<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -- EXCHANGE ACT OF 1934 for the quarterly period ended: March 31, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -- EXCHANGE ACT OF 1934
Commission File Number 333-41939
STELLEX TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3971931
(State of Incorporation) (IRS Employer Identification No.)
680 Fifth Avenue, 8th Floor
New York, New York 10019
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (212) 931-5333
Stellex Industries, Inc., 1430 Broadway, 13th Floor, New York, New York, 10018
------------------------------------------------------------------------------
(Former name and former address)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of May 1, 1999, the number of shares outstanding of the registrant's Common
Stock, no par value, was 1,000 shares. There is no trading market for the Common
Stock. Accordingly, the aggregate market value of the Common Stock held by
non-affiliates of the registrant is not determinable.
================================================================================
<PAGE>
ITEM 1: Financial Statements
STELLEX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................................ $ 4,280 $ 1,405
Account receivables, net ......................................... 28,804 28,452
Inventories ...................................................... 65,838 58,329
Prepaid and other assets ......................................... 5,303 3,200
Deferred income taxes ............................................ 3,403 3,318
--------- ---------
Total current assets ............................................. 107,628 94,704
Property, plant and equipment, net ................................... 56,958 53,871
Goodwill, net ........................................................ 69,284 60,786
Other intangible assets, net ......................................... 51,775 52,552
Deferred financing costs, net ........................................ 8,733 9,033
Other assets ......................................................... 5,642 2,284
--------- ---------
Total assets ..................................................... $ 300,020 $ 273,230
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term obligations ......................... $ 5,513 $ 5,533
Accounts payable ................................................. 10,353 11,639
Accrued liabilities .............................................. 20,100 17,797
Advance billings and customer deposits ........................... 24,811 252
--------- ---------
Total current liabilities ........................................ 60,777 35,221
9 1/2% senior subordinated notes ..................................... 100,000 100,000
Long-term obligations, less current portion .......................... 107,777 106,201
Deferred employee benefits ........................................... 2,009 1,952
Deferred income taxes ................................................ 19,933 20,029
--------- ---------
Total liabilities ................................................ 290,496 263,403
--------- ---------
Stockholders' equity:
Common stock, no par value, 1,000 shares authorized and outstanding .. 50 50
Preferred stock, no par value: 500 shares authorized,
229 shares issued and outstanding ................................ 11,450 11,450
Additional paid-in capital ........................................... 3,054 3,054
Accumulated deficit .................................................. (5,030) (4,727)
--------- ---------
Total stockholders' equity ....................................... 9,524 9,827
--------- ---------
Total liabilities and stockholders' equity ....................... $ 300,020 $ 273,230
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
2
<PAGE>
STELLEX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1999 1998
---- ----
Sales ......................................... $ 49,613 $ 27,899
Cost of sales ................................. 36,422 21,951
-------- --------
Gross profit .................................. 13,191 5,948
Operating expenses:
Selling, general and administrative ........... 5,325 4,128
Research and development ...................... 1,676 940
Amortization of intangibles ................... 1,293 642
-------- --------
Total operating expenses .................. 8,294 5,710
-------- --------
Income from operations ........................ 4,897 238
-------- --------
Other income (expense):
Interest income ........................... 52 32
Interest expense .......................... (4,816) (2,770)
Other ..................................... (3) (63)
-------- --------
Total other expense ....................... (4,767) (2,801)
-------- --------
Income (loss) before provision for income taxes 130 (2,563)
Provision (benefit) for income taxes .......... 69 (772)
-------- --------
Net income (loss) ............................. 61 (1,791)
Preferred stock dividends ..................... 364 286
-------- --------
Loss applicable to common stockholders ........ $ (303) $ (2,077)
======== ========
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
STELLEX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months
March 31,
1999 1998
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 61 $ (1,791)
Reconciliation to net cash provided by (used in) operating activities:
Depreciation and amortization 3,572 2,327
Amortization of step-up in inventory 168 1,057
Gain on sale of property (6) (3)
Deferred income taxes (151) (930)
Stock compensation charge -- 715
Changes in assets and liabilities (net of acquired assets and assumed
liabilities):
Accounts receivable 1,582 (2,535)
Inventories (1,418) (169)
Prepaid and other assets (5,352) 2,428
Accounts payable (2,137) 829
Accrued liabilities 788 64
Advance billings and customer deposits 21,352 (927)
-------- --------
Net cash provided by operating activities 18,459 1,065
-------- --------
Cash Flows from Investing Activities:
Additions to fixed assets (1,958) (1,183)
Proceeds from sale of fixed assets 16 24
Acquisition related costs (538) --
Net cash used in acquisitions (14,660) --
-------- --------
Net cash used in investing activities (17,140) (1,159)
-------- --------
Cash Flows from Financing Activities:
Repayment under revolving line of credit (13,500) --
Proceeds from acquisition line of credit used in connection
with Phoenix Acquisition 16,000 --
Repayment of term loans (900) --
Repayments under capital lease obligations (24) (2)
Repayment of debt and notes payable (20) (15)
-------- --------
Net cash provided by (used in) financing activities 1,556 (17)
-------- --------
Net increase (decrease) in cash and cash equivalents 2,875 (111)
Cash and cash equivalents, beginning of period 1,405 3,304
-------- --------
Cash and cash equivalents, end of period $ 4,280 $ 3,193
======== ========
</TABLE>
4
<PAGE>
STELLEX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
------- -------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 1,836 $ 53
Assets acquired and liabilities assumed in connection with the Phoenix
Acquisition:
Fair value of assets acquired $22,123 $-
Fair value of liabilities assumed 5,221 --
------- -------
Cash paid 16,902 --
Less financing fees and expenses 538 --
Less cash acquired 1,704 --
------- -------
Net cash used for business acquisition $14,660 $ --
======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements
5
<PAGE>
STELLEX TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Description of Business
Formation of Stellex - On September 5, 1997, Stellex Holdings Corp. was
incorporated as a Delaware corporation, which on October 23, 1997 amended its
certificate of incorporation to change its name to Stellex Industries, Inc.
Subsequently, on April 6, 1999, the certificate of incorporation was amended to
change the Company's name to Stellex Technologies, Inc. ("Stellex" or the
"Company"). On September 12, 1997, Stellex issued 1,000 shares of its common
stock to Greystoke Capital Management Limited LDC in exchange for (i) 8,010
shares of common and 84 shares of Series A preferred stock of KII Holding Corp.
("KII Holding"), (ii) $50,000 cash and (iii) the assumption of a $4,000,000
promissory note. KII Holding had previously been formed to effect the
acquisition of Kleinert Industries and subsidiaries ("Kleinert") on July 1,
1997, as described more fully below. As a result of the September 12, 1997
transaction, Stellex acquired an 80.1% interest in KII Holding; the remaining
equity interests were held by certain members of Kleinert management, until
December 1998 when Stellex acquired the remaining equity interests. On April 6,
1999 the certificate of incorporation of KII Holding was amended to change its
name to Stellex Aerospace, Inc.
Kleinert Acquisition - On July 1, 1997, KII Holding through a wholly-owned
subsidiary (KII Acquisition Corp., a Delaware corporation) acquired all of the
outstanding capital stock of Kleinert from Kleinert Industries Holding AG. The
acquisition was accounted for using the purchase method of accounting, and,
accordingly, the net purchase price of approximately $26.5 million (including
the assumption of approximately $2.6 million of indebtedness and the issuance to
the seller of a note for $1.75 million) was allocated to the assets purchased
and the liabilities assumed based upon the fair values at the date of
acquisition. There was no excess purchase price over the fair values of the net
assets acquired in connection with the acquisition. Kleinert's corporate name
was subsequently changed to Stellex Aerospace ("Stellex Aerospace"). Kleinert
commenced operations in 1988, and provided management services for its
wholly-owned subsidiaries - Paragon Precision Products ("Paragon"), General
Inspection Laboratories, Inc. ("GIL"), Scanning Electron Analysis Laboratories,
Inc. ("SEAL"), and Bandy Machining International ("Bandy"). On April 8, 1999,
KII Acquisition Corp. was merged into KII Holding. During April 1999, the
articles of incorporation of Paragon and Bandy were amended to change their
names to Stellex Paragon Precision, Inc. and Stellex Bandy Machining, Inc.,
respectively.
Paragon specializes in the manufacture of precision aerospace components. GIL
provides non-destructive testing services for inspecting critical parts and
manufactured components. SEAL specializes in materials analysis and problem
solving for government and industry. Bandy manufactures precision hinges, door
panels and hinge assemblies for both aerospace and industrial applications.
TSMD Acquisition - On October 31, 1997, Stellex, through a wholly-owned
subsidiary, TSMD Acquisition Corp., purchased 100% of the outstanding common
stock of Stellex Microwave Systems, Inc. ("Stellex Microwave"), which comprised
the operations of the Tactical Subsystems and Microwave Devices Sectors ("TSMD")
of the Watkins-Johnson Company ("Watkins-Johnson"), for a net purchase price of
approximately $82.1 million. The acquisition was accounted for using the
purchase method of accounting with estimated fair value being assigned to the
assets acquired and liabilities assumed. The purchase was financed primarily
with the net proceeds from an offering of senior subordinated notes totaling
$92.3 million. Stellex Microwave designs, markets and manufactures a broad range
of microwave devices, modular subsystems and electronic equipment operating over
the RF and microwave frequency bands for sale primarily for military and
aerospace applications. On April 6, 1999, the certificate of incorporation of
TSMD Acquisition Corp. was amended to change its name to Stellex Electronics,
Inc.
Monitor Aerospace Acquisition - On May 29, 1998, Stellex acquired Monitor
Aerospace Corporation ("Monitor"), a leading aerospace subcontractor engaged in
the manufacture and assembly of precision-machined structural aircraft
components and assemblies for tolerance critical applications, located in
Amityville, New York. Monitor has two wholly-owned subsidiaries, Monitor
Aerospace International Corporation and Monitor Marine Products, Inc. On April
13, 1999, these wholly-owned subsidiaries were merged into Monitor, who then
subsequently amended its certificate of incorporation to change its name to
Stellex Monitor Aerospace, Inc.
6
<PAGE>
The purchase price for Monitor was approximately $95.0 million including the
assumption of approximately $26.5 million of debt and excluding transaction and
financing fees and expenses of approximately $5.9 million. The Monitor
Acquisition was financed through (i) borrowings of $95.7 million under the
Company's senior secured credit financing and (ii) Monitor's issuance of a
promissory note to certain former Monitor shareholders in the principal amount
of $5.2 million. Borrowings under the senior secured credit facility were
comprised of terms loans in an aggregate principal amount of $90.0 million and
revolving loans of $17.0 million, of which $11.3 million was used to refinance
the existing Company revolver and supply near term working capital requirements.
Phoenix Acquisition - On March 2, 1999, Stellex, through its subsidiary, Stellex
Microwave, acquired all of the outstanding common stock of Phoenix Microwave
Corporation ("Phoenix"), a leading supplier of RF and microwave components,
based in Telford, Pennsylvania. Phoenix operates together with Stellex Microwave
in the RF/microwave component and sub-assembly market for commercial, wireless,
military and space applications. The aggregate purchase price for the
acquisition of Phoenix was $14.7 million of cash plus contingent purchase price
of up to $1.0 million payable by March 2000 based on cash flow performance
thresholds. The acquisition was financed with an acquisition term loan drawn
under the Company's senior secured credit facility. The Company is in the
process of completing a purchase accounting valuation of the assets acquired and
liabilities assumed in its recent acquisition of Phoenix. This valuation is not
yet complete and, therefore, the balance sheet of Phoenix as of March 31, 1999
represents management's best estimates which may be subject to adjustment.
Pro forma results of operations as if the Monitor and Phoenix acquisition had
occurred as of January 1, 1998 are as follows:
Three Months Ended
March 31,
1999 1998
---- ----
Net sales $52,368 $53,808
Gross profit 14,391 13,116
Net income (loss) 321 (907)
2. Basis of Presentation
Stellex is a holding company that has no operations or assets separate from its
investments in its subsidiaries. The consolidated balance sheet at March 31,
1999 and the consolidated statements of operations and consolidated statements
of cash flows for the period ended March 31, 1999 include the accounts of
Stellex Microwave and its subsidiary, Phoenix, and Stellex Aerostructures, Inc.
("Stellex Aerostructures") (formerly known as Stellex Aerospace Holdings, Inc.).
Stellex Aerostructures consists of two wholly-owned subsidiaries, Monitor and
KII Holding. KII Holding consists of one wholly-owned subsidiary, Stellex
Aerospace. Phoenix's results of operations presented herein are from March 2,
1999, the date of acquisition, to March 31, 1999. The comparative financial
statements for the quarter ended March 31, 1998 include the accounts of KII
Holding and Stellex Microwave. All significant intercompany transactions have
been eliminated in consolidation.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and do not include the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation, which were of a normal and
recurring nature, have been included. The results of operations for any interim
period are not necessarily indicative of the results for the year. These
unaudited consolidated financial statements should be read in conjunction with
the consolidated financial statements and related notes included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998 and
the Company's Reports on Form 8-K dated March 2, 1999 and April 22, 1999.
7
<PAGE>
3. Inventories
Inventories consisted of the following (in thousands):
March 31, December 31,
1999 1998
------- -------
(Unaudited)
Raw materials $16,594 $15,470
Work-in-process 29,562 25,782
Finished goods 9,781 7,994
Production tooling 9,901 9,083
------- -------
Total $65,838 $58,329
======= =======
4. Long-Term Obligations
Long-term obligations consisted of the following (in thousands):
March 31, December 31,
1999 1998
-------- --------
(Unaudited)
Term Loan A $ 27,750 28,500
Term Loan B 59,550 59,700
Revolving line of credit -- 13,500
Acquisition line of credit 16,000 --
7.785% Mortgage notes payable 2,545 2,561
Sellers Notes Payable 6,930 6,930
Obligations under capital leases 422 446
Other long term obligations 93 97
-------- --------
113,290 111,734
Less current portion 5,513 5,533
-------- --------
Total $107,777 $106,201
======== ========
5. Commitments and Contingencies
The Company is involved from time to time in lawsuits that arise in the normal
course of business. The Company actively and vigorously defends all lawsuits.
Management believes that there are no lawsuits that will have a material affect
on the Company's financial position.
6. Subsequent Event
On April 22, 1999, the Company, through Stellex Precision Machining, Inc., a
wholly-owned subsidiary of Stellex Aerostructures, acquired the assets of the
aerostructures business of Precision Machining, Inc. and certain related
entities ("Precision") for an aggregate purchase price of approximately $86.0
million. Precision, located in Wellington, Kansas, is a leading manufacturer of
complex aerostructure components, serving the commercial, military and business
aviation segments of the aerospace industry. Precision specializes in high speed
five-axis machining of aluminum, titanium and other hard alloys. The acquisition
was financed through borrowings under a new $235 million senior secured credit
facility and the issuance of $20 million of preferred stock. The new secured
credit facility provides for a two tranche term loan comprised of a $60 million
Term A facility and a $110 million Term B facility, in addition to a $65 million
revolving loan facility. The Term A facility has a six-year term with escalating
quarterly principal payments bearing interest at either the base rate plus a
margin rate of up to 2.0% based on a leverage ratio or the Eurodollar rate plus
a margin rate of up to 3.0% based on a leverage ratio. The Term B facility has a
ninety-month term with escalating quarterly principal payments bearing interest
at either the base rate plus a margin rate of 2.5% or the Eurodollar rate plus a
margin rate of 3.5%. The revolving credit facility has a six-year term bearing
interest at either the base rate plus a margin rate of up to 2.0% based on a
leverage ratio or the Eurodollar rate plus a margin rate of up to 3.0% based on
a leverage ratio.
8
<PAGE>
The Preferred Stock provides for cumulative dividends accruing at a
rate of 13% per annum. On or prior to August 31, 2004, Stellex may, at its
option, pay dividends either in cash or in additional shares of Preferred Stock.
After August 31, 2004, dividends may be paid only in cash. The Preferred Stock
is mandatorily redeemable on August 31, 2010 at a redemption price equal to 100%
of the aggregate liquidation preference thereof, plus, without duplication,
accumulated and unpaid dividends to the date of redemption. Stellex may, at its
option, redeem the outstanding shares of Preferred Stock on or before January 1,
2000 (or March 15, 2000 under certain circumstances) or after August 31, 2004 at
specified redemption prices together with accumulated and unpaid dividends, if
any, to the date of redemption. Under certain circumstances, Stellex may also
redeem the Preferred Stock with the proceeds of equity offerings. In connection
with the issuance of the Preferred Stock, Stellex granted warrants to purchase
shares of common stock in an amount equal to 1% of Stellex's issued and
outstanding shares of common stock on the date of grant. The warrants have an
exercise price of $0.01 per share. In the event Stellex is not able to redeem
the Preferred Stock on or before January 1, 2000 (or March 15, 2000 under
certain circumstances), Stellex will be required to grant additional warrants to
the purchaser of the Preferred Stock representing up to 5% of Stellex's issued
and outstanding shares of common stock.
7. Condensed Financial Information of Stellex and its Subsidiaries
The $100 million principal amount 9 1/2% senior subordinated notes and the term
and revolving loans are fully guaranteed, on a full and unconditional basis, by
all domestic subsidiaries of Stellex, including Stellex Microwave, KII Holding,
and Monitor. There are no significant contractual restrictions on the ability of
the Company's subsidiaries to transfer funds to the Company. Set forth below are
the condensed consolidating financial information of the guarantor subsidiaries
as of March 31, 1999 and the three month period then ended. The separate
financial statements of the guarantor subsidiaries are not included because the
guarantor subsidiaries are jointly and severally liable under the notes and
management does not believe that the separate financial structure would be
material to investors.
Condensed Consolidated Balance Sheet
(in thousands)
<TABLE>
<CAPTION>
Stellex Stellex KII Adjustments & Stellex
(Parent Only) Microwave Holding Monitor Eliminations Consolidated
--------- --------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 383 $ 2,771 $ 537 $ 589 $ --- $ 4,280
Accounts receivable, net -- 14,806 4,350 9,648 -- 28,804
Inventories -- 22,812 15,884 27,142 -- 65,838
Other current assets 3,244 3,308 1,534 2,778 (2,158) 8,706
--------- --------- --------- --------- --------- ---------
Total current assets 3,627 43,697 22,305 40,157 (2,158) 107,628
Property, plant and equipment, net 525 18,552 14,933 22,948 -- 56,958
Goodwill and intangibles, net -- 60,700 -- 60,359 -- 121,059
Investment in & advances to
subsidiaries 212,490 -- -- -- (212,490) --
Other assets 3,818 7,593 2,260 9,747 (9,043) 14,375
--------- --------- --------- --------- --------- ---------
Total assets $ 220,460 $ 130,542 $ 39,498 $ 133,211 $(223,691) $ 300,020
========= ========= ========= ========= ========= =========
Current liabilities $ 6,382 $ 54,277 $ 6,164 $ 10,823 $ (16,869) $ 60,777
9 1/2% senior subordinated notes 100,000 -- -- -- -- 100,000
Intercompany notes 1,689 77,174 23,341 67,112 (169,316) --
Term Loans - long term 87,300 -- -- -- (3,600) 83,700
Other long-term liabilities 16,000 2,318 3,879 21,466 2,356 46,019
Stockholders' equity 9,089 (3,227) 6,114 33,810 (36,262) 9,524
--------- --------- --------- --------- --------- ---------
Total liabilities and stockholders'
equity $ 220,460 $ 130,542 $ 39,498 $ 133,211 $(223,691) $ 300,020
========= ========= ========= ========= ========= =========
</TABLE>
9
<PAGE>
8. Condensed Financial Information of Stellex and its Subsidiaries - Continued
Condensed Consolidating Statement of Operations For The Three Months Ended
March 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Stellex Stellex Adjustments & Stellex
(Parent Only) Microwave KII Holding Monitor Eliminations Consolidated
-------------- --------- ----------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ -- $ 20,291 $ 7,272 $ 22,050 $ -- $ 49,613
Cost of sales -- 14,241 5,558 16,623 -- 36,422
Operating expenses 181 4,305 1,241 1,187 87 7,001
Amortization of intangibles -- 700 -- 593 -- 1,293
-------------- --------- ----------- -------- ------------- ------------
Income (loss) from operations (181) 1,045 473 3,647 (87) 4,897
Interest expense (4,290) (2,128) (578) (1,437) 3,617 (4,816)
Other income (expense) 4,044 4 (1) 13 (4,011) 49
-------------- --------- ----------- -------- ------------- ------------
Income (loss) before income taxes (427) (1,079) (106) 2,223 (481) 130
Provision (benefit) for income taxes (171) (318) (42) 838 (238) 69
-------------- --------- ----------- -------- ------------- ------------
Net income (loss) (256) (761) (64) 1,385 (243) 61
Preferred stock dividend 364 -- -- -- -- 364
-------------- --------- ----------- -------- ------------- ------------
Income (loss) applicable to common
shareholders $ (620) $ (761) $ (64) $ 1,385 $ (243) $ (303)
============== ========= =========== ======== ============= ============
</TABLE>
Condensed Consolidating Statement of Cash Flows for the Three Months Ended
March 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Stellex Stellex Adjustments & Stellex
(Parent Only) Microwave KII Holding Monitor Eliminations Consolidated
-------------- --------- ----------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) $ (256) $ (762) $ (64) $ 1,385 $ (242) $ 61
Depreciation and amortization 181 1,882 523 1,154 -- 3,740
Deferred taxes and other -- -- (8) (149) -- (157)
Change in operating assets and
liabilities 1 19,113 (1,305) (3,264) 270 14,815
-------------- --------- ----------- -------- ------------- ------------
Net cash provided by (used in)
operations (74) 20,233 (854) (874) 28 18,459
Fixed asset additions -- (502) (467) (961) (28) (1,958)
Payment of acquisition costs -- (538) -- -- -- (538)
Cash used in acquisitions -- (14,660) -- -- -- (14,660)
Proceeds from sale of fixed assets -- -- 3 13 -- 16
-------------- --------- ----------- -------- ------------- ------------
Net cash used in investing
activities -- (15,700) (464) (948) (28) (17,140)
-------------- --------- ----------- -------- ------------- ------------
Repayment of term loans (900) -- -- -- -- (900)
Proceeds from acquisition line of
credit 16,000 -- -- -- -- 16,000
Repayment of revolver (13,500) -- -- -- -- (13,500)
Intercompany loans, net (1,160) (2,866) 1,623 2,403 -- --
Other -- -- (44) -- -- (44)
-------------- --------- ----------- -------- ------------- ------------
Net cash provided by (used in)
financing activities 440 (2,866) 1,579 2,403 -- 1,556
-------------- --------- ----------- -------- ------------- ------------
Net increase in cash $ 366 $ 1,667 $ 261 $ 581 $ -- $ 2,875
============== ========= =========== ======== ============= ============
</TABLE>
10
<PAGE>
Item 2. Management Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Stellex is a holding company and has no independent operations. The Company,
through its two operating segments, Aerostructures and Electronics, is a leading
provider of highly engineered subsystems and components for the aerospace,
defense and space industries. The Electronics segment consists of Stellex
Microwave and its wholly-owned subsidiary, Phoenix. The Company, through its
electronics segment, is a worldwide leader in the design, manufacture and
marketing of fully integrated and proprietary microwave electronic subsystems
for radar-guided tactical missile systems and a broad line of high radio
frequency and microwave frequency single function modules. Stellex Microwave
products are used in the generation, reception and translation of communication,
data and radar signals. The Aerostructures segment operates through Stellex
Aerostructures and its two wholly-owned subsidiaries, Monitor and KII Holding.
Stellex Aerostructures is a leading full-service supplier of a broad range of
complex machined aerostructure components and subsystems for both commercial and
military and space applications. On March 2, 1999, Stellex acquired Phoenix
which operates with Stellex Microwave in the Electronics segment. In addition,
on April 22, 1999, Stellex acquired the assets of the aerostructures business of
Precision which operates in the Aerostructures segment.
Results of Operations
Historical - Company
Three Months Ended March 31, 1999 Compared to the Three Months Ended March 31,
1998
The historical consolidated operating results for the three months ended March
31, 1999 and 1998 give effect to the Monitor and Phoenix Acquisitions whose
results are presented from their dates of acquisition on May 29, 1998 and March
1, 1999, respectively (in thousands).
<TABLE>
<CAPTION>
Corporate Aerostructures Electronics Total
1999 1998 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $ -- $ -- $ 29,322 $ 8,271 $ 20,291 $ 19,628 $ 49,613 $ 27,899
Cost of goods sold -- -- 22,181 5,876 14,241 16,075 36,422 21,951
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit -- -- 7,141 2,395 6,050 3,553 13,191 5,948
Gross margin -- -- 24.4% 29.0% 29.8% 18.1% 26.6% 21.3%
Selling, general, and
administrative expenses 268 22 2,428 1,913 2,629 2,193 5,325 4,128
Research & development
expenses -- -- -- -- 1,676 940 1,676 940
Amortization of intangibles -- -- 593 -- 700 642 1,293 642
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) from operations (268) (22) 4,120 482 1,045 (222) 4,897 238
Interest expense (4,816) (2,770)
Other income (expense) 49 (31)
-------- --------
Net income (loss) before income
taxes 130 (2,563)
Income tax provision (benefit) 69 (772)
-------- --------
Net income (loss) $ 61 $ (1,791)
======== ========
</TABLE>
Net Sales. Net sales for Stellex totaled $49.6 million and $27.9
million for the three months ended March 31, 1999 and 1998, respectively. Net
sales for the Electronics segment totaled $20.3 million and $19.6 million for
the three months ended March 31, 1999 and 1998, respectively. The increase in
net sales for the electronics segment was primarily due to the acquisition of
Phoenix on March 2, 1999, partially offset by lower commercial sector sales at
Stellex Microwave resulting primarily from the completion of the "catch up" in
delinquent commercial component order backlog built up during 1997 relating to
the start-up of the new production planning software at that time. Net sales for
Phoenix from the date of acquisition to March 31, 1999 totaled $1.7 million.
Tactical subsystem sales for Stellex Microwave were constant compared to the
prior year, as new programs generally fill the voids created by expiring
programs.
11
<PAGE>
Net sales for the Aerostructures segment totaled $29.3 million and $8.3
million for the three months ended March 31, 1999 and 1998, respectively. The
primary reason for the increase in sales was due to the acquisition of Monitor
on May 29, 1998 partially offset by reduced sales at Stellex Aerospace. Net
sales for Monitor for the three months ended March 31, 1999 totaled $22.0
million. The decrease in net sales at Stellex Aerospace during 1999 of $1.0
million, or 12.1%, resulted from weak demand from OEMs in the commercial
aviation market resulting primarily from Boeing-related inventory management
issues and decreased demand from Asian markets. As a result of continuing
customer directed delays in previously scheduled orders, particularly at
Monitor, we expect their net sales to be negatively impacted in comparison to
the previous year for the foreseeable future.
Gross Margins. Gross margin for Stellex was 26.6% and 21.3% for the
three months ended March 31, 1999 and 1998, respectively. Gross margin for the
Electronics segment was 29.8% and 18.1% for the three months ended March 31,
1999 and 1998, respectively. The increase in gross margin for the Electronics
segment was due to a nonrecurring charge relating to the Stellex Microwave
acquisition which impacted the first quarter of 1998 coupled with productivity
improvements on certain programs and more favorable product mix. The
non-recurring charge related to the amortization of the purchase accounting
adjustment for profits in inventory totaling $1.1 million.
Gross margin for the Aerostructures segment was 24.4% and 29.0% for the
three months ended March 31, 1999 and 1998, respectively. The decrease in gross
margin was partially attributable to the impact of the newly acquired operations
of Monitor as of May 29, 1998, which delivered gross margin of 24.6% for the
quarter. In addition, Stellex Aerospace's gross margin totaled 23.6% for the
quarter, which was significantly lower compared to the prior year as a result of
lower volume and higher than normal start-up costs on new programs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for Stellex totaled $5.3 million and $4.1 million, or
10.8% and 14.8% stated as a percentage of net sales, for the three months ended
March 31, 1999 and 1998, respectively. The increase in selling, general and
administrative expenses over the prior year period was due primarily to the
acquisition of Monitor Aerospace, increases in corporate administrative overhead
costs and additional marketing spend directed at strategic customers offset by
the elimination of a non-cash stock compensation charge relating to the
valuation of management ownership puts at Stellex Aerospace.
Research and Development Expenses. Research and development expenses
for Stellex totaled $1.7 million and $0.9 million for the three months ended
March 31, 1999 and 1998, respectively. The increase in research and development
expenses resulted from the expansion of engineering capabilities at Stellex
Microwave relating to new product introductions.
Amortization of Intangibles. Amortization of intangible assets for the
Company increased $0.7 million, or 101.4%, over 1998 due to significant
increases in goodwill and other identifiable intangible assets, such as customer
lists, tradenames, and assembled workforce resulting from purchase accounting
allocations made in connection with the Monitor and Phoenix Acquisitions.
Goodwill and identifiable intangible assets are being amortized over their
estimated lives ranging from one to thirty years.
Interest Expense. Interest expense for the Company increased to $4.8
million in 1999 from $2.8 million in 1998. The increase in interest expense
resulted primarily the incurrence of indebtedness under the Company's senior
secured credit facility to finance the Monitor and Phoenix Acquisitions. The
borrowings under the senior secured credit facility generally bear interest at
an interest rate based on LIBOR. The average interest rate on such borrowings
for the three months ended March 31, 1999 was approximately 7.8%.
Income Tax Provision (Benefit). The effective tax rates for the Company
for the three months ended March 31, 1999 were impacted primarily by
non-deductible goodwill amortization at Stellex Monitor and Phoenix.
12
<PAGE>
Pro Forma Results of the Company for the Three Months Ended March 31, 1999 and
1998
The unaudited pro forma results of operations for the three months ended March
31, 1999 and 1998 give effect to the acquisitions of Monitor and Phoenix (the
"Acquisitions") which were completed on May 29, 1998 and March 2, 1999,
respectively. The pro forma results do not give effect to the acquisition of
Precision and related transactions. For purposes of the pro forma results of
operations, the Acquisitions are reflected as if they occurred simultaneously on
January 1, 1998. Certain non-recurring charges relating directly to the
Acquisitions and which effect expenses within the twelve months following the
transactions such as investment banking fees to Mentmore Holdings Corporation
and the amortization of the acquired profits in inventory, which results from
purchase accounting, have been excluded from the pro forma results. The
unaudited pro forma information set forth below is included herein because
management believes it may be meaningful to investors. However, it should be
read in conjunction with the Company's historical consolidated financial
statements and the other information included herein and included in the
Company's Annual Report for the year ended December 31, 1998 as filed on Form
10-K. The unaudited pro forma consolidated results have been prepared by
management of the Company and do not necessarily represent the results of the
Company's operations which would have occurred if the Acquisitions had actually
taken place on the dates indicated, and may not be indicative of the results of
operations which may be obtainable in the future. The pro forma results are
presented in thousands of dollars.
<TABLE>
<CAPTION>
Corporate Aerostructures Electronics Total
1999 1998 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ -- $ -- $29,322 $30,490 $23,046 $23,318 $52,368 $53,808
Cost of goods sold -- -- 22,181 23,396 15,796 17,296 37,977 40,692
------- -------- ------- ------- ------- ------- ------- -------
Gross profit -- -- 7,141 7,094 7,250 6,022 14,391 13,116
Gross margin -- -- 24.4% 23.3% 31.5% 25.8% 27.5% 24.4%
Selling, general, and
administrative expenses 87 -- 2,429 2,986 2,768 2,798 5,464 5,784
Research & development
expenses -- -- -- -- 1,873 1,313 1,873 1,313
Amortization of intangibles 181 -- 593 593 811 809 1,405 1,402
------- -------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations (268) -- 4,119 3,515 1,798 1,102 5,649 4,617
Interest expense (5,023) (5,423)
Other income (expense) 45 (57)
------- -------
Income (loss) before income
taxes 671 (863)
Provision for taxes 350 44
------- -------
Net income (loss) $ 321 $ (907)
======= =======
</TABLE>
Net Sales. Net sales for Stellex were $52.4 million and $53.8 million
for the three months ended March 31, 1999 and 1998, respectively. Net sales for
the Electronics segment, which is comprised of Stellex Microwave and Phoenix
totaled $23.0 million and $23.3 million for the three months ended March 31,
1999 and 1998, respectively. The slight decrease in sales resulted from lower
commercial sector sales at Stellex Microwave partially offset by increased sales
at Phoenix due to the ramp up of a new $13 million military program. The first
quarter of 1998 was the final quarter at Stellex Microwave impacted by the
"catch-up" of delinquent commercial component orders arising from production
planning problems associated with poor turnover of the production planning
software during 1996 and 1997.
Net sales for the Aerostructures segment, which is comprised of Stellex
Aerospace and Monitor, totaled $29.3 million and $30.5 million for the three
months ended March 31, 1999 and 1998, respectively. The decrease in sales
resulted primarily from weaker demand from OEMs in the commercial aviation
market resulting primarily from Boeing-related inventory management issues and
decreased demand from Asian markets. As a result of continuing customer directed
delays in previously scheduled orders, particularly at Monitor, we expect their
net sales to be negatively impacted in comparison to the previous year for the
foreseeable future.
Gross Margins. Gross margin for Stellex was 27.5% and 24.4% for the
three months ended March 31, 1999 and 1998, respectively. Gross margin for the
Electronics segment was 31.5% and 25.8% for the three months ended March 31,
1999 and 1998, respectively. The increase in gross margin was due to
productivity improvements on certain programs coupled with a more favorable
product mix.
13
<PAGE>
Gross margin for the Aerostructures segment was 24.4% and 23.3% for the
three months ended March 31, 1999 and 1998, respectively. The increase in gross
margin resulted from a favorable product mix coupled with a reduction in
indirect labor resulting from continuous improvement efforts at Monitor,
partially offset by the effect of lower volume and higher than normal start-up
costs on new programs at Stellex Aerospace.
Selling, General and Administrative Expense. Selling, general and
administrative expenses for Stellex totaled $5.5 million and $5.8 million, or
10.4% and 10.7% stated as a percentage of net sales, for the three months ended
March 31, 1999 and 1998, respectively. The decrease in the current period
resulted primarily from the elimination of a non-cash stock compensation charge
relating to the valuation of management ownership puts at Stellex Aerospace. The
stock compensation charge for the three months ended March 31, 1998 totaled
$715,000. This reduction was offset by increases in corporate administrative
overhead costs and additional marketing spend directed at strategic customers.
Research and Development. Research and development expenses for Stellex
totaled $1.9 million and $1.3 million for the three months ended March 31, 1999
and 1998, respectively. The increase in research and development costs resulted
from the expansion of engineering capabilities at Stellex Microwave relating to
new product introductions.
Liquidity and Capital Resources
The Company provided cash flows from operations of $18.5 million and
$1.1 million for the three months ended March 31, 1999 and 1998, respectively.
The increase in cash flows was primarily due to a significant customer advance
received in January. This allowed the Company to repay the entire balance
outstanding under its revolving credit line.
The Company used cash flows for investing activities, excluding cash
flows used in connection with the Phoenix Acquisition, totaling $1.9 million and
$1.2 million for the three months ended March 31, 1999 and 1998, respectively.
The increase in cash flows used resulted from the increase in capital
expenditure requirements of the Company as a result of the Monitor and Phoenix
Acquisitions.
The Company used cash flows from financing activities, excluding cash
flows used in connection with the Phoenix Acquisition, totaling $14.4 million
and $17,000 for the three months ended March 31, 1999 and 1998, respectively.
The increase is a result of the repayment of $13.5 million under its revolving
credit line as a result of a significant customer advance, in addition to $0.9
million of mandatory principal repayments under the Company's term loan
facility. In connection with the Phoenix Acquisition, the Company borrowed $16
million under its acquisition term loan facility.
On April 22, 1999, the Company acquired the assets of the
aerostructures business of Precision for an aggregate purchase price of
approximately $86.0 million. The acquisition was financed through borrowings
under a new $235 million senior secured credit facility and the issuance of $20
million of preferred stock. The new senior secured credit facility provides for
a two tranche term loan comprised of a $60 million Term A facility and a $110
million Term B facility, in addition to a $65 million revolving loan facility
which required a draw of $8 million at closing. The Term A facility has a
six-year term with escalating quarterly principal payments bearing interest at
either the base rate plus a margin rate of up to 2.0% based on a leverage ratio
or the Eurodollar rate plus a margin rate of up to 3.0% based on a leverage
ratio. The Term B facility has a ninety-month term with escalating quarterly
principal payments bearing interest at either the base rate plus a margin rate
of 2.5% or the Eurodollar rate plus a margin rate of 3.5%. The revolving credit
facility has a six-year term bearing interest at either the base rate plus a
margin rate of up to 2.0% based on a leverage ratio or the Eurodollar rate plus
a margin rate of up to 3.0% based on a leverage ratio.
The Preferred Stock provides for cumulative dividends accruing at a
rate of 13% per annum. On or prior to August 31, 2004, Stellex may, at its
option, pay dividends either in cash or in additional shares of Preferred Stock.
After August 31, 2004, dividends may be paid only in cash. The Preferred Stock
is mandatorily redeemable on August 31, 2010 at a redemption price equal to 100%
of the aggregate liquidation preference thereof, plus, without duplication,
accumulated and unpaid dividends to the date of redemption. Stellex may, at its
option, redeem the outstanding shares of Preferred Stock on or before January 1,
2000 (or March 15, 2000 under certain circumstances) or after August 31, 2004 at
specified redemption prices together with accumulated and unpaid dividends, if
any, to the date of redemption. Under certain circumstances, Stellex may also
redeem the Preferred Stock with the proceeds of equity offerings. In connection
with the issuance of the Preferred Stock, Stellex granted warrants to purchase
shares of common stock in an amount equal to 1% of Stellex's issued and
outstanding shares of common stock on the date of grant. The warrants have an
exercise price of $0.01 per share. In the event Stellex is not able to redeem
the Preferred Stock on or before January
14
<PAGE>
1, 2000 (or March 15, 2000 under certain circumstances), Stellex will be
required to grant additional warrants to the purchaser of the Preferred Stock
representing up to 5% of Stellex's issued and outstanding shares of common
stock.
