<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 3, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From ____________ to __________
Commission File Number 1-9929
INSTEEL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0674867
-------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1373 BOGGS DRIVE, MOUNT AIRY, NORTH CAROLINA 27030
- -------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 336-786-2141
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 [ ]
The number of shares outstanding of the registrant's common stock as of
May 12, 1999 was 8,457,226.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INSTEEL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
APRIL 3, OCTOBER 3,
1999 1998
-------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 822 $ 422
Accounts receivable, net 27,368 28,687
Inventories 28,547 30,566
Prepaid expenses and other 1,780 2,023
-------- --------
Total current assets 58,517 61,698
Property, plant and equipment, net 79,497 80,350
Other assets 11,020 5,083
-------- --------
Total assets $149,034 $147,131
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,614 $ 28,758
Accrued expenses 7,489 6,013
Current portion of long-term debt 620 620
-------- --------
Total current liabilities 28,723 35,391
Long-term debt 40,296 35,743
Deferred income taxes 6,694 5,726
Other liabilities 1,012 1,011
Shareholders' equity:
Common stock 16,894 16,885
Additional paid-in capital 38,244 38,232
Retained earnings 17,171 14,143
-------- --------
Total shareholders' equity 72,309 69,260
-------- --------
Total liabilities and shareholders' equity $149,034 $147,131
======== ========
</TABLE>
<PAGE> 3
INSTEEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------- --------------------
APRIL 3, MARCH 28, APRIL 3, MARCH 28,
1999 1998 1999 1998
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Net sales $ 66,162 $ 62,996 $128,429 $ 122,915
Cost of sales 56,958 61,669 112,659 120,113
-------- --------- -------- ---------
Gross profit 9,204 1,327 15,770 2,802
Selling, general and administrative expense 4,565 3,338 8,119 6,418
-------- --------- -------- ---------
Operating income (loss) 4,639 (2,011) 7,651 (3,616)
Interest expense 655 1,049 1,248 2,017
Other expense (income) 82 (2,472) 138 (2,430)
-------- --------- -------- ---------
Earnings (loss) before income taxes and
extraordinary item 3,902 (588) 6,265 (3,203)
Provision (benefit) for income taxes 1,385 (209) 2,224 (1,137)
-------- --------- -------- ---------
Earnings (loss) before extraordinary item 2,517 (379) 4,041 (2,066)
Extraordinary item - loss on early extinguishment of debt -- (408) -- (408)
-------- --------- -------- ---------
Net earnings (loss) $ 2,517 $ (787) $ 4,041 $ (2,474)
======== ========= ======== =========
Weighted average shares outstanding (basic) 8,443 8,443 8,443 8,442
======== ========= ======== =========
Per share (basic and diluted):
Earnings (loss) before extraordinary item $ 0.30 $ (0.04) $ 0.48 $ (0.24)
Extraordinary item - loss on early extinguishment of debt -- (0.05) -- (0.05)
-------- --------- -------- ---------
Net earnings (loss) $ 0.30 $ (0.09) $ 0.48 $ (0.29)
======== ========= ======== =========
Dividends paid per share $ 0.06 $ 0.06 $ 0.12 $ 0.12
======== ========= ======== =========
</TABLE>
<PAGE> 4
INSTEEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------
APRIL 3, MARCH 28,
1999 1998
-------- ---------
<S> <C> <C>
CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES:
Net earnings (loss) $ 4,041 $ (2,474)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization 4,497 4,696
Gain on sale of assets (17) (5,177)
Extraordinary loss -- 408
Net changes in assets and liabilities:
Accounts receivable, net 1,379 (3,450)
Inventories 2,019 153
Accounts payable and accrued expenses (6,668) (578)
Other changes 1,638 (2,335)
-------- --------
Total adjustments 2,848 (6,283)
-------- --------
Net cash provided by (used for) continuing operating activities 6,889 (8,757)
-------- --------
CASH FLOWS FROM DISCONTINUED OPERATING ACTIVITIES:
Net cash provided by discontinued operating activities -- 1,869
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,664) (3,937)
Equity investments (3,250) --
Purchases of short-term investments (1,875) --
Proceeds from (issuance of) notes receivable (1,421) 12
Proceeds from sale of property, plant and equipment 159 8,966
-------- --------
Net cash provided by (used for) investing activities (10,051) 5,041
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 51,437 64,469
Principal payments on long-term debt (46,884) (61,635)
Proceeds from exercise of stock options 22 44
Cash dividends paid (1,013) (1,013)
-------- --------
Net cash provided by financing activities 3,562 1,865
-------- --------
Net increase in cash 400 18
Cash and cash equivalents at beginning of period 422 1,079
-------- --------
Cash and cash equivalents at end of period $ 822 $ 1,097
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 685 $ 2,288
Income taxes 1,060 523
</TABLE>
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The consolidated unaudited financial statements included herein have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. 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 such
rules and regulations. These unaudited consolidated financial statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the year ended October 3, 1998.
The unaudited consolidated financial statements included herein reflect
all adjustments (consisting only of normal recurring accruals) that the Company
considers necessary for a fair presentation of the financial position, results
of operations and cash flows for all periods presented. The results for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
(2) INVENTORIES
<TABLE>
<CAPTION>
APRIL 3, OCTOBER 3,
(Amounts in thousands) 1999 1998
------- ----------
<S> <C> <C>
Raw materials $14,734 $15,514
Supplies 2,614 2,242
Work in process 649 1,525
Finished goods 10,550 11,285
------- -------
Total inventories $28,547 $30,566
======= =======
</TABLE>
(3) EARNINGS PER SHARE
The reconciliation of basic and diluted earnings per share ("EPS") is
as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
APRIL 3, MARCH 28, APRIL 3, MARCH 28,
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998 1999 1998
-------- ---------- -------- --------
<S> <C> <C> <C> <C>
Earnings (loss) before extraordinary item $2,517 $ (379) $4,041 $(2,066)
Extraordinary loss -- (408) -- (408)
------ ------- ------ -------
Net earnings (loss) $2,517 $ (787) $4,041 $(2,474)
====== ======= ====== =======
Weighted average shares outstanding:
Weighted average shares outstanding (basic) 8,443 8,443 8,443 8,442
Dilutive effect of stock options 15 -- 2 --
------ ------- ------ -------
Weighted average shares outstanding (diluted) 8,458 8,443 8,445 8,442
====== ======= ====== =======
Earnings (loss) per share (basic and diluted):
Earnings (loss) before extraordinary item $ 0.30 $ (0.04) $ 0.48 $ (0.24)
Extraordinary loss -- (0.05) -- (0.05)
------ ------- ------ -------
Net earnings (loss) $ 0.30 $ (0.09) $ 0.48 $ (0.29)
====== ======= ====== =======
</TABLE>
Options to purchase 443,000 shares and 532,000 shares for the three
months ended April 3, 1999 and March 28, 1998, respectively, were antidilutive
and were not included in the diluted EPS computation.
(4) NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes
standards for the reporting and display of comprehensive income and its
components. The Company has adopted SFAS No. 130 as required in its interim
financial statements for the first quarter
<PAGE> 6
ended January 2, 1999. The adoption of this statement did not impact the
Company's consolidated financial statements as there were no differences between
net earnings and comprehensive income.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 131, which is based on the
management approach to segment reporting, establishes requirements to report
selected information about operating segments and related disclosures about
products and services, major customers and geographic areas. As the statement
only impacts financial statement disclosures, it will not effect the Company's
financial position or results of operations. Management is in the process of
evaluating the effects of this change on its reporting. The Company will adopt
SFAS No. 131 as required in its annual report for 1999.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. Management has not yet evaluated the effects of this change on
its financial position or results of operations. The Company will adopt SFAS No.
133 as required in its interim financial statements for the first quarter of
2000.
(5) INVESTMENT IN STRUCTURAL REINFORCEMENT PRODUCTS
In January 1999, the Company announced that it had acquired a 25%
interest in Structural Reinforcement Products, Inc. ("SRP"), a manufacturer of
welded wire fabric products for the construction industry. Under the terms of
the purchase agreement, the Company acquired 25% of the common stock in SRP for
$3.3 million. In addition, the Company provided SRP with $1.5 million of debt
financing and $1.9 million of collateral to support its existing credit facility
in order to assume a proportionate share of SRP's debt-related obligations. The
Company may be obligated to increase its investment for its equity position by
up to $1.0 million depending upon SRP's future financial performance.
The Company is accounting for its investment in SRP on an equity basis
and, accordingly, is including its share of SRP's earnings in its consolidated
earnings. For the second quarter, the Company recorded an equity loss of
$125,000 in other expense on its consolidated statement of earnings.
(6) SUBSEQUENT EVENT
Following the end of the second quarter, in April 1999, the Company
acquired the assets of the concrete reinforcing business of Northwestern Steel
and Wire Company ("Northwestern"). Under the terms of the purchase agreement,
the Company acquired the inventory, property, plant and equipment of
Northwestern's Hickman, Kentucky facility for approximately $8.3 million. In
addition, the companies entered into a three-year agreement under which
Northwestern will supply Insteel with a portion of its raw material
requirements.
