<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended: July 27, 1997 Commission file number: 0-25066
OWOSSO CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2756709
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
The Triad Building, 2200 Renaissance Boulevard
Suite 150, King of Prussia, PA 19406
---------------------------------------- ----------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (610) 275-4500
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ___X___ No ______
As of September 5, 1997 there were 5,808,676 shares of Common Stock, $.01 par
value, were outstanding.
<PAGE>
OWOSSO CORPORATION
Index
PART I - Financial Information: Page No.
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets 3
July 27, 1997 (unaudited) and
October 27, 1996
Consolidated Statements of Operations 4
Three and Nine Months Ended July 27, 1997 and
July 28, 1996 (unaudited)
Consolidated Statements of Cash Flows 5
Nine Months Ended July 27, 1997 and
July 28, 1996 (unaudited)
Notes to Consolidated Financial Statements 6
(unaudited)
Item 2. Management's Discussion and Analysis of 11
Financial Condition and Results of Operations
Part II - Other Information:
Item 6. Exhibits and Reports on Form 8-K 17
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<PAGE>
OWOSSO CORPORATION
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 27, October 27,
1997 1996
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 552,061 $ 839,889
Receivables, net 21,070,381 18,415,245
Inventories, net 22,677,029 19,123,122
Advances and interest receivable from affiliate 37,003 36,766
Prepaid expenses and other 2,819,761 2,640,169
------------- -------------
Total current assets 47,156,235 41,055,191
PROPERTY, PLANT AND EQUIPMENT, NET 27,210,391 26,308,809
INTANGIBLES, NET 37,672,945 39,277,112
OTHER ASSETS 1,354,890 1,254,233
------------- -------------
TOTAL ASSETS $ 113,394,461 $ 107,895,345
============= =============
LIABILITIES AND STOCKHOLDERS'EQUITY
CURRENT LIABILITIES:
Payables - trade $ 8,736,118 $ 6,597,061
Accrued compensation and benefits 3,178,872 3,005,658
Accrued expenses 3,044,235 2,321,457
Related party debt 3,750,000 5,975,000
Current portion of long-term debt 2,618,334 2,770,934
------------- -------------
Total current liabilities 21,327,559 20,670,110
LONG-TERM DEBT, LESS CURRENT PORTION 50,175,831 45,068,116
POSTRETIREMENT BENEFITS 1,760,316 1,593,950
DEFERRED TAXES 3,543,353 3,543,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS'EQUITY:
Convertible preferred stock Class A, 5% cumulative, $.01 par value; 10,000,000 shares
authorized; 1,071,428 shares issued and outstanding (aggregate liquidation value at
July 27, 1997 and October 27, 1996 - $15,000,000) 13,888,049 13,667,814
Common stock, $.01 par value; 15,000,000 authorized; 5,865,000 shares issued
and outstanding 58,650 58,650
Additional paid-in capital 21,611,701 21,611,701
Retained earnings 1,478,286 2,131,288
------------- -------------
Total 37,036,686 37,469,453
Less treasury stock, at cost (56,324 shares at July 27, 1997 and October 27, 1996) (449,284) (449,284)
------------- -------------
Total stockholders' equity 36,587,402 37,020,169
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 113,394,461 $ 107,895,345
============= =============
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
OWOSSO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------------- ----------------------------------
July 27, July 28, July 27, July 28,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $ 38,290,250 $ 33,294,650 $ 106,019,421 $ 94,656,946
Cost of products sold 29,415,061 24,768,476 81,275,638 71,133,020
------------- ------------- ------------- -------------
Gross profit 8,875,189 8,526,174 24,743,783 23,523,926
Expenses:
Selling, general and administrative 5,006,524 4,801,301 15,063,417 14,164,205
Corporate 1,128,564 1,240,029 3,681,278 3,291,506
------------- ------------- ------------- -------------
Income from operations 2,740,101 2,484,844 5,999,088 6,068,215
Interest expense 1,048,629 951,086 3,024,006 3,013,434
Other income 86,304 58,450 178,169 112,844
------------- ------------- ------------- -------------
Income before income tax provision 1,777,776 1,592,208 3,153,251 3,167,625
Income tax provision 843,325 748,028 1,455,200 1,416,966
------------- ------------- ------------- -------------
Net income 934,451 844,180 1,698,051 1,750,659
Dividends and accretion on preferred stock (262,297) (256,875) (782,735) (766,771)
------------- ------------- ------------- -------------
Net income available for common stockholders $ 672,154 $ 587,305 $ 915,316 $ 983,888
============= ============= ============= =============
Net income per common share $ 0.12 $ 0.10 $ 0.16 $ 0.17
============= ============= ============= =============
Weighted average number of common shares outstanding 5,808,676 5,865,000 5,808,676 5,865,000
============= ============= ============= =============
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
OWOSSO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------------
July 27, July 28,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,698,051 $ 1,750,659
Adjustments to reconcile net income to net cash provided by operating
activities:
Loss on sale of assets 44,985 118,034
Depreciation 3,003,188 2,923,707
Amortization 1,608,503 1,838,919
Changes in assets and liabilities which provided (used) cash:
Accounts receivable (2,655,136) (1,526,810)
Inventories (3,553,907) (916,343)
Prepaid expenses and other (163,479) (159,466)
Accounts payable 2,139,057 1,628,026
Accrued expenses 896,012 (167,767)
----------- -----------
Net cash provided by operating activities 3,017,274 5,488,959
----------- -----------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (3,986,442) (3,366,995)
Other 82,067 (647,439)
----------- -----------
Net cash used in investing activities (3,904,375) (4,014,434)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from long-term debt 350,000 150,000
Borrowings from line of credit 5,850,000 8,250,000
Payments on long-term debt (1,244,885) (1,384,282)
Payments on related party debt (2,225,000) (6,875,000)
Dividends paid (2,130,842) (2,146,050)
----------- -----------
Net cash provided by (used in) financing activities 599,273 (2,005,332)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (287,828) (530,807)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 839,889 1,750,236
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 552,061 $ 1,219,429
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid during the period for interest $ 3,012,111 $ 2,772,259
=========== ===========
Cash paid during the period for taxes $ 911,000 $ 1,380,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITY -
Accrual of preferred stock dividends $ 187,500 $ 187,500
=========== ===========
</TABLE>
See notes to consolidated financial statements.
-5-
<PAGE>
OWOSSO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. THE COMPANY
Business - The consolidated financial statements represent the
consolidated financial position, results of operations and cash flows of
Owosso Corporation and its subsidiaries (the "Company"). The subsidiaries
include Motor Products - Owosso Corporation (Motor Products), Motor
Products-Ohio Corporation (MP - Ohio), Stature Electric, Inc. (Stature
Electric), Owosso Motor Group, Inc. (Motor Group), Cramer Company
(Cramer), Snowmax Incorporated (Snowmax), The Landover Company
(Dura-Bond), Sooner Trailer Manufacturing Co. (Sooner), DewEze
Manufacturing, Inc., including Parker Industries, Inc. (DewEze), and Great
Bend Manufacturing, Inc. (Great Bend). The Company is a diversified
manufacturer of products in narrowly defined niche markets and currently
operates in two business segments, Engineered Component Products (Motor
Products, MP-Ohio, Stature Electric, Motor Group, Cramer, Snowmax and
Dura-Bond) and Specialized Equipment (Sooner, DewEze and Great Bend). In
the Engineered Component Products segment, the Company's products,
primarily motors, replacement camshaft bearings and heat transfer "fin and
tube" coils, are sold primarily to original equipment manufacturers or
service providers who use them in their end product or service. The
products sold in the Specialized Equipment segment, primarily all-aluminum
horse trailers and agricultural and turf maintenance equipment, are almost
exclusively final products sold through dealers to their users. The
majority of the Company's customers are located in North America.
Seasonality - Sales of certain of the Company's specialized equipment
tend to be seasonal with lowest sales during the first fiscal quarter and
higher sales during the fourth fiscal quarter, corresponding with the fall
harvest season for farmers. Sales of the Company's engineered component
products experience less seasonality but generally have higher sales
during the second fiscal quarter while sales of these products are lowest
during the first fiscal quarter.
Cyclicality - The Company's Engineered Component Products segment is
subject to changes in the overall level of domestic economic activity. The
Specialized Equipment segment is subject to changes in certain sectors of
the agricultural economy, which may be influenced by climate changes and
governmental policy. The segment's horse trailer sales, which have not
tended to be affected by changes in the agricultural economy, have had a
moderating effect on the results of the entire Specialized Equipment
segment, but may be subject to the overall domestic business cycle.
