<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
Commission file number: 1-2917
THE STANDARD PRODUCTS COMPANY
(Exact Name of Registrant as Specified in Its Charter)
OHIO 34-0549970
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
2401 SOUTH GULLEY ROAD
DEARBORN, MICHIGAN 48124
(Address of Principal Executive Offices)(Zip Code)
Registrant's telephone number, including area code: (313) 561-1100
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes. |X| No. |_|
THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF FEBRUARY 5, 1999
WAS 16,078,842 SHARES.
- --------------------------------------------------------------------------------
This report consists of 14 pages.
<PAGE> 2
THE STANDARD PRODUCTS COMPANY
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Statements of Operations.............................................................. 3
Consolidated Balance Sheets........................................................................ 4
Consolidated Statements of Cash Flows.............................................................. 5
Notes to Consolidated Financial Statements......................................................... 6
Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................................................. 12
Item 2. Changes in Securities.............................................................................. 12
Item 3. Defaults upon Senior Securities.................................................................... 12
Item 4. Submission of Matters to a Vote of Security-Holders................................................ 12
Item 5. Other Information.................................................................................. 12
Item 6. Exhibits and Reports on Form 8-K................................................................... 13
SIGNATURES ............................................................................................... 14
</TABLE>
Unless otherwise indicated, references to "Company" mean The Standard Products
Company and its subsidiaries and reference to a fiscal year means the Company's
year ended June 30 of the same year (e.g., "fiscal 1999" refers to the period
beginning July 1, 1998 and ending June 30, 1999).
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED DECEMBER 31,
(UNAUDITED)
(THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
----------------------------- -------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales............................................... $ 276,237 $ 282,544 $ 508,053 $ 528,717
Cost of Goods Sold:
Materials, wages and other manufacturing costs....... 233,894 232,200 432,725 440,712
Research, engineering and development expenses....... 11,921 11,040 22,518 21,464
----------- ----------- ----------- -----------
245,815 243,240 455,243 462,176
----------- ----------- ----------- -----------
Gross income........................................ 30,422 39,304 52,810 66,541
Selling, General and Administrative Expenses ............ 19,909 19,832 38,082 37,156
----------- ----------- ----------- -----------
Operating Income..................................... 10,513 19,472 14,728 29,385
----------- ----------- ----------- -----------
Other (Income) Expense:
Royalty and dividend income.......................... (132) (42) (421) (260)
Interest expense..................................... 3,588 3,202 6,561 6,158
Other, net........................................... (402) 1,463 452 4,066
----------- ----------- ----------- -----------
3,054 4,623 6,592 9,964
----------- ----------- ----------- -----------
Income before Taxes on Income........................... 7,459 14,849 8,136 19,421
Provision for Taxes on Income........................... 2,604 6,088 2,848 7,849
----------- ----------- ----------- -----------
Net Income........................................... $ 4,855 $ 8,761 $ 5,288 $ 11,572
=========== =========== =========== ===========
Earnings Per Common Share:
Basic................................................ $ 0.30 $ 0.52 $ 0.32 $ 0.69
=========== =========== =========== ===========
Diluted.............................................. $ 0.30 $ 0.52 $ 0.32 $ 0.68
=========== =========== =========== ===========
Weighted average shares outstanding (in thousands):
Basic................................................ 16,083 16,849 16,387 16,838
=========== =========== =========== ===========
Diluted.............................................. 16,087 16,926 16,397 16,907
=========== =========== =========== ===========
Dividends declared per share............................ $ 0.18 $ 0.17 $ 0.35 $ 0.34
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, JUNE 30,
1998 1998
----------------- -----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................... $ -- $ 1,625
Receivables, less allowances of $3,813 at December 31 and
$3,949 at June 30 (Note 4)............................................ 141,227 151,535
Inventories (Note 2).................................................... 61,727 61,139
Prepaid insurance, taxes, etc........................................... 32,727 25,319
-------------- -------------
Total current assets................................................. 235,681 239,618
Property, Plant and Equipment, at cost..................................... 664,672 624,188
Less - Accumulated depreciation.......................................... (314,853) (293,836)
-------------- -------------
349,819 330,352
Goodwill, net.............................................................. 78,995 63,617
Other Assets............................................................... 58,905 50,659
-------------- -------------
$ 723,400 $ 684,246
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term notes payable................................................. $ 21,871 $ 14,994
Current maturities of long-term debt..................................... 38,831 14,031
Accounts payable and accrued expenses.................................... 152,912 183,646
Dividend payable......................................................... 2,894 2,869
-------------- -------------
Total current liabilities............................................... 216,508 215,540
Long-term Debt, net of current maturities.................................. 142,941 92,457
Other Postretirement Benefits.............................................. 25,531 24,362
Deferred Income Taxes and Other Credits.................................... 57,590 51,715
Commitments and Contingent Liabilities (Note 3)
Shareholders' Equity:
Serial preferred shares, without par value, authorized 6,000,000 voting
And 6,000,000 non-voting shares, none issued.......................... -- --
Common shares, par value $1 per share; authorized 50,000,000 shares,
16,921,892 shares issued and 16,078,842 shares outstanding at December 31
and 16,877,693 shares issued and outstanding
At June 30............................................................ 16,922 16,878
Paid-in capital......................................................... 100,033 99,462
Common stock held in Treasury, 843,050 shares at cost................... (20,141) --
Retained earnings....................................................... 202,260 202,599
Accumulated other comprehensive income.................................. (18,244) (18,767)
-------------- -------------
Total shareholders' equity............................................. 280,830 300,172
-------------- -------------
$ 723,400 $ 684,246
============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
---------------------------------------
1998 1997
----------------- -----------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income ................................................................ $ 5,288 $ 11,572
Adjustments to reconcile net income to net cash provided by (used for)
Operating activities:
Depreciation and amortization........................................... 27,366 29,882
Deferred taxes and other credits........................................ 878 1,177
Effect of changes in foreign currency................................... (166) 1,680
Other .................................................................. (2,265) (1,447)
Net changes in assets and liabilities:
Receivables......................................................... 13,201 23,923
Inventories......................................................... (47) 2,681
Accounts payable and accrued expenses............................... (33,145) (29,309)
Other current assets and liabilities................................ (8,833) 438
------------- -------------
Net cash provided by operating activities...................... 2,277 40,597
Cash Flows from Investing Activities:
Purchase of property, plant and equipment, net.......................... (37,329) (32,281)
Investment in affiliates and nonconsolidated entities.................. (2,469) (107)
Cash paid for acquisitions.............................................. (19,450) --
------------- -------------
Net cash used by investing activities............................. (59,248) (32,388)
Cash Flows from Financing Activities:
Proceeds of long-term borrowings........................................ 88,415 127
Repayment of long-term borrowings ...................................... (13,865) (1,474)
Net increase (decrease) in short-term borrowings........................ 7,371 (5,676)
Stock repurchase........................................................ (20,141) --
Cash dividends.......................................................... (5,628) (5,729)
------------- --------------
Net cash provided by (used by) financing activities............... 56,152 (12,752)
Effect of exchange rate changes on cash.................................... (806) 345
------------- -------------
Net decrease in cash and cash equivalents.................................. (1,625) (4,198)
Cash and cash equivalents at the beginning of the period................... 1,625 6,972
------------- -------------
Cash and cash equivalents at the end of the period......................... $ -- $ 2,774
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
THE STANDARD PRODUCTS COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
-----------------------------------------
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared
by management and, in the opinion of management, contain all adjustments,
consisting of normal recurring adjustments, necessary to present fairly the
financial position of the Company as of December 31, 1998 and June 30, 1998, and
the results of its operations for the six months ended December 31, 1998 and
1997 and cash flows for the six months ended December 31, 1998 and 1997. The
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1998. Results for
interim periods are not necessarily indicative of those to be expected for the
year.
(2) INVENTORIES
Inventories are stated at the lower of cost or market. The majority of
domestic inventories are valued using the last-in, first-out (LIFO) method and
the remaining inventories are valued using the first-in, first-out (FIFO)
method. The major components of inventory are as follows:
<TABLE>
<CAPTION>
December 31, 1998 June 30, 1998
----------------- -------------
<S> <C> <C>
Raw materials............................................. $ 25,387 $ 24,898
Work-in-process and finished goods........................ 36,340 36,241
------------- -------------
Totals................................................ $ 61,727 $ 61,139
============= =============
</TABLE>
(3) COMMITMENTS AND CONTINGENCIES
At December 31, 1998, the Company was in compliance with these various
financial covenants. Under the most restrictive of the revised covenants of the
Company's various loan agreements, principally the Nationwide Senior Notes,
$34,555 of retained earnings were not restricted at December 31, 1998 for the
payment of dividends. Management expects that the Company will remain in
compliance with these financial covenants through the period ending December 31,
1999.
The Company and its subsidiaries are involved in certain legal actions
and claims. In the opinion of management, any liability that may ultimately be
incurred would not materially affect the financial position or results of
operations of the Company.
(4) ACCOUNTS RECEIVABLE SECURITIZATION
In September 1995, the Company and certain of its U.S. subsidiaries
entered into an agreement to sell, on an ongoing basis, all of their accounts
receivable to The Standard Products Funding Corporation (Funding Co.), a wholly
owned subsidiary of the Company. Accordingly, the Company and those
subsidiaries, irrevocably and without recourse, transferred all of their U.S.
dollar denominated trade accounts receivable (principally representing amounts
owed by original equipment customers in the U.S. automotive and related
industries) to the Funding Co. The Funding Co. has sold and, subject to certain
conditions, may from time to time sell an undivided interest in those
receivables to the Clipper Receivables Corporation. The Funding Co. is permitted
to receive advances of up to $50,000 for the sale of such undivided interest. At
December 31, 1998, $50,000 had been advanced to the Funding Company. This
agreement has been extended to November 2000.
6
<PAGE> 7
Proceeds from the sales of receivables have been used to reduce
outstanding borrowings under the Company's Revolving Credit Agreement and are
reflected as operating cash flows in the accompanying consolidated statement of
cash flows. Costs of the program, which primarily consist of the purchasers'
financing and administrative costs, have been classified as Selling, General and
Administrative Expenses in the accompanying consolidated statement of income.
The Company maintains an allowance for accounts receivable ($3,813 and
$3,949 at December 31, 1998 and June 30, 1998, respectively) based on the
expected collectibility of all trade accounts receivable, including receivables
sold.
(5) NEW ACCOUNTING STANDARDS
The FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This standard requires extensive disclosure
of operating segments based on the "management approach." This approach
organizes segments within a company for making operating decisions and assessing
performance. Reportable segments can be based on products and services,
geography, legal structure or any other manner in which management disaggregates
the company. This Statement requires reporting segment profit or loss, certain
specific revenue and expense items and segment assets. It also requires
reconciliations of total segment revenues, total segment profit or loss, total
segment assets and other amounts disclosed for segments to corresponding amounts
reported in the Consolidated Financial Statements. Restatement of comparative
information for earlier periods presented is required in the initial year of
application. Interim information is not required until the second year of
application, at which time comparative information is required.
The FASB has also issued SFAS No. 132, "Employer's Disclosures about
Pensions and Other Postretirement Benefits." This standard revises employers'
disclosures on pension and other postretirement benefit plans. The objective of
the statement is to standardize the disclosure requirements and report
additional information on changes in the benefit obligations and fair value of
plan assets.
SFAS Nos. 131 and 132 are effective for fiscal years beginning after
December 15, 1997.
The FASB also issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This standard provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. This standard is effective for fiscal years beginning after
June 15, 1999.
The Company has not determined the impact that the adoption of these
new standards will have on its Consolidated Financial Statements or disclosures.
