UNITED STATES
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-9294
Imo Industries Inc.
(Exact name of registrant as specified in its charter)
Delaware 21-0733751
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1009 Lenox Drive, Building Four West
Lawrenceville, New Jersey 08648
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 609-896-7600
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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date: Common Stock, $1.00 Par Value-17,127,859
shares as of July 31, 1997.
<PAGE>
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
Consolidated Statements of Income--Three and six
months ended June 30, 1997 and 1996 2
Consolidated Balance Sheets--June 30, 1997 and
December 31, 1996 3
Consolidated Statements of Cash Flows--Six
months ended June 30, 1997 and 1996 4
Notes to Consolidated Financial Statements--
June 30, 1997 5 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 10 - 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 21
Item 2. Changes in Securities 21
Item 4. Submission of Matters to a Vote of Security Holders. 22
Item 6. Exhibits and Reports on Form 8-K. 22
SIGNATURES 24
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands except per share amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996* 1997 1996*
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Sales $126,613 $119,988 $246,159 $241,403
Cost of products sold 89,342 85,406 173,429 171,263
Gross Profit 37,271 34,582 72,730 70,140
Selling, general and
administrative expenses 26,157 22,578 50,088 44,910
Research and development expenses 2,353 2,394 4,620 4,669
Unusual item (2,400) --- 10,500 ---
Income From Operations 11,161 9,610 7,522 20,561
Interest expense 8,555 8,024 16,957 16,314
Interest income (481) (307) (766) (704)
Other expense (income), net (227) 85 51 262
Equity in (income) loss of
unconsolidated companies 222 (25) 400 (50)
Income (Loss) From Continuing
Operations Before Income Taxes,
Minority Interest and
Extraordinary Item 3,092 1,833 (9,120) 4,739
Income Tax Expense 637 1,046 1,292 1,994
Minority Interest 26 (69) 1 (51)
Income (Loss) From Continuing
Operations Before
Extraordinary Item 2,429 856 (10,413) 2,796
Discontinued Operations:
Income from Operations --- --- --- ---
Total Income from
Discontinued Operations --- --- --- ---
Extraordinary Item - Loss on
Extinguishment of Debt --- (8,455) --- (8,455)
Net Income (Loss) $ 2,429 $ (7,599) $ (10,413) $ (5,659)
Earnings (Loss) per share:
Continuing operations
before extraordinary item $ 0.14 $ 0.05 $ (0.61) $ 0.16
Discontinued operations $ --- $ --- $ --- $ ---
Extraordinary item $ --- $ (0.49) $ --- $ (0.49)
Net income (loss) $ 0.14 $ (0.44) $ (0.61) $ (0.33)
Weighted average number of
shares outstanding 17,126,297 17,086,234 17,125,716 17,085,538
</TABLE>
See accompanying notes to consolidated financial statements.
*Restated to conform to 1997 presentation.
2
<PAGE>
<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
<CAPTION>
June 30, December 31,
1997 1996
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 2,807 $ 4,863
Trade accounts and notes
receivable, less
allowance of $1,925 in 1997
and $1,877 in 1996 87,811 78,955
Inventories-net 94,330 94,433
Deferred income taxes 8,871 9,165
Net assets of discontinued
operations-current --- 7,214
Prepaid expenses and other
current assets 11,890 7,877
Total Current Assets 205,709 202,507
Property, Plant and Equipment-
on the basis of cost 206,131 212,356
Less allowance for depreciation
and amortization (112,596) (112,581)
Net Property, Plant and Equipment 93,535 99,775
Intangible Assets, Principally
Goodwill 66,491 69,402
Investments in and Advances to
Unconsolidated Companies 8,459 9,872
Net Assets of Discontinued
Operations - Noncurrent 2,990 7,615
Other Assets 15,528 22,443
Total Assets $392,712 $411,614
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities
Notes payable $ 51,185 $ 43,338
Trade accounts payable 50,181 42,821
Accrued expenses and other
liabilities 49,299 42,632
Accrued costs related to
discontinued operations 5,574 8,586
Income taxes payable 5,274 6,011
Current portion of long-term debt 17,900 14,994
Total Current Liabilities 179,413 158,382
Long-Term Debt 228,793 251,860
Deferred Income Taxes 3,688 4,069
Accrued Postretirement Benefits -
Long-Term 17,212 17,418
Accrued Pension Expense and Other
Liabilities 32,138 33,815
Total Liabilities 461,244 465,544
Minority Interest 875 954
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock: $1.00 par value;
authorized and unissued 5,000,000
shares --- ---
Common stock: $1.00 par value;
authorized 25,000,000 shares;
issued 18,799,397 and 18,796,897
in 1997 and 1996, respectively 18,799 18,797
Additional paid-in capital 80,471 80,466
Retained earnings (deficit) (145,375) (134,962)
Cumulative foreign currency
translation adjustments (2,099) 2,057
Minimum pension liability
adjustment (2,503) (2,503)
Unearned compensation (680) (719)
Treasury stock at cost -
1,672,788 shares in 1997 and 1996 (18,020) (18,020)
Total Shareholders' Equity
(Deficit) (69,407) (54,884)
Total Liabilities and
Shareholders' Equity (Deficit) $392,712 $411,614
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
Imo Industries Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
<CAPTION>
Six Months Ended
June 30,
1997 1996*
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (10,413) $ (5,659)
Adjustments to reconcile net loss to
net cash provided by (used in)
continuing operations:
Depreciation 8,253 7,800
Amortization 1,882 2,218
Extraordinary item --- 8,455
Unusual item 10,500 ---
Other 684 122
Other changes in operating
assets and liabilities:
Increase in accounts and
notes receivable (9,142) (10,383)
Decrease in inventories 103 1,943
Increase (decrease) in
accounts payable and
accrued expenses 3,277 (875)
Other operating assets and
liabilities (473) (6,863)
Net cash provided by (used by)
continuing operations 4,671 (3,242)
Net cash used by discontinued
operations (3,951) (5,050)
Net Cash Provided by (Used in)
Operating Activities 720 (8,292)
INVESTING ACTIVITIES
Purchases of property, plant and
equipment (6,797) (5,965)
Proceeds from sale of businesses and
sales of property, plant and equipment 15,045 3,523
Acquisitions, net of cash acquired --- (3,200)
Net cash used by discontinued operations --- (34)
Other 581 ---
Net Cash Provided by (Used in)
Investing Activities 8,829 (5,676)
FINANCING ACTIVITIES
Increase (decrease) in notes payable 9,667 (14,268)
Proceeds from long-term borrowings 119 265,473
Principal payments on long-term debt (20,048) (223,207)
Payment of debt financing costs (384) (13,916)
Other (443) 20
Net Cash (Used in) Provided by
Financing Activities (11,089) 14,102
Effect of exchange rate changes on cash (516) (161)
Decrease in Cash and Cash Equivalents (2,056) (27)
Cash and cash equivalents at beginning
of period 4,863 5,539
Cash and Cash Equivalents at End of
Period $ 2,807 $ 5,512
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest expense $ 16,544 $ 20,189
Income taxes $ 2,029 $ 1,030
</TABLE>
See accompanying notes to consolidated financial statements.
* Restated to conform to 1997 presentation.
4
<PAGE>
Imo Industries Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited with
respect to June 30, 1997 and 1996 and the periods then
ended.)
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The accompanying unaudited
consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes
required by generally accepted accounting principles for
complete financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring
accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended
June 30, 1997 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's
annual report on Form 10-K for the year ended December 31,
1996.
Impact of Recently Issued Accounting Standards: In February
1997, the FASB issued Statement No. 128, "Earnings Per
Share," which specifies the computation, presentation, and
disclosure requirements for earnings per share. The
Statement is effective for annual periods ending after
December 15, 1997, and early adoption is not permitted. The
Company does not believe the effect of adoption will be
material.
Restatements: The Consolidated Financial Statements, and the
notes thereto, have been restated to reflect the Company's
Roltra-Morse business segment as a continuing operation due
to its withdrawal from potential sale in November 1996.
Certain prior year amounts have been restated to conform to
the current year presentation.
NOTE B-- SALE AGREEMENT
On July 25, 1997, the Company executed a definitive agreement
with II Acquisition Corp. ("Acquisition Corp."), an affiliate
of Constellation Capital Partners LLC, pursuant to which, on
July 31, 1997, Acquisition Corp. commenced a cash tender
offer for all outstanding shares of the Company's common
stock at a price of $7.05 per share, net in cash.
The Company had previously announced on June 26, 1997 that it
had entered into a merger agreement with United Dominion
Industries Limited ("UDI") pursuant to which, on July 2, 1997,
UDI commenced a cash tender offer for all of the outstanding
shares of the Company's common stock at a price of $6 per
share. The Company's Board of Directors unanimously
determined that the Acquisition Corp. offer was on terms more
favorable to
5
<PAGE>
the Company's stockholders. As a result, the Board of
Directors withdrew its approval of UDI's tender offer and
the other transactions contemplated by the merger agreement
with UDI and exercised its right to terminate the merger
agreement.
Pursuant to the terms of the UDI merger agreement,
Acquisition Corp., on behalf of the Company, deposited $8
million into an account with instructions to disburse such
funds to UDI as a result of the Company's termination of the
merger agreement and also deposited $2 million into an escrow
account for payment of expenses incurred by UDI in connection
with the transactions contemplated by the UDI merger
agreement.
Acquisition Corp.'s tender offer for the shares of Imo common
stock is conditioned, among other things, on the receipt of
more than 80% of the outstanding shares. Any shares not
purchased in the tender offer will remain outstanding.
The purchase of shares by Acquisition Corp. pursuant to the
tender offer would reduce the number of shares that might
otherwise trade publicly and would reduce the number of
holders of shares. Depending on the number of shares
purchased pursuant to the tender offer, the Company's common
stock may no longer meet the requirements of the New York
Stock Exchange ("NYSE") for continued listing and may be
delisted from the NYSE and deregistered under provisions of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Each of these events could adversely affect
the liquidity and market value of the remaining shares held
by the public. Reference is made to II Acquisition Corp.'s
Schedule 14D-1 filed with the Commission on July 31, 1997 for
additional information regarding liquidity and market value
of shares.
NOTE C--DISCONTINUED OPERATIONS
The Company has accounted for its former Electro-Optical
Systems business and Turbomachinery business segments as
discontinued operations in accordance with Accounting
Principles Board Opinion No. 30. By the end of the second
quarter of 1995, the Company had completed the sales of its
Turbomachinery business and a substantial part of its Electro-
Optical Systems business. On April 28, 1997, the Company
completed the sale of the Varo Electronic Systems division to
a small defense contractor for $12.0 million, which was used
to reduce its domestic senior debt. The sale of this business
completed the sale of the Electro-Optical Systems business.
Net sales of the discontinued operations were $1.7 million
and $4.9 million for the three months ended June 30, 1997 and
1996, respectively, and $9.2 million and $9.7 million for the
six months ended June 30, 1997 and 1996, respectively.
Operating results of discontinued operations resulted in net
income of $.3 million and $.7 million for the three months
ended June 30, 1997 and 1996, respectively, and $.8 million
and $.5 million for the six months ended June 30, 1997 and
1996, respectively. These results from operations include
allocated interest expense of $.1 million and $.5 million for
the three months ended
6
<PAGE>
June 30, 1997 and 1996, respectively, and $.5 million and $.9
million for the six months ended June 30, 1997 and 1996,
respectively. The net income from discontinued operations
has been charged against the reserve for anticipated losses
previously established by the Company.
Allocated interest expense includes interest on debt of the
discontinued operations to be assumed by the buyer, and an
allocation of other consolidated interest expense to the
discontinued operations based on the ratio of net assets to
be sold to the sum of the Company's consolidated net assets,
if positive, plus other consolidated debt.
NOTE D--INVENTORIES
Inventories (in thousands of dollars) are summarized as
follows:
June 30, December 31,
1997 1996
(Unaudited)
Finished products $ 44,455 $ 46,905
Work in process 32,119 30,802
Materials and supplies 30,770 30,641
107,344 108,348
Less customers' progress payments 1,599 2,710
Less valuation allowance 11,415 11,205
$ 94,330 $ 94,433
NOTE E--ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities (in thousands of
dollars) consist of the following:
June 30, December 31,
1997 1996
(Unaudited)
Accrued product warranty costs $ 2,107 2,596
Accrued litigation and claim costs 12,758 2,132
Payroll and related items 17,314 17,610
Accrued interest payable 4,053 3,731
Accrued restructuring costs 1,828 3,422
Accrued divestiture costs 997 2,460
Other 10,242 10,681
$ 49,299 $ 42,632
7
<PAGE>
NOTE F--EARNINGS PER SHARE
Earnings per share for 1997 and 1996 are based upon the
weighted average number of shares of common stock
outstanding. Common stock equivalents related to stock
options and warrants are excluded because their effect is not
material.