The consolidated balance sheet as of July 27, 1997 and the consolidated
statements of operations and cash flows for the three and nine months
ended July 27, 1997 and July 28, 1996 have been prepared by the Company,
without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) considered necessary to present
fairly the financial position, results of operations and cash flows as of
July 27, 1997 and for all periods presented have been made. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These financial statements
should
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<PAGE>
1. THE COMPANY (continued)
be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's October 27, 1996 Annual Report on
Form 10-K.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
New Accounting Pronouncements - In June 1997, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income". This
statement, which establishes standards for reporting and disclosure of
comprehensive income, is effective for interim and annual periods
beginning after December 15, 1997, although earlier adoption is permitted.
Reclassification of financial information for earlier periods presented
for comparative purposes is required under SFAS No. 130. As this statement
only requires additional disclosures in the Company's consolidated
financial statements, its adoption will not have any impact on the
Company's consolidated financial position or results of operations. The
Company expects to adopt SFAS No. 130 effective fiscal 1998.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information". This statement, which establishes
standards for the reporting of information about operating segments and
requires the reporting of selected information about operating segments in
interim financial statements, is effective for fiscal years beginning
after December 15, 1997, although earlier application is permitted.
Reclassification of segment information for earlier periods presented for
comparative purposes is required under SFAS No. 131. The Company does not
expect adoption of this statement to result in significant changes to its
presentation of financial data by business segment. The Company expects to
adopt SFAS No. 131 effective for the first quarter of fiscal 1999.
3. INVENTORIES
Inventories are summarized as follows:
July 27, October 27,
1997 1996
Raw materials and purchased parts $ 9,927,797 $ 8,468,218
Work in process 4,842,403 4,316,588
Finished goods 7,906,829 6,338,316
----------- -----------
Total $22,677,029 $19,123,122
=========== ===========
-7-
<PAGE>
4. LONG-TERM DEBT
Long-term debt consists of the following:
July 27, October 27,
1997 1996
Banks $37,252,694 $31,507,643
Industrial revenue bonds 8,988,704 9,173,642
Former and current stockholders 6,031,299 6,842,692
Related party debt 3,750,000 5,975,000
Other 521,468 315,073
----------- -----------
Total long-term debt 56,544,165 53,814,050
Less portion due within one year 6,368,334 8,745,934
----------- -----------
Total $50,175,831 $45,068,116
=========== ===========
The Company has a $55,000,000 unsecured revolving credit agreement with
two banks, which expires on March 31, 2000. Interest is payable, at the
Company's option, at either the bank's prime rate (8.50% at July 27, 1997)
or a variable spread (2.00% at July 27, 1997) over the London Interbank
Offered Rate. The agreement includes financial and other covenants,
including fixed charge, cash flow and net worth ratios, restrictions on
certain asset sales, mergers and other significant transactions, and a
negative pledge on fixed assets. Repayment of the Industrial Revenue Bonds
of certain of the subsidiaries has been guaranteed by the Company.
The Company entered into two interest rate swap agreements, each with a
$7.5 million notional amount. During the fourth quarter of fiscal 1997,
the Company will begin receiving floating interest rate payments at the
three month London Interbank Offered Rate in exchange for quarterly fixed
interest rate payments of 7.0675% and 7.09% over the life of the
agreements. The Company enters into these interest rate swap agreements to
change the fixed/variable interest rate mix of the debt portfolio to
reduce the Company's aggregate risk to movements in interest rates. These
agreements are accounted for using settlement accounting.
5. CONVERTIBLE PREFERRED STOCK
In connection with the acquisition of Stature Electric in October 1995,
the Company issued 1,071,428 of its 10,000,000 authorized preferred shares
of Class A convertible preferred stock with a stated value of $14.00 per
share. Such preferred stock is convertible into the Company's common stock
on a one for one basis, at the holders' option, through October 2000, at
which time, the Company has the right, but is not obligated, to redeem the
preferred stock for cash at its stated value of $14.00 per share. The
Company's option to redeem the preferred stock continues after October
2000, with the redemption price increasing annually until it reaches
$21.00 in 2009. The Company is accreting the value of its preferred stock
to its stated value of $14.00 per share over the period ending in October
-8-
<PAGE>
5. CONVERTIBLE PREFERRED STOCK (continued)
2000, when the conversion feature of the stock expires, using the
effective interest method at a rate of 7.6%.
The preferred stock earns quarterly cash dividends as a percentage of the
stated value of $15,000,000 at a rate of 5% per annum through October
2000. Thereafter, the dividend percentage rate increases 1% each year to
its maximum rate of 10% in November 2004 and thereafter. To the extent
that the preferred stock has not been converted by October 2000, the
increasing rate dividend will be accounted for by the accrual of amounts
in excess of the cash dividend through the income statement using the
effective interest method. Dividends paid on the preferred stock were
$187,500 for each of the three month periods ended July 27, 1997 and July
28, 1996, respectively, and $562,500 and $375,000 for each of the nine
month periods ended July 27, 1997 and July 28, 1996, respectively.
6. CONTINGENCIES
The Company is subject to federal, state and local environmental
regulation with respect to their operations. The Company believes that it
is operating in substantial compliance with applicable environmental
regulations. Manufacturing and other operations at the Company's various
facilities may result, and may have resulted, in the discharge and release
of hazardous substances and waste from time to time. The Company routinely
responds to such incidents as deemed appropriate pursuant to applicable
federal, state and local environmental regulations.
Cramer is a party to a consent decree with the State of Connecticut
pursuant to which it has agreed to complete its environmental
investigation of the site on which its facility is located and conduct
any remedial measures which may be required. Cramer is also in
negotiations with the former operator of the site concerning the
reimbursement by the former operator of any costs the Company has incurred
or may incur in the future in connection with this matter. The cost of
any required remediation which may be incurred by the Company cannot
currently be reasonably estimated, although the Company does not believe
that the resolution of this matter will have a material adverse effect
on the financial results of the Company.
The Company has been named as a potentially responsible party with respect
to two hazardous substance disposal sites currently under remediation by
the U.S. Environmental Protection Agency under its "Superfund" program.
With respect to both sites, based on the minimal amount of waste alleged
to have been contributed to the site by the Company, the Company expects
to resolve the matter through the payment of a de minimis amount.
Sooner and DewEze have arrangements with a number of financial
institutions to provide floor plan financing for their dealers, which
require them to repurchase repossessed products from the financial
institutions in the event of a default by the financed dealer. Their
obligation is typically to repurchase the equipment at 90% of the purchase
price for the first 180 days, 80% for the next 90 days and 70% for the
next 90 days, after which the obligation expires. In the event of a
default by all of the financed dealers, the Company would be required to
repurchase approximately $3.0 million of product as of July 27, 1997. The
Company does not believe that its obligation under these repurchase
agreements will have a material adverse effect on the financial results of
the Company. Neither subsidiary
-9-
<PAGE>
6. CONTINGENCIES (continued)
has taken possession on any equipment pursuant to the repurchase
obligations in these contracts.
In addition to the matters reported herein, the Company is involved in
litigation dealing with the numerous aspects of its business operations.
The Company believes that settlement of such litigation will not have a
material effect on its financial position or results of operations.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion addresses the financial condition of the Company as of
July 27, 1997 and the results of operations for the three and nine month periods
ended July 27, 1997 and July 28, 1996. This discussion should be read in
conjunction with the financial statements included elsewhere herein and the
Management's Discussion and Analysis and Financial Statement sections of the
Company's Annual Report on Form 10-K to which the reader is directed for
additional information.
Results of Operations
Three months ended July 27, 1997 compared to three months ended July 28, 1996
Net Sales. For the third quarter of 1997, net sales were $38.3 million, an
increase of 15.0% over net sales of $33.3 million in the third quarter of 1996.
In the Company's Engineered Component Products segment, net sales increased 9.3%
to $21.4 million in 1997, from $19.5 million in the prior year quarter. Net
sales at the Company's motor businesses increased 16.1% as a result of increased
demand from existing customers, as well as sales to new customers. This increase
was partially offset by a 19.6% decrease in net sales at Dura-Bond, which has
been adversely affected by softening demand in the engine rebuilding market, as
well as the continued reduction in sales to Federal-Mogul Corporation, which has
taken the majority of its replacement camshaft bearing requirements in-house.
Net sales in the Specialized Equipment segment were $16.9 million, an 23.1%
increase over net sales of $13.8 million in the third quarter of 1996. Demand
for the Company's agricultural equipment continued to be strong, resulting in a
37.0% increase in net sales at the Company's agricultural equipment businesses.
Net sales of aluminum trailers at Sooner increased 10.1% over the prior year
quarter.
Gross Profit. For the third quarter of 1997, gross profit increased 4.1%, to
$8.9 million, from $8.5 million in the prior year quarter. As a percentage of
sales, gross profit decreased to 23.2% in the current year quarter, as compared
to 25.6% in the prior year quarter.
