July 4, 1998 and June 30, 1997 4
Unaudited Condensed Consolidated Statements
of Cash Flow-Three Month and Six Month Periods
Ended July 4, 1998 and June 30, 1997 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 7
Part II. Other Information 12
Signatures 13
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands)
July 4, December 31,
1998 1997 *
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 810 $ 13,779
Short-term investments -- 8,700
Accounts receivable 28,831 23,278
Inventories 75,772 68,226
Prepaid expenses & other
current assets 3,767 1,265
Deferred income taxes 15,100 15,800
Total current assets 124,280 131,048
Property, plant & equipment 67,640 62,192
Less accumulated depreciation
and amortization 32,389 29,237
Net property, plant & equipment 35,251 32,955
Non-current deferred income taxes 5,100 5,500
Other assets 5,285 5,285
Total assets $169,916 $174,788
Liabilities and shareholders'equity
Current liabilities
Accounts payable $ 3,621 $ 10,273
Accrued expenses 41,871 38,013
Total current liabilities 45,492 48,286
Employee benefit plan liabilities 13,962 13,345
Shareholders' equity
Preferred stock -- --
Common stock:
Class A 84 87
Class B 12 12
Retained earnings 110,366 113,058
Total shareholders' equity 110,462 113,157
Total liabilities and shareholders'
equity $169,916 $174,788
*Condensed from audited financial statements.
See notes to condensed consolidated financial statements.
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Month Period Ended Six Month Period Ended
July 4, June 30, July 4, June 30,
1998 1997 1998 1997
Net sales $ 82,288 $ 71,144 $184,823 $168,507
Cost of products sold 49,512 47,362 114,658 112,431
Gross profit 32,776 23,782 70,165 56,076
Selling, general and
administrative expenses 29,700 26,292 60,362 53,659
Royalty income, net (1,542) (1,206) (3,796) (3,012)
Operating income (loss) 4,618 (1,304) 13,599 5,429
Other income (expense):
Interest expense (87) (97) (172) (129)
Interest income 259 672 497 1,065
Miscellaneous (23) (17) (74) (145)
Other income -- net 149 558 251 791
Income (loss) before taxes 4,767 (746) 13,850 6,220
Income taxes (benefit) 1,936 (300) 5,678 2,490
Net income (loss) $ 2,831 $ (446) $ 8,172 $ 3,730
Net income (loss) per
common share
Basic $ 0.29 $ (0.04) $ 0.83 $ 0.32
Diluted $ 0.29 $ (0.04) $ 0.82 $ 0.32
Weighted average common
shares outstanding
Basic 9,754 11,686 9,810 11,731
Diluted (including share
equivalents) 9,902 11,716 9,943 11,747
Cash dividends per common
share
Class A $ 0.07 $ 0.07 $ 0.14 $ 0.14
Class B $ 0.06 $ 0.06 $ 0.12 $ 0.12
See notes to condensed consolidated financial statements.
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flow
(Dollars in thousands)
(Unaudited)
Six Month Period Ended
July 4, June 30,
1998 1997
Cash flows from operating activities
Net income for the period $ 8,172 $ 3,730
Depreciation 4,081 4,465
Provision for deferred income taxes 1,100 2,200
Items in income not affecting cash 1,096 173
Changes in current assets (15,601) 2,249
Changes in current liabilities (2,470) (5,005)
Net cash provided by (used in) operating
activities (3,622) 7,812
Cash flows from investing activities
Additions to property, plant and
equipment (6,672) (2,965)
Proceeds from disposal of assets 157 1,765
Sale (purchase) of short-term
investments, net 8,700 (1,630)
Other (341) (1,958)
Net cash provided by (used in)
investing activities 1,844 (4,788)
Cash flows from financing activities
Cash dividends paid (1,347) (1,619)
Common shares issued, net 493 --
Repurchase of common shares (10,337) (1,691)
Net cash used in financing activities (11,191) (3,310)
Net decrease in cash and cash equivalents $ (12,969) $ (286)
See notes to condensed consolidated financial statements.
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Basis of Preparation
The condensed financial statements included herein have been
prepared by the Company without audit. However, the foregoing
statements contain all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of Company
management, necessary to present fairly the financial position as
of July 4, 1998, the results of operations for the three-month
and six-month periods ended July 4, 1998 and June 30, 1997, and
cash flows for the six-month periods ended July 4, 1998 and June
30, 1997.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and
Exchange Commission. It is suggested that these condensed
financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's 1997
Annual Report.