NOTE G--UNUSUAL ITEM
On May 8, 1997, the Company was informed that the U.S.
District Court for the Northern District of California had
reinstated the judgment against the Company in favor of
International Insurance Company ("International"), awarding
International $11.2 million, plus interest from March 1995
(See Note H). The Company therefore recorded a charge to
income in the first quarter of 1997 of $12.9 million as an
unusual item, which represented the amount of the judgment
plus interest to date. On July 15, 1997, the Company agreed
to settle with International by dropping an appeal and paid a
reduced amount on July 30, 1997 in complete settlement of all
outstanding amounts. As a result of the settlement, the
Company recorded a favorable adjustment of $2.4 million as an
unusual item in the second quarter of 1997.
NOTE H--CONTINGENCIES
Legal Proceedings
LILCO Insurance Litigation. In January 1993, the Company was
served with a complaint in a case brought in the U.S.
District Court for the Northern District of California by
International alleging that International was entitled to
recover $10 million in defense costs, and $1.2 million of a
judgment, each of which was paid on behalf of the Company in
connection with litigation between the Company and Long
Island Lighting Company ("LILCO") which was concluded in
October 1993. International's principal contention was that
the International policies did not cover the matters in
question in the LILCO case. In June 1995, the Court entered
a judgment in favor of International awarding it $11.2
million, plus interest from March 1995 (the "International
Judgment"). The International Judgment, however, was not
supported by an order, and in July 1995, the Court vacated
the International Judgment as being premature because certain
outstanding issues of recoverability of the $10 million in
defense costs had not been finally determined. On May 8,
1997, the Company was informed that the Court had reinstated
the International Judgment. The Company therefore recorded a
charge to income in the first quarter of 1997 of $12.9
million as an unusual item, which represented the amount of
the judgment plus interest to date. On July 15, 1997 the
Company agreed to settle with International by dropping an
appeal and paid a reduced amount on July 30, 1997 in complete
settlement of all outstanding amounts. As a result of the
settlement, the Company recorded a favorable adjustment of
$2.4 million as an unusual item in the second quarter of
1997.
8
<PAGE>
Additional Litigation and Claims. The Company and one of its
subsidiaries are two of a large number of defendants in a
number of lawsuits brought in various jurisdictions by
approximately 6,100 claimants who allege injury caused by
exposure to asbestos. Although neither the Company nor any
of its subsidiaries has ever been a producer or direct
supplier of asbestos, it is alleged that the industrial and
marine products sold by the Company and the subsidiary named
in such complaints contained components which contained
asbestos. Suits against the Company and its subsidiary have
been tendered to their insurers, who are defending under
their stated reservation of rights. In addition, the Company
and the subsidiary are named in cases involving approximately
20,000 claimants which in 1996 were "administratively
dismissed" by the U.S. District Court for the Eastern
District of Pennsylvania. Cases that have been
"administratively dismissed" may be reinstated only upon a
showing to the Court that (i) there is satisfactory evidence
of an asbestos-related injury; and (ii) there is probative
evidence that the plaintiff was exposed to products or
equipment supplied by each individual defendant in the case.
Should settlements for these claims be reached at levels
comparable to those reached by the Company in the past, they
would not be expected to have a material effect on the
Company.
There are lawsuits pending against the Company in the U.S.
District Court for the Western District of Pennsylvania
alleging component failures in equipment sold by its former
diesel engine division and claiming damages of approximately
$3.0 million, and in the Circuit Court of Cook County,
Illinois, alleging performance shortfalls in products
delivered by the Company's former Delaval Turbine Division
and claiming damages of approximately $8.0 million. Each
lawsuit is in the discovery stage, and the Cook County suit
is scheduled for trial in late 1997.
The major portion of the Company's former Electro-Optical
Systems business was sold to Litton Industries in a
transaction, which closed on June 2, 1995. The sales
contract between the Company and Litton Industries provided
certain representations and warranties as to the status of
the business at the time of the sale. By letters dated
November 19, 1996 and November 26, 1996, Litton has notified
the Company of claims under the representations and warranty
provisions for: (1) environmental losses of unspecified
amounts, and (2) anticipated losses in excess of $10 million
under a U.S. Government contract as a result of the Company's
alleged failure to notify Litton of a reasonably anticipated
loss under a bid that was pending at the time of transfer of
the business. The contract was subsequently awarded to the
Company's Varo subsidiary and thereafter transferred to
Litton. The Company has preliminarily analyzed the
supporting documentation provided by Litton and has notified
Litton that it disputes the nature, validity, and amount of
the claims of losses and objects to the timeliness of
submission of notice to the Company with respect to the
claims. The Company has received notice, but has not yet
been served with a complaint, in an action brought by Litton
in the State of New Jersey relating to this claim. The
Company believes the claims are without merit and intends to
vigorously defend against the claims.
9
<PAGE>
The operations of the Company, like those of other companies
engaged in similar businesses, involve the use, disposal and
clean up of substances regulated under environmental
protection laws. In a number of instances the Company has
been identified as a Potentially Responsible Party by the U.S.
Environmental Protection Agency, and in one instance by
the State of Washington, with respect to the disposal of
hazardous wastes at a number of facilities that have been
targeted for clean-up pursuant to CERCLA or similar State law.
Although CERCLA and corresponding State law liability is
joint and several, the Company believes that its liability
will not have a material adverse effect on the financial
condition of the Company since it believes that it either
qualifies as a de minimis or minor contributor at each site.
Accordingly, the Company believes that the portion of
remediation costs that it will be responsible for will not be
material.
With respect to the litigation and claims described in the
preceding paragraphs, management of the Company believes that
it either expects to prevail, has adequate insurance coverage
or has established appropriate reserves to cover potential
liabilities. There can be no assurance, however, as to the
ultimate outcome of any of these matters.
The Company is also involved in various other pending legal
proceedings arising out of the ordinary course of the
Company's business. None of these legal proceedings is
expected to have a material adverse effect on the financial
condition of the Company. A range of possible outcomes for
all of these legal proceedings currently cannot be estimated.
However, if all or substantially all of these legal
proceedings were to be determined adversely to the Company,
there could be a material adverse effect on the financial
condition of the Company.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following paragraphs provide Management's discussion and
analysis of the significant factors which have affected the
Company's consolidated results of operations and financial
condition during the three and six months ended June 30,
1997.
Recent Events
Sale Agreement: In the first quarter of 1997, the Company
announced that it had retained Credit Suisse First Boston to
help it explore strategic alternatives, including the
possibility of a merger or sale of the Company. On July 25,
1997, the Company executed a definitive agreement with II
Acquisition Corp. ("Acquisition Corp."), an affiliate of
Constellation Capital Partners LLC, pursuant to which
Acquisition Corp., on July 31, 1997, commenced a cash tender
offer for all outstanding shares of the Company's common
stock at a price of $7.05 per share, net in cash.
10
<PAGE>
The Company had previously announced on June 26, 1997 that it
had entered into a merger agreement with United Dominion
Industries Limited ("UDI") pursuant to which UDI commenced a
cash tender offer for all of the outstanding shares of the
Company's common stock at a price of $6 per share. The
Company's Board of Directors unanimously determined that the
Acquisition Corp. offer was on terms more favorable to the
Company's stockholders. In addition, the Board of Directors
withdrew its approval of UDI's tender offer and the other
transactions contemplated by the merger agreement with UDI
and exercised its right to terminate the merger agreement.
Management believes that if the cash tender offer by
Acquisition Corp., which expires August 27, 1997 unless
extended, is successful, upon completion of the tender offer,
control of the Company will be transferred to Acquisition
Corp.
Reference is made to Note B in Part I of this Form 10-Q
Report for additional information.
Legal Settlement: On May 8, 1997, the Company was informed
that the U.S. District Court for the Northern District of
California had reinstated the International Judgment,
awarding International $11.2 million, plus interest from
March 1995. The Company therefore recorded a charge to income
in the first quarter of 1997 of $12.9 million as an unusual
item, which represented the amount of the judgment plus
interest to date. On July 15, 1997 the Company agreed to
settle with International by dropping an appeal and paid a
reduced amount on July 30, 1997 in complete settlement of all
outstanding amounts. As a result of the settlement, the
Company recorded a favorable adjustment of $2.4 million as an
unusual item in the second quarter of 1997. Reference is made
to Notes G and H in Part I of this Form 10-Q Report for
additional information.
Asset Sales: On June 27, 1997, The Company completed the
sale of a portion of its non-operating real estate for
proceeds of approximately $3.0 million, which were used to
repay senior debt.
On April 28, 1997, the Company completed the sale of its Varo
Electronic Systems business to a small defense contractor for
$12 million in cash. The sale of this business completed the
divestiture of the Company's Electro-Optical Systems
business. The proceeds from this sale were used to repay
senior debt.
The impact of the Acquisition Corp. agreement, if any, on the
remaining asset sales is uncertain at this time. See
"Restructuring Plans" below for discussion on assets being
held for sale.
II Acquisition Corp. has entered into a letter of intent with
Danaher Corporation pursuant to which, if the Acquisition
Corp. tender offer is consummated, Danaher Corporation would
purchase the operations of the Company's Instrumentation
segment and assume certain liabilities in connection therewith.
According to the letter of intent, the purchase price
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would be $85 million. Reference is made to the letter of
intent which was filed as an exhibit to II Acquisition Corp.'s
Schedule 14D-1 filed with the Commission on July 31, 1997
for additional information regarding such proposed sale and
the other conditions thereof.
Restructuring Plans
In October 1992, the Company determined that it needed to de-
lever its balance sheet through the sale of certain
businesses and the application of the proceeds from the
divestitures to reduce debt. Pursuant to this decision, the
Company divested its Heim Bearings, Aerospace, Barksdale
Controls and CEC Instruments businesses during 1993 and 1994.
In 1993, management, under Donald K. Farrar, who became Chief
Executive Officer in September 1993, initiated a strategy to
reposition the Company to focus on its less capital intensive
businesses that exhibited strong brand name recognition,
a broad customer base and market leadership with less
dependence on U.S. Government sales. In connection with this
strategy, the Company divested its Turbomachinery and most
of its Electro-Optical Systems businesses during 1995. The
remaining Electro-Optical Systems business was sold in April
1997.
On February 7, 1996, the Company announced a plan to sell its
Roltra-Morse business. The Company had been accounting for
this business as a discontinued operation from that time
until November 11, 1996, when the Company announced the
withdrawal of Roltra-Morse from its divestiture program. The
Company made the decision to withdraw Roltra-Morse from sale
because threats to revoke certain license agreements, made by
an unsuccessful bidder for the business, made it impossible
for the Company to receive fair value for this business.
Roltra-Morse has been reclassified as a continuing operation
and the prior year results have been restated to reflect this
change.
Management believes that the recorded amount of estimated
liabilities related to the loss on disposal of discontinued
operations at June 30, 1997 is adequate. The adequacy of
these liabilities is evaluated each quarter based on current
estimates, which may differ from actual results.
The Company continues to actively market certain non-
operating real estate originally identified for sale in
October 1992 and targets completion of these sales over the
next nine months and plans to apply the net proceeds to
reduce debt.
Reference is made to the Company's 1996 Annual Report on Form
10-K for the year ended December 31, 1996 for further details
related to previous asset sales and cost reduction programs.
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<PAGE>
Results of Operations
The recently sold Electro-Optical Systems business was
accounted for as a discontinued operation in the accompanying
consolidated financial statements. Accordingly, the
discussion that follows concerns only the results of
continuing operations. The Company's continuing businesses
are grouped into five business segments for management and
segment reporting purposes: Power Transmission, Pumps,
Instrumentation, Morse Controls, and Roltra-Morse.
Three Months Ended June 30, 1997 Compared with 1996
Sales. Net sales from continuing operations for the three
months ended June 30, 1997 were $126.6 million, an increase
of 5.5%, compared with $120.0 million in the comparable 1996
period. Foreign exchange rate changes, primarily in Italy
and Sweden, had an unfavorable impact on second quarter 1997
sales compared to the prior year period. Excluding the
impact of exchange rate changes in the second quarter of
1997, net sales increased 9.3% compared with 1996. Each
of the Company's five business segments contributed to this
increase in the second quarter of 1997. Second quarter 1997
net sales increased 15.9%, 8.1%, and 4.7% for the Roltra-
Morse, Power Transmission and Pumps segments, respectively,
while the Instrumentation and Morse Controls segments were
just slightly ahead, compared to the prior year period. See
"Segment Operating Results" below.
