<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1997
Commission File Number 1-8803
MATERIAL SCIENCES CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 95-2673173
(State or other jurisdiction (IRS employer identification
of incorporation or organization) number)
2200 East Pratt Boulevard
Elk Grove Village, Illinois 60007
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (847) 439-8270
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ___X___ No______
As of October 8, 1997, there were outstanding 15,350,855 shares of common
stock, $.02 par value.
<PAGE>
MATERIAL SCIENCES CORPORATION
FORM 10-Q
For The Quarter Ended August 31, 1997
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- -----------------------------
(a) Financial statements of Material Sciences Corporation and Subsidiaries
(b) Summarized income statement information for Walbridge Coatings, An Illinois
Partnership
2
<PAGE>
Consolidated Statements of Income (Unaudited)
Material Sciences Corporation and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
(In thousands, except per share data) 1997 1996 1997 1996
- ------------------------------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales (1) $ 70,541 $ 70,420 $143,637 $139,304
Cost of Sales 53,757 51,137 109,262 102,512
-------- -------- -------- --------
Gross Profit $ 16,784 $ 19,283 $ 34,375 $ 36,792
Selling, General and Administrative
Expenses 12,937 11,934 26,139 23,398
-------- -------- -------- --------
Income from Operations $ 3,847 $ 7,349 $ 8,236 $ 13,394
-------- -------- -------- --------
Other (Income) and Expense:
Interest Income $ (46) $ (69) $ (75) $ (135)
Interest Expense 1,045 142 2,058 142
Equity in Results of Partnership 344 595 (158) 481
Other, Net (267) (227) (527) (456)
-------- -------- -------- --------
Total Other Expense, Net $ 1,076 $ 441 $ 1,298 $ 32
-------- -------- -------- --------
Income Before Income Taxes $ 2,771 $ 6,908 $ 6,938 $ 13,362
Income Taxes 1,067 2,660 2,672 5,145
-------- -------- -------- --------
Net Income $ 1,704 $ 4,248 $ 4,266 $ 8,217
======== ======== ======== ========
Net Income Per Common and Common
Equivalent Share $ 0.11 $ 0.27 $ 0.28 $ 0.53
======== ======== ======== ========
Weighted Average Number of Common and
Common Equivalent Shares Outstanding 15,485 15,620 15,461 15,586
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
Consolidated Balance Sheets
Material Sciences Corporation and Subsidiaries
<TABLE>
<CAPTION>
August 31, February 28,
1997 1997
(In thousands) Unaudited Audited
- ----------------------------------------------------------------------- ---------- ------------
<S> <C> <C>
Assets:
Current Assets:
Cash and Cash Equivalents $ 1,946 $ 2,116
Receivables:
Trade, Less Reserves of $2,556 and $2,271, Respectively (2) 35,087 35,944
Current Portion of Partnership Note 761 767
Income Taxes 1,123 1,249
Prepaid Expenses 3,978 2,791
Inventories 35,248 30,952
Prepaid Taxes 1,186 1,186
-------- --------
Total Current Assets $ 79,329 $ 75,005
-------- --------
Gross Property, Plant and Equipment $255,392 $242,340
Accumulated Depreciation and Amortization (96,638) (87,954)
-------- --------
Net Property, Plant and Equipment $158,754 $154,386
-------- --------
Other Assets:
Investment in Partnership $ 10,921 $ 10,759
Partnership Note Receivable, Less Current Portion - 374
Intangible Assets, Net 13,869 12,837
Other 482 728
-------- --------
Total Other Assets $ 25,272 $ 24,698
-------- --------
Total Assets $263,355 $254,089
======== ========
Liabilities:
Current Liabilities:
Current Portion of Long-Term Debt $ 4,089 $ 3,750
Accounts Payable 22,300 24,092
Accrued Payroll Related Expenses 7,750 9,838
Accrued Expenses 6,602 6,171
-------- --------
Total Current Liabilities $ 40,741 $ 43,851
-------- --------
Long-Term Liabilities:
Deferred Income Taxes $ 11,323 $ 11,392
Long-Term Debt, Less Current Portion 63,047 54,761
Accrued Superfund Liability 4,026 4,071
Other 6,822 6,641
-------- --------
Total Long-Term Liabilities $ 85,218 $ 76,865
-------- --------
Shareowners' Equity:
Preferred Stock (3) $ - $ -
Common Stock (4) 326 325
Additional Paid-In Capital 50,925 50,142
Treasury Stock at Cost (5) (8,545) (7,518)
Retained Earnings 94,690 90,424
-------- --------
Total Shareowners' Equity $137,396 $133,373
-------- --------
Total Liabilities and Shareowners' Equity $263,355 $254,089
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
Consolidated Statements of Cash Flows (Unaudited)
Material Sciences Corporation and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
(In thousands) 1997 1996 1997 1996
- ---------------------------------------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash Flows From:
Operating Activities:
Net Income $ 1,704 $ 4,248 $ 4,266 $ 8,217
Adjustments to Reconcile Net Income to Net Cash Used in
Operating Activities:
Depreciation and Amortization 4,688 3,801 9,368 7,464
Benefit for Deferred Income Taxes (27) (74) (69) (148)
Compensatory Effect of Stock Plans (52) 130 31 280
Other, Net 344 595 (160) 481
-------- -------- -------- --------
Operating Cash Flow Prior to Changes in Assets and Liabilities $ 6,657 $ 8,700 $ 13,436 $ 16,294
-------- -------- -------- --------
Changes in Assets and Liabilities:
Receivables $ 1,633 $ (2,312) $ (220) $ (6,046)
Income Taxes Receivable (1,123) (673) 126 725
Prepaid Expenses (278) 245 (1,146) (94)
Inventories (1,633) 47 (2,602) (2,125)
Accounts Payable 196 (250) (1,866) (1,315)
Accrued Expenses 808 1,141 (1,751) (2,135)
Other, Net 48 180 102 (64)
-------- -------- -------- --------
Cash Flow from Changes in Assets and Liabilities $ (349) $ (1,622) $ (7,357) $(11,054)
-------- -------- -------- --------
Net Cash Provided by Operating Activities $ 6,308 $ 7,078 $ 6,079 $ 5,240
-------- -------- -------- --------
Investing Activities:
Capital Expenditures, Net $ (4,726) $(14,051) $(12,921) $(26,492)
Acquisitions, Net of Cash Acquired (1,129) - (1,129) (2,489)
Investment in Partnership (459) (672) (1,004) (877)
Distribution from Partnership 1,374 375 1,374 375
Other Long-Term Assets 149 119 197 289
-------- -------- -------- --------
Net Cash Used in Investing Activities $ (4,791) $(14,229) $(13,483) $(29,194)
-------- -------- -------- --------
Financing Activities:
Net Proceeds (Payments) Under Lines of Credit $ (1,200) $ 6,500 $(11,300) $ 23,700
Proceeds from Senior Notes - - 20,000 -
Payments to Settle Debt (452) (404) (1,192) (844)
Purchase of Treasury Stock - - (1,027) -
Sale of Common Stock 48 100 753 676
-------- -------- -------- --------
Net Cash Provided by (Used in) Financing Activities $ (1,604) $ 6,196 $ 7,234 $ 23,532
-------- -------- -------- --------
Net Decrease in Cash $ (87) $ (955) $ (170) $ (422)
Cash and Cash Equivalents at Beginning of Period 2,033 3,912 2,116 3,379
-------- -------- -------- --------
Cash and Cash Equivalents at End of Period $ 1,946 $ 2,957 $ 1,946 $ 2,957
======== ======== ======== ========
Supplemental Cash Flow Disclosures:
Subordinated Notes Issued for Acquisitions $ 1,117 $ - $ 1,117 $ 1,500
Cash Portion of Acquisitions and Related Costs 1,129 - 1,129 2,489
-------- -------- -------- --------
Total Consideration Paid for Acquisitions $ 2,246 $ - $ 2,246 $ 3,989
======== ======== ======== ========
</TABLE>
The Changes in Assets and Liabilities above for the three months and six months
ended August 31, 1997, are net of assets and liabilities acquired.
