<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _______
Commission file number 0-14669
-------
THE ARISTOTLE CORPORATION AND SUBSIDIARY
----------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 06-1165854
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
78 Olive Street, New Haven, Connecticut 06511
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 867-4090
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
----- -----
As of April 28, 1997, 1,097,902 shares of Common Stock were outstanding.
<PAGE>
THE ARISTOTLE CORPORATION AND SUBSIDIARY
INDEX OF INFORMATION CONTAINED IN FORM 10-Q FOR THE
QUARTER ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I - Financial Information
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at March 31, 1997
and June 30, 1996 3
Condensed Consolidated Statements of Operations for the Three and Nine Months
Ended March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K 12
Signatures 13
Exhibit Index 14
</TABLE>
2
<PAGE>
THE ARISTOTLE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except for share data)
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
---- ----
(Unaudited)
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 472 $ 99
Marketable securities held in escrow, at market value - 6,253
Accounts receivable, net of reserves of $142 and $242 3,707 2,834
Inventories 10,101 9,478
Other current assets 213 359
--------- ---------
Total current assets 14,493 19,023
--------- ---------
Property and equipment, net 1,517 1,684
--------- ---------
Other assets:
Marketable securities held in escrow, at market value 1,200 -
Employee notes receivable 354 354
Goodwill, net of amortization of $138 and $101 1,796 1,845
Deferred tax asset 630 630
Other noncurrent assets 248 259
--------- ---------
4,228 3,088
--------- ---------
$ 20,238 $ 23,795
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable and current maturities of long-term debt $ 6,691 $ 6,055
FDIC tax refund claim payable - 3,760
Accounts payable 2,182 1,372
Accrued expenses 465 919
Deferred tax liability 630 630
--------- ---------
Total current liabilities 9,968 12,736
--------- ---------
Long-term debt, less current maturities 1,770 2,097
--------- ---------
Total liabilities 11,738 14,833
--------- ---------
Minority interest in subsidiary's preferred stock 1,975 2,247
--------- ---------
Minority interest in subsidiary's common stock 189 182
--------- ---------
Commitments and contingencies
Redeemable preferred stock, $.01 par value; 3,000,000 shares authorized; 76,014
and 101,976 Series A at March 31, 1997 and June 30, 1996, respectively,
60,756 and 61,345 Series B at March 31, 1997 and June 30, 1996, respectively,
60,756 and 61,345 Series C at March 31, 1997 and June 30, 1996, respectively
and 24,998 shares Series D at March 31, 1997 and June 30, 1996 issued and
outstanding 3 3
--------- ---------
Stockholders' equity:
Common stock, $.01 par value; 3,000,000 shares authorized; 1,105,801 shares at
March 31, 1997 and June 30, 1996 issued and outstanding 11 11
Additional paid-in capital 159,762 159,762
Retained earnings (deficit) (153,410) (153,245)
Treasury stock at cost - 7,287 and 1,287 shares at March 31, 1997 and June 30,
1996, respectively (30) (8)
Net unrealized investment gains - 10
--------- ---------
Total stockholders' equity 6,333 6,530
--------- ---------
$ 20,238 $ 23,795
========= =========
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
3
<PAGE>
THE ARISTOTLE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands, except for share data)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 5,105 $ 5,390 $ 15,352 $ 18,147
Cost of goods sold 3,701 4,040 11,093 13,467
----------- ---------- ----------- -----------
Gross profit 1,404 1,350 4,259 4,680
Operating expenses:
Selling 599 552 2,026 1,980
General and administrative 422 455 1,398 1,476
Product development 167 121 444 348
----------- ---------- ----------- -----------
Operating income 216 222 391 876
----------- ---------- ----------- -----------
Other income (expense)
Investment and interest income 34 80 133 248
Interest expense ( 171) ( 210) ( 522) ( 663)
----------- ---------- ----------- -----------
Income before income
taxes and minority interest 79 92 2 461
Income tax expense 6 12 28 18
----------- ---------- ----------- -----------
Income (loss) before minority
interest 73 80 ( 26) 443
Minority interest 43 58 139 177
----------- ---------- ----------- -----------
NET INCOME (LOSS) $ 30 $ 22 ($ 165) $ 266
=========== ========== =========== ===========
Net income (loss) per share $ 0.03 $ 0.02 ($ 0.15) $ 0.24
=========== ========== =========== ===========
Weighted average shares outstanding 1,131,940 1,138,510 1,134,852 1,128,340
=========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
4
<PAGE>
THE ARISTOTLE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months
Ended March 31,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($ 165) $ 266
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 397 383
Changes in assets and liabilities:
Accounts receivable ( 873) 1,080
Inventories ( 623) 1,212
Other assets 140 624
Accounts payable 810 ( 764)
Accrued expenses ( 454) ( 788)
Issuance of treasury stock - 61
----------- -----------
Net cash provided by (used in) operating
activities ( 768) 2,074
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment ( 186) ( 470)
Proceeds from IRS refund - 1,751
Increase in escrow reserve - ( 1,751)
Purchase of marketable securities ( 707) -
Minority interest 7 12
Repurchase of ASI preferred stock ( 260) -
Sale of marketable securities 5,760 -
Settlement of FDIC claim ( 3,760) -
----------- -----------
Net cash provided by (used in) investing
activities 854 ( 458)
----------- -----------
Cash flows from financing activities:
Net borrowings (payments) under line-of-credit 987 ( 1,334)
Principal payments under note payable ( 678) ( 228)
Purchase of treasury stock ( 22) -
Proceeds from issuance of long-term debt - 75
----------- -----------
Net cash provided by (used in) financing
activities 287 ( 1,487)
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 373 129
CASH AND CASH EQUIVALENTS, beginning of period
99 188
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 472 $ 317
=========== ===========
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
5
<PAGE>
THE ARISTOTLE CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
---------------------
The Aristotle Corporation ("Aristotle") is a holding company for its
subsidiary, Aristotle Sub, Inc. ("ASI"). ASI is a holding company for The
Strouse, Adler Company ("Strouse"). Strouse designs, manufactures and markets
women's intimate apparel. Unless the context indicates otherwise, all references
herein to the "Company" include Aristotle, ASI and Strouse.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the instructions to Form 10-Q
and do not include all of the information and notes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine months ended March 31, 1997 are not necessarily indicative
of results that may be expected for the year ending June 30, 1997. For further
information, refer to the consolidated financial statements and notes included
in the Company's Annual Report on Form 10-K for the year ended June 30, 1996.
2. Earnings per Common Share
-------------------------
Weighted average shares outstanding are primary; treasury stock has
not been included. At March 31, 1997, the weighted average shares include 33,424
shares of common stock equivalents.
3. Debt Agreement
--------------
On October 3, 1996, Strouse and Bank of Boston, Connecticut (the
"Bank") entered into a credit agreement that provides for a line-of-credit
facility and a term loan facility (the "Credit Facilities"). Borrowing under the
line-of-credit is determined by a borrowing base which is equal to the sum of
80% of eligible accounts receivable, as defined, plus 50% of eligible raw
material inventory, as defined, plus 60% of eligible finished goods inventory,
as defined, with a maximum borrowing of $8,000,000 at any one time. In addition,
the line-of-credit facility permits advances to exceed the borrowing base amount
by up to $750,000 through September 1997, and $500,000 thereafter through
September 1999 (so long as the total line-of-credit is not more than the
$8,000,000 and the overadvance is reduced to zero for 30 consecutive days per
annum). The principal amount of the term loan is $2,000,000. The credit
agreement matures in September 1999. Strouse uses the Credit Facilities for
working capital and other general corporate purposes.
The interest on the line-of-credit will vary from prime to prime plus
1.0% or Eurodollar plus 1.75% to Eurodollar plus 3.0% per annum based on the
financial performance of Strouse. The term loan bears interest at the option of
Strouse at a rate per annum equal to prime plus .75%, Eurodollar plus 2.5% or at
a fixed rate of the Bank's cost of funds plus 2.25%. The term loan has a three
year term and requires principal payments to reduce the amount outstanding based
on a ten year amortization.
6
<PAGE>
The Credit Facilities are secured by a lien on all assets of Strouse.
Aristotle and ASI have unconditionally guaranteed the Credit Facilities.
Recourse under each guaranty is limited to $2,000,000. To secure Aristotle's
guarantee of the Credit Facilities, Aristotle has pledged $500,000 (the "Account
Pledged to the Bank") which is included in marketable securities held in escrow
in the accompanying balance sheet. The credit agreement further provides that
Strouse may not pay dividends to ASI or Aristotle without the Bank's prior
written consent. Strouse must maintain certain financial ratios and satisfy
various other covenants in connection with the Credit Facilities.
As of April 28, 1997, the balance outstanding on the line-of-credit
was $6,466,000 and the balance outstanding on the term loan was $1,900,000. As
of April 28, 1997, the additional borrowing available on the overadvance was
$534,000.
During the third quarter ended March 31, 1997, Aristotle entered into
a line-of-credit agreement with The Bank of New Haven for $300,000 (the "BNH
Line of Credit"). The line-of-credit bears interest at a rate of prime plus 1.5%
and is payable on demand. The line-of-credit is secured by the collateral
assignment of a demand promissory note executed by Strouse. As of April 28,
1997, the balance outstanding on the line-of-credit was $75,000.
7
<PAGE>
THE ARISTOTLE CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Three Months Ended March 31, 1997 and 1996
------------------------------------------
The Company's net sales for the three months ended March 31, 1997
decreased 5% to $5,105,000, compared to net sales of $5,390,000 for the three
months ended March 31, 1996. The decrease was primarily generated by a $288,000
volume decrease in shapewear products, and a $152,000 volume decrease in
specialty brassiere products, offset by a $155,000 impact from increased prices.
The decreases reflect increased competition in the shapewear market and softness
in the specialty bra market in the beginning of the quarter which began to
strengthen during February and March 1997.
The Company's gross profit for the three months ended March 31, 1997
increased 4% to $1,404,000, compared to gross profit of $1,350,000 for the three
months ended March 31, 1996. Gross margin percentage increased to 27.5% from
25.0%. The increase in gross profit and gross margin percentage was principally
a result of lower per unit costs resulting from increases in production levels
primarily relating to the implementation of new product lines, the stabilization
of raw material and production costs versus increases in prices of product and a
reduction in the private label business (which contributes operating income
margins comparable to Strouse's branded business, but at lower gross margins).
Selling, general and administrative expenses for the three months
ended March 31, 1997 were $1,021,000, compared to $1,007,000 for the
corresponding three months ended March 31, 1996. The $14,000, or 1%, increase
was principally a result of increases in advertising and selling costs,
partially offset by a reduction in shareholder expenses.
Product development costs for the Company for the three months ended
March 31, 1997 were $167,000, compared to $121,000 for the three months ended
March 31, 1996. Product development costs primarily included compensation of
Company personnel and were incurred by Strouse. All products are designed
internally in Strouse's New Haven and New York design centers. The $46,000, or
38%, increase in costs reflects Strouse's continued investment in the product
development process through increases in staffing in Strouse's design centers.
Investment and interest income was $34,000 and $80,000 for the three
months ended March 31, 1997 and 1996, respectively. Investment and interest
income for the three months ended March 31, 1997 was principally generated by an
investment account (the "Strouse Escrow Account"), which was established in
connection with the acquisition of Strouse by Aristotle (the "Acquisition") and
is subject to an escrow and pledge agreement with the former Strouse
stockholders (the "Former Strouse Stockholders"), the Account Pledged to the
Bank and cash on-hand. Investment and interest income for the three months ended
March 31, 1996 was principally generated by the Strouse Escrow Account and two
special escrow accounts (the "FDIC Escrow Accounts"). The FDIC Escrow Accounts
contained approximately $5,760,000 in tax refunds received by the Company that
the Federal Deposit Insurance Corporation ("FDIC") claimed. The $46,000
reduction in investment and interest income for the three months ended March 31,
1997 was primarily a result of the payment to the FDIC of approximately
$3,760,000 from the FDIC Escrow Accounts in the first quarter of 1996 in
connection with a settlement between the Company and the FDIC related to certain
disputes between the FDIC, the Company and others (the "FDIC Settlement").
8
<PAGE>
Interest expense for the three months ended March 31, 1997 decreased
to $171,000 from $210,000 in the corresponding three months ended March 31,
1996. The decrease in interest expense primarily resulted from reduced borrowing
levels under the Credit Facilities due to lower average inventory levels in 1997
versus 1996.