Gross Profit. The gross profit in the second quarter of 1997
increased slightly to 29.4% compared with 28.8% in 1996. See
"Segment Operating Results" below.
Selling, General and Administrative Expenses. Selling,
general and administrative expenses increased as a percentage
of sales to 20.7% for the three months ended June 30, 1997
compared with 18.8% in the 1996 period. The increased
expenses as a percent of sales in 1997 was due to certain
Corporate expenses related to the proposed sale of the
Company, and to the fact that the 1996 period benefited from
a favorable adjustment of $1.1 million related to the Company
phase-out of accumulated postretirement benefit obligations.
Research and development expenditures remained relatively
constant at 1.9% of net sales for the three months ended June
30, 1997 compared with 2.0% in 1996.
Unusual Item. In the second quarter of 1997, the Company
recorded a favorable amount of $2.4 million, which reflects
an adjustment to the unusual charge of $12.9 million recorded
in the first quarter of 1997. The original provision of
$12.9 million was a result of the reinstatement of a
judgment, plus interest to date, against the Company in favor
of International. The Company and International subsequently
reached a final settlement under which the Company paid
International a reduced amount on July 30, 1997. Reference
is made to Notes G and H in Part I of this Form 10-Q Report
for additional information.
13
<PAGE>
Interest Expense. Average borrowings in the second quarter
of 1997 were approximately $13 million higher than the second
quarter of 1996. Total interest expense (before allocation to
discontinued operations) increased slightly to $8.7 million
for the three months ended June 30, 1997 compared with $8.5
million for the same period in 1996. Interest expense for
continuing operations excludes a general interest allocation
to the discontinued operations of $.1 million and $.5 million
for the three months ended June 30, 1997 and 1996,
respectively.
Provision for Income Taxes. Income tax expense for
continuing operations was $.6 million and $1.0 million for
the three months ended June 30, 1997 and 1996, respectively.
These amounts represent current tax expense for foreign and
state income taxes, as the Company is utilizing existing U.S.
net operating loss carryforwards with its domestic earnings.
The Company establishes valuation allowances against
unrecognized prior year tax benefits in accordance with the
provisions of FASB Statement No. 109, "Accounting for Income
Taxes." The Company is recognizing these benefits only as
reassessment demonstrates that it is more likely than not
that they will be realized.
Income from Continuing Operations. The Company had net
income from continuing operations of $2.4 million, or $.14
per share, for the three months ended June 30, 1997, compared
with income of $.9 million, or $.05 per share, for the
comparable 1996 period. See "Unusual Item" above and "Segment
Operating Results" below.
Extraordinary Item. As a result of the April 1996
refinancing of the Company's domestic debt, the three months
ended June 30, 1996 include an extraordinary charge of $8.5
million after-tax, representing costs incurred in connection
with the early extinguishment of debt as well as the write-
off of previously deferred loan costs.
Net (Loss) Income. Net income in the second quarter of 1997
was $2.4 million, or $.14 per share, compared with a net loss
of $7.6 million, or $.44 per share, in the comparable 1996
period. See "Unusual Item" and "Extraordinary Item" above,
and "Segment Operating Results", below.
Segment Operating Results
Total segment operating income for the three months ended
June 30, 1997 was $11.3 million, an increase of 4.5% as
compared with $10.8 million for the 1996 period.
Segment operating income comparisons with 1996 were adversely
affected by the phase out of certain postretirement employee
benefits ("OPEB"), completed in December 1996. This non-cash
gain, which resulted when the Company amended its policy
regarding retiree medical and life insurance benefits in
early 1994, was amortized to income during the phase-out
years 1994 through 1996. The second quarter of 1996
benefited by $1.1 million from this
14
<PAGE>
phase-out adjustment. Excluding this adjustment in 1996,
segment operating income increased 15.9% in the second
quarter of 1997 as compared with 1996.
Operating results by business segment for the three months
ended June 30, 1997 and 1996 are summarized below.
Power Transmission. Net sales of $22.9 million in the second
quarter of 1997 were 8.1% ahead of last year's comparable
period. Segment operating income of $2.4 million was $.7
million, or 42%, above the second quarter of 1996. Excluding
a $.5 million credit related to the OPEB phase-out that
benefited the 1996 period, segment operating income for the
three months ended June 30, 1997 nearly doubled compared with
the 1996 period. Market penetration of recently introduced
new electrical products began to pick up momentum. The sale
of Fincor variable speed drives was up 16% in the second
quarter of 1997, compared to last year. Sales to the
newspaper industry were also improved over a weak 1996.
In the first quarter of 1997, the segment introduced an
important new line of low-cost micro inverters, used to
control the speed and torque of fractional horsepower AC
motors in hundreds of different applications. In addition, a
new line of hollow shaft worm gear speed reducers for the
material handling industry, the power transmission business'
largest market, were introduced at that time.
Pumps. Net sales for the three months ended June 30, 1997 of
$28.7 million increased 4.7% from $27.4 million in the 1996
period. Excluding the unfavorable effects of exchange rate
changes (primarily in Sweden), net sales increased 8.5%
compared to the prior year. Segment operating income of $4.1
million in the second quarter of 1997 was 16.7% ahead of last
year's second quarter. Excluding the favorable effect of the
OPEB adjustment in 1996 of $.3 million, segment operating
income increased 27.7% in the second quarter of 1997,
compared with 1996. This positive sales and earnings growth
in the second quarter was primarily supported by increased
orders for equipment used in the transport and processing of
crude oil and fuel pumps for turbine-generators used in
electric power generation. The turnaround at the Warren
Pumps facility is also making a contribution to
profitability.
Instrumentation. Net sales of $19.4 million for the second
quarter of 1997 remained relatively constant compared to the
second quarter of last year. Segment operating income of $2.4
million for the three months ended June 30, 1997 was 4.4%
below the comparable prior-year period; however, excluding
the favorable OPEB adjustment in 1996, second quarter 1997
segment operating income was ahead of 1996 by 2.0%. The sales
and segment operating income for the segment's U.S. operation
were up 13.2% and 30.0%, respectively, as compared with the
second quarter of 1996. A new management team at the
segment's European operation has improved on-time performance
and is working to recapture the market share lost when
production schedules slipped during the past two years.
15
<PAGE>
Morse Controls. Second quarter 1997 segment net sales of
$29.7 million were just slightly ahead of the prior year.
Segment operating income was down $.4 million, or 14.8%, to
$2.2 million when comparing the same periods. Excluding the
favorable OPEB adjustment in 1996, second quarter 1997
segment operating income was down $.2 million, or 9.7%.
Persistent problems at the segment's operation in Germany,
which has undergone extensive restructuring, are expected to
begin showing improvement later in the year, now that
industrial segments of the German economy are beginning to
show signs of recovery.
Roltra-Morse. Net sales for the Roltra-Morse segment
increased 15.9% (or 26.5% excluding the unfavorable impact of
exchange rate changes) to $25.9 million in the second quarter
of 1997 compared to the prior year period, which continue to
be favorably impacted by the Italian government incentives to
auto buyers intended to prod the stagnant Italian economy
into recovery. This stimulus has increased auto sales in
Italy by more than 20%. Delays in implementing both
restructuring plans and the introduction of new lower-cost
components held second quarter 1997 segment operating income
to $.2 million, about half of last year's second quarter.
Six Months Ended June 30, 1997 Compared with 1996
Sales. Net sales from continuing operations for the six
months ended June 30, 1997 were $246.2 million, a 2% increase
compared with the comparable 1996 period. Excluding the
effects of exchange rate changes, primarily in Italy, Sweden
and Germany for the six months ended June 30, 1997, net sales
increased 4.5% compared to 1996. The Power Transmission,
Pumps and Roltra-Morse segments experienced increased sales
levels in the first half of 1997 as compared with the prior
year, which were partially offset by decreases in net sales
of the Instrumentation and Morse Controls segments. See
"Segment Operating Results" below.
Gross Profit. The gross profit in the first half of 1997
increased slightly to 29.5% compared with 29.1% in 1996. See
"Segment Operating Results" below.
Selling, General and Administrative Expenses. Selling,
general and administrative expenses increased as a percentage
of sales to 20.3% for the six months ended June 30, 1997
compared with 18.6% in the 1996 period. The increased
expenses as a percent of sales in 1997 was due to certain
Corporate expenses related to the proposed sale of the
Company, and to the fact that the 1996 period benefited from
a favorable adjustment of $2.2 million related to the Company
phase-out of accumulated postretirement benefit obligations.
The increased selling, general and administrative expenses in
the first half of 1997 were partially offset by net reductions
of $.6 million to previously recorded provisions. Research and
development expenditures were 1.9% of net sales for both the
six months ended June 30, 1997 and 1996.
16
<PAGE>
Unusual Item. In the six months ended June 30, 1997, the
Company recorded an unusual charge of $10.5 million related
to the settlement of a judgment against the Company in favor
of International. Reference is made to Note G and H in Part
I of this Form 10-Q Report for additional information.
Interest Expense. Average borrowings in the first six months
of 1997 were approximately $25 million higher than the first
half of 1996. Total interest expense (before allocation to
discontinued operations) increased only $.3 million to $17.5
million for the six months ended June 30, 1997 compared with
$17.2 million for the same period in 1996. The additional
interest expense as a result of the increased borrowing level
was partially offset by the lower interest rates incurred by
the Company since refinancing its domestic debt in April
1996. Interest expense for continuing operations excludes a
general interest allocation to the discontinued operations of
$.5 million and $.9 million for the six months ended June 30,
1997 and 1996, respectively.
Provision for Income Taxes. Income tax expense for
continuing operations was $1.3 million and $2.0 million for
the six months ended June 30, 1997 and 1996, respectively.
These amounts represent current tax expense for foreign and
state income taxes, as the Company is utilizing existing U.S.
net operating loss carryforwards with its domestic earnings.
The Company establishes valuation allowances against
unrecognized prior year tax benefits in accordance with
the provisions of FASB Statement No. 109, "Accounting for
Income Taxes." The Company is recognizing these benefits only
as reassessment demonstrates that it is more likely than not
that they will be realized.
Income (Loss) from Continuing Operations. The Company had a
net loss from continuing operations of $10.4 million, or $.61
per share, for the six months ended June 30, 1997, compared
with income of $2.8 million, or $.16 per share, for the
comparable 1996 period. See "Unusual Item" above and "Segment
Operating Results" below.
Extraordinary Item. The six months ended June 30, 1996
include an extraordinary charge of $8.5 million after-tax,
representing costs incurred in connection with the early
extinguishment of debt as well as the write-off of previously
deferred loan costs.
Net (Loss) Income. The net loss in the first quarter of 1997
was $10.4 million, or $.61 per share, compared to a net loss
of $5.7 million, or $.33 per share, in the comparable 1996
period. See "Unusual Item" above and "Segment Operating
Results" below.
Segment Operating Results
Total segment operating income for the six months ended June
30, 1997 was $21.8 million, a decrease of 4.4% as compared
with $22.8 million for the comparable 1996 period. As
discussed above, segment operating income comparisons with
1996 were adversely affected by the phase out of certain
postretirement benefits completed in December 1996.
17
<PAGE>
The first half of 1996 benefited by $2.2 million from this
OPEB phase-out adjustment. Excluding this adjustment in 1996,
segment operating income increased 5.4% in the first six
months of 1997 as compared with 1996.
Operating results by business segment for the six months
ended June 30, 1997 and 1996 are summarized below.
Power Transmission. Net sales of $46.0 million in the first
half of 1997 were 2.3% above last year's comparable period.
Segment operating income for the first six months of 1997 of
$4.4 million was $.1 million below the 1996 period, which
included a $.9 million credit related to the employee benefit
phase-out. Excluding this favorable OPEB credit in 1996,
segment operating income increased 23.6% in 1997 compared to
the prior year. Market penetration of recently introduced new
electrical products began to pick up momentum.
Pumps. Segment operating income increased 10.7% in the first
six months of 1997 to $7.7 million, on a 4.4% increase in net
sales to $56.1 million. The sales increase was due primarily
to the inclusion of Imo Pompes, SA, a French licensee
acquired in March 1996, which was partially offset by the
unfavorable impact of exchange rate changes (primarily in
Sweden). Segment operating income was ahead of the prior
year by 21.2% excluding the favorable OPEB adjustment in
1996. Also contributing to the increased sales and earnings
in the second quarter of 1997 was the increased orders for
equipment used in the transport and processing of crude oil
and fuel pumps for turbine-generators used in electric power
generation. The turnaround at the Warren Pumps facility is
also making a contribution to profitability.