Gross profit in the Engineered Component Products segment was $5.2 million, or
24.4% of net sales, as compared to $5.3 million, or 27.0% of net sales, in the
prior year quarter. This decrease was primarily a result of a 41.9% decrease in
gross profit at Dura-Bond, resulting from the decrease in revenues, combined
with increased maintenance costs related to its valve seat and shim product
line, partially offset by higher gross profit at Snowmax and the Company's motor
businesses.
In the Specialized Equipment segment, gross profit increased 13.2% to $3.7
million, from $3.2 million in the prior year quarter, primarily as a result of
increased sales. As a percentage of net sales, gross profit decreased to 21.7%,
as compared to 23.6% in the prior year quarter. This decrease was primarily a
result of changes in product mix at Parker Industries and increased labor costs
at Sooner Trailers.
-11-
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $5.0 million, or 13.1% of net sales, in 1997, as
compared to $4.8 million, or 14.4% of net sales, in the third quarter of 1996.
In the Engineered Component Products segment, selling, general and
administrative expenses were $2.6 million, or 12.3% of net sales, as compared to
$2.5 million, or 12.8% of net sales, in the prior year quarter. In the
Specialized Equipment segment, selling, general and administrative expenses were
$2.4 million, or 14.0% of net sales, as compared to $2.3 million, or 16.7% of
net sales, in the prior year quarter.
Corporate Expenses. Corporate expenses in the third quarter of 1997 were $1.1
million, as compared to $1.2 million in 1996, a decrease of 9%. Corporate
expenses in the third quarter of 1996 included higher recruiting costs and
severance costs related to the resignation of the Company's former chief
operating officer.
Income from Operations. Income from operations increased 10.3% in the third
quarter of 1997 to $2.7 million, or 7.2% of net sales, from $2.5 million, or
7.5% of net sales, in the prior year quarter.
Among other measures, the Company evaluates the operating performance of its
business segments and its individual subsidiaries based on business unit income,
which is defined as income from operations before allocation of corporate
expenses. The Company believes this measurement most closely reflects the
subsidiaries' individual contributions. On this basis, business unit income for
the Engineered Component Products segment decreased 7.7% to $2.6 million, or
12.0% of net sales in the third quarter of 1997, as compared to $2.8 million, or
14.2% of net sales in the third quarter of 1996. This decrease was primarily
attributable to reduced sales and margins at Dura-Bond, partially offset by
increased business unit income at Snowmax and the motor businesses.
Business unit income in the Specialized Equipment segment before corporate
expenses increased to $1.3 million, or 7.7% of sales, as compared to $947,000,
or 6.9% of sales in the prior year quarter, primarily as a result of increased
sales and business unit income at Great Bend.
Interest Expense. Interest expense increased to $1.0 million for the third
quarter of 1997, as compared to $951,000, in 1996, reflecting a marginally
higher effective interest rate.
Income Tax Provision. The Company's effective income tax rate was 47.4% in the
current year quarter, as compared to 47.0% in the prior year. The Company's
effective tax rates were higher than the statutory rate primarily as a result of
the amortization of goodwill.
Net Income Available for Common Stockholders. The Company reported income
available to common stockholders of $672,000, or $0.12 per share, as compared to
$587,000, or $0.10 per share in the third quarter of 1996. Income available for
common stockholders is calculated by subtracting dividends on preferred stock of
$187,500 and non-cash accretion in value of preferred stock of $74,797 ($69,375
in the prior year quarter) from net income.
Nine months ended July 27, 1997 compared to nine months ended July 28, 1996
Net Sales. Net sales for the nine months ended July 27, 1997 were $106.0
million, an increase of 12.0% over net sales of $94.7 million in the comparable
prior year period.
-12-
<PAGE>
In the Company's Engineered Component Products segment, net sales increased
10.6% to $59.7 million in 1997, from $54.0 million in 1996, primarily as a
result of increased demand at the Company's motor businesses.
Net sales in the Specialized Equipment segment were $46.3 million, a 13.9%
increase over net sales of $40.7 million in the prior year period. An improved
economic environment for the agricultural equipment businesses resulted in an
increase of 25.3% in net sales at those businesses, while net sales of aluminum
trailers at Sooner increased 3.4% over the prior year.
Gross Profit. For the 1997 nine month period, gross profit was $24.7 million, or
23.3% of net sales, an increase of 5.2% over gross profit in the comparable 1996
period of $23.5 million, or 24.9% of net sales.
Gross profit in the Engineered Component Products segment increased 5.8% to
$14.7 million, from $13.9 million in the prior year period, primarily as a
result of increased sales. As a percentage of net sales, gross profit decreased
to 24.7%, as compared to 25.8% in the prior year, primarily as a result of lower
margins at Dura-Bond, partially offset by an increased gross profit margin at
Snowmax.
In the Specialized Equipment segment, gross profit increased 4.3% to $10.0
million, from $9.6 million in the prior year period, primarily as a result of
increased agricultural equipment sales, partially offset by lower gross profit
at Sooner Trailers caused by higher labor costs and production inefficiencies.
As a percentage of net sales, gross profit decreased to 21.6% in 1997, as
compared to 23.6% in the prior year, primarily as a result of the lower margins
at Sooner Trailer.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $15.1 million, or 14.2% of net sales for the nine
months ended July 27, 1997, as compared to $14.2 million, or 15.0% of net sales
in the prior year period. In the Engineered Component Products segment, selling,
general and administrative expenses were $7.9 million, or 13.3% of net sales, in
1997, as compared to $7.5 million, or 13.9% of net sales, in the prior year
period. In the Specialized Equipment segment, selling, general and
administrative expenses were $7.1 million, or 15.4% of net sales, as compared to
$6.7 million, or 16.4% of net sales, in the prior year period.
Corporate Expenses. For the current nine month period, corporate expenses
increased 11.8% to $3.7 million, as compared to $3.3 million in 1996. This
increase resulted primarily from increased personnel costs and information
services expenses, including higher depreciation and amortization expenses
related to a computer upgrade.
Income from Operations. Income from operations was $6.0 million, or 5.7% of net
sales, in the current year period, as compared to $6.1 million, or 6.4% of net
sales, in the prior year period.
Business unit income, before allocation of corporate expenses, for the
Engineered Component Products segment increased 5.7%, to $6.8 million, or 11.4%
of net sales, in the current year period from $6.4 million, or 11.9% of sales in
1996. Increased business unit income in the motor businesses and at Snowmax was
partially offset by reduced business unit income at Dura-Bond.
Business unit income in the Specialized Equipment segment before corporate
expenses was $2.9 million, or 6.2% of net sales, as compared to $2.9 million, or
7.2% of sales, in 1996. The Company's DewEze and Great Bend subsidiaries had
substantial increases in business unit income
-13-
<PAGE>
as compared to the prior year period. These increases were mitigated by a
significant reduction in business unit income at Sooner caused by higher labor
costs and production inefficiencies.
Interest Expense. Interest expense was $3.0 million in both the current year and
prior year periods.
Income Tax Provision. The Company's effective income tax rate was 46.1% in the
current year period, as compared to 44.7% in the prior year. The Company's
effective tax rates were higher than the statutory rate primarily as a result of
the amortization of goodwill.
Net Income Available for Common Stockholders. For the current nine month period,
the Company reported income available to common stockholders of $915,000, or
$0.16 per share, as compared to $984,000, or $0.17 per share in the prior year
period. Income available for common stockholders is calculated by subtracting
dividends on preferred stock of $562,500 and non-cash accretion in value of
preferred stock of $220,235 ($204,271 in 1996) from net income.
Liquidity and Capital Resources
Cash and cash equivalents decreased $288,000 to $552,000 at July 27, 1997 from
the October 27, 1996 balance, exclusive of $416,000 of cash that was restricted
under industrial revenue financings. Working capital increased to $25.8 million
at July 27, 1997 from $20.4 million at October 27, 1996, primarily as a result
of seasonal increases in inventory and accounts receivable and the repayment of
current maturities of related party debt issued in connection with the purchase
of Stature, using proceeds from the Company's long-term revolving credit
agreement.
Net cash provided by operating activities was $3.0 million in the current year
period, as compared to $5.5 million in the prior year period. This decrease was
attributable to marginally lower operating results and increased levels of
accounts receivable and inventories, as a result of increased sales and seasonal
increases, partially offset by increased levels of accounts payable.
Net cash used in investing activities was $3.9 million, and consisted
principally of capital expenditures for equipment. Of this amount, approximately
$2.4 million was invested in the Engineered Component Products segment and $1.4
million in the Specialized Equipment segment. The Company expects to incur
approximately $1.5 million in additional capital expenditures through the
remainder of the fiscal year, primarily for added capacity and production
efficiencies in the Engineered Component Products segment.
Net cash provided by financing activities was $599,000 and included borrowings
under the Company's $55.0 million revolving credit agreement of $5.9 million,
debt repayments of $3.5 million and the payment of dividends of $2.1 million.