The Company's primary liquidity demands will be for capital
expenditures and working capital needs. During the remaining three quarters of
1999, based on the Company's existing operations, the Company expects to spend
approximately $8 million on equipment upgrades and maintenance capital spend.
The Company enjoys a reputation as a high quality supplier and will continue to
support that reputation through appropriate levels of capital spend as well as
maintenance of its various continuous improvement programs. Based on its
existing operations, the Company anticipates capital expenditures for the
foreseeable future to remain relatively consistent, in order to continue to
support facilities maintenance, production capacity expansion and existing
equipment upgrade programs.
The Company's management believes that, based on its current level of
operations and anticipated growth, its anticipated cash flow from operations and
available borrowings under the new senior secured credit facility, its level of
liquidity will be adequate to meet its anticipated requirements for working
capital, capital expenditures, interest payments and any scheduled principal
payments in the foreseeable future.
The Year 2000 Issue
The Year 2000 issue concerns the inability of information systems to
recognize properly and process date-sensitive information beyond January 1,
2000. The critical areas for the Company are viewed as: (1) compliance of
products manufactured by the Company (primarily Stellex Microwave), (2)
readiness of internal information and business systems, and (3) readiness of key
suppliers of products and services.
State of readiness: During 1997 and 1998, the Company initiated an
assessment of the impact of the Year 2000 issue on its internal operations and
began the development of a plan to bring all of its computer systems into
compliance. This focus has been on all systems potentially impacted by the Year
2000 issue, including information technology ("IT") systems and non-IT systems,
such as those with embedded chips and factory floor systems. Each operating
company has responsibility for its own assessment and correction activities with
teams in place at each operating unit. These activities have been periodically
monitored by both local and corporate management. At the present time all of the
Company's subsidiaries with the exception of the newly acquired Phoenix and
Precision Machining have substantially completed their internal IT and non-IT
systems reviews for Year 2000 compliance. The remaining procedures in each
company's assessment of the Year 2000 issue on its operations involve the
completion of compliance testing. Significant vendors and customers have been
contacted and queried and have substantially responded on their current status
favorably. The Company's subsidiaries will continue to pursue other vendors and
customers who have yet to respond.
A Year 2000 compliant upgrade to the IT systems of Stellex Microwave is
substantially complete with only certain workstations and operating software
requiring upgrade, the upgrade of which is expected to be completed during the
second quarter of 1999.
Year 2000 compliance assessments have already begun on the recently
acquired Phoenix Microwave and Precision Machining businesses. Preliminary
assessments of internal IT and non-IT systems indicate that no significant
system hardware or software upgrades will be required. Completion of compliance
testing and implementation of any required fixes is scheduled for completion by
September 1999.
Costs to address Year 2000 issues: To date, costs to implement and the
timeframe contemplated by management to be Year 2000 compliant are based on
management's best estimates. The types of expenditures made and expected to be
made include hardware and software upgrades, conversion costs, and compliance
assessment reviews. Costs incurred to date are approximately $1,380,000. The
remaining estimated costs, which will include the evaluation and correction of
deficiencies at Precision and Phoenix, are expected to total approximately
$350,000 and will be incurred substantially during the second quarter of 1999.
Risks associated with Year 2000 issue: The Company believes there is
low risk of any internal critical system, embedded system, or other critical
asset not being Year 2000-ready by the end of 1999. The Company continues to
assess its risk exposure attributable to external factors, suppliers and
customers. With respect to outside parties who have responded to requests for
information concerning their state of readiness for Year 2000 compliance, they
have indicated that their hardware, software, and related non-IT systems are
currently or will be Year 2000 compliant within the 1999 calendar year.
Evaluation of these issues is continuing and there can be no assurance that
additional issues, not presently
15
<PAGE>
known to the Company, will be discovered which could present a material risk of
disruption to the Company's operations. Such disruptions could result in delays
in the delivery or sale of products.
Contingency plans: A complete contingency plan for suppliers, customers
and mission critical systems impacted by Year 2000 issues is currently under
development and is being evaluated in light of worst-case scenarios. One of the
greatest areas of exposure is considered to be the ability for vendors to supply
critical materials and services. The contingency plan addresses this concern
through means such as double and triple sourcing certain critical products and
services and evaluation of stockpiling of critical inventory prior to the year
2000 to assure uninterrupted manufacturing.
Forward Looking Statements
Certain statements in this Annual Report contain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that any forward-looking statements, including
statements regarding the intent, belief, or current expectations of the Company
or its management, are not guarantees of future performance as they involve
known and unknown risks and uncertainties. Actual results may differ materially
from those in the forward-looking statements as a result of various factors
including, but not limited to: changes in the competitive marketplace, changes
in the overall pricing environment, changes in global economic conditions, the
risks associated with the Company's dependence on a limited number of large
customers, the risk of loss of certain significant military programs, Year 2000
issues, and the risks associated with the consolidation, restructuring, and
changes in ownership in the defense and aerospace industry.
ITEM 3. Quantitative and Qualitative Disclosures About Marketing Risk
No significant change has occurred since the filing by the Registrant
on Form 10-K for the year ended December 31, 1998. Reference is made to Part II,
Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
The Company's primary market risk exposure is that of interest rate
risk associated with its various debt instruments. The Company has not entered
into any derivative financial instruments to manage its interest rate risks to
date.
At March 31, 1999, the Company's total outstanding debt was comprised
of fixed interest rate obligation of $109,475,000 and variable interest rate
obligation of $103,815,000.
The Company incurred an increase of approximately $87,000,000 of
variable debt as a result of the Precision Acquisition on April 22, 1999. See
Note 6 - Subsequent Events for further detail.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings
The Company is involved in various legal action arising in the normal course of
business. While it is not possible to determine with certainty the outcome of
these matters, in the opinion of management, the eventual resolution of the
claims and action outstanding will not have a material adverse effect on the
Company's financial position or operating results.
ITEM 2: Changes in Security
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
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
3.1 Restated Certificate of Incorporation of Stellex Technologies, Inc.
3.2 Certificate of Incorporation of PMC Acquisition Corporation.
3.3 Bylaws of PMC Acquisition Corporation.
3.4 Articles of Incorporation of Phoenix Microwave Corporation.
3.5 Bylaws of Phoenix Microwave Corporation.
3.6 Certificate of Incorporation of Phoenix Microwave, Ltd.
3.7 Bylaws of Phoenix Microwave, Ltd.
3.8 Certificate of Incorporation of Stellex Precision Machining, Inc.
3.9 Bylaws of Stellex Precision Machining, Inc.
4.1 Supplemental Indenture No. 3 dated as of April 22, 1999 to Indenture
dated as of October 31, 1997 by and among Stellex Technologies, Inc. (f/k/a Stellex
Industries, Inc.), Stellex Precision Machining, Inc., the Subsidiary Guarantors party
thereto and HSBC Bank USA (f/k/a Marine Midland Bank), as trustee.
10.1 Registration Rights Agreement dated as of April 22, 1999 between
Stellex Technologies, Inc. and SG Cowen Securities Corporation.
10.2 Warrant Agreement dated as of April 22, 1999 between Stellex
Technologies, Inc. and HSBC Bank USA, as warrant agent.
27 Financial Data Schedule.
</TABLE>
(a) Reports on Form 8-K: A Form 8-K was filed on March 16, 1999
describing the details of the Phoenix acquisition and
providing historical financial information for Phoenix. A Form
8-K was filed on May 7, 1999, describing the details of the
Precision Acquisition, providing historical financial
information for Precision and pro forma financial information
for Stellex, inclusive of results for both Phoenix and
Precision.
17
<PAGE>
(b) SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused the Report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, as of May 17, 1999.
STELLEX TECHNOLOGIES, INC
By: /s/ William L. Remley
-------------------------------------
William L. Remley,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed by the following persons in the capacities
and as of dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Richard L. Kramer Chairman of the Board of Directors and May 17, 1999
- ------------------------ Director of Stellex Technologies, Inc.
Richard L. Kramer
/s/ William L. Remley Vice Chairman, President, Chief Executive May 17, 1999
- ------------------------ Officer, Treasurer and Director of Stellex
William L. Remley Technologies, Inc.
/s/ P. Roger Byer Chief Financial Officer of Stellex May 17, 1999
- ------------------------ Technologies, Inc. (principal financial
P. Roger Byer and accounting officer)
</TABLE>
18
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
STELLEX TECHNOLOGIES, INC.,
a Delaware corporation
Stellex Technologies, Inc. (originally incorporated as Stellex Holdings
Corp.) (the "Corporation"), a corporation organized and existing under the
General Corporation Law of the State of Delaware, hereby certifies as follows:
1. The original Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on September 5, 1997.
2. Immediately prior to this amendment of the Certificate of
Incorporation of the Corporation, as hereinbelow set forth, the Corporation had
authority to issue an aggregate of One Thousand Five Hundred (1,500) shares, of
which One Thousand (1,000) shares, without par value, were designated "Common
Stock" and Five Hundred (500) shares, without par value, were designated "Series
A Preferred Stock", having a stated value of Fifty Thousand Dollars ($50,000)
per share.
3. Pursuant to Sections 242 and 245 of the General Corporation Law of
the State of Delaware, this Restated Certificate of Incorporation restates and
integrates and further amends the Certificate of Incorporation of this
Corporation (including the Certificate of the Powers, Designations, Preferences
and Rights of the Series A Preferred Stock filed on October 24, 1997) by:
a. Authorizing the issuance and designating the terms of an
aggregate Forty-Three Thousand (43,000) shares, of which: (i) Two Thousand
(2,000) shares, without par value, shall be designated "Common Stock"; and (ii)
Forty-One Thousand (41,000) shares, without par value, shall be designated
"Preferred Stock," of which Forty Thousand (40,000) shares, without par value,
but with a stated value of One Thousand Dollars ($1,000) per share, shall be
designated "13% Senior Cumulative Redeemable Preferred Stock"; Five Hundred
(500) shares, without par value, but with a stated value of Fifty Thousand
Dollars ($50,000) per share shall be designated "Series A Preferred Stock"; and
Five Hundred (500) shares, without par value, but with a stated value of Ten
Thousand Dollars ($10,000) per share, shall be designated "Serial Preferred
Stock" in Article FOURTH; and
b. Deleting Article FIFTH, which contained the name of the sole
incorporator and initial directors and conforming the remaining articles
accordingly.
<PAGE>
4. The text of the Certificate of Incorporation is hereby amended and
restated to read as herein set forth in full.
FIRST. The name of the corporation is Stellex Technologies, Inc. (the
"corporation", the "Corporation" or the "Company")
SECOND. The address of the registered office of the corporation in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle. The name of its registered agent at that address is Corporation
Service Company.
THIRD. The nature or purposes of the business to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH. The Corporation shall have authority to issue: (i) Two Thousand (2,000)
shares of Common Stock, without par value; and (ii) Forty-One Thousand
(41,000) shares of "Preferred Stock," of which Forty Thousand (40,000)
shares, without par value, but with a stated value of One Thousand
Dollars ($1,000) per share, shall be designated "13% Senior Cumulative
Redeemable Preferred Stock"; Five Hundred (500) shares, without par
value, but with a stated value of Fifty Thousand Dollars ($50,000) per
share, shall be designated "Series A Preferred Stock"; and Five Hundred
(500) shares, without par value, but with a stated value of Ten
Thousand Dollars ($10,000) per share, shall be designated "Serial
Preferred Stock". The 13% Senior Cumulative Redeemable Preferred Stock,
Series A Preferred Stock and Serial Preferred Stock are collectively
referred to herein as the "Preferred Stock".
The designations, preferences, privileges and powers and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions of the above classes of capital stock shall
be as follows:
A. 13% Senior Cumulative Redeemable Preferred Stock
(a) Designation. There is hereby created out of the authorized and
unissued shares of preferred stock of the Company a series of
preferred stock designated as the "13% Senior Cumulative
Redeemable Preferred Stock" (the "Redeemable Preferred
Stock"). The number of shares constituting such series shall
be 40,000 shares of Redeemable Preferred Stock, consisting of
an initial issuance of 20,000 shares of Redeemable Preferred
Stock, plus up to 20,000 additional shares of Redeemable
Preferred Stock which may be issued to pay dividends on the
Redeemable Preferred Stock if the Company elects to pay
dividends in additional shares of Redeemable Preferred Stock.
The liquidation preference of the Redeemable Preferred Stock
shall be $1,000 per share.
2
<PAGE>
(b) Rank. The Redeemable Preferred Stock shall, with respect to
dividend distributions and distributions upon the liquidation,
winding-up and dissolution of the Company, rank (i) senior to
all classes of common stock of the Company (the "Common
Stock") and each other class of Capital Stock or series of
Preferred Stock of the Company existing on the date hereof or
hereafter created by the Board of Directors the terms of which
do not expressly provide that it ranks on a parity with the
Redeemable Preferred Stock (collectively referred to with the
Common Stock of the Company as "Junior Securities") and (ii)
on a parity with each series of Preferred Stock created in
accordance with paragraph (f)(ii)(A) hereof, the terms of
which expressly provide that it ranks on parity with any
Redeemable Preferred Stock as to dividend distributions and
distributions upon the liquidation, winding-up and dissolution
of the Company (collectively referred to as "Parity
Securities"). No Capital Stock shall rank senior to the
Redeemable Preferred Stock as to dividend distributions and
distributions upon the liquidation, winding-up and dissolution
of the Company.
(c) Dividends.
(i) Beginning on the Issue Date, the Holders of
outstanding shares of Redeemable Preferred Stock
shall be entitled to receive, when, as and if
declared by the Board of Directors of the Company,
out of funds legally available therefor, dividends on
each share of Redeemable Preferred Stock outstanding,
at a rate per annum equal to 13% of the liquidation
preference per share of the Redeemable Preferred
Stock. All dividends shall be cumulative, whether or
not earned or declared, on a daily basis from the
Issue Date and shall be payable quarterly in arrears
on each Dividend Payment Date, commencing on August
31, 1999. Dividends may be paid, at the Company's
option, on any Dividend Payment Date occurring on or
before August 31, 2004 either in cash or by the
issuance of additional duly authorized, validly
issued, fully paid and non-assessable shares of
Redeemable Preferred Stock (including fractional
shares) having an aggregate liquidation preference
equal to the amount of such dividends (rounded to the
nearest whole cent) due on such Dividend Payment
Date. In the event that on or prior to August 31,
2004 dividends are declared and paid through the
issuance of additional shares of Redeemable
Preferred Stock as provided in the previous sentence,
such dividends shall be deemed paid in full and shall
not accumulate. After August 31, 2004, all dividends
on outstanding shares of Redeemable Preferred Stock
shall be paid in cash only. Each distribution in the
form of a dividend (whether in cash or in additional
shares of Redeemable
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<PAGE>
Preferred Stock) shall be payable to Holders of
record as they appear on the stock register of the
Company on the applicable Dividend Record Date.
Dividends shall cease to accumulate in respect of
shares of the Redeemable Preferred Stock on the date
of their redemption unless the Company shall have
failed to pay the relevant redemption price on the
date called for redemption.
(ii) All dividends paid with respect to shares of
Redeemable Preferred Stock pursuant to paragraph
(c)(i) shall be paid pro rata to the Holders entitled
thereto.
(iii) Dividends in arrears for any past Dividend Period and
dividends in connection with any optional redemption
pursuant to paragraph (e)(i) may be declared and paid
at any time, without reference to any regular
Dividend Payment Date, to Holders of record on such
date, not less than 10 nor more than 60 days prior to
the payment thereof, as may be fixed by the Board of
Directors.
(iv) No dividends shall be declared by the Board of
Directors or paid or funds set apart for payment of
dividends by the Company on any Parity Securities for
any period unless full cumulative dividends shall
have been or contemporaneously are declared, and paid
in full or declared, and (in the case of dividends
payable in cash) a sum in cash set apart sufficient
for such payment, on the Redeemable Preferred Stock
for all Dividend Periods terminating on or prior to
the date of payment of such dividends on such Parity
Securities. If any dividends are not paid in full, as
aforesaid, upon the shares of the Redeemable
Preferred Stock and any other Parity Securities, all
dividends declared upon shares of the Redeemable
Preferred Stock and any other Parity Securities shall
be declared pro rata so that the amount of dividends
declared per share on the Redeemable Preferred Stock
and such Parity Securities shall in all cases bear to
each other the same ratio that accrued dividends per
share on the Redeemable Preferred Stock and such
Parity Securities bear to each other.
(v) (A) Holders of shares of the Redeemable
Preferred Stock shall be entitled to receive
the dividends provided for in this paragraph
(c) in preference to and in priority over
any dividends or distributions upon any of
the Junior Securities.
(B) So long as any shares of Redeemable
Preferred Stock are outstanding, the Company
shall not declare, pay or set apart for
payment any dividend on any Junior
Securities or make
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<PAGE>
any payment on account of, or set apart for
payment money for a sinking or other similar
fund for, the purchase, redemption or other
retirement of, any Junior Securities or any
warrants, rights, calls or options
exercisable for or convertible into any
Junior Securities, or make any distribution
in respect thereof, either directly or
indirectly, and whether in cash, obligations
or shares of the Company or other property
(other than dividends on Junior Securities
paid in additional shares of Junior
Securities), and shall not permit any
corporation or other entity directly or
indirectly controlled by the Company to
purchase or redeem any Junior Securities or
any such warrants, rights, calls or options
unless cumulative dividends determined in
accordance herewith have been paid in full
on the Redeemable Preferred Stock.
(C) So long as any shares of Redeemable
Preferred Stock are outstanding, the Company
shall not make any payment on account of, or
set apart for payment money for a sinking or
other similar fund for, the purchase,
redemption or other retirement of, any
Parity Securities or any warrants, rights,
calls or options exercisable for or
convertible into any Parity Securities, and
shall not permit any corporation or other
entity directly or indirectly controlled by
the Company to purchase or redeem any Parity
Securities or any such warrants, rights,
calls or options unless (1) the dividends
determined in accordance herewith on the
Redeemable Preferred Stock have been paid in
full and (2) the Company makes a pari passu
Offer (as defined in paragraph (g)(i)(A)
hereof) to purchase, redeem or otherwise
retire the Redeemable Preferred Stock.
(vi) Dividends payable on shares of the Redeemable
Preferred Stock for any period less than a year shall
be computed on the basis of a 360-day year of twelve
30-day months and the actual number of days elapsed
in the period for which payable. If any Dividend
Payment Date occurs on a day that is not a Business
Day, any accrued dividends otherwise payable on such
Dividend Payment Date shall be paid on the next
succeeding Business Day.
(vii) (A) In the event of (1) an initial public
offering of Common Stock resulting in gross
proceeds to the Company of at least $20
million, the proceeds of which have not been
applied to redeem all of the Redeemable
Preferred Stock pursuant to
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<PAGE>
paragraph (e)(i)(A) or (e)(i)(B) and/or (2)
the receipt by the Company of at least $20
million in gross proceeds from the sale of
capital stock to a third-party equity
investor, the proceeds of which have not
been applied to redeem all of the Redeemable
Preferred Stock pursuant to paragraph
(e)(i)(A) or (e)(i)(B), in each case
occurring during a period when the
Redeemable Preferred Stock is redeemable at
the option of the Company pursuant to the
terms of paragraph (e)(i)(A) or (e)(i)(B),
dividends on each share of Redeemable
Preferred Stock shall automatically accrue,
commencing on the date that is 30 days after
the consummation of such initial public
offering or third-party equity investment,
as applicable, at a rate per annum equal to
18% of the liquidation preference per share
of the Redeemable Preferred Stock, unless
the Redeemable Preferred Stock shall have
been redeemed by such date.
(B) In the event of a Change of Control
occurring prior to February 1, 2008 and not
otherwise subject to paragraph (g)(i)(A)
hereof, if the Company shall not have made
an offer to purchase all the Redeemable
Preferred Stock at a cash purchase price
equal to or greater than 101% of the
aggregate liquidation preference thereof,
plus, without duplication, an amount in cash
equal to all accumulated and unpaid
dividends per share (including an amount in
cash equal to a prorated dividend for the
period from the Dividend Payment Date
immediately prior to the date of purchase)
by the date that is 45 days after the
consummation of such Change of Control, then
the Holders of a majority of the outstanding
shares of Redeemable Preferred Stock may
require, by written notice to the Company,
that dividends on each share of Redeemable
Preferred Stock shall accrue, commencing on
the date that is 45 days after the
consummation of such Change of Control, at a
rate per annum equal to 18% of the
liquidation preference per share of the
Redeemable Preferred Stock; provided,
however, that if the Company shall have made
an offer as described in this paragraph
(c)(vii)(B), the Company shall not be
required to purchase any shares of
Redeemable Preferred Stock pursuant to such
offer and the Holders shall not be permitted
to increase the dividend rate on the
outstanding shares of Redeemable Preferred
Stock, if the Holders of a majority of the
outstanding shares of Redeemable Preferred
Stock shall have elected not to have
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<PAGE>
their shares of Redeemable Preferred Stock
purchased pursuant to such offer; provided
further, that if the Company makes an offer
described in this paragraph (c)(vii)(B) and
defaults in its payment obligations
thereunder, the Holders of a majority of the
outstanding shares of Redeemable Preferred
Stock may require, by written notice to the
Company, that dividends on each share of
Redeemable Preferred Stock that has not been
purchased by the Company shall accrue,
commencing on the date that is 45 days after
the consummation of the applicable Change of
Control and ending on the date any such
default in its payment obligations is cured,
at a rate per annum equal to 18% of the
liquidation preference per share of the
Redeemable Preferred Stock.
(d) Liquidation Preference.
(i) Upon any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the
Company, the Holders of shares of Redeemable
Preferred Stock then outstanding shall be entitled to
be paid, out of the assets of the Company available
for distribution to its stockholders, $1,000 per
share of Redeemable Preferred Stock, plus an amount
in cash equal to all accumulated and unpaid dividends
thereon to the date fixed for liquidation,
dissolution or winding-up (including an amount equal
to a prorated dividend for the period from the last
Dividend Payment Date to the date fixed for
liquidation, dissolution or winding-up), before any
payment shall be made or any assets distributed to
the holders of any of the Junior Securities,
including, without limitation, Common Stock of the
Company. If, upon any voluntary or involuntary
liquidation, dissolution or winding-up of the
Company, the assets of the Company are not sufficient
to pay in full the liquidation preference and
accumulated and unpaid dividends payable to the
Holders of outstanding shares of the Redeemable
Preferred Stock and all Parity Securities, then the
holders of all such Redeemable Preferred Stock and
Parity Securities shall share equally and ratably in
such distribution of assets of the Company in
proportion to the full liquidation preferences plus
all accumulated and unpaid dividends which would be
payable on such distribution if the amount to which
the Holders of outstanding shares of Redeemable
Preferred Stock and the holders of outstanding Parity
Securities are entitled were paid such amounts in
full.
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<PAGE>
(ii) After payment in cash of the full amount of the
liquidation preference and all accumulated and unpaid
dividends to which they are entitled, the holders of
shares of the Redeemable Preferred Stock shall not be
entitled to any further participation in any
distribution of assets of the Company.
(iii) For the purposes of this paragraph (d), neither the
sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration)
of all or substantially all of the property or assets
of the Company nor the consolidation or merger of the
Company with or into one or more corporations, in
each case in accordance with the terms hereof, shall
be deemed to be a liquidation, dissolution or
winding-up of the affairs of the Company (unless such
sale, conveyance, exchange, transfer, consolidation
or merger is in connection with a dissolution or
winding-up of the business of the Company).
(e) Redemption.
(i) Optional Redemption.
(A) The Company may redeem at any time on or
prior to August 31, 1999, from any source of
funds legally available therefor, in whole,
in the manner provided in paragraph (e)(iii)
hereof, all of the shares of the Redeemable
Preferred Stock, at a redemption price of
100% of the liquidation preference thereof
plus, without duplication, an amount in cash
equal to a prorated dividend for the period
from the Dividend Payment Date immediately
prior to the Redemption Date (or if no
Dividend Payment Date has occurred, the
Issue Date) to the Redemption Date (the
"Early Optional Redemption Price");
provided, however, that if prior to August
31, 1999, the Company (1) has filed a
registration statement with the Commission
with respect to an offering by the Company
of securities the proceeds of which are to
be used to finance the redemption of the
Redeemable Preferred Stock or (2) certifies
in an Officers' Certificate delivered to the
Holders that (x) it is in the process of
preparing an offering memorandum with
respect to an unregistered offering,
pursuant to Rule 144A under the Securities
Act or otherwise, of securities the proceeds
of which are to be used to finance the
redemption of the Redeemable Preferred Stock
and (y) it intends to circulate such
offering memorandum to investors within 30
calendar
8
<PAGE>
days of the date of such Officer's
Certificate, then the Company shall have
until October 15, 1999 (the "Extension
Date") to redeem the Redeemable Preferred
Stock at the Early Optional Redemption Price
in accordance with this paragraph (e)(i)(A).
(B) The Company may redeem at any time
subsequent to August 31, 1999, or, if
applicable, the Extension Date, and prior to
January 1, 2000, from any source of funds
legally available therefor, in whole, in the
manner provided in paragraph (e)(iii)
hereof, all of the shares of the Redeemable
Preferred Stock, at a redemption price of
106.50% of the aggregate liquidation
preference thereof, plus, without
duplication, an amount in cash equal to a
prorated dividend for the period from the
Dividend Payment Date immediately prior to
the Redemption Date to the Redemption Date
(the "Second Early Optional Redemption
Price"); provided, however, that if prior to
January 1, 2000, the Company (1) has filed a
registration statement with the Commission
with respect to an offering by the Company
of securities the proceeds of which are to
be used to finance the redemption of the
Redeemable Preferred Stock or (2) certifies
in an Officers' Certificate delivered to the
Holders that (x) it is in the process of
preparing an offering memorandum with
respect to an unregistered offering,
pursuant to Rule 144A under the Securities
Act or otherwise, of securities the proceeds
of which are to be used to finance the
redemption of the Redeemable Preferred Stock
and (y) it intends to circulate such
offering memorandum to investors within 30
calendar days of the date of such Officer's
Certificate, then the Company shall have
until March 15, 2000 (the "Second Extension
Date") to redeem the Redeemable Preferred
Stock at the Second Early Optional
Redemption Price in accordance with this
paragraph (e)(i)(B).
(C) Except as set forth in paragraphs (e)(i)(A)
and (B) above and (D) below, the Redeemable
Preferred Stock shall not be redeemable at
the Company's option prior to August 31,
2004. From and after August 31, 2004, the
Company may redeem, at its option, at any
time, from any source of funds legally
available therefor, in whole or in part, in
the manner provided in paragraph (e)(iii)
hereof, any or all of the shares of the
Redeemable Preferred Stock, at the
redemption
9
<PAGE>
prices (expressed as a percentage of the
liquidation preference thereof) set forth
below plus, without duplication, an amount
in cash equal to all accumulated and unpaid
dividends per share (including an amount in
cash equal to a prorated dividend for the
period from the Dividend Payment Date
immediately prior to the Redemption Date to
the Redemption Date) (the "Optional
Redemption Price"), if redeemed during the
12-month period beginning on August 31 of
each of the calendar years indicated below:
YEAR PERCENTAGE
---- ----------
2004......................... 106.500%
2005......................... 104.333%
2006 ........................ 102.167%
2007 and thereafter ......... 100.000%
provided that no optional redemption
pursuant to this paragraph (e)(i)(C) shall
be made unless prior thereto full unpaid
cumulative dividends for all Dividend
Periods terminating on or prior to the
Redemption Date and a prorated dividend for
the period from the Dividend Payment Date
immediately prior to the Redemption Date to
the Redemption Date shall have been or
immediately prior to the Redemption Date are
declared and paid in cash or declared and a
sum set apart sufficient for such cash
payment on the Redemption Date, on the
outstanding shares of the Redeemable
Preferred Stock.
(D) In addition, at any time and from time to
time subsequent to January 1, 2000, or, if
applicable, the Second Extension Date and
prior to the third anniversary of the Issue
Date, the Company may redeem, in whole, in
the manner provided in paragraph (e)(iii)
hereof, shares of Redeemable Preferred Stock
redeemable out of the net proceeds
therefrom, at a redemption price equal to
113% of the aggregate liquidation preference
thereof plus, without duplication, an amount
in cash equal to all accumulated and unpaid
dividends per share (including an amount in
cash equal to a
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<PAGE>
prorated dividend for the period from the
Dividend Payment Date immediately prior to
the Redemption Date to the Redemption Date)
(the "Equity Offering Redemption Price"),
out of the proceeds of any Equity Offering
completed during such period; provided that
such redemption shall occur within 45 days
after consummation of such Equity Offering.
(E) In the event of a redemption of only a
portion of the then outstanding shares of
the Redeemable Preferred Stock, the Company
shall effect such redemption pro rata
according to the number of shares held by
each Holder of the Redeemable Preferred
Stock or by lot, as may be determined by the
Company in its sole discretion, except that
the Company may redeem such shares held by
any Holder of fewer than 100 shares (or
shares held by Holders who would hold less
than 100 shares as a result of such
redemption), without regard to any pro rata
redemption requirement.
(ii) Mandatory Redemption. On August 31, 2010, the Company
shall redeem from any source of funds legally
available therefor, in whole, in the manner provided
in paragraph (e)(iii) hereof, all of the shares of
the Redeemable Preferred Stock then outstanding, at a
redemption price in cash of 100% of the liquidation
preference thereof, plus, without duplication, an
amount in cash equal to all accumulated and unpaid
dividends per share (the "Mandatory Redemption
Price").
(iii) Procedures for Redemption.
(A) At least 15 days and not more than 60 days
prior to the date fixed for any redemption
of the Redeemable Preferred Stock, written
notice (the "Redemption Notice") shall be
given by first-class mail, postage prepaid,
to each Holder of record on the record date
fixed for such redemption of the Redeemable
Preferred Stock at such Holder's address as
the same appears on the stock register of
the Company; provided, that during the
period that SG Cowen Securities Corporation
("SG Cowen") is a Holder of record such
Redemption Notice may be given at least five
(5) days and not more than 60 days prior to
the date fixed for any such redemption and,
provided further, that no failure to give
such notice nor any deficiency therein shall
affect the validity of the procedure for the
redemption of any shares of Redeemable
Preferred Stock to be redeemed except as to
the Holder or Holders to whom the
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<PAGE>
Company has failed to give said notice or
except as to the Holder or Holders whose
notice was defective. The Redemption Notice
shall state:
(1) whether the redemption is
pursuant to paragraph (e)(i)(A), (e)(i)(B),
(e)(i)(C), (e)(i)(D) or (e)(ii) hereof;
(2) the Early Optional Redemption
Price, the Second Early Optional Redemption
Price, the Optional Redemption Price, the
Equity Offering Redemption Price or the
Mandatory Redemption Price, as applicable;
(3) whether all or less than all
the outstanding shares of the Redeemable
Preferred Stock are to be redeemed and the
total number of shares of the Redeemable
Preferred Stock being redeemed;
(4) the number of shares of
Redeemable Preferred Stock held, as of the
appropriate record date, by the Holder that
the Company intends to redeem;
(5) the date fixed for redemption;
(6) that the Holder is to surrender
to the Company, at the place or places where
certificates for shares of Redeemable
Preferred Stock are to be surrendered for
redemption, in the manner and at the price
designated, the certificate or certificates
representing the shares of Redeemable
Preferred Stock to be redeemed; and
(7) that dividends on the shares of
the Redeemable Preferred Stock to be
redeemed shall cease to accrue on such
Redemption Date unless the Company defaults
in the payment of the Early Optional
Redemption Price, the Second Early Optional
Redemption Price, the Optional Redemption
Price, the Equity Offering Redemption Price
or the Mandatory Redemption Price, as the
case may be.
(B) Each Holder of Redeemable Preferred Stock
shall surrender the certificate or
certificates representing such shares of
Redeemable Preferred Stock to the Company,
duly endorsed, in the manner and at the
place designated in the Redemption Notice,
and on the Redemption Date the full Early
Optional Redemption Price, the
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<PAGE>
Second Early Optional Redemption Price,
Optional Redemption Price, Equity Offering
Redemption Price or the Mandatory Redemption
Price, as the case may be, for such shares
shall be payable in cash to the Person whose
name appears on such certificate or
certificates as the owner thereof, and each
surrendered certificate shall be canceled
and retired. In the event that less than all
of the shares represented by any such
certificate are redeemed, a new certificate
shall be issued representing the unredeemed
shares. All payments to the Holders in
respect of the Redeemable Preferred Stock,
whether on account of liquidation,
dividends, redemption or otherwise, shall be
subject to the satisfaction of all
applicable Federal, State, local and foreign
withholding taxes and other amounts required
by law to be withheld.
(C) Unless the Company defaults in the payment
in full of the applicable redemption price,
dividends on the Redeemable Preferred Stock
called for redemption shall cease to
accumulate on the Redemption Date, and the
Holders of such redemption shares shall
cease to have any further rights with
respect thereto on the Redemption Date,
other than the right to receive the Early
Optional Redemption Price, the Second Early
Optional Redemption Price, the Optional
Redemption Price, the Equity Offering
Redemption Price or the Mandatory Redemption
Price, as the case may be, without interest.
In connection with a redemption at the Early
Optional Redemption Price during the period
from the date hereof to August 31, 1999, or,
if applicable, the Extension Date, the
Company may deliver one (1) Redemption
Notice pursuant to paragraph (e)(i)(A) above
that may state that such redemption of
Redeemable Preferred Stock is contingent
upon the receipt of financing the proceeds
of which are to be applied to redeem the
Redeemable Preferred Stock. In the event
such contingency does not occur within the
time frame set forth in such Redemption
Notice, the Company shall return to the
Holders any certificates representing the
Redeemable Preferred Stock delivered by
Holders to the Company and dividends on the
Redeemable Preferred Stock shall continue to
accumulate as if such Redemption Notice had
not been delivered.
(f) Voting Rights.
(i) The Holders of shares of the Redeemable
Preferred Stock, except as otherwise
required under the laws of the State of
Delaware or as set forth in paragraphs (ii)
and (iii) below and in paragraph (l) hereof,
shall not be entitled or permitted to vote
on any matter
13
<PAGE>
required or permitted to be voted upon by
the stockholders of the Company.
(ii) (A) So long as any shares of the Redeemable
Preferred Stock are outstanding, the Company
shall not authorize the issuance of any
class of Parity Securities without the
affirmative vote or consent of Holders of at
least 66 2/3% of the then outstanding shares
of Redeemable Preferred Stock, voting or
consenting, as the case may be, separately
as one class, given in person or by proxy,
either in writing or by resolution adopted
at an annual or special meeting, except that
without the approval of Holders of the
Redeemable Preferred Stock, the Company may
(1) authorize or issue additional shares of
Redeemable Preferred Stock payable as
dividends pursuant to paragraph (c) hereof
and (2) authorize or issue shares of Parity
Securities in exchange for, or the net
proceeds of which are used to redeem or
repurchase, in accordance with the terms
hereof, any or all shares of Redeemable
Preferred Stock or other Parity Securities
then outstanding.
(B) So long as any shares of the Redeemable
Preferred Stock are outstanding, the Company
shall not amend this Certificate of
Incorporation so as to affect adversely the
specified rights, preferences, privileges or
voting rights of Holders of shares of
Redeemable Preferred Stock or, except as
provided in paragraph (f)(ii)(A) above, to
authorize the issuance of any additional
shares of Redeemable Preferred Stock without
the affirmative vote or consent of Holders
of a least 66 2/3% of the outstanding shares
of Redeemable Preferred Stock, voting or
consenting, as the case may be, separately
as one class, given in person or by proxy,
either in writing or by resolution adopted
at an annual or special meeting.
(C) (1) The creation, authorization or issuance
of any shares of any Junior Securities, (2)
the decrease in the amount of authorized
capital stock of any class, including the
Redeemable Preferred Stock, or (3) the
increase in the amount of authorized capital
stock of any class of Junior Securities
shall not require the consent of Holders of
Redeemable Preferred Stock and shall not be
deemed to affect adversely the rights,
preferences, privileges or voting rights of
Holders of shares of Redeemable Preferred
Stock.
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<PAGE>
(iii)
(A) If (1) dividends on the Redeemable Preferred
Stock are in arrears and unpaid (and, in the
case of dividends payable after August 31,
2004, are not paid in cash) for six
quarterly periods (a "Dividend Default");
(2) the Company fails to discharge any
repurchase or redemption obligation
(including pursuant to paragraph (g) hereof)
of the Redeemable Preferred Stock when
required (a "Redemption Default"), whether
or not the Company is permitted to do so by
the terms of the New Credit Facility, the
2007 Notes or any other obligations of the
Company; (3) the Company breaches or
violates one of the provisions set forth in
paragraph (l) hereof and the breach or
violation continues for a period of 60 days
or more after the Company receives notice
thereof specifying the default from Holders
representing at least 25% of the Redeemable
Preferred Stock then outstanding (a
"Covenant Default"); (4) a default occurs on
the obligations to pay principal of,
interest on or any other payment obligation
on one or more classes of Indebtedness of
the Company or any Subsidiary of the Company
within any applicable grace period after
final maturity (a "Payment Default"),
whether such Indebtedness exists on the
Issue Date or is incurred thereafter, or any
other Payment Default occurs on one or more
such classes of Indebtedness and such class
or classes of Indebtedness are declared due
and payable prior to their respective
maturities, and the amount of such
Indebtedness unpaid at final maturity or
declared due and payable exceeds, in the
aggregate, $10 million or its foreign
currency equivalent; or (5) any final,
non-appealable judgment or decree by a court
of competent jurisdiction for the payment of
money in excess of $10 million is rendered
against the Company or any Significant
Subsidiary of the Company and such judgment
or decree remains outstanding for a period
of 60 days following such judgment and is
not discharged, waived or stayed (a
"Judgment Default"), then, in any such case,
the number of directors constituting the
Board of Directors of the Company shall be
immediately and automatically adjusted to
permit the Holders of the majority of the
then outstanding shares of Redeemable
Preferred Stock, voting separately as one
class, to elect two directors. Subject to
paragraph (f)(iii)(B) below, Holders of a
majority of the issued and outstanding
shares of the Redeemable Preferred Stock,
voting separately as one class,
15
<PAGE>
shall have the exclusive right to elect two
directors at a meeting therefor called upon
occurrence of such Dividend Default,
Redemption Default, Covenant Default,
Payment Default or Judgment Default, as the
case may be, and at every subsequent meeting
at which the terms of office of the
directors so elected by the Holders of the
Redeemable Preferred Stock expire (other
than as described in paragraph (f)(iii)(B)
below). Each such event described in clauses
(l), (2), (3), (4) and (5) is a "Voting
Rights Triggering Event."