Instrumentation. Segment operating income for the first half
of 1997 of $4.8 million was up 2.4% on sales of $37.6
million, a 2.8% decrease, compared with the prior year
period. Excluding the favorable OPEB adjustment in 1996,
segment operating income for the first six months of 1997
increased 9.7% compared with the prior year period. Net sales
and segment operating income for the segment's U.S. operation
were up 12.8% and 30.4%, respectively, as compared with the
first half of 1996. A new management team at the segment's
European operation has improved on-time performance and is
working to recapture the market share lost when production
schedules slipped during the past two years. Cost savings at
the segment's European operation planned for 1997 are
expected to be realized in the last half of the year.
Morse Controls. Segment net sales declined 2.6% to $58.1
million in the first half of 1997 compared with the prior
year. Segment operating income was down $1.0 million, or
18.5%, to $4.3 million when comparing the same periods. The
downturn in both sales and income was attributable to
persistent problems at the segment's operation in Germany,
which has undergone extensive restructuring, and is expected
to begin showing improvement later in the year, now that
industrial segments of the German economy are beginning to
show signs of recovery. The effects of unfavorable exchange
rate changes in
18
<PAGE>
Germany also had the effect of decreasing net sales by 2.3%
in the first half of 1997 compared with 1996. The segment's
U.S. sales rose 4.0% in the first six months of 1997, largely
due to the increased demand in the pleasure marine market
which has picked up in the last three months after a slow
start to the pleasure boating season.
Roltra-Morse. Net sales for the Roltra-Morse segment, which
increased 8.9% (or 15.4% excluding the unfavorable impact of
exchange rate changes) to $48.3 million in the first six
months of 1997 compared with the prior year, were boosted by
the impact of Italian government incentives to auto buyers
intended to prod the stagnant Italian economy into recovery.
Despite this sales increase, segment operating income of $.6
million for the first half of 1997 was less than half of the
1996 amount, due to delays in implementing both restructuring
plans and the introduction of new lower-cost components.
Roltra-Morse is expected to continue to benefit in the second
half of the year from a continuing high level of auto sales
in Italy.
Liquidity and Capital Resources
Short-term and Long-term Debt
The Company's domestic liquidity requirements are served by
the $70 million revolving credit facility (including a letter
of credit subfacility) under its senior secured credit
agreement entered into in April 1996 (the "New Credit
Agreement"), while its needs outside the U.S. continue to be
covered by short and intermediate term credit facilities from
foreign banks. As of June 30, 1997, there were $28.8 million
of revolving credit borrowings and $15.5 million of standby
letters of credit outstanding under the New Credit Agreement.
In connection with the recent judgment of $12.9 million
entered against the Company related to the International
Insurance matter, the Company has agreed to a settlement with
International for approximately $10.0 million, which was paid
on July 30, 1997. Due to the lower settlement amount with
International, and the Company's efforts to maximize
liquidity, the availability under the revolving credit
facility should be sufficient for the foreseeable future. If
Acquisition Corp. is successful in its tender offer, it
intends to refinance the New Credit Agreement with the
proceeds of new credit facilities of up to $147,400,000.
Reference is made to the Schedule 14D-1 of II Acquisition
Corp. filed with the Commission on July 31, 1997 for more
information regarding such new credit facilities.
The Company also has, in the aggregate, foreign short-term
credit facilities of approximately $34.6 million. As of June
30, 1997, $22.4 million was outstanding under those foreign
facilities.
At June 30, 1997, the Company also had outstanding under the
New Credit Agreement $20.0 million of a term loan amortizing
to April 2001, $12.9 million of a second term loan amortizing
to April 2001, and $44.5 million of a third term loan
amortizing to April 2003.
19
<PAGE>
In addition, the Company had outstanding $155 million of
its 11.75% senior subordinated notes due in 2006 (the "Notes").
Cash Flow
The Company's operating activities provided cash of $.7
million in the first half of 1997, compared with cash used of
$8.3 million in the comparable 1996 period. The cash
provided by operating activities in 1997 was primarily due to
a lower working capital usage than the first half of 1996.
Net cash provided by investing activities of $8.8 million in
the first six months of 1997 was due primarily to the sales
of the Company's Varo Electronic Systems business and non-
operating real estate. This compared with cash used in
investing activities of $5.7 million for the six months ended
June 30, 1996. Cash and cash equivalents were $2.8 million at
June 30, 1997 compared with $4.9 million at December 31,
1996.
Working capital at June 30, 1997 was $26.3 million, a
decrease of $17.3 million from the end of 1996, due primarily
to the provision recorded in the first quarter of 1997
related to the International Judgment. The ratio of current
assets to current liabilities was 1.1 at June 30, 1997
compared with 1.3 at December 31, 1996. The Company's total
debt as a percent of its total capitalization increased to
130.4% at June 30, 1997 compared with 121.5% at December 31,
1996.
Management believes that cash flow from operations, cash
available from unused credit facilities and cash generated by
additional asset sales will be sufficient to meet the
Company's foreseeable liquidity needs.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. Except for historical matters, the matters discussed
in this Form 10-Q Report are forward-looking statements based
on current expectations and involve risks and uncertainties.
Forward-looking statements include, but are not limited to,
statements under the following headings: (i) "Restructuring
Plans" - the likelihood of completing the sales of the
remaining assets identified for sale and the impact of
various cost reduction programs; (ii) Legal Proceedings - the
future impact of legal proceedings on the financial condition
of the Company; (iii) "Segment Operating Results" - the
future performance of various programs and foreign market
conditions in each segment and the impact of such programs
and foreign market conditions on future sales and on
operating income; and, (iv) "Recent Events" and "Liquidity
and Capital Resources" - statements concerning the outcome of
the Acquisition Corp. tender offer for the Company's common
stock, the Company's ability to sell the remaining assets
identified for sale and repay outstanding debt under the New
Credit Agreement and statements regarding the announced sale
of the Company and the impact of such an action, if any, on
the remaining asset sales. The Company wishes to caution the
reader that, in addition to the matters described above,
various factors such as delays in contracts from key
customers, demand and market acceptance risk for new
20
<PAGE>
products, continued or increased competitive pricing and the
effects of under-utilization of plants and facilities,
particularly in Europe, and the impact of worldwide economic
conditions on demand for the Company's products, could cause
results to differ materially from those in any forward-
looking statement.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
LILCO Insurance Litigation. On May 8, 1997, the Company was
informed that the U.S. District Court for the Northern
District of California had reinstated the judgment in favor
of International Insurance Company. This case was commenced
in January 1993, in the U.S. District Court for the Northern
District of California by International alleging that
International was entitled to recover $10 million in defense
costs, and $1.2 million of a judgment, each of which was paid
on behalf of the Company in connection with litigation
between the Company and LILCO which was concluded in October
1993. International contends, among other things, that the
International policies did not cover the matters in question
in the LILCO case. The Company therefore recorded a charge to
income in the first quarter of 1997 of $12.9 million as an
unusual item, which represented the amount of the judgment
plus interest to date. On July 15, 1997 the Company agreed to
settle with International by dropping an appeal and paid a
reduced amount on July 30, 1997 in complete settlement of all
outstanding amounts. As a result of the settlement, the
Company recorded a favorable adjustment of $2.4 million as an
unusual item in the second quarter of 1997.
For information regarding certain pending lawsuits, reference
is made to the Company's Form 10-K for the year ended
December 31, 1996, which is incorporated herein by reference,
and to Note H in Part I of this Form 10-Q Report.
Item 2. Changes in Securities
On April 30, 1997, the Board of Directors of the Company
declared a dividend distribution of one Right for each
outstanding share of Company Common Stock to stockholders of
record at the close of business on May 4, 1997. Each Right
entitles the registered holder to purchase from the Company a
unit consisting of one one-hundredth of a share (a "Unit") of
Series B Junior Participating Preferred Stock, par value
$1.00 per share, at a purchase price of $15 per Unit, subject
to adjustment. Concurrent with the issuance of these Rights,
previously issued rights for the purchase of Series A Junior
Preferred Stock expired. A complete description of the
Rights is included in the Company's Form 8-A filed with the
Commission on May 2, 1997.
21
<PAGE>
Item 4. Submission of Matters to a Vote of Security
Holders.
The Annual Meeting of the Company's Stockholders was held on May
20, 1997.
The following Directors were elected:
Name Votes For Votes Withheld
James B. Edwards 13,381,153 1,943,379
Carter P. Thacher 13,380,463 1,944,069
There were no broker non-votes regarding the election of Directors.
The following Directors terms of office continued after the
meeting:
Name
Donald K. Farrar
Richard J. Grosh
Donald C. Trauscht
Arthur E. Van Leuven
Ernst & Young LLP was elected as independent auditors of the
Company with 15,174,970 votes in favor of such election, 104,355
votes against and 45,207 abstentions. There were no broker non-
votes regarding the election of such auditors.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
The following exhibits are being filed as part of
this Report:
Exhibit No. Description
3(i) The Company's Restated Certificate of
Incorporation, as amended
4.3 (A) Rights Agreement, dated as of April 30, 1997
between Imo Industries Inc. and First Chicago
Trust Company of New York, which includes, as
Exhibit A thereto, the Certificate of
Designation, Preferences and Rights of Series
B Junior Participating Preferred Stock of Imo
Industries Inc., as Exhibit B thereto, the
Form of Rights Certificate and as Exhibit C
thereto, the Summary of Rights to Purchase
Preferred Stock. (Incorporated by reference
to Exhibit 1 to the Company's Form 8-A
Registration Statement filed with the
Commission on May 2, 1997.)
22
<PAGE>
(B) Amendment dated June 25, 1997 between the
Company and First Chicago Trust Company of
New York, (Incorporated by reference to
Exhibit G to the Company's Schedule 14D-9
Solicitation/Recommendation Statement filed
with the Commission on July 2, 1997.)
(C) Amendment dated July 25, 1997 between the
Company and First Chicago Trust Company of
New York, (Incorporated by reference to
Exhibit J to the Company's Schedule 14D-9
Solicitation/Recommendation Statement filed
with the Commission on July 31, 1997.)
10.24 Agreement and Plan of Merger, dated June 26,
1997, among United Dominion Industries
Limited, UD Delaware Corp. and Imo Industries
Inc. (Incorporated by reference to Exhibit C
to the Company's Schedule 14D-9
Solicitation/Recommendation Statement filed
with the Commission on July 2, 1997.)
10.25 Share Purchase Agreement, dated July 25,
1997, between II Acquisition Corp. and the
Company, (Incorporated by reference to
Exhibit C to the Company's Schedule 14D-9
Solicitation/Recommendation Statement filed
with the Commission on July 31, 1997.)
27 Financial Data Schedule as of June 30, 1997
(b) Reports on Form 8-K:
On July 1, 1997, the Company filed a report on Form 8-K,
reporting under Item 5, disclosing the announcement that
the Registrant and United Dominion Industries Limited
("UDI") had executed a definitive merger agreement
providing for a tender offer for all shares of the
Registrant's common stock by UDI.
On July 29, 1997, the Company filed a report on Form 8-
K, reporting under Item 5, disclosing the announcement
that the Registrant and II Acquisition Corp. had
executed a definitive agreement providing for a tender
offer for all shares of the Registrant's common stock by
II Acquisition Corp. and had terminated the merger
agreement with United Dominion Industries Limited.
23
<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.
Imo Industries Inc.
(Registrant)
Date August 13, 1997 /s/ DONALD K. FARRAR
Donald K. Farrar
Chairman, Chief Executive Officer,
President and Director
(principal executive officer)
Date August 13, 1997 /s/ WILLIAM M. BROWN
William M. Brown
Executive Vice President,
Chief Financial Officer and
Corporate Controller
(principal financial and accounting
officer)
24
State of Delaware
Office of Secretary of State
------------------------------------
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF RESTATED
CERTIFICATE OF INCORPORATION OF IMO DELAVAL INC. FILED IN THIS OFFICE ON THE
EIGHTEENTH DAY OF DECEMBER, A.D. 1986, AT 10:45 O'CLOCK A.M.
SEAL
/s/ Michael Harkins
---------------------------------------
Michael Harkins, Secretary of State
AUTHENTICATION: 1683354
DATE: 05/03/1988
<PAGE>
8603520230
RESTATED CERTIFICATE OF INCORPORATION
OF
IMO DELAVAL INC.
Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware
IMO DELAVAL INC. (the "Corporation") a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, in order to amend and restate its Certificate of Incorporation
pursuant to Sections 242 and 245 of said General Corporation Law, certifies as
follows:
1. The name of the Corporation is Imo Delaval Inc. and the name under
which the corporation was originally incorporated is Elbee Ventures, Inc. The
date of filing its original Certificate of Incorporation with the Secretary of
State was March 2, 1959.
2. This Restated Certificate of Incorporation restates and integrates
and also further amends the provisions of the Certificate of Incorporation of
the Corporation, as heretofore amended or supplemented.