The Company maintains a $55.0 million revolving credit agreement with two banks
with a termination date of March 31, 2000. At July 27, 1997, $35.9 million was
outstanding and $19.1 million was available for additional borrowing under this
agreement. Interest is payable, at the Company's option, at either the agent
bank's prime rate or at a spread over the London Interbank Offered Rate that
varies with the Company's ratio of total debt to EBITDA. The LIBOR spread was 2%
at July 27, 1997. The agreement contains customary financial and other
covenants, including fixed charge, cash flow and net worth ratios, restrictions
on certain asset sales, mergers and other significant transactions and a
negative pledge on assets. The covenants were amended in the second quarter of
fiscal 1997 to reduce the required levels of net worth and to increase the
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maximum allowable ratio of total debt to cash flow. In addition, the definition
of the fixed charge coverage ratio was changed and the leverage covenant was
eliminated. The Company anticipates being in compliance with these covenants for
the foreseeable future.
During fiscal 1996, the Company entered into interest rate swap agreements with
its two banks with notional amounts totaling $15.0 million. The agreements
require the Company to make quarterly fixed payments on the notional amount at
rates of 7.0675% and 7.09% for five years, beginning in the fourth quarter of
1997, in exchange for receiving payments at the three month London Interbank
Offered Rate.
The Company believes that anticipated funds to be generated from future
operations and available credit facilities will be sufficient to meet
anticipated operating and capital needs. Depending upon the future growth of the
business, additional financing may be required.
Seasonality
Sales of certain of the Company's specialty equipment tend to be seasonal, with
lowest sales during the first fiscal quarter and higher sales during the fourth
fiscal quarter, corresponding with the fall harvest season for farmers. Sales of
the Company's engineered component products experience less seasonality but
generally have higher sales during the second fiscal quarter while sales of
these products are lowest during the first fiscal quarter. Accordingly, the
Company's results have historically been lowest in the fiscal first quarter.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995
The following information is provided pursuant to the "Safe Harbor" provisions
of the Private Securities Litigation Reform Act of 1995. Certain statements in
Management's Discussion and Analysis of this Form 10-Q are "forward-looking
statements" made pursuant to these provisions.
The Company cautions readers that the following important factors, among others,
have in the past affected and could in the future affect the Company's actual
results of operations and cause the Company's actual results to differ
materially from the results expressed in any forward-looking statements made by
or on behalf of the Company:
The Company's results have been and can be expected to continue to be
affected by the general economic conditions in the United States and
specific economic factors influencing the manufacturing and
agricultural sectors of the economy. Lower demand for the Company's
products can lower revenues as well as cause underutilization of the
Company's plants, leading to reduced gross margins.
Commodity prices can have a material influence on the Company's
results. Grain prices and cattle prices can affect demand for certain
agricultural equipment sold by the businesses in the Company's
Specialized Equipment segment. Metal prices, particularly aluminum,
copper and steel, can affect the Company's costs as well as demand for
the Company's products and the value of inventory held at the end of a
reporting period. Lack of availability of certain commodities could
also disrupt the Company's production.
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Weather can affect the success of the grain harvest in the United
States, which can directly affect demand for the Company's grain
handling equipment business.
The Company's Sooner Trailer subsidiary has experienced production
inefficiencies which have caused increased production costs and lower
gross margins. Continuation of such inefficiencies could continue to
adversely affect the Company's results of operations.
Loss of a substantial customer may affect results of operations.
Employees at the Company's Motor Products subsidiary are represented by
a labor union, the International Union, United Automobile, Aerospace
and Agricultural Implement Workers of America, Local 743. The
collective bargaining agreement governing such employees expires on
September 13, 1997. Although negotiations with the union are
proceeding, any work stoppage could adversely affect the Company's
results of operations.
The Company's results can be affected by engineering difficulties in
designing new products or applications for existing products to meet
the requirements of its customers.
Obsolescence or quality problems leading to returned goods in need of
repair can also affect the value of the Company's inventories and its
profitability.
The Company has a substantial amount of floating rate debt. Increases
in short term interest rates could be expected to increase the
Company's interest expense.
Acquisitions are an important part of the Company's growth strategy.
Acquisitions may have a dilutive effect on the Company's earnings and
could adversely affect the Company's available credit and interest
costs. Conversely, the Company may from time to time divest of product
lines or business units. Any such divestiture may involve costs of
disposition or losses on the disposition that could adversely impact
the Company's results.
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Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
3.2 By-Laws of the Company, as amended June 5, 1997
27 Financial Data Schedule
(b) Form 8-K
No reports on Form 8-K were filed during the period
ended July 27, 1997.
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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 hereunto duly authorized.
OWOSSO CORPORATION
By: /s/ George B. Lemmon, Jr.
---------------------------------
George B. Lemmon, Jr.
Chief Executive Officer
By: /s/ John H. Wert, Jr.
---------------------------------
John H. Wert, Jr.
Senior Vice President - Finance and Chief
Financial Officer
Date: September 5, 1997
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Index to Exhibits
Exhibit Number Description
- -------------- -----------
3.2 By-Laws of the Company, as amended June 5, 1997
27 Financial Data Schedule
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EXHIBIT No. 3.2
BY-LAWS OF THE COMPANY,
AS AMENDED JUNE 5, 1997
<PAGE>
OWOSSO CORPORATION
BY-LAWS
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered office of
OWOSSO CORPORATION (the "Corporation") in the Commonwealth of Pennsylvania shall
be as specified in the Articles of Incorporation of the Corporation, as they may
be amended from time to time (the "Articles"), or at such other place as the
Board of Directors of the Corporation (the "Board") may specify in a statement
of change of registered office filed with the Department of State of the
Commonwealth of Pennsylvania.
Section 1.2. Other Offices. The Corporation may also have an
office or offices at such other place or places either within or without the
Commonwealth of Pennsylvania as the Board may from time to time determine or the
business of the Corporation requires.
ARTICLE II
MEETINGS OF THE SHAREHOLDERS
Section 2.1. Place. All meetings of the shareholders shall be
held at such places, within or without the Commonwealth of Pennsylvania, as the
Board may from time to time determine.
<PAGE>
Section 2.2. Annual Meeting. A meeting of the shareholders for
the election of directors and the transaction of such other business as may
properly be brought before the meeting shall be held once each calendar year
within seven months after the end of each fiscal year, with the precise date to
be determined by the Board. If the annual meeting is not called and held within
six months after the expiration of the time period set forth above for such
meeting, any shareholder may call the meeting at any time after the expiration
of such six-month period.
Section 2.3. Written Ballot. Unless required by vote of the
shareholders before the voting begins, elections of directors need not be by
written ballot.
Section 2.4. Special Meetings. Special meetings of the
shareholders, for any purpose or purposes, may be called at any time by the
Chairman of the Board, the President or by the Board, upon written request
delivered to the Secretary of the Corporation. In addition, an "interested
shareholder" (as defined in section 2553 of the Pennsylvania Business
Corporation Law of 1988, as it may from time to time be amended (the "1988
BCL")) may, upon written request delivered to the Secretary of the Corporation,
call a special meeting for the purpose of approving a business combination under
either subsection (3) or (4) of section 2553 of the 1988 BCL. Any request for a
special meeting of shareholders shall state the purpose or purposes of the
proposed meeting. Upon receipt of any such request, it shall be the duty of the
Secretary to give notice, in a manner consistent with Section 2.6 of these
Bylaws, of a special meeting of the shareholders to be held at such time as the
Secretary may fix, which time may not be, if the meeting is called pursuant to a
statutory right, more than sixty (60) days after receipt of the request. If the
Secretary shall neglect or refuse to fix the date of the meeting and give notice
thereof, the person or persons calling the meeting may do so.
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Section 2.5. Scope of Special Meetings. Business transacted at
any special meeting shall be confined to the business stated in the notice.
Section 2.6. Notice. Written notice of every meeting of the
shareholders, stating the place, the date and hour thereof and, in the case of a
special meeting of the shareholders, the general nature of the business to be
transacted thereat, shall be given in a manner consistent with the provisions of
Section 12.5 of these Bylaws at the direction of the Secretary of the
Corporation or, in the absence of the Secretary of the Corporation, any
Assistant Secretary of the Corporation, at least ten (10) days prior to the day
named for a meeting called to consider a fundamental change under Chapter 19 of
the Pennsylvania Business Corporation Law of 1988, as it may from time to time
be amended (the "1988 BCL"), or five (5) days prior to the day named for the
meeting in any other case, to each shareholder entitled to vote thereat on the
date fixed as a record date in accordance with Section 8.1 of these Bylaws or,
if no record date be fixed, then of record at the close of business on the tenth
(10th) day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the day immediately preceding the day of the
meeting, at such address (or telex, TWX, facsimile or telephone number), as
appears on the transfer books of the Corporation. Any notice of any meeting of
shareholders may state that, for purposes of any meeting that has been
previously adjourned for one or more periods aggregating at least fifteen (15)
days because of an absence of a quorum, the shareholders entitled to vote who
attend such a meeting, although less than a quorum pursuant to Section 2.7 of
these Bylaws, shall nevertheless constitute a quorum for the purpose of acting
upon any matter set forth in the original notice of the meeting that was so
adjourned.