Effective January 1, 1998, the Company changed its fiscal year
from a calendar year to a 52/53-week year ending on the Saturday
closest to December 31 (January 2, 1999 for fiscal 1998). Each
quarter will generally consist of a 13-week period ending on a
Saturday. Due to the conversion to a 52/53-week year, the first
quarter of 1998 consisted of 13 weeks and 3 days. Accordingly,
the six-month period ended July 4, 1998 was four days longer than
the comparative period in fiscal 1997.
Note 2. Inventories
A summary of inventories follows:
July 4, December 31,
1998 1997
(Dollars in thousands)
Finished goods $ 64,290 $ 49,400
Work in process 8,914 14,782
Raw materials 2,568 4,044
Total $ 75,772 $ 68,226
The replacement cost of inventory exceeds the above LIFO costs by
$14,498 and $14,138 at July 4, 1998 and December 31, 1997,
respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated,
selected Company income statement data expressed as a percentage
of net sales.
As a Percentage of Net Sales for the
Three Month Period Ended Six Month Period Ended
July 4, 1998 June 30, 1997 July 4, 1998 June 30, 1997
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 60.2% 66.6% 62.0% 66.7%
Gross profit 39.8% 33.4% 38.0% 33.3%
Selling, general and
administrative expenses 36.1% 37.0% 32.7% 31.8%
Royalty income, net (1.9%) (1.8%) (2.1%) (1.7%)
Operating income (loss) 5.6% (1.8%) 7.4% 3.2%
Other income, net 0.2% 0.8% 0.1% 0.5%
Income (loss) before
income taxes 5.8% (1.0%) 7.5% 3.7%
Income taxes 2.4% (0.4%) 3.1% 1.5%
Net income (loss) 3.4% (0.6%) 4.4% 2.2%
Net Sales
Consolidated net sales for the three month period ended July 4,
1998 were $82.3 million, a $11.2 million increase (15.8%) over
1997 second quarter net sales of $71.1 million. Consolidated net
sales for the six month period ended July 4, 1998 were $184.8
million, a $16.3 million increase (9.7%) from net sales of $168.5
million for the first six months of 1997. The Company's net
sales for the three month and six month periods ended July 4,
1998 and June 30, 1997 are summarized as follows:
Net Sales
(in millions)
Domestic
Wholesale Retail International Total
Three month period ended:
July 4, 1998 $ 41.7 $ 39.6 $ 1.0 $ 82.3
June 30, 1997 34.0 35.7 1.4 71.1
Increase (decrease) 7.7 3.9 (0.4) 11.2
Percent increase (decrease) 22.6% 10.9% (28.6%) 15.8%
Six month period ended:
July 4, 1998 $105.8 $ 76.2 $ 2.8 $ 184.8
June 30, 1997 96.3 68.5 3.7 168.5
Increase (decrease) 9.5 7.7 (0.9) 16.3
Percent increase (decrease) 9.9% 11.2% (24.3%) 9.7%
The Company's domestic wholesale unit shipments for the three
month and six month periods ended July 4, 1998 were up 16.7% and
9.5%, respectively, over the corresponding three month and six
month periods of 1997. The second quarter 1998 increase in unit
shipments and sales dollars were the result of increased demand
for both the Company's fashion and classics product offerings.
Unit shipments for the first six months of 1998 were also
favorably impacted by the Company's change in its fiscal year to
a 52/53-week period ending on the Saturday closest to December
31. As a result, the Company's first six months of 1998 ended
July 4, which resulted in an additional two days of wholesale
shipments as compared to the six months ended June 30, 1997. The
Company currently anticipates a unit sales increase in the 4% to
6% range for the second half of 1998 as compared to 1997.
The Company's second quarter 1998 retail sales increase resulted
from a combination of an 8.2% comparable store sales gain and
sales volume from stores opened subsequent to June 30, 1997.
Second quarter 1998 comparable store sales were favorably
impacted by a later Easter selling season (during April) as
compared to 1997 (during March). The Company's increase in
retail sales for the first six months of 1998 resulted from a
combination of a 9.3% comparable store sales gain and sales
volume from newly opened stores. Comparable store sales for 1998
were also favorably impacted by increased sales of Genuine Girl
and Genuine Blues branded products for the entire period. These
bigger sizes were introduced during the first quarter of 1997.