(B) The right of the Holders of Redeemable
Preferred Stock voting separately as one
class to elect members of the Board of
Directors as set forth in paragraph
(f)(iii)(A) above shall continue until such
time as (1) in the event such right arises
due to a Dividend Default, all accumulated
dividends that are in arrears on the
Redeemable Preferred Stock are paid in full
(and, in the case of Dividends payable after
August 31, 2004, are paid in cash); and (2)
in the event such right arises due to a
Redemption Default, a Covenant Default, a
Payment Default or a Judgment Default, the
Company remedies any such failure, breach or
default, at which time the term of any
directors elected pursuant to paragraph
(f)(iii)(A) shall terminate, subject always
to the same provisions for the renewal and
divestment of such special voting rights in
the case of any future Voting Rights
Triggering Event. At any time after voting
power to elect directors shall have become
vested and be continuing in the Holders of
shares of the Redeemable Preferred Stock
pursuant to this paragraph (f)(iii), or if
vacancies shall exist in the offices of
directors elected by the Holders of shares
of the Redeemable Preferred Stock, a proper
officer of the Company may, and upon the
written request of the Holders of record of
at least 10% of the shares of Redeemable
Preferred Stock then outstanding addressed
to the Secretary of the Company shall, call
a special meeting of the Holders of
Redeemable Preferred Stock, for the purpose
of electing the directors which such Holders
are entitled to elect. If such meeting shall
not be called by the proper officer of the
Company within 20 days after personal
service of said written request upon the
Secretary of the Company, or within 20 days
after mailing the same within the United
States by certified mail, addressed to the
Secretary of the Company at its principal
executive offices, then the Holders of
record of at least 20%
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<PAGE>
of the outstanding shares of the Redeemable
Preferred Stock may designate in writing one
of their numbers to call such meeting at the
expense of the Company, and such meeting may
be called by the Person so designated upon
the notice required for the annual meeting
of stockholders of the Company and shall be
held at the place for holding the annual
meetings of Stockholders or such other place
in the United States as shall be designated
in such notice. Notwithstanding the
provisions of this paragraph (f)(iii)(B), no
such special meeting shall be called if any
such request is received by the Company less
than 30 days before the date fixed for the
next ensuing annual or special meeting of
stockholders of the Company. Any Holder of
shares of the Redeemable Preferred Stock so
designated shall have, and the Company shall
provide, access to the lists of Holders of
shares of the Redeemable Preferred Stock for
purposes of calling a meeting pursuant to
the provisions of this paragraph
(f)(iii)(B).
(C) At any meeting held for the purpose of
electing directors at which the Holders of
Redeemable Preferred Stock shall have the
right, voting separately as one class, to
elect directors as aforesaid, the presence
in person or by proxy of the Holders of at
least a majority of the outstanding
Redeemable Preferred Stock shall be required
to constitute a quorum of such Redeemable
Preferred Stock.
(D) Any vacancy occurring in the office of a
director elected by the Holders of shares of
the Redeemable Preferred Stock may be filled
by the remaining director elected by the
Holders of shares of the Redeemable
Preferred Stock unless and until such
vacancy shall be filled by the Holders of
shares of the Redeemable Preferred Stock.
(iv) In any case in which the Holders of shares of the
Redeemable Preferred Stock shall be entitled to vote
pursuant to this paragraph (f) or pursuant to the
laws of the State of Delaware, each Holder of shares
of the Redeemable Preferred Stock shall be entitled
to one vote for each share of Redeemable Preferred
Stock held.
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<PAGE>
(g) Change of Control.
(i) (A) Upon the occurrence of a Change of Control
on or after the earlier to occur of (1) such
date that the 2007 Notes are no longer
outstanding and (2) February 1, 2008, each
Holder of Redeemable Preferred Stock shall
have the right to require the Company to
purchase all or any part of such Holder's
Redeemable Preferred Stock pursuant to an
offer (an "Offer") at a purchase price in
cash equal to 101% of the aggregate
liquidation preference thereof plus, without
duplication, an amount in cash equal to all
accumulated and unpaid dividends per share
(including an amount in cash equal to a
prorated dividend for the period from the
Dividend Payment Date immediately prior to
the repurchase date to the repurchase date),
if any, to the repurchase date (subject to
the right of Holders of Redeemable Preferred
Stock of record on the relevant record date
to receive dividends due on the relevant
Dividend Payment Date); provided, however,
that notwithstanding the occurrence of a
Change of Control, the Company shall not be
obligated to purchase the Redeemable
Preferred Stock pursuant to this paragraph
(g) in the event that it has irrevocably
exercised its right to redeem all of the
Redeemable Preferred Stock under paragraph
(e)(i) hereof and, provided further, that
the Company does not default in its
redemption obligations pursuant to such
election.
(B) In the event that at the time of such Change
of Control the terms of the Bank
Indebtedness restrict or prohibit the
repurchase of Redeemable Preferred Stock
pursuant to this paragraph (g), then prior
to the mailing of the notice to Holders of
Redeemable Preferred Stock provided for in
paragraph (g)(ii) below but in any event
within 30 days following any Change of
Control (unless the Company has exercised
its right to redeem all the Redeemable
Preferred Stock under paragraph (e)(i)
hereof), the Company shall (1) repay in full
all Bank Indebtedness or offer to repay in
full all Bank Indebtedness and repay the
Bank Indebtedness of each lender who has
accepted such offer or (2) obtain the
requisite consent under the agreements
governing the Bank Indebtedness to permit
the repurchase of the Redeemable Preferred
Stock as provided for in paragraph (g)(ii)
below.
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<PAGE>
(ii) Unless the Company has exercised its right
to redeem all the Redeemable Preferred Stock
under paragraph (e)(i) hereof, within 30
days following any Change of Control
described in clause (g)(i)(A) above, the
Company shall mail a notice to each Holder
of Redeemable Preferred Stock stating: (A)
that a Change of Control has occurred or
will occur and that such Holder of
Redeemable Preferred Stock has (or upon such
occurrence will have) the right to require
the Company to purchase such Holder's
Redeemable Preferred Stock at a purchase
price in cash equal to 101% of the aggregate
liquidation preference thereof, plus an
amount in cash equal to all accumulated and
unpaid dividends per share (including an
amount in cash equal to a prorated dividend
for the period from the Dividend Payment
Date immediately prior to the repurchase
date to the repurchase date), if any, to the
repurchase date (subject to the right of the
Holders of Redeemable Preferred Stock of
record on a record date to receive dividends
on the relevant Dividend Payment Date); (B)
the circumstances and relevant facts
regarding such Change of Control; (C) the
repurchase date (which shall be no earlier
than 30 days nor later than 60 days from the
date such notice mailed); and (D) the
instructions determined by the Company,
consistent with this paragraph (g), that a
Holder of Redeemable Preferred Stock must
follow in order to have its Redeemable
Preferred Stock purchased.
(iii) (A) Holders of Redeemable Preferred
Stock electing to have shares of
Redeemable Preferred Stock
purchased shall be required to
surrender Redeemable Preferred
Stock, together with all necessary
endorsements and appropriate forms
duly completed, to the Company at
the address specified in the notice
at least three Business Days prior
to the purchase date. Holders of
Redeemable Preferred Stock shall be
entitled to withdraw their election
if the Company receives not later
than two Business Days prior to the
purchase date a facsimile
transmission or letter setting
forth the name of the Holder of
Redeemable Preferred Stock, the
liquidation preference of the
Redeemable Preferred Stock which
was delivered for purchase by the
Holder of Redeemable Preferred
Stock as to which such notice of
withdrawal is being submitted and a
statement that such Holder of
Redeemable Preferred Stock is
withdrawing his election to have
such Redeemable Preferred Stock
purchased.
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<PAGE>
(B) On the repurchase date, all shares
of Redeemable Preferred Stock
purchased by the Company under this
paragraph (g) shall be retired by
the Company, and the Company shall
pay the purchase price plus
accumulated and unpaid dividends,
if any, to the Holders entitled
thereto.
(C) Unless the Company defaults in the
payment for the shares of
Redeemable Preferred Stock tendered
pursuant to the Offer, dividends
shall cease to accrue with respect
to the shares of Redeemable
Preferred Stock tendered and all
rights of Holders of such tendered
shares shall terminate, except for
the right to receive payment
therefor, on the purchase date.
(iv) The Company shall comply, to the extent
applicable, with the requirements of Section
14(e) under the Exchange Act and any other
securities laws and regulations, in
connection with the repurchase of Redeemable
Preferred Stock pursuant to this paragraph
(g). To the extent that the provisions of
any applicable securities laws or
regulations conflict with provisions of this
paragraph (g), the Company will comply with
the applicable securities laws and
regulations and it will not be deemed to
have breached its obligations under this
paragraph (g) by virtue thereof.
(h) Conversion or Exchange. Neither the Company nor the
Holders of shares of Redeemable Preferred Stock shall
have any rights hereunder to convert such shares into
or exchange such shares for shares of any other class
or classes or of any other series of any class or
classes of Capital Stock or Indebtedness of the
Company.
(i) Preemptive Rights. No shares of Redeemable Preferred
Stock shall have any rights of preemption whatsoever
as to any securities of the Company, or any warrants,
rights or options issued or granted with respect
thereto, regardless of how such securities or such
warrants, rights or options may be designated, issued
or granted.
(j) Reissuance of Redeemable Preferred Stock. Shares of
Redeemable Preferred Stock that have been issued and
reacquired in any manner, including shares purchased
or redeemed or exchanged, shall (upon compliance with
any applicable provisions of the laws of Delaware)
have the status of authorized but unissued shares of
Preferred Stock of the Company undesignated as to
series and may be designated or redesignated and
issued or reissued, as the case may be, as part of
any series of Preferred Stock of the Company,
provided that any issuance of such shares
20
<PAGE>
as Redeemable Preferred Stock must be in compliance
with the terms hereof.
(k) Business Day. If any payment, redemption or other
action shall be required by the terms hereof to be
made on a day that is not a Business Day, such
payment, redemption or other action shall be made on
the immediately succeeding Business Day.
(l) Certain Additional Provisions.
(i) Merger or Consolidation. The Company shall
not consolidate or merge with or into, or
convey, transfer or lease all or
substantially all of its assets to, any
Person unless (A) the resulting, transferee
or surviving Person (the "Successor
Company") will be a Person organized and
existing under the laws of the United States
of America, any State thereof or the
District of Columbia; (B) the Redeemable
Preferred Stock shall be converted into or
exchanged for and shall become shares of the
Successor Company having in respect of such
successor, transferee or resulting
corporation substantially the same powers,
preferences and relative participating,
optional or other special rights, and the
qualifications, limitations or restrictions
thereon that the Redeemable Preferred Stock
had immediately prior to such transaction;
(C) immediately after such transaction, no
Voting Rights Triggering Event, and no event
that after the giving of notice or lapse of
time or both would become a Voting Rights
Triggering Event, shall have occurred and be
continuing; (D) immediately after giving pro
forma effect to such transaction (and
treating any Indebtedness which becomes any
obligation of the Successor Company or any
Restricted Subsidiary as a result of such
transaction as having been Incurred by the
Successor Company or such Restricted
Subsidiary at the time of such transaction)
no Voting Rights Triggering Event shall have
occurred and be continuing; (E) immediately
after giving pro forma effect to such
transaction, the Successor Company would be
able to Incur an additional $1.00 of
Indebtedness under paragraph (l)(v)(A); (F)
immediately after giving effect to such
transaction, the Successor Company will have
a Consolidated Net Worth in an amount which
is not less than the Consolidated Net Worth
of the Company immediately prior to such
transaction; and (G) prior to the
consummation of any such proposed
transaction, the Company shall have
delivered to the Holders of a majority of
the outstanding shares of Redeemable
Preferred Stock an Officers' Certificate and
an Opinion of Counsel, each stating that
such transaction complies
21
<PAGE>
with the terms of this Certificate of
Incorporation and that all conditions
precedent to such transaction have been
satisfied.
Notwithstanding paragraphs (l)(i)(E) and
(l)(i)(F), any Wholly Owned Subsidiary may
consolidate with, merge into or transfer all
or part of its properties and assets to the
Company.
(ii) Limitation on Restricted Payments. The
Company will not, and will not permit any
Restricted Subsidiary to, directly or
indirectly, (A) declare or pay any dividend
or make any distribution on or in respect of
any Junior Securities (including any payment
in connection with any merger or
consolidation involving the Company) except
dividends or distributions payable solely in
Junior Securities (other than Disqualified
Stock) or in options, warrants or other
rights to purchase such Junior Securities
and except dividends or distributions
payable to the Company or another Restricted
Subsidiary (and, if such Restricted
Subsidiary making such dividend or
distribution is not wholly owned, to its
other stockholders on a pro rata basis), (B)
purchase, repurchase, redeem, retire or
otherwise acquire or retire for value any
Junior Securities or Parity Securities of
the Company held by Persons other than the
Company or a Restricted Subsidiary or (C)
make any Investment (other than a Permitted
Investment) in any Person (any such
dividend, distribution, purchase,
redemption, repurchase, other acquisition,
retirement, payment or Investment being
herein referred to as a "Restricted
Payment") if at the time the Company or such
Restricted Subsidiary makes such Restricted
Payment:
(x) a Voting Rights Triggering
Event shall have occurred and be continuing
or would occur as a consequence thereof;
(y) the Company and its Restricted
Subsidiaries could not Incur at least $1.00
of additional Indebtedness under paragraph
(l)(v)(A); or
(z) the aggregate amount of such
Restricted Payment and all other Restricted
Payments (the amount so expended, if other
than in cash, to be determined in good faith
by the Board of Directors of the Company)
made subsequent to the Issue Date (excluding
Restricted Payments permitted by paragraphs
(l)(ii)(1), (l)(ii)(3) and (l)(ii)(6)),
would exceed the sum of: (i) 50% of the
Consolidated Net Income with respect to the
period (treated as one accounting period)
from the beginning of the fiscal quarter in
which the Issue Date occurs) to the end of
the most recent fiscal
22
<PAGE>
quarter for which internal financial
statements are available ending at least 30
days prior to the date of such Restricted
Payment (or, in case such Consolidated Net
Income is a deficit, minus 100% of such
deficit); (ii) the aggregate Net Cash
Proceeds received by the Company from the
issue or sale of Capital Stock (other than
Disqualified Stock) subsequent to the Issue
Date (other than an issuance or sale to a
Subsidiary) and, without duplication, the
aggregate amount of any other capital
contributions received by the Company in
cash subsequent to the Issue Date and on or
prior to the date the Restricted Payment
occurs; (iii) the amount by which
Indebtedness of the Company is reduced on
the Company's balance sheet upon the
conversion or exchange (other than by a
Restricted Subsidiary) subsequent to the
Issue Date of any Indebtedness of the
Company convertible or exchangeable for
Capital Stock (other than Disqualified
Stock) of the Company (less the amount of
any cash or other property distributed by
the Company upon such conversion or
exchange); and (iv) the amount equal to the
net reduction in Investments in Unrestricted
Subsidiaries resulting from (a) repayments
of the principal of loans or advances or
other transfers of assets to the Company or
any Restricted Subsidiary from Unrestricted
Subsidiaries or (b) the redesignation of
Unrestricted Subsidiaries as Restricted
Subsidiaries or (c) the sale or liquidation
of any Unrestricted Subsidiaries (valued in
each case as provided in the definition of
"Investment") not to exceed, in the case of
any Unrestricted Subsidiary, the amount of
Investments previously made by the Company
or any Restricted Subsidiary in such
Unrestricted Subsidiary, which amount was
previously included in the calculation of
the amount of Restricted Payments.
Notwithstanding the foregoing, this
Certificate of Incorporation shall not
prohibit as Restricted Payments:
(1) any purchase, redemption,
repurchase, defeasance, retirement
or other acquisition of Junior
Securities or Parity Securities
made by exchange (including any
such exchange pursuant to the
exercise of a conversion right or
privilege in connection with which
cash is paid in lieu of the
issuance of fractional shares) for,
or out of the net proceeds of the
substantially concurrent sale of,
Junior Securities or Parity
Securities of the Company (other
than Disqualified Stock and other
than Capital Stock issued or sold
to a Subsidiary); provided,
however, that (a) such purchase,
redemption, defeasance or other
acquisition will be excluded in the
23
<PAGE>
calculation of the amount of
Restricted Payments pursuant to
paragraph (l)(ii)(z) and (b) the
Net Cash Proceeds from such sale
will be excluded from paragraph
(l)(ii)(z);
(2) dividends paid within 60 days after
the date of declaration thereof if
at such date of declaration such
dividend would have complied with
this Certificate of Incorporation,
including without limitation
paragraph (l)(ii); provided,
however, that the amount of such
dividend will be included in the
calculation of the amount of
Restricted Payments pursuant to
paragraph (l)(ii)(z);
(3) Investments in securities not
constituting cash or Temporary Cash
Investments received in connection
with an Asset Disposition effected
in accordance with the Indenture
governing the 2007 Notes (the
"Indenture"); provided, however,
that such amounts will be excluded
in the calculation of the amount of
Restricted Payments pursuant to
paragraph (l)(ii)(z);
(4) the payment of scheduled dividends
on, or the scheduled or mandatory
redemption, repurchase or
retirement of, any Disqualified
Stock (other than Put/Call
Preferred Stock) issued after the
date hereof in compliance with the
provisions of this Certificate of
Incorporation; provided, however,
that such amounts will be included
in the calculation of the amount of
Restricted Payments pursuant to
paragraph (l)(ii)(z);
(5) payments made with respect to the
repurchase, redemption or other
acquisition or retirement for value
of Management Equity Interests (a)
prior to October 31, 2000 in an
aggregate principal amount not to
exceed $500,000 in any twelve-month
period and (b) subsequent to October
31, 2000 in an aggregate principal
amount not to exceed $2 million in
any twelve month period; provided,
however, that (x) subsequent to
October 31, 2000, the Company may
make an additional $2 million of
such payments in any such
twelve-month period if, after giving
pro forma effect to all such
payments, the Consolidated Coverage
Ratio would be greater than 2.5:1,
and (y) to the extent such
Management Equity Interests have
been exchanged for Put/Call
Promissory Notes or Put/Call
Preferred Stock incurred or issued
in accordance with paragraph
(l)(v)(B)(11), such
24
<PAGE>
amounts may be applied toward the
repurchase of or payment on such
Put/Call Promissory Notes and
Put/Call Preferred Stock; and
provided further that such amounts
will be included in the calculation
of the amount of Restricted
Payments pursuant to paragraph
(l)(ii)(z);
(6) the repurchase of Management Equity
Interests in exchange for Put/Call
Promissory Notes and Put/Call
Preferred Stock incurred or issued
in accordance with paragraph
(l)(v)(B)(11); provided that such
repurchase will be excluded in the
calculation of the amount of
Restricted Payments pursuant to
paragraph (l)(ii)(z); and
(7) other Restricted Payments in an
aggregate amount not to exceed $10
million; provided that such amounts
will be included in the calculation
of the amount of Restricted
Payments pursuant to paragraph
(l)(ii)(z);
provided, however, that at the time of, and
after giving effect to, any Restricted
Payment permitted by paragraphs (l)(ii)(4),
(l)(ii)(5) and (l)(ii)(7) hereof no Voting
Rights Triggering Event shall have occurred
and be continuing. In addition, dividends on
the Company's Capital Stock used in good
faith to effect the payment of fees,
expenses and other transactions which are
permitted pursuant to paragraph (l)(iii)(B)
shall not be deemed to be Restricted
Payments.
(iii) Transactions with Affiliates.
(A) The Company will not, and will not
permit any Restricted Subsidiary
to, directly or indirectly, enter
into or conduct any transaction or
series of related transactions
(including the purchase, sale,
lease or exchange of any property
or the rendering of any service)
with any Affiliate of the Company
or a Restricted Subsidiary (an
"Affiliate Transaction") unless (1)
the terms of such transaction are
no less favorable to the Company or
such Restricted Subsidiary, as the
case may be, than those that could
be obtained at the time of such
transaction in arm's-length
dealings with a Person who is not
such an Affiliate, (2) in the event
such Affiliate Transaction involves
an aggregate amount in excess of
$2.0 million, the terms of such
transaction shall have been
approved by a majority of the
members of the Board of Directors
(and such majority determines that
such
25
<PAGE>
Affiliate Transaction satisfies the
criteria set forth in paragraph
(l)(iii)(A)(1) and (3) in the event
such Affiliate Transaction involves
an aggregate amount in excess of
$7.5 million, the Company has
received a written opinion from (I)
a nationally recognized independent
accounting or investment banking
firm or (II) in the event the
applicable Affiliate Transaction
requires expertise of an expert
other than an accounting or an
investment banking firm, an
appraiser selected by the Company
with expertise in analyzing the
applicable Affiliate Transaction,
that such Affiliate Transaction is
fair to the Company or such
Restricted Subsidiary from a
financial point of view.
(B) The provisions of paragraph
(l)(iii)(A) shall not prohibit (1)
any Restricted Payment permitted to
be made pursuant to paragraph
(l)(ii), (2) any issuance of
securities, or other payments,
awards or grants in cash,
securities or otherwise pursuant
to, or the funding of, employment
arrangements, stock options and
stock ownership plans approved by
the Board of Directors of the
Company, (3) any fees, indemnities,
loans or advances to employees in
the ordinary course of business,
(4) any transaction between the
Company and a Restricted Subsidiary
or between Restricted Subsidiaries,
(5) any agreement in effect on the
Issue Date or any amendment thereto
or transaction contemplated thereby
(and any replacement or amendment
of any such agreement so long as
any such amendment or replacement
thereof is not materially less
favorable to the Holders than the
original agreement in effect on the
Issue Date), (6) payments by the
Company or any of its Restricted
Subsidiaries to Mentmore and/or its
Affiliates made for any financial
advisory, financing, underwriting
or placement services or in respect
of other investment banking
activities, including, without
limitation, in connection with
acquisitions or divestitures, which
payments are approved by a majority
of the members of the Board of
Directors of the Company in good
faith, (7) payments under any tax
sharing agreement to the extent
such payments do not otherwise
exceed the tax liability the
Company would have had were it not
party to such tax sharing
agreement, (8) any other payment or
reimbursement of reasonable and
customary fees and expenses
incurred by an Affiliate for
services rendered to the Company or
any of its Restricted Subsidiaries
not to exceed $250,000 in any
twelve-month
26
<PAGE>
period (without duplication for any
amounts paid pursuant to any other
clause of this paragraph
(l)(iii)(B)), and (9) payments
under the Management Agreement in
an amount equal to the greater of
(a) $750,000 in any fiscal year and
(b) 1% of the Company's total
consolidated sales in any fiscal
year, provided, in the case of
clause (b) of this paragraph
(l)(iii)(B)(9), that the Company's
Consolidated Coverage Ratio, after
giving pro forma effect to such
payment, is equal to or greater
than 2.25 to 1, in each case plus
reasonable expenses incurred in
connection with and reimbursable
under the Management Agreement.
(iv) Reports. Whether or not required by the
rules and regulations of the Commission, so
long as any shares of Redeemable Preferred
Stock are outstanding, the Company will
furnish to the Holders of Redeemable
Preferred Stock, within 15 days after it is
or would have been required to file such
with the Commission, (A) all quarterly and
annual financial information that would be
required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the
Company were required to file such Forms,
including a "Management's Discussion and
Analysis of Financial Condition and Results
of Operations" and, with respect to the
annual information only, a report thereon by
the Company's certified independent
accountants and (B) all current reports that
would be required to be filed with the
Commission on Form 8-K if the Company was
required to file such reports. In addition,
whether or not required by the rules and
regulations of the Commission, the Company
will file a copy of all such information and
reports with the Commission for public
availability (unless the Commission will not
accept such a filing) and make such
information available to securities analysts
and prospective investors upon request. In
addition, the Company has agreed that, for
so long as any shares of Redeemable
Preferred Stock remain outstanding, it will
furnish to the Holders and to securities
analysts and prospective investors, upon
their request, the information required to
be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
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<PAGE>
(v) Limitation on Indebtedness.
(A) (1) The Company will not Incur, and will
not permit any Restricted Subsidiary to
Incur, any Indebtedness (including Acquired
Indebtedness) or issue Disqualified Stock
and (2) the Company will not permit any of
its Restricted Subsidiaries to issue any
shares of Preferred Stock; provided,
however, that the Company may Incur
Indebtedness (including Acquired
Indebtedness) or issue Disqualified Stock
and any Restricted Subsidiary may incur
Indebtedness (including Acquired
Indebtedness but excluding Preferred Stock),
in each case if on the date thereof (and
after giving effect to the application of
proceeds therefrom) the Consolidated
Coverage Ratio would be greater than 2.0:1.
(B) Notwithstanding paragraph (l)(v)(A),
the Company and its Restricted
Subsidiaries may Incur:
(1) Indebtedness (including,
without limitation, letters of credit and
Guarantees) of the Company or any Restricted
Subsidiary under the New Credit Facility in
an aggregate principal amount outstanding at
any time not to exceed $235 million;
(2) Indebtedness of the Company
owing to and held by any Restricted
Subsidiary or Indebtedness of a Restricted
Subsidiary owing to and held by the Company
or any Restricted Subsidiary; provided,
however, that any subsequent issuance or
transfer of any Capital Stock or any other
event which results in any such Restricted
Subsidiary ceasing to be a Restricted
Subsidiary or any subsequent transfer of any
such Indebtedness (except to the Company or
a Restricted Subsidiary or a pledge or other
transfer thereof intended to create a
security interest therein) will be deemed to
constitute the Incurrence of such
Indebtedness by the issuer thereof;
(3) Indebtedness of the Company
represented by the Redeemable Preferred
Stock and any Indebtedness, Disqualified
Stock or Preferred Stock of the Company or
any Restricted Subsidiary (other than the
Indebtedness described in paragraphs
(l)(v)(B)(1) and (l)(v)(B)(2)) outstanding
on the Issue Date (including the $100
million aggregate principal amount of the
2007 Notes and the Guarantees thereof
outstanding on the Issue Date);
28
<PAGE>
(4) Indebtedness, Disqualified
Stock or Preferred Stock of a Restricted
Subsidiary outstanding on or prior to the
date on which such Restricted Subsidiary was
acquired by the Company or a Restricted
Subsidiary (other than Indebtedness,
Disqualified Stock or Preferred Stock
Incurred in connection with, or in
contemplation of, the transaction or series
of related transactions pursuant to which
such Restricted Subsidiary became a
Restricted Subsidiary or was otherwise
acquired by the Company or a Restricted
Subsidiary); provided, however, that the
aggregate principal amount, accreted value
or liquidation preference, as applicable, of
such Indebtedness, Disqualified Stock or
Preferred Stock does not exceed $7.5 million
at any one time outstanding;
(5) Indebtedness (a) in respect of
performance bonds, bankers' acceptances,
workers' compensation claims, surety or
appeal bonds, payment obligations in
connection with self-insurance or similar
obligations, and bank overdrafts (and
letters of credit in respect thereof)
provided by the Company or any Restricted
Subsidiary in the ordinary course of its
business and which do not secure other
Indebtedness and (b) under Currency
Agreements and Interest Rate Agreements
Incurred which, at the time of Incurrence,
is in the ordinary course of business;
provided that such agreements are entered
into for bona fide hedging purposes, are not
for speculation or trading purposes and are
designed to protect against fluctuations in
interest rates or currency exchange rates,
as the case may be, and, in the case of
Interest Rate Agreements, any such Interest
Rate Agreement has a notional amount
corresponding to the Indebtedness being
hedged thereby;
(6) Indebtedness represented by
Guarantees by the Company of Indebtedness
otherwise permitted to be Incurred pursuant
to this paragraph (l)(v) and Indebtedness
represented by Guarantees by a Restricted
Subsidiary of Indebtedness of the Company or
of another Restricted Subsidiary otherwise
permitted to be Incurred pursuant to this
paragraph (l)(v) (including Guarantees of
the 2007 Notes);
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(7) Indebtedness Incurred by the
Company or any Restricted Subsidiary and
arising from agreements providing for
indemnification, adjustment of purchase
price or similar obligations, and from
guarantees or letters of credit, surety
bonds or performance bonds securing any
obligations of the Company or any Restricted
Subsidiary pursuant to such agreements, in
each case incurred in connection with the
purchase or sale of a business or assets
otherwise permitted by this Certificate of
Incorporation;
(8) Indebtedness, Disqualified
Stock or Preferred Stock of the Company or
Indebtedness (other than Preferred Stock) of
any Restricted Subsidiary in an aggregate
principal amount (or having an aggregate
liquidation preference) not to exceed $5
million at any time outstanding (including
pursuant to any refinancing thereof)
incurred in connection with the purchase,
redemption, acquisition, cancellation or
other retirement for value of Management
Equity Interests;
(9) the incurrence by the Company
or any Restricted Subsidiary of Indebtedness
represented by Capitalized Lease
Obligations, mortgage financings or purchase
money obligations, in each case incurred for
the purpose of financing or refinancing all
or any part of the purchase price or cost of
construction or improvement of property,
plant or equipment used in the business of
the Company or such Restricted Subsidiary,
in an aggregate principal amount not to
exceed the principal amount of such
Capitalized Lease Obligations outstanding on
the date hereof plus $10 million at any time
outstanding;
(10) the issuance by Stellex
Aerospace of Series B Preferred Stock having
an aggregate liquidation preference not to
exceed $200,000 at any one time outstanding
to its officers and employees;
(11) (a) Indebtedness of the
Company or a Restricted Subsidiary
represented by Put/Call Promissory Notes and
(b) Preferred Stock (other than Disqualified
Stock) of the Company or a Restricted
Subsidiary represented by Put/Call Preferred
Stock, in each case incurred or issued in
exchange for Management Equity Interests, in
an aggregate amount not to exceed the value
(calculated in accordance with the
respective agreements pursuant to which such
Management Equity Interests were issued or
exchanged) of the Management Equity
Interests so exchanged;
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(12) the issuance by the Company or
any Restricted Subsidiary of Refinancing
Indebtedness in exchange for, or the net
proceeds which are used to refund, refinance
or replace, Indebtedness that was permitted
by paragraph (l)(v)(A) or by paragraphs
(l)(v)(B)(3) and (4) to be incurred;
(13) other Indebtedness or
Preferred Stock (other than Disqualified
Stock) of the Company or other Indebtedness
(other than Preferred Stock) of any
Restricted Subsidiary in an aggregate
principal amount (or having an aggregate
liquidation preference) at any one time
outstanding not to exceed $20 million; and
(14) Indebtedness of a Restricted
Subsidiary represented by Preferred Stock
issued to the seller in connection with the
acquisition from the seller of such
Restricted Subsidiary (or the assets
comprising all or a portion of the assets
held by such Restricted Subsidiary) by the
Company or a Restricted Subsidiary, having
an aggregate liquidation preference at any
one time outstanding not to exceed $20
million; provided that after giving effect
to any such incurrence and the related
dividends in accordance with the definition
of Consolidated Coverage Ratio, the Company
would have been able to incur at least $1.00
of additional Indebtedness under paragraph
(l)(v)(A).
(C) The Company will not permit any
Unrestricted Subsidiary to Incur
any Indebtedness other than
Non-Recourse Debt, provided,
however, if any such Indebtedness
ceases to be Non-Recourse Debt,
such event shall be deemed to
constitute an Incurrence of
Indebtedness by the Company or a
Restricted Subsidiary.
(D) For purposes of determining
compliance with this section
(l)(v), (1) in the event that an
item of Indebtedness meets the
criteria of more than one of the
types of Indebtedness described
above, the Company will classify
(and may reclassify from time to
time) such item of Indebtedness and
only be required to include the
amount and type of such
Indebtedness in one of the above
clauses and (2) an item of
Indebtedness may be divided and
classified in more than one of the
types of Indebtedness described
above.
(vi) Limitation on Restrictions on Distributions
from Restricted Subsidiaries. The Company
will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or
permit to
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exist or become effective any consensual
encumbrance or restriction on the ability of
any Restricted Subsidiary to (A) pay
dividends or make any other distributions on
its Capital Stock or pay any Indebtedness or
other obligation owed to the Company, (B)
make any loans or advances to the Company or
(C) transfer any of its property or assets
to the Company, except:
(1) any encumbrance or restriction
pursuant to an agreement in effect at or
entered into on the Issue Date (including
the New Credit Facility and the Indenture
governing the 2007 Notes);
(2) any encumbrance or restriction
with respect to a Restricted Subsidiary
pursuant to an agreement relating to any
Capital Stock of such Restricted Subsidiary
or Indebtedness Incurred by such Restricted
Subsidiary on or prior to the date on which
such Restricted Subsidiary was acquired by
the Company or a Restricted Subsidiary and
outstanding on such date (other than
Indebtedness Incurred in connection with, or
in contemplation of, the transaction or
series of related transactions pursuant to
which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the
Company or a Restricted Subsidiary);
(3) any encumbrance or restriction
contained in agreements or instruments with
respect to purchase money obligations for
property acquired in the ordinary course of
business that impose restrictions of the
nature described in clause (C) of this
section (l)(vi) on the property so acquired;
(4) any encumbrance or restriction
pursuant to an agreement effecting a
Refinancing of Indebtedness Incurred
pursuant to an agreement referred to in
paragraphs (l)(vi)(1), (2) or (3) or
contained in any amendment to an agreement
referred to in paragraphs (l)(vi)(1), (2) or
(3); provided, however, that the
encumbrances and restrictions contained in
any such refinancing agreement or amendment
are not, taken as a whole, materially less
favorable to the Holders than the
encumbrances and restrictions contained in
any such agreement as determined in good
faith by the Company;
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(5) in the case of paragraph
(l)(vi)(C), any encumbrance or restriction
(a) that restricts in a customary manner the
subletting, assignment or transfer of any
property or asset that is subject to a
lease, license or similar contract, (b) by
virtue of any transfer of, agreement to
transfer, option or right with respect to,
or Lien on, any property or assets of the
Company or any Restricted Subsidiary not
otherwise prohibited by this Certificate of
Incorporation or (c) contained in security
agreements, mortgages or Capitalized Lease
Obligations securing Indebtedness of a
Restricted Subsidiary to the extent such
encumbrance or restrictions restrict the
transfer of the property subject to such
security agreements, mortgages or
Capitalized Lease Obligations;
(6) any restriction with respect to
a Restricted Subsidiary imposed pursuant to
an agreement entered into for the sale or
disposition of Capital Stock or assets of
such Restricted Subsidiary pending the
closing of such sale or disposition;
(7) any encumbrance or restriction
arising under or by reason of applicable
law;
(8) any encumbrance or restriction
contained in this Certificate of
Incorporation;
(9) customary net worth provisions
contained in leases and other agreements
entered into by a Restricted Subsidiary in
the ordinary course of business; and
(10) customary restrictions
contained in any agreements or documentation
governing Indebtedness issued pursuant to
paragraph (l)(v)(B)(13); provided that such
restrictions are no more restrictive, taken
as a whole, than those pursuant to the New
Credit Facility.
(vii) Limitation on Sales of Subsidiary Capital
Stock. The Company (A) will not, and will
not permit any Restricted Subsidiary of the
Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of
any Restricted Subsidiary to any Person
(other than to the Company or a
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<PAGE>
Wholly Owned Subsidiary or to management of
such Restricted Subsidiary) and (B) will not
permit any Restricted Subsidiary to issue
any of its Capital Stock (other than to
management of such Restricted Subsidiary
and, if necessary, shares of its Capital
Stock constituting directors' qualifying
shares) to any Person other than to the
Company or a Wholly Owned Subsidiary, unless
after any such transfer, conveyance, sale,
lease, disposition or issuance, such
Restricted Subsidiary continues to be a
Restricted Subsidiary; provided, however,
that this provision shall not prohibit the
transfer, conveyance, sale, lease or other
disposition of all of the Capital Stock of
any Restricted Subsidiary or the retention
of Preferred Stock in connection with any
such transfer, conveyance, sale, lease or
other disposition.
(viii) Compliance Certificate. The Company and each
Restricted Subsidiary shall deliver to the
Holders of a majority of the outstanding
shares of Redeemable Preferred Stock within
120 days after the end of each fiscal year
of the Company an Officers' Certificate
signed by the chief executive officer, the
chief financial officer or the chief
accounting officer stating that in the
course of the performance by the signers of
their duties as Officers of the Company they
would normally have knowledge of any Voting
Rights Triggering Event and whether or not
the signers know of any Voting Rights
Triggering Event that occurred during such
period. If they do, the certificate shall
describe the Voting Rights Triggering Event,
its status and what action the Company is
taking or proposes to take with respect
thereto.
(ix) Further Instruments and Acts. Upon request
of the Holders of a majority of the
outstanding shares of Redeemable Preferred
Stock, the Company will execute and deliver
such further instruments and do such further
acts as may be reasonably necessary or
proper to carry out more effectively the
purpose of this Certificate of
Incorporation.
(x) Corporate Existence. Except as otherwise
permitted by section (l)(i), the Company
shall do or cause to be done, at its own
cost and expense, all things necessary to
preserve and keep in full force and effect
its corporate existence and the corporate
existence of each of its Subsidiaries in
accordance with the respective
organizational documents of each such
Subsidiary and the material rights (charter
and statutory) and franchises of the Company
and each such Subsidiary; provided, however,
that the Company shall not be required to
preserve, with respect to itself, any
material right or franchise and, with
respect to any of its Subsidiaries, any such
existence, material right or franchise, if
the Board of Directors of the Company shall
determine in good faith that the
preservation thereof is no longer desirable
in the conduct of the business of the
Company and the Subsidiaries, taken as a
whole.
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<PAGE>
(xi) Payment of Taxes and Other Claims. The
Company shall pay or discharge or cause to
be paid or discharged, before the same shall
become delinquent, (A) all material taxes,
assessments and governmental charges
(including withholding taxes and any
penalties, interest and additions to taxes)
levied or imposed upon it or any of its
Subsidiaries or properties of it or any of
its Subsidiaries and (B) all lawful claims
for labor, materials and supplies that, if
unpaid, might by law become a Lien upon the
property of it or any of its Subsidiaries;
provided, however, that the Company shall
not be required to pay or discharge or cause
to be paid or discharged any such tax,
assessment, charge or claim whose amount,
applicability or validity is being contested
in good faith by appropriate proceedings
properly instituted and diligently conducted
for which adequate reserves, to the extent
required under GAAP, have been taken.