The income tax provision reflects minimum state taxes, as any federal
tax obligation is sheltered by the utilization of net operating loss
carryforwards.
Minority interest expense of $43,000 and $58,000 for the three months
ended March 31, 1997 and 1996, respectively, was principally due to preferred
dividends paid or accrued during the corresponding period on outstanding
preferred stock of ASI (the "ASI Preferred Stock") issued to the Former Strouse
Stockholders in connection with the Acquisition. The preferred dividends
decreased as a result of the exercise of the Put Right, as defined in the
Liquidity and Capital Resources section, which resulted in fewer shares of ASI
Preferred Stock being outstanding during 1997.
Nine Months Ended March 31, 1997 and 1996
-----------------------------------------
The Company's net sales for the nine months ended March 31, 1997
decreased 15% to $15,352,000, compared to net sales of $18,147,000 for the nine
months ended March 31, 1996. The decrease was primarily generated by a $923,000
volume decrease in shapewear products, and a $2,520,000 volume decrease in
specialty brassiere products, offset by a $648,000 impact from increased prices.
The decrease in net sales for the nine months ended March 31, 1997 was primarily
a result of increased competition and some softness in certain market segments
plus an inability to supply all orders received due to production problems which
have all shown improvement during the last three months ended March 31, 1997.
The Company's gross profit for the nine months ended March 31, 1997
decreased 9% to $4,259,000, compared to gross profit of $4,680,000 for the nine
months ended March 31, 1996. Gross margin percentage increased to 27.7% from
25.8%. The decrease in gross profit was primarily a result of the reduction in
sales. The increase in gross margin percentage was principally a result of
stable raw material costs, lower production costs resulting from a reduction in
production rates charged by the Company's Dominican subcontractor and a
consolidation of Strouse's production to locations with lower costs.
Selling, general and administrative expenses for the nine months
ended March 31, 1997 were $3,424,000, compared to $3,456,000 for the
corresponding nine months ended March 31, 1996. The $32,000, or 1%, decrease was
principally a result of a reduction in administrative personnel, sales
commissions and shareholder expenses, partially offset by an increase in
advertising.
Product development costs for the Company for the nine months ended
March 31, 1997 were $444,000, compared to $348,000 for the nine months ended
March 31, 1996. Product development costs primarily included compensation of
Company personnel and were incurred by Strouse. All products are designed
internally in Strouse's New Haven and New York design centers. The $96,000, or
28%, increase in costs reflects Strouse's continued investment in the product
development process through increases in staffing in Strouse's design centers.
Investment and interest income was $133,000 and $248,000 for the nine
months ended March 31, 1997 and 1996, respectively. This income was principally
generated by the FDIC Escrow Accounts, the Strouse Escrow Account, the Account
Pledged to the Bank and cash on-hand. The $115,000 reduction in investment and
interest income for the nine months ended March 31, 1997 was primarily a result
of the payment to the FDIC of approximately $3,760,000 from the FDIC Escrow
Accounts in the first quarter of 1996 in connection with the FDIC Settlement.
9
<PAGE>
Interest expense for the nine months ended March 31, 1997 decreased
to $522,000 from $663,000 in the corresponding nine months ended March 31, 1996.
The decrease in interest expense primarily resulted from reduced borrowing
levels under the Credit Facilities due to lower average inventory levels in 1997
versus 1996.
The income tax provision reflects minimum state taxes, as any federal
tax obligation is sheltered by the utilization of net operating loss
carryforwards.
Minority interest expense of $139,000 and $177,000 for the nine
months ended March 31, 1997 and 1995, respectively, was principally due to
preferred dividends paid or accrued during the corresponding period on
outstanding ASI Preferred Stock. The preferred dividends decreased for the nine
months ended March 31, 1997 as a result of the exercise of the Put Right by the
Former Strouse Stockholders throughout fiscal 1997, which resulted in fewer
shares of ASI Preferred Stock being outstanding.
Liquidity and Capital Resources
The Company utilized cash of $768,000 for operations during the nine
months ended March 31, 1997 and generated cash of $2,074,000 from operations for
the nine months ended March 31, 1996. During the nine months ended March 31,
1997, the utilization of cash from operations was principally the result of net
loss from operations and increases in accounts receivables, inventories and
accounts payable, partially offset by depreciation and amortization and a
decrease in accrued expenses. During the nine months ended March 31, 1996, the
generation of cash from operations was principally the result of net income from
operations and decreases in accounts receivables, inventories, other assets,
accrued expenses and accounts payable.
The Company generated $854,000 from investing activities for the
nine months ended March 31, 1997 and utilized $458,000 for investing activities
for the nine months ended March 31, 1996. In the nine months ended March 31,
1997, the primary generation of cash from investing activities was the
$5,760,000 sale of marketable securities that were withdrawn from the FDIC
Escrow Accounts in connection with the FDIC Settlement, offset by the payment of
$3,760,000 from the FDIC Escrow Accounts in connection with the FDIC Settlement.
The Company also used $260,000 to fund the payment of the Put Right, as defined
below, exercised by three of the Former Strouse Stockholders, including one
executive officer and one former executive officer of the Company. In exchange
for the funding of the Put Right, the Company received 25,962 shares of ASI
Series A Preferred Stock and 25,962 shares of Aristotle Preferred Stock. During
1997, the Company also utilized $707,000 of its cash from investing activities
to purchase marketable securities to fund the Account Pledged to the Bank, which
secures Aristotle's guarantee of the Credit Facilities, and to restore the
Strouse Escrow Account. During both periods, the Company used cash from
investing activities to purchase property and equipment.
The Company generated $287,000 from financing activities for the nine
months ended March 31, 1997. The Company utilized $1,487,000 for financing
activities during the nine months ended March 31, 1996. Funds generated during
the nine months ended March 31, 1997 were primarily a result of the Company
drawing $987,000 from its line-of-credit, offset by the $678,000 payment of its
notes payable. In addition, the Company repurchased 6,000 shares of its Common
Stock in the open market for approximately $22,000. The Company intends to pay
its directors' annual retainer with these treasury shares. During the third
quarter ended March 31, 1997, Aristotle entered into the BNH Line of Credit for
$300,000, which bears interest at a rate of prime plus 1.5%.
10
<PAGE>
In connection with the Acquisition, ASI issued to the Former Strouse
Stockholders 245,381 shares of ASI Preferred Stock and Aristotle issued to the
Former Strouse Stockholders 270,379 shares of voting preferred stock of
Aristotle (the "Aristotle Preferred Stock"). The Former Strouse Stockholders may
require that ASI repurchase each share of ASI Preferred Stock at various dates
beginning in April 1996 for $10.00 per share, plus any accrued but unpaid
dividends (the "Put Right"). Prior to the vesting of the Put Right, the ASI
Preferred Stock is entitled to quarterly dividends of 8.9% per annum. Once the
Put Right is exercisable, the dividends cease. In order to exercise the Put
Right, a Former Strouse Stockholder must sell an equal number of shares of
Aristotle Preferred Stock to Aristotle for $.001 per share. The Put Right is
secured by the Strouse Escrow Account.
If the Former Strouse Stockholders exercise their Put Right with
respect to the ASI Preferred Stock, then Aristotle would have to pay up to
$1,975,000 during the next four fiscal years to such Stockholders. It is not
anticipated that current amounts of capital will be sufficient to satisfy
potential commitments related to the Acquisition. However, there is $700,000
held in the Strouse Escrow Account and $354,000 in employee notes receivable to
satisfy a portion of the requirements of the Put Rights, if exercised. In
addition, there is $560,000 from Strouse intercompany loans that are pledged to
the Bank of New Haven and $500,000 held in the Account Pledged to the Bank which
may be used, but are not readily available, to fulfill the exercise of the Put
Right. Any default in the payments due to the Former Strouse Stockholders could
create a partial unwinding of the Acquisition in which the Former Strouse
Stockholders would be entitled to receive 59% of the capital stock of Strouse,
in exchange for certain consideration previously paid to them by Aristotle in
connection with the Acquisition.
In order to conserve funds, in November 1996, the Company requested
that the holders of the ASI Preferred Stock postpone the Put Right with respect
to 101,976 shares of ASI Series A Preferred Stock and 61,345 shares of ASI
Series B Preferred Stock from dates in April 1996 and April 1997 to October
1997. In exchange, ASI offered to continue to pay the 8.9% dividend until
October 1997 to the holders of the ASI Preferred Stock who postpone the Put
Right. In addition, the Company offered to delay the repayment of certain loans
made by Aristotle to certain Former Strouse Stockholders (the "Acquisition
Loans") in connection with the Acquisition from April 1997 until October 1997 if
such Stockholders postpone their Put Rights.
In October 1996, pursuant to terms of an employment agreement between
a former executive officer of Strouse and the Company, upon the voluntary
termination of such officer's employment, the former executive officer was
obligated to sell to the Company for nominal consideration 589 shares of ASI
Series B Preferred Stock and 589 shares of ASI Series C Preferred Stock. As
mentioned above, in November and December of 1996, three Former Strouse
Stockholders exercised their Put Right with respect to 25,962 shares of ASI
Series A Preferred Stock and 25,962 shares of Aristotle Preferred Stock for a
cash payment of $260,000.
After repurchases of ASI Preferred Stock pursuant to the foregoing
employment agreement and exercise of Put Rights, the offer resulted in the
holders of 73,604 shares of ASI Series A Preferred Stock and 31,842 shares of
ASI Series B Preferred Stock postponing their Put Right until October 1997 with
the remaining 2,410 shares of ASI Series A Preferred Stock continuing to be
exercisable. In addition, there are 28,914 shares of ASI Series B Preferred
Stock that will be exercisable beginning April 1997. The offer also resulted in
the delay of the repayment of $131,000 principal amount of Acquisition Loans to
October 1997, with $46,000 principal amount of Acquisition Loans remaining
payable in April 1997. There are 60,756 shares of ASI Series C Preferred Stock
that will be exercisable beginning April 1998.
In order to meet its projected capital requirements and potential
commitments to the Former Strouse Stockholders, the Company believes that it
must either raise new equity capital or obtain additional financing or both.
There can, however, be no assurance that the Company will be able to raise new
equity capital or obtain additional financing.
11
<PAGE>
Recent Developments
In April 1997, two of the Former Strouse Stockholders exercised their
Put Right enabling them to receive an aggregate cash payment of $224,122 in
exchange for 22,410 shares of ASI Preferred Stock and 22,410 shares of Aristotle
Preferred Stock.
In connection with the Acquisition, a former executive officer
borrowed $92,330 from Aristotle. This employee note receivable was secured by a
pledge agreement between the former executive officer and Aristotle. The loan
provided that $46,165 in principal was due to Aristotle on April 11, 1997. The
principal payment was satisfied by the assignment of 336 shares of Series A
Preferred Stock of ASI and 4,281 shares of Series B Preferred Stock.
Effect of Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued
SFAS No. 128, "Earnings Per Share," which establishes new standards for
computing and presenting earnings per share. SFAS No. 128 is effective for
financial statements issued for periods ending after December 15, 1997 and
earlier application is not permitted. The Company plans to adopt SFAS No. 128.
As of March 31, 1997, SFAS No. 128 had no material impact on Earnings Per Share.
Certain Factors That May Affect Future Results of Operations
The Company believes that this report may contain forward-looking
statements within the meaning of the "safe-harbor" provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
include statements regarding the Company's liquidity and are based on
management's current expectations and are subject to a number of factors and
uncertainties that could cause actual results to differ materially from those
described in the forward-looking statements. The Company cautions investors that
there can be no assurance that actual results or business conditions will not
differ materially from those projected or suggested in such forward-looking
statements as a result of various factors, including, but not limited to, the
following: the availability of financing and additional capital to fund the
Company's business strategy on acceptable terms, if at all, market responses to
pricing actions, continued competitive factors and pricing pressures, changes in
product mix, the timely acceptance of new products, inventory risks due to
shifts in market demand, the dependence by the Company on key customers, and
general economic conditions. As a result, the Company's future development
efforts involve a high degree of risk. For further information, refer to the
more specific risks and uncertainties discussed throughout this report.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K:
There were no reports on Form 8-K for the three months ended
March 31, 1997.