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
STATEMENTS OF EARNINGS - SELECTED DATA
($ in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------------- -----------------------------------
APRIL 3, MARCH 28, APRIL 3, MARCH 28,
1999 CHANGE 1998 1999 CHANGE 1998
------- ------ --------- ---------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 66,162 5% $ 62,996 $ 128,429 4% $ 122,915
Gross profit 9,204 594% 1,327 15,770 463% 2,802
Percentage of net sales 13.9% 2.1% 12.3% 2.3%
Selling, general and administrative expense $ 4,565 37% $ 3,338 $ 8,119 27% $ 6,418
Percentage of net sales 6.9% 5.3% 6.3% 5.2%
Operating income (loss) $ 4,639 N/M $ (2,011) $ 7,651 N/M $ (3,616)
Percentage of net sales 7.0% (3.2)% 6.0% (2.9)%
Interest expense $ 655 (38)% $ 1,049 $ 1,248 (38)% $ 2,017
Percentage of net sales 1.0% 1.7% 1.0% 1.6%
Effective income tax rate 35.5% 35.5% 35.5% 35.5%
Earnings (loss) before extraordinary item $ 2,517 N/M $ (379) $ 4,041 N/M $ (2,066)
Percentage of net sales 3.8% (0.6)% 3.1% (1.7)%
</TABLE>
Net sales for the second quarter increased 5% to $66.2 million from
$63.0 million in the year-ago period. For the six-month period, sales increased
4% from the prior year. The sales increase was in spite of the sale of the
assets related to the Company's agricultural fencing product line in February
1998 which reduced current year sales relative to the prior year. On a
comparable basis, sales rose 9% for the quarter and 10% for the six-month
period. Sales of concrete reinforcing products increased sharply driven by
strong construction markets. Sales of tire bead wire and welding wire rose to
new highs during the quarter as the Company continued to make significant
progress towards obtaining customer approvals and furthering its market
penetration. Industrial wire sales declined from a year ago primarily due to a
significant increase in the proportion of wire consumed internally to
manufacture higher value products.
Gross margins for the second quarter increased to 13.9% of sales
compared with 2.1% in the prior year. For the six-month period, gross margins
rose to 12.3% of sales from 2.3% a year ago. The increase in margins was
primarily caused by higher shipment volumes and widening spreads between selling
values and raw material costs for most products together with increased
operating efficiencies and lower per-unit manufacturing costs. Higher sales of
tire bead wire and welding wire were also responsible for the margin
improvement. The Company is incurring substantially all of the manufacturing
costs related to these products while it operates at a low level of capacity
utilization. As a result, any increases in volume significantly impact the
Company's profitability.
Selling, general and administrative expense ("SG&A expense") rose 37%
for the second quarter, increasing to 6.9% of sales from 5.3% in the prior year.
For the six-month period, SG&A expense increased 27%, rising to 6.3% of sales
from 5.2% a year ago. The increase in SG&A expense was primarily caused by
higher incentive plan and profit-sharing plan expenses resulting from the
significant improvement in the Company's financial results.
Interest expense fell sharply for the second quarter and six-month
periods compared with a year ago due to lower borrowing levels on the Company's
revolving credit facility. The reduction in debt was primarily related to lower
inventories and the improvement in the Company's earnings relative to the
year-ago loss.
Second-quarter and six-month results for the prior year reflect a
pre-tax gain of $2.5 million in other income related to the February 1998 sale
of the assets related to the Company's agricultural fencing product line.
Second-quarter and six-month results for the prior year reflect an
extraordinary loss of $408,000 after income taxes, or approximately five cents
per share, related to the early extinguishment of debt.. In March 1998, the
Company retired its $10.0 million 8.25% senior secured notes due 2002, funding
the prepayment under its unsecured revolving credit facility,
<PAGE> 8
FINANCIAL CONDITION
SELECTED FINANCIAL DATA
($ in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------------
APRIL 3, MARCH 28,
1999 1998
----------- -----------
<S> <C> <C>
Net cash provided by (used for) continuing operating activities $ 6,889 $ (8,757)
Net cash provided by (used for) investing activities (10,051) 5,041
Net cash provided by financing activities 3,562 1,865
Total long-term debt 40,916 55,554
Percentage of total capital 36% 45%
Shareholders' equity $ 72,309 $ 67,879
Percentage of total capital 64% 55%
Total capital (total long-term debt + shareholders' equity) $ 113,225 $ 123,433
</TABLE>
Operating activities generated $6.9 million of cash for six-month
period while using $8.8 million a year ago. The year-to-year change was
primarily related to the significant improvement in the Company's financial
results. Cash generated from reductions in accounts receivables and inventories
was offset by a reduction in accounts payable and accrued expenses.
Investing activities used $10.1 million of cash for the six-month
period while providing $5.0 million a year ago. The year-to-year change was
principally due to the current year investments related to SRP together with the
prior year proceeds from the sale of agricultural fencing equipment. Capital
expenditures were primarily for recurring equipment maintenance and upgrades
together with the tire bead wire and welding wire expansion.
Financing activities provided $3.6 million of cash for the six-month
period compared with $1.9 million a year ago. The increase in financing
requirements primarily resulted from the investments relating to SRP.
The Company's debt to capital ratio decreased to 36% at April 3, 1999
compared with 45% at March 28, 1998. At April 3, 1999, approximately $18.2
million was available under the Company's revolving credit facility which
provided for maximum availability of $55.0 million. Following the end of the
second quarter, in April 1999, the facility was amended, increasing the maximum
availability to $60.0 million. The Company currently expects to fund its capital
expenditure requirements and liquidity needs from a combination of internally
generated funds, the revolving credit facility and additional long-term sources
of financing.
YEAR 2000
The "Year 2000" issue refers to older computer systems and other
equipment operating on software that uses only two digits to represent the year,
rather than four digits. As a result, these older systems and equipment may not
process information or otherwise function properly when using the year "2000",
since that year will be indistinguishable from the year "1900".
The Company has initiated a Year 2000 program to assess and develop
plans to resolve the issue both internally and externally. During 1996, the
Company began developing a plan to upgrade its business and operating systems to
Year 2000 compliant software. In addition to addressing the Year 2000 issue, the
systems upgrade is expected to enhance the performance of the Company's customer
service, manufacturing and administrative processes. Implementation of the
upgrade began in 1997 with the initial testing of the system on a limited basis
prior to converting all of the Company's locations. As of April 3, 1999, the
implementation had been completed at 50% of the Company's facilities with the
pace of the conversion expected to accelerate for the remaining locations. The
Company expects to complete the project by September 1999.
In order to identify potential Year 2000 problems at key suppliers and
customers, the Company initiated external surveys to assess their level of
compliance. As of April 3, 1999, the Company had received responses back from
approximately 75% of its critical suppliers indicating that they were either
already in compliance or planned on being in compliance by December 31, 1999.
The Company is in the process of following up with those suppliers who have not
responded that are considered to be critical to the Company's operations.
Alternative suppliers will be identified and evaluated by October 31, 1999 for
those vendors who have not indicated that they will be Year 2000 compliant by
December 31, 1999.
<PAGE> 9
The Company also is in the process of reviewing embedded software in
its equipment and facilities to identify potential Year 2000 issues. Equipment
manufacturers are being requested to certify their compliance and assist the
Company in developing solutions where they are currently non-compliant. As of
April 3, 1999, approximately 90% of the Company's critical manufacturing
equipment had been certified by vendors as being Year 2000 compliant. The
Company expects to complete the assessment and testing process by September
1999. Any critical equipment that is non-compliant will be upgraded or replaced
as necessary.
The Company's efforts to date have been concentrated on mitigating Year
2000 disturbances. As the Company proceeds forward with its assessment,
remediation and testing programs and evaluates the reasonable potential risks,
it will determine the appropriate contingency plans and resources. Any such
contingency actions and resources would be planned to be in place in sufficient
time for the Year 2000.
While reasonable actions have been taken to address the Year 2000
problem and will continue to be taken in the future to mitigate such disruption,
the magnitude of all Year 2000 disturbances cannot be predicted. Failure to
complete these programs as planned could result in the corruption of data,
hardware or equipment failures or the inability to manufacture products or
conduct other business activities, all of which could have a material impact on
the Company's business, consolidated financial position or results of
operations. Management believes that past or expected future capital
requirements related to Year 2000 compliance issues will not have a material
impact on its consolidated financial position or results of operations.
OUTLOOK
The Company's operating results are impacted by seasonal factors,
particularly in the first quarter of the fiscal year, which has historically
represented the lowest quarterly sales volume. Shipments typically increase in
the second quarter and reach a high point in the third or fourth quarter,
reflecting the buying patterns of the Company's customers.
Market conditions for hot-rolled wire rod, the Company's primary raw
material, continued to be favorable through the second quarter. Recent
expansions in domestic production capacity together with changes in the global
market environment significantly increased supplier competition. In December
1998, domestic wire rod producers initiated a Section 201 filing with the U.S.