(xii) Maintenance of Properties and Insurance.
(A) The Company shall, and shall cause
each of its Subsidiaries to,
maintain its material properties in
good working order and condition
(subject to ordinary wear and tear)
and make all necessary repairs,
renewals, replacements, additions,
betterments and improvements
thereto and actively conduct and
carry on its business; provided,
however, that nothing in this
section (l)(xii) shall prevent the
Company or any of its Subsidiaries
from discontinuing the operation
and maintenance of any of its
properties, if such discontinuance
is, in the good faith judgment of
the Board of Directors of the
Company or the Subsidiary, as the
case may be, desirable in the
conduct of their respective
businesses and is not
disadvantageous in any material
respect to the Holders.
(B) The Company shall provide or cause
to be provided, for itself and each
of its Subsidiaries, insurance
(including appropriate
self-insurance) against loss or
damage of the kinds that, in the
good faith judgment of the Board of
Directors of the Company, are
adequate and appropriate for the
conduct of the business of the
Company and such Subsidiaries in a
prudent manner, with reputable
insurers or with the government of
the United States of America or any
agency or instrumentality thereof,
in such amounts, with such
deductibles, and by such methods as
shall be
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<PAGE>
customary, in the good faith
judgment of the Board of Directors
of the Company, for companies
similarly situated in the industry.
(xiii) Compliance with Laws. The Company shall
comply, and shall cause each of its
Subsidiaries to comply, with all applicable
statutes, rules, regulations, orders and
restrictions of the United States of
America, all states and municipalities
thereof, and of any governmental department,
commission, board, regulatory authority,
bureau, agency and instrumentality of the
foregoing, in respect of the conduct of
their respective businesses and the
ownership of their respective properties,
except for such noncompliances as are not in
the aggregate reasonably likely to have a
material adverse effect on the financial
condition or results of operations of the
Company and its Subsidiaries, taken as a
whole.
(m) Definitions. As used in this Article FOURTH, Section
A of the Certificate of Incorporation, the following
terms shall have the following meanings (with terms
deemed in the singular having comparable meanings
when used in the plural and vice versa), unless the
context otherwise requires:
"Acquired Indebtedness" of any specified Person means
Indebtedness of any other Person existing at the time
such other Person is merged with or into or becomes a
Restricted Subsidiary of such specified Person,
including Indebtedness Incurred in connection with,
or in contemplation of, such other Person's becoming
a Restricted Subsidiary of such specified Person.
"Affiliate" of any specified Person means any other
Person, directly or indirectly, controlling or
controlled by or under direct or indirect common
control with such specified Person. For the purposes
of this definition, "control" when used with respect
to any Person means the power to direct the
management and policies of such Person, directly or
indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings
correlative to the foregoing; provided that the
beneficial ownership of 10% or more of the Voting
Stock of a Person shall be deemed to be control.
"Asset Disposition" means any sale, lease, transfer
or other disposition (or series of related sales,
leases, transfers or dispositions) of shares of
Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares), property or other
assets, including by way of a Sale/Leaseback
Transaction (each referred to for the purposes of
this definition as a "disposition"), by the Company
or any of its Restricted Subsidiaries (including any
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<PAGE>
disposition by means of a merger, consolidation or
similar transaction) other than (i) a disposition by
a Restricted Subsidiary to the Company or by the
Company or a Restricted Subsidiary to a Restricted
Subsidiary, (ii) a disposition of property or assets
in the ordinary course of business, (iii)
dispositions of inventory in the ordinary course of
business, (iv) dispositions of obsolete or worn-out
equipment and (v) dispositions with a fair market
value of less than $1.0 million in any 12-month
period.
"Average Life" means, as of the date of
determination, with respect to any Indebtedness or
Preferred Stock, the quotient obtained by dividing
(i) the sum of the product of the numbers of years
from the date of determination to the dates of each
successive scheduled principal payment of such
Indebtedness or redemption or similar payment with
respect to such Preferred Stock multiplied by the
amount of such payment by (ii) the sum of all such
payments.
"Bank Indebtedness" means any and all Obligations,
whether outstanding on the Issue Date or thereafter
incurred, payable by the Company or its Subsidiaries
under or in respect of the New Credit Facility and
any related notes, collateral documents, letters of
credit and guarantees, including, without limitation,
principal, premium (if any), interest (including
interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating
to the Company whether or not a claim for post filing
interest is allowed in such proceedings), fees,
charges, expenses, reimbursement obligations,
guarantees, indemnities and all other amounts payable
thereunder or in respect thereof.
"Board of Directors" means the Board of Directors or
equivalent governing body of a Person (or the general
partner of such Person, as the case may be) or any
committee thereof duly authorized to act on behalf of
such Board of Directors or equivalent governing body.
"Business Day" means a day other than a Saturday,
Sunday or other day on which banking institutions in
New York State are authorized or required by law to
close.
"Capitalized Lease Obligation" of a Person means an
obligation of such Person that is required to be
classified and accounted for on the balance sheet of
such Person as a capitalized lease for financial
reporting purposes in accordance with GAAP, and the
amount of Indebtedness represented by such obligation
shall be the capitalized amount of such obligation
determined in accordance with GAAP; and the Stated
Maturity thereof shall be the date of the last
payment of rent or any other amount due under such
lease.
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<PAGE>
"Capital Stock" of any Person means (i) in the case
of a corporation, corporate stock, (ii) in the case
of an association or business entity, any and all
shares, interests, participations, rights or other
equivalents (however designated) of corporate stock,
(iii) in the case of a partnership or limited
liability company, partnership or membership
interests (whether general or limited) and (iv) any
other interest or participation that confers on a
Person the right to receive a share of the profits
and losses of, or distributions of assets of, the
issuing Person, in each case, including Preferred
Stock.
"Change of Control" means the occurrence of any of
the following events:
(i)(A) the consummation of any transaction
(including, without limitation, any merger or
consolidation) the result of which is that any
"person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more
Permitted Holders, is or becomes the beneficial owner
(as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of more than
35% of the total voting power of the Voting Stock of
the Company and (B) the Permitted Holders
"beneficially own" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act), directly or
indirectly, in the aggregate a lesser percentage of
the total voting power of the Voting Stock of the
Company than such other person and do not have the
right or ability by voting power, contract or
otherwise to elect or designate for election a
majority of the Board of Directors of the Company;
(ii) the first day on which a majority of the members
of the Board of Directors of the Company are not
Continuing Directors;
(iii) any sale, lease, exchange or other transfer (in
one transaction or a series of related transactions)
of all, or substantially all, the assets of the
Company and its Restricted Subsidiaries taken as a
whole to any "person" or group of "persons" for
purposes of Section 13(d) of the Exchange Act (other
than to any Wholly Owned Subsidiary of the Company or
to one or more Permitted Holders); or
(iv) the adoption of a plan of liquidation of the
Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Consolidated Coverage Ratio" as of any date of determination
means the ratio of
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(i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters for which internal
financial information is available ending at least 30 days
prior to the date of such determination to (ii) Consolidated
Interest Expense for such four fiscal quarters; provided,
however, that, without duplication, (1) if the Company or any
Restricted Subsidiary has Incurred any Indebtedness (other
than in the case of Indebtedness arising under revolving
credit borrowings, in which case Consolidated Interest Expense
shall be computed based upon the average daily balance of such
Indebtedness during the period) since the beginning of such
period that remains outstanding or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio
is an Incurrence of Indebtedness, or both, EBITDA and
Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the
first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if
such discharge had occurred on the first day of such period,
(2) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition or
if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Asset Disposition, the
EBITDA for such period shall be reduced by an amount equal to
the EBITDA (if positive) directly attributable to the assets
which are the subject of such Asset Disposition for such
period, or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced
by an amount equal to the Consolidated Interest Expense
directly attributable to any Indebtedness of the Company or
any Restricted Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to the Company and its
continuing Restricted Subsidiaries in connection with such
Asset Disposition for such period (and, if the Capital Stock
of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such sale), (3) if
since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made
an Investment in any Restricted Subsidiary (or any Person
which becomes a Restricted Subsidiary) or an acquisition of
assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made
hereunder, which constitutes all or substantially all of an
operating unit of a business, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro
forma effect thereto (including the Incurrence or retirement
of any Indebtedness) as if such Investment or acquisition
occurred on the first day of such period and EBITDA for such
period shall be calculated without giving effect to clause
(ii) set forth in the definition of Consolidated Net Income
and (4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with
or into the
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<PAGE>
Company or any Restricted Subsidiary since the beginning of
such period) shall have made any Asset Disposition or any
Investment that would have required an adjustment pursuant to
clause (2) or (3) above if made by the Company or a Restricted
Subsidiary during such period, EBITDA and Consolidated
Interest Expense for such period shall be calculated after
giving pro forma effect thereto as if such Asset Disposition
or Investment occurred on the first day of such period. For
purposes of this definition, whenever pro forma effect is to
be given to an acquisition of assets, the amount of income or
earnings relating thereto and the amount of Consolidated
Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be
determined in good faith by a responsible financial or
accounting officer of the Company. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect,
the interest expense on such Indebtedness shall be calculated
as if the rate in effect on the date of determination had been
the applicable rate for the entire period (taking into account
any Interest Rate Agreement applicable to such Indebtedness).
"Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its consolidated
Restricted Subsidiaries, plus, to the extent not included in
such interest expense, (i) interest expense attributable to
capital leases, (ii) amortization of debt discount and debt
issuance cost (excluding the amortization of deferred
financing fees), (iii) capitalized interest, (iv) non-cash
interest expense, (v) commissions, discounts and other fees
and charges owed with respect to letters of credit and
bankers' acceptance financing, (vi) interest actually paid by
the Company or any such Restricted Subsidiary under any
Guarantee of Indebtedness or other obligation of any other
Person, (vii) net costs associated with Hedging Obligations
(including amortization of fees), (viii) (A) Disqualified
Stock dividends and (B) Preferred Stock dividends of a
Restricted Subsidiary, in each case, other than dividends paid
in Capital Stock (except Disqualified Stock) and only in
respect of such Disqualified Stock or Preferred Stock held by
Persons other than the Company or a Wholly Owned Subsidiary
and (ix) the cash contributions to any employee stock
ownership plan or similar trust to the extent such
contributions are used by such plan or trust to pay interest
or fees to any Person (other than the Company or a
Wholly-Owned Subsidiary) in connection with Indebtedness
Incurred by such plan or trust; provided, however, that there
shall be excluded therefrom (A) any such interest expense of
any Unrestricted Subsidiary to the extent the related
Indebtedness is not Guaranteed or paid by the Company or any
Restricted Subsidiary, (B) interest on Put/Call Promissory
Notes, (C) dividends on Put/Call Preferred Stock and (D)
dividends on the Redeemable Preferred Stock.
"Consolidated Net Income" means, for any period, the net
income (loss) of the Company and its consolidated
Subsidiaries; provided, however, that there shall not be
included in such Consolidated Net Income:
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(i) any net income (loss) of any Person (other than the
Company) if such Person is not a Restricted Subsidiary, except
that (A), subject to the limitations contained in clause (iv)
below, the Company's equity in the net income of any such
Person for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company
or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution paid
to a Restricted Subsidiary, to the limitations contained in
clause (iii) below) and (B) the Company's equity in a net loss
of any such Person (other than an Unrestricted Subsidiary) for
such period shall be included in determining such Consolidated
Net Income,
(ii) any net income (loss) of any Person acquired by the
Company or a Subsidiary in a pooling of interests transaction
for any period prior to the date of such acquisition,
(iii) any net income of any Restricted Subsidiary to the
extent such Restricted Subsidiary is prohibited, directly or
indirectly, from paying dividends or distributions, directly
or indirectly, to the Company or any other Restricted
Subsidiary, except that (A), subject to the exclusion
contained in clause (iv) below, the Company's equity in the
net income of any such Restricted Subsidiary for such period
shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such
Restricted Subsidiary during such period to the Company or
another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend paid to
another Restricted Subsidiary, to the limitation contained in
this clause) and (B) the Company's equity in a net loss of any
such Restricted Subsidiary for such period shall be included
in determining such Consolidated Net Income,
(iv) any gain or loss realized upon the sale or other
disposition of any property, plant or equipment of the Company
or its consolidated Subsidiaries (including pursuant to any
Sale/Leaseback Transaction) which is not sold or otherwise
disposed of in the ordinary course of business and any gain or
loss realized upon the sale or other disposition of any
Capital Stock of any Person,
(v) any extraordinary gain or loss,
(vi) the cumulative effect of a change in accounting
principles,
(vii) foreign currency exchange gains and losses, and
(viii) any income (loss) from discontinued operations.
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Notwithstanding the foregoing, for the purpose of section
(l)(ii) only, there shall be excluded from Consolidated Net
Income any dividends, repayments of loans or advances or other
transfers of assets from Unrestricted Subsidiaries to the
Company or a Restricted Subsidiary to the extent such
dividends, repayments or transfers increase the amount of
Restricted Payments permitted under paragraph (l)(ii)(z)(iv).
"Consolidated Net Worth" means the total of the amounts shown
on the balance sheet of the Company and its Restricted
Subsidiaries, determined on a consolidated basis in accordance
with GAAP, as of the end of the most recent fiscal quarter of
the Company ending at least 30 days prior to the taking of any
action for the purpose of which the determination is being
made, as (i) the par or stated value of all outstanding
Capital Stock of the Company plus (ii) paid-in capital or
capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated
deficit and (B) any amounts attributable to Disqualified
Stock.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Company who (i)
was a member of such Board of Directors on the Issue Date or
(ii) was nominated by either of the Principals or the Holders
to serve on such Board of Directors.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar
agreement or arrangement as to which such Person is a party or
a beneficiary.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable) or upon the happening of any event (other than
as a result of a change of control or an asset sale) (i)
matures or is mandatorily redeemable pursuant to a sinking
fund obligation or otherwise, (ii) is convertible or
exchangeable automatically or at the option of the holder
thereof for Indebtedness or other Disqualified Stock or (iii)
is redeemable at the option of the holder thereof, in whole or
in part, in each case on or prior to the 91st day following
the Stated Maturity of the Redeemable Preferred Stock. For
avoidance of doubt, the Redeemable Preferred Stock shall not
be deemed Disqualified Stock.
"Dividend Payment Date" means August 31, November 30, February
28 (or February 29, as applicable) and May 31 of each year,
commencing August 31, 1999.
"Dividend Period" means the Initial Dividend Period and,
thereafter, each Quarterly Dividend Period.
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"Dividend Record Date" means August 15, November 15, February
15 and May 15 of each year.
"EBITDA" for any period means the Consolidated Net Income for
such period, plus the following (without duplication) to the
extent deducted in calculating such Consolidated Net Income:
(i) income tax expense, (ii) Consolidated Interest Expense,
(iii) depreciation expense, (iv) amortization expense
(including amortization of goodwill and other intangibles),
(v) non-cash management compensation expense, (vi) any
increase in cost of sales resulting from the write-up of
inventory in accordance with Accounting Principles Board
Opinion No. 16 (or a successor provision) and (vii) all other
non-cash items reducing Consolidated Net Income (excluding any
non-cash item to the extent it requires an accrual of or
reserve for cash disbursements for any future period), in each
case for such period, (viii) any extraordinary, non-recurring
or unusual loss plus any net loss realized in connection with
an asset disposition and (ix) all premiums on prepayments of
Indebtedness and minus (x) all non-cash items increasing
Consolidated Net Income.
"Equity Offering" means any public or private offering by the
Company of its Common Stock or Preferred Stock, or options,
warrants or rights to acquire such Capital Stock other than
offerings registered on Forms S-4 or S-8 (or any successor
forms).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the date of this
Certificate of Designation, including those set forth in the
opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other
entity as approved by a significant segment of the accounting
profession. All ratios and computations based on GAAP
contained in this Article FOURTH, Section A of the Certificate
of Incorporation shall be computed in conformity with GAAP.
"Guarantee" means a guarantee, direct or indirect, in any
manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any
part of any Indebtedness; provided, however, that the term
"Guarantee" shall not include endorsements for collection or
deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Hedging Obligations" of any Person means the obligations of
such Person pursuant to any Interest Rate Agreement or
Currency Agreement.
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"Holder" means a holder of record of Redeemable Preferred
Stock.
"Incur" means issue, assume, Guarantee, incur or otherwise
become liable for; provided, however, that any Indebtedness or
Disqualified Stock of a Person existing at the time such
Person becomes a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be incurred by
such Subsidiary at the time it becomes a Subsidiary.
"Indebtedness" means, with respect to any Person on any date
of determination (without duplication),
(i) the principal of and, if any is due and payable at such
time, premium in respect of indebtedness of such Person for
borrowed money,
(ii) the principal of and, if any is due and payable at such
time, premium in respect of obligations of such Person
evidenced by bonds, debentures, notes or other similar
instruments,
(iii) all obligations of such Person in respect of
unreimbursed drawings under letters of credit or other similar
instruments (including reimbursement obligations with respect
thereto) (other than letters of credit securing obligations
entered into in the ordinary course of business to the extent
any drawings thereunder are reimbursed no later than the fifth
Business Day following receipt by such Person of a demand for
reimbursement following payment on the letter of credit),
(iv) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services (except Trade
Payables), which purchase price is due more than six months
after the date of placing such property in service or taking
delivery and title thereto or the completion of such services,
(v) all Capitalized Lease Obligations of such Person,
(vi) the amount of all obligations of such Person with respect
to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Restricted
Subsidiary, the aggregate liquidation preference of any
Preferred Stock (but excluding, in each case, any accrued
dividends),
(vii) all Indebtedness of other Persons secured by a Lien on
any asset of such Person, whether or not such Indebtedness is
assumed by such Person; provided, however, that the amount of
such Indebtedness shall be the lesser of (A) the fair market
value of such asset at such date of determination and (B) the
amount of such Indebtedness of such other Person,
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(viii) all Indebtedness of other Persons to the extent
Guaranteed by such Person,
(ix) to the extent not otherwise included in this definition,
Hedging Obligations, and
(x) Acquired Indebtedness.
The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional
obligations as described above (or the accreted value thereof,
in the case of Indebtedness that does not require current
payments of interest) and the maximum liability, upon the
occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date. Indebtedness shall
not include interest or commitment or other fees.
"Initial Dividend Period" means the dividend period commencing
on the Issue Date and ending on the day before the first
Dividend Payment Date to occur thereafter.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future
agreement, interest rate option agreement, interest rate swap
agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement or other similar
agreement or arrangement as to which such Person is party or a
beneficiary.
"Investment" in any Person means any direct or indirect
advance, loan (other than advances to customers or suppliers
in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of such Person and
advances to employees of such Person and its Restricted
Subsidiaries made in the ordinary course of business) or other
extension of credit (including by way of Guarantee or similar
arrangement) or capital contribution to (by means of any
transfer of cash or other property to others or any payment
for property or services for the account or use of others), or
any purchase or acquisition for consideration of Capital
Stock, Indebtedness or other similar instruments issued by
such Person; provided that if the sole consideration for any
such investment is Capital Stock of such Person or its
Subsidiaries that is not Disqualified Stock, then such
investment shall not be deemed an Investment for purposes of
this Certificate of Designation. "Investment" shall exclude
extensions of trade credit by the Company and its Restricted
Subsidiaries on commercially reasonable terms in accordance
with such Person's normal trade practices. For purposes of the
definition of "Unrestricted Subsidiary" and paragraph (l)(ii)
of this Article FOURTH, Section A of the Certificate of
Incorporation, (i) "Investment" shall include the portion
(proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of any
Subsidiary of the Company at the time that
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such Subsidiary is designated an Unrestricted Subsidiary;
provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be
deemed to continue to have a permanent "Investment" in an
Unrestricted Subsidiary in an amount (if positive) equal to
(x) the Company's "Investment" in such Subsidiary at the time
of such original designation less (y) the portion
(proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time that such Subsidiary is so
re-designated a Restricted Subsidiary; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be
valued at its fair market value at the time of such transfer,
in each case as determined in good faith by the Board of
Directors. For the purposes of calculating the amount of other
"Investments," including Permitted Investments, the amount of
any Investment shall be the original cost of such Investment
plus the cost of all additional Investments by the Company or
any of its Restricted Subsidiaries, without any adjustments
for increases or decreases in value, or write-ups, write-downs
or write-offs with respect to such Investment, reduced by the
payment of dividends or distributions in connection with such
Investment or any other amounts received in respect of such
Investment; provided that no such payment of dividends or
distributions or receipt of any such other amounts shall
reduce the amount of any Investment if such payment of
dividends or distributions or receipt of any such amounts
would be included in Consolidated Net Income.
"Issue Date" means the date on which the Redeemable Preferred
Stock is originally issued under this Certificate of
Incorporation.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any
conditional sale or other title retention agreement or lease
in the nature thereof).
"Management Agreement" means the Amended and Restated
Management Advisory Services Agreement, dated as of May 29,
1998, between the Company, certain of its Subsidiaries and
Mentmore, as it may be amended, modified, supplemented or
restated from time to time.
"Management Equity Interests" means shares of Capital Stock of
the Company or of a Restricted Subsidiary or options, warrants
or stock appreciation or similar rights to purchase such
Capital Stock, in each case held by any current or former
officer, employee or other member of management (or their
estates or beneficiaries under their estates or their
respective family members) of the Company or of such
Restricted Subsidiary pursuant to any management equity
subscription agreement, employment agreement, employee benefit
plan, stockholder agreement, warrant agreement, stock option
agreement or similar management investor agreement and which
may be required to be repurchased by the Company or such
Restricted Subsidiary, or which may be repurchased at the
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<PAGE>
option of the Company or such Restricted Subsidiary, in each
case pursuant to the terms of any agreement governing such
equity interests or under which such equity interests were
issued.
"Mentmore" means Mentmore Holdings Corporation and its
successors.
"Net Cash Proceeds", with respect to any issuance or sale of
Capital Stock, means the cash proceeds of such issuance or
sale net of attorneys' fees, accountants' fees, underwriters'
or placement agents' fees, discounts or commissions and
brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"New Credit Facility" means the credit facility dated as of
April 22, 1999, among the Company, its Subsidiaries, Societe
Generale, as administrative agent, and Lehman Commercial
Paper, Inc., as syndication agent, and the lenders from time
to time party thereto, including all collateral documents,
instruments and agreements executed in connection therewith,
and the term New Credit Facility shall also include any
amendments, supplements, modifications, extensions, renewals,
restatements or refundings thereof and any credit facilities
or agreements that replace, refund or refinance any part of
the loans, other credit facilities or commitments thereunder,
including any such replacement, refunding or refinancing
facility that increases the amount borrowable thereunder or
alters the maturity thereof.
"Non-Recourse Debt" means Indebtedness (i) as to which neither
the Company nor any Restricted Subsidiary (a) provides any
Guarantee or credit support of any kind (including any
undertaking, Guarantee, indemnity, agreement or instrument
that would constitute Indebtedness) or (b) is directly or
indirectly liable (as a guarantor or otherwise) and (ii) no
default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default
under such other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its stated maturity.
"Obligations" means any principal, interest, penalties, fees,
indemnities, damages and other liabilities payable under the
instruments governing, or under agreements entered into in
connection with, any Indebtedness.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary of the Company,
as applicable.
"Officers' Certificate" means a certificate signed by two
Officers.
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"Opinion of Counsel" means a written opinion from Winston &
Strawn or other outside legal counsel to the Company.
"Permitted Holders" means (i) Richard L. Kramer and William L.
Remley (the "Principals"), (ii) any spouse or immediate family
member of a Principal and any child or spouse of any spouse or
immediate family member of a Principal, (iii) a trust,
corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially
holding, directly or indirectly, a controlling interest of
which consists of a Principal and/or such other Persons
referred to in the immediately preceding clause (ii) or (iv)
the trustees of any trust referred to in clause (iii).
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<PAGE>
"Permitted Investment" means an Investment by the Company or
any Restricted Subsidiary in (i) the Company or in a
Restricted Subsidiary or a Person which will, upon the making
of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted
Subsidiary is a Related Business; (ii) another Person if as a
result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted
Subsidiary; provided, however, that such Person's primary
business is a Related Business; (iii) Temporary Cash
Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary, if created or acquired in the ordinary
course of business and payable or dischargeable in accordance
with customary trade terms; provided, however, that such trade
terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable
under the circumstances; (v) payroll, travel, relocation and
similar advances to cover matters that are expected at the
time of such advances ultimately to be treated as expenses for
accounting purposes and that are made in the ordinary course
of business; (vi) loans or advances to employees made in the
ordinary course of business of the Company or such Restricted
Subsidiary; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business
and owing to the Company or any Restricted Subsidiary or in
satisfaction of judgments; (viii) Guarantees permitted to be
made pursuant to section (l)(v); (ix) Investments in
securities of trade creditors received in settlement of
obligations or pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy of insolvency of any
trade creditors of customers; (x) Currency Agreements and
Interest Rate Agreements entered into in the ordinary course
of business; provided that such agreements are entered into
for bona fide hedging purposes, are not for speculation or
trading purposes and are designed to protect against
fluctuations in interest rates, currency exchange rates or
commodity prices, as the case may be, and, in the case of
Interest Rate Agreements, any such Interest Rate Agreement has
a notional amount corresponding to the Indebtedness being
hedged thereby; (xi) Investments made by the Company or any
Restricted Subsidiary in connection with an Asset Disposition
made in compliance with the provisions of the Indenture
governing the 2007 Notes; (xii) any acquisition of assets
solely in exchange for the issuance of Capital Stock (other
than Disqualified Stock) of the Company; (xiii) any Investment
existing on the date of this Certificate of Incorporation; and
(xiv) other Investments in any Person having an aggregate fair
market value, when taken together with all other Investments
made pursuant to this clause (xiii) that are at the time
outstanding, not to exceed $10 million.
"Person" means any individual, corporation, partnership joint
venture, association, joint-stock company, trust, limited
liability company, unincorporated organization, government or
any agency or political subdivision thereof or any other
entity.
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"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes
(however designated) which is preferred as to the payment of
dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class
of such corporation.
"Put/Call Preferred Stock" means Preferred Stock which may be
issued by the Company or a Restricted Subsidiary to the
holders of any Management Equity Interests of the Company or a
Restricted Subsidiary in exchange for such Management Equity
Interests held by such holders; provided that (a) payments on
such Preferred Stock, including pursuant to any redemption,
repurchase or default provision, and payments of dividends on
such Preferred Stock, in each case in cash, may be made only
to the extent Restricted Payments would then be permitted to
be made in accordance with section (l)(ii) with any such
payment being included in the calculation of the amount of
Restricted Payments pursuant to clause (z) of such section and
(b) no failure to pay such Preferred Stock or failure to
comply with any other provision of such Preferred Stock or of
the instrument governing such Preferred Stock shall cause a
default or event of default under any Indebtedness of the
Company and its Restricted Subsidiaries.
"Put/Call Promissory Notes" means promissory notes which may
be issued by the Company or a Restricted Subsidiary to the
holders of any Management Equity Interests of the Company or
such Restricted Subsidiary in exchange for such Management
Equity Interests held by such holders; provided that (a)
payments of principal on such notes, including pursuant to any
guarantee, redemption, repurchase or default provision, and
payments of interest on such notes, including pursuant to any
guarantee, in each case in cash, may be made only to the
extent Restricted Payments would then be permitted to be made
in accordance with section (l)(ii), with any such payment
being included in the calculation of the amount of Restricted
Payments pursuant to clause (z) of such section and (b) no
failure to pay such notes or failure to comply with any other
provision of such notes or of the instrument governing such
notes shall cause a default or event of default under any
Indebtedness of the Company and its Restricted Subsidiaries.
"Quarterly Dividend Period" shall mean the quarterly period
commencing on each August 31, November 30, February 28 (or
February 29, as applicable) and May 31 and ending on the day
before the following Dividend Payment Date.
"Redemption Date" with respect to any shares of Redeemable
Preferred Stock, means the date on which such shares of
Redeemable Preferred Stock are redeemed by the Company.
"Refinancing Indebtedness" means Indebtedness issued in
exchange for, or that refunds, refinances, replaces, renews,
repays or extends (including pursuant to any
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defeasance or discharge mechanism) (collectively,
"refinances," and "refinanced" shall have a correlative
meaning) any Indebtedness existing on the date of this
Certificate of Incorporation or Incurred in compliance with
this Certificate of Incorporation (including Indebtedness of
the Company that refinances Indebtedness of any Restricted
Subsidiary and Indebtedness of any Restricted Subsidiary that
refinances Indebtedness of another Restricted Subsidiary)
including Indebtedness that refinances other Refinancing
Indebtedness; provided, however, that (i) the Refinancing
Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being refinanced (or, if earlier,
the Stated Maturity of the Redeemable Preferred Stock), (ii)
the Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being
refinanced and (iii) such Refinancing Indebtedness is Incurred
in an aggregate principal amount (or if issued with original
issue discount, an aggregate issue price) that is equal to or
less than the sum of the aggregate principal amount (or if
issued with original issue discount, the aggregate accreted
value) then outstanding of the Indebtedness being refinanced
plus the amount of reasonable fees and expenses and prepayment
premiums incurred in connection with such refinancing;
provided further, however, that Refinancing Indebtedness shall
not include (x) Indebtedness of a Restricted Subsidiary that
refinances Indebtedness of the Company or (y) Indebtedness of
the Company or a Restricted Subsidiary that refinances
Indebtedness of an Unrestricted Subsidiary (unless such
Unrestricted Subsidiary is concurrently redesignated a
Restricted Subsidiary).
"Related Business" means the businesses of the Company and the
Restricted Subsidiaries on the date hereof and any business
related, ancillary or complementary thereto, or which is an
extension thereof, in each case as determined by the Company
in good faith.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Company
or a Restricted Subsidiary transfers such property to a Person
(other than to the Company or a Restricted Subsidiary) and the
Company or a Restricted Subsidiary leases it from such Person.
"Secured Indebtedness" means any Indebtedness of the Company
or a Restricted Subsidiary secured by a Lien.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" means any Restricted Subsidiary that
would be a
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'Significant Subsidiary' of the Company within the meaning of
Rule 1-02 under Regulation S-X promulgated by the Commisssion.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the
payment of principal of such security is due and payable,
including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the
happening of any contingency unless such contingency has
occurred).
"Stellex Aerospace" means Stellex Aerospace, Inc., a
Restricted Subsidiary of the Company on the Issue Date, and
its successors and assigns.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of
the total voting power of shares of Capital Stock or other
interests (including partnership interests) entitled (without
regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by (i) such
Person, (ii) such Person and one or more Subsidiaries of such
Person or (iii) one or more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following:
(A)(i) pounds sterling, (ii) Euro, (iii) French Francs or (iv)
German Deutschemarks and (B)(i) any investment in direct
obligations of the United States of America or any agency
thereof or obligations Guaranteed by the United States of
America or any agency thereof, (ii) investments in time
deposit accounts, certificates of deposit, eurodollar time
deposits, bankers' acceptances and money market deposits
maturing within 360 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the
laws of the United States of America, any state thereof or any
foreign country recognized by the United States of America
having capital, surplus and undivided profits aggregating in
excess of $250,000,000 (or the foreign currency equivalent
thereof) and whose long-term debt is rated "A" (or such
similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as
defined in Rule 436 under the Securities Act), (iii)
repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause
(B)(i) above entered into with a bank meeting the
qualifications described in clause (B)(ii) above, (iv)
investments in commercial paper, maturing not more than 180
days after the date of acquisition, issued by a corporation
(other than an Affiliate of the Company) organized and in
existence under the laws of the United States of America or
any foreign country recognized by the United States of America
with a rating at the time as of which any investment therein
is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard &
Poor's Ratings Services, (v) investments in securities with
maturities of six
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months or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the
United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by Standard &
Poor's Ratings Services or "A" by Moody's Investors Service,
Inc. and (vi) investment funds registered under the Investment
Company Act of 1940, as amended, investing at least 95% of
their assets in securities of any of the types described in
clauses (B)(i) through (v) above.
"2007 Notes" means the Company's 9 1/2% Senior Subordinated
Notes due 2007, as the same may be amended, supplemented or
modified from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated
an Unrestricted Subsidiary by the Board of Directors in the
manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary of the Company) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries
owns any Capital Stock or Indebtedness of, or owns or holds
any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that either
(A) the Subsidiary to be so designated has total consolidated
assets of $10,000 or less or (B) if such Subsidiary has
consolidated assets greater than $10,000, then such
designation would be permitted under section (l)(ii). The
Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation (x) the
Company could Incur $1.00 of additional Indebtedness under
paragraph (l)(v)(A) and (y) no Voting Rights Triggering Event
shall have occurred and be continuing or would occur as a
consequence thereof. Any such designation by the Board of
Directors shall be evidenced to the Holders of the Redeemable
Preferred Stock by promptly sending to the Holders of the
Redeemable Preferred Stock a copy of the Board Resolution
giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing
provisions.
"Voting Stock" of a corporation means all classes of Capital
Stock of such corporation then outstanding and normally
entitled to vote in the election of directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the
Company all the outstanding Capital Stock of which (other than
directors' qualifying shares) is owned by the Company or
another Wholly Owned Subsidiary.
(n Registration Rights.
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Reference is made to the Registration Rights
Agreement by and between the Company and SG Cowen,
dated April 22, 1999, as such agreement may be
amended, modified or supplemented from time to time.
So long as any shares of Redeemable Preferred Stock
constitute "Transfer Restricted Securities" as
defined in the Registration Rights Agreement, each
Holder shall be entitled to the rights granted by the
Company thereunder, and shall be bound by the
restrictions contained therein, on the certificates
representing the Redeemable Preferred Stock.
B. Series A Preferred Stock
1. Designation and Number of Shares. There shall be
hereby established a series of the preferred stock,
without par value, but with a stated value of Fifty
Thousand Dollars ($50,000) per share (the "Stated
Value"), designated as "Series A Preferred Stock"
(such series being hereinafter referred to as the
"Series A Preferred Stock"). The authorized number of
shares of Series A Preferred Stock shall be 500.
2. Rank. The Series A Preferred Stock shall, with
respect to dividend distributions and distributions
of assets and rights upon the liquidation, winding up
and dissolution of the Corporation, rank junior to
the 13% Senior Preferred Stock (the "13% Senior
Preferred Stock"). The Series A Preferred Stock
shall, however, rank senior to all classes of common
stock of the Corporation (including, without
limitation, the currently authorized common stock,
without par value, of the Corporation (the "Common
Stock")), and to each other class or series of
Capital Stock (as hereinafter defined) of the
Corporation hereafter created with respect to
dividend distributions and distributions of assets
and rights upon the liquidation, winding up and
dissolution of the Corporation (collectively with the
Common Stock, the "Junior Stock").
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3. Dividends.
a. The holders of the outstanding shares of
Series A Preferred Stock shall be entitled
to receive, when, as and if declared by the
Board of Directors, out of funds legally
available therefor, cash dividends on each
share of Series A Preferred Stock at a rate
equal to ten percent (10%) per annum of the
sum of (i) the Liquidation Preference (as
hereinafter defined) and (ii) any dividends
which may be in arrears. All dividends shall
be cumulative, whether or not earned or
declared, from the date of issuance of the
Series A Preferred Stock and shall be
payable quarterly in arrears on each
Dividend Payment Date (as hereinafter
defined), commencing on the first Dividend
Payment Date after the issuance of the
Series A Preferred Stock. Each distribution
on the Series A Preferred Stock shall be
payable to holders of record as they appear
on the stock record books of the Corporation
on such record dates, not less than ten (10)
nor more than sixty (60) days preceding the
applicable Dividend Payment Date, as shall
be fixed by the Board of Directors of the
Corporation.
b. All dividends paid with respect to shares of
Series A Preferred Stock pursuant to Article
FOURTH, subparagraph (B)(3)(a) shall be paid
pro rata and in a like manner to all of the
holders entitled thereto.
c. Nothing herein contained shall in any way or
under any circumstances be construed or
deemed to require the Board of Directors to
declare, or the Corporation to pay or set
apart for payment, any dividends on shares
of the Series A Preferred Stock at any time,
except out of funds legally available
therefor.
d. Dividends on account of arrears for any past
Dividend Period (as hereinafter defined) may
be declared and paid at any time, without
reference to any regular Dividend Payment
Date, to holders of record on such date, not
less than ten (10) nor more than sixty (60)
days prior to the payment thereof, as may be
fixed by the Board of Directors.
e. Without the affirmative vote or consent of
holders of at least a majority of the then
outstanding shares of Series A Preferred
Stock, voting or consenting, as the case may
be, as one class, the Corporation shall not
declare, pay or set apart for payment any
dividend on any shares of Junior Stock or
make any payment on account of, or set apart
for payment money for a sinking or other
55
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similar fund for, the purchase, redemption
or other retirement of, any shares of Junior
Stock or any warrants, rights, puts, calls
or options exercisable for or convertible
into any shares of Junior Stock or make any
distribution in respect thereof, either
directly or indirectly, whether in cash,
obligations or shares of the Corporation or
other property (all such prohibited payments
and other actions set forth above in this
subparagraph 3(e) being collectively
referred to as "Restricted Junior Payments")
except that the Corporation may pay
dividends or other distributions on Junior
Stock in the form of additional shares of
Junior Stock (or the adjustment of the
amount of the liquidation preference, if
any, of such Junior Stock).
f. Dividends payable on the Series A Preferred
Stock for any period less than a year shall
be computed on the basis of a 365-day year
and the actual number of days elapsed in the
period for which such dividends are payable.
4. Liquidation Preference.
a. The liquidation preference of the Series A
Preferred Stock shall be $50,000 per share
(the "Liquidation Preference"). In the event
of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of
the Corporation, the holders of shares of
Series A Preferred Stock then outstanding
shall be entitled to be paid for each share
held, out of the assets of the Corporation
available for distribution to its
stockholders, an amount in cash equal to the
aggregate Liquidation Preference plus an
amount in cash equal to all accumulated and
unpaid dividends thereon to the date fixed
for liquidation, dissolution or winding up
(including, without duplication, an amount
equal to pro rated dividends for the period
from the last Dividend Payment Date to the
date fixed for liquidation, dissolution or
winding up), before any payment shall be
made or any assets distributed to the
holders of any shares of Junior Stock.