12
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE ARISTOTLE CORPORATION
/s/ John J. Crawford
--------------------
John J. Crawford
Its President, Chief Executive Officer
and Chairman of the Board
Date: May 15, 1997
/s/ Paul McDonald
-----------------
Paul McDonald
Its Chief Financial Officer
and Secretary
(principal financial and chief
accounting officer)
Date: May 15, 1997
13
<PAGE>
EXHIBIT INDEX
Exhibit Description
- ------- -----------
3.1 Restated Certificate of Incorporation of The Aristotle
Corporation.
3.2 Amended and Restated Bylaws of The Aristotle Corporation.
27.1 Financial Data Schedule.
14
<PAGE>
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
THE ARISTOTLE CORPORATION
Under Section 245
of the
Delaware General Corporation Law
I, John Crawford, President of The Aristotle Corporation (the
"Corporation"), a corporation organized and existing under the laws of the State
of Delaware, do hereby certify as follows:
FIRST: The name of the Corporation is The Aristotle Corporation.
SECOND: The original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of
Delaware on February 25, 1986, under the name FFB Corp.
THIRD: This Restated Certificate of Incorporation was duly
adopted by the Board of Directors of the Corporation
without a vote of the stockholders in accordance with
Section 245 of the Delaware General Corporation Law.
FOURTH: This Restated Certificate of Incorporation only restates
and integrates and does not further amend the provisions
of the Corporation's Certificate of Incorporation as
heretofore amended or supplemented. There is no
discrepancy between those provisions and the provisions of
this Restated Certificate of Incorporation.
FIFTH: The text of the Restated Certificate of Incorporation, as
amended or supplemented heretofore, is hereby restated
without further amendments or changes to read as set forth
in full on Exhibit A attached hereto.
---------
<PAGE>
IN WITNESS WHEREOF, The Aristotle Corporation has caused this
certificate to be signed by John Crawford, its President, whose signature shall
constitute his acknowledgement, under penalty of perjury, that this instrument
is the act and deed of The Aristotle Corporation and that the facts stated
herein are true, this 21st day of February, 1997.
THE ARISTOTLE CORPORATION
By /s/John Crawford
-------------------
John Crawford
Its President
<PAGE>
Exhibit A
---------
RESTATED CERTIFICATE OF INCORPORATION
OF
THE ARISTOTLE CORPORATION
Article 1. Corporate Title. The name of the corporation is The
---------------
Aristotle Corporation (the "Corporation").
Article 2. Duration. The duration of the Corporation is perpetual.
--------
Article 3. Purpose. The purpose or purposes for which the Corporation
-------
is organized are to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware (the "DGCL").
Article 4. Capital Stock. The total number of shares of all classes
-------------
of the capital stock which the Corporation has authority to issue is six million
(6,000,000) shares of which three million (3,000,000) shares shall be common
stock, par value $.01 per share, amounting in the aggregate to thirty thousand
dollars ($30,000), and three million (3,000,000) shares shall be serial
preferred stock, par value $.01 per share, amounting in the aggregate to thirty
thousand dollars ($30,000). The shares may be issued by the Corporation from
time to time as approved by its board of directors without the approval of its
shareholders. The consideration for the issuance of the shares shall be paid in
full before their issuance and shall not be less than the par value per share.
Neither promissory notes nor future services shall constitute payment or part
payment for the issuance of the shares of the Corporation. The consideration for
the shares shall be cash, services actually performed for the Corporation,
personal property, real property, leases of real property or any combination of
the foregoing. In the absence of actual fraud in the transaction, the value of
such property, labor or services, as determined by the board of directors of the
Corporation, shall be conclusive. Upon payment of such consideration such shares
shall be deemed to be fully paid and nonassessable.
Nothing contained in this Article 4 (or in any resolution or
resolutions adopted by the board of directors pursuant hereto) shall entitle the
holders of any class or series of capital stock to more than one vote per share.
A description of the different classes and series of the
Corporation's capital stock and a statement of the designations, and the powers,
preferences and rights, and the qualifications, limitations and restrictions of
the shares of each class of and series of capital stock are as follows:
<PAGE>
A. Common Stock. Except as provided in this Article 4 (or in any
------------
resolution or resolutions adopted by the board of directors pursuant hereto),
the holders of the common stock shall exclusively possess all voting power. Each
holder of shares of common stock shall be entitled to one vote for each share
held by such holder, including the election of directors. There shall be no
cumulative voting rights in the election of directors. Each share of common
stock shall have the same relative rights as and be identical in all respects
with all the other shares of common stock.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to the payment of dividends, the full amount
of dividends and of sinking fund or retirement fund or other retirement
payments, if any, to which such holders are respectively entitled in preference
to the common stock, then dividends may be paid on the common stock and on any
class or series of stock entitled to participate therewith as to dividends, out
of any assets legally available for the payment of dividends; but only when and
as declared by the board of directors.
In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid to or set aside for the holders of
any class having preferences over the common stock in the event of liquidation,
dissolution or winding up of the full preferential amounts of which they are
respectively entitled, the holders of the common stock, and of any class or
series of stock entitled to participate therewith, in whole or in part, as to
distribution of assets, shall be entitled after payment or provision for payment
of all debts and liabilities of the Corporation, to receive the remaining assets
of the Corporation available for distribution, in cash or in kind.
B. Serial Preferred Stock. Except as provided in this Section 4, the
----------------------
board of directors of the Corporation is authorized by resolution or resolutions
from time to time adopted and by filing a certificate pursuant to the applicable
law of the State of Delaware, to provide for the issuance of serial preferred
stock in series and to fix and state the voting powers, full or limited, or no
voting powers, and such designations, preferences and relative, participating,
optional or other special rights of the shares of each such series and the
qualifications, limitations and restrictions thereof. Each share of each series
of serial preferred stock shall have the same relative rights as and be
identical in all respects with all the other shares of the same series.
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<PAGE>
1. Designation and Amount. The first, second, third and fourth
----------------------
series of preferred stock of the Corporation shall be designated Series A
Preferred Stock ("Series A Preferred Stock"), which shall consist of one hundred
twenty-two thousand six hundred ninety (122,690) shares, Series B Preferred
Stock ("Series B Preferred Stock") and Series C Preferred Stock ("Series C
Preferred Stock"), which shall each consist of sixty-one thousand three hundred
forty-five (61,345) shares, and Series D Preferred Stock ("Series D Preferred
Stock"), which shall consist of twenty-five thousand (25,000) shares.
2. Dividends Rights of Series A, B, C and D Preferred Stock. The
--------------------------------------------------------
holders of the Series A, B, C and D Preferred Stock shall not be entitled to
receive any dividends.
3. Liquidation Preference. In the event of any liquidation,
-----------------------
dissolution or winding up of the Corporation, either voluntary or involuntary,
the holders of the Series A, B, C and D Preferred Stock shall not be entitled to
receive any distribution or payment of any kind.
4. Corresponding Dividends and Distributions. In the event the
-----------------------------------------
Corporation at any time or from time to time after April 12, 1994 and before the
applicable Voting Termination Date shall make or issue a dividend or other
distribution to be made to holders of its common stock payable in additional
shares of common stock of the Corporation, without payment of any consideration
by such holders, the Corporation shall contemporaneously therewith make or issue
a dividend or distribution to holders of Series A, B, C and D Preferred Stock of
the Corresponding Number of shares of additional Series A, B, C and D Preferred
Stock. For the purposes hereof, (a) the "Corresponding Number" of shares for
each holder of Series A, B, C and D Preferred Stock shall be determined by
multiplying the number of outstanding shares of Series A, B, C and D Preferred
Stock held by such holder immediately before the dividend or distribution by a
fraction, the numerator of which shall be the aggregate number of outstanding
shares of Common Stock issued as a dividend or distribution to the holders of
Common Stock, and the denominator of which shall be the aggregate number of
outstanding shares of Common Stock on the record date for the dividend or
distribution, and (b) the "Voting Termination Date" shall mean April 11, 1999
with respect to the Series A and D Preferred Stock; April 11, 2000 with respect
to the Series B Preferred Stock; and April 11, 2001 with respect to the Series C
Preferred Stock.
5. Right of Corporation to Redeem Series A, B, and C Preferred
-----------------------------------------------------------
Stock; Put Right. The Corporation shall have the right, as and when determined
- ----------------
by the board of directors of the Corporation
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<PAGE>
out of funds legally available therefor, to redeem the Series A, B, C and D
Preferred Stock in whole or in part, for $0.001 per share, at any time after the
applicable Voting Termination Date (as defined in Paragraph 4 above). Any holder
of Series A, B, C or D Preferred Stock shall have the right to require the
Corporation to purchase such holder's Series A, B, C or D Preferred Stock at any
time for $0.001 per share (such right being referred to as a "Put Right").
The shares to be included in any partial redemption shall be chosen
by lot, to be conducted in such manner as the board of directors of the
Corporation shall deem to be appropriate.
Any redemption of Series A, B, C and D Preferred Stock by the
Corporation shall be carried out in accordance with the following provisions:
(A) In the event the Corporation shall redeem shares of Series
A, B, C and D Preferred Stock, notice of such redemption shall be given by
certified mail, return receipt requested, or by recognized overnight delivery
service, sent not less than ten (10) nor more than sixty (60) days prior to the
redemption date, to each holder of record of the shares to be redeemed, at such
holder's address as the same appears on the stock record books of the
Corporation. Each such notice shall state: (i) the redemption date; (ii) the
number of shares to be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of such shares to be redeemed from such
holder; and (iii) the place or places where certificates for such shares are to
be surrendered for payment of the redemption price.
(B) In the event that a holder of Series A, B, C or D Preferred
Stock shall be entitled to and shall exercise his Put Right, notice of such
holder's exercise of such Put Right shall be given to the Corporation by
certified mail, return receipt requested, or by recognized overnight delivery
service, sent not less than ten (10) nor more than sixty (60) days prior to the
purchase date designated by such holder. Each such notice shall state: (i) the
purchase date designated by such holder; and (ii) the number of shares of such
series to be purchased.
(C) Notice having been mailed as aforesaid, then from and after
the redemption or purchase date (unless default shall be made by the Corporation
in providing money for the payment of the redemption or purchase price of the
shares called for redemption or purchase), said shares shall: (i) be transferred
or deemed transferred to the Corporation free and clear of all liens and
encumbrances; (ii) no longer be deemed to be outstanding; and (iii) all rights
of the holders thereof as shareholders of the Corporation (except the right to
receive from the Corporation the
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<PAGE>
redemption or purchase price) shall cease and terminate. Upon surrender in
accordance with said notice of the certificates for any shares so redeemed or
purchased (properly endorsed or assigned for transfer, if the board of directors
of the Corporation shall so require), such shares shall be redeemed or purchased
by the Corporation at the price aforesaid, without interest. In case fewer than
all the shares represented by any such certificate are redeemed or purchased, a
new certificate shall be issued representing the unredeemed or unpurchased
shares without cost to the holder thereof. If the certificates evidencing
ownership of redeemed shares are not surrendered to the Corporation within six
(6) years after the giving of such notice of redemption, then the Corporation
shall have the right to retain the redemption price and to deem the shareholder
to have waived his right to receive the redemption price or any further right or
benefit from such certificate or shares.
D. Any shares of Series A, B, C and D Preferred Stock which
shall at any time have been redeemed or purchased by the Corporation may, after
such redemption or purchase, be cancelled or retired in the manner provided by
applicable law.
6. Covenant. In addition to any other rights provided by law,
--------
so long as shares of a Series A, B, C and D Preferred Stock shall be
outstanding, the Corporation shall not, without first obtaining the affirmative
vote or written consent of the holders of a majority of such outstanding shares
of such Series A, B, C and D Preferred Stock increase or decrease the number of
shares of Series A, B, C and D Preferred Stock authorized hereby. The covenant
set forth in this Paragraph shall terminate on the Voting Termination Date.
7. Voting Rights. With respect to matters other than the
-------------
election of directors and the ratification of the appointment of auditors, the
Series A, B, C and D Preferred Stock shall have one (1) vote per share until the
respective Voting Termination Dates thereof and shall vote with the Common Stock
as one class; after the respective Voting Termination Dates, Series A, B, C and
D Preferred Stock, shall not have any voting rights. With respect to the
election of directors and the appointment of auditors, the Series A, B, C and D
Preferred Stock shall not have any voting rights at any time.
Article 5. Preemptive Rights. Holders of the capital stock of the
-----------------
Corporation shall not be entitled to preemptive rights with respect to any
shares or other securities of the Corporation which may be issued.