International Trade Commission ("ITC") alleging that rising import levels had
resulted in serious injury. The domestic producers are pursuing trade relief on
a worldwide basis against all countries other than NAFTA nations through duties,
quotas or other measures intended to reduce import competition. In May 1999, the
ITC voted 3-3 in its initial injury determination with the investigation now
proceeding to the remedy phase. Domestic rod producers have recently announced
or implemented price increases in response to strong market conditions. The
future impact of these actions on the Company's financial results is difficult
to predict, depending upon the resolution of the trade filings together with the
Company's ability to recover any raw material price increases in its markets.
The Company's business strategy continues to be focused on (1) further
expansion into higher value products that offer the potential to generate
returns that exceed the Company's cost of capital and (2) improving the
financial performance of the Company's traditional businesses to acceptable
levels. During 1994 - 1997, the Company built two new production facilities and
reconfigured an existing operation in order to develop the manufacturing
capabilities required to enter the markets for PC strand, collated fasteners,
tire bead wire and welding wire. Sales of these new products are expected to
increase from $39.6 million in 1998 to $100.0 million when fully operational.
The Company expects that the recently enacted federal highway spending
legislation ("TEA-21") will have a favorable impact on the demand for its
concrete reinforcing products. As customer requirements rise, the Company
expects to gradually increase the operating volumes of its recently expanded PC
strand manufacturing facility to its full design capacity. During the second
quarter, sales of the Company's most recent product additions, tire bead wire
and welding wire, rose to new highs as the Company made significant progress
towards completing the qualification process and establishing itself as a
credible supplier. As the Company is currently incurring substantially all of
the anticipated operating costs required to support its new businesses, the
incremental impact of projected increases in sales is expected to have a
significant favorable impact on its financial performance.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that reflect
management's current assumptions and estimates of future performance and
economic conditions. Such statements are made in reliance upon the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are subject to various risks and uncertainties that
could cause actual results to differ materially from those projected, stated or
implied by the statements. Such risks and uncertainties include, but are not
limited to, general economic conditions in the markets in which the Company
operates;
<PAGE> 10
unanticipated changes in customer demand, order patterns and inventory levels;
fluctuations in the cost and availability of the Company's primary raw material,
hot rolled steel wire rod; the Company's ability to raise selling prices in
order to recover increases in wire rod prices; the impact of the resolution of
the Section 201 filing with the U.S International Trade Commission on the cost
and availability of wire rod; legal, environmental or regulatory developments
that significantly impact the Company's operating costs; increased demand for
the Company's concrete reinforcing products resulting from increased federal
funding levels provided for in the TEA-21 highway spending legislation; the
success of the Company's new product initiatives, including the PC strand,
collated fastener, tire bead wire and welding wire expansions; the inability of
the Company to expedite the qualification process with prospective customers for
tire bead wire and welding wire; and the failure of the Company to receive
regular and substantial orders for its new products.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On April 26, 1999, the Board of Directors of the Company declared a
dividend distribution of one Preferred Stock Purchase Right on each share of the
Company's Common Stock to shareholders of record on May 17, 1999. One right will
also be issued for each share of Common Stock issued after May 17, 1999. The
Company issued the rights pursuant to a Rights Agreement dated as of April 27,
1999 between the Company and First Union National Bank, as Rights Agent. The
issuance of the rights did not constitute a sale of securities for the purpose
of Section 5 of the Securities Act of 1933. The rights and the Rights Agreement
are described in the Company's Current Report on Form 8-K dated April 26, 1999,
which is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its 1999 Annual Meeting of Shareholders on February 9,
1999. Three directors were elected to serve for three-year terms ending in 2002.
Voting results were as follows:
<TABLE>
<CAPTION>
VOTES
--------------------------------
FOR WITHHELD
------------ ----------
<S> <C> <C>
W. Allen Rogers II 7,898,020 56,694
Gary L. Pechota 7,896,617 58,097
William J. Shields 7,901,254 53,460
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
<TABLE>
<CAPTION>
3 - ARTICLES OF INCORPORATION AND BYLAWS
------------------------------------
<S> <C> <C>
3.1 Articles of amendment to the restated articles of incorporation of the registrant.
3.2 Bylaws of the registrant (as last amended April 26, 1999)
27 - Financial Data Schedule (for SEC use only)
b. Reports on Form 8-K
</TABLE>
No reports on Form 8-K were filed by the Registrant during the
quarter ended April 3, 1999.
<PAGE> 11
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.
INSTEEL INDUSTRIES, INC.
------------------------
Registrant
Date: May 12, 1999 By /s/ H.O. Woltz III
------------------------------
H.O. Woltz III
President and Chief Executive Officer
Date: May 12, 1999 By /s/ Michael C. Gazmarian
------------------------------
Michael C. Gazmarian
Chief Financial Officer and Treasurer
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF AMENDMENT
OF INSTEEL INDUSTRIES, INC.
Insteel Industries, Inc., a North Carolina corporation (the "Corporation"),
hereby submits these Articles of Amendment for the purpose of amending its
Restated Charter to determine the preferences, limitations, and relative
rights of a new series of No Par Preferred Stock:
(1) The name of the Corporation is Insteel Industries, Inc.
(2) Pursuant to authority granted by Article IV of the Restated Charter
of the Corporation and in accordance with the provisions of Section 55-6-02 of
the North Carolina Business Corporation Act, the Board of Directors of the
Corporation duly adopted on April 26, 1999, the following amendment to the
Restated Charter of the Corporation:
Article IV of the Corporation's Restated Charter is hereby amended by
adding the following to the end of Article IV:
Series A Junior Participating Preferred Stock. There is hereby created a
new series of No Par Preferred Stock designated "Series A Junior Participating
Preferred Stock." The number of shares constituting such series initially shall
be nine hundred thousand (900,000). Such number of shares may be increased or
decreased by the Board of Directors; provided, however, that no decrease shall
reduce the number of shares of Series A Junior Participating Preferred Stock to
a number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights
or warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Series A Junior Participating Preferred Stock. The
Series A Junior Participating Preferred Stock shall have the preferences,
limitations and relative rights set forth below:
(a) Dividends and Distributions:
(i) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock ranking prior and
superior to the shares of Series A Junior Participating Preferred
Stock with respect to dividends, the holders of shares of
Series A Junior Participating Preferred Stock, in preference to
the holders of Common Stock and of any other junior stock,
shall be entitled to receive, when, as and if declared by the
Board of
1
<PAGE> 2
Directors out of funds legally available therefor, quarterly dividends
payable in cash on the fifteenth day of January, April, July and
October 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 A Junior Participating Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of
(x) $1.00 or (y) subject to the provision for adjustment hereinafter
set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a
dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock.
In the event the Corporation shall on or at any time after April 26,
1999 (the "Rights Declaration Date") (A) declare any dividend on
Common Stock payable in shares of Common Stock, (B) subdivide the
outstanding Common Stock, or (C) combine or consolidate the
outstanding shares of Common Stock into a smaller number of shares,
then in each such case the amount to which holders of shares of Series
A Junior Participating Preferred Stock were entitled immediately prior
to such event under clause (y) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
(ii) The Corporation shall declare a dividend or
distribution on the Series A Junior Participating Preferred Stock as
provided in subparagraph (i) above immediately after it declares a
dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, subject to the
requirements of applicable law and the Restated Charter, 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
$1.00 per share on the Series A Junior Participating Preferred Stock
shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(iii) Dividends shall begin to accrue and be
cumulative on outstanding shares of Series A Junior Participating
Preferred Stock from the
2
<PAGE> 3
Quarterly Dividend Payment Date next preceding the date of issue of
such shares of Series A Junior Participating 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 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 A Junior Participating 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 A Junior Participating
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 A Junior
Participating Preferred Stock entitled to receive payment of a
dividend distribution declared thereon, which record date shall be
no more than 60 days prior to the date fixed for the payment
thereof.
(b) Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(i) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Junior Participating Preferred Stock
shall entitle the holder thereof to 100 votes on all matters
submitted to a vote of the shareholders of the Corporation. In the
event the Corporation shall at any time on or after the Rights
Declaration Date (A) declare any dividend on Common Stock payable in
shares of Common Stock, (B) subdivide the outstanding Common Stock,
or (C) combine or consolidate the outstanding Common Stock into a
smaller number of shares, then in each such case the number of votes
per share to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a
fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(ii) Except as otherwise provided herein, in any other
amendment to the Restated Charter of the Corporation or by law, the
holders of shares of Series A Junior Participating Preferred Stock and
the holders of shares of
3
<PAGE> 4
Common Stock shall vote together as one group on all matters submitted
to a vote of shareholders of the Corporation.
(iii) Except as set forth herein, holders of Series A Junior
Participating 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.
(c) Certain Restrictions.
(i) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred
Stock as provided in Paragraph (a) are in arrears, thereafter and
until all accrued and unpaid dividends and distributions, whether or
not declared, on shares of Series A Junior Participating Preferred
Stock outstanding shall have been paid in full, the Corporation shall
not:
(A) declare or pay dividends on, redeem or purchase or
otherwise acquire for consideration, or make any other
distributions on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock;
(B) declare or pay dividends on, redeem or purchase or
otherwise acquire for consideration, 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 A Junior Participating Preferred Stock, provided
that there may be declared and paid ratably dividends on the
Series A Junior Participating 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; and, provided further, that the Corporation may at
any time redeem or purchase or otherwise acquire shares of any
such parity stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Junior
Participating Preferred Stock; or
(C) purchase or otherwise acquire for consideration any
shares of Series A Junior Participating Preferred Stock, or
redeem or purchase or otherwise acquire any shares of stock
ranking on a parity
4
<PAGE> 5
with the Series A Junior Participating 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 shares 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.