The accompanying notes are an integral part of these statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MATERIAL SCIENCES CORPORATION
The data for the three and six months ended August 31, 1997 and 1996 have not
been audited by independent public accountants but, in the opinion of the
Company, reflect all adjustments (consisting of only normal, recurring
adjustments) necessary for a fair presentation of the information at those dates
and for those periods. The financial information contained in this report should
be read in conjunction with the Company's 1997 Annual Report to Shareowners and
Annual Report on Form 10-K. Certain prior year amounts have been reclassified to
conform with the fiscal 1998 presentation.
(1) During the six month periods ending August 31, 1997 and 1996, the Company
derived approximately 20.4% and 20.9%, respectively, of its sales from fees
billed to the Partnership by a subsidiary of the Company for operating the
Walbridge, Ohio facility.
(2) Includes trade receivables due from the Partnership of $2,596 at August 31,
1997 and $2,256 at February 28, 1997.
(3) Preferred Stock, $1.00 Par Value; 10,000,000 Shares Authorized; 1,000,000
Designated Series B Junior Participating Preferred; None Issued.
(4) Common Stock, $.02 Par Value; 40,000,000 Shares Authorized; 16,282,048
Shares Issued and 15,302,400 Shares Outstanding at August 31, 1997 and
16,256,132 Shares Issued and 15,339,384 Shares Outstanding at February 28,
1997.
(5) Treasury Stock at Cost; 979,648 Shares at August 31, 1997 and 916,748
Shares at February 28, 1997.
(6) During the second quarter of fiscal 1998, the Company purchased designated
assets of a specialty films distribution business in Australia and the
remaining 51% interest of a joint venture in Singapore. Consideration for
the purchases, including transaction costs, was $1,117 in subordinated
notes ("Notes") and $1,129 in cash. The Notes bear interest at a rate of 9%
per annum. The notes mature in three equal installments with the first Note
becoming due annually beginning on July 19, 1998. The acquisitions have
been accounted for under the purchase method of accounting.
6
<PAGE>
Summarized Income Statement Information (Unaudited)
Walbridge Coatings, An Illinois Partnership
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
(In thousands) 1997 1996 1997 1996
- ---------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Revenues $16,656 $16,317 $34,991 $34,383
Gross Profit 141 342 1,764 1,159
Income (Loss) from Operations (499) (279) 372 (92)
Net Income (Loss) (637) (552) 45 (721)
NOTE: The Net Income (Loss) shown above does not directly correlate to the
Equity in Results of Partnership shown in the Company's Statement of
Income due to certain contractual allocation requirements of the
Partnership. The Company's primary financial benefit from participation
in the Partnership is in the form of revenues from operating the
Walbridge, Ohio facility. These revenues are included in the Company's
net sales.
</TABLE>
7
<PAGE>
MATERIAL SCIENCES CORPORATION
FORM 10-Q
For the Quarter Ended August 31, 1997
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Material Sciences Corporation ("MSC" or "Company") operates in one business
segment comprised of the following four product groups: laminates and
composites, specialty films, coil coating and electrogalvanizing. The following
table provides a summary of net sales and the percent of net sales of MSC's
product groups.
<TABLE>
<CAPTION>
Net Sales Summary Quarter Ended August 31,
- --------------------- ------------------------------------------------------------
1997 1996
------------------------- ----------------------------
Product Group: Dollars Percent Dollars Percent
----------- ------- ------------ --------
<S> <C> <C> <C> <C>
Laminates and Composites $ 14,747 20.9% $ 17,021 24.2%
Specialty Films 11,608 16.5% 11,178 15.9%
Coil Coating 29,718 42.1% 28,332 40.2%
Electrogalvanizing 14,468 20.5% 13,889 19.7%
-------- ----- ------- -----
$ 70,541 100.0% $ 70,420 100.0%
======== ===== ======== =====
Six Months Ended August 31,
------------------------------------------------------------
1997 1996
------------------------- ----------------------------
Product Group: Dollars Percent Dollars Percent
----------- -------- ------------ --------
Laminates and Composites $ 31,833 22.2% $ 32,479 23.3%
Specialty Films 23,018 16.0% 21,327 15.3%
Coil Coating 59,445 41.4% 56,446 40.5%
Electrogalvanizing 29,341 20.4% 29,052 20.9%
-------- ----- -------- -----
$143,637 100.0% $139,304 100.0%
======== ===== ======== =====
</TABLE>
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Net Sales
Net sales in the second quarter of fiscal 1998 increased 0.2% over the same
period last year. Sales of specialty films increased by 3.8%; coil coating 4.9%;
and electrogalvanizing 4.2%. Laminates and composites sales decreased by 13.4%
compared to last fiscal year's second quarter. For the six-month period ended
August 31, 1997, sales were 3.1% higher than the first six months of last year.
Sales of specialty films increased by 7.9%; coil coating 5.3%; and
electrogalvanizing 1.0%. Laminates and composites sales decreased by 2.0%
compared to the prior year's six months.
Laminates and Composites
Sales of laminates and composites products decreased 13.4% in the second quarter
of fiscal 1998, as compared to the same quarter last year. The decrease was
largely due to lower shipments of disc brake noise dampers to the replacement
market, as well as a decrease in sales of Specular+(R). These shortfalls were
offset, in part, by higher sales of Polycore Composites(R) to both the computer
and appliance markets. On a six-month basis, sales in this product group
decreased 2.0% for the same prior period. An overall softness in the reflective
lighting market is the major contributor to the lower sales of Specular+ for the
first half of the year, offset, in part, by higher demand for Polycore
Composites in the appliance, automotive, and computer markets.
Specialty Films
During the second quarter of fiscal 1998, sales of specialty films increased
3.8% over the same period last year. For the first six months, specialty films
sales increased 7.9%, as compared to the first six months of last fiscal year.
For both periods, the increase was primarily due to higher sales of high
performance solar control window film and shipments of sputter coated films for
the imaging and printing industries. In addition, during the second quarter,
the Company completed the acquisitions of a distribution business in Australia,
as well as the remaining 51% interest of a joint venture in Singapore, further
strengthening its position in this market.
Coil Coating
Coil coating sales during the second quarter of fiscal 1998 grew 4.9% over the
same quarter last year. The major contributors to the growth were increases in
sales to the transportation and building products markets, offset, in part, by
lower sales to the swimming pool and appliance markets. For the six months
ended August 31, 1997, sales were 5.3% higher than the same period last fiscal
year. The increase in sales for the six-month period was due to an increase in
the transportation and appliance markets, offset, in part, by lower sales to the
swimming pool market.