Article 6. Directors. The Corporation shall be under the direction of a
---------
board of directors. The board of directors shall
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<PAGE>
consist of not less than seven directors nor more than 15 directors. The number
of directors within this range shall be as stated in the Corporation's Bylaws,
as may be amended from time to time, and shall initially consist of 13
directors. The board of directors shall divide the directors into three classes
and, when the number of directors is changed, shall determine the class or
classes to which the increased or decreased number of directors shall be
apportioned; provided, that the directors in each class shall be as nearly equal
in number as possible; provided, further, that no decrease in the number of
directors shall affect the term of any director then in office.
The classification shall be such that the term of one class shall expire
each succeeding year. The Corporation's board of directors shall initially be
divided into three classes named Class I, Class II and Class III, with Class I
initially consisting of five directors and Class II and III each initially
consisting of four directors. The terms, classifications, qualifications and
election of the board of directors and the filling of vacancies thereon shall be
as provided herein and in the Bylaws.
Subject to the foregoing, at each annual meeting of shareholders the
successors to the class of directors whose term shall then expire shall be
elected to hold office for a term expiring at the third succeeding annual
meeting and until their successors shall be elected and qualified.
Any vacancy occurring in the board of directors, including any vacancy
created by reason of an increase in the number of directors, shall be filled for
the unexpired term by the concurring vote of a majority of the directors then in
office, whether or not a quorum, and any director so chosen shall hold office
for the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified.
No director may be removed except for cause and then only by an
affirmative vote of at least two-thirds of the total votes eligible to be voted
by shareholders at a duly constituted meeting of shareholders called for such
purpose. At least 30 days prior to such meeting of shareholders, written notice
shall be sent to the director or directors whose removal will be considered at
such meeting.
Article 7. Bylaws. The board of directors or the shareholders may from
------
time to time amend the Bylaws of the Corporation. Such action by the board of
directors shall require the affirmative vote of at least two-thirds of the
directors then in office at a duly constituted meeting of the board of directors
called for such purpose. Such action by the shareholders shall require the
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<PAGE>
affirmative vote of at least two-thirds of the total votes eligible to be voted
at a duly constituted meeting of shareholders called for such purpose.
Article 8. Special Meetings. Special meetings of shareholders may be
----------------
called at any time but only by the chairman of the board or the president of the
Corporation or by the board of directors of the Corporation.
Article 9. Registered Office. The street address of the Corporation's
-----------------
initial registered office in the State of Delaware is 1209 Orange Street, City
of Wilmington, County of New Castle, and the name of its initial registered
agent at such address is The Corporation Trust Company.
Article 10. Criteria for Evaluating Certain Offers. The board of
--------------------------------------
directors of the Corporation, when evaluating any offer to (i) make a tender or
exchange offer for the common stock of the Corporation, (ii) merge or
consolidate the Corporation with another institution, or (iii) purchase or
otherwise acquire all or substantially all of the properties and assets of the
Corporation, shall, in connection with the exercise of its judgment in
determining what is in the best interests of the Corporation and its
shareholders, give due consideration to all relevant factors, including without
limitation the economic effects of acceptance of such offer on (a) depositors,
borrowers and employees of the insured institution subsidiary or subsidiaries of
the Corporation, and on the communities in which such subsidiary or subsidiaries
operate or are located and (b) the ability of such subsidiary or subsidiaries to
fulfill the objectives of an insured institution under applicable federal
statutes and regulations.
Article 11. Certain Business Combinations. The votes of shareholders
-----------------------------
and directors required to approve any Business Combination shall be as set forth
in this Article 11. The term "Business Combination" is used as defined in
subsection 1 of this Article 11. All other capitalized terms not otherwise
defined in this Article 11 or elsewhere in this Certificate of Incorporation are
used as defined in subsection 3 of this Article 11.
Subsection 1. Vote Required for Certain Business
----------------------------------
Combinations.
------------
A. Higher Vote for Certain Business Combinations. In
---------------------------------------------
addition to any affirmative vote required by law or this Certificate
of Incorporation, and except as otherwise expressly provided in
subsection 2 of this Article 11:
(i) any merger, consolidation or share
-7-
<PAGE>
exchange of the Corporation or any Subsidiary (as hereinafter
defined) with (a) any Interested Shareholder (as hereinafter defined)
or (b) any other corporation (whether or not itself an Interested
Shareholder) which is, or after the merger, consolidation or share
exchange would be, an Affiliate or Associate (as the terms are
hereinafter defined) of such Interested Shareholder prior to the
transaction; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition other than in the usual and regular course of
business (in one transaction or a series of transactions in any
twelve-month period) to any Interested Shareholder or any Affiliate
or Associate of such Interested Shareholder, other than the
Corporation or any of its Subsidiaries, of any assets of the
Corporation or any Subsidiary having, measured at the time the
transaction or transactions are approved by the board of directors of
the Corporation, an aggregate book value as of the end of the
Corporation's most recent fiscal quarter of ten percent or more of
the total Market Value (as hereinafter defined) of the outstanding
shares of the Corporation or of its net worth as of the end of its
most recent fiscal quarter; or
(iii) the issuance or transfer by the Corporation, or any
Subsidiary (in one transaction or a series of transactions) of any
equity securities of the Corporation or any Subsidiary having an
aggregate Market Value of five percent or more of the total Market
Value of the outstanding shares of the Corporation to any Interested
Shareholder or any Affiliate or Associate of any Interested
Shareholder, other than the Corporation or any of its Subsidiaries,
except pursuant to the exercise of warrants, rights or options to
subscribe to or purchase securities offered, issued or granted pro
rata to all holders of the Voting Stock (as hereinafter defined) of
the Corporation or any other method affording substantially
proportionate treatment to the holders of Voting Stock; or
(iv) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation or any Subsidiary
proposed by or on behalf of an Interested Shareholder or any
Affiliate or Associate of such Interested Shareholder, other than the
Corporation or any of its Subsidiaries; or
(v) any reclassification of securities
-8-
<PAGE>
(including any reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the Corporation with
any of its Subsidiaries or any other transaction (whether or not with
or into or otherwise involving an Interested Shareholder) which has
the effect, directly or indirectly, in one transaction or a series of
transactions, of increasing the proportionate amount of the
outstanding shares of any class of equity or convertible securities
of the Corporation or any Subsidiary which is directly or indirectly
owned by any Interested Shareholder or any Affiliate or Associate of
any Interested Shareholder, other than the Corporation or any of its
Subsidiaries;
shall be approved by affirmative vote of at least (a) the holders of two-thirds
of the total number of outstanding shares of Voting Stock and (b) the holders of
a majority of the voting power of the outstanding shares of Voting Stock,
excluding for purposes of calculating the affirmative vote and the total number
of outstanding shares of Voting Stock under this clause (b), all shares of
Voting Stock of which the beneficial owner is the Interested Shareholder
involved in the Business Combination or any Affiliate or Associate of such
Interested Shareholder. Such affirmative vote shall be required notwithstanding
the fact that no vote may be required, or that a lesser percentage may be
specified, by law.
B. Definition of "Business Combination." The term "Business
-----------------------------------
Combination" as used in this Article 11 shall mean any transaction which is
referred to in any one or more of clauses (i) through (v) of paragraph A of this
subsection 1.
Subsection 2. When Higher Vote Is Not Required.
--------------------------------
The provisions of subsection 1 of this Article 11 shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law and any other
provision of this Certificate of Incorporation, if all of the conditions
specified in either paragraph A, or paragraph B are met:
A. Approval by Continuing Directors. The Business Combination
--------------------------------
shall have been approved by at least two-thirds of the Continuing Directors (as
hereinafter defined) then in office at a duly constituted meeting of the board
of directors of the Corporation called for such purpose.
B. Price and Procedure Requirements. All of the following
--------------------------------
conditions shall have been met:
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<PAGE>
(i) The aggregate amount of the cash and the Market Value as of
the Valuation Date (as hereinafter defined) of the Business Combination of
consideration other than cash to be received per share by holders of common
stock in such Business Combination shall be at least equal to the highest of the
following:
(a) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the
Interested Shareholder for any shares of common stock acquired by it (1) within
the two-year period immediately prior to the first public announcement of the
proposal of the Business Combination (the "Announcement Date") or (2) in the
transaction in which it became an Interested Shareholder, whichever is higher;
or
(b) the Market Value per share of common stock of the same
class or series on the Announcement Date or on the date on which the Interested
Shareholder became an Interested Shareholder (such latter date is referred to in
this Article 11 as the "Determination Date"), whichever is higher; or
(c) the price per share equal to the Market Value per share of
common stock of the same class or series determined pursuant to subdivision
(i)(b) hereof, multiplied by the fraction of (1) the highest per share price
(including brokerage commissions, transfer taxes and soliciting dealer's fees)
paid by the Interested Shareholder for any shares of common stock of the same
class or series acquired by it within the two-year period immediately prior to
the Announcement Date, over (2) the Market Value per share of common stock of
the same class or series on the first day in such two-year period on which the
Interested Shareholder acquired shares of common stock.
(ii) The aggregate amount of the cash and the Market Value as of
the Valuation Date of consideration other than cash to be received per share by
holders of shares of any class or series of outstanding Voting Stock, other than
common stock, shall be at least equal to the highest of the following (it being
intended that the requirements of this paragraph B(ii) shall be required to be
met with respect to every class of outstanding Voting Stock, whether or not the
Interested Shareholder has previously acquired any shares of a
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<PAGE>
particular class of Voting Stock):
(a) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the
Interested Shareholder for any shares of such class or series of Voting Stock
acquired by it: (1) within two-year period immediately prior to the Announcement
Date or (2) in the transaction in which it became an Interested Shareholder,
whichever is higher; or
(b) (if applicable) the highest preferential amount per share to
which the holders of shares of such class or series of Voting Stock are entitled
in the event of any voluntary or involuntary liquidation, dissolution or winding
up of the Corporation; or
(c) the Market Value per share of such class or series of Voting
Stock on the Announcement Date or on the Determination Date, whichever is
higher; or
(d) the price per share equal to the Market Value per share of
such class or series of stock determined pursuant to subdivision (ii)(c) hereof
multiplied by the fraction of (1) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the
Interested Shareholder for any shares of any class or series of Voting Stock
acquired by it within the two-year period immediately prior to the Announcement
Date over (2) the Market Value per share of the same class or series of Voting
Stock on the first day in such two-year period on which the Interested
Shareholder acquired any shares of the same class or series of Voting Stock.
(iii) The consideration to be received by holders of a particular class or
series of outstanding Voting Stock shall be in cash or in the same form as the
Interested Shareholder has previously paid for shares of such class or series of
Voting Stock. If the Interested Shareholder has paid for shares of any class or
series of Voting Stock with varying forms of consideration, the form of
consideration for such class or series of Voting Stock shall be either cash or
the form used to acquire the largest number of shares of such class or series of
Voting Stock previously acquired by it.
(iv) After such Interested Shareholder has become an Interested
Shareholder and prior to the consummation of such Business Combination: (a)
there
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<PAGE>
shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends (whether
or not cumulative) on any outstanding preferred stock of
the Corporation, unless the failure so to declare and pay
such dividends is approved by a majority of the Continuing
Directors; (b) there shall have been (1) no reduction in
the annual rate of dividends paid on any class or series of
the capital stock of the Corporation (except as necessary
to reflect any subdivision of the capital stock), except as
approved by a majority of the Continuing Directors, and (2)
an increase in such annual rate of dividends as necessary
to reflect any reclassification (including any reverse
stock split), recapitalization, reorganization or any
similar transaction which has the effect of reducing the
number of outstanding shares of common stock, unless the
failure so to increase such annual rate is approved by a
majority of the Continuing Directors; and (c) such
Interested Shareholder shall not have become the beneficial
owner of any additional shares of capital stock except as
part of the transaction which results in such Interested
Shareholder becoming an Interested Shareholder or by virtue
of proportionate stock splits or stock dividend.
(v) After such Interested Shareholder has become
an Interested Shareholder, such Interested Shareholder
shall not have received the benefit, directly or indirectly
(except proportionately as a shareholder), of any loans,
advances, guarantees, pledges or other financial assistance
or any tax credits or other tax advantages provided by the
Corporation or any of its Subsidiaries (whether in
anticipation of or in connection with such Business
Combination or otherwise).
(vi) A proxy or information statement describing
the proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations) shall
be mailed to public shareholders of the Corporation at
least 20 days prior to the consummation of such Business
Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or
subsequent provisions).
Subsection 1. Certain Definitions.