(ii) The Corporation shall not permit any subsidiary of the
Corporation (for the account of such subsidiary) to purchase or
otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under subparagraph (i) of
this Paragraph (c), purchase or otherwise acquire such shares at such
time and in such manner.
(iii) No dividend shall be declared and paid, or set apart for
payment on, any share of the Series A Junior Participating Preferred
Stock or any share of any other series of Preferred Stock or any share
of any class of stock, or series thereof, ranking on a parity with the
Series A Junior Participating Preferred Stock as to dividends, for any
dividend period unless at the same time a like proportionate dividend
for the same dividend period, ratably in proportion to the respective
dividends applicable thereto, shall be declared and paid, or set apart
for payment on, all shares of the Series A Junior Participating
Preferred Stock and all shares of all other series of Preferred Stock
and all shares of any class, or series thereof, ranking on a parity
with the Series A Junior Participating Preferred Stock as to
dividends, then issued and outstanding and entitled to receive
dividends.
(d) Reacquired Shares. Any shares of Series A Junior Participating
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 No Par Preferred Stock and may be
reissued as part of a new series of No Par Preferred Stock, subject to the
conditions and restrictions on issuance set forth herein, in the Restated
Charter of the Corporation (including Articles of Amendment duly adopted in
accordance with the North Carolina Business Corporation Act) creating a
series of No Par Preferred Stock or any similar stock, or as otherwise
required by law.
5
<PAGE> 6
(e) Liquidation, Dissolution or Winding Up.
(i) Upon any liquidation (voluntary or otherwise), dissolution
or winding up of the Corporation, no distribution shall be made to
the holders of shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A
Junior Participating Preferred Stock unless, prior thereto, the
holders of shares of Series A Junior Participating Preferred Stock
shall have received $100 per share, plus an amount equal to all
accrued and unpaid dividends and distributions thereon, whether or
not declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series
A Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series A Junior Participating Preferred
Stock unless, prior thereto, the holders of shares of Common Stock
shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (A) the Series A
Liquidation Preference by (B) 100 (as appropriately adjusted as set
forth in subparagraph (iii) below to reflect such events as stock
splits, stock dividends and recapitalizations with respect to the
Common Stock) (such number in clause (B), the "Adjustment Number").
Following the payment of the full amount of the Series A Liquidation
Preference and the Common Adjustment in respect of all outstanding
shares of Series A Junior Participating Preferred Stock and Common
Stock, respectively, holders of Series A Junior Participating
Preferred Stock and holders of shares of Common Stock shall receive
their ratable and proportionate share of the remaining assets to be
distributed in the ratio of the Adjustment Number to one (1) with
respect to such Series A Junior Participating Preferred Stock and
Common Stock, on a per share basis, respectively.
(ii) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A
Liquidation Preference and the liquidation preferences of all other
series of No Par Preferred Stock, if any, which rank on a parity with
the Series A Junior Participating Preferred Stock, then such
remaining assets shall be distributed ratably to the holders of the
Series A Junior Participating Preferred Stock and such parity shares
in proportion to their respective liquidation preferences. In the
event that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets
shall be distributed ratably to the holders of Common Stock.
(iii) In the event the Corporation shall at any time on or after
the Rights Declaration Date (A) declare any dividend on Common Stock
payable
6
<PAGE> 7
in shares of Common Stock, (B) subdivide the outstanding Common Stock,
or (C) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such
Adjustment Number by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(iv) Neither the sale, lease or conveyance of all or
substantially all of the property or business of the Corporation, nor
the merger, consolidation or statutory share exchange of the
Corporation into or with any other corporation or the merger,
consolidation or statutory share exchange of any other corporation
into or with the Corporation, shall be deemed to be a liquidation,
dissolution or winding-up, voluntary or involuntary, for the purposes
of this Paragraph (e).
(f) Statutory Share Exchange, Merger Consolidation, etc. In case the
Corporation shall enter into any statutory share exchange, merger,
consolidation, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case the shares of Series
A Junior Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 100 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as
the case may be, into which or for which each share of Common Stock is
changed or exchanged. In the event the Corporation shall at any time on or
after the Rights Declaration Date (A) declare any dividend on Common Stock
payable in shares of Common Stock, (B) subdivide the outstanding Common
Stock, or (C) combine or consolidate the outstanding Common Stock into a
smaller number of shares, then in each such case the amount set forth in
the preceding sentence with respect to the exchange or change of shares of
Series A Junior Participating Preferred Stock shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(g) No Redemption. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
(h) Ranking. The Series A Junior Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as to
the payment
7
<PAGE> 8
of dividends and the distribution of assets, unless the terms of any such
series shall provide otherwise.
(i) Amendment. The Restated Charter of the Corporation shall not be
further amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Junior Participating
Preferred Stock so as to affect them adversely, except in accordance with
the provisions of Section 55-10-04 of the North Carolina Business
Corporation Act, or as otherwise permitted by law.
(j) Fractional Shares. Series A Junior Participating Preferred Stock
may be issued in fractions of a share (which shall be integral multiples of
one one-hundredth of a share of Series A Junior Participating Preferred
Stock), which shall entitle the holder, in proportion to such holder's
fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Junior Participating Preferred Stock.
This 26th day of April, 1999.
INSTEEL INDUSTRIES, INC.
By: /s/ Howard O. Woltz, III
-----------------------------------------
Name: Howard O. Woltz, III
Title: President
8
<PAGE> 1
Exhibit 3.2
BYLAWS
OF
INSTEEL INDUSTRIES, INC.
EFFECTIVE AUGUST 21, 1990
AS LAST AMENDED APRIL 26, 1999
<PAGE> 2
TABLE OF CONTENTS TO BYLAWS
OF
INSTEEL INDUSTRIES, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1 -- OFFICES........................................................... 1
Section 1. Principal and Registered Office................................... 1
Section 2. Other Offices..................................................... 1
ARTICLE 2 -- MEETINGS OF SHAREHOLDERS.......................................... 1
Section 1. Place of Meeting.................................................. 1
Section 2. Annual Meeting.................................................... 1
Section 3. Substitute Annual Meeting......................................... 1
Section 4. Special Meetings.................................................. 1
Section 5. Notice of Meetings................................................ 1
Section 6. Quorum............................................................ 2
Section 7. Shareholders' List................................................ 2
Section 8. Voting of Shares.................................................. 2
Section 9. Inspectors of Election............................................ 3
Section 10. Action Without Meeting............................................ 3
Section 11. Action to Be Taken at Annual or Special Meetings of Shareholders*. 4
ARTICLE 3 -- BOARD OF DIRECTORS................................................ 5
Section 1. General Powers.................................................... 5
Section 2. Number, Term and Qualification.................................... 5
Section 3. Removal........................................................... 6
Section 4. Vacancies......................................................... 6
Section 5. Compensation...................................................... 6
ARTICLE 4 -- MEETINGS OF DIRECTORS............................................. 6
Section 1. Annual and Regular Meetings....................................... 6
Section 2. Special Meetings.................................................. 7
Section 3. Notice of Meetings................................................ 7
Section 4. Quorum............................................................ 7
Section 5. Manner of Acting.................................................. 7
Section 6. Presumption of Assent............................................. 7
Section 7. Action Without Meeting............................................ 7
Section 8. Meeting by Communications Device.................................. 7
ARTICLE 5 -- COMMITTEES........................................................ 8
Section 1. Election and Powers............................................... 8
</TABLE>
- --------------
* As adopted by the Board of Directors effective April 26, 1999.
i
<PAGE> 3
Section 2. Removal; Vacancies........................................... 8
Section 3. Meetings..................................................... 9
Section 4. Minutes...................................................... 9
ARTICLE 6 -- OFFICERS...................................................... 9
Section 1. Titles....................................................... 9
Section 2. Election; Appointment........................................ 9
Section 3. Removal...................................................... 9
Section 4. Vacancies.................................................... 9
Section 5. Compensation................................................. 9
Section 6. Chairman and Vice Chairman of the Board of Directors......... 9
Section 7. Chief Executive Officer......................................10
Section 8. President....................................................10
Section 9. Vice President...............................................10
Section 10. Secretary....................................................10
Section 11. Assistant Secretaries........................................11
Section 12. Treasurer....................................................11
Section 13. Assistant Treasurers.........................................11
Section 14. Controller and Assistant Controllers.........................11
Section 15. Voting Upon Stocks...........................................11
ARTICLE 7 -- CAPITAL STOCK.................................................12
Section 1. Certificates.................................................12
Section 2. Transfer of Shares...........................................12
Section 3. Transfer Agent and Registrar.................................12
Section 4. Regulations..................................................12
Section 5. Fixing Record Date...........................................12
Section 6. Lost Certificates............................................13
ARTICLE 8 -- INDEMNIFICATION OF DIRECTORS AND OFFICERS.....................13
Section 1. Indemnification Provisions...................................13
Section 2. Definitions..................................................13
Section 3. Settlements..................................................14
Section 4. Litigation Expense Advances..................................14
Section 5. Approval of Indemnification Payments.........................14
Section 6. Suits by Claimant............................................14
Section 7. Consideration: Personal Representatives and Other Remedies...15
Section 8. Scope of Indemnification Rights..............................15
ARTICLE 9 -- GENERAL PROVISIONS............................................15
Section 1. Dividends and Other Distributions............................15
Section 2. Seal.........................................................15
Section 3. Waiver of Notice.............................................15
Section 4. Checks.......................................................15
Section 5. Fiscal Year..................................................15
Section 6. Amendments...................................................15
Section 7. Applicability of Antitakeover Statutes.......................16
ii
<PAGE> 4
BYLAWS
OF
INSTEEL INDUSTRIES, INC.