(6) EARNINGS PER SHARE
The Company has adopted the provisions of SFAS No. 128, "Earnings per
Share." The information required by this pronouncement is presented on the face
of the Company's "Consolidated Statements of Operations" found on page 3 of this
document. A reconciliation of the numerators and denominators of the basic and
diluted earnings per share are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED DEC. 31, SIX MONTHS ENDED DEC. 31,
----------------------------------- ----------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $ 4,855 $ 8,761 $ 5,288 $ 11,572
------------- ------------- ------------- -------------
Basic:
Basic Shares 16,083 16,849 16,387 16,838
------------- ------------- ------------- -------------
Basic EPS $ 0.30 $ 0.52 $ 0.32 $ 0.69
============= ============= ============= =============
Diluted:
Basic Shares 16,083 16,849 16,387 16,838
Stock Options 4 77 10 69
------------- ------------- ------------- -------------
16,087 16,926 16,397 16,907
------------- ------------- ------------- -------------
Diluted EPS $ 0.30 $ 0.52 $ 0.32 $ 0.68
============= ============= ============= =============
</TABLE>
7
<PAGE> 8
(7) COMPREHENSIVE INCOME
Effective July 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which establishes standards for the display of
comprehensive income for financial statement purposes. Comprehensive income is
defined as all changes in a company's net assets except changes resulting from
transactions with shareholders. It differs from traditionally defined net income
in that certain items recorded in shareholders' equity become part of
comprehensive income.
Comprehensive income consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
--------------------------- ---------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income..................................... $ 4,855 $ 8,761 $ 5,288 $ 11,572
---------- ---------- ---------- ----------
Other comprehensive income:
Foreign currency translation (1,940) (547) 524 (145)
adjustment..........................
Minimum pension liability adjustment...... -- -- -- --
---------- ---------- ---------- ----------
Other comprehensive income..................... (1,940) (547) 524 (145)
---------- ---------- ---------- ----------
Comprehensive income........................... $ 2,915 $ 8,214 $ 5,812 $ 11,427
========== ========== ========== ==========
</TABLE>
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(1) RESULTS OF OPERATIONS
The Company's net sales for the second quarter of fiscal 1999 were
$276.2 million, a decrease of $6.3 million, or 2.2% compared to the record
levels of a year ago. Sales for the Company's Transportation Equipment segment
totaled $242.0 million for the second quarter of fiscal 1999 compared with
$248.7 million for the same period last year, a decrease of $6.7 million, or
2.7%. The overall reduction was primarily attributable to deteriorating economic
conditions in Brazil and lower volumes in North American automotive operations.
Sales for the Company's Tread Rubber segment increased 1.2% to $34.2 million.
This is attributable to additional revenue of $1.6 million from Oliver Rubber's
agreement with Michelin North America, Inc. to provide for the extrusion and
pressing of tread rubber for resale. This increase in sales was partially offset
by lower volumes for moldcure and custom mix rubber products totaling $1.3
million.
Sales for the Company's North American automotive operations decreased
to $139.3 million, a reduction of 6.7% or $10.1 million, from the same period
last year. The reduction was primarily attributable to volume decreases on key
platforms on which the Company had substantial content, including the Jeep(R)
Grand Cherokee and Plymouth/Dodge Neon and Dodge Stratus platforms. Volume
decreases on these vehicles totaled $10.8 million from prior year levels.
Translation losses related to a weaker Canadian dollar accounted for an
additional $5.3 million of the decrease. This was partially offset by volume
increases of $5.8 million on Ford's Cougar and Crown Victoria models and General
Motor's Silverado light truck platform. The Company's Brazilian subsidiary
reported a sales decrease of $13.0 million, or 62.4% over the prior year. The
decrease is a result of the downturn in the Brazilian economy that has resulted
in significantly reduced production by South American automobile manufacturers.
The production decline was caused by continuing deterioration in Brazilian
economic conditions, including extremely high interest rates, which has reduced
demand for high price items such as automobiles. These conditions appear likely
to continue for the remainder of fiscal year 1999 and the Company presently
anticipates a continuation of lower sales volumes and reduced earnings from its
Brazilian subsidiary for the remainder of the fiscal year. Automotive sales in
Europe increased $5.9 million, or 10.2% to $64.1 million, due primarily to
increased sales volumes in the United Kingdom, principally on the Opel Astra and
Honda Accord, totaling $4.5 million. The Company also benefited from currency
translations as a stronger French franc and British pound resulted in increased
sales of $2.6 million. These increases were partially offset by price reductions
of $0.6 million. Sales at the Company's Holm Industries subsidiary were up 43.5%
to $33.5 million, from the same period last year. This is primarily due to the
addition of OEM/Miller, which increased sales by $5.7 million, and strong
volumes for appliance sealing products, which reported increased revenues of
$2.7 million.
Based on published industry data, management believes that car and
light truck production in the United States and Canada increased by
approximately 3.2% during the quarter when compared to the same period in the
prior year. Car production increased by 3.9%, while light truck production
increased by approximately 2.5%. Certain key vehicles for which the Company
supplies components, such as the Chrysler Neon and Ford Escort, had
significantly reduced build rates during the quarter. This was only partially
offset by others such as the Ford Grand Marquis and Mustang, which experienced
substantial increases. Year-to-date car and light truck production in the United
States and Canada was flat compared to prior year levels with a 1.9% increase in
car production being offset by a 1.3% decline in light truck production.
For the first half of fiscal 1999, sales of the Transportation
Equipment segment were down $22.2 million to $439.9 million, or 4.8% below prior
year levels. Sales for the Company's North American automotive operations
decreased to $247.8 million, a reduction of 9.6% or $26.3 million. The reduction
was the result of volume decreases on platforms on which the Company had
significant content, including, the Jeep(R) Grand Cherokee, Plymouth/Dodge Neon
and General Motors Lumina/Monte Carlo. Translation losses related to a weaker
Canadian dollar accounted for $9.8 million of the decrease while price
reductions accounted for an additional $1.1 million of the decline. Volume
increases of $6.5 million on the Ford Cougar and Crown Victoria models partially
offset the above declines. Year-to-date, South American sales have decreased
$19.3 million to $21.2 million due to the Brazilian economic problems noted
above. These reductions were partially offset by increases in European
automotive operations and Holm Industries. Sales in Europe were up $8.5 million
to $113.9 million, an increase of
9
<PAGE> 10
8.0% from prior year levels. The improvement was due to new business totaling
$8.1 million and currency exchange gains of $3.5 million resulting from a
strengthened French franc and British pound. These gains were partially offset
by volume declines and price reductions on existing business. Holm Industries
sales grew 33.1% to $63.2 million as a result of the OEM/Miller acquisition and
strong demand from existing customers in the appliance industry.
Gross income for the Company's second quarter of fiscal 1999 decreased
$8.9 million to $30.4 million, or 11.0% of net sales, from $39.3 million, or
13.9% of net sales for the same period in fiscal 1998. Several factors led to
the decline in operating margins. These include the impact of the severe decline
of the Brazilian economy and launch costs on new platforms. In Brazil, the
Company took immediate and drastic cost-cutting measures, including reducing
staffing levels by 55 percent. While management believes its measures will help
its Brazilian operations achieve breakeven results in the second half of the
year, they did not take effect soon enough to have a significant impact on
results in this quarter. Reduced revenues for the quarter were not at a level
sufficient to enable the Company to recover the substantial fixed costs of the
Brazilian facility. The Company has also incurred approximately $5.1 million in
increased launch and other related costs on new product lines in the United
Kingdom and, to a lesser extent, several new platforms in North America. As in
the United States, European automakers have continued to seek ongoing price
givebacks on existing business. While the Company's low cost producer
initiatives have helped to improve efficiencies in Europe, social regulations
there have made it difficult for the Company to react quickly as it needs to
adapt it cost structures to current pricing requirements. Year-to-date gross
income is $52.8 million, a decrease of $13.7 million from fiscal 1998. This
represents 10.4% of net sales compared to 12.6% a year earlier. The Brazilian
economic downturn and European operating difficulties related to product
launches and manufacturing inefficiencies are the primary factors in the
decline.
The Company does not expect the current environment in Brazil to
improve for the rest of the fiscal year, and it does not expect pricing pressure
to ease in either its North American or European markets. As a result, the
Company must take further steps to bring its cost structure in line with
anticipated operating performance. In addition to continuing its low cost
producer initiatives, the Company is currently taking steps to reduce the level
of selling, general and administrative expenses, including the offering of a
voluntary early retirement program to certain qualified employees in the United
States, and is currently reviewing its capacity requirements on a global basis.
Research, engineering and development expenses for the second quarter
increased $0.9 million, or 8.0% to $11.9 million from the same period in fiscal
1998. The increase is primarily attributable to increased personnel costs
related to development programs targeted to enhance the Company's sealing system
production methods. Year-to-date expenses have increased by $1.1 million over
the prior year to $22.5 million, or 4.4% of net sales.
Selling, general and administrative expenses for the second quarter
were flat when compared to the same period a year ago, at $19.9 million.
Additional costs associated with the acquisition of OEM/Miller of $0.6 million
and depreciation charges of $0.3 million were offset by reduced personnel costs
of $0.8 million. Year-to-date costs have increased $0.9 million, to $38.1
million related primarily to an increased provision for doubtful accounts and
the addition of OEM/Miller. These charges were partially offset by lower
personnel costs.
Other income and expense totaled $6.6 million in expense for the first
half of fiscal 1998, a decrease of $3.4 million over the same period a year ago.
Approximately $2.6 million of this improvement is attributable to earnings at
NISCO, the Company's joint venture with Nishikawa Rubber Company of Japan. NISCO
returned to profitability in the second quarter earning $0.5 million. The
year-to-date loss at NISCO has narrowed to $0.4 million from $3.0 million a year
ago. The remainder of the increase is primarily due to gains on the disposition
of fixed assets. These improvements were partially offset by increased interest
expense as year-to-date costs have increased by $0.4 million due to increased
borrowing levels in North America and Europe. The increased borrowing results
largely from the Company's acquisition of OEM/Miller and its stock repurchase
program.
The Company's tax provision for the second quarter of fiscal 1999
reflects tax rate of 34.9%. This compares favorably with the prior year's
effective tax rate of 41.0%. This reduction is primarily attributable to the
utilization of U.S. tax credits. The year-to-date effective tax provision
reflects an expected rate of 35.0%.
10
<PAGE> 11
(2) FINANCIAL CONDITION
Cash provided by operations for the first half of fiscal 1999 totaled
$2.3 million. This represents a decrease from the same period in fiscal 1998 of
$38.3 million. The decrease is the result of several factors including accounts
receivable, prepaid items, accounts payable, and reduced net income. The change
in accounts receivable is directly attributable to the decline in sales levels
and associated collections when compared to prior year levels, while the change
in prepaids and accounts payable was due to timing of payments with suppliers.
Capital spending for the first six months of fiscal 1999 totaled $37.3
million, an increase of $5.0 million over the same period last year. The Company
expects capital spending in fiscal 1999 to approximate $65.0 million. This
includes capital required in connection with the addition of equipment at its
Mexican facility as it ramps up to full production, expenditures required in
support of the new General Motors Silverado and Sierra truck platforms, and the
upgrade of facilities in England related to the introduction of various new
platforms. The Company has also invested $19.5 million for acquisitions in the
first half of the current year and $2.5 million to its nonconsolidated
affiliates.
Cash generated from financing activities resulted in a net inflow of
$56.2 million for the first half of the fiscal year. The funds came from
borrowings under the Company's Revolving Credit Agreement and other short-term
credit lines. These funds were used to fund an acquisition, reacquire shares of
the Company's stock, provide for working capital, and pay dividends. At December
31, 1998, debt represented 42.0% of total capitalization compared with 28.8% at
June 30, 1998.