Except as provided in the preceding
sentence, holders of the Series A Preferred
Stock shall not be entitled to any
distribution in the event of any
liquidation, dissolution or winding up of
the affairs of the Corporation. If the
assets of the Corporation are not sufficient
to pay in full the liquidation payments
payable to the holders of outstanding shares
of the Series A Preferred Stock, then the
holders of all such shares shall share
ratably in such distribution of assets.
b. For purposes of this paragraph 4, neither
the sale, conveyance, exchange or transfer
(for cash, shares of stock, securities or
other consideration) of all or substantially
all or part of the property or
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assets of the Corporation nor the
consolidation or merger of the Corporation
into or with one or more other corporations
or entities shall be deemed to be a
liquidation, dissolution or winding up,
voluntary or involuntary, of the affairs of
the Corporation.
5. Voting Rights.
a. So long as any shares of the Series A
Preferred Stock are outstanding, the
Corporation shall not reclassify any Junior
Stock into any preferred stock of the
Corporation that ranks on a partly or senior
(in either case as to dividends or other
distributions or rights upon liquidation,
dissolution or winding up) to the Series A
Preferred Stock ("Parity Stock" or "Senior
Stock", respectively) or create or authorize
any new class of Parity Stock or Senior
Stock without the affirmative vote or
consent of holders of at least a majority of
the then outstanding shares of Series A
Preferred Stock, voting or consenting, as
the case may be, as one class.
b. So long as any shares of Series A Preferred
Stock are outstanding, the Corporation shall
not amend the Certificate of Incorporation
of the Corporation so as to adversely affect
the specified rights, preferences,
privileges or voting rights of holders of
shares of the Series A Preferred Stock,
without the affirmative vote or consent of
at least a majority of the issued and
outstanding shares of Series A Preferred
Stock, voting or consenting, as the case may
be, as one class.
c. In any case in which the holders of Series A
Preferred Stock shall be entitled to vote
pursuant to Article FOURTH, paragraph (B)(5)
or pursuant to the General Corporation Law
of the State of Delaware, each holder of
Series A Preferred Stock shall be entitled
to one vote for each share of Series A
Preferred Stock. Except as otherwise
provided in this paragraph 5 and under the
General Corporation Law of the State of
Delaware, holders of Series A Preferred
Stock shall not be entitled to vote on any
matters.
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6. Redemption.
a. The Series A Preferred Stock may be redeemed
in cash, in whole or in part, at any time or
from time to time, at the option of the
Corporation by resolution of the Board of
Directors at a price per share equal to the
Liquidation Preference plus an amount equal
to all dividends thereon accrued and unpaid
(the "Redemption Price") to the date fixed
by the Board of Directors as the redemption
date (the "Redemption Date"). If fewer than
all shares of Series A Preferred Stock are
to be redeemed, shares of Series A Preferred
Stock shall be redeemed ratably among the
holders thereof.
b. Notice of any redemption pursuant to this
paragraph 6 (a "Redemption Notice") shall be
mailed, first class, postage prepaid, not
less than fifteen (15) days nor more than
sixty (60) days prior to the Redemption Date
to the holders of record of the shares of
Series A Preferred Stock to be redeemed, at
their respective addresses as the same
appear upon the stock record books of the
Corporation or are supplied by them in
writing to the Corporation for the purposes
of such notice. Such notice shall set forth
the anticipated Redemption Price or formula
on which such Redemption Price will be
based, the anticipated Redemption Date
within such fifteen (15) to sixty (60) day
period, the number of shares to be redeemed
and the place at which the shares called for
redemption will, upon presentation and
surrender of the stock certificates
evidencing such shares, be redeemed.
c. On or before the anticipated Redemption
Date, each holder of Series A Preferred
Stock shall surrender the certificate or
certificates representing such shares of
Series A Preferred Stock to the Corporation,
in the manner and at the place designated in
the Redemption Notice, and on the Redemption
Date, if the redemption occurs, the full
Redemption Price for such shares shall be
payable in cash to the Person (as
hereinafter defined) whose name appears on
such certificate or certificates as the
owner thereof, and each surrendered
certificate shall be canceled and retired.
If for any reason the redemption does not
occur, the certificates shall be returned.
In the event that fewer than all of the
Series A Preferred Stock represented by any
such certificate are redeemed, a new
certificate shall be issued representing the
unredeemed shares.
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d. If any Redemption Notice by the Corporation
pursuant to this paragraph 6 shall have been
mailed as provided in Article FOURTH,
subparagraph (B)(6)(b) and if on or before
the Redemption Date, the consideration
necessary for such redemption shall have
been irrevocably set apart in trust for the
benefit of the holders of shares to be so
redeemed so as to be available therefor and
only therefor, then on and after the close
of business on the Redemption Date, the
shares called for redemption,
notwithstanding that any certificate
therefor shall not have been surrendered for
cancellation, shall no longer be deemed
outstanding, and all rights with respect to
such shares shall forthwith cease and
terminate, except the right of the holders
thereof to receive upon surrender of their
certificates the consideration payable upon
redemption thereof.
7. Payment in Kind. Any payments by the Corporation on
account of the Series A Preferred Stock as a result
of the declaration of dividends on the Series A
Preferred Stock may, in the sole discretion of the
Board of Directors, be payable, in whole or in part,
in the form of additional shares of Series A
Preferred Stock of the Corporation or any of the
assets of the Corporation. For the purposes of such
payment, shares of Series A Preferred Stock shall be
valued at the Stated Value or upon such other
reasonable basis as the Board of Directors shall
determine in its sole discretion.
8. Business Day. If any payment shall be required by the
terms hereof to be made on a day that is not a
Business Day, such payment shall be made on the
immediately succeeding Business Day.
9. Preemptive Rights. The holders of the Series A
Preferred Stock shall not have any preemptive right
to subscribe for or purchase any shares of stock or
any other securities that may be issued by the
Corporation.
10. Exclusion of Other Rights. The shares of Series A
Preferred Stock shall not have any designation,
preferences, limitations or relative rights, other
than those specifically set forth in the Certificate
of Incorporation of the Corporation.
11. Legends. Unless the Series A Preferred Stock is to be
registered under the Securities Act of 1933, as
amended, or any other applicable federal or state
securities law, the following legends shall be placed
on the Series A Preferred Stock:
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<PAGE>
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY OTHER APPLICABLE FEDERAL OR STATE
SECURITIES LAW AND MAY NOT BE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION UNLESS THE
PROPOSED TRANSFER DOES NOT REQUIRE ANY SUCH
REGISTRATION AND THE CORPORATION HAS
RECEIVED AN OPINION OF COUNSEL TO SUCH
EFFECT.
12. Headings. The headings of the various paragraphs and
subparagraphs hereof are for convenience of reference
only and shall not affect the interpretation of any
of the provisions hereof.
13. Definitions. As used in this Article FOURTH, Section
B of the Certificate of Incorporation, the following
terms shall have the following meanings, unless the
context otherwise requires:
"Board of Directors" means the Board of Directors of
the Corporation.
"Business Day" means any day except a Saturday,
Sunday or any day on which banking institutions in
New York City, New York or Los Angeles, California
are required or authorized by law or other
governmental action to be closed.
"Capital Stock" means all common stock and any other
capital stock of the Corporation authorized from time
to time, and any other shares, options, interests,
participations, or other equivalents (however
designated), whether voting or nonvoting, including,
without limitation, common stock, options, warrants,
preferred stock, phantom stock, stock appreciation
rights, convertible notes or debentures, stock
purchase rights, and all agreements, instruments,
documents, and securities convertible, exercisable or
exchangeable, in whole or in part, into any one or
more of the foregoing.
"Closing Date" means October 31, 1997.
"Common Stock" means the common stock, without par
value, of the Corporation.
"Corporation" means Stellex Technologies, Inc., a
Delaware corporation.
"Dividend Payment Date" means March 31, June 30,
September 30 and December 31 of each year.
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"Dividend Period" means the Initial Dividend Period
and, thereafter, each Quarterly Dividend Period.
"Initial Dividend Period" means the dividend period
commencing on the Closing Date and ending on the
first Dividend Payment Date to occur thereafter.
"Junior Stock" has the meaning ascribed to it in
Article FOURTH, paragraph (B)(2).
"Liquidation Preference" has the meaning ascribed to
it in Article FOURTH, paragraph (B)(4).
"Parity Stock" has the meaning ascribed to it in
Article FOURTH, paragraph (B)(5).
"Person" means any individual, corporation, limited
liability company, partnership, joint venture,
association, joint-stock company, trust,
unincorporated organization or government or any
agency or political subdivision thereof.
"Quarterly Dividend Period" means the quarterly
periods commencing on each January 1, April 1, July 1
and October 1 and ending on each Dividend Payment
Date, respectively.
"Redemption Date" has the meaning ascribed to it in
Article FOURTH, paragraph (B)(6).
"Redemption Notice" has the meaning ascribed to it in
Article FOURTH, paragraph (B)(6).
"Redemption Price" has the meaning ascribed to it in
Article FOURTH, paragraph (B)(6).
"Restricted Junior Payments" has the meaning ascribed
to it in Article FOURTH, paragraph (B)(3).
"Senior Stock" has the meaning ascribed to it in
Article FOURTH, paragraph (B)(5).
"Series A Preferred Stock" has the meaning ascribed
to it in Article FOURTH, paragraph (B)(1).
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"Stated Value" has the meaning ascribed to it in
Article FOURTH, paragraph (B)(1).
"13% Senior Preferred Stock" has the meaning ascribed
to it in Article FOURTH, paragraph (B)(2).
C. Serial Preferred Stock
The Board of Directors is hereby empowered to cause the Serial
Preferred Stock of the Corporation to be issued in series with such of
the variations permitted by clauses (1)-(8) of this Section C as shall
have been fixed and determined by the Board of Directors with respect
to any series prior to the issue of any shares of such series.
The shares of the Serial Preferred Stock of different series
may vary as to:
(1) the number of shares constituting such
series and the designation of such series,
which shall be such as to distinguish the
shares thereof from the shares of all other
series and classes;
(2) the rate of dividend, the time of payment
and, if cumulative, the dates from which
dividends shall be cumulative, the extent of
participation rights, if any, and the
priority in payment of dividends;
(3) any right to vote with holders of shares of
any other series or class and any right to
vote as a class, either generally or as a
condition to specified corporate acts;
(4) the price at and the terms and conditions on
which shares may be redeemed;
(5) the amount payable upon shares and the
priority of payment in event of involuntary
liquidation;
(6) the amount payable upon shares and the
priority of payment in event of voluntary
liquidation;
(7) any sinking fund provisions for the
redemption or purchase of shares; and
(8) the terms and conditions on which shares may
be converted, if the shares of any series
are issued with the privilege of conversion.
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The shares of all series of Serial Preferred Stock shall be
identical except as, within the limitations set forth above in this
Section C, shall have been fixed and determined by the Board of
Directors prior to the issuance thereof. Except as specifically set
forth in any Certificate of Serial Designation filed with the Secretary
of State of the State of Delaware or as required by the General
Corporation Law of the State of Delaware, none of these shares of any
series of Serial Preferred Stock shall have any right to vote on any
matters.
D. Common Stock.
1. Dividends. When and if declared by the Board of
Directors, the holders of the Common Stock shall only
be entitled to receive cash dividends and dividends
payable in property other than securities of the
Corporation at such time as all dividends on the
Preferred Stock through the record date of any such
Common Stock dividend have been paid in full.
2. Liquidation. In the event of the voluntary or
involuntary liquidation, dissolution, distribution of
assets or winding-up of the Corporation, after
distribution in full to the holders of Preferred
Stock of their preferred liquidation payments, the
holders of Common Stock shall be entitled to receive
the remaining assets of the Corporation.
3. Voting Rights. Except as may be otherwise required by
law or the Certificate of Incorporation of the
Corporation, as amended, each share of Common Stock
shall have one (1) vote on all matters voted upon by
the stockholders.
FIFTH. The Corporation is to have perpetual existence.
SIXTH. Election of directors need not be by written ballot unless the by-laws
of the Corporation shall so provide.
SEVENTH. The Corporation reserves the rights to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
EIGHTH. A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for broach of
fiduciary duty as a director except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware or
(iv) for any transaction from which the director derived any improper
personal benefit.
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IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be signed by William L. Remley, Its President,
this ___ day of _________, 1999.
/s/ William L. Remley,
------------------------------------
William L. Remley, President
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CERTIFICATE OF INCORPORATION
OF
PMC ACQUISITION CORPORATION.
a Delaware corporation
FIRST. The name of the corporation is PMC Acquisition
Corporation.
SECOND. The address of the corporation's registered office in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of its registered agent at
such address is The Corporation Trust Company.
THIRD. The nature of the business of or purpose to be
conducted or promoted by the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH. The total number of shares of stock which the
corporation has authority to issue is 1,000 shares. All of such shares are
Common Stock with no par value per share.
FIFTH. The name and mailing address of the sole incorporator
is:
Name: Mailing Address:
----- ----------------
Janelle Telesford c/o Winston & Strawn
200 Park Avenue
New York, NY 10166-4193
SIXTH. In furtherance and not in limitation of the powers
conferred by statute, the board of directors of the corporation is expressly
authorized to adopt, amend or repeal the by-laws of the corporation.
SEVENTH. Elections of directors need not be by written ballot
unless the by-laws of the corporation so provide.
EIGHTH. To the fullest extent permitted by the General
Corporation Law of the State of Delaware as the same exists or may hereafter be
amended, a director of the corporation shall not be liable to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director. The corporation shall indemnify, in accordance with and to the full
extent now or hereafter permitted by law, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including, without limitation, an action by or in the right of the
<PAGE>
corporation), by reason of such person's acting as a director of the corporation
(and the corporation, in the discretion of the board of directors, may so
indemnify a person by reason of the fact that such person is or was an officer
or employee of the corporation or is or was serving at the request of the
corporation in any other capacity for or on behalf of the corporation) against
any liability or expense actually or reasonably incurred by such person in
respect thereof. Any repeal or modification of this EIGHTH Article shall not
adversely affect any right or protection of a director of the corporation
existing at the time of such repeal or modification. Such indemnification is not
exclusive of any other right of indemnification provided by law, agreement or
otherwise.
I, the undersigned, being the sole incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, do make this certificate, hereby
declaring and certifying that this is my actual deed and that the facts stated
herein are true, and accordingly have hereunto set my hand this 12th day of
February, 1999.
/s/ Janelle Telesford
---------------------
Janelle Telesford
Sole Incorporator
<PAGE>
BY-LAWS
OF
PMC ACQUISITION CORPORATION
a Delaware corporation
ARTICLE I
Offices
Section 1.1 Registered Office. The registered office of the Corporation
in the State of Delaware shall be located at 1209 Orange Street, Wilmington,
Delaware, County of New Castle. The name of the Corporation's registered agent
at such address shall be The Corporation Trust Company.
Section 1.2 Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
Stockholders
Section 2.1 Annual Meetings. An annual meeting of stockholders shall be
held each year for the election of directors at such date, time and place either
within or without the State of Delaware as shall be designated by the Board of
Directors. Any other proper business may be transacted at the annual meeting of
stockholders.
Section 2.2 Special Meetings. Special meetings of stockholders may be
called at any time by the Board of Directors, the Chairman, if any, the Vice
Chairman, if any, or the President and shall be called by the Chairman or the
Secretary at the request, in writing, stating the purpose or purposes of the
meeting, of stockholders who hold a majority of the outstanding shares of each
class of capital stock entitled to vote at the meeting. Each special meeting
shall be held at such date, time and place either within or without the State of
Delaware as shall be designated by the person or persons calling such meeting at
least ten days prior to such meeting.
Section 2.3 Notice of Meeting. Unless otherwise provided by law,
whenever stockholders are required or permitted to take any action at a meeting,
a written notice of the meeting shall be given which shall state the date, time
and place of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called. Unless otherwise provided by law, the
<PAGE>
written notice of any meeting shall be given not less than ten nor more than
sixty days before the date of the meeting to each stockholder entitled to vote
at the meeting. If mailed, notice is given when deposited in the United States
mail, postage prepaid, directed to the stockholder at his address as it appears
on the records of the Corporation.
Section 2.4 Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 2.5 Quorum. Unless otherwise provided by law or the certificate
of incorporation, at each meeting of stockholders, the presence in person or
representation by proxy of the holders of a majority of the outstanding shares
of each class of capital stock entitled to vote at the meeting shall constitute
a quorum for the transaction of business. For purposes of the foregoing, two or
more classes or series of capital stock shall be considered a single class if
the holders thereof are entitled to vote together as a single class at the
meeting. In the absence of a quorum, the stockholders so present and represented
may, by vote of the holders of a majority of the shares of capital stock of the
Corporation so present and represented, adjourn the meeting from time to time
until a quorum shall attend, and the provisions of Section 2.4 of these by-laws
shall apply to each such adjournment. Shares of its own capital stock belonging
on the record date for the meeting to the Corporation or to another corporation,
if a majority of the shares entitled to vote in the election of directors of
such other corporation is held, directly or indirectly, by the Corporation,
shall neither be entitled to vote nor be counted for quorum purposes; provided,
however, that the foregoing shall not limit the right of the Corporation to vote
stock, including but not limited to its own stock, held by it in a fiduciary
capacity.
Section 2.6 Organization. Meetings of stockholders shall be presided
over by the Chairman, if any, or in his absence by the Vice Chairman, if any, or
in his absence by the President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 2.7 Voting; Proxies. Unless otherwise provided by the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of capital stock
held by him which has voting power on the subject matter submitted to a vote at
the meeting. Each stockholder entitled to vote at a meeting of stockholders or
to express consent or dissent to corporate action in writing without a meeting
may authorize another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and if, and only as long as, it is coupled
with an
-2-
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interest sufficient in law to support an irrevocable power. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy or another duly
executed proxy bearing a later date with the Secretary before the proxy is
voted. Unless otherwise required by law, voting of stockholders for the election
of directors need not be by written ballot. Voting of stockholders for all other
matters need not be by written ballot unless so determined at a stockholders
meeting by the vote of the holders of a majority of the outstanding shares of
each class of capital sock present in person or represented by proxy at the
meeting and entitled to vote on the subject matter submitted to a vote at the
meeting. Unless otherwise provided by law or the certificate of incorporation,
the vote of the holders of a majority of the shares of capital stock of the
Corporation present in person or represented by proxy at a meeting at which a
quorum is present and entitled to vote on the subject matter submitted to a vote
at the meeting shall be the act of the stockholders.
Section 2.8 Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
nor less than ten days before the date of such meeting, more than ten days after
the date upon which the resolution fixing the record date with respect to the
taking of corporate action by written consent without a meeting is adopted by
the Board of Directors, nor more than sixty days prior to any other action. If
no record date is fixed: (a) the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held; (b) the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed; (c) the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when prior action by the Board of Directors is
required, shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action; and (d) the record
date for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 2.9 List of Stockholders Entitled to Vote. The Secretary shall
make, at least ten days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
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place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof and may be
inspected by any stockholder who is present.
Section 2.10 Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided by the certificate of incorporation, any action required by
law to be taken at any annual or special meeting of stockholders of the
Corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
Board of Directors
Section 3.1 Powers; Number; Qualifications. Unless otherwise provided
by law or the certificate of incorporation, the business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. Unless otherwise provided by the certificate of incorporation, the
Board of Directors shall consist of such number of directors as the Board of
Directors shall from time to time designate. Unless otherwise provided by the
certificate of incorporation, directors need not be stockholders.
Section 3.2 Election; Term of Office; Resignation; Removal; Vacancies.
Each director shall hold office until his successor is elected and qualified or
until his earlier resignation or removal. Any director may resign at any time
upon written notice to the Corporation directed to the Board of Directors or the
Secretary. Such resignation shall take effect at the time specified therein, and
unless otherwise specified therein no acceptance of such resignation shall be
necessary to make it effective. Any director or the entire Board of Directors
may be removed, with or without cause, by the vote of the holders of a majority
of shares of capital stock then entitled to vote at an election of directors.
Whenever the holders of shares of any class or series of capital stock are
entitled to elect one or more directors by the provisions of the certificate of
incorporation, the provisions of the preceding sentence shall apply, in respect
to the removal without cause of a director or directors so elected, to the vote
of the holders of the outstanding shares of that class or series of capital
stock and not to the vote of the holders of the outstanding shares of capital
stock as a whole. Unless otherwise provided by the certificate of incorporation,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors elected by all of the stockholders having a right
to vote as a single class may be filled by the vote of a majority of the
directors then in office, although less than a quorum, or by the vote of the
sole remaining director. Whenever the holders of shares of any class or classes
of capital stock or series thereof are entitled to elect one or more
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directors by the provisions of the certificate of incorporation, vacancies and
newly created directorships of such class or classes or series thereof may be
filled by the vote of a majority of the directors elected by such class or
classes or series thereof then in office, or by the vote of the sole remaining
director so elected.
Section 3.3 Regular Meetings. Regular meetings of the Board of
Directors shall be held at such dates, times and places either within or without
the State of Delaware as the Board of Directors shall from time to time
determine.
Section 3.4 Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Chairman, if any, the Vice Chairman,
if any, the President or by any two members of the Board of Directors. Each
special meeting shall be held at such date, time and place either within or
without the State of Delaware as shall be fixed by the person or persons calling
the meeting.
Section 3.5 Notice of Meetings. Written notice of each meeting of the
Board of Directors shall be given which shall state the date, time and place of
the meeting. The written notice of any meeting shall be given at least
twenty-four hours in advance of the meeting to each director. Notice may be
given by letter, telegram, telex or facsimile and shall be deemed to have been
given when deposited in the United States mail, delivered to the telegraph
company or transmitted by telex or facsimile, as the case may be.
Section 3.6 Telephonic Meetings Permitted. Members of the Board of
Directors or any committee designated by the Board of Directors may participate
in a meeting of the Board of Directors or of such committee by means of
conference telephone or similar communication equipment by means of which all
persons participating in the meeting can hear each other, and participation in
the meeting pursuant to this by-law shall constitute presence in person at such
meeting.
Section 3.7 Quorum; Vote Required for Action. Unless otherwise required
by law, at each meeting of the Board of Directors, the presence of one-third of
the total number of directors shall constitute a quorum for the transaction of
business. The vote of a majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors, unless the vote
of a greater number is required by law or the certificate of incorporation. In
case at any meeting of the Board of Directors a quorum shall not be present, the
members of the Board of Directors present may by majority vote to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall attend.
Section 3.8 Organization. Meetings of the Board of Directors shall be
presided over by the Chairman, if any, or in his absence by the Vice Chairman,
if any, or in his absence by the President, or in their absence by a chairman
chosen at the meeting. The Secretary shall act as secretary of the meeting, but
in his absence the chairman of the meeting may appoint any person to act as
secretary of the meeting.
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Section 3.9 Action by Directors Without a Meeting. Unless otherwise
provided by the certificate of incorporation, any action required or permitted
to be taken at any meeting of the Board of Directors or any committee designated
by the Board of Directors may be taken without a meeting if all members of the
Board of Directors or of such committee consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or such committee.
Section 3.10 Compensation of Directors. Unless otherwise provided by
the certificate of incorporation, the Board of Directors shall have the
authority to fix the compensation of directors, which compensation may include
the reimbursement of expenses incurred in connection with meetings of the Board
of Directors or a committee thereof.
ARTICLE IV
Committees
Section 4.1 Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member of such committee at any meeting thereof. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in place of any such absent or disqualified
member.
Section 4.2 Power of Committees. Any committee designated by the Board
of Directors, to the extent provided in a resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority to take any
action which by law may only be taken by the Board of Directors or to take any
action with reference to: amending the certificate of incorporation (except that
a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors,
fix the designation and any of the preferences or rights of such shares relating
to dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series),
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of dissolution, removing or
indemnifying directors or amending these by-laws; and, unless a resolution of
the Board of Directors expressly so provides, no such committee
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shall have the power or authority to declare a dividend, to authorize the
issuance of stock or to adopt a certificate of ownership and merger pursuant to
Section 253 of the General Corporation Law of the State of Delaware.
Section 4.3 Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may adopt, amend
and repeal rules for the conduct of its business. In the absence of a resolution
by the Board of Directors or a provision in the rules of such committee to the
contrary, the presence of a majority of the total number of members of such
committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members present at a meeting at which a quorum is
present shall be the act of such committee.
ARTICLE V
Officers
Section 5.1 Officers; Elections. As soon as practicable after the
annual meeting of stockholders in each year, the Board of Directors shall elect
from its membership or outside thereof a President and a Secretary. The Board of
Directors may also elect from its membership a Chairman of the Board of
Directors (herein called "Chairman") and a Vice Chairman of the Board of
Directors (herein called "Vice Chairman"), and from its membership or outside
thereof one or more Vice Presidents, one or more Assistant Vice Presidents, one
or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers
and such other officers or agents as it may determine. Unless otherwise provided
by the certificate of incorporation, any number of offices may be held by the
same person.
Section 5.2 Term of Office; Resignation; Removal; Vacancies. Except as
otherwise provided by the Board of Directors when electing any officer, each
officer shall hold office until the first meeting of the Board of Directors
after the annual meeting of stockholders next succeeding his election, or until
his successor is elected and qualified or until his earlier resignation or
removal. Any officer may resign at any time upon written notice to the
Corporation directed to the Board of Directors and the Secretary. Such
resignation shall take effect at the time specified therein, and unless
otherwise specified therein no acceptance of such resignation shall be necessary
to make it effective. The Board of Directors may remove any officer or agent
with or without cause at any time. Any such removal shall be without prejudice
to the contractual rights of such officer or agent, if any, with the
Corporation, but the election of an officer or agent shall not of itself create
any contractual rights. Any vacancy occurring in any office of the Corporation
by death, resignation, removal or otherwise may be filled for the unexpired
portion of the term by the Board of Directors.
Section 5.3 Powers and Duties. The officers of the Corporation shall
have such powers and duties in the management of the Corporation as shall be
stated in these by-laws or in a resolution of the Board of Directors which is
not inconsistent with these by-laws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board of Directors.
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The Secretary shall have the duty to record in a book to be kept for that
purpose the proceedings of the meetings of the stockholders, the Board of
Directors and any committees designated by the Board of Directors.
Section 5.4 Other Officers; Security. The other officers, if any, of
the Corporation shall have such duties and powers as generally pertain to their
respective offices and such other duties and powers as the Board of Directors
shall from time to time delegate to each such officer. The Board of Directors
may require any officer, agent or employee to give security, by bond or
otherwise, for the faithful performance of his duties.
Section 5.5 Compensation of Officers. The compensation of each officer
shall be fixed by the Board of Directors and no officer shall be prevented from
receiving such compensation by virtue of his also being a director.
ARTICLE VI
Stock
Section 6.1 Certificates. Every holder of one or more shares of capital
stock of the Corporation shall be entitled to have a certificate signed by or in
the name of the Corporation by the Chairman or Vice Chairman, if any, or the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
if any, or the Secretary or an Assistant Secretary, certifying the number of
shares owned by him in the Corporation. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 6.2 Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VII
Indemnification of Directors and Officers
Section 7.1 Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
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"proceeding"), by reason of the fact that he is or was a director or officer of
the Corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), against all reasonable expense, liability and loss (including, without
limitation, reasonable attorneys' fees, judgments, fines and amounts paid in
settlement) incurred or suffered by such indemnitee in connection therewith and
such indemnification shall continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators; provided, however, that,
except as provided in Section 7.02 below with respect to proceedings to enforce
rights to indemnification, the Corporation shall indemnify any such indemnitee
in connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation. The right to indemnification conferred in this
ARTICLE VII shall be a contract right and shall include the right to be paid by
the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition (hereinafter an "advancement of expenses");
provided, however, that, if the Delaware General Corporation Law requires, an
advancement of expenses incurred by an indemnitee in his capacity as a director
or officer (and not in any other capacity in which service was or is rendered by
such indemnitee) shall be made only upon delivery to the corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (hereinafter a
"final adjudication") that such indemnitee is not entitled to be indemnified for
such expenses under this ARTICLE VII or otherwise.
Section 7.2 Right of Indemnitee to Bring Suit. If a claim under Section
7.01 above is not paid in full by the Corporation within sixty days after a
written claim has been received by the Corporation, except in the case of a
claim for an advancement of expenses, in which case the applicable period shall
be thirty days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole or
in part in any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit. In (a) any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right to an advancement of expenses) it shall be a defense that and
(b) in any suit by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking the Corporation shall be entitled to
recover such expenses upon a final adjudication that, the indemnitee has not met
the applicable standard of conduct set forth in the General Corporation Law of
the State of Delaware. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel or its stockholders) to have made
a determination prior to the commencement of such suit that
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indemnification of the indemnitee is proper in the circumstances because the
indemnitee has met the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent counsel or its stockholders) that
the indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the indemnitee, be a defense to such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this ARTICLE VII or
otherwise shall be on the Corporation.
Section 7.3 Non-Exclusivity of Rights under this ARTICLE. The rights to
indemnification and to the advancement of expenses conferred in this ARTICLE VII
shall not be exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the certificate of incorporation,
by-law, agreement, vote of stockholders or disinterested directors or otherwise.
Section 7.4 Insurance. The Corporation may purchase and maintain
insurance on its own behalf or on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss asserted against him in any such capacity, or arising
out of his status as such, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
General Corporation Law of the State of Delaware.
Section 7.5 Indemnification of Employees and Agents. The Corporation
may, to the extent authorized at any time from time to time by the Board of
Directors, grant rights to indemnification and the advancement of expenses to
any employee or agent of the Corporation to the fullest extent of the provisions
of this ARTICLE VII with respect to the indemnification and advancement of
expenses of directors and officers of the Corporation.
ARTICLE VIII
Miscellaneous
Section 8.1 Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
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Section 8.2 Seal. The Corporation may have a corporate seal which shall
have the name of the Corporation inscribed thereon and shall be in such form as
may be approved from time to time by the Board of Directors.
Section 8.3 Waiver of Notice of Meetings of Stockholders, Directors and
Committees. Whenever notice is required to be given by law, the certificate of
incorporation or these by-laws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Unless otherwise provided by the certificate of incorporation, neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the stockholders, directors or members of a committee of directors
need be specified in any written waiver of notice.
Section 8.4 Interested Directors, Officers, Quorum. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if: (a) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (b) the material facts as to
his relationship or interest and as to the contract or transaction are disclosed
or are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (c) the contract or transaction is fair as to the Corporation as of the time
it is authorized, approved or ratified, by the Board of Directors, a committee
thereof or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
Section 8.5 Books and Records. The books and records of the Corporation
may be kept within or without the State of Delaware at such place or places as
may be designated from time to time by the Board of Directors. Any records
maintained by the Corporation in the regular course of its business, including
its stock ledger, books of account and minute books, may be kept on, or be in
the form of, punch cards, magnetic tape, photographs, microphotographs or any
other information storage device provided that the records so kept can be
converted into clearly legible form within a reasonable time. The Corporation
shall so convert any records so kept upon the request of any person entitled to
inspect the same.
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Section 8.6 Amendment of By-Laws. These By-laws may be amended or
repealed, and new by-laws adopted, by the Board of Directors, but the
stockholders entitled to vote may adopt additional by-laws and may amend or
repeal any by-law whether or not adopted by them.
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Articles of Incorporation
010 Name of Corporation:
Phoenix Microwave Corporation
011 Address of Registered Office in Pennsylvania:
c/o Spector Cohen Gadon & Rosen, P.C., 1700 Market Street, 29th
Floor, Philadelphia, PA 19103
050 Explain the Purpose or Purposes of the Corporation:
To engage in and to do any lawful acts concerning any and all lawful
business for which corporations may be incorporated under the
Pennsylvania Business Corporation Act.
The Aggregate Number of Shares, Classes of Shares and Par Value of Shares Which
the Corporation Shall have Authority to Issue:
040 Number and Class of Shares:
1,000 common
041 Stated Par Value Per Share If Any:
$1.00
042 Total Authorized Capital:
$1,000
031 Term of Existence:
Perpetual
The Name and Address of Each Incorporator, and the Number and Class of Shares
Subscribed to by each Incorporator
060 Name:
Nelson A. Erlam
061 Address:
c/o Spector Cohen Gadon & Rosen, P.C.
<PAGE>
1700 Market Street, 29th Floor
Philadelphia, PA 19103
Number & Class of Shares:
1 common
IN TESTIMONY WHEREOF, the incorporator(s) has (have) signed and sealed the
Articles of Incorporation this 24th day of February 1987.
/s/ Nelson A. Erlam
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Nelson A. Erlam
<PAGE>
Articles of Amendment-
Domestic Business Corporation
In compliance with the requirements of section 806 of the Business
Corporation Law, act of May 5, 1933 (P.L. 364) (15 P.S. Section 1806), the
undersigned corporation desiring to amend its Articles, does hereby certify
that:
1. The name of the corporation is:
Phoenix Microwave Corporation
2. The location of its registered office in this Commonwealth is:
1700 Market Street, 29th Floor
Philadelphia, Pennsylvania 19103
3. The statute by or under which it was incorporated is:
Business Corporation Law of 1933, P.L. 364
4. The date of its incorporation is:
February 25, 1987
5. The amendment was adopted by a consent in writing, setting forth the
action so taken, signed by all of the shareholders entitled to vote thereon
and filed with the Secretary of the corporation.
6. At the time of the action of shareholders:
(a) The total number of shares outstanding was:
400
(b) The number of shares entitled to vote was:
400
7. In the action taken by the shareholders:
(a) The number of shares voted in favor of the amendment was:
400
(b) The number of shares voted against the amendment was:
<PAGE>
0
8. The amendment adopted by the shareholders, set forth in full, is as follows:
The aggregate number of shares, classes of shares and par value of
shares which the Corporation shall have authority to issue is 500,000
shares of common stock, par value $0.002 per share.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer and its
corporate seal, duly attested by another such officer, to be hereunto affixed
this 31st day of August, 1989.
Phoenix Microwave Corporation
By: /s/ Constantinos Kamnitsis
------------------------------------------
Constantinos Kamnitsis, President
Attest:
/s/ Joseph J. Diesso
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Joseph J. Diesso, Secretary
<PAGE>
B Y L A W S
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KEY TO BYLAWS
-------------
ARTICLE I. NAME AND SEAL.
ARTICLE II. REGISTERED AND PRINCIPAL OFFICES.
ARTICLE III. MEETING OF SHAREHOLDERS.
ARTICLE IV. DIRECTORS AND BOARD MEETINGS.
ARTICLE V. OFFICERS.
ARTICLE VI. INDEMNIFICATION OF DIRECTORS, OFFICERS
AND OTHER PERSONS.
ARTICLE VII. FINANCIAL REPORTS TO SHAREHOLDERS.
ARTICLE VIII. RELATION OF DIRECTORS AND OFFICERS TO
CORPORATION.
ARTICLE IX. CORPORATE RECORDS.
ARTICLE X. SHARES OF CAPITAL STOCK.
ARTICLE XI. DIVIDENDS AND OTHER DISTRIBUTIONS TO
SHAREHOLDERS.
ARTICLE XII. MISCELLANEOUS.
ARTICLE XIII. AMENDMENTS.
ARTICLE XIV. ADOPTION OF BYLAWS.
<PAGE>
PHOENIX MICROWAVE CORPORATION
BYLAWS
ARTICLE I. NAME AND SEAL.
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Section 101. Name. The name of the corporation is PHOENIX MICROWAVE
CORPORATION.
Section 102. State of Incorporation. The corporation has been
incorporated under the laws of the Commonwealth of Pennsylvania.
Section 103. Seal. The corporate seal of the Corporation shall have
inscribed thereon the name of the corporation, the year of its organization, the
words "Corporate Seal", and the name "Commonwealth of Pennsylvania". The seal
may be used by any person authorized by the Board of Directors of the
corporation or by these Bylaws by causing the seal or a facsimile thereof to be
impressed or affixed, or in any manner reproduced.
ARTICLE II. REGISTERED AND PRINCIPAL OFFICES.
- ----------- ---------------------------------
Section 201. Registered Office. The registered office of the
corporation in the Commonwealth of Pennsylvania shall be at c/o Spector Cohen
Gadon & Rosen, P.C., 1700 Market Street, 29th Floor, Philadelphia, PA 19103.
Section 202. Offices. The principal office of the corporation and any
other offices of the corporation shall be located at such places, within and
without the Commonwealth of Pennsylvania, as the Board of Directors may from
time to time determine or as the business of the corporation may require.
ARTICLE III. MEETINGS OF SHAREHOLDERS.
- ------------ -------------------------
Section 301. Place of Meetings. All meetings of the shareholders shall
be held at such place or places, within or without the Commonwealth of
Pennsylvania, as shall be determined by the Board..of Directors from time to
time.
Section 302. Annual Meetings. At least once in each calendar year on a
date determined by the Board of Directors, a meeting of the shareholders shall
be held at which time they shall elect Directors and transact such other
business as may properly be brought before the meeting.
Section 303. Special Meetings. Special meetings of the shareholders may
be called at any time by the President, or the Board of Directors. At any time,
upon such written request for a special meeting, it shall be the duty of the
Secretary to fix a date for the meeting, to be held not more than sixty (60)
days after receipt of the request, and to give due notice thereof. If the
Secretary shall
<PAGE>
neglect or refuse to fix the date and give notice, the person or persons making
the request may do so.
Section 304. Notice of Meetings. Written notice of every meeting of
shareholders, stating the time and place thereof, shall be given as herein
provided (by, or at the direction of, the person authorized to call the meeting)
to each shareholder of record entitled to vote at the meeting, at least five (5)
days prior to the day named for the meeting, unless a greater period of notice
is required by statute in a particular case. In the case of a special meeting of
shareholders, the notice shall also set forth the purpose of the meeting. When a
meeting is adjourned, it shall not be necessary to give any notice of the
adjourned meeting or of the business to be transacted at any adjourned meeting,
other than by announcement at the meeting at which such adjournment is taken.