Section 2.7. Quorum. The shareholders present in person or by
proxy, entitled to cast at least a majority of the votes that all shareholders
are entitled to cast on any particular matter
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to be acted upon at the meeting, shall constitute a quorum for the purposes of
consideration of, and action on, such matter. The shareholders present in person
or by proxy at a duly organized meeting can continue to do business until the
adjournment thereof notwithstanding the withdrawal of enough shareholders to
leave less than a quorum. If a meeting cannot be organized because a quorum has
not attended, the shareholders present in person or by proxy may, except as
otherwise provided by the 1988 BCL and subject to the provisions of Section 2.8
of these Bylaws, adjourn the meeting to such time and place as they may
determine.
Section 2.8. Adjournment. Any meeting of the shareholders,
including one at which directors are to be elected, may be adjourned for such
period as the shareholders present in person or by proxy and entitled to vote
shall direct. Other than as provided in the last sentence of Section 2.6 of
these Bylaws, notice of the adjourned meeting or the business to be transacted
thereat need not be given, other than announcement at the meeting at which
adjournment is taken, unless the Board fixes a new record date for the adjourned
meeting or the 1988 BCL requires notice of the business to be transacted and
such notice has not previously been given. At any adjourned meeting at which a
quorum is present, any business may be transacted that might have been
transacted at the meeting as originally noticed.
Those shareholders entitled to vote present in person or by
proxy, although less than a quorum pursuant to Section 2.7 of these Bylaws,
shall nevertheless constitute a quorum for the purpose of (a) electing directors
at a meeting called for the election of directors that has been previously
adjourned for lack of a quorum, and (b) acting, at a meeting that has been
adjourned
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for one or more periods aggregating fifteen (15) days because of an absence of a
quorum, upon any matter set forth in the original notice of such adjourned
meeting, provided that such original notice shall have complied with the last
sentence of Section 2.6 of these Bylaws.
Section 2.9. Majority Voting. Any matter brought before a duly
organized meeting for a vote of the shareholders shall be decided by a majority
of the votes cast at such meeting by the shareholders present in person or by
proxy and entitled to vote thereon, unless the matter is one for which a
different vote is required by express provision of the 1988 BCL, the Articles or
a bylaw adopted by the shareholders, in any of which case(s) such express
provision shall govern and control the decision on such matter.
Section 2.10. Voting Rights. Except as otherwise provided in
the Articles, at every meeting of the shareholders, every shareholder entitled
to vote shall have the right to one vote for each share having voting power
standing in his or her name on the books of the Corporation. Shares of the
Corporation owned by it, directly or indirectly, and controlled by the Board,
directly or indirectly, shall not be voted.
Section 2.11. Proxies. Every shareholder entitled to vote at a
meeting of the shareholders or to express consent or dissent to corporate action
in writing may authorize another person to act for him or her by proxy. The
presence of, or vote or other action at a meeting of shareholders, or the
expression of consent or dissent to corporate action in writing, by a proxy of a
shareholder, shall constitute the presence of, or vote or action by, or written
consent or dissent of the shareholder. Every proxy shall be executed in writing
by the shareholder or by the shareholder's duly authorized attorney-in-fact and
filed with the Secretary of the Corporation. A proxy, unless coupled with an
interest, shall be revocable at will, notwithstanding any other
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agreement or any provision in the proxy to the contrary, but the revocation of a
proxy shall not be effective until written notice of revocation has been given
to the Secretary of the Corporation. No unrevoked proxy shall be valid after
three (3) years from the date of its execution, unless a longer time is
expressly provided therein. A proxy shall not be revoked by the death or
incapacity of the maker unless, before the vote is counted or the authority is
exercised, written notice of such death or incapacity is given to the Secretary
of the Corporation.
Section 2.12. Voting Lists. The officer or agent having charge
of the transfer books for securities of the Corporation shall make a complete
list of the shareholders entitled to vote at a meeting of the shareholders,
arranged in alphabetical order, with the address of and the number of shares
held by each shareholder, which list shall be produced and kept open at the time
and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting. If the Corporation has five
thousand (5000) or more shareholders, it may make such information available at
the meeting by any other means.
Section 2.13. Judges of Election. In advance of any meeting of
the shareholders, the Board may appoint judges of election, who need not be
shareholders, to act at such meeting or any adjournment thereof. If judges of
election are not so appointed, the presiding officer of any such meeting may,
and on the request of any shareholder shall, appoint judges of election at the
meeting. The number of judges shall be one (1) or three (3), as determined by
the Board to be appropriate under the circumstances. No person who is a
candidate for office to be filled at the meeting shall act as a judge at the
meeting. The judges of election shall do all such acts as may be proper to
conduct the election or vote with fairness to all shareholders, and shall make a
written report of any matter determined by them and execute a certificate of any
fact found by
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them, if requested by the presiding officer of the meeting or any shareholder or
the proxy of any shareholder. If there are three (3) judges of election, the
decision, act or certificate of a majority shall be effective in all respects as
the decision, act or certificate of all.
Section 2.14. Participation by Conference Call. The right of
any shareholder to participate in any shareholders' meeting by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting may hear each other, in which event all
shareholders so participating shall be deemed present at such meeting, shall be
granted solely in the discretion of the Board.
ARTICLE III
SHAREHOLDER ACTION BY PARTIAL WRITTEN CONSENT
Section 3.1. Partial Written Consent. Any action required or
permitted to be taken at a meeting of the shareholders or of a class of
shareholders may be taken without a meeting upon the written consent of
shareholders who would have been entitled to cast the minimum number of votes
that would be necessary to authorize the action at a meeting at which all
shareholders entitled to vote thereon were present and voting. An action taken
pursuant to this Section may become effective immediately upon its
authorization, but prompt notice of the action shall be given to those
shareholders entitled to vote thereon who have not consented. The consents shall
be filed with the Secretary of the Corporation.
Section 3.2. Record Date - Consents. Except as otherwise
provided in Section 8.1 of these Bylaws, the record date for determining
shareholders entitled to (a) express consent or dissent to corporate action in
writing without a meeting, when prior action by the Board is not necessary, (b)
call a special meeting of the shareholders, or (c) propose an amendment of the
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Articles, shall be at the close of business on the day on which the first
written consent or dissent, request for a special meeting or petition proposing
an amendment of the Articles is filed with the Secretary of the Corporation. If
prior action by the Board is necessary, the record date for determining such
shareholders shall be at the close of business on the day on which the Board
adopts the resolution relating to such action.
ARTICLE IV
DIRECTORS
Section 4.1. Number and Qualifications. The Board shall
consist of one or more directors as determined from time to time by the Board.
Except as provided in Section 4.4 of these Bylaws in the case of vacancies,
directors, other than those constituting the first board of directors, shall be
elected by the shareholders. Directors shall be natural persons of full age and
need not be residents of the Commonwealth of Pennsylvania or shareholders of the
Corporation.
Section 4.2. Term. Each director shall be elected to serve a
term of one (1) year and until a successor is elected and qualified or until the
director's earlier death, resignation or removal.
Section 4.3. Nominations of Directors. Nominees for election
to the Board shall be selected by the Board or a committee of the Board to which
the Board has delegated the authority to make such selections pursuant to
Section 4.11 of these Bylaws. The Board or such committee, as the case may be,
may consider written recommendations from shareholders for nominees for election
to the Board provided any such recommendation, together with (a) such
information regarding each nominee as would be required to be included in a
proxy statement filed pursuant to the Exchange Act, (b) a description of any
arrangements or understandings
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among the recommending shareholder and each nominee and any other person with
respect to such nomination, and (c) the consent of each nominee to serve as a
director of the Corporation if so elected, is received by the Secretary of the
Corporation, in the case of an annual meeting of shareholders, not later than
the date specified in the most recent proxy statement of the Corporation as of
the date by which shareholder proposals for consideration at the next annual
meeting of shareholders must be received and, in the case of a special meeting
of shareholders, not later than the tenth (10th) day after the giving of notice
of such meeting. Only persons duly nominated for election to the Board in
accordance with this Section 4.3 and persons with respect to whose nominations
proxies have been solicited pursuant to a proxy statement filed pursuant to the
Exchange Act shall be eligible for election to the Board.