The Company has determined that the functional currency of its
Brazilian and Mexican subsidiaries is the U.S. dollar. Accordingly, the results
for these operations have been translated utilizing a remeasurement process
prescribed by Statement of Financial Accounting Standard ("SFAS") No. 52. The
criteria for determining highly inflationary status and the functional currency
of an operation are detailed in SFAS No. 52. The Company will continue to
translate its results using the remeasurement process until the criteria
supporting an U.S. dollar functional currency are no longer met.
(3) YEAR 2000
The "Year 2000" problem relates to computer systems that have time and
date-sensitive programs that were designed to read years beginning with "19,"
but may not properly recognize the year 2000. If a computer system or software
application used by the Company or a third party dealing with the Company fails
because of the inability of the system or application to properly read the year
"2000," the results could conceivably have a material adverse effect on the
Company.
The Company provided an extensive description of its Year 2000 plans
and progress to date as part of its Management Discussion and Analysis ("MD&A")
in its Form 10-K for the fiscal year ended June 30, 1998, which was filed in
September 1998. The Company continues to make progress on its plan in accordance
with the timetable described in that MD&A. Based on this progress, management
believes that a comprehensive contingency plan with respect to all of its
information technology and production processes is not necessary at this time.
However, as specific issues arise or fall slightly behind schedule, contingency
plans are being developed to solve these particular areas. Examples of potential
solutions include: stockpiling or re-sourcing of components and materials,
manual work arounds or flexible staffing arrangements. In addition, the Company
has not encountered any specific problems with any of its suppliers that would
require development of a contingency plan.
The Company believes that its program to monitor the compliance of its
suppliers with Year 2000 requirements will minimize the risks associated with
noncompliance. Management believes that the cost of Year 2000 compliance for its
information and production systems will not be material to its consolidated
results of operations and financial position.
Although the Company has made progress in identifying its Year 2000
problems, and believes this issue is not likely to pose a significant problem
for it, there can be no absolute assurance that the Company and all of its
vendors and suppliers will identify and remediate in a timely fashion all
potential Year 2000 issues.
11
<PAGE> 12
(4) CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR" UNDER THE PRIVATE
SECURITIES REFORM ACT OF 1995
Certain statements in this Management's Discussion and Analysis, the
attached Consolidated Financial Statements, in the Company's press releases and
in oral statements made by or with the approval of an authorized executive
officer of the Company, constitute "forward-looking statements," as that term is
defined under the Private Securities Litigation Reform Act of 1995. These may
include statements projecting, forecasting or estimating Company performance and
industry trends. The achievement of the projections, forecasts or estimates is
subject to certain risks and uncertainties. Actual results and events may differ
materially from those projected, forecasted or estimated. The applicable risks
and uncertainties include general economic and industry conditions that affect
all international businesses, as well as matters that are specific to the
Company and the markets it serves. In addition, please see the "Year 2000"
section for a description of the risks and uncertainties associated with this
issue.
General risks that may impact the achievement of such forecasts include
compliance with new laws and regulations; significant raw material price
fluctuations; currency exchange rate fluctuations; limits on repatriation of
funds; and political uncertainties. Specific risks to the Company include risk
of recession in the economies in which its products are sold, especially in
emerging markets where recent currency weakness may lead to recessionary
conditions; the concentration of a substantial percentage of the Company's sales
with a few major OEM customers; labor relations at the Company, its customers
and its suppliers; competition in pricing and new product development from
larger companies with substantial resources; and continued globalization of the
automotive supply base resulting in new competition in certain locations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
12
<PAGE> 13
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<S><C>
If incorporated by
Exhibit No. reference, documents
Under Reg. S-K Form 10-Q with which Exhibit
Item 601 Exhibit No. Description was previously filed
--------------- ---------- ------------------------ ----------------------
3 3a Second Amended and Restated
Articles of Incorporation of
The Standard Products Company
4 4a First Amendment Agreement among
The Standard Products Company,
Comerica Bank, NBD Bank,
KeyBank National Association,
The Bank of New York, Harris
Trust and Savings Bank, N.A., and
National City Bank, as Agent, Dated
December 10, 1998.
4 4b Rights Agreement (Filed with the SEC
on February 3, 1999
on Form 8-A File
Number 001-02917;
See Exhibit 1 therein)
4 4c Form of Right Certificate (Filed with the SEC
on February 3, 1999
on Form 8-A File
Number 001-02917;
See Exhibit 3 therein)
4 4d Summary of Rights to Purchase (Filed with the SEC
Preferred Shares on February 3, 1999
on Form 8-A File
Number 001-02917;
See Exhibit 4 therein)
27 27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
None.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE STANDARD PRODUCTS COMPANY
Dated: February 12, 1999 by /s/ Donald R. Sheley, Jr.
--------------------------------
Donald R. Sheley, Jr.
Vice President, Finance
Chief Financial Officer
/s/ Bernard J. Theisen
--------------------------------
Bernard J. Theisen
Corporate Controller
Principal Accounting Officer
14
<PAGE> 15
<TABLE>
<CAPTION>
If incorporated by
Exhibit No. reference, documents
Under Reg. S-K Form 10-Q with which Exhibit
Item 601 Exhibit No. Description was previously filed
--------------- ---------- ------------------------ ----------------------
<S> <C> <C> <C>
3 3a Second Amended and Restated
Articles of Incorporation of
The Standard Products Company
4 4a First Amendment Agreement among
The Standard Products Company,
Comerica Bank, NBD Bank,
KeyBank National Association,
The Bank of New York, Harris
Trust and Savings Bank, N.A., and
National City Bank, as Agent, Dated
December 10, 1998.
4 4b Rights Agreement (Filed with the SEC
on February 3, 1999
on Form 8-A File
Number 001-02917;
See Exhibit 1 therein)
4 4c Form of Right Certificate (Filed with the SEC
on February 3, 1999
on Form 8-A File
Number 001-02917;
See Exhibit 3 therein)
4 4d Summary of Rights to Purchase (Filed with the SEC
Preferred Shares on February 3, 1999
on Form 8-A File
Number 001-02917;
See Exhibit 4 therein)
27 27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 3A
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
THE STANDARD PRODUCTS COMPANY
FIRST: The name of said corporation shall be THE STANDARD
PRODUCTS COMPANY.
SECOND: The place in the State of Ohio where the principal
office of the corporation is to be located is in the City of Cleveland,
Cuyahoga County.
THIRD: The purpose or purposes for which the corporation is
formed are:
(a) To produce, manufacture, buy, sell and otherwise
deal in automobile specialties, parts and accessories, or any
of them.
(b) To manufacture, fabricate, process, buy, sell,
and otherwise deal in all kinds, forms, combinations and
products of iron, steel, wood and other metals and materials,
or any of them, and all or any articles consisting, or partly
consisting, of iron, steel, wood and other metals or
materials, or either, or any of them.
(c) To undertake, conduct, assist, promote and
participate in every kind of commercial, industrial,
manufacturing, mercantile or mining enterprise, business,
undertaking, venture, or operation in any state, territory,
dependency or colony of the United States, or its insular
possessions, or in the District of Columbia, or in any foreign
country.
(d) To acquire by purchase or otherwise, and to own,
hold, improve, develop, maintain, use, lease, sell, convey,
transfer, mortgage, guarantee, pledge, exchange or otherwise
deal in or dispose of real and personal property, tangible or
intangible, of any character whatsoever, including but not by
way of limitation, letters patent, patent rights, copyrights,
licenses and franchises, and any or all interests or rights
therein, without any limitation, to the extent that the same
may be permitted by law.
(e) To purchase, apply for, register, obtain or
otherwise acquire, and to hold, own, use, operate, develop and
introduce and sell, lease, assign, pledge or in any manner
dispose of and in any manner deal with and contract with
reference to applications for letters patent, patents,
<PAGE> 2
patent rights, patented processes, designs and similar rights,
copyrights, trade-marks, trade-names and similar rights
granted by the United States or any other Government or
country, or any interest therein, or any inventions, and to
acquire, own, use, or in any manner dispose of any and all
inventions, improvements and processes, labels, designs,
marks, brands or other rights, and to work, operate or develop
the same.
(f) To acquire by purchase, subscription or
otherwise, and to own, hold, invest in, sell, negotiate,
assign, exchange, dispose of, transfer, pledge, hypothecate,
mortgage, guarantee, deal in, lend or borrow money upon all
forms and kinds of securities, shares of stock, scrip, bonds,
coupons, debentures, mortgages, notes, commercial paper, trust
certificates, land trust certificates, certificates of
interest, certificates of deposit, certificates of
indebtedness, bills receivable, accounts receivable, contract
obligations, investments, warrants, and interim receipts and
certificates, issued or created by, or claims against any
person, firm, corporation, joint stock company, trust or
association, public or private, wherever or however organized
or created, or any nation, state, municipality or political
subdivision thereof, and to issue in exchange therefor in any
manner permitted by law, shares of the capital stock, bonds or
other obligations of this corporation; and while the holder or
owner of any of such securities or property, to possess and
exercise in respect thereof any and all rights, powers and
privileges of ownership, including all voting, consenting or
other rights in or in respect thereof.
(g) To promote, carry on or participate with others
in the organization, merger, consolidation, financing,
liquidation, realization or reorganization of corporations,
partnerships or associations engaged in any lawful business
enterprise; to become interested in or participate with
others, in any subscription, underwriting or syndicate, and to
enter into contracts, whether alone or with others, for the
purchase, issuance and sale of any securities, property or
rights.
(h) To make, enter into, perform and carry out any
arrangements, contracts and/or agreements of every kind, for
any lawful purpose, without limit as to amount or otherwise,
with any corporation, association, partnership, firm, trustee,
syndicate, individual and/or any political or governmental
division or subdivision, domestic or foreign; to obtain
therefrom or otherwise to acquire by purchase, lease,
assignment or otherwise, any powers,
-2-
<PAGE> 3
rights, privileges, immunities, franchises, guaranties, grants
and concessions; to hold, own, exercise, exploit, dispose of
and realize upon the same and to undertake, conduct, operate
or participate in any business dependent thereon.
(i) To borrow or acquire in any manner permitted by
law, money for any of the purposes of this corporation, with
or without security, and to mortgage, pledge, hypothecate,
encumber in any manner and/or place in the hands of trustees
as security for the payment of money borrowed, or the
fulfillment of any obligation of this corporation, any or all
property and assets which this corporation may own or acquire;
to draw, make, accept, endorse, discount and have discounted,
execute, issue and deal in every lawful manner in promissory
notes, bills of exchange, debentures, bonds, warrants, scrip,
drafts and other negotiable or non-negotiable instruments and
evidences of indebtedness, and to secure the payment of any
thereof together with interest thereon by pledge, mortgage,
conveyance or assignment of the whole or any part of the
property and assets of this corporation, whether at the time
owned or thereafter acquired.
(j) To lend money on time or call and with or without
collateral security, and to give credit to individuals, firms,
corporations, associations, or co-partnerships, and to
municipalities, states, nations or any political subdivisions
thereof, and to realize upon any property taken by the
corporation as collateral security for any loans.
(k) To cause or allow the legal title and/or any
estate, right or interest in any property, whether real,
personal, or mixed, owned, acquired, controlled or operated by
the corporation, to remain or to be vested or registered in
the name of or operated by any person, firm, association or
corporation, domestic or foreign, formed or to be formed,
either upon trust for or as agent or nominee of this
corporation or upon any other proper terms or conditions which
the Board of Directors may consider for the benefit of the
corporation.
(l) To purchase, hold, sell and transfer the shares
of its own capital stock, provided it shall not use its funds
or property for the purchase of its own shares of capital
stock when such use would cause any impairment of its capital
stock except as otherwise permitted in law, and provided
further that its own shares of capital stock belonging to it
shall not be voted upon, directly or indirectly.