Section 305. Quorum. The shareholders present, in person or by proxy,
at a shareholders' meeting duly called shall constitute a quorum for the
transaction of business except as otherwise provided by law or by resolution of
the Board of Directors prior to such meeting. If however, such quorum shall not
be present, those present thereat may adjourn the meeting to such time and place
as they may determine, but in the case of any meeting called for the election of
Directors, those who attend the second of such adjourned meetings, although less
than a quorum, shall nevertheless constitute a quorum for the purpose of
electing Directors.
Section 306. Voting. Each shareholder shall be entitled to one (1)
vote, in person or by proxy, for each full share having voting power standing
registered in his name on the tenth (10th) day preceding the meeting of
shareholders exclusive of the day of such meeting, or on such other record date
as the Board of Directors shall fix prior to such record date.
Section 307. Vote by Ballot. Upon the demand of any shareholder made
before the voting begins, the vote for Directors and the vote upon any other
question or matter before a shareholder meeting, shall be by ballot.
Section 308. Proxy Voting. At each meeting of the shareholders every
shareholder having the right to vote shall be entitled to vote in person or by
proxy appointed by an instrument in writing subscribed by such shareholder and
delivered to the Secretary at the meeting. No unrevoked proxy shall be valid
after eleven (11) months from the date of its execution, unless a longer time is
expressly provided therein.
Section 309. Unpaid Shares. No share upon which any installment is due
the corporation and unpaid shall be voted at any meeting.
Section 310. Voting List. The officer or agent having charge of the
transfer books shall make at least five (5) days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, with the address of and the number of
shares held by each, which list shall be kept on file at the registered office
of the corporation, and shall be subject to inspection by any shareholder at any
time during usual business hours. Such list shall also be produced and kept open
at the time and place of the meeting, and shall be subject to the inspection of
any shareholder during the whole time of the meeting. The original share ledger
or
<PAGE>
transfer book, or a duplicate thereof (kept at the registered office of the
corporation) shall be prima facie evidence as to who are the shareholders
entitled to examine such list or share ledger or transfer book, or to vote in
person or by proxy, at any meeting of shareholders.
Section 311. Informal Action by Less Than Unanimous Consent. Any action
which may be taken at a meeting of the shareholders or of a class of
shareholders may be taken without a meeting, if a consent or consents in writing
to such action, setting forth the action so taken, shall be (1) signed by
shareholders entitled to cast such a percentage of the number of votes which all
such shareholders are entitled to cast thereon as is required by law for the
taking of action at a meeting of the shareholders or of a class of shareholders
and (2) filed with the secretary of the Corporation. In no case, however, shall
such percentage be less than the larger of (1) two-thirds of the total number of
votes which all shareholders of the corporation or of a class of shareholders
are entitled by the Articles to case upon such action, or (2) the minimum
percentage of the vote required by law, if any, for the proposed corporate
action.
Such action shall not become effective until after at least ten days' written
notice of such action shall have been given to each shareholder of record
entitled to vote thereon. This section shall not be applicable to any action
with respect to any plan or amendment of articles in which Section 515 of the
Pennsylvania Business Corporation Law is applicable.
Section 312. Cumulative Voting. Unless the Articles of the corporation
expressly provide for cumulative voting, in all elections for Directors, every
shareholder entitled to vote shall have the right, in person or by proxy, to
cast one vote per share; there shall be-no cumulative voting.
ARTICLE IV. DIRECTORS AND BOARD MEETINGS.
- ----------- -----------------------------
Section 401. Management by Board of Directors. The business, property
and affairs of the corporation shall be managed by its Board of Directors. The
Board of Directors may exercise all such powers of the corporation and do all
such lawful acts and things as are not by statute or by the Articles of
Incorporation or by these Bylaws directed or required to be exercised or done by
the shareholders.
Section 402. Number of Directors. The Board of Directors shall consist
of not less than three (3) nor more than six (6) Directors. Within these limits
the number of Directors shall be as established by resolution of the Board of
Directors, provided, however, that no reduction in the
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<PAGE>
number of Directors shall in any way affect the terms of Directors then in
office.
Section 403. Qualifications of Directors. The Directors need not be
residents of the Commonwealth of Pennsylvania or shareholders in the
corporation.
Section 404. Election of Directors. The Directors shall be elected by
the shareholders at the annual meeting of shareholders of the corporation. Each
Director shall be elected for the term of one year, and until his successor
shall be elected and shall qualify. Only such persons as are duly nominated by
(1) the incumbent officers of the corporation in consultation with the Board of
Directors, or (2) holders of that number of shares which is entitled to cast at
least ten percent of all votes at said annual election, which nominations shall
be filed with the Secretary of the corporation at least forty-eight hours before
the time scheduled for said meeting, shall be eligible for election.
Section 405. Vacancies. If the office of any Director shall become
vacant by reason of death, resignation, disqualification or other cause, such
vacancy or vacancies, including vacancies resulting from an increase in the
number of Directors, shall be filled by a majority of the remaining members of
the Board, though less than a quorum. Each person so elected by the Board of
Directors to fill a vacancy shall be a Director until his or her successor is
elected by the shareholders who may make such election at the next annual
meeting of shareholders, or at any earlier special meeting of the shareholders
duly called for that purpose, and until such successor shall qualify.
Section 406. Removal of Directors. The entire Board of Directors, or
any individual director may be removed from office without assigning any cause
by the vote of shareholders entitled to cast at least a majority of the votes
which all shareholders would be entitled to cast at any annual election of such
directors. In case the Board or any one or more directors be so removed, new
directors may be elected at the same meeting. Except in a situation in which the
entire Board be removed, unless the Articles of Incorporation fail to provide
for cumulative voting, no individual Director shall be removed from office if a
number of votes are cast against the resolution for his removal, which, if
cumulatively voted at an election of the full Board or full class of Directors
of which he is part, would be sufficient to elect one director. The Board of
Directors may declare vacant the office of a director if he be declared of
unsound mind by an order of court, or convicted of felony, or for any other
proper cause, or if, within sixty (60) days after notice of his election, he
does not accept such office either in writing or by attending a meeting of the
Board of Directors and fulfill such other requirements of qualification as these
Bylaws may specify.
Section 407. Resignations. Any Director may resign at any time. Such
resignation shall
5
<PAGE>
be in writing, but the acceptance thereof shall not be necessary to make it
effective.
Section 408. Compensation of Directors. The compensation, if any, of
Directors shall be as determined by the Board of Directors. In addition to
compensation, if any, for services as a Director, a Director may serve the
Corporation in other capacities and receive separate compensation therefor.
Section 409. Place of Board Meetings. Meetings of the Board of
Directors may be held at any place or places, within or outside the Commonwealth
of Pennsylvania, as shall be determined by the Board of Directors from time to
time, or as may be designated in the notice calling the meeting.
Section 410. Regular Meetings. Regular meetings of the Board of
Directors shall be held in each year at such times as the Board of Directors may
provide, from time to time, by resolution with appropriate notice to the members
of the Board of Directors.
Section 411. Special Meetings. Unless the Board of Directors shall
otherwise direct, special meetings of the Board of Directors may be called by or
at the request of the President of the corporation on appropriate notice to each
Director, which notice shall, in any event, be given at least twenty-four (24)
hours before the time for which the meeting is scheduled. Special meetings shall
be called by the President or Secretary in like manner and on like notice on the
written request of any two (2) Directors. The person or persons authorized to
call special meetings of the Board of Directors may fix any place, either within
or outside the Commonwealth of Pennsylvania, as the place for holding any
special meeting of the Board of Directors called by them. Any business may be
transacted at a special meeting.
Section 412. Notice of Meetings. Unless otherwise required by law or
these Bylaws, neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting. Notwithstanding anything herein to the contrary, no
action of the Board of Directors or corporate action taken pursuant thereto
shall be deemed unauthorized solely because the provisions of this Article
concerning notice of Directors' meetings have not been complied with, provided
that said Board action is taken in a meeting at which a quorum of Directors is
present, and such action is approved or subsequently ratified by a majority of
Directors then in office.
Section 413. Quorum. A majority of the Directors in office shall be
necessary to constitute
6
<PAGE>
a quorum for the transaction of business, and the acts of a majority of the at
the pleasure of the Board of Directors. The Board of Directors may add to the
title of any officer or assistant officer a word or words descriptive of his
powers or the general character of his duties. If the office of any officer or
assistant officer becomes vacant for any reason, the vacancy shall be filled by
the Board of Directors.
Section 502. Agents of Employees. The Board of Directors may by
resolution designate the officer or officers who shall have authority to appoint
such agents or employees as the needs of the corporation may require. In the
absence of such designation this function may be performed by the President and
may be delegated by him to others in whole or in part.
Section 503. Salaries. The salaries of all officers of the corporation
shall be fixed by the Board of Directors or by authority conferred by resolution
of the Board. The Board also may fix the salaries of other compensation of
assistant officers, agents and employees of the corporation, but in the absence
of such action this function shall be performed by the President or by others
under his supervision.
Section 504. Removal of Officers, Agents or Employees. Any officer,
assistant officer, agent or employee of the corporation may be removed or his
authority revoked by resolution of the Board of Directors whenever in its
judgment the best interests of the corporation will be served thereby, but such
removal or revocation shall be without prejudice to the rights, if any, of the
person so removed, to receive compensation or other benefits in accordance with
the terms of existing contracts. Any agent or employee of the corporation
likewise may be removed by the President or, subject to his supervision, by the
person having authority with respect to the appointment of such agent or
employee.
Section 505. Chairman of the Board and President; Powers and Duties.
(a) The Chairman of the Board, if elected or appointed, shall
preside at all meetings of the shareholders and of the Board of Directors and
shall have such powers and duties as the Board may prescribe.
(b) The President shall be the chief executive officer of the
corporation. He shall have general charge and supervision of the business of the
corporation and shall exercise or perform all the powers and duties usually
incident to the office of President. In the absence of the Chairman of the Board
the President shall preside at all Directors present at a meeting at which a
quorum is present shall be the acts of the Board of Directors.
7
<PAGE>
Section 414. Informal Action by Board of Directors Without Meeting. Any
action which may be taken at a meeting of the Board of Directors may be taken
without a meeting and without notice or a waiver of notice, if a consent in
writing, setting forth the action so taken or the action to be taken by the
corporation, shall be signed by all the Directors and shall be filed with the
Secretary of the corporation.
Section 415. Executive Committee. The Board of Directors may, by
resolution adopted by a majority of the whole Board, delegate two (2) or more of
its number to constitute an Executive Committee, which, to the extent provided
in such resolution, shall have and exercise the authority of the Board of
Directors, in the management of the business of the corporation.
Section 416. Other Committees. Committees other than the Executive
Committee may be established, from time to time, by resolution adopted by a
majority of the whole Board, and shall consist of at least two Directors,
and shall have such powers as the Board of Directors shall. prescribe by the
resolution forming such Committee.
Section 417. Presence at Meetings. Any one or more Directors or
shareholders may participate in a meeting of the Board or a committee of the
Board or of the shareholders by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and any person so participating shall be deemed
present at the meeting for all purposes.
ARTICLE V. OFFICERS, AGENTS AND EMPLOYEES.
- ---------- -------------------------------
Section 501. Executive Officers. The executive officers of the
corporation shall be elected annually by the Board of Directors and shall be a
President, a Secretary and a Treasurer. A Chairman of the Board, one or more
Vice Presidents, and such other officers and assistant officers also may be
elected or appointed as the Board of Directors may authorize from time to time.
Any two offices, except those of President and Vice President, may be filled by
the same person. In addition to the powers and duties prescribed by these
Bylaws, the officers and assistant officers shall have such authority and shall
perform such duties as from time to time shall be prescribed by the Board. The
officers and assistant officers of the corporation shall hold office meetings of
the shareholders and of the Board of Directors. He shall from time to time make
such reports of the affairs of the corporation as the Board may require and
shall annually present to the annual meeting of the
8
<PAGE>
shareholders a report of the business of the corporation for the preceding
fiscal year.
(c) The Chairman of the Board and President shall be, ex officio,
members of the executive committee (if any) and of every other committee
appointed by the Board.
Section 506. Vice President; Powers and Duties. The Vice President
shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President; and if there be more than one Vice
President, their seniority in performing such duties and exercising such powers
shall be determined by the Board of Directors or, in default of such
determination, by the order in which they were first elected or appointed. Each
Vice President also shall have such powers and perform such duties as may be
assigned to him by the Board.
Section 507. Secretary; Powers and Duties. The Secretary shall attend
all sessions of the Board and all meetings of the shareholders and act as clerk
thereof, and record all the votes and minutes thereof in books to be kept for
that purpose; and shall perform like duties for the executive committee of the
Board of Directors when required. He shall give, or cause to be given, notice of
all meetings of the shareholders and of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board or by the President.
He shall keep in safe custody the corporate seal of the corporation, and may
affix the same to any instrument requiring it and attest the same.
Section 508. Treasurer; Powers and Duties. The Treasurer shall be the
chief financial officer and shall cause full and accurate accounts of receipts
and disbursements to be kept in books belonging to the corporation. He shall see
to the deposit of all moneys and other valuable effects in the name and to the
credit of the corporation in such depositary or depositaries as may be
designated by the Board of Directors, subject to disbursement or disposition
upon orders signed in such manner as the Board of Directors shall prescribe. He
shall render to the President and to the directors, at the regular meetings of
the Board or whenever the President or the Board may require it, an account of
all his transactions as Treasurer and of the results of operations and financial
condition of the corporation. Only if required by the Board, the Treasurer shall
give the corporation a bond in such sum, and with such surety or sureties as may
be satisfactory to the Board for the faithful discharge of the duties of his
office, and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, records, money,
and other property of whatever kind in his possession or under his control
belonging to the corporation.
Section 509. Delegation of Officers' Duties. Any officer may delegate
duties to his assistant (if any) appointed by the Board; and in case of the
absence of any officer or assistant officer
9
<PAGE>
of the corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board may delegate or authorize the delegation of his powers or
duties, for the time being, to any person.
ARTICLE VI. INDEMNIFICATION OF DIRECTORS,
- ----------- -----------------------------
OFFICERS AND OTHER PERSONS.
---------------------------
Section 601. Indemnification in Non-derivative Context. The corporation
may indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 602. Special Director Provision. The corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative by reason of the fact that he is or
was a director of the Corporation, or is or was serving at the request of the
corporation as a director of another corporation or for any reason while serving
as director of the corporation, against monetary damages as such for any action
taken, or any failure to take any action, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding (whether
brought by or in the right of the corporation or otherwise) if he performed his
duties as a director, including his duties as a member of any committee of the
board upon which he may serve, in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation, and
with such care, including reasonable inquiry, skill and diligence, as a person
of ordinary prudence would use under similar circumstances within the meaning of
42 Pa. C.S.A. 58363 (1986) unless the
10
<PAGE>
director has breached or failed to perform the duties of his office under
ss.8363 and the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness; provided that, absent breach of fiduciary duty, lack
of good faith or self-dealing, actions taken as a director or any failure to
take any action shall be presumed to be in the best interests of the
corporation. The provisions of this section shall not apply to the
responsibility or liability of a director pursuant to any criminal statute, or
the liability of a director for the payment of taxes pursuant to local, state or
federal law.
In performing his duties, a director shall be entitled to rely in good
faith on information, opinions, reports or statements, including financial
statements and other financial data, in each case prepared or presented by any
of the following:
(1) One or more officers or employees of the Corporation whom the
director reasonably believes to be reliable and competent in
the matters presented.
(2) Counsel, public accountants or other persons as to matters
which the director reasonably believes to be within the
professional or expert competence of such person.
(3) A committee of the board upon which he does not serve, duly
designated in accordance with law, or so believed to be by the
director, as to matters within its designated authority, which
committee the director reasonably believes to merit
confidence; and provided however that, a director shall not be
considered to be acting in good faith if he has knowledge
concerning the matter in question that would cause his
reliance to be unwarranted. In discharging the duties of their
respective positions, the board of directors, committees of
the board and individual directors may, in considering the
best interests of the corporation, consider the effects of any
action upon employees, upon suppliers and customers of the
corporation and upon communities in which offices or other
establishments of the corporation are located, and all other
pertinent factors. The consideration of those factors shall
not constitute a violation of any duties described in this
Section 602.
This Section 602 shall not apply to any actions filed prior to January
28, 1987, nor to any breach of performance of duty or any failure of performance
of duty by any director occurring prior to January 28, 1987.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction,
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or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in, or not opposed to, the best interests of
the corporation.
In addition to the rights set forth above, directors of the corporation
shall be entitled to such indemnification rights and rights to receive advances,
insurance coverage or other monetary protection in connection with their service
as directors of the corporation or otherwise, while serving as directors of the
corporation as the Board of Directors may direct or grant in a manner not
inconsistent with Pennsylvania law.
Section 603. Non-director Indemnification in Derivative Context. The
corporation may indemnify any person who was or is a party, or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was an officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the corporation and except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless and only to
the extent that the Court of Common Pleas of the county in which the registered
office of the corporation is located or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to be indemnified for such expenses which the
Court of Common Pleas or such other court shall deem proper.
Section 604. Payments By Corporation. The indemnification provided for
in the preceding sections shall be paid by the corporation only as authorized in
the specific case upon a determination that indemnification of the director,
officer, employee or other agent is proper under the circumstances because he
has met the applicable standard of conduct. Such determination is to be made by
the Board of Directors by majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or in any other manner
authorized by law which the Board of Directors shall direct; provided, however,
that to the extent that a director, officer, employee or agent has been
successful on the merits or otherwise in defense of any such suit, action or
proceeding, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably
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<PAGE>
incurred by him in connection therewith.
Section 605. Payment of Expenses. Expenses incurred by an officer,
director, employee or agent in defending a civil or criminal action, suit or
proceeding may be paid by the corporation as advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such person to repay such amount if it shall ultimately be determined that he
is not entitled to be indemnified by the corporation.
Section 606. Nonexclusivity. The indemnification provided by this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of shareholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 607. Insurance. The corporation shall have power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under the specified statutory
authority or the provisions of this Article VI.
ARTICLE VII. FINANCIAL REPORTS TO SHAREHOLDERS.
- ------------ ----------------------------------
Section 701. No Annual Report Required. Unless required by law, it is
hereby expressly provided that the Directors of the corporation shall not be
required (pursuant to any statutory provision or requirement of law applicable
in the absence of this express provision), to send or cause to be sent to the
shareholders of this corporation any annual financial report.
Section 702. Optional Financial Reports. Nothing in these Bylaws shall
be construed to prohibit the Board of Directors, the President, or other duly
authorized officers from sending financial or other reports to the shareholders
on an annual basis or from time to time, in such form as they may deem necessary
or advisable in their discretion. It is hereby expressly provided that such
reports need not be prepared by an independent public or certified accountant.
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ARTICLE VIII. LIABILITY OF DIRECTORS AND RELATION
- ------------- OF OFFICERS TO CORPORATION.
-----------------------------------
Section 801. Fiduciary Relationship. Officers of the corporation shall
stand in and have a fiduciary relation to the corporation, and shall discharge
the duties of their respective positions in good faith and with that diligence,
care, including reasonable inquiry and skill which ordinarily prudent men and
women would exercise under similar circumstances.
Section 802. Liability of Directors to the Corporation. The directors
of the corporation shall not be personally liable for monetary damages as such
for any action taken, or any failure to take any action unless the director has
breached or failed to perform the duties of his office according to the
standards set forth in Section 602 of Article VI.
ARTICLE IX. CORPORATE RECORDS.
- ----------- ------------------
Section 901. Proceedings of Shareholders and Directors. There shall be
kept at the registered office of the Corporation an original or duplicate record
of the proceedings of the shareholders and of the Directors, and the original or
a copy of its Bylaws, including all amendments or alterations thereof to date,
together with other necessary and appropriate corporate records.
Section 902. Shareholders' Right to Examine Corporate Records. Every
shareholder shall, upon written demand under oath stating the purpose thereof,
have a right to examine, in person or by agent or attorney, during the usual
hours for business for any purpose reasonably related to such person's interests
as a shareholder, the share register, books or records of account, and records
of the proceedings of the shareholders and Board of Directors, and make copies
of extracts therefrom provided, however, that the Board of Directors shall be
entitled to exercise such specific rights as the corporation may have under the
law to keep confidential such records which contain business secrets, the
disclosure of which would be injurious to the best interests of the corporation
and its shareholders. If any attorney or other agent shall be the person who
seeks the right to inspection, the demand under oath shall be accompanied by a
power of attorney or such other writing which authorizes the attorney or other
agent to so act on behalf of the shareholder. The demand under oath shall be
directed to the corporation at its registered office in the Commonwealth of
Pennsylvania or at its principal place of business.
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ARTICLE X. SHARES OF CAPITAL STOCK.
- ---------- ------------------------
Section 1001. Share Certificates. Every shareholder in the
corporation shall be entitled to receive a certificate representing the shares
owned by him. Said share certificates shall be numbered and registered in the
books of the Corporation, as they are issued.
Section 1002. Contents of Share Certificates. Said share certificates
shall state: (1) the name of the Commonwealth of Pennsylvania; (2) the name of
the registered holder of the shares represented thereby; (3) the number and
class of shares and the designation of the series, if any, which the certificate
represents; and (4) the par value of each share represented, or a statement that
the shares are without par value. If the corporation is authorized to issue more
than one (1) class of stock, then upon the face or back of the certificate there
shall be set forth (or a statement shall appear that the Corporation will
furnish to any shareholder, upon request and without charge) a full summary
statement of the designations, preferences, limitations and relative rights of
the shares of each class authorized to be issued and, if the corporation is
authorized to issue any preferred or special class in series, the variations in
the relative rights and preferences between the shares of each such series so
far as the same have been fixed and determined, and the authority of the Board
of Directors to fix and determine the relative rights and preferences of
subsequent series.
Section 1003. Signatures on Share Certificates. Each such certificate
shall be signed by the President or Vice President, and by the Secretary or
Treasurer (or Assistant Secretary or Assistant Treasurer), or by such other
officers as may be designated by the Board of Directors, and sealed with the
corporate seal of the corporation. If a certificate is signed (1) by a transfer
agent or an assistant transfer agent or (2) by a transfer clerk acting on behalf
of the corporation and a registrar, the signature of any such authorized officer
may be facsimile. In case any officer who has signed, or whose facsimile
signature has been used on, any certificate or certificates shall cease to be
such officer of the corporation, before such certificate is issued, it may be
issued by the corporation with the same effect as if the officer had not ceased
to be such at the date of its issue.
Section 1004. Lost or Destroyed Certificates. Any person claiming a
share certificate to be lost or destroyed shall make an affidavit or affirmation
of that fact and, in the manner and to the extent required by the Board of
Directors, shall advertise the same, give the corporation a bond of indemnity
with sufficient surety to protect the corporation or any person injured by the
issue of a new certificate from any liability or expense which it or they may
incur by reason of the fact that the
15
<PAGE>
original certificate remains outstanding, whereupon a new certificate may be
issued of the same tenor and for the same number of shares as the one alleged to
be lost or destroyed, but always to the approval of the Board of Directors.
Section 1005. Transfer of Shares. All transfers of shares of the
corporation shall be made upon the books of the corporation upon surrender to
the corporation or the transfer agent of the corporation of a certificate or
certificates for shares, duly endorsed by the person named in the certificate or
by attorney, lawfully constituted in writing, or accompanied by proper evidence
of succession, assignment or authority to transfer. Thereupon, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificates and record the transaction upon its books.
Section 1006. Agreements Restricting Transfer of Shares. The Board of
Directors may authorize the corporation to become party to agreements with
shareholders and others relating to transfer, repurchase, and issuance, of
shares of stock of the corporation; provided, however, that such agreement must
be filed with the corporation and all share certificates affected thereby shall
have clearly imprinted thereon a legend containing such agreement or referring
thereto.
Section 1007. Registered Shareholders. The corporation may treat the
person registered on its books as the holder of any shares as the absolute
owner thereof, and as the one entitled to vote such shares and receive
dividends thereon.
Section 1008. Determination of Shareholders to Record. The Board of
Directions may fix a time not more than forty (40) days prior to the date of any
meeting of shareholders, or the date fixed for the payment of any dividend or
distribution, or the date for the allotment of rights, or the date when any
change or conversion or exchange of shares will be made or go into effect, as a
record date for the determination of the shareholders entitled to notice of, or
to vote at, any such meeting, or entitled to receive payment of any such
dividend or distribution, or to receive any such allotment of rights or to
exercise the rights in respect to any such change, conversion, or exchange of
shares. In such case only such shareholders as shall be shareholders of record
on the date so fixed shall be entitled to notice of, or to vote at, such
meeting, or to receive payment of such dividends, or to receive such allotment
or rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after any record date
fixes as aforesaid. The Board of Directors may close the books of the
corporation against transfers of shares during the whole or any part of such
period, and in such case written or printed notice thereof shall be mailed at
least ten (10) days before the closing thereof to each shareholder of record at
the address appearing
16
<PAGE>
on the records of the corporation or supplied by him to the corporation for the
purpose of notice. While the stock transfer books of the corporation are closed,
no transfer of shares shall be made thereon. Unless a record date is fixed for
the determination of shareholders entitled to receive notice of, or vote at, a
shareholders' meeting, transferees of shares which are transferred on the books
of the corporation within ten (10) days next preceding the date of such meeting
shall not be entitled to notice of or vote at such meeting.
Section 1009. Voting Trusts. Unless the laws of the Commonwealth of
Pennsylvania or the Articles of Incorporation of the corporation shall otherwise
provide, two (2) or more shareholders of the corporation may, by agreement in
writing, surrender their shares to the corporation and cause new certificates to
be issued therefor in the name of the trustee or trusts, all in accordance with
the agreement and Pennsylvania law. The duration of such voting trust shall not
exceed ten (10) years.
ARTICLE XI. DIVIDENDS AND OTHER DISTRIBUTIONS TO SHAREHOLDERS.
- ----------- --------------------------------------------------
Section 1101. Dividends. Subject to applicable Pennsylvania law, and in
accordance with the provisions thereof at the pertinent time, the Board of
Directors of the corporation may from time to time declare, and the corporation
may pay, dividends on its outstanding shares in cash or property other than its
own shares, except when the corporation is 'insolvent, or when the payment
thereof would render the corporation insolvent, or when the declaration or
payment thereof would be contrary to any restriction contained in the Articles
of Incorporation, but
(1) Dividends may be declared and paid in cash or
property only out of unreserved and unrestricted
earned surplus of the corporation, except as
otherwise provided by statute; and
(2) No dividends shall be paid which would reduce the
remaining net assets of the corporation below the
aggregate preferential amount payable in the event of
voluntary liquidation to the holders of shares having
preferential rights to the assets of the corporation
in the event of liquidation. The Board of Directors
may also, from time to time, distribute to the
holders of the corporation's outstanding shares
having a cumulative preferential right to receive
dividends in discharge of their cumulative dividend
rights, dividends payable in cash out of the
unrestricted capital surplus of the corporation, if
at the time the corporation has no earned surplus and
is not insolvent and would
17
<PAGE>
not thereby be rendered insolvent. Each such
distribution, when made, shall be identified as a
payment of cumulative dividends out of capital
surplus.
Section 1102. Distribution of Shares of the Corporation. The Board of
Directors of the corporation may, from time to time, distribute pro rata to
holders of any class or classes of its issued shares, treasury shares and
authorized but unissued shares, but
(1) If distribution is made, in the corporation's
authorized but unissued shares having a par value,
there shall be transferred to stated capital at the
time of such distribution an amount of surplus at
least equal to the aggregate par value of the shares
so issued;
(2) If a distribution is made in the corporation's
authorized but unissued shares without par value, the
Board of Directors may fix a stated value for the
shares so issued, and there shall be transferred to
stated capital, at the time of such distribution, an
amount of surplus equal to the aggregate stated
value, if any, so fixed;
(3) The amount per share so transferred to stated
capital, or the fact that there was no such transfer,
shall be disclosed to the shareholders receiving such
distribution concurrently with the distribution
thereof;
(4) No distribution of shares of any class shall be made
to holders of shares of any other class unless the
articles so provide or such distribution is
authorized by the affirmative vote or written consent
of the holders of a majority of the outstanding
shares of the class in which the distribution is to
be made.
In lieu of issuing fractional shares in any such distribution, the
corporation may pay in cash the fair value thereof, as determined by the Board
of Directors, to shareholders entitled thereto.
Section 1103. Reserves. There may be set aside out of any funds of the
corporation available for dividends such sum or sums as the Directors, from time
to time, in their absolute discretion determine as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the corporation, or for the purchase of additional property, or for
such other purpose as the Board of Directors shall think conducive to the
interests of the corporation. The Board of Directors may abolish or modify any
such reserve.
18
<PAGE>
Section 1104. Distributions in Partial Liquidation. The Board of
Directors of the corporation may, from time to time, distribute to the
shareholders in partial liquidation, out of unrestricted capital surplus of the
corporation, a portion of its assets in cash or property, subject to the
following conditions:
(1) No such distribution shall be made at a time when the
corporation is insolvent or when such distribution
would render the corporation insolvent.
(2) No such distribution shall be made unless such
distribution shall have been authorized by the prior
affirmative vote, obtained within one (1) year of
such distribution, of the holders of at least a
majority of the outstanding shares of each class,
whether or not entitled to vote thereon by the
provisions of the articles;
(3) No such distribution shall be made to the holders of
any class of shares unless all cumulative dividends
accrued on all classes of shares entitled to
preferential dividends, prior to dividends on the
shares to the holders of which such distribution is
to be made, shall have been fully paid;
(4) No such distribution shall be made to the holders of
any class of shares which would reduce the remaining
net assets of the corporation below the aggregate
preferential amount payable in event of voluntary
liquidation to the holders of shares; having
preferential rights to the, assets of the corporation
in the event of liquidation.
(5) Each such distribution, when made, shall be identified as a
distribution in partial liquidation and the amount per share
disclosed to the shareholders receiving the same concurrently
with the distribution thereof.
ARTICLE XII. MISCELLANEOUS.
- ------------ --------------
Section 1201. Fiscal Year. The fiscal year of the corporation shall be
as fixed by resolution of the Board of Directors. If the Board of Directors
shall not do so, the President shall fix the fiscal year.
19
<PAGE>
Section 1202. Signing Checks. All checks or demands for money and notes
of the corporation shall be signed by such officer, officers, or other person
or persons as the Board of Directors may from time to time designate.
Section 1203. Designation of Presiding and Recording Officers. The
Directors or shareholders, at any meeting of Directors or shareholders, as the
case may be, shall have the right to designate any person, whether or not an
officer, director or shareholder to preside over, or record the proceedings of,
such meeting.
Section 1204. Written Notice of Meetings. Whenever written notice is
required to be given to any person pursuant to law, the Articles of
Incorporation or these Bylaws, it may be given to such person, either personally
or by sending a copy thereof through the mail, or by telegram, charges prepaid,
to his address appearing on the books of the corporation, or to his business or
other address supplied by him to the corporation for the purpose of notice. If
the notice is sent by mail or by telegraph, it shall be deemed to have been
given to the person entitled thereto when deposited in the United States mail or
with a telegraph office for transmission to such person. Such notice shall
specify the place, day and hour of the meeting and, in case of a special meeting
of the shareholders, the general nature of the business to be transacted.
Section 1205. Waiver of Notice. Whenever any written notice is required
to be given pursuant to law, by the Articles of Incorporation or these Bylaws, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Except in the case of a special meeting
of shareholders, neither the business to be transacted at, nor the purpose of,
the meeting need be specified in the waiver of notice of such meeting.
Attendance of a person, either in person or by proxy, at any meeting, shall
constitute a waiver of notice of such meeting, except where a person attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting was now lawfully called or convened.
Section 1206. Text of Proposed Resolution in Written Notice. Whenever
the language of a proposed resolution is included in a written notice to
shareholders, the shareholders' meeting considering the resolution may adopt it,
with such clarifying or other amendments as do not enlarge its original purpose,
without further notice to shareholders not present in person or by proxy.
Section 1207. Interpretation of Bylaws. All words, terms and provisions
of these Bylaws shall be defined by and in accordance with the Pennsylvania
Business corporation Law, the
20
<PAGE>
Director's Liability Act and other applicable laws as such laws and these Bylaws
are interpreted by the corporation's counsel.
Section 1208. Headings; Pronouns. The headings of the Several Articles
and Sections of these Bylaws are for convenience of reference only, and shall
not be relied upon in the interpretation hereof. Pronouns used herein shall be
deemed to include the masculine, feminine and neuter, singular and plural, as
their context may require.
ARTICLE XIII. AMENDMENTS.
- ------------- -----------
Section 1301. Amendment by Shareholders. These Bylaws may be altered,
amended or repealed by a majority vote of all of the shares of stock of the
corporation issued and outstanding and entitled to vote at any annual or special
meetings of the shareholders duly convened after appropriate notice to the
shareholders of such proposed alteration, amendment or repeal.
Section 1302. Amendment by the Board of Directors. These Bylaws may be
altered, amended or repealed by the affirmative vote of a majority of the Board
of Directors at any regular or special meeting of the Board duly convened after
appropriate notice to the Directors of such proposed alteration, amendment or
repeal.
Section 1303. Recording Amendments and Alterations. The text of all
amendments and alterations to these Bylaws shall be attached to the Bylaws with
a notation of the date of each such amendment or alteration and a notation of
whether such amendment or alteration was adopted by the shareholders or the
Board of Directors.
ARTICLE XIV. ADOPTION OF BYLAWS RECORD OR AMENDMENT.
- ------------ ---------------------------------------
Section 1401. These Bylaws have been adopted and filed with the
undersigned to be effective as of the 25th day of February, 1987.
/s/ JOSEPH J. DIESSO
--------------------------------
JOSEPH J. DIESSO, Secretary
21
<PAGE>
Section 1402. Amendment to Bylaws.
Section Amended Date Amended Adopted By
--------------- ------------ ----------
22
<PAGE>
CERTIFICATE OF INCORPORATION
OF
PHOENIX MICROWAVE, LTD.
The undersigned, a natural person, for the purpose of
organizing a corporation for conducting the business and promoting the purposes
hereinafter stated, under the provisions and subject to the requirements of the
laws of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware
Code and the acts amendatory thereof and supplemental thereto, and known,
identified, and referred to as the "General Corporation Law of the State of
Delaware"), hereby certifies that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is Phoenix Microwave, Ltd.
SECOND: The address, including street, number, city, and
county, of the registered office of the corporation in the State of Delaware is
2707 Lansdowne Drive East, Wilmington, 19810, County of New Castle; and the name
of the registered agent of the corporation in the State of Delaware at such
address is Christopher P. Flannery, Esquire.
THIRD: The nature of the business and the purposes to be
conducted and promoted by the corporation shall be to conduct any lawful
business, to promote any lawful purpose, and to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The Corporation is authorized to issue capital
stock of one thousand (1,000) shares of Common Stock, par value $.01 per share.
FIFTH: The name and the mailing address of the incorporator
are as follows:
NAME MAILING ADDRESS
Jill Spalding Spector Gadon & Rosen, P.C.
1700 Market Street, 29th Floor
Philadelphia, PA 19103
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed
between this corporation and its creditors or any class of them and/or between
this corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware
<PAGE>
may, on the application in a summary way of this corporation or of any creditor
or stockholder thereof or on the application of any receiver or receivers
appointed for this corporation under the provisions of ss. 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for this corporation under the provisions of
ss.279 of Title 8 of the Delaware Code order a meeting of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.
EIGHTH: The number of directors constituting the initial
Board of Directors shall be one (1), and the name and address of the initial
director is as follows:
Name Address
---- -------
Stanley P. Jaskiewicz c/o Spector Gadon & Rosen, P.C.
1700 Market Street, 29th Floor
Philadelphia, PA 19103
NINTH: The personal liability of the directors of the
corporation is hereby eliminated to the fullest extent permitted by the
provisions of paragraph (7) of subsection (b) of ss. 102 of the General
Corporation Law of the State of Delaware, as the same may be amended and
supplemented.
TENTH: The corporation shall, to the fullest extent permitted
by the provisions of ss. 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify directors and
officers under said section from and against any and all of the expenses
(including reasonable attorneys' fees), liabilities, or other matters referred
to in or covered by said section and the Corporation may, upon the determination
of the Board of Directors of the Corporation, to the fullest extent permitted by
the provisions of ss.145 of the General Corporation Law of the State of
Delaware, as the same may be amended or supplemented, indemnify employees or
agents of the Corporation and any and all other persons whom it shall have power
to indemnify under said section, from and against any and all of the expenses
(including reasonable attorneys' fees), liabilities, or other matters referred
to in or covered by said section. The indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer,
<PAGE>
employee, or agent and shall inure to the benefit of the heirs, executors, and
administrators of such a person. The corporation shall pay and advance expenses
(including reasonable attorneys' fees) to directors and officers for matters
covered by indemnification to the fullest extent permitted by the provisions of
ss. 145 of the General Corporation Law of the State of Delaware, and may
similarly pay and advance expenses for employees and agents as shall be approved
by the Board of Directors of the Corporation.
ELEVENTH: From time to time any of the provisions of this
certificate of incorporation may be amended, altered, or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the corporation by
this certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
TWELFTH: The effective time of the certificate of
incorporation of the corporation, and the time when the existence of the
corporation shall commence, shall be upon filing.
Signed on April 24, 1996
/s/ Jill Spalding
--------------------------------
Jill Spalding
<PAGE>
BY-LAWS
OF
PHOENIX MICROWAVE, LTD.
(a Delaware corporation)
---------------------------
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing stock in
the corporation shall be signed by, or in the name of, the corporation by the
Chairman or Vice-Chairman of the Board of Directors, if any, or by the President
or a Vice President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the corporation. Any or all the
signatures on any such certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than one
class of stock or more than one series of any class of stock, and whenever the
corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock or uncertificated
shares in place of any certificate theretofore issued by it, alleged to have
been lost, stolen, or destroyed, and the Board of Directors may require the
owner of the lost, stolen, or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate or the issuance of
any such new certificate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions imposed by the
General Corporation Law, the Board of Directors of the corporation may provide
by resolution or resolutions that some or all of any or all classes or series of
the stock of the corporation shall be uncertificated
<PAGE>
shares. Within a reasonable time after the issuance or transfer of any
uncertificated shares, the corporation shall send to the registered owner
thereof any written notice prescribed by the General Corporation Law.