Electrogalvanizing
MSC participates in the electrogalvanizing market through Walbridge Coatings
(the "Partnership"), a partnership among subsidiaries of MSC, Bethlehem Steel
Corporation
9
<PAGE>
("Bethlehem") and Inland Steel Industries, Inc. ("Inland"). MSC's
net sales for electrogalvanizing consists of various fees charged to the
Partnership for operating the facility. Bethlehem and Inland are primarily
responsible for the sales and marketing activities of the Partnership. The
Company's primary financial benefits from the Partnership are the revenues
billed to Walbridge Coatings for operating the facility. These revenues
represent 20.4% and 20.9% of the Company's net sales in the first six months of
fiscal 1998 and 1997, respectively. The profitability for operating the facility
was comparable to the Company's overall operating results. Under the equity
method of accounting, the Company includes its portion of the Partnership shown
in the Consolidated Statements of Income. The amounts do not directly correlate
to the Company's 50% ownership interest due to contractual allocation
requirements of the Partnership agreement. The Company's potential alternatives
upon expiration of the Partnership term in June 1998 include, among other
things, extension of the Partnership, purchase of the facility, or sale of the
facility. The partners are actively discussing the various alternatives. The
Company believes its investment in the Partnership is realizable.
MSC's electrogalvanizing sales in the second quarter of fiscal 1998 increased
4.2% over the second quarter last year even though volume declined 5.4% to
103,351 tons for the period. A shift in the product mix to higher value-added
organically coated materials contributed to the increase in sales which more
than offset the decline in volume. The volume reduction was primarily a result
of the annual maintenance shutdown taking a planned two weeks as compared to one
week in the prior year. For the six months of fiscal 1998, sales increased 1.0%
and volume decreased 4.1% to 225,831 tons from 235,416 tons over the same period
in the prior fiscal year. Again, the increase in sales and lower volume was due
to a change in product mix, as well as the extended maintenance shutdown.
The sales and marketing responsibilities of the Partnership are split between
Bethlehem and Inland at 76% and 24%, respectively. During the first six months
of fiscal 1998, Inland utilized 16.2% of available production line time rather
than its full 24% share. Bethlehem and other customers utilized this additional
available line time. In fiscal 1998, the Company expects more production line
time will be utilized by customers other than Bethlehem and Inland. Inland is
reviewing its future involvement in the Partnership, and therefore, there is no
assurance that Inland will utilize its full 24% of available line time on a
long-term basis. The Company believes that any short-term disruption in volume
that might be caused by a reduction in Inland's line time requirements could
eventually be replaced by additional volume from Bethlehem and other customers.
Gross Profit
The Company's gross profit margin was 23.8% in the second quarter of fiscal 1998
as compared to 27.4% in the same period last year. For the first six months of
fiscal 1998, gross profit margin was 23.9% versus 26.4% last year. The decrease
in gross profit margin for the quarter and six months was primarily due to
inefficiencies and start-up expenses associated with the new coil coating line
in Elk Grove Village, Illinois, changes in the product mix, and underabsorption
of production costs due to recent capacity additions in our coil coating,
laminates and composites, and specialty films areas.
10
<PAGE>
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses were 18.3% of sales in the
second quarter of fiscal 1998 as compared to 16.9% of sales for the same period
last fiscal year. For the six months ended August 31, 1997, SG&A expenses
increased to 18.2% of sales from 16.8% of sales for the same period in fiscal
1997. For the second quarter, the increase in SG&A is largely due to an
increase in powder coating development initiatives, as well as the acquisitions
of the specialty films distribution business in Australia and the remaining
interest in a joint venture in Singapore. On a year to date basis, SG&A was
also affected by one-time expenses of approximately $500 incurred for the
investigation of previously announced accounting irregularities, in addition to
the Company's ongoing strategic marketing efforts.
Total Other Expense, Net and Income Taxes
Total other expense, net was $1,076 and $1,298 during the second quarter and
first six months of fiscal 1998, respectively, versus $441 and $32 for the
second quarter and first six months of fiscal 1997. The increase in expense was
attributable to an increase in interest expense due to less capitalized
interest, higher debt levels, and fixed interest rates that are higher than
actual fiscal 1997 variable interest rates. The increase in interest expense
was partially offset by an increase in equity in results of partnership due to
the Company receiving the profit allocation on third party sales. MSC's
effective income tax rate was approximately 38.5% during the second quarter and
first six months of fiscal 1998 and fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the second quarter of fiscal 1998, MSC generated $6,308 of cash from
operating activities compared to $7,078 in the second quarter last year. The
decrease in cash generation is due mainly to lower net income, offset, in part,
by higher depreciation and amortization and improvements in working capital as
compared to last year. For the six months of fiscal 1998, operating activities
generated $6,079 of cash versus $5,240 last year. The increase in cash
utilization is due mainly to higher depreciation and amortization and
improvements in working capital as compared to the prior year, offset, in part
by lower net income.
MSC's capital expenditures during the second quarter and first six months of
fiscal 1998 were $4,726 and $12,921, respectively, versus $14,051 and $26,492,
respectively, last fiscal year. Included in the prior fiscal periods was higher
spending for the new coil coating facility in Elk Grove Village, Illinois,
versus this fiscal year. In the second quarter ended August 31, 1997, the
Company purchased designated assets of a specialty films distribution business
in Australia and the remaining interest in a joint venture in Singapore for
$2,246 in cash and subordinated notes. On a year to date basis, investments
were made in the construction of a new coating and laminating line at the San
Diego, California facility which was commissioned during the second quarter of
fiscal 1998.
MSC's total debt increased at August 31, 1997, to $67,136 from $58,511 at
fiscal year end due mainly to capital investments, the Company's stock
repurchase program, and the acquisitions of the distribution businesses for the
specialty films area. As of August 31, 1997, the Company maintains three
unsecured lines of credit totaling $75,000. There was $3,700 outstanding under
these lines of credit as of August 31, 1997. The Company has executed letters
of credit totaling $4,759 against these lines leaving available lines of credit
of $66,541 at August 31,
11
<PAGE>
1997. On February 15, 1997, MSC authorized the issuance and sale of $50,000
Senior Notes ("Notes"). As of May 31, 1997, the Notes were issued and funded.
The Company believes that its cash flow from operations, together with available
financing and cash on hand will be sufficient to fund its working capital needs,
capital expenditure program, and debt amortization.
The Company previously announced the signing of a letter of intent to acquire
certain assets of Pinole Point Steel Company and Colorstrip, Inc., which have
now merged and are now known as Colorstrip, Inc. Located in San Francisco,
California, the combined company operates a hot-dip galvanizing line and
produces prepainted metal on its coil coating line. Although the term of the
letter of intent has expired, the parties are continuing their discussions. Any
transaction is subject to completion of satisfactory due diligence. There can be
no assurance that definitive agreements will be executed or that the transaction
will be consummated.
On April 9, 1997, a plaintiff claiming to represent a class of Material Sciences
Corporation shareowners filed a complaint in the United States District Court
for the Northern District of Illinois. The purported class includes shareowners
who purchased MSC shares between April 18, 1996 and April 7, 1997 and who
allegedly suffered injury as a result of the accounting irregularities announced
on April 7, 1997. The plaintiff claims that the Company and certain of its
officers violated the federal securities laws by making material misstatements
in the Company's publicly filed financial reports. On August 25, 1997, a class
action complaint was filed in the Circuit Court of Cook County, Illinois. The
complaint claims the Company violated the Illinois Consumer Fraud and Deceptive
Practices Act as a result of false, misleading and deceptive representations and
omissions of material facts relating to the Company's financial position during
the period April 18, 1996 to April 6, 1997. The amount of both claims are
uncertain. The Company believes that the claims are without merit and intends
to vigorously defend the lawsuits. However, there can be no assurance with
respect to the outcome of the litigation. No amounts have been provided in the
accompanying financial statements for these claims.