-3-
<PAGE> 4
(m) To have one or more offices or plants, to carry
on and conduct all or any part of its operations and business,
without restriction or limitation as to amount, both within
and without the State of Ohio; and this corporation may
qualify under the laws of, be domiciled in, and conduct any or
all of its business in any City, State, Commonwealth,
District, Territory or Colony of the United States, and in any
or all foreign countries.
(n) To do any one or more of the acts and things
expressed in this Article THIRD either as principal or as
agent or representative for any other person, firm,
association, corporation, Municipality, County, State, body
politic, government or dependency thereof.
(o) In general to do any and all things herein set
forth, and in addition such other acts and things as are
incident or conducive to the attainment of the purposes of
this corporation, or any of them, to the same extent that
natural persons lawfully might or could do in any part of the
world, in so far as such acts and things are not inconsistent
with the provision of the laws of the State of Ohio; provided,
however, that nothing herein contained shall be construed as
including in the business and purposes of this corporation,
(1) the transacting of the business of banking or the
receiving of money on deposit except as agent pending
investment thereof for or on account of the principal, or (2)
the transaction or conduction of the business of a public
utility.
The objects and purposes specified in the foregoing clauses of this
Article THIRD shall be construed both as objects and powers, and the foregoing
enumeration of specified powers shall not be held to limit or restrict the
powers of the corporation, and are in furtherance of and in addition to, and not
in limitation of, the general powers conferred by the statutes of the State of
Ohio.
FOURTH: The authorized number of shares of the corporation is
37,000,000 consisting of 25,000,000 Common Shares, $1.00 par value (hereinafter
called "Common Shares"), 6,000,000 Voting Serial Preferred Shares, without par
value (hereinafter called "Voting Serial Preferred Shares"), and 6,000,000
Non-Voting Serial Preferred Shares, without par value (hereinafter called
"Non-Voting Serial Preferred Shares").
-4-
<PAGE> 5
DIVISION A
The Voting Serial Preferred Shares shall have the following express
terms:
SECTION 1. SERIES. The Voting Serial Preferred Shares may be
issued from time to time in one or more series. All shares of Voting
Serial Preferred Shares shall be of equal rank and shall be identical,
except in respect of the matters that may be fixed by the Board of
Directors as hereinafter provided, and each share of a series shall be
identical with all other shares of such series, except as to the dates
from which dividends shall accrue and be cumulative. All Voting Serial
Preferred Shares shall rank on a parity with and be identical to all
Non-Voting Serial Preferred Shares except in respect of (i) the matters
that may be fixed by the Board of Directors as provided in clauses (a)
through (i), both inclusive, of this Section and (ii) the voting rights
and provisions for consents relating to Voting Serial Preferred Shares
as fixed and determined by Section 5 of this Division. Subject to the
provisions of Sections 2 through 6, both inclusive, of this Division,
which provisions shall apply to all Voting Serial Preferred Shares, the
Board of Directors hereby is authorized to cause such shares to be
issued in one or more series and with respect to each such series to
determine and fix prior to the issuance thereof (and thereafter, to the
extent provided in clause (b) of this Section) the following:
(a) The designation of the series, which may be by
distinguishing number, letter or title;
(b) The authorized number of shares of the series,
which number the Board of Directors may (except where
otherwise provided in the creation of the series) increase or
decrease from time to time before or after the issuance
thereof (but not below the number of shares thereof then
outstanding);
(c) The dividend rate or rates of the series,
including the means by which such rates may be established;
(d) The date or dates from which dividends shall
accrue and be cumulative and the dates on which and the period
or periods for which dividends, if declared, shall be payable,
including the means by which such dates and periods may be
established;
(e) The redemption rights and price or prices, if
any, for shares of the series;
-5-
<PAGE> 6
(f) The terms and amount of the sinking fund, if any,
for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in
the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the corporation;
(h) Whether the shares of the series shall be
convertible into Common Shares or shares of any other class
and, if so, the conversion rate or rates or price or prices,
any adjustments thereof and all other terms and conditions
upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in
Subsection 5(c) of this Division) on the issuance of shares of
the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to time
amendments to the Amended Articles of Incorporation fixing, with respect to each
such series, the matters described in clauses (a) through (i), both inclusive,
of this Section and is authorized to take such actions with respect thereto as
may be required by law in order to effect such amendments.
SECTION 2. DIVIDENDS.
(a) The holders of Voting Serial Preferred Shares of
each series, in preference to the holders of Common Shares and
of any other class of shares ranking junior to the Voting
Serial Preferred Shares, shall be entitled to receive out of
any funds legally available for Voting Serial Preferred Shares
and Non-Voting Serial Preferred Shares, and when and as
declared by the Board of Directors, dividends in cash at the
rate or rates for such series fixed in accordance with the
provisions of Section 1 of this Division and no more, payable
on the dates fixed for such series. Such dividends shall
accrue and be cumulative, in the case of shares of each
particular series, from and after the date or dates fixed with
respect to such series. No dividends shall be paid upon or
declared or set apart for any series of the Voting Serial
Preferred Shares for any dividend period unless at the same
time (1) a like proportionate dividend for the dividend
periods terminating on the same or any earlier date, ratably
in proportion to the respective dividend rates fixed therefor,
shall have been paid upon or declared or set apart for all
Voting Serial Preferred Shares of all series then issued and
outstanding and entitled to receive such dividend and (2) the
dividends payable for the dividend periods terminating on the
same or any earlier
-6-
<PAGE> 7
date, ratably in proportion to the respective dividend rates
fixed therefor, shall have been paid upon or declared or set
apart for all Non-Voting Serial Preferred Shares of all series
then issued and outstanding and entitled to receive such
dividend.
(b) So long as any Voting Serial Preferred Shares
shall be outstanding no dividend, except a dividend payable in
Common Shares or other shares ranking junior to the Voting
Serial Preferred Shares, shall be paid or declared or any
distribution be made, except as aforesaid, in respect of the
Common Shares or any other shares ranking junior to the Voting
Serial Preferred Shares, nor shall any Common Shares or any
other shares ranking junior to the Voting Serial Preferred
Shares be purchased, retired or otherwise acquired by the
corporation, except out of the proceeds of the sale of Common
Shares or other shares of the corporation ranking junior to
the Voting Serial Preferred Shares received by the corporation
subsequent to the date of first issuance of Voting Serial
Preferred Shares of any series, unless:
(1) All accrued and unpaid dividends on
Voting Serial Preferred Shares, including the full
dividends for all current dividend periods, shall
have been declared and paid or a sum sufficient for
payment thereof set apart; and
(2) There shall be no arrearages with
respect to the redemption of Voting Serial Preferred
Shares of any series from any sinking fund provided
for shares of such series in accordance with the
provisions of Section 1 of this Division.
SECTION 3. REDEMPTION.
(a) Subject to the express terms of each series and
to the provisions of Subsection 5(c)(6) of this Division, the
corporation:
(1) May, from time to time at the option of
the Board of Directors, redeem all or any part of any
redeemable series of Voting Serial Preferred Shares
at the time outstanding at the applicable redemption
price for such series fixed in accordance with the
provisions of Section 1 of this Division; and
(2) Shall, from time to time, make such
redemptions of each series of Voting Serial Preferred
Shares as may be required to fulfill the requirements
of any sinking fund provided for shares of such
series
-7-
<PAGE> 8
at the applicable sinking fund redemption price fixed
in accordance with the provisions of Section 1 of
this Division;
and shall in each case pay all accrued and unpaid dividends to
the redemption date.
(b) (1) Notice of every such redemption shall be
mailed, postage prepaid, to the holders of record of
the Voting Serial Preferred Shares to be redeemed at
their respective addresses then appearing on the
books of the corporation, not less than 30 days nor
more than 60 days prior to the date fixed for such
redemption, or such other time prior thereto as the
Board of Directors shall fix for any series pursuant
to Section 1 of this Division prior to the issuance
thereof. At any time after notice as provided above
has been deposited in the mail, the corporation may
deposit the aggregate redemption price of Voting
Serial Preferred Shares to be redeemed, together with
accrued and unpaid dividends thereon to the
redemption date, with any bank or trust company in
Cleveland, Ohio, or New York, New York, having
capital and surplus of not less than $100,000,000,
named in such notice and direct that there be paid to
the respective holders of the Voting Serial Preferred
Shares so to be redeemed amounts equal to the
redemption price of the Voting Serial Preferred
Shares so to be redeemed, together with such accrued
and unpaid dividends thereon, on surrender of the
share certificate or certificates held by such
holders; and upon the deposit of such notice in the
mail and the making of such deposit of money with
such bank or trust company, such holders shall cease
to be shareholders with respect to such shares; and
from and after the time such notice shall have been
so deposited and such deposit of money shall have
been so made, such holders shall have no rights or
claim against the corporation with respect to such
shares, except only the right to receive such money
from such bank or trust company without interest or
to exercise before the redemption date any unexpired
privileges of conversion. In the event less than all
of the outstanding Voting Serial Preferred Shares are
to be redeemed, the corporation shall select by lot
the shares so to be redeemed in such manner as shall
be prescribed by the Board of Directors.
(2) If the holders of Voting Serial
Preferred Shares which have been called for
redemption shall not within six years after such
deposit claim the amount
-8-
<PAGE> 9
deposited for the redemption thereof, any such bank
or trust company shall, upon demand, pay over to the
corporation such unclaimed amounts and thereupon such
bank or trust company and the corporation shall be
relieved of all responsibility in respect thereof and
to such holders.
(c) Any Voting Serial Preferred Shares which are (1)
redeemed by the corporation pursuant to the provisions of this
Section, (2) purchased and delivered in satisfaction of any
sinking fund requirements provided for shares of such series,
(3) converted in accordance with the express terms thereof, or
(4) otherwise acquired by the corporation, shall resume the
status of authorized but unissued Voting Serial Preferred
Shares without serial designation.
SECTION 4. LIQUIDATION.
(a) (1) In the event of any voluntary or
involuntary liquidation, dissolution or winding up of
the affairs of the corporation, the holders of Voting
Serial Preferred Shares of any series shall be
entitled to receive in full out of the assets of the
corporation, including its capital, before any amount
shall be paid or distributed among the holders of the
Common Shares or any other shares ranking junior to
the Voting Serial Preferred Shares, the amounts fixed
with respect to shares of such series in accordance
with Section 1 of this Division, plus an amount equal
to all dividends accrued and unpaid thereon to the
date of payment of the amount due pursuant to such
liquidation, dissolution or winding up of the affairs
of the corporation. In the event the net assets of
the corporation legally available therefor are
insufficient to permit the payment upon all
outstanding Voting Serial Preferred Shares and
Non-Voting Serial Preferred Shares of the full
preferential amount to which they are respectively
entitled, then such net assets shall be distributed
ratably upon all outstanding Voting Serial Preferred
Shares and Non-Voting Serial Preferred Shares in
proportion to the full preferential amount to which
each such share is entitled.
(2) After payment to the holders of Voting
Serial Preferred Shares of the full preferential
amounts as aforesaid, the holders of Voting Serial
Preferred Shares, as such, shall have no right or
claim to any of the remaining assets of the
corporation.
-9-
<PAGE> 10
(b) The merger or consolidation of the corporation
into or with any other corporation, the merger of any other
corporation into it, or the sale, lease or conveyance of all
or substantially all the assets of the corporation, shall not
be deemed to be a dissolution, liquidation or winding up for
the purposes of this Section.
SECTION 5. VOTING.
(a) The holders of Voting Serial Preferred Shares
shall be entitled at all times to one vote for each share and,
except as otherwise provided in this Section or required by
law, the holders of Voting Serial Preferred Shares and the
holders of Common Shares shall vote together as a class on all
matters presented, subject, however, to the special voting
rights of the holders of Non-Voting Serial Preferred Shares as
provided in Section 5 of Division B hereof.