-------------------
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<PAGE>
For the purposes of this Article 11:
A. "Interested Shareholder" shall mean any person (other
than the Corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or
indirectly, of 10 percent or more of the voting power of the
then outstanding Voting Stock; or
(ii) is an Affiliate of the Corporation and at any
time within the two-year period immediately prior to the
date in question was the beneficial owner, directly or
indirectly, of 10 percent or more of the voting power of
the then outstanding Voting Stock.
B. "Beneficial owner," when used with respect to any
Voting Stock, means a person:
(i) that, individually or with any of its
Affiliates or Associates, beneficially owns Voting Stock
directly or indirectly; or
(ii) that, individually or with any of its
Affiliates or Associates, has (a) the right to acquire
Voting Stock (whether such right is exercisable immediately
or only after passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise; (b) the right to vote or direct the voting of
Voting Stock pursuant to any agreement, arrangement or
understanding; or (c) the right to dispose of or to direct
the disposition of Voting Stock pursuant to any agreement,
arrangement or understanding; or
(iii) that, individually or with any of its
Affiliates or Associates, has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting
or disposing of Voting Stock with any other person that
beneficially owns, or whose Affiliates or Associates
beneficially own, directly or indirectly, such shares of
Voting Stock.
C. For the purposes of determining whether a person is an
Interested Shareholder pursuant to paragraph A of this subsection 3,
the number of shares of Voting Stock deemed to be outstanding shall
include shares deemed owned through application of paragraph B of
this subsection 3 but shall not include any other shares of Voting
Stock which may be issuable pursuant to any agreement, arrangement or
understanding, or
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<PAGE>
upon exercise of conversion rights, warrants or options, or
otherwise.
D. "Affiliate" means a person that directly or indirectly
through one or more intermediaries controls, or is controlled by, or
is under common control, with a specified person.
E. "Associate," when used to indicate a relationship with
any person, means: (1) any domestic or foreign corporation or
organization, other than the Corporation or a subsidiary of the
Corporation, of which such person is an officer, director or partner
or is, directly or indirectly, the beneficial owner of ten percent or
more of any class of equity securities; (2) any trust or other estate
in which such person has a substantial beneficial interest or as to
which such person serves as a trustee or in a similar fiduciary
capacity; and (3) any relative or spouse of such person, or any
relative of such spouse who has the same home as such person or who
is a director or officer of the Corporation or any of its Affiliates.
F. "Subsidiary" means any corporation of which Voting
Stock having a majority of the votes entitled to be cast is owned,
directly or indirectly, by the Corporation.
G. "Continuing Director" means any member of the board of
directors of the Corporation who is unaffiliated with the Interested
Shareholder and was a member of the board of directors of the
Corporation prior to the time that the Interested Shareholder
(including any Affiliate or Associate of such Interested Shareholder)
became an Interested Shareholder, and any successor of a Continuing
Director who is unaffiliated with the Interested Shareholder and is
recommended to succeed a Continuing Director by a majority of
Continuing Directors then on the board of directors of the
Corporation.
H. "Market Value" means:
(i) in the case of stock, the highest
closing sale price during the 30-day period immediately
preceding the date in question of a share of such stock on
the composite tape for New York Stock Exchange - listed
stocks, or, if such stock is not quoted on the composite
tape, or the New York Stock Exchange, or, if such stock is
not listed on such exchange, the principal United States
securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or, if
such stock is not listed on any such
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<PAGE>
exchange, the highest closing sales price or bid quotation
with respect to a share of such stock during the 30-day
period preceding the date in question on the National
Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such
quotations are available, the fair market value on the date
in question of a share of such stock as determined by the
board of directors of the Corporation in good faith; and
(ii) in the case of property other than cash or
stock, the fair market value of such property on the date
in question as determined by a majority of the board of
directors of the Corporation in good faith.
I. "Valuation Date" means: (A) For a business
combination voted on by shareholders, the latter of the day prior to
the date of the shareholders vote or the date twenty days prior to the
consummation of the Business Combination; and (B) for a Business
Combination not voted upon by the shareholders, the date of the
consummation of the Business Combination.
J. "Voting Stock" means the then outstanding shares of
capital stock of the Corporation entitled to vote generally in the
election of directors.
K. In the event of any Business Combination in which the
Corporation is the surviving corporation, the phrase "consideration
other than cash to be received" as used in paragraphs B(i) and B(ii)
of Section 2 of this Article 11 shall include the shares of common
stock and/or the shares of any other class or series of outstanding
Voting Stock retained by the holder of such shares.
Subsection 2. Powers of the Board of Directors.
--------------------------------
A majority of the Corporation's directors then in office shall have
the power and duty to determine for the purpose of this Article 11, on the basis
of information known to them after reasonable inquiry, (A) whether a person is
an Interested Shareholder, (B) the number of shares of Voting Stock beneficially
owned by any person, (C) whether a person is an Affiliate or Associate of
another, and (D) whether the requirements of paragraph B of Section 2 have been
met with respect to any Business Combination; and the good faith determination
of a majority of the board of directors on such matters shall be conclusive and
binding for all the purposes of this Article 11.
Subsection 3. No Effect on Fiduciary Obligations of
-------------------------------------
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<PAGE>
Interested Shareholders.
-----------------------
Nothing contained in this Article 11 shall be construed to relieve
any Interested Shareholder from any fiduciary obligation imposed by law.
Article 1. Anti-Greenmail. Any direct or indirect purchase or other
--------------
acquisition by the Corporation of any Voting Stock (as defined in Article 11
hereof) from any Significant Shareholder (as hereinafter defined) who has been
the beneficial owner (as defined in Article 11 hereof) of such Voting Stock for
less than two years prior to the date of such purchase or other acquisition
shall, except as hereinafter expressly provided, require the affirmative vote of
the holders of at least a majority of the total number of outstanding shares of
Voting Stock, excluding in calculating such affirmative vote and the total
number of outstanding shares all Voting Stock beneficially owned by such
Significant Shareholder. Such affirmative vote shall be required notwithstanding
the fact that no vote may be required, or that a lesser percentage may be
specified, by law, but no such affirmative vote shall be required with respect
to any purchase or other acquisition of Voting Stock made as part of a tender or
exchange offer by the Corporation to purchase Voting Stock on the same terms
from all holders of the same class of Voting Stock and complying with the
applicable requirements of the Securities Exchange Act of 1934 and the rules and
regulations hereunder.
For the purposes of this Article 12, "Significant Shareholder" shall
mean any person (other than the Corporation or any corporation of which a
majority of any class of Voting Stock is owned, directly or indirectly, by the
Corporation) who or which is the beneficial owner, directly or indirectly, of
five percent or more of the voting power of the outstanding Voting Stock.
Nothing contained in this Article 12 shall be construed to
relieve any interested shareholder from any fiduciary obligation imposed by law.
Article 2. Shareholder Action. Any action required or permitted to be
------------------
taken by the shareholders of the Corporation must be effected at a duly called
annual or special meeting of such holders and may not be affected by any consent
in writing by such holders, unless such consent is unanimous.
Article 3. Amendment of Certificate of Incorporation. Except as set
-----------------------------------------
forth in this Article 14 or as otherwise specifically required by law, no
amendment of any provision of this Certificate of Incorporation shall be made
unless such amendment has been first proposed by the board of directors of the
Corporation upon the affirmative vote of at least two-thirds of the directors
then in
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<PAGE>
office at a duly constituted meeting of the board of directors called
for such purpose and thereafter approved by the shareholders of the Corporation
by the affirmative vote of the holders of at least a majority of the shares
entitled to vote thereon at a duly called annual or special meeting; provided,
however, that if such amendment is to the provisions set forth in this clause of
Article 14 or in Article 6, 7, 8, 10, 11, 12 or 13, such amendment must be
approved by the affirmative vote of the holders of at least two-thirds of the
shares entitled to vote thereon rather than a majority; provided, further, that
if such amendment is to the provisions set forth in this clause of Article 14 or
in Article 11, such amendment must be approved by the affirmative vote of the
holders of at least 80 percent of the shares entitled to vote thereon rather
than a majority.
Article 4. Limitation on Director Liability. No director of the
--------------------------------
Corporation shall be personally liable to the Corporation or its shareholders
for monetary damages for any breach of fiduciary duty by such director as a
director, except for liability (1) for any breach of the director's duty of
loyalty to the Corporation or its shareholders, (2) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (3) under Section 174 of the DGCL for approval of an unlawful dividend or
an unlawful stock purchase or redemption, or (iv) for any transaction from which
the director derived an improper personal benefit. Any repeal or modification of
this Article 15 by the shareholders of the Corporation shall be prospective
only, and shall not adversely affect any limitation on the personal liability of
a director of the Corporation for acts or omissions occurring prior to the
effective date of such repeal or modification.
Article 5. Certain Restrictions on the Transfer of Stock. In order to
---------------------------------------------
preserve the net operating loss carryovers, net capital loss carryovers, and
certain other attributes (the "Tax Benefits") to which the Corporation is
entitled pursuant to the Internal Revenue Code of 1986, as amended, or any
successor statute (collectively the "Code") and the regulations thereunder, the
following restrictions shall apply until December 31, 2008, unless the board of
directors of the Corporation shall fix an earlier or later date in accordance
with subsection 8 of this Article 16 (such date is sometimes referred to herein
as the "Expiration Date"):
Subsection 1. Restrictions and Definitions. From and after
----------------------------
April 11, 1994, no person other than the Corporation shall transfer any shares
of stock of the Corporation (other than stock described in Section 1504(a)(4) of
the Code or any successor statute, or stock that is not so described solely
because it is entitled to vote as a result of dividend arrearages) to any person
to the extent that such transfer, if effective, would cause the Ownership
Interest Percentage of the transferee or any other person
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<PAGE>
to increase above 4.9 percent, whether or not said transferee or other person
held stock of the Corporation in excess of such percentage before such transfer.
For purposes of this Article 16, (a) "person" refers to any individual,
corporation, estate, trust, association, company, partnership, joint venture, or
similar organization; (b) a person's Ownership Interest Percentage shall be the
sum of (i) such person's direct ownership interest in the Corporation as
determined under Treasury Regulation Section 1.382-2T(f)(8) or any successor
regulation, (ii) such person's indirect ownership interest in the Corporation as
determined under Treasury Regulation Section 1.382-2T(f)(15) or any successor
regulation, and (iii) such person's additional deemed ownership interest in the
Corporation as determined under Proposed Treasury Regulation Section 1.1502-
92(c) or any successor regulation, except that, for purposes of determining a
person's direct ownership interest in the corporation, any ownership interest
held by such person in the Corporation described in Treasury Regulation Section
1.382-2T(f)(18)(iii)(A) or any successor regulation shall be treated as stock of
the Corporation, and for purposes of determining a person's indirect ownership
interest in the Corporation, Treasury Regulations Sections 1.382-2T(g)(2),
1.382-2T(h)(2)(iii) and 1.382-2T(h)(6)(iii) or any successor regulations shall
not apply and any stock that would be attributed to such person pursuant to the
option attribution rules of Treasury Regulation Section 1.382-2T(h)(4) and
Treasury Regulation Section 1.382-4 or any successor regulations, if to do so
would result in an ownership change, shall be attributed to such person without
regard to whether such attribution results in an ownership change; (c)
"transfer" refers to any means of conveying legal or beneficial ownership of
shares of stock of the Corporation, whether such means is direct or indirect,
voluntary or involuntary, including, without limitation, the transfer of
ownership of any entity that owns shares of stock of the Corporation, and
"transferee" means any person to whom stock of the Corporation is transferred.
Subsection 2. Exceptions. Any transfer of shares of stock
----------
of the Corporation that would otherwise be prohibited pursuant to the preceding
subsection shall nonetheless be permitted if information relating to a specific
proposed transaction is presented to the board of directors of the Corporation
and the board determines (based, at its option, upon an opinion of legal counsel
selected by the board to that effect) that such transaction will not jeopardize
the Tax Benefits. Nothing in this subsection shall be construed to limit or
restrict the board of directors of the Corporation in the exercise of its
fiduciary duties under applicable law.