Section 4.4. Vacancies. Vacancies in the Board, including
vacancies resulting from an increase in the number of directors, shall be filled
by a majority vote of the remaining members of the Board, even though less than
a quorum, or by a sole remaining director, and each person so elected shall
serve as a director for the balance of the unexpired term. If one or more
directors resign from the Board effective at a future date, the directors then
in office, including those who have resigned, shall have the power to fill the
vacancies by a majority vote, the vote thereon to take effect when the
resignations become effective.
Section 4.5. Removal. The entire Board or any one or more
directors may be removed from office without assigning any cause by the vote of
the shareholders.
Section 4.6. Powers. The business and affairs of the
Corporation shall be managed under the direction of its Board, which may
exercise all powers of the Corporation and
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do all such lawful acts and things as are not by statute or by the Articles or
these Bylaws directed or required to be exercised and done by the shareholders.
Section 4.7. Place of Board Meetings. Meetings of the Board
may be held at such place within or without the Commonwealth of Pennsylvania as
the Board may from time to time appoint or as may be designated in the notice of
the meeting.
Section 4.8. First Meeting of Newly Elected Board. The first
meeting of each newly elected Board may be held at the same place and
immediately after the meeting at which such directors were elected and no notice
shall be required other than announcement at such meeting. If such first meeting
of the newly elected Board is not so held, notice of such meeting shall be given
in the same manner as set forth in Section 4.8 of these Bylaws with respect to
notice of regular meetings of the Board.
Section 4.9. Regular Board Meetings; Notice. Regular meetings
of the Board may be held at such times and places as shall be determined from
time to time by resolution of at least a majority of the whole Board at a duly
convened meeting, or by unanimous written consent. Notice of each regular
meeting of the Board shall specify the date, place and hour of the meeting and
shall be given to each director, to his or her address or telex, TWX, telecopier
or telephone number as supplied by such director to the Corporation for the
purpose of notice, at least 24 hours before the meeting if given personally or
by telephone, telex, TWX (with answerback received) or telecopier, at least 48
hours before the meeting if given by telegram (with messenger service
specified), express mail (postage prepaid) or courier service (charges prepaid),
and at least five days before the meeting if given by first class mail (postage
prepaid). If the notice is sent by mail, telegraph or courier service, it shall
be deemed to have been given to
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the person entitled thereto when deposited in the United States mail or with a
telegraph office or courier service for delivery to that person, or in the case
of telex or TWX, when dispatched.
Section 4.10. Special Board Meetings; Notice. Special meetings
of the Board may be called by the Chairman of the Board or the President on
notice to each director, specifying the purpose, date, place and hour of the
meeting and given within the same time and in the same manner provided for
notice of regular meetings in Section 4.8 of these Bylaws. Special meetings
shall be called by the Secretary in like manner and on like notice on the
written request of two directors.
Section 4.11. Quorum of the Board. At all meetings of the
Board, the presence of a majority of the directors in office shall constitute a
quorum for the transaction of business, and the acts of a majority of the
directors present and voting at a meeting at which a quorum is present shall be
the acts of the Board. If a quorum shall not be present at any meeting of
directors, the directors present thereat may adjourn the meeting. It shall not
be necessary to give any notice of the adjourned meeting or of the business to
be transacted thereat other than by announcement at the meeting at which such
adjournment is taken.
Section 4.12. Committees of Directors. The Board may, by
resolution adopted by a majority of the directors in office, establish one or
more committees, each committee to consist of one or more of the directors, and
may designate one or more directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of the committee or
for the purposes of any written action by the committee. Any such committee, to
the extent provided in such resolution of the Board or in these Bylaws, shall
have and may exercise all of the powers and authority of the Board; provided,
however, that no such committee
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shall have any power or authority to (a) submit to the shareholders any action
requiring approval of the shareholders under the 1988 BCL, (b) create or fill
vacancies on the Board, (c) amend or repeal these Bylaws or adopt new bylaws,
(d) amend or repeal any resolution of the Board that by its terms is amendable
or repealable only by the Board, (e)act on any matter committed by these Bylaws
or by resolution of the Board to another committee of the Board, (f) amend the
Articles or adopt a resolution proposing an amendment to the Articles, or (g)
adopt a plan or an agreement of merger or consolidation, share exchange, asset
sale or division. In the absence or disqualification of a member or alternate
member or members of a committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not a quorum is present,
may unanimously appoint another director to act at the meeting in the place of
any absent or disqualified member. Minutes of all meetings of any committee of
the Board shall be kept by the person designated by such committee to keep such
minutes. Copies of such minutes and any writing setting forth an action taken by
written consent without a meeting shall be distributed to each member of the
Board promptly after such meeting is held or such action is taken. Each
committee of the Board shall serve at the pleasure of the Board.
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Section 4.13. Participation in Board Meetings by Telephone.
One or more directors may participate in a meeting of the Board or of a
committee of the Board by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and all directors so participating shall be deemed
present at the meeting.
Section 4.14. Action by Consent of Directors. Any action
required or permitted to be taken at a meeting of the Board or of a committee of
the Board may be taken without a meeting if, prior or subsequent to the action,
a consent or consents in writing setting forth the action so taken shall be
signed by all of the directors in office or the members of the committee, as the
case may be, and filed with the Secretary of the Corporation.
Section 4.15. Compensation of Directors. The Board may, by
resolution, fix the compensation of directors for their services as directors. A
director may also serve the Corporation in any other capacity and receive
compensation therefor.
ARTICLE V
OFFICERS
Section 5.1. Principal Officers. The officers of the
Corporation shall be chosen by the Board, and shall include a Cheif Executive
Officer, President, one or more Vice Presidents, a Secretary and a Treasurer
(collectively, the "Principal Officers"). The Board shall designate one officer
(who need not be a Principal Officer, but shall not be an assistant officer) to
be the chief financial officer of the Corporation, and another officer (who may
be the same as the chief financial officer and need not be a Principal Officer,
but shall not be an assistant officer) to be the chief accounting officer of the
Corporation. The President, all Vice Presidents and the
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Secretary shall be natural persons of full age. The Treasurer may be a
corporation, but if a natural person, shall be of full age. Any number of
offices may be held by the same person.
Section 5.2. Electing Principal Officers. The Board,
immediately after each annual meeting of the shareholders, shall elect the
Principal Officers of the Corporation, none of whom need be members of the
Board.
Section 5.3. Other Officers. The Corporation may have such
other officers, assistant officers, agents and employees as the Board may deem
necessary, each of whom shall hold office for such period, have such authority
and perform such duties as the Board may from time to time determine. The Board
may delegate to any Principal Officer the power to appoint or remove, and set
the compensation of, any such other officers and any such agents or employees.
Section 5.4. Compensation. Except as provided in Section 5.3
of these Bylaws, the salaries of all officers of the Corporation shall be fixed
by the Board.
Section 5.5. Term of Office; Removal. Each officer of the
Corporation shall hold office until his or her successor has been chosen and
qualified or until his or her earlier death, resignation or removal. Vacancies
of any office shall be filled by the Board. Any officer or agent may be removed
by the Board with or without cause, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed. The election or
appointment of an officer or agent shall not of itself create any contract
rights.
Section 5.6. The Chief Executive Officer. The Chief Executive
Officer shall supervise and direct all the business and affairs of the
Corporation and shall see that all orders and resolutions of the Board are
carried into effect; he or she shall preside at all meetings of the
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shareholders, shall generally perform all duties incident to the office of Chief
Executive Officer and other duties as may be prescribed by the Board.
Section 5.7. The President. The President shall have general
and active management of the business of the Corporation and shall see that all
orders and resolutions of the Board are carried into effect. The President may
execute bonds, mortgages and other contracts requiring a seal, under the seal of
the Corporation, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the Corporation.
Section 5.8. The Vice Presidents. The Vice-President or
Vice-Presidents, in the order designated by the Board, shall, in the absence or
disability of the President, perform the duties and exercise the powers of the
President, and shall perform such other duties as the Board may prescribe or the
President may delegate to them.
Section 5.9. The Secretary. The Secretary shall attend all
sessions of the Board and all meetings of the shareholders and record all the
votes of the Corporation and the minutes of all the transactions in a book to be
kept for that purpose, and shall perform like duties for the committees of the
Board when required. The Secretary shall give, or cause to be given, notice of
all meetings of the shareholders and of the Board, and shall perform such other
duties as may be prescribed by the Board or the President, under whose
supervision the Secretary shall be. He or she shall keep in safe custody the
corporate seal, if any, of the Corporation.
Section 5.10. The Treasurer.
(a) The Treasurer shall be the chief financial
officer of the Corporation and shall have the custody of the corporate funds and
securities and shall keep full and accurate
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accounts of receipts and disbursements in books belonging to the Corporation,
and shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as shall be designated by the
Board.
(b) The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board, taking proper vouchers for such
disbursements, and shall render to the President and directors, at the regular
meetings of the Board, or whenever they may require it, an account of all his or
her transactions as Treasurer.