For the remainder of 1998, the Company currently anticipates
comparable store sales gains in the middle single digit range.
At July 4, 1998 the Company operated 121 domestic OshKosh retail
stores, including 113 outlet stores and 8 showcase stores.
During the second quarter of 1998, the Company opened 3 outlet
stores and closed 2 existing stores. At June 30, 1997, the
Company operated 114 domestic OshKosh retail stores, including
108 outlet stores and 6 showcase stores. Current Company plans
for the remainder of 1998 call for the addition of 5 retail
stores.
Gross Profit
The Company's gross profit margin as a percent of net sales
improved to 39.8% in the second quarter of 1998, compared to
33.4% in the second quarter of 1997. For the six month period
ended July 4, 1998, gross profit margin as a percent of net sales
was 38.0%, compared to 33.3% for the first six months of 1997.
This gross profit margin improvement was due primarily to
continued implementation and execution of the Company's sourcing
strategy, improved operating efficiencies at the Company's
domestic sewing facilities and the Company's continuing focus on
product design and development activities. The Company's current
1998 sourcing plan indicates that approximately 41% of units will
be produced at the Company's domestic facilities as compared to
47% in 1997.
Selling, General, and Administrative Expenses (S,G&A)
S,G&A expenses for the three month and six month periods ended
July 4, 1998 increased $3.4 million and $6.7 million over the
three and six month periods ended June 30, 1997, respectively.
As a percentage of net sales, S,G,&A expenses were 36.1% and
32.7% for the three month and six month periods ended July 4,
1998 as compared to 37.0% and 31.8% in the comparable periods of
1997. The increase in S,G,&A expenses relates primarily to a
combination of continued expansion of the Company's retail
operations, increased volume of wholesale unit shipments, and
expansion of the Company's brand enhancing activities.
Royalty Income
The Company licenses the use of its trade name to selected
licensees in the U.S. and in foreign countries. Royalty income
for the three month and six month periods ended July 4, 1998
increased $.3 million (27.9%) and $.8 million (26.0%) over the
three and six month periods ended June 30, 1997, respectively.
These increases resulted primarily from increased royalty income
generated from domestic licensees. As a result of the Company's
decisions to not renew its domestic outerwear license (which
expired in May 1998) and its Japanese license arrangement (which
ended in March 1998), the Company currently anticipates its
royalty income for the third quarter of 1998 to be down from the
third quarter of 1997.
Operating Income
As a result of the factors described above, the Company's
operating income (loss) for the three month and six month periods
ended July 4, 1998 increased to $4.6 million and $13.6 million as
compared to ($1.3) million and $5.4 million for the comparable
periods in 1997.
Income Taxes
The Company's effective tax rate for the three month and six
month periods ended July 4, 1998 was approximately 41% as
compared to 40% in 1997.
Net Income Per Common Share
The computation of net income per common share for the second
quarter and first six months of 1998 reflected a lower number of
weighted average outstanding shares as compared to the same
periods in 1997, primarily as a result of the Company's Dutch
auction tender offer which was completed in August 1997.
SEASONALITY OF BUSINESS
The Company's business is seasonal, with highest sales and income
in the third quarter, which is the Company's peak wholesale
shipping period and a major retail selling season at its retail
outlet stores. The Company's second quarter sales and income are
the lowest, both because of relatively low domestic wholesale
unit shipments and relatively modest retail store sales during
this period. The Company anticipates this seasonality trend to
continue to impact 1998 quarterly sales and income. Second
quarter 1998 operating results are not necessarily indicative of
anticipated quarterly results throughout the balance of the year.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
At July 4, 1998 the Company's cash, cash equivalents and short-
term investments were $.8 million, compared to $22.5 million at
December 31, 1997 and $42.6 million at June 30, 1997. Net
working capital at July 4, 1998 was $78.8 million as compared to
$82.8 million at the end of 1997 and $106.3 million at June 30,
1997. The Company's current ratio was 2.7 to 1 at July 4, 1998,
and at the end of 1997, compared to 3.8 to 1 at June 30, 1997.