ARTICLE 1 -- OFFICES
Section 1. Principal and Registered Office. The principal office of
the corporation shall be located at 1373 Boggs Drive, Mount Airy, North
Carolina, which shall also be the registered office of the corporation.
Section 2. Other Offices. The corporation may have offices at such
other places, either within or without the State of North Carolina, as the
board of directors may from time to time determine.
ARTICLE 2 -- MEETINGS OF SHAREHOLDERS
Section 1. Place of Meeting. Meetings of shareholders shall be held
at the principal office of the corporation, or at such other place, either
within or without the State of North Carolina, as shall be designated in the
notice of the meeting.
Section 2. Annual Meeting. The annual meeting of shareholders shall
be held at such time and on such day (except a Saturday, Sunday or legal
holiday) during the month of February in each year as the directors shall from
time to time determine for the purpose of electing directors of the corporation
and the transaction of such other business as may be properly brought before
the meeting.
Section 3. Substitute Annual Meeting. If the annual meeting is not
held on the day designated by these bylaws, a substitute annual meeting may be
called in accordance with Section 4 of this Article. A meeting so called shall
be designated and treated for all purposes as the annual meeting.
Section 4. Special Meetings. Special meetings of the shareholders
may be called at any time by the president or the board of directors.
Section 5. Notice of Meetings. At least 10 and no more than 60 days
prior to any annual or special meeting of shareholders, the corporation shall
notify shareholders of the date, time and place of the meeting and, in the case
of a special or substitute annual meeting or where otherwise required by law,
shall briefly describe the purpose or purposes of the meeting. Only business
within the purpose or purposes described in the notice may be taken at a
special meeting. Unless otherwise required by the articles of incorporation or
by law (for example, in the event of a meeting to consider the adoption of a
plan of merger or share exchange, a sale of assets other than in the
<PAGE> 5
ordinary course of business or a voluntary dissolution), the corporation shall
be required to give notice only to shareholders entitled to vote at the
meeting. If an annual or special shareholders' meeting is adjourned to a
different date, time or place, notice thereof need not be given if the new
date, time or place is announced at the meeting before adjournment. If a new
record date for the adjourned meeting is fixed pursuant to Article 7, Section
5 hereof, notice of the adjourned meeting shall be given to persons who are
shareholders as of the new record date. It shall be the primary responsibility
of the secretary to give the notice, but notice may be given by or at the
direction of the president or other person or persons calling the meeting. If
mailed, such notice shall be deemed to be effective when deposited in the
United States mail with postage thereon prepaid, correctly addressed to the
shareholder's address shown in the corporation's current record of
shareholders.
Section 6 Quorum. A majority of the votes entitled to be cast by
a voting group on a matter, represented in person or by proxy at a meeting of
shareholders, shall constitute a quorum for that voting group for any action
on that matter, unless quorum requirements are otherwise fixed by a court of
competent jurisdiction acting pursuant to Section 55-7-03 of the General
Statutes of North Carolina. Once a share is represented for any purpose at a
meeting, it is deemed present for quorum purposes for the remainder of the
meeting and any adjournment thereof, unless a new record date is or must be
set for the adjournment. Action may be taken by a voting group at any meeting
at which a quorum of that voting group is represented, regardless of whether
action is taken at that meeting by any other voting group. In the absence of a
quorum at the opening of any meeting of shareholders, such meeting may be
adjourned from time to time by a vote of the majority of the shares voting on
the motion to adjourn.
Section 7. Shareholders' List. After a record date is fixed for a
meeting, the secretary of the corporation shall prepare an alphabetical list
of the names of all its shareholders who are entitled to notice of the
shareholders' meeting. Such list shall be arranged by voting group (and within
each voting group by class or series of shares) and shall show the address of
and number of shares held by each shareholder. The shareholders' list shall be
made available for inspection by any shareholder beginning two business days
after notice of the meeting is given for which the list was prepared and
continuing through the meeting, at the corporation's principal office or at
such other place identified in the meeting notice in the city where the
meeting will be held. The corporation shall make the shareholders' list
available at the meeting, and any shareholder or his agent or attorney is
entitled to inspect the list at any time during the meeting of any
adjournment.
Section 8. Voting of Shares. Except as otherwise provided by the
articles of incorporation or by law, each outstanding share of voting capital
stock of the corporation shall be entitled to one vote on each matter
submitted to a vote at a meeting of the shareholders. Unless otherwise
provided in the articles of incorporation, cumulative voting for directors
shall not be allowed. Action on a matter by a voting group for which a quorum
is present is approved if the votes cast within the voting group favoring the
action exceed the voted cast opposing the action, unless the vote of a greater
2
<PAGE> 6
number is required by law or by the articles of incorporation. Voting on all
matters shall be by voice vote or by a show of hands, unless the holders of
one-tenth of the shares represented at the meeting shall demand a ballot vote
on a particular matter. Absent special circumstances, the shares of the
corporation are not entitled to vote if they are owned, directly or indirectly,
by a second corporation, domestic or foreign, and the corporation owns,
directly or indirectly, by a second corporation, domestic or foreign, and the
corporation owns, directly or indirectly, a majority of the shares entitled to
vote for directors of the second corporation, except that this provision shall
not limit the power of the corporation to vote shares held by it in a fiduciary
capacity.
Section 9. Inspectors of Election
(a) Appointment of inspectors of election. In advance of any meeting
of shareholders, the board of directors may appoint any persons, other than
nominees for office, as inspectors of election to act at such meeting or
any adjournment thereof. If inspectors of election are not so appointed,
the chairman of any such meeting may, and on the request of any shareholder
or his proxy shall, appoint inspectors of election at the meeting. The
number of inspectors shall be either one or three. If appointed at a
meeting on the request of one or more shareholders or proxies, the majority
of shares present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment by the
board of directors in advance of the meeting, or at the meeting by the
person acting as chairman.
(b) Duties of inspectors. The inspectors of election shall determine
the number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, the authenticity,
validity, and effect of proxies, receive votes, ballots, or consents, hear
and determine all challenges and questions in any way arising in connection
with the right to vote, count and tabulate all votes or consents, determine
the result, and do such acts as may be proper to conduct the election or
vote with fairness to all shareholders. The inspectors of election shall
perform their duties impartially, in good faith, to the best of their
ability and as expeditiously as is practical.
(c) Vote of inspectors. If there are three inspectors of election the
decision, act, or certificate of a majority is effective in all respects as
the decision, act, or certificate of all.
(d) Report of inspectors. On request of the chairman of the meeting
or of any shareholder or his proxy the inspectors shall make a report in
writing of any challenge or question or matter determined by them and
execute a certificate of any fact found by them. Any report or certificate
made by them is prima facie evidence of the facts stated herein.
Section 10. Action Without Meeting. Any action which the shareholders
could take at a meeting may be taken without a meeting if one or more
3
<PAGE> 7
written consents, setting forth the action taken, shall be signed, before or
after such action, by all the shareholders who would be entitled to vote upon
the action at a meeting. The consent shall be delivered to the corporation for
inclusion in the minutes or filing with the corporate records. The corporation
must give its nonvoting shareholders written notice of the proposed action at
least 10 days before the action is taken, which notice must contain or be
accompanies by the same material that would have been required by law to be
sent to nonvoting shareholders in a notice of meeting at which the proposed
action would have been submitted to the shareholders for action.
Section 11. Action to Be Taken at Annual or Special Meetings of
Shareholders. Business to be conducted at meetings of shareholders shall be
limited to (a) business properly specified in the notice of meeting given as
provided in Article 2, Section 5 hereof; (b) business otherwise properly brought
before the meeting by or at the direction of the board of directors; and (c)
business (which may include nominations for director if in accordance with the
procedures established herein) otherwise properly brought before the meeting by
a holder of voting securities entitled to vote at the meeting in compliance with
the procedures set forth in this Section 11. In addition to any other applicable
requirements, including, but not limited to, requirements established pursuant
to Section 14(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations adopted thereunder, for business
to be brought before an annual or special meeting by a holder of voting
securities pursuant to (c) above, the holder must have given timely notice in
writing to the secretary of the corporation as provided in this Section 11. In
the case of an annual meeting, to be timely, notice must be delivered to, or
mailed to and received by, the secretary of the corporation at the principal
offices of the corporation not less than 90 days prior to the anniversary of the
mailing date for the prior year's annual meeting proxy statement. In the case of
a special meeting, to be timely, notice must be delivered to, or mailed to and
received by, the secretary of the corporation at the principal offices of the
corporation not less than 90 days prior to the date of the special meeting;
provided, however, that if less than 100 days' notice or prior public disclosure
of the meeting is given or made by the corporation, notice will be timely if
received not later that the close of business on the tenth day following the day
on which such notice or public disclosure of the meeting was given or made.