Section 5.10. Bonds. If required by the Board, any officer
shall give the Corporation a bond in such sum, and with such surety or sureties
as may be satisfactory to the Board, for the faithful discharge of the duties of
his or her office and for the restoration to the Corporation, in the case of his
or her death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his or her
possession or under his or her control belonging to the Corporation.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 6.1. Share Certificates. The certificates representing
shares of the Corporation shall be numbered and registered in a share register
as they are issued. The share register shall exhibit the names and addresses of
all registered holders and the number and class of shares and the series, if
any, held by each.
The Certificate shall state that the Corporation is
incorporated under the laws of the Commonwealth of Pennsylvania, the name of the
registered holder and the number and class of shares and the series, if any,
represented thereby. If, under its Articles, the Corporation is
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authorized to issue shares of more than one class or series, each Certificate
shall set forth, or shall contain a statement that the Corporation will furnish
to any shareholder upon request and without charge, a full or summary statement
of the designations, voting rights, preferences, limitations and special rights
of the shares of each class or series authorized to be issued so far as they
have been fixed and determined and the authority of the Board to fix and
determine such rights.
Section 6.2. Execution of Certificates. Every share
certificate shall be executed, by facsimile or otherwise, by or on behalf of the
Corporation by the President, by the Chief Executive Officer, by any
Vice-President, or by the Secretary. In case any officer who has signed or whose
facsimile signature has been placed upon any share certificate shall have ceased
to be such officer, because of death, resignation or otherwise, before the
certificate is issued, it may be issued by the Corporation with the same effect
as if the officer had not ceased to be such at the time of issue.
ARTICLE VII
TRANSFER OF SHARES
Section 7.1. Transfer; Duty of Inquiry. Upon presentment to
the Corporation or its transfer agent of a share certificate indorsed by the
appropriate person or accompanied by proper evidence of succession, assignment
or authority to transfer, a new certificate shall be issued to the person
entitled thereto and the old certificate cancelled and the transfer registered
upon the books of the Corporation, unless the Corporation or its transfer agent
has a duty to inquire as to adverse claims with respect to such transfer which
has not been discharged. The Corporation shall have no duty to inquire into
adverse claims with respect to transfers of its
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securities or the rightfulness thereof unless (a) the Corporation has received
written notification of an adverse claim at a time and in a manner which affords
the Corporation a reasonable opportunity to act on it before the issuance of a
new, reissued or re-registered share certificate and the notification identifies
the claimant, the registered owner and the issue of which the share or shares
are a part and provides an address for communications directed to the claimant;
or (b) the Corporation has required and obtained, with respect to a fiduciary, a
copy of a will, trust, indenture, articles of co-partnership, bylaws or other
controlling instruments, for a purpose other than to obtain appropriate evidence
of the appointment or incumbency of the fiduciary, and such documents indicate,
upon reasonable inspection, the existence of an adverse claim.
Section 7.2. Discharging Duty of Inquiry. The Corporation may
discharge any duty of inquiry by any reasonable means, including notifying an
adverse claimant by registered or certified mail at the address furnished by the
claimant or, if there is no such address, at the claimant's residence or regular
place of business, that the security has been presented for registration of
transfer by a named person, and that the transfer will be registered unless,
within thirty (30) days from the date of mailing the notification, either (a) an
appropriate restraining order, injunction or other process issues from a court
of competent jurisdiction or (b) an indemnity bond, sufficient in the
Corporation's judgment to protect the Corporation and any transfer agent,
registrar or other agent of the Corporation involved from any loss which it or
they may suffer by complying with the adverse claim, is filed with the
Corporation.
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ARTICLE VIII
RECORD DATE; IDENTITY OF SHAREHOLDERS
Section 8.1. Record Date. The Board may fix a time, prior to
the date of any meeting of the shareholders, as a record date for the
determination of the shareholders entitled to notice of, or to vote at, the
meeting, which time, except in the case of an adjourned meeting, shall not be
more than ninety (90) days prior to the date of the meeting. Except as otherwise
provided in Section 8.2 of these Bylaws, only the shareholders of record at the
close of business on the date so fixed shall be entitled to notice of, or to
vote at, such meeting, notwithstanding any transfer of securities on the books
of the Corporation after any record date so fixed. The Board may similarly fix a
record date for the determination of shareholders for any other purpose. When a
determination of shareholders of record has been made as herein provided for
purposes of a meeting, the determination shall apply to any adjournment thereof
unless the Board fixes a new record date for the adjourned meeting.
Section 8.2. Certification of Nominee. The Board may adopt a
procedure whereby a shareholder may certify in writing to the Secretary of the
Corporation that all or a portion of the shares registered in the name of the
shareholder are held for the account of a specified person or persons. The
Board, in adopting such procedure, may specify (a) the classification of
shareholder who may certify, (b) the purpose or purposes for which the
certification may be made, (c) the form of certification and the information to
be contained therein, (d) as to certifications with respect to a record date,
the date after the record date by which the certification must be received by
the Secretary of the Corporation, and (e) such other provisions with respect to
the procedure as the Board deems necessary or desirable. Upon receipt
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by the Secretary of the Corporation of a certification complying with the
procedure, the persons specified in the certification shall be deemed, for the
purpose or purposes set forth in the certification, to be the holders of record
of the number of shares specified instead of the persons making the
certification.
ARTICLE IX
REGISTERED SHAREHOLDERS
Section 9.1. Before due presentment for transfer of any
shares, the Corporation shall treat the registered owner thereof as the person
exclusively entitled to vote, to receive notifications and otherwise to exercise
all the rights and powers of an owner, and shall not be bound to recognize any
equitable or other claim or interest in such securities, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of the Commonwealth of Pennsylvania or Section 8.2 of these Bylaws.
ARTICLE X
LOST CERTIFICATES
Section 10.1. If the owner of a share certificate claims that
it has been lost, destroyed, or wrongfully taken, the Corporation shall issue a
new certificate in place of the original certificate if the owner so requests
before the Corporation has notice that the certificate has been acquired by a
bona fide purchaser, and if the owner has filed with the Corporation an
indemnity bond, an indemnify agreement and an affidavit of the facts
satisfactory to the Board or its designated agent, and has complied with such
other reasonable requirements, if any, as the Board may deem appropriate.
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<PAGE>
ARTICLE XI
DISTRIBUTIONS
Section 11.1. Distributions. Distributions upon the shares of
the Corporation, whether by dividend, purchase or redemption or other
acquisition of its shares subject to any provisions of the Articles related
thereto, may be authorized by the Board at any regular or special meeting of the
Board and may be paid directly or indirectly in cash, in property or by the
incurrence of indebtedness by the Corporation.
Section 11.2. Reserves. Before the making of any
distributions, there may be set aside out of any funds of the Corporation
available for distributions such sum or sums as the Board from time to time, in
its absolute discretion, deems proper as a reserve fund to meet contingencies,
or for equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the Board shall deem conducive to the
interests of the Corporation, and the Board may abolish any such reserve in the
manner in which it was created.
Section 11.3. Stock Dividends/Splits. Stock dividends or
splits upon the shares of the Corporation, subject to any provisions of the
Articles related thereto, may be authorized by the Board at any regular or
special meeting of the Board.
ARTICLE XII
GENERAL PROVISIONS
Section 12.1. Checks and Notes. All checks or demands for
money and notes of the Corporation shall be signed by such officer or officers
as the Board may from time to time designate.
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Section 12.2. Fiscal Year. The fiscal year of the Corporation
shall initially be a 52-53 week year ending on the last Sunday in October, and
may be changed at the discretion of the Board.
Section 12.3. Seal. The corporate seal, if any, shall have
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Pennsylvania." Such seal may be used by causing it or
a facsimile thereof to be impressed or affixed or in any manner reproduced. The
affixation of the corporate seal shall not be necessary to the valid execution,
assignment or endorsement of any instrument or other document by the
Corporation.
Section 12.4. Notices. Whenever, under the provisions of the
1988 BCL or of the Articles or of these Bylaws or otherwise, written notice is
required to be given to any person, it may be given to such person either
personally or by sending a copy thereof by first class or express mail, postage
prepaid, telegram (with messenger service specified), telex, TWX (with
answerback received), courier service (with charges prepaid) or facsimile
transmission, to his or her address, (or to his or her telex, TWX, or facsimile
number), appearing on the books of the Corporation or, in the case of directors,
supplied by the director to the Corporation for the purpose of notice. If the
notice is sent by mail, telegraph or courier service, it shall be deemed to have
been given to the person entitled thereto when deposited in the United States
mail or with a telegraph office or courier service for delivery to that person.
A notice given by telex or TWX shall be deemed to have been given when
dispatched. If mailed at least twenty (20) days prior to the meeting or
corporate action to be taken, notice may be sent by any class of post paid mail
(including bulk mail).