The Company has a capital lease obligation, which was $4,413 as of August 31,
1997, relating to a facility which the Company subleases to the Partnership. In
addition, throughout the term of the Partnership, the Company is contingently
responsible for 50% of the Partnership's financing requirements, including the
Company's share (approximately $1,250) of $2,500 in Partnership financing loans
from third parties at August 31, 1997.
MSC continues to participate in the implementation of settlements with the
government for the clean-up of various Superfund sites. For additional
information, refer to MSC's Form 10-K for the fiscal year ended February 28,
1997.
12
<PAGE>
MATERIAL SCIENCES CORPORATION
FORM 10-Q
For the Quarter Ended August 31, 1997
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
On July 17, 1997, the Company held its Annual Meeting of Shareowners.
Jerome B. Cohen, Roxanne J. Decyk, Eugene W. Emmerich, G. Robert Evans, E.
F. Heizer, Jr., J. Frank Leach, Gerald G. Nadig, Irwin P. Pochter, and Howard B.
Witt, being nine nominees named in the Company's Proxy Statement, dated June 16,
1997, were elected at the Annual Meeting to serve as the Board of Directors by a
majority vote of shareowners. No votes were cast for any other person. The
details of the vote were as follows:
<TABLE>
<CAPTION>
Name For Against
---- --- -------
<S> <C> <C>
Jerome B. Cohen 12,934,124 1,265,397
Roxanne J. Decyk 12,932,166 1,267,355
Eugene W. Emmerich 12,934,203 1,265,318
G. Robert Evans 13,454,701 744,820
E. F. Heizer, Jr. 12,934,292 1,265,229
J. Frank Leach 13,468,385 731,136
Gerald G. Nadig 13,472,764 726,757
Irwin P. Pochter 12,931,801 1,267,720
Howard B. Witt 13,470,689 728,832
</TABLE>
On August 5, 1997, subsequent to the election of the Board of Directors,
Mr. J. Frank Leach passed away. The Company does not currently plan to replace
Mr. Leach's position on the Board of Directors.
Approved by a majority vote of shareowners was the proposal to increase the
number of authorized shares of common stock of the Company from 20,000,000 to
40,000,000 which enhances the Company's flexibility in connection with possible
future actions such as stock splits, acquisitions, and other corporate matters.
The details of the vote were as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
12,202,866 1,933,898 62,757
</TABLE>
13
<PAGE>
Approved by a majority vote of the shareowners was the proposal to amend
the 1992 Omnibus Stock Awards Plan for Key Employees to increase the number of
shares of common stock issuable thereunder by 150,000 shares. The Plan provides
incentives to the key employees of the Company through rewards linked to the
performance of the Company's common stock. The details of the vote were as
follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
7,822,920 6,307,065 69,536
</TABLE>
Approved by a majority vote of the shareowners was the proposal to amend
the Employee Stock Purchase Plan to increase the aggregate number of shares of
the Company's common stock that may be awarded thereunder by 600,000 shares. The
Plan provides incentives to participating employees to create value for the
Company by giving them direct ownership interest in the Company. The details of
the vote were as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
13,391,608 740,769 67,144
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a)3 Restated Certificate of Incorporation
(a)27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter for which
this report is filed.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in Elk Grove Village, State of Illinois,
on the 8th day of October, 1997.
MATERIAL SCIENCES CORPORATION
By: /s/ Gerald G. Nadig
---------------------------
Gerald G. Nadig
President and Chief
Executive Officer
By: /s/ James J. Waclawik, Sr.
---------------------------
James J. Waclawik, Sr.
Vice President,
Chief Financial Officer
and Secretary
15
<PAGE>
MATERIAL SCIENCES CORPORATION
Quarterly Report on Form 10-Q
Index to Exhibits
<TABLE>
<CAPTION>
Sequentially
Exhibit Number Description of Exhibit Numbered Page
- -------------- ---------------------- -------------
<S> <C> <C>
3 Restated Certificate of
Incorporation
27 Financial Data Schedule (1)
</TABLE>
(1) Appears only in the electronic filing of this report with the Securities
and Exchange Commission.
<PAGE>
CERTIFICATE OF
RESTATED CERTIFICATE OF INCORPORATION
OF
MATERIAL SCIENCES CORPORATION
* * * * *
James J. Waclawik, Sr., being the Vice President, Chief Financial
Officer and Secretary of Material Sciences Corporation, a corporation duly
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware (the "Corporation"), DOES HEREBY CERTIFY as follows:
FIRST: The Corporation filed its original Certificate of Incorporation
with the Delaware Secretary of State on September 21, 1982 (as amended, the
"Certificate of Incorporation") under the name of M.S.C. Merger Co.
SECOND: The Corporation changed its name to Material Sciences Corporation
on October 31, 1983 in connection with the filing of a Certificate of Merger,
which merged "Material Sciences Corporation," a California corporation, with and
into the Corporation.
THIRD: The Restated Certificate of Incorporation attached hereto as
Exhibit A was duly adopted by the Board of Directors of the Corporation in
accordance with Section 245 of the General Corporation.
FOURTH: In accordance with the provisions of Section 245 of the General
Corporation Law of the State of Delaware, approval of the Corporation's
stockholders is not required with respect to the adoption of the Restated
Certificate of Incorporation.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the Vice President, Chief
Financial Officer and Secretary hereinabove named, for the purpose of restating
and integrating the Certificate of Incorporation pursuant to the General
Corporation Law of the State of Delaware, under penalty of perjury does hereby
declare and certify that is the act and deed of the Corporation and the facts
stated herein are true, and accordingly has hereunto signed this Certificate of
Restated Certificate of Incorporation this 25th day of September, 1997.
MATERIAL SCIENCES CORPORATION,
a Delaware Corporation
By: /s/ James J. Waclawik, Sr.
--------------------------
James J. Waclawik, Sr.
Vice President, Chief Financial
Officer and Secretary
<PAGE>
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
MATERIAL SCIENCES CORPORATION
Adopted in accordance with Section 245 of the General Corporation Law of the
State of Delaware. This 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 this
Restated Certificate of Incorporation.
The name of the corporation is Material Sciences Corporation and the name under
which the corporation was originally incorporated is M.S.C. Merger Co. The date
of filing of its original Certificate of Incorporation with the Secretary of
State was September 21, 1982.
--------------
ARTICLE ONE
The name of the Corporation is Material Sciences Corporation (hereinafter
referred to as the "Corporation").
ARTICLE TWO
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street in the City of Wilmington, County of New Castle. The
name of the Corporation's registered agent at such address is The Corporation
Trust Company.
ARTICLE THREE
The nature of the business to be conducted or promoted and the purposes of
the Corporation are to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
ARTICLE FOUR
The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 50,000,000 shares, consisting of:
10,000,000 shares of preferred stock of the par value of $1.00
per share ("preferred stock"); and
<PAGE>
40,000,000 shares of common stock of the par value of $.02 per
share ("common stock").