Subsection 3. Attempted Transfer in Violation of Transfer
-------------------------------------------
Restrictions. Unless approval of the board of directors of the Corporation is
- ------------
obtained as provided in subsection 2 of this
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<PAGE>
Article 16, any attempted transfer of shares of stock of the Corporation in
excess of the shares that could be transferred to the transferee without
restriction under subsection 1 of this Article 16 is not effective to transfer
ownership of such excess shares (the "Prohibited Shares") to the purported
acquiror thereof (the "Purported Acquiror"), who shall not be entitled to any
rights as a shareholder of the Corporation with respect to the Prohibited Shares
(including, without limitation, the right to vote or to receive dividends with
respect thereto). All rights with respect to the Prohibited Shares shall remain
the property of the person who initially purported to transfer the Prohibited
Shares to the Purported Acquiror (the "Initial Transferor") until such time as
the Prohibited Shares are resold as set forth in subsection 3(A) or (B) of this
Article 16. The Purported Acquiror, by acquiring ownership of shares of stock of
the Corporation that are not Prohibited Shares, shall be deemed to have
consented to all the provisions of this Article 16 and to have agreed to act as
provided in the following subsection 3(A).
(A) Upon demand by the Corporation, the Purported Acquiror
shall transfer any certificate or other evidence of purported
ownership of the Prohibited Shares within the Purported Acquiror's
possession or control, along with any dividends or other
distributions paid by the Corporation with respect to the Prohibited
Shares that were received by the Purported Acquiror (the "Prohibited
Distribution"), to an agent designated by the Corporation (the
"Agent"). If the Purported Acquiror has sold the Prohibited Shares to
an unrelated party in an arms-length transaction after purportedly
acquiring them, the Purported Acquiror shall be deemed to have sold
the Prohibited Shares as agent for the Initial Transferor, and in
lieu of transferring the Prohibited Shares and Prohibited
Distributions to the Agent shall transfer to the Agent the Prohibited
Distributions and the proceeds of such sale (the "Resale Proceeds")
except to the extent that the Agent grants written permission to the
Purported Acquiror to retain a portion of the Resale Proceeds not
exceeding the amount that would have been payable by the Agent to the
Purported Acquiror pursuant to the following subsection 3(B) if the
Prohibited Shares had been sold by the Agent rather than by the
Purported Acquiror. Any purported transfer of the Prohibited Shares
by the Purported Acquiror other than a transfer described in one of
the two preceding sentences shall not be effective to transfer any
ownership of the Prohibited Shares.
(B) The Agent shall sell in an arms-length transaction
(through the Nasdaq Stock Market, if possible) any Prohibited Shares
transferred to the Agent by the Purported Acquiror, and the proceeds
of such sale (the "Sales Proceeds"), or the
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<PAGE>
Resale Proceeds, if applicable, shall be allocated to the Purported
Acquiror up to the following amount: (i) where applicable, the
purported purchase price paid or value of consideration surrendered
by the Purported Acquiror for the Prohibited Shares, and (ii) where
the purported transfer of the Prohibited Shares to the Purported
Acquiror was by gift, inheritance, or any similar purported transfer,
the fair market value of the Prohibited Shares at the time of such
purported transfer. Subject to the succeeding provisions of this
subsection, any Resale Proceeds or Sales Proceeds in excess of the
amount allocable to the Purported Acquiror pursuant to the preceding
sentence, together with any Prohibited Distributions, shall be the
property of the Initial Transferor. If the identity of the Initial
Transferor cannot be determined by the Agent through inquiry made to
the Purported Acquiror, the Agent shall publish appropriate notice
(in The Wall Street Journal, if possible) for seven (7) consecutive
business days in an attempt to identify the Initial Transferor in
order to transmit any Resale Proceeds or Sales Proceeds or Prohibited
Distributions due to the Initial Transferor pursuant to this
subsection. The Agent may also take, but is not required to take,
other reasonable actions to attempt to identify the Initial
Transferor. If after ninety (90) days following the final publication
of such notice the Initial Transferor has not been identified, any
amounts due to the Initial Transferor pursuant to this subsection may
be paid over to a court or governmental agency, if applicable law
permits, or otherwise shall be transferred to an entity designated by
the Corporation that is described in Section 501(c)(3) of the Code.
In no event shall any such amounts due to the Initial Transferor
inure to the benefit of the Corporation or the Agent, but such
amounts may be used to cover expenses (including but not limited to
the expenses of publication) incurred by the Agent in attempting to
identify the Initial Transferor.
Subsection 4. Prompt Enforcement Against Purported Acquiror. Within
---------------------------------------------
thirty (30) business days of learning of a purported transfer of Prohibited
Shares to a Purported Acquiror, the Corporation through its Secretary shall
demand that the Purported Acquiror surrender to the Agent the certificates
representing the Prohibited Shares, or any Resale Proceeds, and any Prohibited
Distributions, and if such surrender is not made by the Purported Acquiror
within thirty (30) business days from the date of such demand, the Corporation
shall institute legal proceedings to compel such transfer, provided, however,
that nothing in this subsection 4 shall preclude the Corporation in its
discretion from immediately bringing legal proceedings without a prior demand,
and also provided that failure of the Corporation to act within the time periods
set out in this subsection 4 shall not constitute a waiver
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<PAGE>
of any right of the Corporation to compel any transfer required by subsection
3(A) of this Article 16.
Subsection 5. Additional Actions to Prevent Violation or Attempted
----------------------------------------------------
Violation. Upon a determination by the board of directors of the Corporation
- ---------
that there has been or is threatened a purported transfer of Prohibited Shares
to a Purported Acquiror, the board of directors may take such action in addition
to any action required by the preceding subsection as it deems advisable to give
effect to the provisions of this Article 16, including, without limitation,
refusing to give effect on the books of this Corporation to such purported
transfer or instituting proceedings to enjoin such purported transfer.
Subsection 6. Obligation to Provide Information. The Corporation may
---------------------------------
require as a condition to the registration of the transfer of any shares of its
stock that the proposed transferee furnish to the Corporation all information
reasonably requested by the Corporation with respect to all the proposed
transferee's direct or indirect ownership interests in, or options to acquire,
stock of the Corporation.
Subsection 7. Legends. All certificates evidencing ownership of
-------
shares of stock of this Corporation that are subject to the restrictions on
transfer contained in this Article 16 shall bear a conspicuous legend
referencing the restrictions set forth in this Article 16.
Subsection 8. Further Actions. Nothing contained in this Article 16
---------------
shall limit the authority of the board of directors of the Corporation to take
such other action to the extent permitted by law as it deems necessary or
advisable to protect the Corporation and the interests of the holders of its
securities in preserving the Tax Benefits. Without limiting the generality of
the foregoing, in the event of a change in law making one or more of the
following actions necessary or desirable, the board of directors of the
Corporation may (i) accelerate or extend the Expiration Date, (ii) modify the
Ownership Interest Percentage in the Corporation specified in the first sentence
of subsection 1, (iii) modify the definitions of any terms set forth in this
Article 16 as reasonably necessary or desirable to preserve the Tax Benefits
under the Code and the regulations thereunder, or (iv) determine that the
continuation of these restrictions is no longer reasonably necessary for the
preservation of the Tax Benefits, which determination shall be based upon an
opinion of legal counsel to the Corporation and which determination shall be
filed with the Secretary of the Corporation and mailed by the Secretary to
shareholders of this Corporation within ten (10) days after the date of any such
determination.
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<PAGE>
Exhibit 3.2
AMENDED AND RESTATED
BYLAWS
OF
THE ARISTOTLE CORPORATION
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
-----------------
Corporation shall be in the city of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have offices at
-------------
such other places both within and without the State of Delaware as the board of
directors may from time to time determine.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. Meetings of shareholders for the
-----------------
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the board of directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. All annual and special meetings of
---------------
shareholders shall be held at such place, date and hour as shall be designated
from time to time by the board of directors and stated in the notice of the
meeting, at which meetings the shareholders shall elect by a plurality vote a
board of directors and transact such other business as may properly be brought
before the meeting. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each shareholder entitled to vote at
such meeting not less than 20 nor more than 50 days before the date of the
meeting. The notice shall also set forth the purpose or purposes for which the
meeting is called.
Section 3. Business at Annual Meeting. At an annual meeting of the
--------------------------
shareholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the board of directors, (b) otherwise
properly brought before the meeting by or at the direction of the board of
directors, or (c) otherwise properly brought before the meeting by a
shareholder.
For business to be properly brought before an annual meeting
<PAGE>
by a shareholder, the shareholder must have given timely notice thereof in
writing to the secretary of the Corporation. To be timely, a shareholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation not less than 30 days nor more than 90 days prior to
the meeting; provided, however, that in the event that less than 45 days' notice
or prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the 15th day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. A shareholder's notice to the secretary shall set forth as to each
matter the shareholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the Corporation's books, of the shareholder proposing
such business, (c) the class and number of shares of the Corporation which are
beneficially owned by the shareholder, and (d) any material interest of the
shareholder in such business. Notwithstanding anything in these bylaws to the
contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this Section 3. The chairman of an
annual meeting shall, if the facts warrant, determine and declare to the annual
meeting that a matter of business was not properly brought before the meeting in
accordance with the provisions of this Section 3, and if he should so determine,
he shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted.
Section 4. Special Meetings. Special meetings of the shareholders,
----------------
for any purpose or purposes, may be called at any time only by order of the
chairman of the board (and if there is no chairman of the board, the president)
or a majority of the directors then in office. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given not less than 20 nor
more than 50 days before the date of the meeting to each shareholder entitled to
vote at such meeting.
Section 5. Quorum. Except as otherwise provided by law or by the
------
Certificate of Incorporation, the holders of one-third of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the shareholders, the shareholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the
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<PAGE>
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. If the adjournment is for more than 30 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each shareholder entitled to vote at the
meeting.
Section 6. Voting. Except as otherwise required by law, the
------
Certificate of Incorporation or these bylaws, any matter brought before any
meeting of shareholders shall be decided by the affirmative vote of the majority
of the votes cast on the matter. Each shareholder represented at a meeting of
shareholders shall be entitled to cast one vote for each share of the capital
stock entitled to vote thereat held by such shareholder. The board of directors,
in its discretion, may require that any votes cast at such meeting shall be cast
by written ballot.
Section 7. List of Shareholders Entitled to Vote. The officer of the
-------------------------------------
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of shareholders, a complete
list of the shareholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each shareholder and the number
of shares registered in the name of each shareholder. Such list shall be open to
the examination of any shareholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any shareholder of the Corporation who is
present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall
------------
be the only evidence as to who are the shareholders entitled to examine the list
required by Section 7 of this Article II or to vote in person or by proxy at any
meeting of shareholders .
Section 9. Proxies. At all meetings of shareholders, a shareholder
-------
may vote by proxy executed in writing by the shareholder or his duly authorized
attorney-in-fact. Proxies solicited on behalf of the board of directors shall be
voted as directed by the shareholder or, in the absence of such direction, as
determined by a majority of the board of directors. No proxy shall be valid
after three years from its date, unless the proxy
- 3 -
<PAGE>
provides for a longer period. A duly executed proxy shall be irrevocable if it
states that it is irrevocable and if, only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power.
Section 10. Voting of Shares in the Name of Two or More Persons. If
---------------------------------------------------
shares or other securities having voting power stand of record in the names of
two or more persons, whether fiduciaries, members of a partnership, joint
tenants, tenants in common, tenants by the entirety or otherwise, or if two or
more persons have the same fiduciary relationship respecting the same shares,
unless the secretary of the Corporation is given written notice to the contrary
and is furnished with a copy of the instrument or order appointing them or
creating the relationship wherein it is so provided, their acts with respect to
voting shall have the following effect: (1) if only one votes, his act binds
all; (2) if more than one vote, the act of the majority so voting binds all; (3)
if more than one vote, but the vote is evenly split on any particular matter,
each faction may vote the securities in question proportionally, or any person
voting the shares, or a beneficiary, if any, may apply to the Court of Chancery
of the State of Delaware or such other court as may have jurisdiction to appoint
an additional person to act with the persons so voting the shares, which shall
then be voted as determined by a majority of such persons and the person
appointed by the Court. If the instrument so filed shows that any such tenancy
is held in unequal interests, a majority or even-split for the purposes of this
subsection shall be a majority or even-split in interest.
Section 12. Voting of Shares by Certain Holders. Shares standing in
-----------------------------------
the name of another corporation may be voted by any officer, agent or proxy as
the bylaws of such corporation may prescribe, or, in the absence of such
provision, as the board of directors of such corporation may determine. Shares
held by an administrator, executor, guardian or conservator may be voted by him,
but no trustee shall be entitled to vote shares held by him without a transfer
of such shares into his name. Shares standing in the name of a receiver may be
voted by such receiver, and shares held by or under the control of a receiver
may be voted by such receiver without the transfer into his name if authority so
to do is contained in an appropriate order of the court or other public
authority by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares unless in the transfer by the pledgor on the books of the Corporation he
has expressly empowered the pledgee to vote thereon, in which case only the
pledgee, or his proxy, may represent such stock and vote thereon.