3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be
required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (3) issue scrip or warrants in registered form (either
represented by a certificate or uncertificated) or bearer form (represented by a
certificate) which shall entitle the holder to receive a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share or an uncertificated fractional share shall, but scrip or
warrants shall not unless otherwise provided therein, entitle the holder to
exercise voting rights, to receive dividends thereon, and to participate in any
of the assets of the corporation in the event of liquidation. The Board of
Directors may cause scrip or warrants to be issued subject to the conditions
that they shall become void if not exchanged for certificates representing the
full shares or uncertificated full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the corporation and the proceeds thereof distributed to the holders
of scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
4. STOCK TRANSFERS. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and, in the case of shares represented by certificates, on
surrender of the certificate or certificates for such shares of stock properly
endorsed and the payment of all taxes due thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the date next preceding the
day on which notice is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the corporation may determine the stockholders entitled to consent
to corporate action in writing without a meeting, the Board of Directors may fix
2
<PAGE>
a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining the stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required by
the General Corporation Law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by the General Corporation Law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action. In order that
the corporation may determine the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion, or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action. If
no record date is fixed by the Board of Directors, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of the right to
notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the certificate of incorporation
confers such rights where there are two or more classes or series of shares of
stock or upon which or upon whom the General Corporation Law confers such rights
notwithstanding that the certificate of incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder; provided, however, that no such right shall vest
in the event of an increase or a decrease in the authorized number of shares of
stock of any class or series which is otherwise denied voting rights under the
provisions of the certificate of incorporation, except as any provision of law
may otherwise require.
7. STOCKHOLDER MEETINGS.
3
<PAGE>
- TIME. The annual meeting shall be held on the date and at the time
fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization of
the corporation and each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed by the directors.
- PLACE. Annual meetings and special meetings shall be held at such
place, within or without the State of Delaware, as the directors may, from time
to time, fix. Whenever the directors shall fail to fix such place, the meeting
shall be held at the registered office of the corporation in the State of
Delaware.
- CALL. Annual meetings and special meetings may be called by the
directors or by any officer instructed by the directors to call the meeting.
- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
given, stating the place, date, and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes of which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the General Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice of any meeting shall be given, personally
or by mail, not less than ten days nor more than sixty days before the date of
the meeting, unless the lapse of the prescribed period of time shall have been
waived, and directed to each stockholder at his record address or at such other
address which he may have furnished by request in writing to the Secretary of
the corporation. Notice by mail shall be deemed to be given when deposited, with
postage thereon prepaid, in the United States Mail. If a meeting is adjourned to
another time, not more than thirty days hence, and/or to another place, and if
an announcement of the adjourned time and/or place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting unless the
directors, after adjournment, fix a new record date for the adjourned meeting.
Notice need not be given to any stockholder who submits a written waiver of
notice signed by him before or after the time stated therein. Attendance of a
stockholder at a meeting of stockholders shall constitute a waiver of notice of
such meeting, except when the stockholder attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice.
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- STOCKHOLDER LIST. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, a Vice President, or, if none of the foregoing is in
office and present and acting, by a chairman to be chosen by the stockholders.
The Secretary of the corporation, or in his absence, an Assistant Secretary,
shall act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present the Chairman of the meeting shall appoint a
secretary of the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize another person
or persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may, but need
not, appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to appear or act, the
vacancy may be filled by appointment made by the directors in advance of the
meeting or at the meeting by the person presiding thereat. Each inspector, if
any, before entering upon the discharge of his duties, shall take and sign an
oath faithfully to execute the duties of inspectors at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and
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effect of proxies, and shall receive votes, ballots, or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots, or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all stockholders. On request of the person presiding at the meeting, the
inspector or inspectors, if any, shall make a report in writing of any
challenge, question, or matter determined by him or them and execute a
certificate of any fact found by him or them. Except as otherwise required by
subsection (e) of Section 231 of the General Corporation Law, the provisions of
that Section shall not apply to the corporation.
- QUORUM. The holders of a majority of the outstanding shares of stock
shall constitute a quorum at a meeting of stockholders for the transaction of
any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
- VOTING. Each share of stock shall entitle the holders thereof to one
vote. Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors. Any other action shall be authorized by a majority of
the votes cast except where the General Corporation Law prescribes a different
percentage of votes and/or a different exercise of voting power, and except as
may be otherwise prescribed by the provisions of the certificate of
incorporation and these Bylaws. In the election of directors, and for any other
action, voting need not be by ballot.
8. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the
General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. Action taken pursuant to this paragraph shall be
subject to the provisions of Section 228 of the General Corporation Law.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed by or under the direction of the Board of Directors
of the corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the
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phrase "whole board" herein refers to the total number of directors which the
corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a
citizen of the United States, or a resident of the State of Delaware. The
initial Board of Directors shall consist of 2 persons. Thereafter the number of
directors constituting the whole board shall be at least one. Subject to the
foregoing limitation and except for the first Board of Directors, such number
may be fixed from time to time by action of the stockholders or of the
directors, or, if the number is not fixed, the number shall be one. The number
of directors may be increased or decreased by action of the stockholders or of
the directors.
3. ELECTION AND TERM. The first Board of Directors, unless the members
thereof shall have been named in the certificate of incorporation, shall be
elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an annual meeting of stockholders, and directors who are elected
in the interim to fill vacancies and newly created directorships, shall hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified or until their earlier resignation or removal. Except
as the General Corporation Law may otherwise require, in the interim between
annual meetings of stockholders or of special meetings of stockholders called
for the election of directors and/or for the removal of one or more directors
and for the filing of any vacancy in that connection, newly created
directorships and any vacancies in the board of Directors, including unfilled
vacancies resulting from the removal of directors for cause or without cause,
may be filled by the vote of a majority of the remaining directors then in
office, although less than a quorum, or by the sole remaining director.
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the
State of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the
time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, of the President, or of a majority of the directors in office.
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- NOTICE OF ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required
for regular meetings for which the time and place have been fixed. Written,
oral, or any other mode of notice of the time and place shall be given for
special meetings in sufficient time for the convenient assembly of the directors
thereat. Notice need not be given to any director or to any member of a
committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor, the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
- QUORUM AND ACTIONS. A majority of the whole Board shall constitute a
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A majority
of the directors present, whether or not a quorum is present, may adjourn a
meeting to another time and place. Except as herein otherwise provided, and
except as otherwise provided by the General Corporation Law, the vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board. The quorum and voting provisions herein stated
shall not be construed as conflicting with any provisions of the General
Corporation Law and these Bylaws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman
of the Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the
General Corporation Law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
6. COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of any member of any such committee or
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<PAGE>
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board, shall have and
may exercise the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation with the exception of
any authority the delegation of which is prohibited by Section 141 of the
General Corporation Law, and may authorize the seal of the corporation to be
affixed to all papers which may require it.
7. WRITTEN ACTION. Any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof may be taken without
a meeting if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
ARTICLE III
OFFICERS
The officers of the corporation shall consist of a President, a
Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by the
Board of Directors, a Chairman of the Board, a Vice-Chairman of the Board, an
Executive Vice-President, one or more other Vice-Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
with such titles as the resolution of the Board of Directors choosing them shall
designate. Except as may otherwise be provided in the resolution of the Board of
Directors choosing him, no officer other than the Chairman or Vice-Chairman of
the Board, if any, need be a director. Any number of offices may be held by the
same person, as the directors may determine.
Unless otherwise provided in the resolution choosing him, each officer
shall be chosen for a term which shall continue until the meeting of the Board
of Directors following the next annual meeting of stockholders and until his
successor shall have been chosen and qualified.
All officers of the corporation shall have such authority and perform
such duties in the management and operation of the corporation as shall be
prescribed in the resolutions of the Board of Directors designating and choosing
such officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the corporation shall record all of the proceedings of
all meetings and actions in writing of stockholders, directors, and committees
of directors, and shall exercise such additional authority and perform such
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<PAGE>
additional duties as the Board shall assign to him. Any officer may be removed,
with or without cause, by the Board of Directors. Any vacancy in any office may
be filled by the Board of Directors.
ARTICLE IV
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors
shall prescribe.
ARTICLE V
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject
to change, by the Board of Directors.
ARTICLE VI
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, the power to amend, alter, or repeal
these Bylaws and to adopt new Bylaws may be exercised by the Board of Directors
or by the stockholders.
I HEREBY CERTIFY that the foregoing is a full, true, and correct copy
of the Bylaws of Phoenix Microwave, Ltd., a Delaware corporation, as in effect
on the date hereof.
Dated: April 30, 1996
/s/ Joseph J. Diesso,
-------------------------------
Joseph J. Diesso, Secretary
(SEAL)
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CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
STELLEX PRECISION MACHINING, INC.,
a Delaware corporation
William L. Remley and Richard L. Kramer hereby certify that:
1. They are the President and Secretary, respectively, of Stellex
Precision Machining, Inc., a Delaware corporation (the "Corporation").
2. Article FOURTH of the Certificate of Incorporation of the
Corporation is amended to read as follows:
"FOURTH. The total number of shares of stock which the corporation
has authority to issue is 20,000 shares. All of such shares are Common
Stock with no par value per share."
3. The foregoing amendment of the Certificate of Incorporation has been
duly adopted in accordance with the applicable provisions of Section 242 of the
General Corporation Law of the State of Delaware.
4. The foregoing amendment of the Certificate of Incorporation has been
duly adopted by the board of directors of the Corporation.
5. The foregoing amendment of the Certificate of Incorporation has been
duly approved by the required vote of stockholders of the Corporation in
accordance with Section 242 of the General Corporation Law of the State of
Delaware. The total number of outstanding shares of the corporation is One
Hundred (100) shares of Common Stock. The number of shares voting in favor of
the amendment equaled or exceeded the vote required. The percentage vote
required was more than 50%.
<PAGE>
We further declare that the matters set forth in this certificate are
true and correct of our knowledge.
Date: April 19, 1999
/s/ William L. Remley
-------------------------------
William L. Remley, President
/s/ Richard L. Kramer
-------------------------------
Richard L. Kramer, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PREMACH ACQUISITION CORPORATION,
a Delaware corporation
William L. Remley and Richard L. Kramer hereby certify that:
1. They are the President and Secretary, respectively, of PreMach
Acquisition Corporation, a Delaware corporation (the "Corporation").
2. Article FIRST of the Certificate of Incorporation of the Corporation
is amended to read as follows:
"FIRST. The name of the Corporation is Stellex Precision Machining,
Inc."
3. The foregoing amendment of the Certificate of Incorporation has been
duly adopted in accordance with the applicable provisions of Section 242 of the
General Corporation Law of the State of Delaware.
4. The foregoing amendment of the Certificate of Incorporation has been
duly adopted by the board of directors of the Corporation.
5. The foregoing amendment of the Certificate of Incorporation has been
duly approved by the required vote of stockholders of the Corporation in
accordance with Section 242 of the General Corporation Law of the State of
Delaware. The total number of outstanding shares of the corporation is One
Hundred (100) shares of Common Stock. The number of shares voting in favor of
the amendment equaled or exceeded the vote required. The percentage vote
required was more than 50%.
<PAGE>
We further declare that the matters set forth in this certificate are
true and correct of our knowledge.
Date: April 2, 1999
/s/ William L. Remley
-------------------------------
William L. Remley, President
/s/ Richard L. Kramer
-------------------------------
Richard L. Kramer, Secretary
<PAGE>
CERTIFICATE OF INCORPORATION
OF
PREMACH ACQUISITION CORPORATION,
a Delaware corporation
FIRST. The name of the corporation is PreMach Acquisition
Corporation.
SECOND. The address of the corporation's registered office in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of its registered agent at
such address is The Corporation Trust Company.
THIRD. The nature of the business of or purpose to be
conducted or promoted by the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH. The total number of shares of stock which the
corporation has authority to issue is 1,000 shares. All of such shares are
Common Stock with no par value per share.
FIFTH. The name and mailing address of the sole incorporator
is:
Name: Mailing Address:
Janelle Telesford c/o Winston & Strawn
200 Park Avenue
New York, NY 10166-4193
SIXTH. In furtherance and not in limitation of the powers
conferred by statute, the board of directors of the corporation is expressly
authorized to adopt, amend or repeal the by-laws of the corporation.
SEVENTH. Elections of directors need not be by written ballot
unless the by-laws of the corporation so provide.
<PAGE>
EIGHTH. To the fullest extent permitted by the General
Corporation Law of the State of Delaware as the same exists or may hereafter be
amended, a director of the corporation shall not be liable to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director. The corporation shall indemnify, in accordance with and to the full
extent now or hereafter permitted by law, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including, without limitation, an action by or in the right of the
corporation), by reason of such person's acting as a director of the corporation
(and the corporation, in the discretion of the board of directors, may so
indemnify a person by reason of the fact that such person is or was an officer
or employee of the corporation or is or was serving at the request of the
corporation in any other capacity for or on behalf of the corporation) against
any liability or expense actually or reasonably incurred by such person in
respect thereof. Any repeal or modification of this EIGHTH Article shall not
adversely affect any right or protection of a director of the corporation
existing at the time of such repeal or modification. Such indemnification is not
exclusive of any other right of indemnification provided by law, agreement or
otherwise.
I, the undersigned, being the sole incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, do make this certificate, hereby
declaring and certifying that this is my actual deed and that the facts stated
herein are true, and accordingly have hereunto set my hand this 5th day of
March, 1999.
/s/ Janelle Telesford
-------------------------
Janelle Telesford
Sole Incorporator
<PAGE>
BY-LAWS
OF
PREMACH ACQUISITION CORPORATION
a Delaware corporation
ARTICLE I
Offices
Section 1.1 Registered Office. The registered office of the Corporation
in the State of Delaware shall be located at 1209 Orange Street, Wilmington,
Delaware, County of New Castle. The name of the Corporation's registered agent
at such address shall be The Corporation Trust Company.
Section 1.2 Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
Stockholders
Section 2.1 Annual Meetings. An annual meeting of stockholders shall be
held each year for the election of directors at such date, time and place either
within or without the State of Delaware as shall be designated by the Board of
Directors. Any other proper business may be transacted at the annual meeting of
stockholders.
Section 2.2 Special Meetings. Special meetings of stockholders may be
called at any time by the Board of Directors, the Chairman, if any, the Vice
Chairman, if any, or the President and shall be called by the Chairman or the
Secretary at the request, in writing, stating the purpose or purposes of the
meeting, of stockholders who hold a majority of the outstanding shares of each
class of capital stock entitled to vote at the meeting. Each special meeting
shall be held at such date, time and place either within or without the State of
Delaware as shall be designated by the person or persons calling such meeting at
least ten days prior to such meeting.
Section 2.3 Notice of Meeting. Unless otherwise provided by law,
whenever stockholders are required or permitted to take any action at a meeting,
a written notice of the meeting shall be given which shall state the date, time
and place of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called. Unless otherwise provided by law, the
<PAGE>
written notice of any meeting shall be given not less than ten nor more than
sixty days before the date of the meeting to each stockholder entitled to vote
at the meeting. If mailed, notice is given when deposited in the United States
mail, postage prepaid, directed to the stockholder at his address as it appears
on the records of the Corporation.
Section 2.4 Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 2.5 Quorum. Unless otherwise provided by law or the certificate
of incorporation, at each meeting of stockholders, the presence in person or
representation by proxy of the holders of a majority of the outstanding shares
of each class of capital stock entitled to vote at the meeting shall constitute
a quorum for the transaction of business. For purposes of the foregoing, two or
more classes or series of capital stock shall be considered a single class if
the holders thereof are entitled to vote together as a single class at the
meeting. In the absence of a quorum, the stockholders so present and represented
may, by vote of the holders of a majority of the shares of capital stock of the
Corporation so present and represented, adjourn the meeting from time to time
until a quorum shall attend, and the provisions of Section 2.4 of these by-laws
shall apply to each such adjournment. Shares of its own capital stock belonging
on the record date for the meeting to the Corporation or to another corporation,
if a majority of the shares entitled to vote in the election of directors of
such other corporation is held, directly or indirectly, by the Corporation,
shall neither be entitled to vote nor be counted for quorum purposes; provided,
however, that the foregoing shall not limit the right of the Corporation to vote
stock, including but not limited to its own stock, held by it in a fiduciary
capacity.
Section 2.6 Organization. Meetings of stockholders shall be presided
over by the Chairman, if any, or in his absence by the Vice Chairman, if any, or
in his absence by the President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 2.7 Voting; Proxies. Unless otherwise provided by the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of capital stock
held by him which has voting power on the subject matter submitted to a vote at
the meeting. Each stockholder entitled to vote at a meeting of stockholders or
to express consent or dissent to corporate action in writing without a meeting
may authorize another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and if, and only as long as, it is coupled
with an
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<PAGE>
interest sufficient in law to support an irrevocable power. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy or another duly
executed proxy bearing a later date with the Secretary before the proxy is
voted. Unless otherwise required by law, voting of stockholders for the election
of directors need not be by written ballot. Voting of stockholders for all other
matters need not be by written ballot unless so determined at a stockholders
meeting by the vote of the holders of a majority of the outstanding shares of
each class of capital sock present in person or represented by proxy at the
meeting and entitled to vote on the subject matter submitted to a vote at the
meeting. Unless otherwise provided by law or the certificate of incorporation,
the vote of the holders of a majority of the shares of capital stock of the
Corporation present in person or represented by proxy at a meeting at which a
quorum is present and entitled to vote on the subject matter submitted to a vote
at the meeting shall be the act of the stockholders.
Section 2.8 Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
nor less than ten days before the date of such meeting, more than ten days after
the date upon which the resolution fixing the record date with respect to the
taking of corporate action by written consent without a meeting is adopted by
the Board of Directors, nor more than sixty days prior to any other action. If
no record date is fixed: (a) the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held; (b) the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed; (c) the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when prior action by the Board of Directors is
required, shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action; and (d) the record
date for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 2.9 List of Stockholders Entitled to Vote. The Secretary shall
make, at least ten days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
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place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof and may be
inspected by any stockholder who is present.
Section 2.10 Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided by the certificate of incorporation, any action required by
law to be taken at any annual or special meeting of stockholders of the
Corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
Board of Directors
Section 3.1 Powers; Number; Qualifications. Unless otherwise provided
by law or the certificate of incorporation, the business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. Unless otherwise provided by the certificate of incorporation, the
Board of Directors shall consist of such number of directors as the Board of
Directors shall from time to time designate. Unless otherwise provided by the
certificate of incorporation, directors need not be stockholders.
Section 3.2 Election; Term of Office; Resignation; Removal; Vacancies.
Each director shall hold office until his successor is elected and qualified or
until his earlier resignation or removal. Any director may resign at any time
upon written notice to the Corporation directed to the Board of Directors or the
Secretary. Such resignation shall take effect at the time specified therein, and
unless otherwise specified therein no acceptance of such resignation shall be
necessary to make it effective. Any director or the entire Board of Directors
may be removed, with or without cause, by the vote of the holders of a majority
of shares of capital stock then entitled to vote at an election of directors.
Whenever the holders of shares of any class or series of capital stock are
entitled to elect one or more directors by the provisions of the certificate of
incorporation, the provisions of the preceding sentence shall apply, in respect
to the removal without cause of a director or directors so elected, to the vote
of the holders of the outstanding shares of that class or series of capital
stock and not to the vote of the holders of the outstanding shares of capital
stock as a whole. Unless otherwise provided by the certificate of incorporation,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors elected by all of the stockholders having a right
to vote as a single class may be filled by the vote of a majority of the
directors then in office, although less than a quorum, or by the vote of the
sole remaining director. Whenever the holders of shares of any class or classes
of capital stock or series thereof are entitled to elect one or more
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directors by the provisions of the certificate of incorporation, vacancies and
newly created directorships of such class or classes or series thereof may be
filled by the vote of a majority of the directors elected by such class or
classes or series thereof then in office, or by the vote of the sole remaining
director so elected.
Section 3.3 Regular Meetings. Regular meetings of the Board of
Directors shall be held at such dates, times and places either within or without
the State of Delaware as the Board of Directors shall from time to time
determine.
Section 3.4 Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Chairman, if any, the Vice Chairman,
if any, the President or by any two members of the Board of Directors. Each
special meeting shall be held at such date, time and place either within or
without the State of Delaware as shall be fixed by the person or persons calling
the meeting.
Section 3.5 Notice of Meetings. Written notice of each meeting of the
Board of Directors shall be given which shall state the date, time and place of
the meeting. The written notice of any meeting shall be given at least
twenty-four hours in advance of the meeting to each director. Notice may be
given by letter, telegram, telex or facsimile and shall be deemed to have been
given when deposited in the United States mail, delivered to the telegraph
company or transmitted by telex or facsimile, as the case may be.
Section 3.6 Telephonic Meetings Permitted. Members of the Board of
Directors or any committee designated by the Board of Directors may participate
in a meeting of the Board of Directors or of such committee by means of
conference telephone or similar communication equipment by means of which all
persons participating in the meeting can hear each other, and participation in
the meeting pursuant to this by-law shall constitute presence in person at such
meeting.
Section 3.7 Quorum; Vote Required for Action. Unless otherwise required
by law, at each meeting of the Board of Directors, the presence of one-third of
the total number of directors shall constitute a quorum for the transaction of
business. The vote of a majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors, unless the vote
of a greater number is required by law or the certificate of incorporation. In
case at any meeting of the Board of Directors a quorum shall not be present, the
members of the Board of Directors present may by majority vote to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall attend.
Section 3.8 Organization. Meetings of the Board of Directors shall be
presided over by the Chairman, if any, or in his absence by the Vice Chairman,
if any, or in his absence by the President, or in their absence by a chairman
chosen at the meeting. The Secretary shall act as secretary of the meeting, but
in his absence the chairman of the meeting may appoint any person to act as
secretary of the meeting.
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Section 3.9 Action by Directors Without a Meeting. Unless otherwise
provided by the certificate of incorporation, any action required or permitted
to be taken at any meeting of the Board of Directors or any committee designated
by the Board of Directors may be taken without a meeting if all members of the
Board of Directors or of such committee consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or such committee.
Section 3.10 Compensation of Directors. Unless otherwise provided by
the certificate of incorporation, the Board of Directors shall have the
authority to fix the compensation of directors, which compensation may include
the reimbursement of expenses incurred in connection with meetings of the Board
of Directors or a committee thereof.
ARTICLE IV
Committees
Section 4.1 Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member of such committee at any meeting thereof. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in place of any such absent or disqualified
member.
Section 4.2 Power of Committees. Any committee designated by the Board
of Directors, to the extent provided in a resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority to take any
action which by law may only be taken by the Board of Directors or to take any
action with reference to: amending the certificate of incorporation (except that
a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors,
fix the designation and any of the preferences or rights of such shares relating
to dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series),
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of dissolution, removing or
indemnifying directors or amending these
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by-laws; and, unless a resolution of the Board of Directors expressly so
provides, no such committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock or to adopt a certificate of
ownership and merger pursuant to Section 253 of the General Corporation Law of
the State of Delaware.
Section 4.3 Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may adopt, amend
and repeal rules for the conduct of its business. In the absence of a resolution
by the Board of Directors or a provision in the rules of such committee to the
contrary, the presence of a majority of the total number of members of such
committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members present at a meeting at which a quorum is
present shall be the act of such committee.
ARTICLE V
Officers
Section 5.1 Officers; Elections. As soon as practicable after the
annual meeting of stockholders in each year, the Board of Directors shall elect
from its membership or outside thereof a President and a Secretary. The Board of
Directors may also elect from its membership a Chairman of the Board of
Directors (herein called "Chairman") and a Vice Chairman of the Board of
Directors (herein called "Vice Chairman"), and from its membership or outside
thereof one or more Vice Presidents, one or more Assistant Vice Presidents, one
or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers
and such other officers or agents as it may determine. Unless otherwise provided
by the certificate of incorporation, any number of offices may be held by the
same person.
Section 5.2 Term of Office; Resignation; Removal; Vacancies. Except as
otherwise provided by the Board of Directors when electing any officer, each
officer shall hold office until the first meeting of the Board of Directors
after the annual meeting of stockholders next succeeding his election, or until
his successor is elected and qualified or until his earlier resignation or
removal. Any officer may resign at any time upon written notice to the
Corporation directed to the Board of Directors and the Secretary. Such
resignation shall take effect at the time specified therein, and unless
otherwise specified therein no acceptance of such resignation shall be necessary
to make it effective. The Board of Directors may remove any officer or agent
with or without cause at any time. Any such removal shall be without prejudice
to the contractual rights of such officer or agent, if any, with the
Corporation, but the election of an officer or agent shall not of itself create
any contractual rights. Any vacancy occurring in any office of the Corporation
by death, resignation, removal or otherwise may be filled for the unexpired
portion of the term by the Board of Directors.
Section 5.3 Powers and Duties. The officers of the Corporation shall
have such powers and duties in the management of the Corporation as shall be
stated in these by-laws or in a resolution of the Board of Directors which is
not inconsistent with these by-laws and, to the extent not so
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stated, as generally pertain to their respective offices, subject to the control
of the Board of Directors. The Secretary shall have the duty to record in a book
to be kept for that purpose the proceedings of the meetings of the stockholders,
the Board of Directors and any committees designated by the Board of Directors.
Section 5.4 Other Officers; Security. The other officers, if any, of
the Corporation shall have such duties and powers as generally pertain to their
respective offices and such other duties and powers as the Board of Directors
shall from time to time delegate to each such officer. The Board of Directors
may require any officer, agent or employee to give security, by bond or
otherwise, for the faithful performance of his duties.
Section 5.5 Compensation of Officers. The compensation of each officer
shall be fixed by the Board of Directors and no officer shall be prevented from
receiving such compensation by virtue of his also being a director.
ARTICLE VI
Stock
Section 6.1 Certificates. Every holder of one or more shares of capital
stock of the Corporation shall be entitled to have a certificate signed by or in
the name of the Corporation by the Chairman or Vice Chairman, if any, or the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
if any, or the Secretary or an Assistant Secretary, certifying the number of
shares owned by him in the Corporation. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 6.2 Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VII
Indemnification of Directors and Officers
Section 7.1 Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
threatened, pending or completed
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<PAGE>
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he is or
was a director or officer of the Corporation or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than permitted prior thereto), against all reasonable
expense, liability and loss (including, without limitation, reasonable
attorneys' fees, judgments, fines and amounts paid in settlement) incurred or
suffered by such indemnitee in connection therewith and such indemnification
shall continue as to an indemnitee who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the indemnitee's heirs,
executors and administrators; provided, however, that, except as provided in
Section 7.02 below with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this ARTICLE VII
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance of
its final disposition (hereinafter an "advancement of expenses"); provided,
however, that, if the Delaware General Corporation Law requires, an advancement
of expenses incurred by an indemnitee in his capacity as a director or officer
(and not in any other capacity in which service was or is rendered by such
indemnitee) shall be made only upon delivery to the corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (hereinafter a
"final adjudication") that such indemnitee is not entitled to be indemnified for
such expenses under this ARTICLE VII or otherwise.
Section 7.2 Right of Indemnitee to Bring Suit. If a claim under Section
7.01 above is not paid in full by the Corporation within sixty days after a
written claim has been received by the Corporation, except in the case of a
claim for an advancement of expenses, in which case the applicable period shall
be thirty days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole or
in part in any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit. In (a) any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right to an advancement of expenses) it shall be a defense that and
(b) in any suit by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking the Corporation shall be entitled to
recover such expenses upon a final adjudication that, the indemnitee has not met
the applicable standard of conduct set forth in the General Corporation Law of
the State of Delaware. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel or its
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stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent counsel or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
ARTICLE VII or otherwise shall be on the Corporation.
Section 7.3 Non-Exclusivity of Rights under this ARTICLE. The rights to
indemnification and to the advancement of expenses conferred in this ARTICLE VII
shall not be exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the certificate of incorporation,
by-law, agreement, vote of stockholders or disinterested directors or otherwise.
Section 7.4 Insurance. The Corporation may purchase and maintain
insurance on its own behalf or on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss asserted against him in any such capacity, or arising
out of his status as such, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
General Corporation Law of the State of Delaware.
Section 7.5 Indemnification of Employees and Agents. The Corporation
may, to the extent authorized at any time from time to time by the Board of
Directors, grant rights to indemnification and the advancement of expenses to
any employee or agent of the Corporation to the fullest extent of the provisions
of this ARTICLE VII with respect to the indemnification and advancement of
expenses of directors and officers of the Corporation.
ARTICLE VIII
Miscellaneous
Section 8.1 Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
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<PAGE>
Section 8.2 Seal. The Corporation may have a corporate seal which shall
have the name of the Corporation inscribed thereon and shall be in such form as
may be approved from time to time by the Board of Directors.
Section 8.3 Waiver of Notice of Meetings of Stockholders, Directors and
Committees. Whenever notice is required to be given by law, the certificate of
incorporation or these by-laws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Unless otherwise provided by the certificate of incorporation, neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the stockholders, directors or members of a committee of directors
need be specified in any written waiver of notice.
Section 8.4 Interested Directors, Officers, Quorum. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if: (a) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (b) the material facts as to
his relationship or interest and as to the contract or transaction are disclosed
or are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (c) the contract or transaction is fair as to the Corporation as of the time
it is authorized, approved or ratified, by the Board of Directors, a committee
thereof or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
Section 8.5 Books and Records. The books and records of the Corporation
may be kept within or without the State of Delaware at such place or places as
may be designated from time to time by the Board of Directors. Any records
maintained by the Corporation in the regular course of its business, including
its stock ledger, books of account and minute books, may be kept on, or be in
the form of, punch cards, magnetic tape, photographs, microphotographs or any
other information storage device provided that the records so kept can be
converted into clearly legible form within a reasonable time. The Corporation
shall so convert any records so kept upon the request of any person entitled to
inspect the same.
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<PAGE>
Section 8.6 Amendment of By-Laws. These By-laws may be amended or
repealed, and new by-laws adopted, by the Board of Directors, but the
stockholders entitled to vote may adopt additional by-laws and may amend or
repeal any by-law whether or not adopted by them.
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<PAGE>
Supplemental Indenture
No. 3
to
Indenture dated as of October 31, 1997 as amended by
Supplemental Indenture No. 1 dated as of May 29, 1998 and
Supplemental Indenture No. 2 dated as of March 2, 1999
Re:
9 1/2% Senior Subordinated Notes due 2007
<PAGE>
SUPPLEMENTAL INDENTURE No. 3, dated as of April 22, 1999 (this
"Supplemental Indenture"), among Stellex Technologies, Inc. (f/k/a Stellex
Industries, Inc.), a Delaware corporation (the "Company"), Stellex Precision
Machining, Inc., a Delaware corporation (the "New Subsidiary Guarantor"), the
Subsidiary Guarantors (as defined below) and HSBC Bank USA (f/k/a Marine Midland
Bank), a New York banking corporation and trust company, as trustee (the
"Trustee") to the Indenture dated as of October 31, 1997 as amended by
Supplemental Indenture No. 1 dated as of May 29, 1998 and Supplemental Indenture
No. 2 dated as of March 2, 1999 (the "Indenture") among the Company, Stellex
Aerospace, Inc. (f/k/a KII Holding Corp.), a Delaware corporation, Stellex
Electronics, Inc. (f/k/a TSMD Acquisition Corp.), a Delaware corporation,
Stellex Microwave Systems, Inc., a California corporation, Stellex Aerospace, a
California corporation, Stellex Paragon Precision, Inc. (f/k/a Paragon Precision
Products), a California corporation, Stellex Bandy Machining, Inc. (f/k/a Bandy
Machining International), a California corporation, Scanning Electron Analysis
Laboratories, Inc., a California corporation, General Inspection Laboratories,
Inc., a California corporation, Stellex Aerostructures, Inc. (f/k/a Stellex
Aerospace Holdings, Inc.), a Delaware corporation, Stellex Monitor Aerospace,
Inc. (f/k/a Monitor Aerospace Corporation), a New York corporation, PMC
Acquisition Corporation, a Delaware corporation, Phoenix Microwave, Ltd., a
Delaware corporation, and Phoenix Microwave Corporation, a Pennsylvania
corporation (the "Subsidiary Guarantors"), and the Trustee.
W I T N E S S E T H :
WHEREAS, Section 9.1 of the Indenture provides that the
Company and the Trustee may, among other things, amend the Indenture or the
Securities without notice to or consent of any Securityholder to add Guarantees
with respect to the Securities or to secure the Securities;
WHEREAS, Section 11.7 of the Indenture provides that any newly
created or acquired Subsidiary of the Company having either net assets or
stockholders' equity in excess of $50,000 (other than a Foreign Subsidiary or an
Unrestricted Subsidiary) must execute and deliver to the Trustee this
Supplemental Indenture pursuant to which such Subsidiary shall agree to be bound
by the provisions of Article XI of the Indenture; and
WHEREAS, the New Subsidiary Guarantor shall execute and
deliver to the Trustee this Supplemental Indenture.
<PAGE>
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used and not defined
herein shall have the meaning specified in or pursuant to the Indenture.
2. Guarantee. The New Subsidiary Guarantor hereby agrees to
unconditionally assume all the obligations of a Subsidiary Guarantor under the
Indenture as described therein.
3. Trustee. The Trustee accepts the modification of the
Indenture effected by this Supplemental Indenture, but only upon the terms and
conditions set forth in the Indenture. Without limiting the generality of the
foregoing, the Trustee assumes no responsibility for the correctness of the
recitals herein contained, which shall be taken as the statements of the
Company. The Trustee makes no representation and shall have no responsibility as
to the validity and sufficiency of this Supplemental Indenture.
4. Effect on Indenture. As supplemented by this Supplemental
Indenture, the Indenture is hereby ratified and confirmed in all respects.
5. Counterparts. This Supplemental Indenture may be executed
in counterparts, each of which when so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
6. Governing Law. This Supplemental Indenture shall be
governed by and construed in accordance with the laws of the State of New York.
[Signature Pages Follow]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the day and year first above
written.
STELLEX PRECISION MACHINING, INC.
By: /s/ William L. Remley
----------------------------
Name: William L. Remley
Title: Vice Chairman
HSBC BANK USA, as Trustee
By: /s/
----------------------------
Name:
Title:
STELLEX TECHNOLOGIES, INC.
By: /s/ William L. Remley
----------------------------
Name: William L. Remley
Title: President
STELLEX AEROSPACE, INC.
By: /s/ William L. Remley
---------------------------
Name: William L. Remley
Title: Vice Chairman
STELLEX ELECTRONICS, INC.
By: /s/ William L. Remley
---------------------------
Name: William L. Remley
Title: President
STELLEX MICROWAVE SYSTEMS, INC.
By: /s/ William L. Remley
---------------------------
Name: William L. Remley
Title: Chairman
STELLEX AEROSPACE
By: /s/ William L. Remley
---------------------------
Name: William L. Remley
Title: Vice Chairman
<PAGE>
STELLEX PARAGON PRECISION, INC.
By: /s/ William L. Remley
---------------------------
Name: William L. Remley
Title: Vice Chairman
STELLEX BANDY MACHINING, INC.
By: /s/ William L. Remley
---------------------------
Name: William L. Remley
Title: Vice Chairman
SCANNING ELECTRON ANALYSIS LABORATORIES,
INC.
By: /s/ William L. Remley
---------------------------
Name: William L. Remley
Title: Vice Chairman
GENERAL INSPECTION LABORATORIES, INC.
By: /s/ William L. Remley
---------------------------
Name: William L. Remley
Title: Vice Chairman
STELLEX AEROSTRUCTURES, INC.
By: /s/ William L. Remley
---------------------------
Name: William L. Remley
Title: President
STELLEX MONITOR AEROSPACE, INC.
By: /s/ William L. Remley
---------------------------
Name: William L. Remley
Title: Vice Chairman
PMC ACQUISITION CORPORATION
By: /s/ William L. Remley
---------------------------
Name: William L. Remley
Title: President
<PAGE>
PHOENIX MICROWAVE, LTD.
By: /s/ William L. Remley
---------------------------
Name: William L. Remley
Title: Vice Chairman
PHOENIX MICROWAVE CORPORATION
By: /s/ William L. Remley
---------------------------
Name: William L. Remley
Title: Vice Chairman
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EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
April 22, 1999
SG COWEN SECURITIES CORPORATION
1221 Avenue of the Americas
New York, New York 10020
Dear Sirs:
STELLEX TECHNOLOGIES, INC., a Delaware corporation (the
"Company"), proposes to issue and sell to you (the "Initial Purchaser"), upon
the terms set forth in a purchase agreement dated April 22, 1999 (the "Purchase
Agreement"), $20,000,000 aggregate liquidation preference of its 13% Senior
Cumulative Redeemable Preferred Stock due 2010 (the "Securities"). Capitalized
terms used but not specifically defined herein have the respective meanings
ascribed thereto in the Purchase Agreement. As an inducement to the Initial
Purchaser to enter into the Purchase Agreement and in satisfaction of a
condition to your obligations thereunder, the Company agrees with you, for the
benefit of the holders (including the Initial Purchaser) of the Securities
(collectively, the "Holders"), as follows:
1. Shelf Registration.
(a) (x) The Company shall use its best efforts to cause to be
filed with the Commission a Shelf Registration Statement pursuant to Rule 415
under the Securities Act (a "Shelf Registration Statement") on or prior to the
60th day after the later of January 1, 2000 and the Second Extension Date, as
applicable, unless the Securities are no longer outstanding as of such date (the
"Shelf Filing Deadline"), which Shelf Registration Statement shall provide for
resales of Transfer Restricted Securities (as defined below); and
(y) The Company shall use its best efforts to cause
such Shelf Registration Statement to be declared effective by the Commission on
or prior to the 120th day after the Shelf Filing Deadline.