3. The Board of Directors of the Corporation, acting by unanimous
written consent pursuant to Section 141(f) of the General Corporation Law of the
State of Delaware, duly adopted a resolution proposing and declaring advisable
the adoption of a restatement of the Certificate of Incorporation of the
Corporation in the form hereinafter set forth in Item 7.
- 1 -
<PAGE>
4. At a meeting duly held, the sole stockholder of the Corporation
adopted said restatement in accordance with the applicable provisions of Section
211 of the General Corporation Law of the State of Delaware.
5. The aforesaid Restated Certificate of Incorporation was duly adopted
in accordance with the applicable provisions of Sections 242 and 245 of the
General Corporation Law of the State of Delaware.
6. The authorized capital of the Corporation shall not be increased nor
reduced under or by reason of the Restatement of the Certificate of
Incorporation of the Corporation
7. The text of the Certificate of Incorporation, as amended or
supplemented heretofore, is hereby amended and restated so as to read in its
entirety as follows:
ARTICLE I
1.1 The name of this Corporation is Imo Delaval Inc.
ARTICLE II
2.1. The registered office of the Corporation in the State of Delaware
in located at Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name and address of its registered agent
is the Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801.
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ARTICLE III
3.1. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
4.1. The total number of shares of all classes of capital stock which
this Corporation shall have authority to issue is Thirty Million (30,000,000)
shares of which Five Million (5,000,000) shares shall be preferred stock, of the
par value of One Dollar ($1.00) per share ("Preferred Stock") and Twenty Five
Million (25,000,000) shares shall be common stock, of the par value of One
Dollar ($1.00) per share ("Common Stock").
4.2. Upon the effective date of this amendment of Article IV, the Seven
Million Two Hundred Seventy Thousand, Three Hundred Eighty-four (7,270,384)
shares of Common Stock $1.00 oar value of this Corporation are split and changed
into such number of shares of Common Stock, $1.00 par value, of the Corporation
as equals one-tenth (1/10) of the number of issued and outstanding shares of
Transamerica Corporation Common Stock, $1.00 par value, as of the close of
business on the effective date of this amendment of this Article IV. The par
value of the
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Common Stock of this Corporation shall not be changed and shall remain at One
Dollar ($1.00) per share.
4.3. Except as otherwise expressly provided by this Restated
Certificate of Incorporation or the resolution or resolutions of the Board of
Directors providing for the issue of a series of Preferred Stock, stock of any
class or classes may be authorized, and the amount of authorized stock of any
class or classes may be increased or decreased, by the affirmative vote of the
holders of a majority of the stock of this Corporation at the time entitled to
vote.
4.4. At every meeting of the stockholders of this Corporation, each
holder of Common Stock of this Corporation shall be entitled to one vote for
each full share of Common Stock.
4.5. The Preferred Stock may be issued in one or more series with such
redemption provisions, dividend rights, rights on dissolution or distribution of
assets, conversion or exchange rights, designations, voting powers, preferences
and relative, participating, optional or other rights, if any, and
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions providing for the issue of such
stock, or series thereof, adopted, at any time and from time to time, by the
Board of Directors of this
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Corporation.
4.6. No stockholder of this Corporation shall have any preemptive or
preferential right of subscription to any shares of any stock of this
Corporation, or to any obligations convertible into stock of this Corporation,
issued or sold, nor any right of subscription to any thereof other than such, if
any, as the Board of Directors of this Corporation in its discretion from time
to time may determine, and the Board of Directors may issue stock of this
Corporation, or obligations convertible into stock, without offering such issue
of stock either in whole or in part, to the stockholders of this Corporation.
The acceptance of stock in this Corporation shall be a waiver of any such
preemptive or preferential right which in the absence of this provision might
otherwise be asserted by the stockholders of this Corporation or any of them.
4.7. This Corporation shall be entitled to treat the person in whose
name any share is registered as the owner thereof, for all purposes, and shall
not be bound to recognize any equitable or other claim to, or interest in, such
share on the part of any other person, whether or not this Corporation shall
have notice thereof, save as expressly provided by the laws of the State of
Delaware.
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ARTICLE V
5.1. The Corporation shall have perpetual existence.
ARTICLE VI
6.1. The Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of this Corporation without any action on the part of the
stockholders. The stockholders of this Corporation are also authorized to adopt,
amend or repeal the By-Laws of this Corporation, provided that such action by
the stockholders may only be taken by the affirmative vote of the holders of at
least eighty percent (80%) of the voting power of all of the then issued and
outstanding shares of stock of this Corporation entitled to vote, voting
together as a single class, and provided further that a brief description of
such proposed adoption, amendment or repeal is included in the notice of the
annual or special stockholders meeting at which such action is to be considered.
ARTICLE VII
7.1. The stockholders and Board of Directors shall have power, if the
By-Laws so provide, to hold their meetings
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and to keep the books of this Corporation (except such as are required by the
law of the State of Delaware to be kept in Delaware) and documents and papers of
this Corporation outside the State of Delaware and to have one or more offices
within or without the State of Delaware at such places as may be designated from
time to time by the Board of Directors.
7.2. Any action required or permitted to be taken by the stockholders
of this Corporation must be effected at an annual or special meeting of
stockholders of this Corporation and may not be effected by any consent in
writing by such stockholders. Unless otherwise prescribed by statute, special
meetings of stockholders of this Corporation may be called by the Chairman of
the Board and shall be called by him or the Secretary at the request in writing
of a majority of the Board of Directors then in office. Such request shall state
the purpose or purposes of the proposed meeting.
7.3. Notwithstanding any other provision of this Restated Certificate
of Incorporation, the affirmative vote of holders of at least eighty percent
(80%) of the voting power of the shares entitled to vote at an election of
directors shall be required to amend, alter, change or repeal, or to adopt any
provision as part of this Restated Certificate of Incorporation inconsistent
with the purpose and intent of, this Article VII.
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ARTICLE VIII
8.1. This Corporation reserves the right to amend, alter, change, add
to or repeal any provision contained in this Restated Certificate of
Incorporation in the manner now or hereafter prescribed by statute, and all
rights and powers conferred by this Restated Certificate of Incorporation on
stockholders, directors and officers are granted subject to this reservation.
ARTICLE IX
9.1. The specific number of directors of this Corporation shall be
fixed from time to time exclusively by the Board of Directors of this
Corporation. The directors are divided into three classes, designated Class I,
Class II and Class III. Each class shall consist, as nearly as may be possible,
of one-third of the total number of directors constituting the entire Board of
Directors. As of the effective date of this amendment of Article IX, five
directors have been elected, of which one is a Class I director with a term
expiring at the 1987 annual meeting of stockholders, two are Class II directors
with terms expiring at the 1988 annual meet meeting of stockholders, and two are
Class III directors with terms
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expiring at the 1989 annual meeting of stockholders. At the 1987 annual meeting
of stockholders, a Class I director shall be elected for a three-year term. At
each succeeding annual meeting of stockholders beginning in 1988, successors to
the class of directors whose term expires at that annual meeting shall be
elected for a three-year term. If the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as possible, and any
additional director of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with the
remaining term of that class, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. A director shall hold
office until the annual meeting for the year in which his term expires and until
his or her successor shall be elected and shall qualify, subject, however, to
prior death, resignation, retirement, disqualification or removal from office.
Any vacancy in the Board of Directors that results from an increase in the
number of directors may be filled by a majority of the Board of Directors then
in office, provided that a quorum is present, and any other vacancy occurring in
the Board of Directors may be filled by a majority of the directors then in
office, even if less than a quorum, or by a sole remaining director. Any
director elected to fill a vacancy not resulting from an increase in the number
of directors shall have the same
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remaining term as that of such director's predecessor. A Director may not be
removed from office prior to the expiration of his term except for cause (as
provided in the General Corporation Law of the State of Delaware).
9.2. Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by this Corporation shall have
the right, voting separately by class or series, to elect directors at an annual
or special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Restated Certificate of Incorporation applicable thereto, and such
directors so elected shall not be divided into classes pursuant to this Article
IX unless expressly provided by such terms.
9.3. A director of this Corporation shall not be personally liable to
the Corporation or to its stockholders for monetary damages for breach of
fiduciary duty as a director except (i) for any breach of the director's duty of
loyalty to this Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under section 174 of the General Corporation Law of the State of
Delaware or (iv) for any
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transaction from which the director derived an improper personal benefit.
9.4. In discharging the duties of their respective positions, the Board
of Directors, committees of the board, individual directors and individual
officers may, in considering the best interests of this Corporation, consider
the effects of any action upon employees, suppliers and customers of this
Corporation, communities in which offices or other establishments of this
Corporation are located, and all other pertinent factors.
9.5. Notwithstanding any other provision of this Restated Certificate
of Incorporation, the affirmative vote of holders of at least eighty percent
(80%) of the voting power of the shares entitled to vote at an election of
directors shall be required to amend, alter, change, repeal or adopt any
provision as part of this Restated Certificate of Incorporation, inconsistent
with the purpose or intent of, this Article IX.
ARTICLE X
10.1. In addition to any affirmative vote required by law or this
Restated Certificate of Incorporation or the By-Laws of this Corporation, and
except as otherwise expressly provided
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in Section 10.2 of this Article X, a Business Combination (as hereinafter
defined) with, or proposed by or on behalf of, any Interested Stockholder (as
hereinafter defined)) or any Affiliate (as hereinafter defined) or Associate (as
hereinafter defined) of any Interested Stockholder or any person who thereafter
would be an Affiliate or Associate of such Interested Stockholder shall require
the affirmative vote of not less than a majority of the votes entitled to be
cast by the holders of all the then outstanding shares of Voting Stock (as
hereinafter defined), voting together as a single class, excluding Voting Stock
beneficially owned by such Interested Stockholder. Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that a
lesser percentage or separate class vote may be specified, by law or in any
agreement with any national securities exchange or otherwise.
10.2. The provisions of Section 10.1 of this Article X shall not
be applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote, if any, as is required by
law or by any other provision of this Restated Certificate of Incorporation or
the By-Laws of this Corporation, or any agreement with any national securities
exchange, if all of the conditions specified in either of the following
Paragraphs 10.2.1 or 10.2.2 are met or, in the case of a Business Combination
not involving the payment of consideration to the holders of this Corporation's
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outstanding Capital Stock (as hereinafter defined), if the condition specified
in the following Paragraph 10.2.1 is met:
10.2.1. The Business Combination shall have been approved, either
specifically or as a transaction which is within an approved category of
transactions, by a majority (whether such approval is made prior to or
subsequent to the acquisition of, or announcement or public disclosure of the
intention to acquire, beneficial ownership of the Voting Stock that caused the
Interested Stockholder to become an Interested Stockholder) of the Continuing
Directors (as hereinafter defined) then in office.
10.2.2. All of the following conditions shall have been met:
10.2.2.1. The aggregate amount of cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation 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 amount determined under clauses (a) and (b) below:
(a) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or
on behalf of the
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Interested Stockholder for any share of Common Stock in connection with the
acquisition by the Interested Stockholder of beneficial ownership of shares of
Common Stock (x) within the two-year period immediately prior to the first
public announcement of the proposed Business Combination (the "Announcement
Date") or (y) in the transaction in which it became an Interested Stockholder,
whichever is higher, in either case as adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with respect to Common Stock;
and
(b) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested Stockholder became an
Interested Stockholder (the "Determination Date"), whichever is higher, as
adjusted for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to Common Stock.
10.2.2.2. The aggregate amount of cash and the Fair Market Value, as of
the date of the consummation of the Business Combination, of consideration other
than cash to be received per share by holders of shares of any class or series
of outstanding Capital Stock, other than Common Stock, shall be at least equal
to the highest amount determined under clauses (a) and (b) below:
(a) (if applicable) the highest per
<PAGE>
share price (including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested Stockholder for any share
of such other class or series of Capital Stock in connection with the
acquisition by the Interested Stockholder of beneficial ownership of shares of
such other class or series of Capital Stock (x) within the two-year period
immediately prior to the Announcement Date or (y) in the transaction in which it
became an Interested Stockholder, whichever is higher, in either case as
adjusted for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to such other class or series of Capital Stock;
and
(b) the Fair Market Value per share of such other class or series
of Capital Stock on the Announcement Date or on the Determination Date,
whichever is higher, as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to such other class or
series of Capital Stock.
The provisions of this paragraph 10.2.2. shall be required to be met with
respect to every class or series of outstanding Capital Stock, whether or not
the Interested Stockholder has previously acquired beneficial ownership of any
shares of a particular class or series of Capital Stock.