Neither treasury shares of its own stock held by the
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Corporation, nor shares held by another corporation, if a majority of the shares
entitled to vote for the election of directors of such other corporation are
held by the Corporation, shall be voted at any meeting or counted in determining
the total number of outstanding shares at any given time for purposes of any
meeting.
Section 13. 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. The number of inspectors shall be either one or three. If the board of
directors so appoints either one or three such inspectors, that appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed, the chairman of the board or the president may, and on the request of
not less than ten percent of the votes represented at the meeting shall, make
such appointments at the meeting. If appointed at the meeting, the majority of
the votes 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 filed by appointment by the board of
directors in advance of the meeting or by the chairman or vice chairman of the
board or the president.
Unless otherwise prescribed by law, the duties of such inspectors
shall include: determining the number of shares of stock entitled to vote, the
voting power of each share, the shares of stock represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies;
receiving votes, ballots or consents; hearing and determining all challenges and
questions in any way arising in connection with the right to vote; counting and
tabulating all votes or consents; determining the result; and such acts as may
be proper to conduct the election or the vote with fairness to all shareholders.
Section 14. Conduct of Meetings. Annual and special meetings shall
-------------------
be conducted in accordance with rules prescribed by the presiding officer of the
meeting, unless otherwise prescribed by law or these bylaws. The board of
directors shall designate, when present, either the chairman or the vice
chairman of the board or the president to preside at such meetings.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The number of directors
--------------------------------
shall be not less than seven (7) nor more than fifteen (15). The number of
directorships at any time shall be the number most recently fixed by action of
the Board of
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Directors or, absent such action, shall be that number of directors in office
immediately following the preceding regular annual meeting of shareholders or
the meeting held in lieu thereof plus the number elected since such meeting to
fill a vacancy created by an increase in the size of the Board of Directors.
Directors shall be elected only by shareholders at annual meetings of
shareholders, other than the initial board of directors and except as provided
in section 2 of this Article III in the case of vacancies and newly created
directorships. Each director elected shall hold office for the term for which he
is elected and until his successor is elected and qualified or until his earlier
resignation or removal.
Section 2. Classes; Terms of Office; Vacancies. The board of
-----------------------------------
directors shall divide the directors into three classes; and, when the number of
directors is changed, shall determine the class or classes to which the
increased or decreased number of directors shall be apportioned; provided,
further, that no decrease in the number of directors shall affect the term of
any director then in office. At each annual meeting of shareholders, directors
elected to succeed those whose terms are expiring shall be elected for a term of
office to expire at the third succeeding annual meeting of shareholders and when
their respective successors are elected and qualified.
Vacancies and newly created directorships resulting from any increase
in the authorized number of directors may be filled, for the unexpired term, by
the concurring vote of a majority of the directors then in office, whether or
not a quorum, and any director so chosen shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified.
Section 3. Duties and Powers. The business of the Corporation shall
-----------------
be managed by or under the direction of the board of directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
bylaws directed or required to be exercised or done by the shareholders. The
board of directors shall annually elect a chairman and a vice chairman of the
board and a president from among its members and shall designate, when present,
either the chairman or the vice chairman of the board or the president to
preside at its meetings.
Section 4. Meetings. The board of directors of the Corporation may
--------
hold meetings, both regular and special, either within or without the State of
Delaware. The annual regular
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meeting of the board of directors shall be held without other notice than this
bylaw immediately after, and at the same place as, the annual meeting of the
shareholders. Additional regular meetings of the board of directors shall be
held monthly, and may be held without notice at such time and at such place as
may from time to time be determined by the board of directors. Special meetings
of the board of directors may be called by the chairman or the vice chairman of
the board, the president or a majority of directors then in office. Notice
thereof stating the place, date and hour of the meeting shall be given to each
director either by mail not less than 48 hours before the date of the meeting,
or by telephone or telegram on 24 hours' notice.
Section 5. Quorum. Except as may be otherwise specifically provided
------
by law, the Certificate of Incorporation or these bylaws, at all meetings of the
board of directors, a majority of the directors then in office shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the board of directors. If a quorum shall not be present at any meeting of the
board of directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 6. Actions Without Meeting. Any action required or permitted
-----------------------
to be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting, if all the members of the board of directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board of directors or
committee.
Section 7. Meetings by Means of Conference Telephone. Members of the
-----------------------------------------
board of directors of the Corporation, or any committee designated by the board
of directors, may participate in a meeting of the board of directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 7 shall constitute
presence in person at such meeting.
Section 8. Compensation. The board of directors shall have the
------------
authority to fix the compensation of directors. The directors may be paid their
reasonable expenses, if any, of attendance at each meeting of the board of
directors and may be paid a reasonable fixed sum for actual attendance at each
meeting of the board of directors. Directors, as such, may receive a stated
salary for their services. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or
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standing committees may be allowed like compensation for attending committee
meetings.
Section 9. Interested Directors. No contract or transaction between
--------------------
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the board of directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the board of directors or the committee, and the board of directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote thereon, and the
contract or transaction is specifically entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
shareholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the board of
directors, a committee thereof or the shareholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the board of directors or of a committee which authorizes the contract or
transaction.
Section 10. Corporate Books. The directors may keep the books of the
---------------
Corporation outside of the State of Delaware at such place or places as they may
from time to time determine.
Section 11. Presumption of Assent. A director of the Corporation who
---------------------
is present at a meeting of the board of directors at which action on any matter
is taken shall be presumed to have assented to the action taken unless his
dissent or abstention shall be entered in the minutes of the meeting or unless
he shall file his written dissent to such action with the person acting as the
secretary of the meeting between the adjournment thereof or shall forward such
dissent by registered mail to the secretary of the Corporation within five days
after the date he receives a copy of the minutes of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
Section 12. Resignation. Any director may resign at any time by
-----------
sending a written notice of such resignation to the
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principal executive office of the Corporation addressed to the chairman or the
vice chairman of the board or the president. Unless otherwise specified therein
such resignation shall take effect upon receipt thereof by the chairman or the
vice chairman of the board or the president. More than three consecutive
absences from regular meetings of the board of directors, unless excused by
resolution of the board of directors, shall automatically constitute a
resignation, effective when such resignation is accepted by the board of
directors.
Section 13. Nominees. Only persons who are nominated in accordance
--------
with the procedures set forth in this Section 13 shall be eligible for election
as directors. Nominations of persons for election to the board of directors of
the Corporation may be made at a meeting of shareholders by or at the direction
of the board of directors or by any shareholder of the Corporation entitled to
vote for the election of directors at the meeting who complies with the notice
procedures set forth in this Section 13. Such nominations, other than those made
by or at the direction of the board of directors, shall be made pursuant to
timely notice in writing to the secretary of the Corporation. To be timely, a
shareholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 30 days nor more
than 90 days prior to the meeting; provided, however, that in the event that
less than 45 days' notice or prior public disclosure of the date of the meeting
is given or made to shareholders, notice by the shareholder to be timely must be
so received not later than the close of business on the 15th day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. Such shareholder's notice shall set forth (a) as to each
person whom the shareholder proposes to nominate for election or re-election as
a director, (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Corporation which are beneficially owned by
such person, and (iv) any other information relating to such person that is
required to be disclosed in solicitations or proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including without limitation such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected); and (b) as to the shareholder giving
notice (i) the name and address, as they appear on the Corporation's books, of
such shareholder and (ii) the class and number of shares of the Corporation
which are beneficially owned by such shareholder. At the request of the board of
directors, any person nominated by the board of directors for election as a
director shall furnish to the secretary of the Corporation that information
required to be set forth in a shareholder's notice of nomination which
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pertains to the nominee. No person shall be eligible for election as a director
of the Corporation unless nominated in accordance with the procedures set forth
in this Section 13. The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with procedures prescribed by the bylaws, and if he should so
determine, he shall so declare to the meeting and the defective nomination shall
be disregarded.
Section 14. Age Limitation. No person shall be eligible for election
--------------
or reelection as a director after he has reached the age of 72 years. When any
director has reached the age of 72 years, and regardless of his remaining term
of office, he shall retire as a director at the annual meeting of shareholders
immediately following his 72nd birthday.
ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
Section 1. Appointment. The board of directors, by resolution
-----------
adopted by a majority of the full board, shall designate the chief executive
officer and no less than three and no more than six other directors to
constitute an executive committee. The designation of any committee pursuant to
this Article IV and the delegation of authority thereto shall not operate to
relieve the board of directors, or any director, of any responsibility imposed
by law or regulation.
Section 2. Authority. The executive committee, when the board of
---------
directors is not in session, shall have and may exercise all the powers and
authority of the board of directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it, except to the extent, if any, that
such powers and authority shall be limited by the resolution appointing the
executive committee; and except also that the executive committee shall not have
the power or authority of the board of directors with reference to amending the
Certificate of Incorporation; adopting an agreement of merger or consolidation;
recommending to the shareholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets; recommending to the
shareholders a dissolution of the Corporation or a revocation of a dissolution;
amending the bylaws of the Corporation; filling a vacancy or creating a new
directorship; or approving a transaction in which any member of the executive
committee, directly or indirectly, has any material beneficial interest; and
unless the resolution or bylaws expressly so provide, the executive committee
shall not have the power or authority to declare a dividend or to authorize the
issuance of stock or securities convertible into or exercisable
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<PAGE>
for stock.
Section 3. Tenure. Subject to the provisions of Section 8 of this
------
Article IV, each member of the executive committee shall hold office until the
next annual regular meeting of the board of directors following his designation
and until his successor is designated as a member of the executive committee.
Section 4. Meetings. Regular meetings of the executive committee may
--------
be held without notice at such times and places as the executive committee may
fix from time to time by resolution. Special meetings of the executive committee
may be called by the chairman of the executive committee, the chief executive
officer or any two members thereof upon not less than one day's notice stating
the place, date and hour of the meeting, which notice may be written or oral.
Any member of the executive committee may waive notice of any meeting and no
notice of any meeting need be given to any member thereof who attends in person.
The notice of a meeting of the executive committee need not state the business
proposed to be transacted at the meeting.
Section 5. Quorum. A majority of the member of the executive
------
committee shall constitute a quorum for the transaction of business at any
meeting thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action required or
------------------------
permitted to be taken by the executive committee at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the members of the executive committee and the writing
or writings are filed with the minutes of the proceedings of the committee.
Section 7. Vacancies. Any vacancy in the executive committee may be
---------
filled by a resolution adopted by a majority of the full board of directors.
Section 8. Resignations and Removal. Any member of the executive
------------------------
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full board of directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the chairman of the executive committee or to the secretary of the
Corporation. Unless otherwise specified therein, such resignation shall take
effect upon receipt. The acceptance of such resignation shall not be necessary
to make it effective.
Section 9. Procedure. The executive committee shall elect a chairman
---------
from its members and may fix its own rules of
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<PAGE>
procedure which shall not be inconsistent with these bylaws. It shall keep
regular minutes of its proceedings and report the same to the full board of
directors for its information at the meeting thereof held next after the
proceedings shall have been taken.
Section 10. Other Committees. The board of directors by resolution shall
----------------
establish an audit committee and a stock option committee, composed in each case
only of directors who are not employees of the Corporation or any subsidiary
thereof. The board of directors by resolution may also establish such other
committees composed of directors as they may determine to be necessary or
appropriate for the conduct of the business of the Corporation and may prescribe
the duties and powers thereof.
ARTICLE V
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen by the
-------
board of directors and shall be a chairman of the board, a president, a
secretary and a treasurer. The board of directors may also designate one or more
executive vice presidents, senior vice presidents, vice presidents, assistant
vice presidents, assistant secretaries, assistant treasurers and other officers.
The chairman of the board and the president may be the same person. The
secretary and treasurer may be the same person and a vice president may also be
either the secretary or the treasurer. However, the secretary shall not also
serve as the chairman of the board or as the president. Except for the chairman
of the board and the president, the officers of the Corporation need not be
either shareholders or directors of the Corporation.