(b) (1) If, and so often as, the corporation
shall be in default in the payment of the equivalent
of the full dividends on any series of Voting Serial
Preferred Shares at the time outstanding, whether or
not earned or declared, for a number of dividend
payment periods (whether or not consecutive) which in
the aggregate contain at least 540 days, the holders
of Voting Serial Preferred Shares of all series,
voting separately as a class, shall be entitled to
elect, as herein provided, two members of the Board
of Directors of the corporation; provided, however,
that the holders of Voting Serial Preferred Shares
shall not have or exercise such special class voting
rights except at meetings of such shareholders for
the election of directors at which the holders of not
less than 50% of the outstanding Voting Serial
Preferred Shares of all series then outstanding are
present in person or by proxy; and provided further
that the special class voting rights provided for in
this paragraph when the same shall have become vested
shall remain so vested until all accrued and unpaid
dividends on the Voting Serial Preferred Shares of
all series then outstanding shall have been paid,
whereupon the holders of Voting Serial Preferred
Shares shall be divested of their special class
voting rights in respect of subsequent elections of
directors, subject to the revesting of such special
class voting rights in the event above specified in
this paragraph.
(2) In the event of default entitling the
holders of Voting Serial Preferred Shares to elect
two
-10-
<PAGE> 11
directors as specified in paragraph (1) of this
Subsection, a special meeting of such holders for the
purpose of electing such directors shall be called by
the Secretary of the corporation upon written request
of, or may be called by, the holders of record of at
least 10% of the Voting Serial Preferred Shares of
all series at the time outstanding, and notice
thereof shall be given in the same manner as that
required for the annual meeting of shareholders;
provided, however, that the corporation shall not be
required to call such special meeting if the annual
meeting of shareholders shall be called to be held
within 120 days after the date of receipt of the
foregoing written request from the holders of Voting
Serial Preferred Shares. At any meeting at which the
holders of Voting Serial Preferred Shares shall be
entitled to elect directors, the holders of 50% of
the Voting Serial Preferred Shares of all series at
the time outstanding, present in person or by proxy,
shall be sufficient to constitute a quorum, and the
vote of the holders of a majority of such shares so
present at any such meeting at which there shall be
such a quorum shall be sufficient to elect the
members of the Board of Directors which the holders
of Voting Serial Preferred Shares are entitled to
elect as herein provided. Notwithstanding any
provision of these Amended Articles of Incorporation
or the Code of Regulations of the corporation or any
action taken by the holders of any class of shares
fixing the number of directors of the corporation,
the two directors who may be elected by the holders
of Voting Serial Preferred Shares pursuant to this
Subsection shall serve in addition to any other
directors then in office or proposed to be elected
otherwise than pursuant to this Subsection. Nothing
in this Subsection shall prevent any change otherwise
permitted in the total number or classifications of
directors of the corporation nor require the
resignation of any director elected otherwise than
pursuant to this Subsection. Notwithstanding any
classification of the other directors of the
corporation, the two directors elected by the holders
of Voting Serial Preferred Shares shall be elected
annually for terms expiring at the next succeeding
annual meeting of shareholders.
(3) Upon any divesting of the special class
voting rights of the holders of the Voting Serial
Preferred Shares in respect of elections of directors
as provided in this Subsection, the terms of office
of all directors then in office elected by such
holders
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<PAGE> 12
shall terminate immediately thereupon. If the office
of any director elected by such holders voting as a
class becomes vacant by reason of death, resignation,
removal from office or otherwise, the remaining
director elected by such holders voting as a class
may elect a successor who shall hold office for the
unexpired term in respect of which such vacancy
occurred.
(c) The affirmative vote or consent of the holders of
at least two-thirds of the Voting Serial Preferred Shares at
the time outstanding, voting or consenting separately as a
class, given in person or by proxy either in writing or at a
meeting called for the purpose, shall be necessary to effect
any one or more of the following (but so far as the holders of
Voting Serial Preferred Shares are concerned, such action may
be effected with such vote or consent):
(1) The sale, lease or conveyance by the
corporation of all or substantially all of its
assets;
(2) The merger or consolidation of the
corporation into or with any other corporation or the
merger of any other corporation into it;
(3) The voluntary liquidation, dissolution
or winding up of the affairs of the corporation;
(4) Any amendment, alteration or repeal,
whether by merger, consolidation or otherwise, of any
of the provisions of the Amended Articles of
Incorporation or of the Code of Regulations of the
corporation which affects adversely the preferences
or voting or other rights of the holders of Voting
Serial Preferred Shares; provided, however, that for
the purpose of this paragraph only, neither the
amendment of the Amended Articles of Incorporation so
as to authorize, create or change the authorized or
outstanding number of Voting Serial Preferred Shares
or of any shares ranking on a parity with or junior
to the Voting Serial Preferred Shares nor the
amendment of the provisions of the Code of
Regulations so as to change the number or
classification of directors of the corporation shall
be deemed to affect adversely the preferences or
voting or other rights of the holders of Voting
Serial Preferred Shares; and provided further, that
if such amendment, alteration or repeal affects
adversely the preferences or voting or other rights
of one or more but not all series of Voting Serial
Preferred Shares at the time outstanding, only the
affirmative vote or consent of
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<PAGE> 13
the holders of at least two-thirds of the number of
the shares at the time outstanding of the series so
affected shall be required;
(5) The authorization, creation or the
increase in the authorized number of any shares, or
any security convertible into shares, in either case
ranking prior to the Voting Serial Preferred Shares;
or
(6) The purchase or redemption (for sinking
fund purposes or otherwise) of less than all of the
Voting Serial Preferred Shares then outstanding
except in accordance with a stock purchase offer made
to all holders of record of Voting Serial Preferred
Shares, unless all dividends on all Voting Serial
Preferred Shares then outstanding for all previous
dividend periods shall have been declared and paid or
funds therefor set apart and all accrued sinking fund
obligations applicable thereto shall have been
complied with.
SECTION 6. DEFINITIONS. For the purposes of this Division:
(a) Whenever reference is made to shares "ranking
prior to the Voting Serial Preferred Shares," such reference
shall mean and include all shares of the corporation in
respect of which the rights of the holders thereof as to the
payment of dividends or as to distributions in the event of a
voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the corporation are given preference over
the rights of the holders of Voting Serial Preferred Shares;
(b) Whenever reference is made to shares "on a parity
with the Voting Serial Preferred Shares," such reference shall
mean and include all Non-Voting Serial Preferred Shares and
all other shares of the corporation in respect of which the
rights of the holders thereof as to the payment of dividends
or as to distributions in the event of a voluntary or
involuntary liquidation, dissolution or winding up of the
affairs of the corporation rank equally (except as to the
amounts fixed therefor) with the rights of the holders of
Voting Serial Preferred Shares; and
(c) Whenever reference is made to shares "ranking
junior to the Voting Serial Preferred Shares," such reference
shall mean and include all shares of the corporation other
than those defined under Subsections (a)
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<PAGE> 14
and (b) of this Section as shares "ranking prior to" or "on a
parity with" the Voting Serial Preferred Shares.
DIVISION B
The Non-Voting Serial Preferred Shares shall have the following express
terms:
SECTION 1. SERIES. The Non-Voting Serial Preferred
Shares may be issued from time to time in one or more series.
All shares of Non-Voting Serial Preferred Shares shall be of
equal rank and shall be identical, except in respect of the
matters that may be fixed by the Board of Directors as
hereinafter provided, and each share of a series shall be
identical with all other shares of such series, except as to
the dates from which dividends shall accrue and be cumulative.
All Non-Voting Serial Preferred Shares shall rank on a parity
with and be identical to all Voting Serial Preferred Shares
except in respect of (i) the matters that may be fixed by the
Board of Directors as provided in clauses (a) through (i),
both inclusive, of this Section and (ii) the voting rights and
provisions for consents relating to Non-Voting Serial
Preferred Shares as fixed and determined by Section 5 of this
Division. Subject to the provisions of Sections 2 through 6,
both inclusive, of this Division, which provisions shall apply
to all Non-Voting Serial Preferred Shares, the Board of
Directors hereby is authorized to cause such shares to be
issued in one or more series and with respect to each such
series to determine and fix prior to the issuance thereof (and
thereafter, to the extent provided in clause (b) of this
Section) the following:
(a) The designation of the series, which may be by
distinguishing number, letter or title;
(b) The authorized number of shares of the series,
which number the Board of Directors may (except where
otherwise provided in the creation of the series) increase or
decrease from time to time before or after the issuance
thereof (but not below the number of shares thereof then
outstanding);
(c) The dividend rate or rates of the series,
including the means by which such rates may be established;
(d) The date or dates from which dividends shall
accrue and be cumulative and the dates on which and the period
or periods for which dividends, if declared, shall be payable,
including the means by which such dates and periods may be
established;
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<PAGE> 15
(e) The redemption rights and price or prices, if
any, for shares of the series;
(f) The terms and amount of the sinking fund, if any,
for the purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in
the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the corporation;
(h) Whether the shares of the series shall be
convertible into Common Shares or shares of any other class
and, if so, the conversion rate or rates or price or prices,
any adjustments thereof and all other terms and conditions
upon which such conversion may be made; and
(i) Restrictions (in addition to those set forth in
Subsection 5(c) of this Division) on the issuance of shares of
the same series or of any other class or series.
The Board of Directors is authorized to adopt from time to
time amendments to the Amended Articles of Incorporation fixing, with
respect to each such series, the matters described in clauses (a)
through (i), both inclusive, of this Section and is authorized to take
such actions with respect thereto as may be required by law in order to
effect such amendments.
SECTION 2. DIVIDENDS.
(a) The holders of Non-Voting Serial Preferred Shares
of each series, in preference to the holders of Common Shares
and of any other class of shares ranking junior to the
Non-Voting Serial Preferred Shares, shall be entitled to
receive out of any funds legally available for Non-Voting
Serial Preferred Shares and Voting Serial Preferred Shares,
and when and as declared by the Board of Directors, dividends
in cash at the rate or rates for such series fixed in
accordance with the provisions of Section 1 of this Division
and no more, payable on the dates fixed for such series. Such
dividends shall accrue and be cumulative, in the case of
shares of each particular series, from and after the date or
dates fixed with respect to such series. No dividends shall be
paid upon or declared or set apart for any series of the
Non-Voting Serial Preferred Shares for any dividend period
unless at the same time (1) a like proportionate dividend for
the dividend periods terminating on the same or any earlier
date, ratably in proportion to the respective annual dividend
rates fixed therefor, shall have been paid upon or declared or
set apart for all Non-Voting Serial Preferred
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<PAGE> 16
Shares of all series then issued and outstanding and entitled
to receive such dividend and (2) the dividends payable for the
dividend periods terminating on the same or any earlier date,
ratably in proportion to the respective dividend rates fixed
therefor, shall have been paid upon or declared or set apart
for all Voting Serial Preferred Shares of all series then
issued and outstanding and entitled to receive such dividend.
(b) So long as any Non-Voting Serial Preferred Shares
shall be outstanding no dividend, except a dividend payable in
Common Shares or other shares ranking junior to the Non-Voting
Serial Preferred Shares, shall be paid or declared or any
distribution be made, except as aforesaid, in respect of the
Common Shares or any other shares ranking junior to the
Non-Voting Serial Preferred Shares, nor shall any Common
Shares or any other shares ranking junior to the Non-Voting
Serial Preferred Shares be purchased, retired or otherwise
acquired by the corporation, except out of the proceeds of the
sale of Common Shares or other shares of the corporation
ranking junior to the Non-Voting Serial Preferred Shares
received by the corporation subsequent to the date of first
issuance of Non-Voting Serial Preferred Shares of any series,
unless:
(1) All accrued and unpaid dividends on
Non-Voting Serial Preferred Shares, including the
full dividends for all current dividend periods,
shall have been declared and paid or a sum sufficient
for payment thereof set apart; and
(2) There shall be no arrearages with
respect to the redemption of Non-Voting Serial
Preferred Shares of any series from any sinking fund
provided for shares of such series in accordance with
the provisions of Section 1 of this Division.