In addition to any requirements imposed by applicable law (including,
but not limited to, Section 14(a) of the Exchange Act and the rules and
regulations adopted thereunder), notice of the business to be brought before an
annual or special meeting pursuant to (c) above shall set forth the following
as to each matter the holder of voting securities proposes to bring before the
meeting: (i) a brief description of the business desired to be brought before
the meeting and the reasons for bringing such business before the meeting; (ii)
the name and address, as they appear on the corporation's books, of each holder
of voting securities proposing such business; (iii) the classes and number of
shares or other securities of the corporation that are owned of record or
beneficially by such holder; and (iv) any material interest of such holder in
such business other than his interest as a shareholder of the corporation.
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Nominations for election to the board of directors may be made by a
holder of securities entitled to vote for the election of directors if written
notice of the nomination of such person(s) shall have been delivered to the
secretary of the corporation in accordance with the provisions of this Article
2, Section 11 and such notice shall set forth the information required herein
with respect to matters to be brought by a shareholder, as well as (i) the name
and address of the person(s) to be nominated by the shareholder; (ii) a
representation that the shareholder intends to appear in person or by proxy at
the meeting to nominate the person(s) specified in the notice; (iii) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person(s) (naming such person(s)) pursuant to which
the nomination(s) are to be made by the shareholder; (iv) such other information
regarding each such nominee as would be required to be included in a proxy
statement filed pursuant to Section 14(a) of the Exchange Act and the rules and
regulations adopted thereunder if the nominee had been nominated by the board of
directors or a committee thereof; and (v) the written consent of each nominee to
serve as a director of the corporation if so elected.
Notwithstanding anything in these bylaws to the contrary, no business
shall be conducted at an annual or special meeting except in accordance with the
provisions set forth in this Section 11. If the chairman of the meeting
determines that any business was not properly submitted, the chairman shall so
declare to the meeting, and to the extent permitted by law, any such business
not properly submitted shall not be transacted at the meeting.
(Article 2, Section 11 was adopted by the Board of Directors effective
April 26, 1999.)
ARTICLE 3 - BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the
corporation shall be managed under the direction of the board of directors
except as otherwise provided by the articles of incorporation or by a valid
shareholders' agreement.
Section 2. Number, Term and Qualification. The number of directors
constituting the board of directors shall be not less than nine or more than
fifteen as may be fixed by resolution duly adopted by the shareholders or by the
board of directors prior to the annual meeting at which such directors are to be
elected, but, in the absence of such resolution, the number of directors elected
at the meeting shall constitute the number of directors of the corporation until
the next annual meeting of shareholders. The directors shall be divided into
three classes, as nearly equal in number as may be, to serve in the first
instance for terms of one, two and three years, respectively, and until their
successors shall be elected and shall qualify, and thereafter the successors in
each class of directors shall be elected to serve for terms of three years and
until their successors shall be elected and shall qualify. In the event of any
increase or decrease in the number of directors, the additional or eliminated
directorships shall be so classified or chosen that all classes of directors
shall remain or become equal in number, as nearly as may be. In
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the event of the death, resignation, retirement, removal or disqualification of
a director during his elected term of office, his successor shall be elected to
serve only until the expiration of the term of his predecessor. Directors need
not be residents of the State of North Carolina or shareholders of the
corporation unless the articles of incorporation so provide. This Section 2,
although adopted by a vote of the corporation's shareholders, may be amended or
repealed by the corporation's Board of Directors without a shareholder vote.
Section 3. Removal. Directors may be removed from office with or
without cause (unless the articles of incorporation provide that directors may
be removed only for cause) provided the notice of the shareholders' meeting at
which such action is to be taken states that a purpose of the meeting is
removal of the director and the number of votes cast to remove the director
exceeds the number of votes cast not to remove him.
Section 4. Vacancies. Except as otherwise provided in the articles
of incorporation, a vacancy occurring in the board of directors, including,
without limitation, a vacancy resulting from an increase in the number of
directors or from the failure by the shareholders to elect the full authorized
number of directors, may be filled by a majority of the remaining directors or
by the sole director remaining in office. The shareholders may elect a director
at any time to fill a vacancy not filled by the directors. A director elected
to fill a vacancy shall be elected for the unexpired term of his predecessor in
office.
Section 5. Compensation. The directors shall not receive
compensation for their services as such, except that by resolution of the board
of directors, the directors may be paid fees, which may include but are not
restricted to fees for attendance at meetings of the board or of a committee,
and they may be reimbursed for expenses of attendance. Any director may serve
the corporation in any other capacity and receive compensation therefor.
ARTICLE 4 -- MEETINGS OF DIRECTORS
Section 1. Annual and Regular Meetings. The annual meeting of the
board of directors shall be held immediately following the annual meeting of
the shareholders. The board of directors may by resolution provide for the
holding of regular meetings of the board on specified dates and at specified
times. Notice of regular meetings held at the principal office of the
corporation and at the usual scheduled time shall not be required. If any date
for which a regular meeting is scheduled shall be a legal holiday, the meeting
shall be held on a date designated in the notice of the meeting, if any,
during either the same week in which the regularly scheduled date falls or
during the preceding or following week. Regular meetings of the board shall be
held at the principal office of the corporation or at such other place as may
be designated in the notice of the meeting.
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Section 2. Special Meetings. Special meetings of the board of
directors may be called by or at the request of the chairman of the board, the
president or any two directors. Such meetings may be held at the time and place
designated in the notice of the meeting.
Section 3. Notice of Meetings. Unless the articles of incorporation
provide otherwise, the annual and regular meetings of the board of directors
may be held without notice of the date, time, place or purpose of the meeting.
The secretary or other person or persons calling a special meeting shall give
notice by any usual means of communication to be sent at least two days before
the meeting if notice is sent by means of telephone, telecopy or personal
delivery and at least five days before the meeting if notice is sent by mail. A
director's attendance at, or participation in, a meeting for which notice is
required shall constitute a waiver of notice, unless the director at the
beginning of the meeting (or promptly upon arrival) objects to holding the
meeting or transacting business at the meeting and does not thereafter vote
for or assent to action taken at the meeting.
Section 4. Quorum. Except as otherwise provided in the articles of
incorporation, a majority of the directors in office shall constitute a quorum
for the transaction of business at a meeting of the board of directors.
Section 5. Manner of Acting. Except as otherwise provided in the
articles of incorporation, the act of the majority of the directors present at
a meeting at which a quorum is present shall be the act of the board of
directors.
Section 6. Presumption of Assent. A director of the corporation who
is present at a meeting of the board of directors at which action on any
corporate matter is taken is deemed to have assented to the action taken unless
he objects at the beginning of the meeting (or promptly upon arrival) to
holding, or transacting business at, the meeting, or unless his dissent or
abstention is entered in the minutes of the meeting or unless he shall file
written notice of his dissent or abstention to such action with the presiding
office of the meeting before its adjournment or with the corporation
immediately after adjournment of the meeting. The right of dissent or
abstention shall not apply to a director who voted in favor of such action.
Section 7. Action Without Meeting. Unless otherwise provided in the
articles of incorporation, action required or permitted to be taken at a
meeting of the board of directors may be taken without a meeting if the action
is taken by all members of the board. The action must be evidenced by one or
more written consents signed by each director before or after such action,
describing the action taken, and included in the minutes or filed with the
corporate records. Action taken without a meeting is effective when the last
director signs the consent, unless the consent specifies a different effective
date.
Section 8. Meeting by Communications Device. Unless otherwise
provided in the articles of incorporation, the board of directors may permit
any or all
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directors to participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.
ARTICLE 5 -- COMMITTEES
Section 1. Election and Powers. Unless otherwise provided by the
articles of incorporation, a majority of the board of directors may create one
or more committees and appoint two or more directors to serve at the pleasure of
the board on each such committee. To the extent specified by the board of
directors or in the articles of incorporation, each committee shall have and may
exercise the powers of the board in the management of the business and affairs
of the corporation, except that no committee shall have authority to do the
following:
(a) Authorize distributions.
(b) Approve or propose to shareholders action required to be
approved by shareholders.
(c) Fill vacancies on the board of directors or on any of its
committees.
(d) Amend the articles of incorporation.
(e) Adopt, amend or repeal the bylaws.
(f) Approve a plan of merger not requiring shareholder approval.
(g) Authorize or approve the reacquisition of shares, except
according to a formula or method prescribed by the board of directors.
(h) Authorize or approve the issuance, sale or contract for sale of
shares, or determine the designation and relative rights, preferences and
limitations of a class of series of shares, except that the board of
directors may authorize the executive committee (or a senior executive
officer of the corporation) to do so within limits specifically prescribed
by the board of directors.
Section 2. Removal Vacancies. Any member of a committee may be
removed at any time with or without cause, and vacancies in the membership of a
committee by means of death, resignation, disqualification or removal shall be
filled by a majority of the whole board of directors.