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10.2.2.3. The consideration to be received by holders of a particular
class or series of outstanding Capital Stock shall be in cash or in the same
form as previously has been paid by or on behalf of the Interested Stockholder
in connection with its direct or indirect acquisition of beneficial ownership of
shares of such class or series of Capital Stock. If the consideration so paid
for shares of any class or series of Capital Stock varied as to form, the form
of consideration for such class or series of Capital Stock shall be either cash
or the form used to acquire beneficial ownership of the largest number of shares
of such class or series of Capital Stock previously acquired by or on behalf of
the Interested Stockholder.
10.2.2.4. After the Determination Date and prior to the consummation of
such proposed Business Combination: (i) except as approved by a majority of the
Continuing Directors then in office, there shall have been no failure to declare
and pay at the regular date therefor any full quarterly dividends (whether or
not cumulative) payable in accordance with the terms of any outstanding Capital
Stock; (ii) there shall have been no reduction in the annual rate of dividends
paid on the Common Stock (except as necessary to reflect any stock split, stock
dividend or subdivision of the Common Stock), except as approved by a majority
of the Continuing Directors then in office; (iii) there shall have been an
increase in the annual rate of
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dividends paid on the Common Stock as necessary to reflect any declassification
(including any reverse stock split, recapitalization, reorganization or any
similar transaction that 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 then in office; and (iv) such
Interested Stockholder shall not have become the beneficial owner of any
additional shares of Capital Stock except as part of the transaction that
results in such Interested Stockholder becoming an Interested Stockholder and
except in a transaction that, after giving effect thereto, would not result in
any increase in the interested Stockholder's percentage beneficial ownership of
any class or series of Capital Stock.
10.2.2.5. After the Determination Date, such Interested Stockholder
shall not have received the benefit, directly or indirectly (except
proportionately as a stockholder of this Corporation), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or other
tax advantages provided by this Corporation, whether in anticipation of or in
connection with such proposed Business Combination or otherwise.
10.2.2.6. A proxy or information statement describing such proposed
Business Combination and complying with
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the requirements of the Securities Exchange Act of 1934 and the rules and
regulations thereunder (the "Act") (or any subsequent provisions replacing,
amending or modifying the Act) shall be mailed to all stockholders of this
Corporation at least 30 days prior to the consummation of such proposed Business
Combination (whether or not such proxy or information statement is required to
be mailed pursuant to the Act or subsequent provisions). The proxy or
information statement shall contain on the first page thereof, in a prominent
place, any statement as to the advisability (or inadvisability) of such proposed
Business Combination that the Continuing Directors, or any of them, may choose
to make and, if deemed advisable by a majority of the Continuing Directors then
in office, the opinion of an investment banking firm selected by a majority of
the Continuing Directors then in office as to the fairness (or not) of the terms
of the Business Combination from a financial point of view to the holders of the
outstanding shares of Capital Stock other than the Interested Stockholder and
its Affiliates or Associates, such investment banking firm to be paid a
reasonable fee for its services by this Corporation.
10.2.2.7. Such Interested Stockholder shall not have made any major
change in this Corporation's business or equity capital structure without the
approval of a majority of the Continuing Directors then in office.
.
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10.3. The following definitions shall apply with respect to this
Article X.
10.3.1. The term "Business Combination" shall mean:
a. any merger or consolidation of this Corporation or any
Subsidiary (as hereinafter defined) with (i) any Interested Stockholder or (ii)
any other company (whether or not itself an Interested Stockholder) which is or
after such merger or consolidation would be an Affiliate or Associate of an
Interested Stockholder; or
b. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition or security arrangement, investment, loan, advance, guarantee,
agreement to purchase, agreement to pay, extension of credit, joint venture
participation or other arrangement (in one transaction or a series of
transactions) with or for the benefit of any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder involving any assets,
securities or commitments of this Corporation, any Subsidiary or any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder which
(except for any arrangement, whether as employee, consultant or otherwise, other
than as a director, pursuant to which any Interested Stockholder or any
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Affiliate or Associate thereof shall, directly or indirectly, have any control
over or responsibility for the management of any aspect of the business or
affairs of this Corporation, with respect to which arrangements the value test
set forth below shall not apply), together with all other such arrangements
(including all contemplated future events) has an aggregate Fair Market Value
or involves aggregate commitments of $5,000,000 or more; or
c. the adoption of any plan or proposal for the liquidation or
dissolution of this Corporation or for any amendment to this Corporation's
By-Laws; or
d. any reclassification of securities (including any reverse
stock split), or recapitalization of this Corporation, or any merger or
consolidation of this Corporation with any of its Subsidiaries or any other
transaction (whether or not with or otherwise involving an Interested
Stockholder) that has the effect, directly or indirectly, of increasing the
proportionate share of any class or series of Capital Stock, or any securities
convertible into Capital Stock or into equity securities of any Subsidiary, that
is beneficially owned by any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder; or
e. any agreement, contract or other arrangement providing for any
one or more of the actions
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specified in the foregoing clauses (a) to (d).
10.3.2. The term "Capital Stock" shall mean all Capital Stock of this
Corporation authorized to be issued from time to time under Article IV of this
Restated Certificate of Incorporation, and the term "Voting Stock" shall mean
all Capital Stock which by its terms may be voted on all matters submitted to
stockholders of this Corporation generally.
10.3.3. The term "person" shall mean any individual, firm, company or
other entity, and shall include any group comprised of any person and any other
person with whom such person or any Affiliate or Associate of such person has
any agreement, arrangement or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting or disposing of Capital Stock.
10.3.4. The term "Interested Stockholder" shall mean any person (other
than the Corporation or any Subsidiary and other than any profit-sharing,
employee stock ownership or other employee benefit plan of this Corporation or
any Subsidiary or any trustee of, or fiduciary with respect to, any such plan
when acting in such capacity) who (a) is or has announced or publicly disclosed
a plan or intention to become the beneficial owner of Voting Stock representing
twenty percent (20%) or more of the votes entitled to be cast by the holders of
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all then outstanding shares of Voting Stock; or (b) is an Affiliate or Associate
of this Corporation and at any time within the two-year period immediately prior
to the date in question, was the beneficial owner of Voting Stock representing
twenty percent (20%) or more of the votes entitled to be cast by the holders of
all then outstanding shares of Voting Stock.
10.3.5. A person shall be a "beneficial owner" of any Capital Stock (a)
which such person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; (b) which such person or any of its Affiliates or
Associates has, directly or indirectly, (i) the right to acquire (whether such
right is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or understanding; or
(c) which is beneficially owned, directly or indirectly, by any other person
with which such person or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Capital Stock. For the purposes of determining
whether a person is an Interested Stockholder pursuant to Paragraph 10.3.4 of
this Section 10.3, the number of shares of Capital Stock deemed to be
outstanding shall include shares deemed beneficially owned by such person
through application of this Paragraph 10.3.5 of Section 10.3, but shall
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not include any other shares of Capital Stock that may be issuable pursuant to
any agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
10.3.6. The terms "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Act as in effect on the
date of filing of this Restated Certificate of Incorporation (the term
"registrant" in said Rule 12b-2 meaning in this case, this Corporation).
10.3.7. The term "Subsidiary" means any corporation of which a majority
of any class of equity security is beneficially owned by this Corporation;
provided, however, that for the purposes of the definition of Interested
Stockholder set forth in Paragraph 10.3.4 of this Section 10.3, the term
"Subsidiary" shall mean only a corporation of which a majority of each class of
equity security is beneficially owned by this Corporation.
10.3.8. The term "Continuing Director" means any member of the Board of
Directors of this Corporation (the "Board of Directors"), while such person is a
member of the Board of Directors, who is not an Affiliate or Associate or
representative of the Interested Stockholder and was a member of the Board of
Directors prior to the time that the Interested
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Stockholder became an Interested Stockholder, and any successor of a Continuing
Director, while such successor is a member of the Board of Directors, who is not
an Affiliate or Associate or representative of the Interested Stockholder and is
recommended or elected to succeed the Continuing Director by a majority of the
Continuing Directors then in office.
10.3.9. The term "Fair Market Value" means (a) in the case of cash, the
amount of such cash; (b) 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, on the New York Stock
Exchange, or, if such stock is not listed on such Exchange, on the principal
United States securities exchange registered under the Act on which such stock
is listed, or, if such stock is not listed on any such exchange, the highest
closing 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 similar 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 a majority of the Continuing
Directors then in office in good faith; and (c) in the case of property other
than cash or stock, the fair market value of such property on the date in
question as
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determined in good faith by a majority of the Continuing Directors then in
office.
10.3.10. In the event of any Business Combination in which this
Corporation survives, the phrase "consideration other than cash to be received."
as used in Paragraphs 10.2.2.1 and 10.2.2.2 of Section 10.2 of this Article X
shall include the shares of Common Stock and/or the shares of any other class or
series of Capital Stock retained by the holders of such shares.
10.4. A majority of the Continuing Directors then in office shall have
the power and duty to determine, for the purposes of this Article X, on the
basis of information known to them after reasonable inquiry, (a) whether a
person is an Interested Stockholder, (b) the number of shares of Capital Stock
or other securities beneficially owned by any person, (c) whether a person is an
Affiliate or Associate of another, (d) whether the proposed action is with, or
proposed by, or on behalf of an Interested Stockholder or an Affiliate or
Associate of an Interested Stockholder, and (e) whether the assets that are the
subject of any Business Combination have, or the consideration to be received
for the issuance or transfer of securities by this Corporation or any Subsidiary
in any Business Combination has, an aggregate Fair Market Value of $5,000,000 or
more. Any such determination made in good faith shall be
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binding and conclusive on all parties.
10.5. Nothing contained in this Article X shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
10.6. The fact that any Business Combination complies with the
provisions of Section 10.2 of this Article X shall not be construed to impose
any fiduciary duty, obligation or responsibility on the Board of Directors, or
any member thereof, to approve such Business Combination or recommend its
adoption or approval to the stockholders of this Corporation, nor shall such
compliance limit, prohibit or otherwise restrict in any manner the Board of
Directors, or any member thereof, with respect to evaluations of or actions and
responses taken with respect to such Business Combination.
10.7. For the purposes of this Article X, a Business Combination or any
proposal to amend, repeal or adopt any provision of this Restated Certificate of
Incorporation inconsistent with this Article X (collectively, "Proposed Action")
is presumed to have been proposed by, or on behalf of, an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder or a
person who thereafter would become such if (1) after the Interested Stockholder
became such, the Proposed Action is proposed following the election of any
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director of this Corporation who, with respect to such Interested Stockholder,
would not qualify to serve as a Continuing Director or (2) such Interested
Stockholder, Affiliate, Associate or person votes for or consents to the
adoption of any such Proposed Action, unless as to such Interested Stockholder,
Affiliate, Associate or person, a majority of the Continuing Directors makes a
good faith determination that such Proposed Action is not proposed by or on
behalf of such Interested Stockholder, Affiliate, Associate or person, based on
information known to them after reasonable inquiry.
10.8. Notwithstanding any other provisions of this Restated Certificate
of Incorporation or the By-Laws of this Corporation (and notwithstanding the
fact that a lesser percentage or separate class vote may be specified by law,
this Restated Certificate of Incorporation or the By-Laws of this Corporation),
the affirmative vote of the holders of not less than a majority of the votes
entitled to be cast by the holders of all the then issued and outstanding shares
of Voting Stock, voting together as a single class, excluding Voting Stock
beneficially owned by such Interested Stockholder, shall be required to amend or
repeal, or adopt any provisions inconsistent with, this Article X; provided,
however, that this Section 10.8 shall not apply to, and such majority vote shall
not be required for, any amendment, repeal or adoption
- 27 -
<PAGE>
unanimously recommended by the Board of Directors if all of such directors are
persons who would be eligible to serve as Continuing Directors within the
meaning of Section 10.3.8 of this Article X.
IN WITNESS WHEREOF Transamerica Delaval Inc. has caused this Restated
Certificate of Incorporation to be duly executed in its corporate name this
18th day of December, 1986.
TRANSAMERICA DELAVAL INC.
/s/ W. J. Holcombe
By:________________________________
William J. Holcombe
Chairman and Chief Executive Officer
ATTEST:
/s/ Stephen F. Agocs
By: _____________________
Stephen F. Agocs
Secretary
Corporate Seal
- 28 -
<PAGE>
PAGE 1
State of Delaware
Office of Secretary of State
------------------------------
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
OWNERSHIP OF THE "IMO DELAVAL INC." A CORPORATION ORGANIZED AND EXISTING UNDER
THE LAWS OF THE STATE OF DELAWARE, MERGING "IMO INDUSTRIES INC." A CORPORATION
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, PURSUANT TO
SECTION 253 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE AS RECEIVED
AND FILED IN THIS OFFICE THE TENTH DAY OF MARCH, A.D. 1989, AT 10:01 O'CLOCK
A.M.
AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CORPORATION SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
AND I DO HEREBY FURTHER CERTIFY THAT THE SAID "IMO DELAVAL INC.", HAS
RELINQUISHED ITS CORPORATE TITLE AND ASSUMED IN PLACE THEREOF "IMO INDUSTRIES
INC."
SEAL
/S/ Michael Harkins
-----------------------------------
729069095 Michael Harkins, Secretary of State
AUTHENTICATION: *2095033
DATE: 3/10/1989
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
Imo Industries Inc.
INTO
Imo Delaval Inc.
* * * * *
Imo Delaval Inc., a corporation organized and existing under the laws
of Delaware,
DOES HEREBY CERTIFY:
FIRST: That this corporation was incorporated on the 2nd day of March,
1959, pursuant to the General Corporation Law of the State of Delaware.
SECOND: That this corporation owns all of the outstanding shares of the
stock of Imo Industries Inc., a corporation incorporated on the 31st day of
January, 1989, pursuant to the General Corporation Law of the State of Delaware.
THIRD: That this corporation, by the following resolutions duly adopted
at a meeting held on the 9th day of February, 1989 by its Board of Directors,
determined to and did merge into itself said Imo Industries Inc.:
WHEREAS, Imo Delaval Inc. (the "Corporation") owns all of the
outstanding shares of capital stock of Imo Industries Inc., a Delaware
corporation; and
<PAGE>
WHEREAS, it is desirable to merge Imo Industries Inc. into the
Corporation, leaving the Corporation as the surviving corporation;
NOW, THEREFORE, it is hereby
RESOLVED, that the Corporation merge into itself Imo Industries Inc.,
and assume all of its obligations. The surviving corporation shall be the
Corporation. The capital stock of the Corporation shall be unaffected by this
merger. All shares of Imo Industries Inc. capital stock held of record or
beneficially by the Corporation as of the effective date of this merger shall be
cancelled on the effective date of this merger, and no conversion or payment
shall be effected in respect thereof; and
FURTHER RESOLVED, that the Corporation as the surviving corporation
change its corporate name by changing Section 1.1 of Article I of the Restated
Certificate of Incorporation of the Corporation to read as follows:
1.1 The name of this Corporation is Imo Industries Inc.
FURTHER RESOLVED, that the proper officers of the Corporation are
hereby authorized and directed, for and on behalf of the Corporation, to
prepare and execute a Certificate of Ownership and Merger setting forth a copy
of the resolutions to merge said Imo Industries Inc. into itself
and assume its liabilities and obligations, and the date of adoption thereof,
and to cause the Certificate of Ownership and Merger to be filed with the
Secretary of State of Delaware and a certified copy recorded in the office of
the Recorder of Deeds of New Castle County and to do all acts whatsoever,
whether within or without the State of Delaware, which may be deemed necessary
or proper to effect said merger and name change; and
FURTHER RESOLVED, that said merger and name change shall be effective
upon the date of filing of the Certificate of Ownership and Merger with the
Secretary of State of Delaware.
IN WITNESS WHEREOF, said Imo Delaval Inc. caused this certificate to be
signed by Stephen F. Agocs, its Executive Vice
<PAGE>
President and attested by George Szwabiuk, its Assistant Secretary, this 3rd
day of March, 1989.
Imo Delaval Inc.
ATTEST:
By: /s/ Stephen F. Agocs
---------------------------
Stephen F. Agocs
Executive Vice President
By: /s/ George Szwabiuk
--------------------------
George Szwabiuk
Assistant Secretary
<PAGE>
State of Delaware
Office of the Secretary of State
I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
STOCK DESIGNATION OF "IMO INDUSTRIES INC." FILED IN THIS OFFICE ON THE TENTH DAY
OF NOVEMBER, A.D. 1992, AT 10 O'CLOCK A.M.
A CERTIFIED COPY QF THIS CERTIFICATE HAS BEEN FORWARDED TO NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Michael Ratchford
----------------------------------------
Michael Ratchford,
Secretary of State
AUTHENTICATION: *3655540
DATE: 11/10/1992
722315034
<PAGE>
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK
of
IMO INDUSTRIES INC.
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
We, W.J. Holcombe, Chairman of the Board, and Thomas J. Bird,
Secretary of Imo Industries Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Restated Certificate of Incorporation of the said Corporation, the said
Board of Directors on April 22, 1987, adopted the following resolution creating
a series of 250,000 shares of Preferred Stock designated as Series A Junior
Participating Preferred Stock:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of the
Restated Certificate of Incorporation, this Board of Directors hereby authorizes
the issuance of a series of the Preferred Stock of the Corporation (the
"Preferred Stock"), which shall consist of up to 250,000 of the 5,000,000
shares of the Preferred Stock which the Corporation now has authority to issue
and this Board of Directors hereby fixes the terms, relative rights,
restrictions and qualifications as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" and the number of
shares constituting such series shall be 250,000.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating Preferred Stock shall be
entitled to receive,
<PAGE>
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the 15th day
of March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Junior Participating Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (a)
$10.00 or (b) subject to the provision for adjustment hereinafter set forth, 100
times the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, par value $1.00 per share, of the
Corporation (the "Common Stock") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series A
Junior Participating Preferred Stock. In the event the Corporation shall at any
time after April 22, 1987 (the "Rights Declaration Date") (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount to which holders of
shares of Series A Junior Participating Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on
the
2
<PAGE>
Series A Junior Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Junior Participating Preferred Stock shall entitle the
holder thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which
3
<PAGE>
holders of shares of Series A Junior Participating Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number by
a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six (6) quarterly
dividends thereon, the occurrence of such contingency shall mark the beginning
of a period (herein called a "default period") which shall extend until such
time when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been declared
and paid or set apart for payment. During each default period, all holders of
Preferred Stock (including holders of the Series A Junior Participating
Preferred Stock) with dividends in arrears in an amount equal to six (6)
quarterly dividends thereon, voting as a class, irrespective of series, shall
have the right to elect two (2) Directors.
(ii) During any default period, such voting right of the holders of
Series A Junior Participating Preferred Stock may be exercised initially at a
special meeting called pursuant to subparagraph (iii) of this Section 3(C) or
at any annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if any, to increase, in certain
cases, the authorized number of Directors shall be exercised unless the holders
of ten percent (10%) in number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Preferred Stock of such
voting right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right
4
<PAGE>
initially during an existing default period, they shall have the right, voting
as a class, to elect Directors to fill such vacancies, if any, in the Board of
Directors as may then exist up to two (2) Directors or, if such right is
exercised at an annual meeting, to elect two (2) Directors. If the number which
may be so elected at any special meeting does not amount to the required number,
the holders of the Preferred Stock shall have the right to make such increase in
the number of Directors as shall be necessary to permit the election by them of
the required number. After the holders of the Preferred Stock shall have
exercised their right to elect Directors in any default period and during the
continuance of such period, the number of Directors shall not be increased or
decreased except by vote of the holders of Preferred Stock as herein provided or
pursuant to the rights of any equity securities ranking senior to or pari passu
with the Series A Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding, irrespective of series, may request, the calling of
special meeting of the holders of Preferred Stock, which meeting shall thereupon
be called by the President, a Vice-President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting at which holders
of Preferred Stock are entitled to vote pursuant to this paragraph (C) (iii)
shall be given to each holder of record of Preferred Stock by mailing a copy of
such notice to him at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier than 20 days
and not later than 60 days after such order or request or in default of the
calling of such meeting within 60 days after such order or request, such meeting
may be called on similar notice by any stockholder or stockholders owning in
the aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding. Notwithstanding the provisions of this paragraph
(C)(iii), no such special meeting shall be called during the period within 60
days immediately preceding the date fixed for the next annual meeting of the
stockholders.
5
<PAGE>
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be entitled
to elect the whole number of Directors until the holders of Preferred Stock
shall have exercised their right to elect two (2) Directors voting as a class,
after the exercise of which right (x) the Directors so elected by the holders of
Preferred Stock shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period, and (y)
any vacancy in the Board of Directors may (except as provided in paragraph
(C)(ii) of this Section 3) be filled by vote of a majority of the remaining
Directors theretofore elected by the holders of the class of stock which elected
the Director whose office shall have become vacant. References in this paragraph
(C) to Directors elected by the holders of a particular class of stock shall
include Directors elected by such Directors to fill vacancies as provided in
clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right
of the holders of Preferred Stock as a class to elect Directors shall cease,
(y) the term of any Directors elected by the holders of Preferred Stock as a
class shall terminate, and (z) the number of Directors shall be such number as
may be provided for in the certificate of incorporation or by-laws irrespective
of any increase made pursuant to the provisions of paragraph (C)(ii) of this
Section 3 (such number being subject, however, to change thereafter in any
manner provided by law or in the certificate of incorporation or bylaws). Any
vacancies in the Board of Directors effected by the provisions of clauses (y)
and (z) in the preceding sentence may be filled by a majority of the remaining
Directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
6
<PAGE>
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred
Stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, except dividends paid ratably on the Series A
Junior Participating Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Corporation ranking junior (either
as to dividends or upon dissolution, liquidation or winding up) to the
Series A Junior Participating Preferred Stock
(iv) purchase or otherwise acquire for consideration any shares
of Series A Junior Participating Preferred Stock, or any
7
<PAGE>
shares of stock, if any, ranking on a parity with the Series A Junior
Participating Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors)
to all holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the
8
<PAGE>
holders of shares of Common Stock shall have received an amount per share (the
"Common Adjustment") equal to the quotient obtained by dividing (i) the Series A
Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in
subparagraph C below to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the full amount of the Series
A Liquidation Preference and the Common Adjustment in respect of all outstanding
shares of Series A Junior Participating Preferred Stock and Common Stock,
respectively, holders of Series A Junior Participating Preferred Stock and
holders of shares of Common Stock shall receive their ratable and proportionate
share of the remaining assets to be distributed in the ratio of the Adjustment
Number to 1 with respect to such Preferred Stock and Common Stock, on a per
share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series A Junior Participating Preferred Stock,
then such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences. In the
event, however, that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation,
9
<PAGE>
merger, combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case the shares of Series A Junior Participating
Preferred Stock shall at the same time be similarly exchanged or changed in an
amount per share (subject to the provision for adjustment hereinafter set forth)
equal to 100 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A Junior
Participating Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 8. No Redemption. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating Preferred Stock
shall rank junior to all other series of the Corporation's Preferred Stock as to
the payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 10. Amendment. The Restated Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A
Junior Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Junior Participating Preferred Stock, voting separately as a class.
10
<PAGE>
Section 11. Fractional Shares. Series A Junior Participating Preferred
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holders fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury this 5th day
of November, 1992.
/s/ W. Holcombe
------------------------
Chairman of the Board
Attest:
/s/ T.J. Bird
- ---------------------
Secretary
-8-
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES B JUNIOR
PARTICIPATING PREFERRED STOCK
of
IMO INDUSTRIES INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, Donald K. Farrar, Chairman of the Board, and Thomas J.
Bird, Secretary, of Imo Industries Inc. (the "Corporation), a
corporation organized and existing under the General Corporation
Law of the State of Delaware, in accordance with the provisions
of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors of the Corporation by the Restated Certificate of
Incorporation, as amended, of the Corporation, on April 30, 1997,
the Board of Directors adopted the following resolution creating
a series of 250,000 shares of Preferred Stock designated as
"Series B Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority expressly granted
to and vested in the Board of Directors of the Corporation by the
provisions of its Restated Certificate of Incorporation, as
amended, the Board of Directors does hereby establish and
designate and provide for the issuance of a series of the
Preferred Stock of the Corporation designated as "Series B Junior
Participating Preferred Stock," which shall consist of 250,000
shares, and the Board of Directors does hereby fix the terms,
voting powers, preferences and relative rights, participating,
optional and other special rights of the shares of such series,
and the qualifications, limitations and restrictions thereof, to
be as follows:
Section 1. Designation and Amount. The shares of such
series shall be designated as "Series B Junior Participating
Preferred Stock" and the number of shares constituting such
series shall be 250,000.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders
of any shares of any series of Preferred Stock ranking prior and
superior to the shares of Series B Junior Participating Preferred
Stock with respect to dividends, the holders of shares of Series
B Junior Participating Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out
of funds legally available for the purpose, cash dividends in an
amount per share (rounded to the nearest cent) equal to 100 times
the aggregate per share amount of all cash dividends, and non-
cash dividends or distributions in an amount equal to 100 times
the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend payable
in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock, par value $1.00 per share, of the
Corporation (the "Common Stock"), which dividends and
distributions shall be subject to the provisions for adjustment
hereinafter set forth. In the event the Corporation shall at any
time after April 30, 1997 (the "Rights Declaration Date")
(i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or
(iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the amount to which holders of
shares of Series B Junior Participating Preferred Stock were
entitled immediately prior to such event shall be adjusted by
multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or
distribution on the Series B Junior Participating Preferred Stock
as provided in paragraph (A) above immediately after it declares
a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock), and such dividend or
distribution shall be paid or distributed to the holders of the
Series B Junior Participating Preferred Stock at or prior to the
time the related dividend or distribution is paid or distributed
to the holders of the Common Stock.