The reduction in cash, cash equivalents and short-term
investments, net working capital, and current ratio at July 4,
1998 compared to June 30, 1997 is attributable primarily to the
Company's stock repurchases, offset in part by cash generated
from operations.
Accounts receivable at July 4, 1998 were $28.8 million compared
to $20.9 million at June 30, 1997. This increase in accounts
receivable related primarily to a combination of increased
wholesale sales resulting from the second quarter of 1998 ending
on July 4, 1998, along with much higher sales of the Company's
classics line in June 1998.
Inventories at July 4, 1998 were $75.8 million, compared to $60.8
million at June 30, 1997. Management believes that at July 4,
1998 inventory levels are generally appropriate for anticipated
business activities for the remainder of 1998.
The Company's capital expenditures for the first six months of
1998 of $6.7 million compares to $3.0 million for the first six
months of 1997. This increase is primarily due to the Company's
upgrade of its distribution systems and Whitehouse, Tennessee
distribution facilities. Capital expenditures for all of 1998
are currently planned to be in the range of $13.0 million,
including approximately $8.0 million related to the distribution
system and facilities project.
On August 25, 1997, the Company's Board of Directors authorized a
500,000 share repurchase program of the Company's Class A common
stock. During the second quarter of 1998, the Company
repurchased 272,300 shares of its Class A common stock under this
program for approximately $10.3 million. Through July 4, 1998,
the Company has repurchased a total of 413,800 shares of its
Class A common stock under this repurchase program for
approximately $14.9 million.
At July 4, 1998 and June 30, 1997 the Company had no outstanding
long-term debt. The Company believes that its cash and cash
equivalents at July 4, 1998, credit facilities, along with cash
generated from operations, will be sufficient to finance the
Company's seasonal working capital needs and planned capital
expenditures for the remainder of 1998.
OTHER FACTORS THAT MAY AFFECT FUTURE PERFORMANCE
This Form 10-Q contains certain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Such forward-looking statements are based on
current assumptions and expectations that involve risks and
uncertainties. Actual results may differ materially. The
Company's future results of operations and financial position can
be influenced by such factors as the level of consumer spending
for apparel, particularly in the children's wear segment, overall
consumer acceptance of the Company's product styling, the
financial strength of the retail industry, including, but not
limited to, business conditions and the general economy,
competitive factors, risk of non-payment of accounts receivable,
failure of Company suppliers to timely deliver needed raw
materials, as well as risk associated with foreign operations.
In addition, the inability to ship Company products within agreed
timeframes due to unanticipated manufacturing delays or the
failure of Company contractors to deliver products within
scheduled timeframes, are risk factors in ongoing business. As a
part of the Company's product sourcing strategy, it routinely
contracts for apparel products produced by contractors in Asia.
If the current financial and related difficulties were to
adversely impact the Company's contractors in the Asian region,
it could disrupt the supply of products contracted for by the
Company.
The forward-looking statements included herein are only made as
of the date of this report. The Company undertakes no obligation
to publicly update such forward-looking statements to reflect
subsequent events or circumstances.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The registrant's annual meeting of stockholders was held on May
1, 1998 (the "1998 Annual Meeting"). A majority of the shares of
each class of the registrant's Common Stock, represented in
person or by proxy, was required to constitute a quorum for
action to be taken by such class. A total of 7,863,890 shares of
Class A Common Stock and 992,175 shares of Class B Common Stock
were represented, in person or by proxy, at the 1998 Annual
Meeting, constituting a quorum of each class.
With respect to the proposal to amend stock dividend provisions
of the Company's Certificate of Incorporation, the following
votes were cast in favor of and withheld:
Votes in favor Votes withheld Broker non-votes
Class B Common Stock 967,316 50 24,809
With respect to the election of Class A Directors, the following
votes were cast in favor of and withheld with respect to the
following management nominees:
Nominee Votes in favor Votes withheld Broker non-votes
Orren J. Bradley 7,785,788 78,102 0
Jerry M. Hiegel 7,785,288 78,602 0
With respect to the election of Class B Directors, the following
votes were cast in favor of and withheld with respect to the
following management nominees:
Nominee Votes in favor Votes withheld Broker non-votes
Douglas W. Hyde 990,915 1,260 0
Michael D. Wachtel 990,915 1,260 0
David L. Omachinski 990,915 1,260 0
Steve R. Duback 990,915 1,260 0
Shirley A. Dawe 990,915 1,260 0
William F. Wyman 990,915 1,260 0
Stig A. Kry 990,915 1,260 0
Directors are elected by a plurality of the votes of the shares
of the class entitled to elect such directors, present in person
or represented by proxy at the meeting. "Plurality" means that
the individuals who receive the largest number of votes are
elected as directors up to the maximum number of directors to be
chosen at the meeting. There were no nominees for director other
than management's nominees identified above. Accordingly, each
such nominee received a plurality of the votes cast by shares of
the class indicated and, therefore, was elected.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Certificate of Incorporation of OshKosh B'Gosh, Inc. as restated,
May 7, 1998.