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Section 3. Meetings. The provisions of Article 4 governing meetings
of the board of directors, action without meeting, notice, waiver or notice
and quorum and voting requirements shall apply to the committees of the board
and its members.
Section 4. Minutes. Each committee shall keep minutes of its
proceedings and shall report thereon to the board of directors at or before the
next meeting of the board.
ARTICLE 6 -- OFFICERS
Section 1. Titles. The officers of the corporation shall be a
president, a vice president, a secretary and a treasurer and may include a
chairman and vice chairman of the board of directors, a chief executive
officer, an executive vice president, one or more additional vice presidents,
a controller, one or more assistant secretaries, one or more assistant
treasurers, one or more assistant controllers, and such other officers as
shall be deemed necessary. The officers shall have the authority and perform
the duties as set forth herein or as from time to time may be prescribed by
the board of directors or by the president (to the extent that the president
is authorized by the board of directors to prescribe the authority and duties
of officers.) Any two or more offices may be held by the same individual, but
no officer may act in more than one capacity where action of two or more
officers is required.
Section 2. Election; Appointment. The officers of the corporation
shall be elected from time to time by the board of directors or appointed from
time to time by the president (to the extent that the president is authorized
by the board to appoint officers).
Section 3. Removal. Any officer may be removed by the board at any
time with or without cause whenever in its judgment the best interests of the
corporation will be served, but removal shall not itself affect the officer's
contract rights, if any, with the corporation.
Section 4. Vacancies. Vacancies among the officers may be filled
and new offices may be created and filled by the board of directors, or by the
president (to the extent authorized by the board).
Section 5. Compensation. The compensation of the officers shall be
fixed by the board of directors.
Section 6. Chairman and Vice Chairman of the Board of Directors.
The chairman of the board of directors, if such officer is elected, shall
preside at meetings of the board of directors and shareholders and shall have
such other authority and perform such other duties as the board of directors
shall designate. The vice chairman, if elected, shall preside at meetings of
the board and shareholders in the absence of the
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chairman and shall have such other authority and perform such other duties as
the board of directors shall designate.
Section 7. Chief Executive Officer. The chief executive officer
shall be the principal executive officer of the corporation and subject to the
control of the board of directors, shall, in general, supervise and control all
of the business and affairs of the corporation. He shall have such other
authority and perform such other duties as the board of directors shall
designate.
Section 8. President. The president shall be the principal
operating officer of the corporation and shall be in general charge of the
affairs of the corporation in the ordinary course of its business. Subject to
the direction of the chief executive officer, the president may perform such
acts, not inconsistent with applicable law or the provisions of these bylaws,
as may be performed by the president of a corporation and may sign and execute
all authorized notes, bonds, contracts and other obligations in the name of the
corporation. The president shall have such other powers and perform such other
duties as the board of directors shall designate or as may be provided by
applicable law or elsewhere in these bylaws.
Section 9. Vice Presidents. In the absence or inability to act of
both the chief executive officer and the president, the executive vice
president, if such officer is elected or appointed, shall exercise the powers
of the president during that officer's absence or inability to act. In default
of the chief executive officer and both the president and the executive vice
president, any other vice president may exercise the powers of the president.
Any action taken by a vice president in the performance of the duties of the
president shall be presumptive evidence of the absence or inability to act of
the president at the time the action was taken. The vice presidents shall have
such other powers and perform such other duties as may be assigned by the board
of directors or by the president (to the extent that the president is
authorized by the board of directors to prescribe the authority and duties of
other officers).
Section 10. Secretary. The secretary shall keep accurate records of
the acts and proceedings of all meetings of shareholders and of the board of
directors and shall give all notices required by law and by these bylaws. The
secretary shall have general charge of the corporate books and records and shall
have the responsibility and authority to maintain and authenticate such books
and records. The secretary shall have general charge of the corporate seal and
shall affix the corporate seal to any lawfully executed instrument requiring it.
The secretary shall gave general charge of the stock transfer books of the
corporation and shall keep at the principal office of the corporation a record
of shareholders, showing the name and address of each shareholder and the number
and class of the shares held by each. The secretary shall sign such instruments
as may require the signature of the secretary, and in general shall perform the
duties incident to the office of secretary and such other duties as may be
assigned from time to time by the board of directors or the president (to the
extent that the president is authorized by the board of directors to prescribe
the authority and duties of other officers).
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Section 11. Assistant Secretaries. Each assistant secretary, if such
officer is elected, shall have such powers and perform such duties as may be
assigned by the board of directors or the president (if authorized by the board
of directors to prescribe the authority and duties of other officers), and the
assistant Secretaries shall exercise the powers of the secretary during that
officer's absence or inability to act.
Section 12. Treasurer. The treasurer shall have custody of all funds
and securities belonging to the corporation and shall receive, deposit or
disburse the same under the direction of the board of directors. The treasurer
shall keep full and accurate accounts of the finances of the corporation, which
may be consolidated or combined statements of the corporation and one or more of
its subsidiaries as appropriate, that include a balance sheet as of the end of
the fiscal year, an income statement for that year, and a statement of cash
flows for the year unless that information appears elsewhere in the financial
statements. If financial statements are prepared for the corporation on the
basis of generally accepted accounting principles, the annual financial
statements must also be prepared on that basis. The corporation shall mail the
annual financial statements, or a written notice of their availability, to each
shareholder within 120 days of the close of each fiscal year. The treasurer
shall in general perform all duties incident to the office and such other duties
as may be assigned from time to time by the board of directors or the president
(to the extent that the president is authorized by the board of directors to
prescribe the authority and duties of other officers).
Section 13. Assistant Treasurers. Each assistant treasurer, if such
officer is elected, shall have such powers and perform such duties as may be
assigned by the board of directors or the president (to the extent that the
president is authorized by the board of directors to prescribe the authority and
duties of other officers), and the assistant treasurers shall exercise the
powers of the treasurer during that officer's absence or inability to act.
Section 14. Controller and Assistant Controllers. The controller, if
such officer is elected, shall have charge of the accounting affairs of the
corporation and shall have such other powers and perform such other duties as
the board of directors or the president (to the extent that the president is
authorized by the board of directors to prescribe the authority and duties of
other officers) shall designate. Each assistant controller shall have such
powers and perform such duties as may be assigned by the board of directors or
the president (to the extent that the president is authorized by the board of
directors to prescribe the authority and duties of other officers), and the
assistant controllers shall exercise the powers of the controller during that
officer's absence or inability to act.
Section 15. Voting Upon Stocks. Unless otherwise ordered by the board
of directors, the president shall have full power and authority in behalf of the
corporation to attend, act and vote at meetings of the shareholders of any
corporation in which this corporation may hold stock, and at such meetings shall
possess and may exercise any and all rights and powers incident to the ownership
of such stock and which, as the owner, the corporation might have possessed and
exercised if present. The board
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Of directors may by resolution from time to time confer such power and authority
upon any other person or person.
ARTICLE 7 -- CAPITAL STOCK
Section 1. Certificates. Shares of the capital stock of the
corporation shall be represented by certificates. The name and address of the
persons to whom shares of capital stock of the corporation are issued, with the
number of shares and date of issue, shall be entered on the stock transfer
records of the corporation. Certificates for shares of the capital stock of
the corporation shall be in such form not inconsistent with the articles of
incorporation of the corporation as shall be approved by the board of
directors. Each certificate shall be signed (either manually or by facsimile)
by (a) the president or any vice president and by the secretary, assistant
secretary, treasurer or assistant treasurer or (b) any two officers designated
by the board of directors. Each certificate may be sealed with the seal of the
corporation or a facsimile thereof.
Section 2. Transfer of Shares. Transfer of shares shall be made on
the stock transfer records of the corporation, and transfers shall be made only
upon surrender of the certificate for the shares sought to be transferred by
the recordholder or by a duly authorized agent, transferee or legal
representative. All certificates surrendered for transfer or reissue shall be
cancelled before new certificates for the shares shall be issued.
Section 3. Transfer Agent and Registrar. The board of directors may
appoint one or more transfer agents and one or more registrars of transfers and
may require all stock certificates to be signed or countersigned by the
transfer agent and registered by the registrar of transfers.
Section 4. Regulations. The board of directors may make rules and
regulations as it deems expedient concerning the issue, transfer and
registration of shares of capital stock of the corporation.
Section 5. Fixing Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders,
or entitled to receive payment of any dividend, or in order to make a
determination or shareholders for any other purpose, the board of directors may
fix in advance a date as the record date for the determination of
shareholders. The record date shall be not more than 70 days before the
meeting or action requiring a determination of shareholders. A determination
of shareholders entitled to notice of or to vote at a shareholders' meeting
shall be effective for any adjournment of the meeting unless the board of
directors fixes a new record date, which it shall do if the meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting. If no record date is fixed for the determination of shareholders, the
record date shall be the day the notice of the meeting is mailed or the day the
action requiring a determination of shareholders is taken. If no record date
is fixed for action without a meeting, the record date for determining
shareholders entitled to take action without a meeting shall be the date the
first shareholder signs a consent to the action taken.