The designations, voting powers, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations or restrictions thereof, of such stock shall be as follows:
I
PREFERRED STOCK
1. Shares of preferred stock may be issued in one or more series at
such time or times, and for such consideration or considerations, as the Board
of Directors may determine. All shares of any one series of preferred stock
shall be identical with each other in all respects, except that shares of any
one series issued at different times may differ as to dates from which dividends
thereon may be cumulative. All series shall rank equally and be identical in
all respects, except as permitted by the provisions of Section 2 of this
Division I.
2. The Board of Directors is expressly authorized at any time, and
from time to time, to provide for the issuance of shares of preferred stock in
one or more series with such voting powers, designations, preferences and
relative, participating, optional or other special rights, and such
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions providing for the issue thereof
adopted by the Board of Directors, and as are not stated and expressed in this
Certificate of Incorporation (or any amendment thereto), including, but not
limited to, determination of any of the following:
(a) the distinctive designation and number of shares comprising such
series, which number may (except where otherwise provided by the Board of
Directors in creating such series) be increased or decreased (but not below
the number of shares then outstanding) from time to time by like action of
the Board of Directors;
(b) the dividend rate or rates on the shares of such series and the
preferences, if any, over any other series (or of any other series over
such 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;
(c) the voting powers, full or limited, if any, of the shares of such
series, and under what conditions, if any, the shares of such series (alone
or together with the shares of one or more other series having similar
provisions) shall be entitled to vote separately as a class (i) for the
election of one or more directors of the Corporation or (ii) upon other
matters;
(d) whether the shares of such series shall be redeemable, the
limitations and restrictions with respect to such redemptions, the time or
times when, the price or prices at
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<PAGE>
which and the manner in which such shares shall be redeemable, including
the manner of selecting shares of such series for redemption if less than
all shares are to be redeemed;
(e) the rights to which the holders of shares of such series shall be
entitled, and the preferences, if any, over any other series (or of any
other series over such series), upon the voluntary or involuntary
liquidation, dissolution, distribution of assets or winding up of the
Corporation, which rights may vary depending on whether such liquidation,
dissolution, distribution or winding up is voluntary or involuntary, and,
if voluntary, may vary at different dates;
(f) whether the shares of such series shall be subject to the
operation of a purchase, retirement or sinking fund, and, if so, whether
and upon what conditions such purchase, retirement or sinking fund shall be
cumulative or noncumulative, the extent to which and the manner in which
such fund shall be applied to the purchase or redemption of the shares of
such series, including the price or prices at which the shares may be
purchased or redeemed, or to other corporate purposes and the terms and
provisions relative to the operation thereof;
(g) whether the shares of such series shall be convertible into or
exchangeable for shares of stock of any other class or classes, or of any
other series of the same class, and, if so convertible or exchangeable, the
price or prices or the rate or rates of conversion or exchange and the
method, if any, of adjusting the same, and any other terms and conditions
of such conversion or exchange;
(h) whether the issuance of additional shares of preferred stock shall
be subject to restrictions as to issuance, or as to the powers, preferences
or other rights of any other series; and
(i) any other preferences, privileges and powers, and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions of such series, as the Board of Directors may
deem advisable and as shall not be inconsistent with the provisions of this
Certificate of Incorporation, as the same may be amended from time to time.
* * * * *
The Board of Directors of the Corporation pursuant to the authority
vested in it by Article Four, Division I (Preferred Stock) above has designated
a series of preferred stock as follows:
Section 1. Designation and Amount. The shares of such series shall
be designated as "Series B Junior Participating Preferred Stock" (the "Series B
Preferred Stock"), and the number of shares constituting such series shall be
1,000,000. Such number of shares may be increased by resolution of the Board of
Directors.
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<PAGE>
Section 2. Dividends and Distributions.
---------------------------
(A) (i) Subject to the prior rights of any other series of Preferred
Stock ranking prior to the Series B Preferred Stock as to dividends, the
holders of shares of Series B Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the last
day of May, August, November, and February in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series B Preferred Stock, in
an amount per share (rounded to the nearest cent) equal to the greater of
(a) $10.00 or (b) the Adjustment Number (as defined below) times the
aggregate per share amount of all cash dividends, and the Adjustment Number
times the aggregate per share amount (payable in kind), of all non-cash
dividends or other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock, par value
$0.02 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series B Preferred Stock. The "Adjustment
Number" shall initially be 100. In the event the Corporation shall at any
time on or after July 2, 1996 (i) declare or pay any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding
shares of Common Stock (by reclassification or otherwise) into a greater
number of shares of Common Stock or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the
Adjustment Number in effect to which holders of shares of Series B
Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such Adjustment Number in effect by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
(ii) The Corporation shall declare a dividend or distribution on
the Series B Preferred Stock as provided in this paragraph (A)
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have
been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $10.00 per share on the Series B
Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(B) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series B Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series B Preferred
Stock, unless the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
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<PAGE>
unless the date of issue is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of shares of Series
B Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series B Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a-share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series B
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 60 days prior to
the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series B
Preferred Stock shall have the following voting rights:
(A) Each share of Series B Preferred Stock shall entitle the holder
thereof to a number of votes equal to the Adjustment Number on all matters
submitted to a vote of the stockholders of the Corporation.
(B) Except as otherwise provided herein, in the Corporation's
Certificate of Incorporation, as amended, or by-laws, as amended, or by
law, the holders of shares of Series B Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any shares of Series B Preferred
Stock shall be in arrears in an amount equal to at least six quarterly
dividends thereon, the occurrence of such contingency shall mark the
beginning of a period (herein called a "default period") which shall extend
until such time when all accrued and unpaid dividends for all previous
quarterly dividend periods and for the current quarterly dividend period on
all shares of Series B Preferred Stock then outstanding shall have been
declared and paid or set apart for payment. During each default period,
the holders of Preferred Stock (including holders of the Series B Preferred
Stock) upon which these or like voting rights have been conferred and are
exercisable (the "Voting Preferred Stock") with dividends in arrears in an
amount equal to six quarterly dividends thereon voting as a class,
irrespective of series, shall have the right to elect two Directors.
(ii) During any default period, such voting right of the holders
of Series B Preferred Stock may be exercised initially at a special
meeting called pursuant to subparagraph (iii) of this Section 3(C) or
at any annual meeting of stockholders, and thereafter at annual
meetings of stockholders, provided that neither such voting right nor
the right of the holders of Series B Preferred Stock as hereinafter
provided to increase in certain cases the authorized number of
Directors shall be exercised unless the holders of one-third in number
of shares of Voting Preferred Stock outstanding shall be present in
person or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Voting Preferred
Stock
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<PAGE>
of such voting right. At any meeting at which the holders of Voting
Preferred Stock shall initially exercise such voting right during an
existing default period, they shall have the right, voting separately
as a class, to elect Directors to fill such vacancies, if any, in the
Board of Directors as may then exist up to two Directors or, if such
voting right is exercised at an annual meeting, to elect two
Directors. If the number of Directors which may be otherwise elected
at any annual meeting or a special meeting does not permit the holders
of the Voting Preferred Stock to elect two Directors as provided
herein, the holders of Voting Preferred Stock, voting separately as a
class, shall have the right to make such increase in the number of
Directors as shall be necessary to permit the election by them of the
required number. After the holders of Voting Preferred Stock shall
have exercised their right to elect Directors in any default period
and during the continuance of such default period, the number of
Directors shall not be increased or decreased except with the approval
of the holders of Voting Preferred Stock voting separately as a class.