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
OSHKOSH B'GOSH, INC.
Date: 7/22/98 /S/DOUGLAS W. HYDE
Chairman of the Board, President
Chief Executive Officer and Director
Date: 7/22/98 /S/DAVID L. OMACHINSKI
Vice President-Finance, Treasurer
Chief Financial Officer and Director
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<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> JUL-04-1998
<CASH> 810,000
<SECURITIES> 0
<RECEIVABLES> 33,829,000
<ALLOWANCES> 4,998,000
<INVENTORY> 75,772,000
<CURRENT-ASSETS> 124,280,000
<PP&E> 67,640,000
<DEPRECIATION> 32,389,000
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<COMMON> 96,000
<OTHER-SE> 110,366,000
<TOTAL-LIABILITY-AND-EQUITY> 169,916,000
<SALES> 184,823,000
<TOTAL-REVENUES> 184,823,000
<CGS> 114,658,000
<TOTAL-COSTS> 60,362,000
<OTHER-EXPENSES> 74,000
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<INTEREST-EXPENSE> 172,000
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Composite Showing All
Amendments through 5/7/98
RESTATED
CERTIFICATE OF INCORPORATION
OF
OSHKOSH B'GOSH, INC.
The following Restated Certificate of Incorporation of
OSHKOSH B'GOSH, INC. was duly adopted by vote of the stockholders
pursuant to the authority and provisions of Sections 242 and 245
of the Delaware General Corporation Law to supersede and take the
place of the existing Certificate of Incorporation of the
Corporation and all amendments thereto. The original Certificate
of Incorporation of the Corporation was filed with the Secretary
of State of Delaware on March 1, 1929 and the name under which
the Corporation was originally incorporated is OSHKOSH OVERALL
COMPANY.
The text of the Certificate of Incorporation as amended and
supplemented heretofore is further amended hereby to read as
herein set forth in full:
FIRST: The name of the Corporation is OSHKOSH B'GOSH,
INC.
SECOND: The address of the Corporation's registered office
in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, and County of New Castle, Delaware 19801. The name
of the Corporation's registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purposes to be
conducted or promoted is to engage in any lawful act or activity
for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: A. STOCK. The total number of shares of stock
which the Corporation shall have the authority to issue is
Thirty-Four Million Seven Hundred Fifty Thousand (34,750,000)
Shares itemized by classes as follows:
1. Thirty-three Million Seven Hundred Fifty Thousand
(33,750,000) shares of Common Stock, one cent ($.01)
par value, divided into the following classes: (a)
Thirty Million (30,000,000) Shares of Class A Common
Stock (the "Class A Common Stock"); and (b) Three
Million Seven Hundred Fifty Thousand (3,750,000) Shares
of Class B Common Stock (the "Class B Common Stock")
(The Class A Common Stock and the Class B Common Stock
are hereinafter collectively referred to as the "Common
Stock").
2. One Million (1,000,000) Shares of Preferred Stock,
one cent ($.01) par value (the "Preferred Stock").