SECTION 3. REDEMPTION.
(a) Subject to the express terms of each series and
the provisions of Subsection 5(c)(3) of this Division, the
corporation:
(1) May, from time to time at the option of
the Board of Directors, redeem all or any part of any
redeemable series of Non-Voting Serial Preferred
Shares at the time outstanding at the applicable
redemption price for such series fixed in accordance
with the provisions of Section 1 of this Division;
and
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<PAGE> 17
(2) Shall, from time to time, make such
redemptions of each series of Non-Voting Serial
Preferred Shares as may be required to fulfill the
requirements of any sinking fund provided for shares
of such series at the applicable sinking fund
redemption price fixed in accordance with the
provisions of Section 1 of this Division;
and shall in each case pay all accrued and unpaid dividends to
the redemption date.
(b) (1) Notice of every such redemption shall be
mailed, postage prepaid, to the holders of record of
the Non-Voting Serial Preferred Shares to be redeemed
at their respective addresses then appearing on the
books of the corporation, not less than 30 days nor
more than 60 days prior to the date fixed for such
redemption, or such other time prior thereto as the
Board of Directors shall fix for any series pursuant
to Section 1 of this Division prior to the issuance
thereof. At any time after notice as provided above
has been deposited in the mail, the corporation may
deposit the aggregate redemption price of Non-Voting
Serial Preferred Shares to be redeemed, together with
accrued and unpaid dividends thereon to the
redemption date, with any bank or trust company in
Cleveland, Ohio, or New York, New York, having
capital and surplus of not less than $100,000,000,
named in such notice and direct that there be paid to
the respective holders of the Non-Voting Serial
Preferred Shares so to be redeemed amounts equal to
the redemption price of the Non-Voting Serial
Preferred Shares so to be redeemed, together with
such accrued and unpaid dividends thereon, on
surrender of the share certificate or certificates
held by such holders; and upon the deposit of such
notice in the mail and the making of such deposit of
money with such bank or trust company, such holders
shall cease to be shareholders with respect to such
shares; and from and after the time such notice shall
have been so deposited and such deposit of money
shall have been so made, such holders shall have no
rights or claim against the corporation with respect
to such shares, except only the right to receive such
money from such bank or trust company without
interest or to exercise before the redemption date
any unexpired privileges of conversion. In the event
less than all of the outstanding Non-Voting Serial
Preferred Shares are to be redeemed, the corporation
shall select by lot the shares so to be redeemed in
such manner as shall be prescribed by the Board of
Directors.
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<PAGE> 18
(2) If the holders of Non-Voting Serial
Preferred Shares which have been called for
redemption shall not within six years after such
deposit claim the amount deposited for the redemption
thereof, any such bank or trust company shall, upon
demand, pay over to the corporation such unclaimed
amounts and thereupon such bank or trust company and
the corporation shall be relieved of all
responsibility in respect thereof and to such
holders.
(c) Any Non-Voting Serial Preferred Shares which are
(1) redeemed by the corporation pursuant to the provisions of
this Section, (2) purchased and delivered in satisfaction of
any sinking fund requirements provided for shares of such
series, (3) converted in accordance with the express terms
thereof, or (4) otherwise acquired by the corporation, shall
resume the status of authorized but unissued Non-Voting Serial
Preferred Shares without serial designation.
SECTION 4. LIQUIDATION.
(a) (1) In the event of any voluntary or
involuntary liquidation, dissolution or winding up of
the affairs of the corporation, the holders of
Non-Voting Serial Preferred Shares of any series
shall be entitled to receive in full out of the
assets of the corporation, including its capital,
before any amount shall be paid or distributed among
the holders of the Common Shares or any other shares
ranking junior to the Non-Voting Serial Preferred
Shares, the amounts fixed with respect to shares of
such series in accordance with Section 1 of this
Division, plus an amount equal to all dividends
accrued and unpaid thereon to the date of payment of
the amount due pursuant to such liquidation,
dissolution or winding up of the affairs of the
corporation. In the event the net assets of the
corporation legally available therefor are
insufficient to permit the payment upon all
outstanding Non-Voting Serial Preferred Shares and
Voting Serial Preferred Shares of the full
preferential amount to which they are respectively
entitled, then such net assets shall be distributed
ratably upon all outstanding Non-Voting Serial
Preferred Shares and Voting Serial Preferred Shares
in proportion to the full preferential amount to
which each such share is entitled.
(2) After payment to the holders of
Non-Voting Serial Preferred Shares of the full
preferential amounts as aforesaid, the holders of
Non-Voting Serial
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<PAGE> 19
Preferred Shares, as such, shall have no right or
claim to any of the remaining assets of the
corporation.
(b) The merger or consolidation of the corporation
into or with any other corporation, the merger of any other
corporation into it, or the sale, lease or conveyance of all
or substantially all the assets of the corporation, shall not
be deemed to be a dissolution, liquidation or winding up for
the purposes of this Section.
SECTION 5. VOTING.
(a) The holders of Non-Voting Serial Preferred Shares
shall have no voting rights, except as provided in this
Section or required by law.
(b) (1) If, and so often as, the corporation
shall be in default in the payment of the equivalent
of the full dividends on any series of Non-Voting
Serial Preferred Shares at the time outstanding,
whether or not earned or declared, for a number of
dividend payment periods (whether or not consecutive)
which in the aggregate contain at least 540 days, the
holders of Non-Voting Serial Preferred Shares of all
series, voting separately as a class, shall be
entitled to elect, as herein provided, two members of
the Board of Directors of the corporation; provided,
however, that the holders of Non-Voting Serial
Preferred Shares shall not have or exercise such
special class voting rights except at meetings of
such shareholders for the election of directors at
which the holders of not less than 50% of the
outstanding Non-Voting Serial Preferred Shares of all
series then outstanding are present in person or by
proxy; and provided further that the special class
voting rights provided for in this paragraph when the
same shall have become vested shall remain so vested
until all accrued and unpaid dividends on the
Non-Voting Serial Preferred Shares of all series then
outstanding shall have been paid, whereupon the
holders of Non-Voting Serial Preferred Shares shall
be divested of their special class voting rights in
respect of subsequent elections of directors, subject
to the revesting of such special class voting rights
in the event above specified in this paragraph.
(2) In the event of default entitling the
holders of Non-Voting Serial Preferred Shares to
elect two directors as specified in paragraph (1) of
this Subsection, a special meeting of such holders
for the
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purpose of electing such directors shall be called by
the Secretary of the corporation upon written request
of, or may be called by, the holders of record of at
least 10% of the Non-Voting Serial Preferred Shares
of all series at the time outstanding, and notice
thereof shall be given in the same manner as that
required for the annual meeting of shareholders;
provided, however, that the corporation shall not be
required to call such special meeting if the annual
meeting of shareholders shall be called to be held
within 120 days after the date of receipt of the
foregoing written request from the holders of
Non-Voting Serial Preferred Shares. At any meeting at
which the holders of Non-Voting Serial Preferred
Shares shall be entitled to elect directors, the
holders of 50% of the Non-Voting Serial Preferred
Shares of all series at the time outstanding, present
in person or by proxy, shall be sufficient to
constitute a quorum, and the vote of the holders of a
majority of such shares so present at any such
meeting at which there shall be such a quorum shall
be sufficient to elect the members of the Board of
Directors which the holders of Non-Voting Serial
Preferred Shares are entitled to elect as herein
provided. Notwithstanding any provision of these
Amended Articles of Incorporation or the Code of
Regulations of the corporation or any action taken by
the holders of any class of shares fixing the number
of directors of the corporation, the two directors
who may be elected by the holders of Non-Voting
Serial Preferred Shares pursuant to this Subsection
shall serve in addition to any other directors then
in office or proposed to be elected otherwise than
pursuant to this Subsection. Nothing in this
Subsection shall prevent any change otherwise
permitted in the total number of or classifications
of directors of the corporation nor require the
resignation of any director elected otherwise than
pursuant to this Subsection. Notwithstanding any
classification of the other directors of the
corporation, the two directors elected by the holders
of Non-Voting Serial Preferred Shares shall be
elected annually for terms expiring at the next
succeeding annual meeting of shareholders.
(3) Upon any divesting of the special class
voting rights of the holders of the Non-Voting Serial
Preferred Shares in respect of elections of directors
as provided in this Subsection, the terms of office
of all directors then in office elected by such
holders shall terminate immediately thereupon. If the
office of any director elected by such holders voting
as a class becomes vacant by reason of death,
resignation, removal from office or otherwise, the
remaining director elected by such holders voting as
a
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class may elect a successor who shall hold office for
the unexpired term in respect of which such vacancy
occurred.
(c) The affirmative vote or consent of the holders of
at least two-thirds of the Non-Voting Serial Preferred Shares
at the time outstanding, voting or consenting separately as a
class, given in person or by proxy either in writing or at a
meeting called for the purpose, shall be necessary to effect
any one or more of the following (but so far as the holders of
Non-Voting Serial Preferred Shares are concerned, such action
may be effected with such vote or consent):
(1) Any amendment, alteration or repeal,
whether by merger, consolidation or otherwise, of any
of the provisions of the Amended Articles of
Incorporation or of the Code of Regulations of the
corporation which affects adversely the preferences
or voting or other rights of the holders of
Non-Voting Serial Preferred Shares; provided,
however, neither the amendment of the Amended
Articles of Incorporation so as to authorize, create
or change the authorized or outstanding number of
Non-Voting Serial Preferred Shares or of any shares
ranking on a parity with or junior to the Non-Voting
Serial Preferred Shares nor the amendment of the
provisions of the Code of Regulations so as to change
the number or classification of directors of the
corporation shall be deemed to affect adversely the
preferences or voting or other rights of the holders
of Non-Voting Serial Preferred Shares; and provided
further, that if such amendment, alteration or repeal
affects adversely the preferences or voting or other
rights of one or more but not all series of
Non-Voting Serial Preferred Shares at the time
outstanding, only the affirmative vote or consent of
the holders of at least two-thirds of the number of
the shares at the time outstanding of the series so
affected shall be required;
(2) The authorization, creation or the
increase in the authorized number of any shares, or
any security convertible into shares, in either case
ranking prior to the Non-Voting Serial Preferred
Shares; or
(3) The purchase or redemption (for sinking
fund purposes or otherwise) of less than all of the
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Non-Voting Serial Preferred Shares then outstanding
except in accordance with a stock purchase offer made
to all holders of record of Non-Voting Serial
Preferred Shares, unless all dividends on all
Non-Voting Serial Preferred Shares then outstanding
for all previous dividend periods shall have been
declared and paid or funds therefor set apart and all
accrued sinking fund obligations applicable thereto
shall have been complied with.
SECTION 6. DEFINITIONS. For the purposes of this Division:
(a) Whenever reference is made to shares "ranking
prior to the Non-Voting Serial Preferred Shares," such
reference shall mean and include all shares of the corporation
in respect of which the rights of the holders thereof as to
the payment of dividends or as to distributions in the event
of a voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the corporation are given
preference over the rights of the holders of Non-Voting Serial
Preferred Shares;
(b) Whenever reference is made to shares "on a parity
with the Non-Voting Serial Preferred Shares," such reference
shall mean and include all Voting Serial Preferred Shares and
all other shares of the corporation in respect of which the
rights of the holders thereof as to the payment of dividends
or as to distributions in the event of a voluntary or
involuntary liquidation, dissolution or winding up of the
affairs of the corporation rank equally (except as to the
amounts fixed therefor) with the rights of the holders of
Non-Voting Serial Preferred Shares; and
(c) Whenever reference is made to shares "ranking
junior to the Non-Voting Serial Preferred Shares," such
reference shall mean and include all shares of the corporation
other than those defined under Subsections (a) and (b) of this
Section as shares "ranking prior to" or "on a parity with" the
Non-Voting Serial Preferred Shares.