(iii) Unless the holders of Voting Preferred Stock shall, during
an existing default period, have previously exercised their right to
elect Directors, the Board of Directors may order, or any stockholder
or stockholders owning in the aggregate not less than 10% of the total
number of shares of Voting Preferred Stock then outstanding may
request the calling of a special meeting of the holders of Voting
Preferred Stock, which meeting shall thereupon be called by the
Chairman and Chief Executive Officer, any Vice President or the
Secretary of the Corporation. Notice of any such meeting and of any
annual meeting at which holders of Voting Preferred Stock are entitled
to specially elect Directors pursuant to this paragraph (C) shall be
given to each holder of record of Voting Preferred Stock by mailing a
copy of such notice to him at his last address as the same appears on
the books of the Corporation. Such meeting shall be called for a time
not earlier than 20 days and not later than 60 days after such
request, or in default of the calling of such meeting within 60 days
after such order or request such meeting may be called on similar
notice by any stockholder or stockholders owning in the aggregate not
less than 10% of the total number of shares of Voting Preferred Stock
then outstanding. Notwithstanding the provisions of this paragraph
(C)(iii), no such special meeting shall be called during the period
within 60 days immediately preceding the date fixed for the next
annual meeting of the stockholders.
(iv) During any default period after the holders of Voting
Preferred Stock shall have exercised their rights to elect Directors
voting as a class, (x) the Directors so elected by the holders of
Voting Preferred Stock shall continue in effect until their successors
shall have been elected by such holders or until the expiration of the
default period, and (y) any vacancy in the Board of Directors may be
filled by vote of a majority of the remaining Directors theretofore
elected by the holders of the class or classes of stock which elected
the Director whose office shall have become vacant. References in
this paragraph (C) to Directors elected by the holders of a particular
class or classes of stock shall include Directors elected by such
Directors to fill vacancies as provided in clause (y) of the foregoing
sentence.
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<PAGE>
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Voting Preferred Stock as a class to elect two
Directors shall cease, (y) the term of any Directors so elected by the
holders of Voting Preferred Stock as a class shall terminate and (z)
the number of Directors shall be such number as may be provided for in
the Corporation's by-laws, as amended, or the Certificate of
Incorporation, as amended, without regard to any increase made
pursuant to the provisions of paragraph (C) of this Section 3 (such
number being subject, however, to change thereafter in any manner
provided by law or in the Certificate of Incorporation or the by-
laws). Any vacancies in the Board of Directors effected by the
Provisions of clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Series B Preferred Stock
shall have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series B Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series B Preferred
Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration, any
shares of stock ranking junior (either as to dividends or upon
liquidation dissolution or winding up) to the Series B Preferred
Stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series B
Preferred Stock, except dividends paid ratably on the Series B
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
any shares of any stock ranking on junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series B Preferred
Stock, except the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (both as to
dividends and upon dissolution liquidation or winding up) to the
Series B Preferred Stock; or
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<PAGE>
(iv) purchase or otherwise acquire for consideration any shares
of Series B Preferred Stock, or any shams of stock ranking on a parity
with the Series B Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shams upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph
(A) of this Section 4, purchase or otherwise acquire such shares at such
time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
preferred stock and may be reissued as part of a new series of preferred stock
to be created by resolution or resolutions of the Board of Directors subject to
the conditions and restrictions on issuance set forth in the Certificate of
Incorporation.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (A) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series B
Preferred Stock unless, prior thereto, the holders of shares of Series B
Preferred Stock shall have received the greater of (i) $100 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment, and (ii) an aggregate amount per
share equal to the Adjustment Number (as adjusted from time to time pursuant to
Section 2(A) hereof) times the aggregate amount to be distributed per share to
holders of Common Stock, or (B) to the holders of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series B Preferred Stock, except distributions made ratably on the Series B
Preferred Stock and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock,
securities, cash or other property, then in any such case the shares of Series B
Preferred Stock then outstanding shall at the same time be similarly exchanged
or changed in an amount per share equal to the Adjustment Number (as adjusted
from time to time pursuant to Section 2(A) hereof) times the aggregate amount of
stock, securities, cash or other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is changed or exchanged.
Section 8. No Redemption. The shares of Series B Preferred Stock
shall not be redeemable.
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<PAGE>
Section 9. Ranking. The Series B Preferred Stock shall rank junior
to, or pari passu with, all other series of the Corporation's Preferred Stock
subsequently issued, with respect to the payment of dividends and the
distribution of assets, unless the terms of any such series shall provide
otherwise, and shall rank senior to the Common Stock as to such matters.
Section 10. Amendment. The Certificate of Incorporation of the
Corporation, as heretofore amended, shall not be amended in any manner which
would materially alter or change the powers, preferences or special rights of
the Series B Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Series B Preferred Stock, voting together as a single class.
* * * * *
II
COMMON STOCK
1. Shares of common stock may be issued in one or more series at such
time or times, and for such consideration or considerations, as the Board of
Directors shall determine. The Board of Directors is hereby authorized to fix,
state and establish, in the resolution or resolutions providing for the issuance
of any wholly unissued series of common stock, the relative powers, rights,
designations, preferences, qualifications, limitations and restrictions of such
series in relation to any other series of common stock at the time outstanding.
The Board of Directors is also expressly authorized to fix the number of shares
of each such series, but not below the number of shares thereof then
outstanding. The authority of the Board of Directors with respect to each series
of common stock shall include (without limitation) the determination of the
following:
(a) the dividend rate on the shares of each series, whether dividends
shall be cumulative, and, if so, from which date or dates, the relative
rights of priority, if any, with respect to the payment of dividends on the
shares of each such series;
(b) whether the shares of one or more series shall have voting rights
(other than the voting rights provided by law) and, if so, the terms of
such voting rights;
(c) whether the shares of one or more series shall have conversion
privileges, and, if so, the terms and conditions of such conversion,
including provision for adjustment of the conversion rate upon the
occurrence of such events as the Board of Directors may prescribe;
(d) the rights of the shares of each series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation,
and the relative rights of priority, if any, with respect to the
distribution of assets on the shares of each such series; and
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<PAGE>
(e) any other preferences, privileges and powers, and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions of such series, as the Board of Directors may
deem advisable and as shall not be inconsistent with the provisions of this
Certificate of Incorporation, as the same may be amended from time to time.
2. Notwithstanding the foregoing, each holder of common stock or any
series of common stock shall be entitled to cast, at all elections of directors
of the Corporation, as many votes as shall equal the number of votes which such
holder would (except for this cumulative voting provision) be entitled to cast
for the election of directors with respect to the shares so held, multiplied by
the number of directors to be elected by such holder, and such holder may cast
all of such votes for a single director or may distribute the votes among two or
more of the directors as the holder deems appropriate.
* * * * *
The Board of Directors of the Corporation pursuant to the authority
vested in it by Article Four, Division II (Common Stock) above has designated a
series of common stock as follows:
Section 1. Designation of Series. There is hereby established a
series of common stock, designated Common Stock, which shall have a par value of
$.02 per share.
Section 2. Number of Shares of Common Stock. The number of shares
constituting the Common Stock is fixed at 40,000,000.
Section 3. Dividend Provisions.
(a) The holders of outstanding shares of Common Stock shall be
entitled to receive, when and as declared by the Board of Directors, out of
assets at the time legally available therefore, dividends at the rate
determined by the Board of Directors.
(b) The dividends authorized by subparagraph (a) of this Section 3
shall not be cumulative, and no rights shall accrue to the holders of
outstanding shares of Common Stock by reason of the fact that such
dividends may not have been paid or declared and set aside for payment in
any prior fiscal quarter or quarters of the Corporation.