B. THE COMMON STOCK
1. Whenever any Dividend shall be paid by the Corporation
on the Common Stock, such Dividend shall be paid so that the
Dividend per share on the Class A Common Stock shall equal
one hundred fifteen percent (115%) of the Dividend per share
on the Class B Common Stock. As used herein, the term
"Dividend" shall mean any dividend paid by the Corporation
in cash or other assets except to the extent a dividend is
payable in shares of any class of the capital stock of this
Corporation or options, warrants or rights to acquire, or
securities convertible into or exercisable for, such shares
(a "Stock Dividend"). In calculating the amount of any
Dividend payable on the Class A Common Stock, such Dividend
shall be rounded to the closest one quarter of one cent
($.0025). No Stock Dividends or other distributions shall
be declared or paid by the Corporation on the Common Stock
in shares of Common Stock or options, warrants or rights to
acquire, or securities convertible into or exchangeable for,
shares of Common Stock, except Stock Dividends or other
distribution payable to all holders of the holders of Common
Stock ratably according to the number of shares of Common
Stock held by them, in shares of Class A Common Stock (or
options, warrants or rights to acquire, or securities
convertible into or exchangeable for, shares of Class A
Common Stock) to holders of that class of stock and shares
of Class B Common Stock (or options, warrants or rights to
acquire, or securities convertible into or exchangeable for,
shares of Class B Common Stock) to holders of that class of
stock. If any Stock Dividends or other distributions shall
be declared or paid by the Corporation on the Common Stock
in any securities other than shares of Common Stock or
options, warrants or rights to acquire, or securities
convertible into or exchangeable for, shares of Common
Stock, such Stock Dividends or other distributions shall be
payable to all holders of Common Stock ratably according to
the number of shares of Common Stock held by them, without
any distinction between holders of Class A Common Stock and
holders of Class B Common Stock.
2. The holders of Class A Common Stock shall not be
entitled to any vote on any matters except: (a) as may
be required by law; and (b) that the Class A Common
Stock shall have one vote for each share for the
election and removal of the Class A Directors voting as
a separate class. The "Class A Directors" shall be
that number of Directors which constitutes twenty five
percent (25%) of the authorized number of members of
the Board of Directors, including, for all purposes,
the Class A Directors and any Directors which are
entitled to be elected by the holders of any Preferred
Stock. If twenty five percent (25%) of the authorized
number of Directors is not a whole number, then the
number of Class A Directors shall be rounded to the
closest whole number of Directors, but not less than
one (1). In determining the closest whole number, any
number which includes a fraction equal to .5 shall be
deemed to be the next highest whole number.
3. The holders of Class B Common Stock shall be
entitled to one vote for each share of Class B Common
Stock on all matters except the election of Class A
Directors.
4. In case of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the
holders of Class A Common Stock shall be entitled to
receive out of the assets of the Corporation in money
or money's worth the sum of Seven and 50/100 Dollars
($7.50) per share, (the "First Common Payment"),
subject to adjustment in the event of any subdivisions,
combinations, stock splits or stock dividends involving
shares of the Class A Common Stock, before any of such
assets shall be paid or distributed to holders of Class
B Common Stock, and if the assets of the Corporation
shall be insufficient to pay the holders of all of the
Class A Common Stock then outstanding share of the
Class A Common Stock shall share ratably in such assets
in proportion to the amounts which would be payable
with respect to Class A Common Stock if the First
Common Payment was paid in full.
5. After payment in full of the First Common Payment,
the holders of Class B Common Stock shall be entitled
to receive out of the remaining assets of the
Corporation in money or money's worth the sum of Seven
and 50/100 Dollars ($7.50) per share (the "Second
Common Payment"), subject to adjustment in the event of
any subdivisions, combinations, stock splits or stock
dividends involving shares of the Class B Common Stock,
before any of such remaining assets shall be paid or
distributed to holders of the Class A Common Stock, and
if the remaining assets of the Corporation shall be
insufficient to pay the holders of all of the Class B
Common Stock then outstanding the entire Second Common
Payment, the holders of each outstanding share of the
Class B Common Stock shall share ratably in such assets
in proportion to the amounts which would be payable
with respect to Class B Common Stock if the Second
Common Payment was paid in full.
6. After payment in full of the First Common Payment
and the Second Common Payment, any further payments on
the liquidation, dissolution or winding up of the
business of the Corporation shall be on an equal basis
as to all of the shares of Common Stock then
outstanding.
7. Except as to the matters expressly set forth
above, the Class A Common Stock and the Class B Common
Stock shall be identical in all respects.