Section 2. Election. The board of directors at its first meeting held
--------
after the annual meeting of shareholders shall elect annually the officers of
the Corporation who shall exercise such powers and perform such duties as shall
be set forth in these bylaws and as determined from time to time by the board of
directors; and all officers of the Corporation shall hold office until their
successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the board of directors may be removed at any
time by the affirmative vote of a majority of the board of directors. Any
vacancy occurring in any office of the Corporation shall be filled by the board
of directors. The salaries of all officers of the Corporation shall be fixed by
the board of directors.
Section 3. Removal. Any officer may be removed by the board of directors
-------
whenever in its judgment the best interests of the Corporation will be served
thereby, but such removal, other than for cause, shall be without prejudice to
the contract
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<PAGE>
rights, if any, of the person so removed .
Section 4. Voting Securities Owned by the Corporation. Powers of
------------------------------------------
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the chairman of the board, the president or
any executive vice president and any such officer may, in the name of and on
behalf of the Corporation, take all such action as any such officer may deem
advisable to vote in person or by proxy at any meeting of security holders of
any corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and powers incident to
the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The board of
directors may, by resolution, from time to time confer like powers upon any
other person or persons.
Section 5. Chairman of the Board. The chairman of the board shall be a
---------------------
director of the Corporation and an officer. The chairman of the board shall
perform such duties and may exercise such power as may be vested in him by the
board of directors or the president. At the request of the president or in his
absence or inability to act, the chairman of the board shall perform the duties
of the president.
Section 6. President. The president shall be a director of the Corporation
---------
and shall serve as the chief executive officer. The president shall, subject to
the control of the board of directors, have general supervision of the business
of the Corporation and shall see that all orders and resolutions of the board of
directors are carried into effect. He shall execute all bonds, mortgages,
contracts and other instruments of the Corporation requiring a seal under the
seal of the Corporation, except where required or permitted by law to be
otherwise signed and executed and except that the other officers of the
Corporation may sign and execute documents when so authorized by these bylaws,
the board of directors or the president. Unless otherwise designated by the
board of directors, the president shall preside at the annual meetings and
special meetings of the shareholders. The president shall also perform such
other duties and may exercise such other powers as from time to time assigned to
him by these bylaws or by the board of directors.
Section 7. Vice Presidents. At the request of the president or in his
---------------
absence or inability to act, the vice president or the vice-presidents if there
is more than one (in the order designated by the board of directors) shall
perform the duties of the president. Each vice president shall perform such
other duties and have such other powers as the board of directors or the
chairman of the board from time to time may prescribe.
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<PAGE>
Section 8. Secretary. The secretary shall attend all meetings of the
---------
board of directors and all meetings of shareholders and record all of the
proceedings thereat in a book or books to be kept for that purpose; the
secretary shall also perform like duties for the standing committees when
required. The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors, and shall perform such other
duties as may be prescribed by the board of directors or the chairman of the
board, under whose supervision the secretary shall serve. The secretary shall
have custody of the seal of the Corporation and shall have authority to affix
the same to any instrument requiring it and when so affixed, it may be attested
by the signature of the secretary. The board of directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his signature. The secretary shall see that all books,
reports, statements, certificates and other documents and records required by
law to be kept or filed are properly kept or filed, as the case may be.
Section 9. Treasurer. The treasurer shall have the custody of the
---------
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the board of
directors. The treasurer shall disburse the funds of the Corporation as may be
ordered by the chairman of the board or the board of directors, taking proper
vouchers for such disbursements, and shall render to the chairman of the board
and to the board of directors, at its regular meetings, or when the chairman of
the board or the board of directors so requires, an account of all his
transactions as treasurer and of the financial condition of the Corporation.
Section 10. Assistant Secretaries. Assistant secretaries, if there be
---------------------
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the board of directors, the chairman of the board or the
secretary. At the request of the secretary or in his absence or inability the
assistant secretary shall perform the duties of the secretary.
Section 11. Assistant Treasurers. Assistant treasurers, if there be
--------------------
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the board of directors, the chairman of the board or the
treasurer. At the request of the treasurer, or in his absence or inability to
act, the assistant treasurer shall perform the duties of the treasurer.
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<PAGE>
Section 12. Other Officers. Such other officers as the board of directors
--------------
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the board of directors or the chairman of the board.
The board of directors may delegate to any other officer of the Corporation the
power to choose such other officers and to prescribe their respective duties and
powers.
ARTICLE VI
STOCK
Section 1. Form of Certificates. Every holder of stock in the Corporation
--------------------
shall be entitled to have a certificate signed by, or in the name of the
Corporation by (i) the chairman or vice-chairman of the board or the president
or vice-president and (ii) the treasurer or an assistant treasurer or the
secretary or an assistant secretary of the Corporation, representing the number
of shares registered in certificate form.
Section 2. Signatures. Any or all of the signatures on a certificate may
----------
be facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the date of
issue.
Section 3. Lost Certificates. The chairman of the board may direct a new
-----------------
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
chairman of the board may, in his discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the chairman of the board may require and/or to give the Corporation a bond
in such sum as he may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in
---------
the manner prescribed by law and in these bylaws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be cancelled before a new certificate shall be
issued.
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<PAGE>
Section 5. Record Date. In order that the Corporation may determine the
-----------
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the board of directors may fix, in advance, a record
date, which shall not be more than 50 days nor less than 20 days before the date
of such meeting, nor more than 50 days prior to any other action. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
-----------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not the Corporation shall
have express or other notice thereof, except as otherwise required by law.
ARTICLE VII
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
-------
Certificate of Incorporation or these bylaws, to be given to any director,
member of a committee or shareholder, such notice may be given by mail,
addressed to such director, member of a committee or shareholder, at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by law, the
-----------------
Certificate of Incorporation or these bylaws, to be given to any director,
member of a committee or shareholder, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
Attendance of a person at a meeting shall constitute a waiver of notice of
such meeting, except when the person attends a meeting with the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the
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meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
shareholders, directors, or members of a committee of directors need be
specified in any other waiver of notice unless so required by the certificate of
incorporation of these bylaws.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the Corporation,
---------
subject to the provisions of the Certificate of Incorporation and the laws of
the State of Delaware may be declared by the board of directors at any regular
or special meeting, and may be paid in cash, in property, or in shares of the
capital stock.
Subject to the provisions of the General Corporation Law of the State of
Delaware, such dividends may be paid either out of surplus, out of the net
profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year.
Section 2. Disbursements. All checks or demands for money and notes of the
-------------
Corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be June
-----------
30.
Section 4. Corporate Seal. The corporate seal shall have inscribed thereon
--------------
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE IX
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other Than
--------------------------------------------------------------
Those by or in the Right of the Corporation. Subject to Section 3 of this
- -------------------------------------------
Article IX, the Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, and any appeal therein, whether civil, criminal,
administrative, arbitrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a director,
officer, trustee, employee or agent of the Corporation, or is or
- 17 -
<PAGE>
was serving at the request of the Corporation as a director, officer, trustee,
employee or agent of another corporation, association, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines, penalties and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding,
and any appeal therein, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding, and any appeal therein, by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
---------------
create a presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits, or Proceedings by or in
-------------------------------------------------------------
the Right of the Corporation. Subject to Section 3 of this Article IX, the
- ----------------------------
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, trustee, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against amounts paid in
settlement and expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit, if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation; provided, however, that
no indemnification shall be made against expenses in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable to the
Corporation or against amounts paid in settlement unless and only to the extent
that there is a determination (as set forth in Section 3 of this Article IX)
that despite the adjudication of liability or the settlement, but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses or amounts paid in settlement.
Section 3. Authorization of Indemnification. Any indemnification under
--------------------------------
this Article IX (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, trustee, employee or agent is proper
in the
- 18 -
<PAGE>
circumstances because such director, officer, trustee, employee or agent has met
the applicable standard of conduct set forth in Section 1 or Section 2 of this
Article IX and, if applicable, is fairly and reasonably entitled to indemnity as
set forth in the proviso in Section 2 of this Article IX, as the case may be.
Such determination shall be made (i) by the board of directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, (ii) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the shareholders. To the extent,
however, that a director, officer, trustee, employee or agent of the Corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith, without the necessity of
authorization in the specific case. No director, officer, trustee, employee or
agent of the Corporation shall be entitled to indemnification in connection with
any action, suit or proceeding voluntarily initiated by such person unless the
action, suit or proceeding was authorized by a majority of the entire board of
directors.
Section 4. Good Faith Defined. For purposes of any determination under
------------------
Section 3 of this Article IX, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any association, partnership, joint venture, trust or
other enterprise of which such person is or was serving at the request of the
Corporation as a director, officer, trustee, employee or agent. The provisions
of this Section 4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standards of conduct set forth in Sections 1 or 2 of this Article IX, as the
case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
--------------------------
determination in the specific case under Section 3
- 19 -
<PAGE>
of this Article IX, and not withstanding the absence of any determination
thereunder, any director, officer, trustee, employee or agent may apply to any
court of competent jurisdiction in the State of Delaware for indemnification to
the extent otherwise permissible under Sections 1 and 2 of this Article IX. The
basis of such indemnification by a court shall be a determination by such court
that indemnification of the director, officer, trustee, employee or agent is
proper in the circumstances because he has met the applicable standards of
conduct set forth in Sections 1 and 2 of this Article IX, as the case may be.
Notice of any application for indemnification pursuant to this Section 5 shall
be given to the Corporation promptly upon the filing of such application.
Notwithstanding any of the foregoing, unless otherwise required by law, no
director, officer, trustee, employee or agent of the Corporation shall be
entitled to indemnification in connection with any action, suit or proceeding
voluntarily initiated by such person unless the action, suit or proceeding was
authorized by a majority of the entire board of directors.
Section 6. Expenses Payable in Advance. Expenses incurred in connection
---------------------------
with a threatened or pending action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, trustee, employee or agent to repay such amount if it shall be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article IX.
Section 7. Contract and Non-exclusivity. The indemnification provided by
----------------------------
this Article IX shall be deemed to be a contract between the Corporation and
each director, officer, employee and agent who serves in such capacity at any
time while this Article IX is in effect, and any repeal or modification thereof
shall not affect any rights or obligations then existing with respect to any
state of facts then or theretofore existing or any action, suit or proceeding
theretofore or thereafter existing or any action, suit or proceeding theretofore
or thereafter brought based in whole or in part upon any such state of facts.
Further, the indemnification and/or advancement of expenses provided by, or
granted pursuant to, this Article IX shall not be deemed exclusive of any other
rights to which those seeking indemnification and/or advancement of expenses may
be entitled under any certificate of incorporation, bylaw, agreement, contract,
vote of shareholders or disinterested directors or pursuant to the direction
(howsoever embodied) of any court of competent jurisdiction or otherwise, both
as to action in his official capacity and as to action in another capacity while
holding such office, it being the policy of the Corporation that, subject to the
limitation in Section 3 of this Article IX concerning voluntary initiation of
actions, suits or
- 20 -
<PAGE>
proceedings, indemnification of the persons specified in Section 1 and 2 of this
Article IX shall be made to the fullest extent permitted by law. The provisions
of this Article IX shall not be deemed to preclude the indemnification of any
person who is not specified in Sections 1 or 2 of this Article IX but whom the
Corporation has the power or obligation to indemnify under the provisions of the
law of the State of Delaware.
Section 8. Insurance. The Corporation may purchase and maintain insurance
---------
on behalf of any person who is or was a director, officer, trustee, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, trustee, employee or agent of another corporation,
association, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his statute as such, whether or not the Corporation would have
the power or the obligation to indemnify him against such liability under the
provisions of this Article IX.
Section 9. Meaning of "Corporation" for Purposes of Article IX. For
---------------------------------------------------
purposes of this Article IX, references to "the Corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, association,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article IX with respect to the resulting
or surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
Section 10. Survival of Indemnification. The indemnification and
---------------------------
advancement of expenses provided by, or granted pursuant to, this Article IX
shall continue as to a person who has ceased to be a director, officer, trustee,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such person.
ARTICLE X
AMENDMENTS
The board of directors or the shareholders may from time to time amend the
bylaws of the Corporation. Such action by the board of directors shall require
the affirmative vote of at least
-21-
<PAGE>
two-thirds of the directors then in office at a duly constituted meeting of the
board of directors called for such purposes. Such action by the shareholders
shall require the affirmative vote of at least two-thirds of the total votes
eligible to be voted at a duly constituted meeting of shareholders called for
such purpose.
-22-
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
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<INVENTORY> 10,101
<CURRENT-ASSETS> 14,493
<PP&E> 2,571
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1,975
0
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