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of
this Corporation, either voluntary or involuntary, the holders of shares of
Common Stock shall be entitled to receive an amount per share equal to the
sum of (i) $5.00 for each outstanding share of Common Stock and (ii) all
declared but unpaid dividends thereon.
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<PAGE>
(b) If the assets available for distribution are, upon the occurrence
of an event specified in subparagraph (a) of this Section 4, insufficient
to permit the payment to the holders of Common Stock of the full
preferential amount to which they are entitled pursuant to such
subparagraph, then the entire amount of assets of this Corporation legally
available for distribution to the holders of Common Stock shall be
distributed ratably among holders of the Common Stock only, in proportion
to the number of shares of Common Stock held by each of them.
(c) Should any assets remain in this Corporation upon completion of
the distributions required by subparagraph (a) of this Section 4, then the
holders of Common Stock shall be entitled to a distribution of such
remaining assets.
(d) The liquidation preferences and rights provided under this
Section 4 to the holders of Common Stock by reason of their ownership
thereof shall be appropriately adjusted by the Board of Directors in the
event of any stock split, stock dividend or similar capital transaction
affecting the number of outstanding shares of Common Stock without the
Corporation's receipt of consideration therefor.
Section 5. Voting Rights. The holder of each share of Common
Stock shall have the right to one vote, for each share of Common Stock held, on
all matters requiring shareholder approval under the law of this Corporation's
state of incorporation. Notwithstanding the foregoing, each holder of shares of
Common Stock shall be entitled to cast, at all elections of directors of this
Corporation, as many votes as shall equal the number of votes which such holder
would (except for this cumulative voting provision) be entitled to cast for the
election of directors with respect to the shares so held, multiplied by the
number of directors to be elected by such holder, and such holder may cast all
of such votes for a single director or may distribute the votes among two or
more of the directors as the holder deems appropriate.
* * * * *
III
OTHER PROVISIONS
No holder of the capital stock of the Corporation shall have the right
as such holder to purchase or subscribe for any security of the Corporation now
or hereafter authorized or issued. All such securities may be issued and
disposed of by the Board of Directors to such persons, firms, corporations and
associations for such lawful considerations, and on such terms, as the Board of
Directors in its discretion may determine, without first offering the same, or
any part thereof, to the holders of any shares of the capital stock of the
Corporation.
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ARTICLE FIVE
No action required to, or which may, be taken at an annual or special
meeting of stockholders of the Corporation may be taken without a meeting, and
the power of the stockholders of the Corporation to act by written consent,
whether pursuant to Section 228 of the General Corporation Law of the State of
Delaware or otherwise, is specifically denied.
ARTICLE SIX
Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or by the Certificate of Incorporation,
may be called by the Chairman of the Board, in his discretion, and shall be
called by the Chairman of the Board or the Secretary at the request in writing
of a majority of the directors then holding office, or at the request in writing
of stockholders owning at least the number of shares of the Corporation issued
and outstanding and entitled to cast a majority of the votes at such meeting.
Any such written request shall state the purpose or purposes of the proposed
meeting.
ARTICLE SEVEN
1. In addition to any affirmative vote required by law or this
Certificate of Incorporation, the affirmative vote of the holders of that number
of the then outstanding shares of the capital stock of the Corporation entitled
to vote generally in the election of directors (the "Voting Stock"), voting
together as a single class (it being understood that for purposes of this
Article Seven, each share of Voting Stock shall have the number of votes granted
to it pursuant to Article Four of this Certificate of Incorporation), which
equals at least the sum of (i) the number of outstanding shares of Voting Stock
of the Corporation beneficially owned by a "Related Person" (as defined in this
Article Seven) plus (ii) one half of the number of outstanding shares of Voting
Stock of the Corporation held by stockholders other than a Related Person, shall
be required for the approval or authorization of a "Business Combination" (as
defined in this Article Seven) of the Corporation with a Related Person;
provided, however, that the foregoing voting requirement shall not be applicable
(and only such affirmative vote as is required by law or any other provision of
this Certificate of Incorporation shall be applicable) if:
(a) the "Continuing Directors" (as defined in this Article Seven) of
the Corporation by a majority affirmative vote (i) have expressly approved
the acquisition of the outstanding shares of Voting Stock of the
Corporation that caused the Related Person involved in the Business
Combination to become a Related Person or (ii) have expressly approved the
Business Combination; or
(b) the Business Combination is solely between the Corporation and
another corporation, fifty percent or more of the voting stock of which is
owned by the Corporation and none of which is owned by the Related Person;
provided that if the Corporation is not the surviving entity, each
stockholder of the Corporation receives the same type of
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consideration in such transaction in proportion to the number of shares
owned and the provisions of Articles Five through Seven (inclusive) and
Article Eleven hereof are continued in effect or adopted by such surviving
corporation as part of its articles of incorporation or certificate of
incorporation, as the case may be, without any change; or
(c) the Business Combination is a merger or consolidation and the
cash or fair market value (as determined by the Continuing Directors) of
the property, securities or other consideration to be received per share
pursuant to the Business Combination by:
(i) holders of shares of the Corporation's common stock, $.02
par value per share and designated by the Board of Directors as
"Common Stock" pursuant to a Certificate filed September 30, 1982, is
not less than the highest of (1) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Related Person involved in the Business
Combination in acquiring any of its holdings of the Corporation's
common stock, $.02 par value per share and so designated as "Common
Stock", (2) an amount that bears the same percentage relationship to
the market price of the Corporation's common stock, $.02 par value per
share and so designated as "Common Stock", immediately prior to the
announcement of such Business Combination as the highest per share
price determined in clause (1) above bears to the market price of the
Corporation's common stock, $.02 par value per share and so designated
as "Common Stock", immediately prior to the commencement of the
acquisition of the Corporation's Voting Stock that caused such Related
Person to become a Related Person, or (3) if the Business Combination
is announced or effected on or prior to May 31, 1986, $12.63;
(ii) holders of shares of any other series of the corporation's
common stock is not less than the highest of (1) the highest per share
price (including any brokerage commissions, transfer taxes and
soliciting dealers fees) paid by the Related Person involved in the
Business Combination in acquiring any holdings of shares of such
series of the Corporation's common stock, (2) in the case of any
series which is convertible into shares of the Corporation's common
stock, $.02 par value per share and designated by the Board of
Directors as "Common Stock" pursuant to a Certificate filed September
30, 1982, a per share price determined by multiplying the per share
price applicable to shares of the Corporation's common stock, $.02 par
value per share and so designated as "Common Stock", pursuant to
subparagraph l(c)(i) of this Article Seven by an amount equal to the
number of shares of the Corporation's common stock, $.02 par value per
share and so designated as "Common Stock," into which one share of
such other series of the Corporation's common stock may be converted,
whether or not such conversion is subject to the occurrence of any
event, or (3) an amount that bears the same percentage relationship to
the market price of shares of such other series of the Corporation's
common stock immediately prior to the announcement of such Business
Combination as the highest per share price determined in clause (1)
above bears to the market price of shares of such other series of the
Corporation's common stock immediately prior to the
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<PAGE>
commencement of the acquisition of the Corporation's Voting Stock that
caused such Related Person to become a Related Person; and
(iii) holders of shares of any other class of Voting Stock is
not less than the highest of (1) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Related Person involved in the Business
Combination in acquiring any holdings of any such class of Voting
Stock, (2) if applicable, the highest preferential amount per share to
which the holders of shares of such event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation,
or (3) an amount that bears the same percentage relationship to the
market price of shares of any such class of Voting Stock immediately
prior to the announcement of such Business Combination as the highest
per share price determined in clause (1) above bears to the market
price of shares of any such class of Voting Stock immediately prior to
the commencement of the acquisition of the Corporation's Voting Stock
that caused such Related Person to become a Related Person.