8. Conversion.
(a) Each holder of shares of Class B Common
Stock shall have the right, exercisable at any
time, and from time to time, at the holder's
option, to convert each share of Class B Common
Stock so held into one (1) fully paid and
nonassessable share of Class A Common Stock. This
right shall be exercised by the surrender of the
certificate(s) representing the share(s) of Class
B Common Stock to be converted to the agent then
maintained by the Corporation for the registration
or transfer of shares of Class B Common Stock (the
"Conversion Agent") (or, if no Conversion Agent
has been appointed or is then acting, to the
principal executive offices of the Corporation (to
the attention of the Secretary of the
Corporation)), at any time during normal business
hours, accompanied by written notice of such
holder's election to convert and (if so required
by the Corporation or the Conversion Agent) by
instruments of transfer, in form satisfactory to
the Corporation and the Conversion Agent, duly
executed by the holder or by his duly authorized
attorney, and by transfer tax stamps or funds
therefor if required pursuant to paragraph (e) of
this subsection 8.
(b) As promptly as practicable after the
surrender for conversion of a certificate(s)
representing shares of Class B Common Stock in the
manner provided in paragraph (a) of this
subsection 8, and the payment in cash of any
amount required by the provisions of paragraphs
(a) and (e) of this subsection 8, the Corporation
shall deliver or cause to be delivered, at the
office of the Conversion Agent (or, if no
Conversion Agent has been appointed or is acting,
at its principal executive offices) to the holder
of the surrendered certificate(s) (or upon the
written order of the holder), a new certificate or
certificates representing the number of shares of
Class A Common Stock issuable upon such
conversion, issued in such name or names as such
holder may direct. Except as otherwise provided
herein, a conversion shall be deemed to have been
made immediately prior to the close of business on
the date of the surrender of the certificate
representing shares of Class B Common Stock. All
rights of the holder of the surrendered shares, as
a holder of such shares, shall cease at the time
the conversion is deemed to occur, and the person
or persons in whose name or names the certificate
or certificates representing the shares of Class A
Common Stock are to be issued shall be treated for
all purposes as having become the record holder or
holders of such shares of Class A Common Stock at
the time the conversion is deemed to occur. If a
surrender occurs on a date when the stock transfer
books of the Corporation are closed, the
conversion shall not be deemed to have occurred
until immediately prior to the close of business
on the next succeeding day on which such stock
transfer books are open.
(c) No adjustments in respect of dividends,
voting rights or liquidation preferences of the
Class A Common Stock or the Class B Common Stock
shall be made upon the conversion of any shares of
the Class B Common Stock into shares of Class A
Common Stock; provided, however, that if a share
of Class B Common Stock shall be converted
subsequent to the record date for the payment of a
dividend or other distribution on shares of Common
Stock but prior to such payment, the registered
holder of such share of Class B Common Stock at
the close of business on such record date shall be
entitled, notwithstanding the conversion, to
receive the dividend or other distribution payable
with respect to such share of Class B Common Stock
on the date set for payment of such dividend or
other distribution (and the person or persons in
whose name or names the certificate or
certificates representing the share of Class A
Common Stock are to be issued in connection with
such conversion shall not be entitled to any
dividend or other distribution payable with
respect to the share of Class A Common Stock
received in such conversion).
(d) The Corporation covenants that it will
at all times reserve and keep available, solely
for the purpose of issuance upon the conversion of
outstanding shares of Class B Common Stock into
shares of Class A Common Stock, such number of
shares of Class A Common Stock as shall be
issuable upon the conversion of all outstanding
shares of Class B Common Stock; provided that
nothing contained herein shall be construed to
preclude the Corporation from satisfying its
obligations in respect of the conversion of the
shares of Class B Common Stock by delivery of
purchased shares of Class A Common Stock or by
delivery of shares of Class A Common Stock which
are held in the treasury of the Corporation. The
Corporation covenants that all shares of Class A
Common Stock which shall be issued upon conversion
of the shares of the Class B Common Stock, will,
upon issue, be fully paid and nonassessable and
not subject to any preemptive rights, except as
otherwise required by applicable law.
(e) The issuance of certificates for shares
of Class A Common Stock upon conversion of shares
of Class B Common Stock shall be made without
charge for any stamp or similar tax in respect to
such issuance. Notwithstanding the foregoing,
however, if any certificate for shares of Class A
Common Stock is to be issued in a name other than
that of the holder of the shares of Class B Common
Stock to be converted therefor, such holder shall
pay to the Corporation the amount of any tax which
may be payable in respect of any transfer involved
in the issuance of the shares of Class A Common
Stock or shall establish to the satisfaction of
the Corporation that such tax has been paid.