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DIVISION C
The Common Shares shall have the following express terms:
The Common Shares shall be subject to the express terms of the
Voting Serial Preferred Shares and any series thereof and to the
express terms of the Non-Voting Serial Preferred Shares and any series
thereof. Each Common Share shall be equal to every other Common Share
and the holders thereof shall be entitled to one vote for each Common
Share on all matters presented.
FIFTH: In furtherance and not in limitation of the general
powers conferred by the laws of Ohio and the purposes herein set forth, and only
for the purpose of defining, limiting and regulating the exercise of authority
of the corporation and of the directors and shareholders and creating and
defining rights and privileges of the shareholders among themselves, it is
expressly provided:
(a) The purpose for which the corporation is formed
may be substantially changed in the manner provided by law.
(b) The Articles of Incorporation of the corporation
may be amended at any time after subscriptions to shares have
been received, by the affirmative vote of the holders of
shares entitling them to exercise a majority of the voting
power of the corporation on such proposal.
(c) Upon any reduction of the stated capital of the
corporation, and upon any distribution to shareholders of
excess assets remaining after any such reduction of stated
capital, any action required or permitted by the shareholders
shall be on affirmative vote of the holders of a majority of
such shares.
(d) The corporation may purchase its own shares to
the extent of the surplus of the aggregate of its assets over
the aggregate of its liabilities plus stated capital when
authorized by the Board of Directors without further corporate
action.
(e) The corporation may, by action taken at any
meeting of its Board of Directors, sell, lease, exchange or
otherwise dispose of all or substantially all of its property
and assets, including its good will, in any lawful manner, as
the Board of Directors may deem expedient, when and as
authorized by the affirmative vote of holders of shares
entitling them to exercise a majority of the voting power on
any such proposal.
(f) The corporation may wind up its affairs and
dissolve by resolution adopted by the vote cast in person
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<PAGE> 24
or by proxy by the holders of shares entitling them to
exercise a majority of the voting power upon such proposal.
(g) Unless these Amended Articles of Incorporation
otherwise provide, the affirmative vote or consent of the
holders of shares entitling them to exercise a majority of the
voting power of the corporation shall determine any matter or
proposal in each case in which the statutes of the State of
Ohio provide that the vote or consent of holders of shares
entitling them to exercise a designated proportion more than a
majority of the voting power of the corporation be required on
any such matter or proposal, except that in order to amend,
alter, change or repeal Article SEVENTH of these Amended
Articles of Incorporation or the provisions of this paragraph
(g) of Article FIFTH dealing with the amendment, alteration,
change or repeal of Article SEVENTH, the affirmative vote of
the holders of record of 75 percent of the shares having
voting power with respect to any such proposal shall be
required.
(h) No holder of shares of the corporation of any
class shall be entitled as such, as a matter of right, to
subscribe for or purchase shares of any class, now or
hereafter authorized or to purchase or subscribe for
securities convertible into or exchangeable for shares of the
corporation or to which shall be attached or appertain any
warrants or rights entitling the holder thereof to subscribe
for or purchase shares except such rights of subscription or
purchase, if any, at such price or prices and upon such terms
and conditions as the Board of Directors in its discretion
from time to time may determine.
SIXTH: These Second Amended and Restated Articles of
Incorporation shall supersede and take the place of the heretofore existing
Amended and Restated Articles of Incorporation and all amendments thereto.
SEVENTH:
(a) If any person, together with its affiliates and
associates as defined from time to time under the Rules of the
Securities and Exchange Commission, beneficially owns (as so
defined) in the aggregate 20% or more of the outstanding
Common Shares of the corporation and attempts to effect or
effects:
(i) any merger or consolidation of the corporation or
subsidiary with or into such person,
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(ii) any sale, lease, exchange, transfer or other
disposition, including without limitation, a mortgage
or any other security device, of all or substantially
all the assets of the corporation (including any
voting securities of a subsidiary), or of a
subsidiary, to such person,
(iii) any merger or consolidation of such person with or
into the corporation or a subsidiary,
(iv) any sale, lease, exchange, transfer or other
disposition of all or substantially all of the assets
of such person to the corporation or a subsidiary,
(v) the issuance of any securities of the corporation or
a subsidiary to such person,
(vi) any recapitalization that would have the effect of
increasing the voting power of such person, or
(vii) any agreement, contract or other arrangement
providing for any of the transactions described
herein,
the consideration per share to be received by holders of
Common Shares of the corporation as a result of such
transaction shall not be less than the highest per share
price, adjusted for any share split, share dividend or
recapitalization or other capital distribution, paid by such
person in obtaining any of its holdings of the corporation's
Common Shares unless
1. a majority of the directors of the corporation who
were directors immediately prior to the time that
such person acquired 20% or more of the Company's
outstanding Common Shares approves such transaction,
or
2. the proposed transaction receives the affirmative
vote of the holders of record of 75% of the voting
power including shares held by such person and the
affirmative vote of the holders of a majority of the
voting power excluding shares held by such person.
(b) For the purpose of this Article SEVENTH:
(i) a person shall be any individual or any corporation,
partnership or other entity.
(ii) beneficial ownership shall include any Common Shares
of the corporation a person, or affiliate or
associate thereof, has the right to acquire pursuant
to any
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<PAGE> 26
agreement, or upon exercise of conversion rights,
warrants or options or otherwise.
EIGHTH: No shareholder of the corporation may cumulate his
voting power in the election of directors.
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<PAGE> 27
AMENDMENT
TO
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
THE STANDARD PRODUCTS COMPANY
The first paragraph of Article FOURTH of the Company's Second
Amended and Restated Articles of Incorporation is deleted in its entirety and
the following substituted therefor:
FOURTH: The authorized number of shares of the corporation is
62,000,000, consisting of 50,000,000 Common Shares, $1.00 par value (hereinafter
called "Common Shares"), 6,000,000 Voting Serial Preferred Shares, without par
value (hereinafter called "Voting Serial Preferred Shares"), and 6,000,000
Non-Voting Serial Preferred Shares, without par value (hereinafter called
"Non-Voting Serial Preferred Shares.").
-27-
<PAGE> 28
CERTIFICATE OF AMENDMENT
TO THE
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
THE STANDARD PRODUCTS COMPANY
Theodore K. Zampetis, President, and Richard N. Jacobson,
Secretary, of The Standard Products Company, an Ohio corporation (the
"Company"), do hereby certify that at a meeting of the Board of Directors of the
Company held on January 26, 1999, the following resolution to amend the Second
Amended and Restated Articles of Incorporation, as amended, of the Company was
adopted pursuant to the authority granted by Section 1701.70(B)(1) of the Ohio
Revised Code:
RESOLVED, that the Second Amended and Restated Articles of
Incorporation, as amended, of the Company be, and they hereby are, amended by
adding at the end of Division B of Article FOURTH a new Section 7 that reads as
follows:
SECTION 7. SERIES A NON-VOTING SERIAL PREFERRED SHARES.
(a) Designation and Amount. Of the 6,000,000 authorized
Non-Voting Serial Preferred Shares, 1,000,000 are designated as a series
designated as "Series A Non-Voting Serial Preferred Shares" (the "Series A
Preferred Shares"). The Series A Preferred Shares have the express terms set
forth in this Division as being applicable to all Non-Voting Serial Preferred
Shares as a class and, in addition, the following express terms applicable to
all Series A Preferred Shares as a series of Preferred Shares. The number of
Series A Preferred Shares may be increased or decreased by resolution of the
Board of Directors and by the filing of a certificate of amendment pursuant to
the provisions of the General Corporation Law of the State of Ohio stating that
such increase or reduction has been so authorized; however, no decrease shall
reduce the number of Series A Preferred Shares to a number less than that of the
Series A Preferred Shares then outstanding plus the number of Series A Preferred
Shares issuable upon exercise of outstanding rights, options or warrants or upon
conversion of outstanding securities issued by the Company.
(b) Dividends and Distributions.
(1)(i) Subject to the rights of the holders of any series of
preferred shares (or any similar shares) ranking prior to the Series A
Preferred Shares with respect to dividends, the holders of Series A
Preferred Shares, in preference to the holders of Common Shares and of
any other junior shares, will be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the fifteenth day
of
-28-
<PAGE> 29
March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing
on the first Quarterly Dividend Payment Date after the first issuance
of a Series A Preferred Share or fraction thereof, in an amount per
share (rounded to the nearest cent) equal to the greater of (a) $1.00
or (b) subject to the provisions for adjustment hereinafter set forth,
1,000 times the aggregate per share amount of all cash dividends, and
1,000 times the aggregate per share amount (payable in kind) of all
noncash dividends or other distributions other than a dividend payable
in Common Shares or a subdivision of the outstanding Common Shares (by
reclassification or otherwise), declared on the Common Shares after the
immediately preceding Quarterly Dividend Payment Date, or, with respect
to the first Quarterly Dividend Payment Date, after the first issuance
of any Series A Preferred Share or fraction thereof. The multiple of
cash and noncash dividends declared on the Common Shares to which
holders of the Series A Preferred Shares are entitled, which is 1,000
initially but which will be adjusted from time to time as hereinafter
provided, is hereinafter referred to as the "Dividend Multiple." If the
Company at any time after January 26, 1999 (the "Rights Declaration
Date"): (i) declares or pays any dividend on the Common Shares payable
in Common Shares, or (ii) effects a subdivision or combination or
consolidation of the outstanding Common Shares (by reclassification or
otherwise than by payment of a dividend in Common Shares) into a
greater or lesser number of Common Shares, then in each such case the
Dividend Multiple thereafter applicable to the determination of the
amount of dividends that holders of Series A Preferred Shares are
entitled to receive will be the Dividend Multiple applicable
immediately prior to that event multiplied by a fraction, the numerator
of which is the number of Common Shares outstanding immediately after
that event and the denominator of which is the number of Common Shares
that were outstanding immediately prior to that event.
(ii) Notwithstanding anything else contained in this paragraph
(1), the Company shall, out of funds legally available for that
purpose, declare a dividend or distribution on the Series A Preferred
Shares as provided in this paragraph (1) immediately after it declares
a dividend or distribution on the Common Shares (other than a dividend
payable in Common Shares); but if no dividend or distribution has been
declared on the Common Shares during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1.00 per share on the Series A Preferred
Shares shall nevertheless accrue on such subsequent Quarterly Dividend
Payment Date.
(2) Dividends will begin to accrue and be cumulative on
outstanding Series A Preferred Shares from the Quarterly Dividend
-29-
<PAGE> 30
Payment Date next preceding the date of issue of such Series A Preferred Shares,
unless the date of issue of such shares is prior to the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such shares
will begin to accrue from the date of issue of such shares, or unless the date
of issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of Series A Preferred Shares entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends will begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends will not
bear interest. Dividends paid on the Series A Preferred Shares in an amount less
than the total amount of such dividends at the time accrued and payable on such
shares will be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix in accordance
with applicable law a record date for the determination of holders of Series A
Preferred Shares entitled to receive payment of a dividend or distribution
declared thereon, which record date will be not more than such number of days
prior to the date fixed for the payment thereof as may be allowed by applicable
law.