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Section 6. Lost Certificates. The board of directors must authorize
the issuance of a new certificate in place of a certificate claimed to have
been lost, destroyed or wrongfully taken, upon receipt of (a) an affidavit from
the person explaining the loss, destruction or wrongful taking, and (b) a bond
from the claimant in a sum as the corporation may reasonably direct to
indemnify the corporation against loss from any claim with respect to the
certificate claimed to have been lost, destroyed or wrongfully taken. The board
of directors may, in its discretion, waive the affidavit and bond and authorize
the issuance of a new certificate in place of a certificate claimed to have
been lost, destroyed or wrongfully taken.
ARTICLE 8 -- INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Indemnification Provisions. Any person who at any time
serves or has served as a director or officer of the corporation or of any
wholly owned subsidiary of the corporation, or in such capacity at the request
of the corporation for any other foreign or domestic corporation, partnership,
joint venture, trust or other enterprise, or as a trustee or administrator
under any employee benefit plan of the corporation or of any wholly owned
subsidiary thereof (a "Claimant"), shall have the right to be indemnified and
held harmless by the corporation to the fullest extent from time to time
permitted by law against all liabilities and litigation expenses (as
hereinafter defined) in the event a claim shall be made or threatened against
that person in, or that person is made or threatened to be made a party to, any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether or not brought by or on
behalf or the corporation, including an appeals therefrom (a "proceeding"),
arising out of that person's status as such or that person's activities in any
such capacity; provided, that such indemnification shall not be effective with
respect to (a) that portion of any liabilities or litigation expenses with
respect to which the Claimant is entitled to receive payment under any
insurance policy or (b) any liabilities or litigation expenses incurred on
account of any of the Claimant's activities which were at the time taken known
or believed by the Claimant to be clearly in conflict with the best interests
of the corporation.
Section 2. Definitions. As used in this Article, (a) "liabilities"
shall include, without limitation, (1) payments in satisfaction of any
judgment, money decree, excise tax, fine or penalty for which Claimant had
become liable in any proceeding and (2) payments in settlement of any such
proceeding subject, however, to Section 3 of this Article 8; (b) "litigation
expenses" shall include, without limitation, (1) reasonable costs and expenses
and attorneys' fees and expenses actually incurred by the Claimant in
connection with any proceeding and (2) reasonable costs and expenses and
attorneys' fees and expenses in connection with the enforcement of rights to
the indemnification granted hereby or by applicable law, if such enforcement is
successful in whole or in part; and (c) "disinterested directors" shall mean
directors who are not party to the proceeding in question.
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Section 3. Settlements. The corporation shall not be liable to
indemnify the Claimant for any amounts paid in settlement of any
proceeding effected without the corporation's written consent. The
corporation will not unreasonably withhold its consent to any proposed
settlement.
Section 4. Litigation Expense Advances.
(a) Except as provided in subsection (b) below, any litigation
expenses shall be advanced to any Claimant within 30 days of receipt by
the secretary of the corporation of a demand therefor, together with an
undertaking by or on behalf of the Claimant to repay to the corporation
such amount unless it is ultimately determined that Claimant is entitled
to be indemnified by the corporation against such expenses. The secretary
shall promptly forward notice of the demand and undertaking immediately
to all directors of the corporation.
(b) Within 10 days after mailing of notice to the directors
pursuant to subsection (a) above, any disinterested director may, if
desired, call a meeting of all disinterested directors to review the
reasonableness of the expenses so requested. No advance shall be made if
a majority of the disinterested directors affirmatively determines that
the item of expense is unreasonable in amount; but if the disinterested
directors determine that a portion of the expense item is reasonable, the
corporation shall advance such portion.
Section 5. Approval of Indemnification Payments. Except as provided in
Section 4 of this Article, the board of directors of the corporation shall
take all such action as may be necessary and appropriate to authorize the
corporation to pay the indemnification required by Section 1 of this
Article, including, without limitation, making a good faith evaluation of
the manner in which the Claimant acted and of the reasonable amount of
indemnity due the Claimant. In taking any such action, any Claimant who is
a director of the corporation shall not be entitled to vote on any matter
concerning such Claimant's right to indemnification.
Section 6. Suits by Claimant. No Claimant shall be entitled to bring
suit against the corporation to enforce his rights under this Article
until sixty days after a written claim has been received by the
corporation, together with any undertaking to repay as required by
Section 4 of this Article. It shall be a defense to any such action that
the Claimant's liabilities or litigation expenses were incurred on
account of activities described in clause (b) of Section 1, but the
burden of proving this defense shall be on the corporation. Neither the
failure of the corporation to have made a determination prior to the
commencement of the action to the effect that indemnification of the
Claimant is proper in the circumstances, nor an actual determination by
the corporation that the Claimant had not met the standard of conduct
described in clause (b) of Section 1, shall be a defense to the action or
create a presumption that the Claimant has not met the applicable standard
of conduct.
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Section 7. Consideration; Personal Representatives and Other
Remedies. Any person who during such time as this Article or corresponding
provisions of predecessor bylaws is or has been in effect serves or has served
in any of the aforesaid capacities for or on behalf of the corporation shall be
deemed to be doing so or to have done so in reliance upon, and as consideration
for, the right of indemnification provided herein or therein. The right of
indemnification provided herein or therein shall inure to the benefit of the
legal representatives of any person who qualifies or would qualify as a Claimant
hereunder, and the right shall not be exclusive of any other rights to which the
person or legal representative may be entitled apart from this Article.
Section 8. Scope of Indemnification Rights. The rights granted herein
shall not be limited by the provisions of Section 55-8-51 of the General
Statutes of North Carolina or any successor statute.
ARTICLE 9 -- GENERAL PROVISIONS
Section 1. Dividends and Other Distributions. The board of directors
may from time to time declare and the corporation may pay dividends or make
other distributions with respect to its outstanding shares in the manner and
upon the terms and conditions provided by law.
Section 2. Seal. The seal of the corporation shall be any form
approved from time to time or at any time by the board of directors.
Section 3. Waiver of Notice. Whenever notice is required to be given
to a shareholder, director or other person under the provisions of these bylaws,
the articles of incorporation or applicable law, a waiver in writing signed by
the person or persons entitled to the notice, whether before or after the date
and time stated in the notice, and delivered to the corporation shall be
equivalent to giving the notice.
Section 4. Checks. All checks, drafts or orders for the payment of
money shall be signed by the officer or officers or other individuals that the
board of directors may from time to time designate.
Section 5. Fiscal Year. The fiscal year of the corporation shall be
fixed by the board of directors.
Section 6. Amendments. Unless otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or by law, these bylaws may
be amended or repealed by the board of directors, except that a bylaw adopted,
amended or repealed by the shareholders may not be readopted, amended or
repealed by the board of directors if neither the articles of incorporation nor
a bylaw adopted by the shareholders authorizes the board of directors to adopt,
amend or repeal that particular bylaw or the bylaws generally. These bylaws may
be amended or repealed by the shareholders even though the bylaws may also be
amended or repealed by the board of directors. A bylaw that fixes a greater
quorum or voting requirement for the board of directors may be
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amended or repealed (a) if originally adopted by the shareholders, only by the
shareholders, unless such bylaw as originally adopted by the shareholders
provides that such bylaw may be amended or repealed by the board of directors
or (b) if originally adopted by the board of directors, either by the
shareholders or by the board of directors. A bylaw that fixes a greater quorum
or voting requirement may not be adopted by the board of directors by a vote
less than a majority of the directors then in office and may not itself be
amended by a quorum or vote of the directors less than the quorum or vote
prescribed in such bylaw or prescribed by the shareholders.
Section 7. Applicability of Antitakeover Statutes. The provisions of
Article 9 and Article 9A of the North Carolina Business Corporation Act shall
not be applicable to the corporation.
THIS IS TO CERTIFY that the above bylaws of Insteel Industries, Inc., were
adopted by the board of directors of the corporation by action taken at a
meeting held on August 21, 1990, as amended by the shareholders of the
corporation as to Article 3, Section 2, on February 5, 1991, and as further
amended by the board of directors of the corporation as to Article 2, Section
11 on April 26, 1999.
This 5th day of May, 1999.
[Corporate Seal] /S/ Gary D. Kniskern
----------------------------------------
Gary D. Kniskern
Secretary
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF INSTEEL INDUSTRIES, INC. FOR THE SIX MONTH PERIOD ENDED
APRIL 3, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-02-1999
<PERIOD-END> APR-03-1999
<CASH> 822
<SECURITIES> 0
<RECEIVABLES> 27,368
<ALLOWANCES> 0
<INVENTORY> 28,547
<CURRENT-ASSETS> 58,517
<PP&E> 79,497
<DEPRECIATION> 0
<TOTAL-ASSETS> 149,034
<CURRENT-LIABILITIES> 28,723
<BONDS> 0
0
0
<COMMON> 16,894
<OTHER-SE> 55,415
<TOTAL-LIABILITY-AND-EQUITY> 149,034
<SALES> 128,429
<TOTAL-REVENUES> 128,429
<CGS> 112,659
<TOTAL-COSTS> 112,659
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,248
<INCOME-PRETAX> 6,265
<INCOME-TAX> 2,224
<INCOME-CONTINUING> 4,041
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,041
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
</TABLE>