Appropriate adjustments shall be made with respect to clauses (i), (ii) and
(iii) above for recapitalizations and for stock splits, stock dividends,
and like distributions.
2. For the purpose of this Article Seven:
(a) The term "Business Combination" shall mean:
(i) any merger or consolidation of the Corporation with or into a
Related Person;
(ii) any sale, lease, exchange, transfer or other disposition,
including, without limitation, a mortgage or any other security
device, of all or any Substantial Part (as defined in this Article
Seven) of the assets of the Corporation (including, without
limitation, any voting securities of a subsidiary) or of the assets of
a subsidiary of the Corporation, to a Related Person in one
transaction or a series of transactions;
(iii) any merger or consolidation of a Related Person with or
into the Corporation or a subsidiary of the Corporation;
(iv) any sale, lease, exchange, transfer or other disposition of
all or any Substantial Part of the assets of a Related Person to the
Corporation or a subsidiary of the Corporation;
(v) the issuance of any securities of the Corporation or a
subsidiary of the Corporation to a Related Person;
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(vi) the acquisition by the Corporation or a subsidiary of the
Corporation of any securities issued by a Related Person;
(vii) any reclassification of securities, recapitalization or
other transaction designed to decrease the number of holders of the
Corporations voting securities remaining, if there is a Related
Person;
(viii) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation proposed by or on behalf of the
Related Person; or
(ix) any agreement, contract or other arrangement providing for
any transaction herein described in clauses (i) to (viii) of this
definition of Business Combination.
(b) The term "Related Person" shall mean and include any individual,
corporation, partnership or other person or entity which, together with its
"Affiliates" and "Associates" (as those terms are defined as of September
24, 1984, in Rule 12b-2 of the General Rules and Regulations promulgated
under the Securities Exchange Act of 1984), in the aggregate, beneficially
owns twenty percent or more of the outstanding shares of Voting Stock of
the Corporation, and shall mean and include any Affiliate or Associate of
such Related Person.
(c) The term "Substantial Part" shall mean more than thirty percent of
the fair market value of the total assets of the Corporation in question at
the end of the Corporations most recent fiscal year ending prior to the
time said determination is made.
(d) The term "Continuing Director" shall mean a director who was a
member of the Board of Directors of the Corporation immediately prior to
the time the Related Person involved in a Business Combination became a
Related Person.
(e) For the purposes of subparagraph l(c) of this Article Seven, the
term "other consideration to be received" shall include, without
limitation, capital stock of the Corporation retained by its existing
public stockholders in the event of a Business Combination in which the
Corporation is the surviving corporation.
(f) For the purposes of this Article Seven, any corporation, person or
other entity shall be deemed to be the beneficial owner of any shares of
the Voting Stock of the Corporation:
(i) which such corporation, person or other entity beneficially
owns,
(ii) which such corporation, person or other entity has the right
(whether or not such right is immediately exercisable) to acquire
pursuant to any agreement, or upon exercise of conversion rights,
warrants or options, or otherwise,
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<PAGE>
(iii) which are beneficially owned, directly or indirectly
(including shares deemed owned through application of clause (ii)
above), (A) by any Affiliate or Associate of such corporation, person
or other entity, or (B) by any corporation, person or other entity
acting in concert with it, or
(iv) which are beneficially owned, directly or indirectly
(including shares deemed owned through application of clause (ii)
above), by any corporation, person or other entity with which it or
any Affiliate or Associate of it or any corporation, person or other
entity acting in concert with it or with any Affiliate or Associate of
it, has any agreement, arrangement or understanding with respect to
acquiring, holding, voting or disposing of the Voting Stock of the
Corporation.
For the purposes of this Article Seven, the outstanding shares of any
class of stock of the Corporation shall include shares deemed owned by a Related
Party through application but shall not include any other shares which may be
issuable pursuant to any agreement, or upon exercise of conversion rights,
warrants or options, or otherwise.
3. On the basis of information known to the Corporation, the
Continuing Directors, by a majority affirmative vote shall make all
determinations to be made under this Article Seven, including whether (i) a
corporation, person or other entity beneficially owns more than twenty percent
of the outstanding shares of the Voting Stock of the Corporation, or (ii) a
corporation, person or other entity has the right to acquire shares of the
Voting Stock of the Corporation, or (iii) a corporation, person or other entity
is an Affiliate or Associate of another, or (iv) a corporation, person or other
entity has any agreement, arrangement or understanding with respect to
acquiring, holding voting or disposing of the Voting Stock of the Corporation,
or (v) a corporation, person or other entity is acting in concert with any other
corporation, person or other entity, or (vi) a per share consideration proposed
to be paid meets the conditions of subparagraphs l(c)(i), (ii) and (iii) of this
Article Seven; and all such determinations shall be conclusive.
4. The affirmative vote required by this Article Seven is required
notwithstanding the fact that no vote may be required, or that some lesser
percentage may be specified by law or in any agreement with any national
securities exchange or otherwise.
5. The provisions set forth at this Article Seven may not be
repealed or amended in any respect, unless such action is approved by the
affirmative vote of the holders of that number of the then outstanding shares of
the Voting Stock of the Corporation, voting together as a single class, which
equals at least the sum of (i) the number of outstanding shares of Voting Stock
of the Corporation beneficially owned by a Related Person plus (ii) one-half of
the number of outstanding shares of Voting Stock of the Corporation held by
stockholders other than a Related Person.
ARTICLE EIGHT
The Board of Directors is authorized to make, alter or repeal the By-
laws of the Corporation. Election of directors need not be by written ballot.
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ARTICLE NINE
The Corporation shall indemnify any person against any liability
arising by reason of the fact that he is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another enterprise, to the fullest
extent allowed under the General Corporation Law of the State of Delaware.
ARTICLE TEN
In addition to any other requirements for amendments to the
Certificate of Incorporation, no amendment to the Certificate of Incorporation
shall amend, alter, change or repeal any of the provisions of Article Five,
Article Six, Article Nine, or this Article Ten, unless the amendment effecting
such amendment, alteration, change or repeal shall be approved by the
affirmative vote of the holders of that number of the then outstanding shares of
the "Voting Stock" (as such term is defined in Article Seven hereof) of the
Corporation, voting together as a single class (it being understood that for
purposes of this Article Ten, each share of Voting Stock shall have the number
of votes granted to it pursuant to Article Four of this Certificate of
Incorporation), which equals at least the sum of (i) the number of outstanding
shares of Voting Stock of the Corporation beneficially owned by a "Related
Person" (as such term is defined and determined in Article Seven hereof) plus
(ii) one-half of the number of outstanding shares of Voting Stock of the
Corporation held by stockholders other than a Related Person.
ARTICLE ELEVEN
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of 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 General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
an improper personal benefit. If the General Corporation Law of the State of
Delaware is amended after approval by the stockholders of this Article to
authorize corporate action further eliminating or limiting the personal
liability of directors then the liability of a director of the Corporation shall
be eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware as so amended. Any repeal or
modification of this Article by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
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0
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