(c) Reacquired Shares. Any Series A Preferred Shares purchased
or otherwise acquired by the Company in any manner whatsoever will be retired
and canceled promptly after the acquisition thereof. All such shares will upon
their cancellation become authorized but unissued preferred shares and may be
reissued as part of a new series of Series A Non-Voting Serial Preferred Shares
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
(d) Liquidation, Dissolution or Winding Up. Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the Company,
no distribution may be made (x) to the holders of shares ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Shares unless, prior thereto, the holders of Series A Preferred Shares
shall have received an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
plus an amount equal to the greater of (1) $1,000.00 per share or (2) an
aggregate amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 1,000 times the aggregate amount to be distributed per share
to holders of Common Shares, or (y) to the holders of shares ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Shares, except distributions made ratably on the Series A
Preferred Shares and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. If the Company at any time after the
Rights Declaration Date (i) declares or pays any dividend on Common Shares
payable in Common
-30-
<PAGE> 31
Shares, or (ii) effects a subdivision or combination or consolidation of the
outstanding Common Shares (by reclassification or otherwise than by payment of a
dividend in Common Shares) into a greater or lesser number of Common Shares,
then in each such case the aggregate amount per share to which holders of Series
A Preferred Shares were entitled immediately prior to such event under clause
(x) of the preceding sentence will be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of Common Shares outstanding
immediately after such event and the denominator of which is the number of
Common Shares that were outstanding immediately prior to such event.
Neither the consolidation of nor merging of the Company with
or into any other corporation or corporations, nor the sale or other transfer of
all or substantially all of the assets of the Company, will be considered to be
a liquidation, dissolution or winding up of the Company within the meaning of
this paragraph (d).
(e) Consolidation, Merger, etc. If the Company shall enter
into any consolidation, merger, combination or other transaction in which the
Common Shares are exchanged for or changed into other shares, stock or
securities, cash or any other property, then in any such case the Series A
Preferred Shares will at the same time be similarly exchanged or changed in an
amount per share (subject to the provision for adjustment hereinafter set forth)
equal to 1,000 times the aggregate amount of shares, stock, securities, or other
property, as the case may be, into which or for which each Common Share is
changed or exchanged, plus accrued and unpaid dividends, if any, payable with
respect to the Series A Preferred Shares. If the Company at any time after the
Rights Declaration Date (i) declares or pays any dividend on Common Shares
payable in Common Shares, or (ii) effects a subdivision or combination or
consolidation of the outstanding Common Shares (by reclassification or otherwise
than by payment of a dividend in Common Shares) into a greater or lesser number
of Common Shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of Series A Preferred Shares
will be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of Common Shares outstanding immediately after such event
and the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
(f) Redemption. The Series A Preferred Shares are not
redeemable, but the foregoing does not limit the ability of the Company to
purchase or otherwise deal in the Series A Preferred Shares to the extent
otherwise permitted hereby and by law.
(g) Amendment. The Second Amended Articles of Incorporation of
the Company, as amended, may not be amended in any manner that would materially
alter or change the powers, preferences or special rights of the Series A
Preferred Shares so as to affect
-31-
<PAGE> 32
them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding Series A Preferred Shares, voting separately as a
class.
(h) Fractional Shares. Series A Preferred Shares may be issued
in whole shares or in any fraction of a share that is one one-thousandth
(1/1,000th) of a share or any integral multiple of such fraction, which will
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and have
the benefit of all other rights of holders of Series A Preferred Shares. In lieu
of fractional shares, the Company may elect to make a cash payment as provided
in that certain Rights Agreement dated as of January 26, 1999, between the
Company and National City Bank, a national banking association, as rights agent,
for fractions of a share smaller than one one-thousandth (1/1,000th) of a share
or any integral multiple thereof.
IN WITNESS WHEREOF, we have executed this instrument in one or
more counterparts as of January 28, 1999.
THE STANDARD PRODUCTS
COMPANY, an Ohio corporation
/s/ Theodore K. Zampetis
-------------------------------
Theodore K. Zampetis, President
/s/ Richard N. Jacobson
-------------------------------
Richard N. Jacobson, Secretary
Articles of Incorporation
-32-
<PAGE> 1
EXHIBIT 4a
FIRST AMENDMENT AGREEMENT
This First Amendment Agreement is made as of the 10th day of December,
1998, by and among THE STANDARD PRODUCTS COMPANY, an Ohio corporation
("Borrower"), NATIONAL CITY BANK, as agent ("Agent"), and the banking
institutions named in Schedule 1 to the Credit Agreement, as defined herein (the
"Banks"):
WHEREAS, Borrower, Agent and the Banks are parties to a certain Credit
Agreement dated as of September 26, 1997, as it may from time to time be
amended, restated or otherwise modified (the "Credit Agreement");
WHEREAS, Borrower, Agent and the Banks desire to amend the Credit
Agreement to modify the net worth financial covenant and by modifying certain
other provisions thereof; and
WHEREAS, each term used herein shall be defined in accordance with the
Credit Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein and for other valuable considerations, Borrower, Agent and the
Banks agree as follows:
1. The Credit Agreement is hereby amended by deleting Section 5.7(a)
in its entirety and by inserting in place thereof the following:
(a) NET WORTH. Borrower shall not suffer or permit its Consolidated
Net Worth at any time, based upon Borrower's financial statements for
the most recent fiscal quarter, to fall below the minimum amount
required, which minimum amount required shall be One Hundred Sixty
Million Dollars ($160,000,000) on the Closing Date through June 29,
1998, with such minimum amount required to be positively increased by
the Increase Amount on June 30, 1998, and by an additional Increase
Amount on each successive June 30 thereafter; provided, however, for
purposes of calculating Consolidated Net Worth for this Subsection
5.7(a), the following shall be added to such calculation: (i) Fifteen
Million Dollars ($15,000,000) of goodwill reported by Borrower in
connection with the acquisition by Borrower of the assets of OEM/Miller
Corporation, and (ii) an amount equal to the actual amount paid by
Borrower in connection with the repurchase by Borrower from time to
time from and after September 26, 1997, of Borrower's common shares, in
an amount not to exceed Thirty-Five Million Dollars ($35,000,000). As
used herein, the term "Increase Amount" shall mean an amount equal to
fifty percent (50%) of Borrower's Consolidated Net Earnings (with no
deduction for losses) for the fiscal year then ended.
2. Borrower hereby represents and warrants to Agent and the Banks that
(a) Borrower has the corporate power and authority to execute and deliver this
First Amendment Agreement; (b) the official executing this First Amendment
Agreement has been duly authorized to execute and deliver the same and bind
Borrower with respect to the provisions hereof; (c) the
<PAGE> 2
execution and delivery hereof by Borrower and the performance and observance by
Borrower of the provisions hereof do not violate or conflict with the
organizational documents of Borrower or any law applicable to Borrower or result
in a breach of any provision of or constitute a default under any other
agreement, instrument or document binding upon or enforceable against Borrower;
(d) no Event of Default exists under the Credit Agreement, nor will any occur
immediately after the execution and delivery of the First Amendment Agreement or
by the performance or observance of any provision hereof; (e) Borrower does not
have any claim or offset against, or defense or counterclaim to, any of
Borrower's obligations or liabilities under the Credit Agreement or any Related
Writing, and Borrower and each Subsidiary hereby waives and releases Agent and
each of the Banks, and their respective directors, officers, employees,
attorneys, affiliates and subsidiaries, from any and all such claims, offsets,
defenses and counterclaims of which Borrower is aware, such waiver and release
being with full knowledge and understanding of the circumstances and effect
thereof and after having consulted legal counsel with respect thereto; and (f)
this First Amendment Agreement constitutes a valid and binding obligation of
Borrower in every respect, enforceable in accordance with its terms.
3. Each reference that is made in the Credit Agreement or any other
writing shall hereafter be construed as a reference to the Credit Agreement as
amended hereby. Except as herein otherwise specifically provided, all provisions
of the Credit Agreement shall remain in full force and effect and be unaffected
hereby.
4. This First Amendment Agreement may be executed in any number of
counterparts by different parties hereto in separate counterparts and by
facsimile signature, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
5. The rights and obligations of all parties hereto shall be governed
by the laws of the State of Ohio.
[The remainder of this page is intentionally blank.]
2
<PAGE> 3
6. JURY TRIAL WAIVER. BORROWER, AGENT AND EACH OF THE BANKS WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, BETWEEN BORROWER, AGENT AND THE BANKS, OR ANY
THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
Address: 2401 South Gulley Road THE STANDARD PRODUCTS COMPANY
Dearborn, Michigan 48124
Attention: Mr. Charles Nagy By: /s/ Charles Nagy
Treasurer ---------------------------
Treasurer
---------------------
Address: National City Bank Building NATIONAL CITY BANK
1900 East Ninth Street, 10th Floor As a Bank and as Agent
Cleveland, Ohio 44114-3484
Attention: Ms. Marybeth S. Howe By: /s/ Marybeth S. Howe
Senior Vice President ---------------------------
Senior Vice President
---------------------
Address: 500 Woodward Ave. COMERICA BANK
Detroit, Michigan 48226-3265
Attention: Mr. Michael Shea By: /s/ Michael T. Shea
Vice President ---------------------------
Vice President
---------------------
Address: 611 Woodward Ave., 2nd Floor NBD BANK
Detroit, Michigan 48226
Attention: Ms. Tess Kalil By: /s/ Mary Lu D. Cramer
Vice President ---------------------------
Vice President
---------------------
[Signatures continued on next page]
3
<PAGE> 4
Address: 127 Public Square KEYBANK NATIONAL ASSOCIATION
Cleveland, Ohio 44114
Attn: Mr. J.T. Taylor By: /s/ J. T. Taylor
Vice President ---------------------------
Vice President
---------------------
Address: One Wall Street, 22nd Floor THE BANK OF NEW YORK
New York, New York 10286
Attn: Mr. William M. Barnum, Jr. By: /s/ William Barnum
Vice President ---------------------------
Vice President
---------------------
Address: 111 West Monroe Street HARRIS TRUST AND SAVINGS BANK
10th Floor, West
Chicago, Illinois 60603
Attn: Mr. Kirby Law By: /s/ Kirby M. Law
Vice President ---------------------------
Vice President
---------------------
Address: 100 Federal Street BANKBOSTON, N.A.
Boston, Massachusetts 02110
Attn: Mr. Rob MacElhiney By: /s/ Robert W. MacElhiney
Vice President ---------------------------
Vice President
---------------------
4
<PAGE> 5
GUARANTOR ACKNOWLEDGMENT
Each of the undersigned acknowledges and agrees (i) to remain bound by
the terms and conditions of the Guaranty of Payment of Debt and the other Loan
Documents executed and delivered by each of the undersigned to Agent for the
benefit of the Banks, and (ii) that the liability of each of the undersigned
pursuant to such Guaranty of Payment of Debt or other Loan Documents shall
continue and remain in full force and effect. Each of the undersigned hereby
consents to Borrower's execution of the First Amendment Agreement and further
agrees that Agent and the Banks may rely on this acknowledgment in entering into
the First Amendment Agreement.
IN WITNESS WHEREOF, the foregoing acknowledgment has been executed and
delivered as of December 10, 1998.
Address: 215 Oneta Street OLIVER RUBBER CORPORATION
Athens, Georgia 30613
By: /s/ Donald R. Sheley, Jr.
---------------------------
Assistant Treasurer
--------------------
Address: 995 South Gardner Street HOLM INDUSTRIES, INC.
Scottsburg, Indiana 47170
By: /s/ Charles Nagy
---------------------------
Assistant Treasurer
---------------------
5
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 145,040
<ALLOWANCES> 3,813
<INVENTORY> 61,727
<CURRENT-ASSETS> 235,681
<PP&E> 664,672
<DEPRECIATION> 314,853
<TOTAL-ASSETS> 723,400
<CURRENT-LIABILITIES> 216,508
<BONDS> 142,941
0
0
<COMMON> 16,922
<OTHER-SE> 263,908
<TOTAL-LIABILITY-AND-EQUITY> 723,400
<SALES> 276,237
<TOTAL-REVENUES> 276,237
<CGS> 245,815
<TOTAL-COSTS> 265,724
<OTHER-EXPENSES> (534)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,588
<INCOME-PRETAX> 7,459
<INCOME-TAX> 2,604
<INCOME-CONTINUING> 4,855
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,855
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