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Section 12.5. Waiver of Notice. Whenever any notice is
required to be given by the 1988 BCL or by the Articles or these Bylaws, a
waiver thereof in writing, signed by the person or persons entitled to the
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Neither the business to be transacted
nor the purpose of a meeting need be specified in the waiver of notice of the
meeting. Attendance of a person at any meeting shall constitute a waiver of
notice of the meeting, except where any person attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting was
not lawfully called or convened, and the person so objects at the beginning of
the meeting.
ARTICLE XIII
AMENDMENTS
Section 13.1. Amendments. The Bylaws may be adopted, amended
or repealed by a majority vote of the shareholders entitled to vote thereon at
any regular or special meeting duly convened or, except for a bylaw on a subject
expressly committed to the shareholders by the 1988 BCL, by a majority vote of
the members of the Board at any regular or special meeting duly convened,
subject always to the power of the shareholders to change such action by the
directors; however, whenever the Bylaws require for the taking of any action by
the shareholders or a class of shareholders a specific number or percentage of
votes, the provision of the Bylaws setting forth that requirement shall not be
amended or repealed by any lesser number or percentage of votes of the
shareholders or of the class of shareholders. In the case of a meeting of
shareholders, written notice shall be given to each shareholder that the
purpose, or one of the purposes, of a meeting is to consider the adoption,
amendment or repeal of the Bylaws. There shall be included
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in, or enclosed with the notice, a copy of the proposed amendment or a summary
of the changes to be effected thereby. Any change in the Bylaws shall take
effect when adopted unless otherwise provided in the resolution effecting the
change.
ARTICLE XIV
INDEMNIFICATION
Section 14.1. Officers and Directors - Direct Actions. The
Corporation shall indemnify any director or officer of the Corporation (as used
herein, the phrase "director or officer of the Corporation" shall mean any
person who is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director or officer of another
domestic or foreign corporation for profit or not-for-profit, partnership, joint
venture, trust or other enterprise), any person who was or is a party (other
than a party plaintiff suing on his or her own behalf), or who is threatened to
be made such a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that he
or she is or was a director or officer of the Corporation, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she met the standard of conduct of (a)acting in good
faith and in a manner he or she reasonably believed to be in, or not opposed to,
the best interests of the Corporation and (b) with respect to any criminal
proceeding, having no reasonable cause to believe his or her conduct was
unlawful. The termination of any action or proceeding by judgment, order,
settlement or conviction or upon a plea of nolo contendere or its equivalent
shall not of itself create a presumption that the person (a) did not act in good
faith and
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<PAGE>
in a manner that he or she reasonably believed to be in, or not opposed to, the
best interests of the Corporation and (b)with respect to any criminal
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
Section 14.2. Officers and Directors - Derivative Actions. The
Corporation shall indemnify any director or officer of the Corporation who was
or is a party (other than a party suing in the right of the Corporation), or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding by or in the right of the Corporation to procure a judgment
in the Corporation's favor by reason of the fact that he or she is or was a
director or officer of the Corporation, against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with the
defense or settlement of the action, suit or proceeding if he or she met the
standard of conduct of acting in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the Corporation.
Indemnification shall not be made under this Section in respect of any claim,
issue or matter as to which the person has been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Common Pleas of the
judicial district embracing the county in which the registered office of the
Corporation is located or the court in which the action, suit or proceeding was
brought determines upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for the expenses that the Court of Common Pleas
or other court deems proper.
Section 14.3. Employees and Agents. The Corporation may, to
the extent permitted by the 1988 BCL, indemnify any employee or agent of the
Corporation (as used in this Article XIV, the phrase "employee or agent of the
Corporation shall mean any person who is or
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was an employee or agent of the Corporation, other than an officer, or is or was
serving at the request of the Corporation as an employee or agent of another
domestic or foreign corporation for profit or not-for-profit, partnership, joint
venture, trust or other enterprise) who was or is a party, or who is threatened
to be made such a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding by reason of the fact that he or she is or was
an employee or agent of the Corporation, provided he or she has met the standard
of conduct set forth in Sections 14.1 and 14.2, subject to the limitations set
forth in Section 14.2 in the case of an action, suit or proceeding by or in the
right of the Corporation to procure a judgment in the Corporation's favor.
Section 14.4. Mandatory Indemnification. To the extent that a
director or officer of the Corporation or any employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action or proceeding referred to in Sections 14.1, 14.2 or 14.3 of this Article
XIV, or in defense of any claim, issue or matter therein, he or she shall be
indemnified by the Corporation against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection therewith.
Section 14.5. Advancing Expenses. Expenses (including
attorneys' fees) incurred by a director or officer of the Corporation or an
employee or agent of the Corporation in defending any action or proceeding
referred to in this Article XIV may be paid by the Corporation in advance of the
final disposition of the action or proceeding upon receipt of an undertaking by
or on behalf of such person to repay such amount if it is ultimately determined
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that he or she is not entitled to be indemnified by the Corporation as
authorized in this Article XIV.
Section 14.6. Procedure.
(a) Unless ordered by a court, any indemnification
under Section 14.1, 14.2 or 14.3 or advancement of expenses under Section 14.5
of this Article XIV shall be made by the Corporation only as authorized in a
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in Section 14.1, 14.2 or 14.3.
(b) All determinations under this Section 14.6 shall
be made:
(1) With respect to indemnification under
Section 14.3 and advancement of expenses to an employee or agent of the
Corporation, other than an officer, by the Board by a majority vote.
(2) With respect to indemnification under
Section 14.1 or 14.2 and advancement of expenses to a director or officer of the
Corporation,
(A) By the Board by a majority vote of a
quorum consisting of directors who were not parties to such action or
proceeding, or
(B) If such a quorum is not obtainable, or,
if obtainable and if a majority vote of a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or
(C) By the shareholders.
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<PAGE>
Section 14.7. Nonexclusivity of Indemnification.
(a) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article XIV shall not be deemed
exclusive of any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under any Bylaw, agreement, vote of
shareholders or disinterested directors or otherwise, both as to actions in his
or her official capacity and as to actions in another capacity while holding
that office. Section 1728 (relating to interested directors; quorum) of the 1988
BCL, or any successor section, shall be applicable to any Bylaw, contract or
transaction authorized by the directors under this Section 14.7. The Corporation
may create a fund of any nature, which may, but need not be, under the control
of a trustee, or otherwise secure or insure in any manner its indemnification
obligations, whether arising under or pursuant to this Article XIV or otherwise.
(b) Indemnification pursuant to Section 14.7(a)
hereof shall not be made in any case where the act or failure to act giving rise
to the claim for indemnification is determined by a court to have constituted
willful misconduct or recklessness.
(c) Indemnification pursuant to Section 14.7(a) under
any Bylaw, agreement, vote of shareholders or directors or otherwise, may be
granted for any action taken or any failure to take any action and may be made
whether or not the Corporation would have the power to indemnify the person
under any other provision of law except as provided in this Section 14.7 and
whether or not the indemnified liability arises or arose from any threatened or
pending or completed action by or in the right of the Corporation.
Section 14.8. Insurance. The Corporation shall have power to
purchase and maintain insurance on behalf of any person who is or was a director
or officer of the Corporation
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<PAGE>
or an employee or agent of the Corporation, against any liability asserted
against such person and incurred by him or her in any such capacity, or arising
out of his or her status as such, whether or not the Corporation would have the
power to indemnify him or her against that liability under the provisions of
this Article XIV or otherwise.
Section 14.9. Past Officers and Directors. The indemnification
and advancement of expenses provided by, or granted pursuant to, this Article
XIV shall continue as to a person who has ceased to be a director, officer,
employee or agent of the Corporation and shall inure to the benefit of the heirs
and personal representatives of that person.
Section 14.10. Surviving or New Corporations. References to
"the Corporation" in this Article XIV include all constituent corporations
absorbed in a consolidation, merger or division, as well as the surviving or new
corporation resulting therefrom, so that any director, officer, employee or
agent of the constituent, surviving or new corporation shall stand in the same
position under the provisions of this Article XIV with respect to the surviving
or new corporation as he or she would if he or she had served the surviving or
new corporation in the same capacity.
Section 14.11. Employee Benefit Plans.
(a) References in this Article XIV to "other
enterprises" shall include employee benefit plans and references to "serving at
the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation that imposes duties on, or
involves services by, the person with respect to an employee benefit plan, its
participants or beneficiaries.
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<PAGE>
(b) Excise taxes assessed on a person with respect to
an employee benefit plan pursuant to applicable law shall be deemed "fines."
(c) Action with respect to an employee benefit plan
taken or omitted in good faith by a director, officer, employee or agent of the
Corporation in a manner he or she reasonably believed to be in the interest of
the participants and beneficiaries of the plan shall be deemed to be action in a
manner that is not opposed to the best interests of the Corporation.
-30-
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