(f) Notwithstanding any other provisions in
this article FOURTH, when the number of
outstanding shares of Class B Common Stock falls
below two percent (2%) of the aggregate number of
shares of Class A Common Stock and Class B Common
Stock then outstanding, (i) all of the outstanding
shares of Class A Common Stock and Class B Common
Stock shall be deemed, without further act on
anyone's part, to be immediately and automatically
converted into an equal number of shares of Common
Stock, with all shares of such Common Stock having
equal rights as to dividends, voting rights and
liquidation, (ii) stock certificates formerly
representing outstanding shares of Class A Common
Stock and Class B Common Stock shall thereupon and
thereafter be deemed to represent a like number of
shares of Common Stock, and (iii) subsections 1,
2, 3, 4, 5, 6, 7 and 8(a), (b), (c), (d) and (e)
of this Section B of Article FOURTH of this
Restated Certificate of Incorporation shall be
void and of no effect.
9. The rights of the Common Stock under this Section B of
this Article Fourth of this Restate Certificate of
Incorporation are subject to the provisions below concerning
the Preferred Stock.
B. THE PREFERRED STOCK
The Preferred Stock may be issued in series, and
authority is vested in the Board of Directors, from time to
time, to establish and designate series and to fix the
variations in the powers, preferences, rights,
qualifications, limitations or restrictions of any series of
the Preferred Stock, but only with respect to:
1. the dividend rate or rates and the
preferences, if any, over any other class or
series (or of any other class or series over such
class or series) with respect to dividends, the
terms and conditions upon which and the periods in
respect of which dividends shall be payable,
whether and upon what conditions such dividends
shall be cumulative and, if cumulative, the date
or dates from which dividends shall accumulate;
2. the price and terms and conditions on
which shares may be redeemed;
3. the amount payable upon shares in the
event of voluntary or involuntary liquidation;
4. sinking fund provisions for the
redemption or purchase of shares;
5. the terms and conditions on which shares
may be converted into shares of any other class or
series of the same or any other class of stock of
the Corporation, if the shares of any series are
issued with the privilege of conversion; and
6. voting rights, if any
Except as to the matters expressly set forth above, all
series of the Preferred Stock shall have the same
preferences, limitations and relative rights and shall
rank equally, share ratably and be identical in all
respects as to all matters. All shares of any one
series of the Preferred Stock shall be alike in every
particular.
D. GENERAL
The number of authorized shares of any class of
the capital stock of the Corporation may be increased or
decreased (but not below the number of shares of such class then
outstanding) by the affirmative vote of the holders of a majority
of the outstanding Class B Common Stock.
FIFTH: The Corporation is to have perpetual
existence.
SIXTH: In furtherance and not in limitation of
the powers conferred by statute, the Board of Directors is
expressly authorized to make, alter or repeal the bylaws of the
Corporation.
SEVENTH: Meetings of stockholders may be held
within or without the State of Delaware, as the bylaws may
provide. The books of the Corporation may be kept (subject to
any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time
to time by the Board of Directors or in the bylaws of the
Corporation. Elections of Directors need not be by written
ballot unless the bylaws of the Corporation shall so provide.
EIGHTH: The holders of any stock of the
Corporation, or the holders or any class or series of class
thereof, shall have no preemptive rights.
NINTH: The Corporation reserves the right to
amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
TENTH: Any merger or consolidation of the
Corporation with or into any other corporation; or any sale,
lease, exchange or other disposition of all or substantially all
of the assets of the Corporation to or with any other
corporation, person or entity, shall require the affirmative vote
of the holders of at least two-thirds of the outstanding shares
of the Class B Common Stock and at least two-thirds of the
outstanding shares of any other class of the capital stock of the
Corporation issued and outstanding and entitled to vote thereon.
This Article TENTH may not be amended or rescinded
except by the affirmative vote of the holders of at least two-
thirds of the outstanding shares of Class B Common Stock and at
least two-thirds of the outstanding shares of any other class of
the capital stock of the Corporation issued and outstanding and
entitled to vote thereon, at any regular or special meeting of
the stockholders if notice of the proposed alteration or
amendment be contained in the notice of the meeting.
ELEVENTH: No director of this corporation shall be
personally liable to the corporation or its stockholders for
monetary damage for breach of his fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith, or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal
benefit.