(C) The Board of Directors may fix a record date for the
determination of holders of shares of Series B Junior
Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date
shall be no more than 30 days prior to the date fixed for the
payment thereof. Dividends and distributions payable under
paragraph (A) above, if any, shall begin to accrue and be
cumulative on outstanding shares of Series B Junior Participating
Preferred Stock from the record date for the determination of
holders of shares of Series B Junior Participating Preferred
Stock entitled to receive such dividends or distributions, or if
no record date shall be fixed, from the date on which the related
dividend or distribution was declared by the Board of Directors
on the Common Stock. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series B Junior
Participating Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.
Section 3. Voting Rights. The holders of shares of
Series B Junior Participating Preferred Stock shall have the
following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series B Junior Participating Preferred
Stock shall entitle the holder thereof to 100 votes on all
matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such
case the number of votes per share to which holders of shares of
Series B Junior Participating Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying
such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such
event.
(B) Except as otherwise provided herein or by law, the
holders of shares of Series B Junior Participating Preferred
Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) (i) If at any time dividends on any Series B Junior
Participating Preferred Stock shall be in arrears for more than
270 consecutive weeks, the occurrence of such contingency shall
mark the beginning of a period (herein called a "default period")
which shall extend until such time when all accrued and unpaid
dividends for all previous periods on all shares of Series B
Junior Participating Preferred Stock then outstanding shall have
been declared and paid or set apart for payment. During each
default period, all holders of Preferred Stock (including holders
of the Series B Junior Participating Preferred Stock) with
dividends in arrears in an amount equal to six quarterly
dividends thereon, voting as a class, irrespective of series,
shall have the right to elect two Directors of the Corporation.
(ii) During any default period, such voting right of
the holders of Series B Junior Participating Preferred Stock may
be exercised initially at a special meeting called pursuant to
subparagraph (iii) of this Section 3(C) or at any annual meeting
of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the
right of the holders of any other series of Preferred Stock, if
any, to increase, in certain cases, the authorized number of
Directors shall be exercised unless the holders of 10% in number
of shares of the Series B Junior Participating Preferred Stock
outstanding shall be present in person or by proxy. The absence
of a quorum of the holders of Common Stock shall not affect the
exercise by the holders of the Series B Junior Participating
Preferred Stock of such voting right. At any meeting at which
the holders of the Series B Junior Participating Preferred Stock
shall exercise such voting right initially during an existing
default period, they shall have the right, voting as a class, to
elect Directors to fill such vacancies, if any, in the Board of
Directors as may then exist, up to two Directors or, if such
right is exercised at an annual meeting, to elect two Directors.
If the number which may be so elected at any special meeting does
not amount to the required number, the holders of the Series B
Junior Participating Preferred Stock shall have the right to make
such increase in the number of Directors as shall be necessary to
permit the election by them of the required number. After the
holders of the Series B Junior Participating Preferred Stock
shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the
number of Directors shall not be increased or decreased except by
vote of the holders of Series B Junior Participating Preferred
Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or ranking on a parity with the
Series B Junior Participating Preferred Stock.
(iii) Unless the holders of the Series B Junior
Participating Preferred Stock shall, during an existing default
period, have previously exercised their right to elect Directors,
the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than 10% of the
total number of shares of Series B Junior Participating Preferred
Stock outstanding, irrespective of series, may request, the
calling of a special meeting of the holders of Series B Junior
Participating Preferred Stock, which meeting shall thereupon be
called by the President, a Vice President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting at
which holders of Series B Junior Participating Preferred Stock
are entitled to vote pursuant to this paragraph (C)(iii) shall be
given to each holder of record of Series B Junior Participating
Preferred Stock by mailing a copy of such notice to him at his
last address as the same appears on the books of the Corporation.
Such meeting shall be called for a time not earlier than 20 days
and not later than 60 days after such order or request or, in
default of the calling of such meeting within 60 days after such
order or request, such meeting may be called on similar notice by
any stockholder or stockholders owning in the aggregate not less
than 10% of the total number of shares of Series B Junior
Participating Preferred Stock outstanding. Notwithstanding the
provisions of this paragraph (C)(iii), no such special meeting
shall be called during the period within 60 days immediately
preceding the date fixed for the next annual meeting of the
stockholders.
(iv) In any default period, the holders of Common
Stock, and other classes of stock of the Corporation, if
applicable, shall continue to be entitled to elect the whole
number of Directors of the Corporation until the holders of
Series B Junior Participating Preferred Stock voting as a class
shall have exercised their right to elect two Directors, after
the exercise of which right (x) the Directors so elected by the
holders of Series B Junior Participating Preferred Stock shall
continue in office until their successors shall have been elected
by such holders or until the expiration of the default period,
and (y) any vacancy in the Board of Directors may (except as
provided in paragraph (C)(ii) of this Section 3) be filled by
vote of a majority of the remaining Directors theretofore elected
by the holders of the class of stock that elected the Director
whose office shall have become vacant. References in this
paragraph (C) to Directors elected by the holders of a particular
class of stock shall include Directors elected by such Directors
to fill vacancies as provided in clause (y) of the preceding
sentence.
(v) Immediately upon the termination of a default
period, (x) the right of the holders of Series B Junior
Participating Preferred Stock as a class to elect Directors shall
cease, (y) the term of any Directors elected by the holders of
Series B Junior Participating Preferred Stock as a class shall
terminate, and (z) the number of Directors shall be such number
as may be provided for in the certificate of incorporation or
by-laws of the Corporation (as then in effect) irrespective of
any increase made pursuant to the provisions of paragraph (C)(ii)
of this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the certificate of
incorporation or by-laws). Any vacancies in the Board of
Directors effected by the provisions of clauses (y) and (z) in
the preceding sentence may be filled by a majority of the
remaining Directors.
(D) Except as set forth herein, holders of Series B Junior
Participating Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set
forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever dividends or other distributions payable on
the Series B Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on
shares of Series B Junior Participating Preferred Stock
outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series B Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Series B Junior Participating Preferred Stock, except
dividends paid ratably on the Series B Junior Participating
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series B Junior Participating Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Series B Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration
any shares of Series B Junior Participating Preferred Stock, or
any shares of stock, if any, ranking on a parity with the Series
B Junior Participating Preferred Stock, except in accordance with
a purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon
such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine
in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration
any shares of stock of the Corporation unless the Corporation
could, under paragraph (A) of this Section 4, purchase or
otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B
Junior Participating Preferred Stock purchased or otherwise
acquired by the Corporation in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized
but unissued shares of Series B Junior Participating Preferred
Stock and may be reissued as part of a new series of Series B
Junior Participating Preferred Stock to be created by resolution
or resolutions of the Board of Directors, subject to the
conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise),
dissolution or winding up of the Corporation, no distribution
shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or
winding up) to the Series B Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Series B Junior
Participating Preferred Stock shall have received $100 per share,
plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of
such payment (the "Series B Liquidation Preference"). Following
the payment of the full amount of the Series B Liquidation
Preference, no additional distributions shall be made to the
holders of shares of Series B Junior Participating Preferred
Stock unless, prior thereto, the holders of shares of Common
Stock shall have received an amount per share (the "Common
Adjustment") equal to the quotient obtained by dividing (i) the
Series B Liquidation Preference by (ii) 100 (as appropriately
adjusted as set forth in paragraph (C) below to reflect such
events as stock splits, stock dividends and recapitalizations
with respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the full
amount of the Series B Liquidation Preference and the Common
Adjustment in respect of all outstanding shares of Series B
Junior Participating Preferred Stock and Common Stock,
respectively, holders of Series B Junior Participating Preferred
Stock and holders of shares of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be
distributed in the ratio of the Adjustment Number to 1 with
respect to such Series B Junior Participating Preferred Stock and
Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series B
Liquidation Preference and the liquidation preferences of all
other series of Preferred Stock, if any, which rank on a parity
with the Series B Junior Participating Preferred Stock, then such
remaining assets shall be distributed ratably to the holders of
such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not
sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after
the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the
Adjustment Number in effect immediately prior to such event shall
be adjusted by multiplying such Adjustment Number by a fraction,
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common
Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case
the shares of Series B Junior Participating Preferred Stock shall
at the same time be similarly exchanged or changed in an amount
per share (subject to the provision for adjustment hereinafter
set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as
the case may be, into which or for which each share of Common
Stock is changed or exchanged. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare
any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in
each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series B
Junior Participating Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to
such event.
Section 8. No Redemption. The shares of Series B Junior
Participating Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series B Junior Participating
Preferred Stock shall rank on a parity with the Corporation's
Series A Junior Participating Preferred Stock. The Series B
Junior Participating Preferred Stock shall rank junior to all
other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the
terms of any such series shall provide otherwise.
Section 10. Amendment. The Restated Certificate of
Incorporation, as amended, of the Corporation shall not be
further amended in any manner that would materially alter or
change the powers, preferences or special rights of the Series B
Junior Participating Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of a
majority or more of the outstanding shares of Series B Junior
Participating Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series B Junior
Participating Preferred Stock may be issued in fractions of a
share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit
of all other rights of holders of Series B Junior Participating
Preferred Stock.
1 IN WITNESS WHEREOF, we have executed and subscribed this
Certificate and do affirm the foregoing as true under the
penalties of perjury this 30th day of April, 1997.
Attest: IMO INDUSTRIES INC.
/s/ Thomas J. Bird By:/s/ Donald K. Farrar
Thomas J. Bird, Secretary Donald K. Farrar
Chairman of the Board,
President and Chief
Executive Officer
CERTIFICATE OF ELIMINATION OF THE SHARES
OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
IMO INDUSTRIES INC.
Imo Industries Inc., a corporation organized and existing
under and by virtue of the Delaware General Corporation Law,
DOES HEREBY CERTIFY THAT:
Pursuant to the authority conferred upon its Board of Direc
tors under Section 151 of the Delaware General Corporation Law,
the Board of Directors of Imo Industries Inc. (the "Corpo
ration"), at a meeting of the Board of Directors held May 20,
1997 pursuant to notice duly given, duly adopted the following
resolution eliminating from its Restated Certificate of
Incorporation the 250,000 shares of the Corporation's Series A
Junior Participating Preferred Stock created pursuant to the
Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock (the "Series A Certificate")
that was filed with the Secretary of State of the State of
Delaware on November 10, 1992. The resolution so adopted is as
follows:
RESOLVED, that, pursuant to the authority conferred
upon the Board of Directors under Section 151(g) of the
Delaware General Corporation Law, the Board of Directors
does hereby declare and acknowledge that none of the
authorized shares of the Corporation's Series A Junior
Participating Preferred Stock are outstanding and does
hereby direct that none of such shares shall be issued
pursuant to the Series A Certificate, and the Board of
Directors does hereby further direct that the appropriate
officers of the Corporation are hereby authorized to execute
and file with the Secretary of State of the State of
Delaware a certificate of elimination with respect to the
Series A Junior Participating Preferred Stock, such
certificate of elimination to have the effect
of eliminating from the Corporation's Restated Certificate
of Incorporation all matters set forth in the Series A
Certificate.
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate and do affirm the foregoing as true under penalties
of perjury this 20th day of May, 1997.
Attest: IMO INDUSTRIES INC.
/s/ Thomas J. Bird By: /s/ Donald K.Farrar
Thomas J. Bird, Secretary Donald K. Farrar
Chairman of the Board,
President and Chief
Executive Officer
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,807
<SECURITIES> 0
<RECEIVABLES> 89,736
<ALLOWANCES> 1,925
<INVENTORY> 94,330
<CURRENT-ASSETS> 205,709
<PP&E> 206,131
<DEPRECIATION> (112,596)
<TOTAL-ASSETS> 392,712
<CURRENT-LIABILITIES> 179,413
<BONDS> 228,793
<COMMON> 18,799
0
0
<OTHER-SE> (88,206)
<TOTAL-LIABILITY-AND-EQUITY> 392,712
<SALES> 246,159
<TOTAL-REVENUES> 246,159
<CGS> 173,429
<TOTAL-COSTS> 173,429
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 286
<INTEREST-EXPENSE> 16,957
<INCOME-PRETAX> (9,120)
<INCOME-TAX> 1,292
<INCOME-CONTINUING> (10,413)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (10,413)
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