(b) The Company shall use its reasonable best efforts to keep
the Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be usable by Holders for a period of two
years from the Closing Date or such shorter period that will terminate when all
the Securities covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement (in any such case, such period
being called the "Shelf Registration Period"). The Company shall not be deemed
to have breached its obligations pursuant to the preceding sentence if it shall
be required to amend the Shelf Registration Statement or the effectiveness of
the Shelf Registration Statement shall be suspended, or the prospectus contained
in the Shelf Registration Statement shall not be usable, as a result of a
corporate transaction involving the Company that is not adequately reflected in
the
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Shelf Registration Statement; provided that the failure to keep the Shelf
Registration Statement effective and usable for such reasons shall last no
longer than 45 days in any 12-month period (whereafter Liquidated Damages
pursuant to Section 2 shall accrue). Any such period during which the Company
fails to keep the Shelf Registration Statement effective and usable is referred
to as a "Suspension Period." A Suspension Period shall commence on and include
the date that the Company gives notice that the Shelf Registration Statement is
no longer effective or the prospectus included therein is no longer usable and
shall end on the earlier to occur of (i) the date when each seller of Transfer
Restricted Securities covered by such Shelf Registration Statement either
receives copies of the supplemented or amended prospectus or is advised in
writing by the Company that the use of the prospectus may be resumed and (ii)
the expiration of the 45 days in any 12-month period during which one or more
Suspension Periods has been in effect; provided that the period during which the
Shelf Registration Statement is required to be kept continuously effective shall
be increased by the total number of days of all such Suspension Periods.
(c) Notwithstanding any other provisions hereof, the Company
will ensure that (i) any Shelf Registration Statement and any amendment thereto
and any prospectus forming part thereof and any supplement thereto complies in
all material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Shelf Registration Statement and any amendment thereto (in
either case, other than with respect to information included therein in reliance
upon or in conformity with written information furnished to the Company by or on
behalf of any Holder specifically for use therein (the "Holders' Information"))
does not, when it becomes effective, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading and (iii) any prospectus forming
part of any Shelf Registration Statement, and any supplement to such prospectus
(in either case, other than with respect to Holders' Information), does not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
2. Liquidated Damages. (a) The parties hereto agree that the
Holders of Securities will suffer damages if the Company fails to fulfill its
obligations under Section 1 and that it would not be feasible to ascertain the
extent of such damages. Accordingly, if (i) the Shelf Registration Statement is
not filed with the Commission on or prior to the date specified for such filing
in this Agreement, (ii) the Shelf Registration Statement is not declared
effective on or prior to the date specified for such effectiveness in this
Agreement or (iii) the Shelf Registration Statement is filed and declared
effective on or prior to the date specified for such effectiveness in this
Agreement but shall thereafter cease to be effective (at any time that the
Company is obligated to maintain the effectiveness thereof) without being
succeeded within 45 days by an amendment to the Shelf Registration Statement or
an additional Shelf Registration Statement filed and declared effective (each
such event referred to in clauses (i) through (iii), a "Shelf Registration
Default"), the Company will generally be obligated to pay liquidated damages
("Liquidated Damages") to each Holder of Transfer Restricted Securities, with
respect to the first 90-day period immediately following the occurrence of such
Shelf Registration Default, in an amount equal to $0.05 per week per $1,000
liquidation preference of the Securities constituting Transfer Restricted
Securities held by such Holder for each week or portion thereof that the Shelf
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Registration Default continues. The amount of the Liquidated Damages will
increase by an additional $.05 per week per $1,000 liquidation preference of
Securities constituting Transfer Restricted Securities with respect to each
subsequent 90-day period until all Shelf Registration Defaults have been cured,
up to a maximum amount of Liquidated Damages of $.20 per week per $1,000
liquidation preference of Transfer Restricted Securities. Following the cure of
all Shelf Registration Defaults, the accrual of Liquidated Damages will cease.
"Transfer Restricted Securities" means each Security (including any Security
received in the way of a dividend payment in accordance with the Certificate of
Designation) until the earliest to occur of (i) the date on which such Security
has been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (ii) the date on which such
Security is eligible for resale (without being subject to volume limitations)
pursuant to Rule 144 under the Securities Act (or any successor provision) or
(iii) the date on which such Security has otherwise become eligible for resale
without registration under the Securities Act. Notwithstanding anything to the
contrary in this Section 2(a), the Company shall not be required to pay
Liquidated Damages to the Holder of Transfer Restricted Securities if such
Holder failed to provide the information required to be provided by it, if any,
pursuant to Section 3(j).
(b) The Company may act as its own transfer and paying agent.
If at anytime the Company has not appointed a transfer and paying agent, the
Company shall notify the Holders under the Certificate of Designation promptly
upon the happening of each and every Shelf Registration Default. In the event
the Company has appointed a transfer and paying agent, the Company shall pay the
Liquidated Damages due on the Transfer Restricted Securities by depositing with
the transfer and paying agent (which may not be the Company for these purposes),
in trust, for the benefit of the Holders thereof, prior to 10:00 a.m., New York
City time on the next dividend payment date specified by the Certificate of
Designation and the Securities, sums sufficient to pay the Liquidated Damages
then due. If at any time the Company has not appointed a transfer and paying
agent, the Company shall pay Liquidated Damages to the Holders directly. The
Liquidated Damages due shall be payable on each dividend payment date specified
by the Certificate of Designation to the record holder entitled to receive the
interest payment to be made on such date. Each obligation to pay Liquidated
Damages shall be deemed to accrue from and including the applicable Shelf
Registration Default.
(c) The parties hereto agree that the Liquidated Damages
provided for in this Section 2 constitute a reasonable estimate of and are
intended to constitute the sole damages that will be suffered by Holders of
Transfer Restricted Securities by reason of the failure of (i) the Shelf
Registration Statement to be filed, (ii) the Shelf Registration Statement to be
declared effective or (iii) the Shelf Registration Statement ceasing to remain
effective at any time that the Company is obligated to maintain the
effectiveness thereof, in each case to the extent required by this Agreement.
3. Registration Procedures. In connection with any Shelf
Registration Statement required to be filed hereunder, the following provisions
shall apply:
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(a) The Company shall use its reasonable best efforts to
furnish to the Initial Purchaser and its counsel, prior to the filing thereof
with the Commission, a copy of the Shelf Registration Statement and each
amendment thereof and each supplement, if any, to the prospectus included
therein and shall use reasonable best efforts to consult with the Initial
Purchaser regarding such comments as the Initial Purchaser or its counsel
reasonably may propose.
(b) The Company shall advise you and the Holders (if
applicable) and, if requested by such person, confirm such advice in writing
(which advice pursuant to clauses (iii)-(iv) hereof shall be accompanied by an
instruction to suspend the use of the prospectus until the requisite changes
have been made):
(i) when the Shelf Registration Statement and any amendment
thereto has been filed with the Commission and when such Shelf
Registration Statement or any post-effective amendment thereto has
become effective;
(ii) prior to the effectiveness of the Shelf Registration
Statement, of the receipt of any comment letter or request for
information from the Commission;
(iii) following the effectiveness of the Shelf Registration
Statement, of any request by the Commission for amendments or
supplements to such Shelf Registration Statement or the prospectus
included therein or for additional information;
(iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement or the
initiation of any proceeding for that purpose;
(v) following the effectiveness of the Shelf Registration
Statement, of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(vi) of the happening of any event that requires the making
of any changes in the Shelf Registration Statement or the prospectus so
that, as of such date, the statements therein are not misleading in any
material respect and do not omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in any material respect.
The Company will make every reasonable effort to obtain the
withdrawal at the earliest possible time of any order suspending the
effectiveness of any Shelf Registration Statement.
(c) The Company will furnish to each Holder of Transfer
Restricted Securities specifically named in the Shelf Registration Statement,
without charge, at least one copy of such
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Shelf Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if the Holder so requests in writing,
all exhibits (including those incorporated by reference).
(d) The Company will, during the Shelf Registration Period,
promptly deliver to each Holder of Transfer Restricted Securities specifically
named in the Shelf Registration Statement, without charge, as many copies of the
prospectus (including each preliminary prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Company consents to the use of the prospectus or
any amendment or supplement thereto by each of the selling Holders of Transfer
Restricted Securities in connection with the offering and sale of the Transfer
Restricted Securities covered by the prospectus or any amendment or supplement
thereto.
(e) To the extent required by applicable law, prior to any
public offering of Securities pursuant to the Shelf Registration Statement, the
Company will use its reasonable best efforts to register or qualify or cooperate
with the Holders of Securities included therein and its counsel in connection
with the registration or qualification of such securities for offer and sale
under the state securities or blue sky laws of such United States jurisdictions
as any such Holder reasonably requests in writing and do any and all other acts
or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Securities covered by such Shelf Registration Statement;
provided, however, that the Company shall not be required to qualify as a
foreign corporation where it is not now so qualified or to take any action that
would subject it to service of process in suits or to taxation in any
jurisdiction where it is not now so subject.
(f) The Company will cooperate with the Holders of Securities
to facilitate the timely preparation and delivery of certificates representing
Securities to be sold pursuant to the Shelf Registration Statement free of any
restrictive legends and in such denominations and registered in such names as
Holders may request in writing prior to sales of Securities pursuant to such
Shelf Registration Statement.
(g) If any event contemplated by paragraphs (b)(iii) through
(v) above occurs during the period in which the Company is required to maintain
an effective Shelf Registration Statement, the Company will use its reasonable
best efforts to promptly prepare a post-effective amendment to the Shelf
Registration Statement or a supplement to the related prospectus or file any
other required document so that, as thereafter delivered to purchasers of the
Securities from a Holder, the prospectus will not include an untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(h) The Company will comply with all applicable rules and
regulations of the Commission and will make generally available to the Company's
security holders as soon as practicable after the effective date of the Shelf
Registration Statement an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act; provided that in no event shall such
earnings statement be delivered later than 45 days after the end of a 12-month
period (or 90
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6
days, if such period is a fiscal year) beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of the Shelf
Registration Statement, which statements shall cover such 12-month period.
(i) The Company may require each Holder of Transfer Restricted
Securities to be sold pursuant to the Shelf Registration Statement to furnish to
the Company such information regarding the Holder and the distribution of such
Transfer Restricted Securities as the Company may from time to time reasonably
require for inclusion in such Shelf Registration Statement, and the Company may
exclude from such registration the Transfer Restricted Securities of any Holder
that fails to furnish such information within a reasonable time after receiving
such request.
(j) Each Holder of Transfer Restricted Securities to be
registered agrees by acquisition of such Transfer Restricted Securities that,
upon receipt of any notice from the Company pursuant to Section 3(b)(iii)
through (v) hereof, such Holder will discontinue disposition of such Transfer
Restricted Securities until such Holder's receipt of copies of the supplemental
or amended prospectus contemplated by Section 3(g) hereof, or until advised in
writing (the "Advice") by the Company that the use of the applicable prospectus
may be resumed. If the Company shall give any notice under Section 3(b)(iii)
through (v) during the period that the Company is required to maintain an
effective Shelf Registration Statement (the "Effectiveness Period"), such
Effectiveness Period shall be extended by the number of days during such period
from and including the date of the giving of such notice to and including the
date when each seller of Transfer Restricted Securities covered by such Shelf
Registration Statement shall have received (x) the copies of the supplemental or
amended prospectus contemplated by Section 3(g) (if an amended or supplemental
prospectus is required) or (y) the Advice (if no amended or supplemental
prospectus is required).
(k) The Company shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form) and take
all such other action, if any, as Holders of a majority in aggregate liquidation
preference of the Securities being sold or the managing underwriters (if any)
shall reasonably request in order to facilitate any disposition of Securities
pursuant to the Shelf Registration Statement; provided, however, that the
Company shall not be obligated to enter into an underwriting agreement or to
facilitate such disposition in an underwritten offering pursuant to any Shelf
Registration Statement unless Holders of a majority in aggregate liquidation
preference of such Transfer Restricted Securities elect to dispose of such
Transfer Restated Securities in such an underwritten offering.
(l) The Company shall (i) make reasonably available for
inspection by a representative of, and Special Counsel (as defined below) acting
for, Holders of a majority in aggregate liquidation preference of the Securities
being sold and any managing underwriter participating in any disposition of
Securities pursuant to such Shelf Registration Statement, all relevant financial
and other records, pertinent corporate documents and properties of the Company
and its subsidiaries and (ii) use its reasonable best efforts to have its
officers, directors, employees, accountants and counsel supply all relevant
information reasonably requested by
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such representative, Special Counsel or any such managing underwriter (an
"Inspector") in connection with such Shelf Registration Statement; provided,
however, that the Company need not make available or supply any information
pursuant to this paragraph (m) to the extent such information may not be
disclosed pursuant to any confidentiality agreement to which the Company or any
of its Subsidiaries is a party or such disclosure would jeopardize any
applicable attorney-client, work product or other privilege and; provided
further, that the Inspector enter into appropriate confidentiality agreements
with the Company and agree to be bound by confidentiality agreements to which
the Company is subject.
(m) The Company shall, if requested by Holders of a majority
in aggregate liquidation preference of the Securities being sold, their Special
Counsel or the managing underwriters (if any) in connection with such Shelf
Registration Statement, use its reasonable best efforts to cause (i) its counsel
to deliver an opinion relating to the Shelf Registration Statement and the
Securities in customary form, (ii) its officers to execute and deliver all
customary documents and certificates reasonably requested by Holders of a
majority in aggregate liquidation preference of the Securities being sold, their
Special Counsel or the managing underwriters (if any) and (iii) its independent
public accountants to provide a comfort letter in customary form, subject to
receipt of appropriate documentation as contemplated, and only if permitted, by
Statement of Auditing Standards No. 72.
4. Registration Expenses. The Company will bear all expenses
incurred in connection with the performance of its obligations under Sections 1,
2, and 3 hereof and the Company will reimburse the Initial Purchaser and the
Holders for the reasonable fees and disbursements of one firm of attorneys
chosen by the Holders of a majority in aggregate liquidation preference of the
Securities to be sold pursuant to a Shelf Registration Statement (the "Special
Counsel") acting for the Initial Purchaser or Holders in connection therewith.
The Company shall not have any obligation to pay any underwriting fees,
discounts or commissions attributable to the sale of any Securities pursuant to
this Agreement.
5. Indemnification. (a) Indemnification of Holders. The
Company and its subsidiaries, jointly and severally, shall indemnify and hold
harmless each Holder (including, without limitation, the Initial Purchaser),
their respective directors, officers, representatives and agents and each
person, if any, who controls such Holder within the meaning of Section 15 of the
Securities Act (collectively referred to for the purposes of this Section 5 as a
Holder) against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, without limitation, any loss, claim,
damage, liability or action relating to purchases and sales of Securities), to
which that Holder may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of or is
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in any Shelf Registration Statement or any preliminary or final
prospectus forming part thereof or in any amendment or supplement thereto or
(ii) the omission or alleged omission to state in any such Shelf Registration
Statement or any preliminary or final prospectus forming part thereof or in any
amendment or supplement thereto a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse
each Holder for any legal or
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other expenses reasonably incurred by that Holder in connection with
investigating or preparing to defend or defending against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the foregoing
indemnification agreement with respect to any preliminary prospectus shall not
inure to the benefit of any Holder from whom the person asserting any such loss,
claim, damage or liability purchased Securities, if (i) a copy of the
preliminary prospectus (as then amended or supplemented) was delivered to such
person at or prior to the written confirmation of the sale of Securities to such
person, (ii) a copy of the final prospectus (as then amended or supplemented)
was not sent or given to such person by or on behalf of such Holder and (iii)
the final prospectus (as so amended or supplemented) would have cured the defect
giving rise to such loss, claim, damage or liability; and further provided,
however, that the Company and its subsidiaries shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of or is based upon an untrue statement or alleged untrue statement in or
omission or alleged omission from any preliminary prospectus or Shelf
Registration Statement or any such amendment or supplement in reliance upon and
in conformity with any Holders' Information.
(b) Indemnification of Company, Directors and Officers. Each
Holder, severally and not jointly, agrees to indemnify and hold harmless the
Company, the Company's shareholders, affiliates, directors, officers,
representatives and agents, and each person, if any, who controls them or any of
them within the meaning of Section 15 of the Securities Act (collectively
referred to for the purposes of this Section 5 as the Company), against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof, to which they or any of them may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage, liability or action
arises out of or is based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in a preliminary or final prospectus or
such Shelf Registration Statement or in any amendment or supplement thereto or
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
but in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with any Holders' Information furnished to the Company by or on
behalf of that Holder specifically for use therein, and shall reimburse the
indemnified party for any legal or other expenses reasonably incurred by the
indemnified party in connection with investigating or preparing to defend or
defending against or appearing as third party witness in connection with any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that no such Holder shall be liable for any indemnity claims
hereunder in excess of the amount of net proceeds received by such Holder from
the sale of Securities pursuant to such Shelf Registration Statement.
(c) Actions; Notification. Promptly after receipt by an
indemnified party under this Section 5 of notice of any claim or the
commencement of any action, the indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under this Section 5,
notify the indemnifying party in writing of the claim or the commencement of
that action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under this
Section 5 except to the extent it has been
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materially prejudiced by such failure; and, provided, further, that the failure
to notify the indemnifying party shall not relieve it from any liability which
it may have to an indemnified party otherwise than under this Section 5. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 5 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; provided, however, that any indemnified party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the employment thereof has been specifically
authorized by the indemnifying party in writing, (ii) such indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party and in the reasonable judgment of such
counsel it is advisable for such indemnified party to employ separate counsel or
(ii) the indemnifying party has failed to assume the defense of such action and
employ counsel reasonably satisfactory to the indemnified party, in which case,
if such indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for all such indemnified parties, which firm shall be designated in writing
by the Holders of a majority in aggregate liquidation preference of the
Securities if the indemnified parties under this Section 5 consist of any Holder
or any of their respective officers, employees or controlling persons, or by the
Company, if the indemnified parties under this Section 5 consist of the Company
or any of the Company's directors, officers, employees or controlling persons.
Each indemnified party, as a condition of the indemnity agreements contained in
Sections 5(a) and 5(b), shall use all reasonable efforts to cooperate with the
indemnifying party in the defense of any such action or claim. Subject to the
provisions of Section 5(d) below, no indemnifying party shall be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment.
(d) Settlement without Consent if Failure to Reimburse. If at
any time an indemnified party shall have requested that an indemnifying party
reimburse the indemnified party for fees and expenses of counsel payable in
accordance with this Section 5, such indemnifying party agrees that it shall be
liable for any settlement of the nature contemplated by this Section 5 effected
without its written consent if (i) such settlement is entered into more than
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45 days after receipt by such indemnifying party of the request for
reimbursement, (ii) such indemnifying party shall have received notice of the
terms of such settlement at least 30 days prior to such settlement being entered
into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(e) Contribution. If the indemnification provided for in this
Section 5 is unavailable or insufficient to hold harmless an indemnified party
under Section 5(a) or (b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and such Holder on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or to any
Holders' Information supplied by such Holder on the other, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Company and the
Holders agree that it would not be just and equitable if contributions pursuant
to this Section 5(e) were to be determined by pro rata allocation (even if the
Holders were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 5(e) shall be deemed to include, for purposes
of this Section 5(e), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 5(e), no Holder shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities sold by such Holder to any purchaser exceeds the
amount of any damages which such Holder has otherwise paid or become liable to
pay by reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
Any Holder's obligations to contribute as provided in this
Section 5(e) are several and not joint.
The obligations of the Company and the Holders in this Section
5 are in addition to any other liability which the Company or the Holders as the
case may be, may otherwise have.
6. Rule 144A. Unless the Company is then subject to Section 13
or 15(d) of the Exchange Act, the Company hereby agrees with each Holder, for so
long as any Transfer Restricted Securities remain outstanding, to make
available, upon request, to any Holder or beneficial owner of Transfer
Restricted Securities in connection with any sale thereof and any
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prospective purchaser of such Transfer Restricted Securities from such Holder or
beneficial owner, the information required by Rule 144A(d)(4) under the Act in
order to permit resales of such Transfer Restricted Securities pursuant to Rule
144A. Notwithstanding the foregoing, nothing in this Section 6 shall be deemed
to require the Company to register any of its securities pursuant to the
Exchange Act.
7. Underwritten Registrations. If any of the Transfer
Restricted Securities covered by any Shelf Registration Statement are to be sold
in an underwritten offering, the investment banker or investment bankers and
manager or managers that will administer the offering will be selected by the
Holders of a majority in aggregate liquidation preference of such Transfer
Restricted Securities included in such offering, subject to the consent of the
Company (which shall not be unreasonably withheld or delayed), and such Holders
shall be responsible for all underwriting commissions and discounts in
connection therewith. Under no circumstances shall there be more than one
underwritten offering of Transfer Restricted Securities pursuant to this
Agreement.
8. Miscellaneous. (a) Amendments and Waivers. The provisions
of this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Holders of a majority in aggregate
liquidation preference of the Securities. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of the Holders of Securities whose
Securities are being sold pursuant to a Shelf Registration Statement and that
does not directly or indirectly affect the rights of other Holders may be given
by Holders of a majority in aggregate liquidation preference of the Securities
being sold by such Holders pursuant to such Shelf Registration Statement.
(b) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
8(b), which address initially is, with respect to each Holder, the
address of SG Cowen Securities Corporation;
(2) if to you, initially at your address set forth in the
Purchase Agreement; and
(3) if to the Company, initially at the address of the Company
set forth in the Purchase Agreement, with a copy to Winston & Strawn,
200 Park Avenue, New York, New York 10016, Attention: Daniel A.
Ninivaggi.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; one business
day after being delivered to a
<PAGE>
12
next-day air courier; five business days after being deposited in the mail; and
when receipt is acknowledged by the recipient's telecopier machine, if
telecopied.
(c) Successors and Assigns. This Agreement shall be binding
upon the successors and assigns of each of the parties; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a successor
or assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder.
(d) Counterparts. This Agreement may be executed in any number
of counterparts (which may be delivered in original form or by telecopies) and
by the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(f) Governing Law; Submission to Jurisdiction.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(g) No Inconsistent Agreements. The Company has not and shall
not, on or after the date of this Agreement, enter into any agreement that is
inconsistent with the rights granted to the holders of Transfer Restricted
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The Company has not previously entered into any agreement which remains in
effect granting any registration rights with respect to any of its preferred
securities to any person, which agreement would allow any person other than the
Holders of Transfer Restricted Securities to require the Company to register any
such preferred securities pursuant to a Shelf Registration Statement. Without
limiting the generality of the foregoing, without the written consent of the
holders of a majority in aggregate liquidation preference of the then
outstanding Transfer Restricted Securities, the Company shall not grant to any
person the right to request the Company to register any preferred securities of
the Company under the Securities Act pursuant to a Shelf Registration Statement
unless the rights so granted are not in conflict or inconsistent with the
provisions of the Agreement.
(h) No Piggyback on Registrations. Neither the Company, nor
any of its security holders (other than the holders of Transfer Restricted
Securities in such capacity) shall have the right to include any securities of
the Company in any Shelf Registration Statement other than Transfer Restricted
Securities or, if permitted by the Commission, the Warrants and the shares of
Common Stock received, or issued and received, as the case may be, upon exercise
of the Warrants.
(i) Severability. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this
<PAGE>
13
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction.
(j) Remedies. In the event of a breach by the Company, or by
any holder of Transfer Restricted Securities, of any of their obligations under
this Agreement, each holder of Transfer Restricted Securities or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law, including recovery of damages (other than the recovery of damages for a
breach by the Company of its obligations under Section 1 hereof for which
Liquidated Damages have been paid pursuant to Section 2 hereof), will be
entitled to specific performance of its rights under this Agreement. Except as
provided in Section 2(c), the Company and each holder of Transfer Restricted
Securities agree that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agree that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a remedy
at law would be adequate.
<PAGE>
Please confirm that the foregoing correctly sets forth the
agreement among the Company and you.
Very truly yours,
STELLEX TECHNOLOGIES, INC.
By
---------------------------------------
Name:
Title:
STELLEX AEROSPACE, INC.
By
---------------------------------------
Name:
Title:
STELLEX AEROSPACE
By
---------------------------------------
Name:
Title:
STELLEX PARAGON PRECISION, INC.
By
---------------------------------------
Name:
Title:
SCANNING ELECTRON ANALYSIS LABORATORIES,
INC.
By
---------------------------------------
Name:
Title:
<PAGE>
STELLEX BANDY MACHINING INC.
By
---------------------------------------
Name:
Title:
GENERAL INSPECTION LABORATORIES, INC.
By
---------------------------------------
Name:
Title:
STELLEX ELECTRONICS, INC.
By
---------------------------------------
Name:
Title:
STELLEX MICROWAVE SYSTEMS, INC.
By
---------------------------------------
Name:
Title:
STELLEX AEROSTRUCTURES, INC.
By
---------------------------------------
Name:
Title:
<PAGE>
16
STELLEX MONITOR AEROSPACE INC.
By
-------------------------------------
Name:
Title:
STELLEX PRECISION MACHINING, INC.
- ---------------------------------------
Name:
Title:
PMC ACQUISITION CORPORATION
By
-------------------------------------
Name:
Title:
PHOENIX MICROWAVE CORPORATION
By
-------------------------------------
Name:
Title:
PHOENIX MICROWAVE, LTD.
By
-------------------------------------
Name:
Title:
<PAGE>
PHOENIX MICROWAVE INTERNATIONAL, INC.
By
-----------------------------------
Name:
Title:
Accepted in New York, New York
SG COWEN SECURITIES CORPORATION
By:
Name:
Title:
<PAGE>
EXECUTION COPY
WARRANT AGREEMENT
Dated as of
April 22, 1999
between
STELLEX TECHNOLOGIES, INC.
and
HSBC BANK USA
as the Warrant Agent
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. Defined Terms
SECTION 1.1 Definitions..................................................... 1
SECTION 1.2 Other Definitions............................................... 3
SECTION 1.3 Rules of Construction........................................... 4
ARTICLE 2. Warrant Certificates
SECTION 2.1 Issuance and Dating............................................. 4
SECTION 2.2 Execution and Countersignature.................................. 4
SECTION 2.3 Certificate Register............................................ 5
SECTION 2.4 Transfer and Exchange........................................... 5
SECTION 2.5 Legends......................................................... 6
SECTION 2.6 Replacement Certificates........................................ 7
SECTION 2.7 Temporary Certificates.......................................... 7
SECTION 2.8 Cancellation.................................................... 7
ARTICLE 3. Exercise Terms
SECTION 3.1 Exercise Price.................................................. 8
SECTION 3.2 Exercise Periods................................................ 8
SECTION 3.3 Expiration...................................................... 8
SECTION 3.4 Manner of Exercise.............................................. 8
SECTION 3.5 Issuance of Warrant Shares...................................... 9
SECTION 3.6 Fractional Warrant Shares....................................... 9
SECTION 3.7 Reservation of Warrant Shares................................... 9
SECTION 3.8 Compliance with Law............................................. 10
SECTION 3.9 Taxes........................................................... 10
ARTICLE 4. Release of Warrants
SECTION 4.1 Terms of Release................................................ 10
SECTION 4.2 Holder Put Right................................................ 12
ARTICLE 5. Antidilution Provisions
SECTION 5.1 Changes in Common Stock......................................... 12
SECTION 5.2 Cash Dividends and Other Distributions.......................... 12
SECTION 5.3 Rights Issue.................................................... 13
SECTION 5.4 Reclassification; Combination; Liquidation...................... 14
SECTION 5.5 Tender Offers: Exchange Offers.................................. 14
SECTION 5.6 Issuance of Additional Shares of Common Stock................... 15
SECTION 5.7 Other Events.................................................... 16
SECTION 5.8 Current Market Value............................................ 16
SECTION 5.9 Superseding Adjustment.......................................... 17
SECTION 5.10 Minimum Adjustment............................................. 17
SECTION 5.11 Notice of Adjustment........................................... 17
-i-
<PAGE>
SECTION 5.12 Notice of Certain Transactions................................. 18
SECTION 5.13 Adjustment to Warrant Certificate.............................. 18
ARTICLE 6. Rights of Holders
SECTION 6.1 Registration Rights............................................. 19
ARTICLE 7. Warrant Agent
SECTION 7.1 Appointment of Warrant Agent.................................... 19
SECTION 7.2 Rights and Duties of Warrant Agent.............................. 19
SECTION 7.3 Individual Rights of Warrant Agent.............................. 20
SECTION 7.4 Warrant Agent's Disclaimer...................................... 20
SECTION 7.5 Indemnity....................................................... 20
SECTION 7.6 Compensation. . ............................................... 21
SECTION 7.7 Successor Warrant Agent......................................... 21
ARTICLE 8. Miscellaneous
SECTION 8.1 Financial Reports............................................... 22
SECTION 8.2 Persons Benefitting............................................. 22
SECTION 8.3 Rights of Holders............................................... 22
SECTION 8.4 Amendment....................................................... 22
SECTION 8.5 Notices......................................................... 23
SECTION 8.6 Governing Law................................................... 24
SECTION 8.7 Successors...................................................... 24
SECTION 8.8 Counterparts.................................................... 24
SECTION 8.9 Table of Contents............................................... 24
SECTION 8.10 Severability................................................... 24
EXHIBIT A - Form of Warrant Certificate
EXHIBIT B - Form of Election to Purchase Warrant Certificates
EXHIBIT C - Certificate to be Delivered upon Exchange or Registration of
Transfer of Warrants
EXHIBIT D - Registration Rights
EXHIBIT E - Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and other Special Rights of
the Company's 13% Senior Cumulative Redeemable Preferred Stock
due 2010
-ii-
<PAGE>
WARRANT AGREEMENT, dated as of April 22, 1999 (this "Warrant
Agreement"), between STELLEX TECHNOLOGIES, INC., a Delaware corporation (the
"Company"), and HSBC BANK USA, a New York banking corporation and trust company,
as Warrant Agent (in such capacity, the "Warrant Agent") for the benefit of the
Holders from time to time of the Warrants and the Warrant Shares.
W I T N E S S E T H :
WHEREAS, the Company has caused Stellex Precision Machining,
Inc. to enter into an Asset Purchase Agreement with Precision Machining, Inc.
("Precision"), BK Metals, Inc., Billy Bert Meridith and the Billy Bert Meridith
Trust, pursuant to which the Company will ultimately acquire certain assets of
Precision and related entities upon the terms and subject to the conditions set
forth therein (the "Acquisition");
WHEREAS, in connection with the Acquisition, the Company is to
receive proceeds in the amount of approximately (a) $235,000,000 from borrowings
on the Closing Date (as defined below) under the Senior Credit Facility (as
defined below) and (b) $20 million from the sale by the Company to SG Cowen
Securities Corporation (the "Initial Holder") on the Closing Date of its 13%
Senior Cumulative Redeemable Preferred Stock (the "Redeemable Preferred Stock"),
pursuant to a Redeemable Preferred Stock Purchase Agreement dated the date
hereof (the "Redeemable Preferred Stock Purchase Agreement");
WHEREAS, it is a condition to the obligations of the Initial
Holder to enter into the Redeemable Preferred Stock Purchase Agreement and
thereby provide a portion of the funds required to consummate the Acquisition
that the Company execute and deliver this Warrant Agreement;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties hereto hereby agree as follows:
ARTICLE 1.
Defined Terms
SECTION 1.1 Definitions. All terms defined in the Certificate
of Designation of the Powers, Preferences and Relative, Participating, Optional
and other Special Rights of the Company's 13% Senior Cumulative Redeemable
Preferred Stock due 2010, a copy of which is annexed hereto as Exhibit E, shall
have such defined meanings when used herein unless otherwise defined herein. As
used in this Agreement, the following terms shall have the following meanings:
"Affiliate" means, as to any Person, any other Person (other
than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with,
<PAGE>
2
such Person. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (a) vote 10% or more of the securities
having ordinary voting power for the election of directors of such Person or (b)
direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.
"Board" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to close.
"Cashless Exercise Ratio" means a fraction, the numerator of
which is the excess of the Current Market Value per share of Common Stock on the
date of exercise over the Exercise Price per share as of the date of exercise
and the denominator of which is the Current Market Value per share of the Common
Stock on the date of exercise.
"Closing Date" means April 22, 1999, the date upon which the
Initial Holder purchases the Redeemable Preferred Stock.
"Combination" means an event in which the Company consolidates
with, merges with or into, or sells all or substantially all its property and
assets to, another Person other than a sale of assets by the Company to a Wholly
Owned Subsidiary or any merger of the Company with a Wholly Owned Subsidiary
where the Company is the surviving corporation.
"Common Stock" means the Common Stock, without par value, of
the Company together with any other equity securities that may be issued by the
Company in substitution therefor.
"DeMinimus Non-Affiliate Sale" means a Non-Affiliate Sale of
Common Stock which, when added to the aggregate amount of prior Non-Affiliate
Sales, constitutes no more than 10% of the fully-diluted shares of Common Stock
of the Company as of the date of determination.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Expiration Date" means August 31, 2010.
"Holder" means the duly registered holder of a Warrant under
the terms of this Warrant Agreement.
"Initial Holder" means SG Cowen Securities Corporation.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Chief Financial Officer or the Treasurer of the Company.
<PAGE>
3
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Transfer Restricted Securities" means the Warrants and the
Common Stock which may be issued to Holders upon exercise of the Warrants,
whether or not such exercise has been effected. Each such security shall cease
to be a Transfer Restricted Security when (i) it has been disposed of pursuant
to a registration statement of the Company filed with the SEC and declared
effective by the SEC that covers the disposition of such Transfer Restricted
Security, (ii) it is eligible for resale (without being subject to volume
limitations) pursuant to Rule 144 (or any similar provisions under the
Securities Act then in effect) or (iii) it has otherwise become eligible for
resale without registration under the Securities Act.
"Voting Stock" of a corporation means all classes of capital
stock of such corporation then outstanding and normally entitled to vote in the
election of directors.
"Warrant Certificates" means the certificates evidencing the
Warrants to be delivered pursuant to this Agreement, substantially in the form
of Exhibit A hereto.
"Warrants" means the Warrants issued hereunder to purchase
from the Company shares of Common Stock.
"Warrant Shares" means the shares of Common Stock of the
Company received, or issued and received, as the case may be, upon exercise of
the Warrants.
SECTION 1.2 Other Definitions.
Defined in
Term Section
---- -------
"Cashless Exercise" . . . . . . . . ................... 3.4
"Certificate Register . . . . . . . ................... 2.3
"Company" . . . . . . . . . . . . . ................... Recitals
"Current Market Value"................................. 5.8
"Exercise Price" . . . . . . . . . . .................. 3.1
"Extension Date" . . . . . . . . . . .................. 4.1
"Fair Value" . . . . . . . . . . ...................... 5.2
"Non-Affiliate Sale" . . . . . . . . .................. 5.8
"Put" . . . . . . . . . ............................... 4.2
"Put Notice" . . . . . . . . . ........................ 4.2
"Redemption" . . . . . . . . . . . . .................. 4.1
"Rule 144A Offering" . . . . . . . . . . . . .......... 4.1
<PAGE>
4
"Second Extension Date". . . . . . . . . . . .......... 4.1
"Second Warrant Release Date".......................... 4.1
"Successor Company" . . . . . . . ..................... 5.4(a)
"Time of Determination"................................ 5.8
"Transfer Agent"....................................... 3.5
"Warrant Agent"........................................ Recitals
"Warrant Release Date"................................. 4.1
SECTION 1.3 Rules of Construction. Unless the text
otherwise requires.
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with United States generally
accepted accounting principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including, without
limitation; and
(v) words in the singular include the plural and
words in the plural include the singular.
ARTICLE 2.
Warrant Certificates
SECTION 2.1 Issuance and Dating. The Warrants shall be
initially issued on the Closing Date. The Warrant Certificates will be issued in
registered form as definitive Warrant Certificates, substantially in the form of
Exhibit A, which is hereby incorporated in and expressly made a part of this
Agreement. The Warrant Certificates may have notations, legends or endorsements
required by law, stock exchange rule, agreements to which the Company is
subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Company) and shall bear the legend
required by Section 2.5 if required by the terms of such Section. Each Warrant
shall be dated the date of its countersignature. The terms of the Warrants set
forth in Exhibit A are part of the terms of this Agreement.
SECTION 2.2 Execution and Countersignature. (a) With respect
to the Warrants to be issued on the Closing Date, one or more Warrant
Certificates representing the Warrants shall be executed in blank on behalf of
the Company by manual or facsimile signature by one Officer and attested by its
Secretary or an Assistant Secretary. Upon written order of the Company, the
Warrant Agent shall countersign such Warrant Certificate(s) by manual or
facsimile signature, and such Warrant Certificate(s) shall be delivered pursuant
to such written order.
<PAGE>
5
(b) With respect to all other Warrants, the Warrant
Certificates therefor shall be executed on behalf of the Company by one Officer
and attested by its Secretary or an Assistant Secretary. Such signature may be
manual or facsimile signature. If an Officer whose signature is on a Warrant
Certificate no longer holds that office at the time the Warrant Agent
countersigns the Warrant Certificate, the Warrant Certificate shall be valid
nevertheless. A Warrant Certificate shall not be valid until an authorized
signatory of the Warrant Agent manually countersigns the Warrant Certificate.
The signature of the Warrant Agent shall be conclusive evidence that the Warrant
Certificate has been countersigned under this Agreement.
(c) The Warrant Agent may appoint an agent reasonably
acceptable to the Company to countersign the Warrant Certificates. Unless
limited by the terms of such appointment, such agent may countersign a Warrant
Certificate whenever the Warrant Agent may do so. Each reference in this
Agreement to countersignature by the Warrant Agent includes by such agent. Such
agent will have the same rights as the Warrant Agent for service of notices and
demands.
SECTION 2.3 Certificate Register. The Warrant Agent shall keep
a register ("Certificate Register") of the Warrant Certificates and of their
transfer and exchange. The Certificate Register shall show the names and
addresses of the respective Holders and the date and number of Warrants
evidenced on the face of each of the Warrant Certificates. The Company and the
Warrant Agent may deem and treat the Person in whose name a Warrant Certificate
is registered as the absolute owner of such Warrant Certificate for all purposes
whatsoever and neither the Company nor the Warrant Agent shall be affected by
notice to the contrary.
SECTION 2.4 Transfer and Exchange. (a) When Warrants are
presented to the Warrant Agent with a request to register the transfer of such
Warrants or to exchange such Warrants for an equal number of Warrants of other
authorized denominations, the Warrant Agent shall register the transfer or make
the exchange as requested if its reasonable requirements for such transaction
are met; provided, however, that the Warrant Certificates representing such
Warrants surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a
written instrument of transfer in form reasonably satisfactory to the
Company and the Warrant Agent, duly executed by the Holder thereof or
his attorney duly authorized in writing; and
(ii) in the case of Warrants that are Transfer
Restricted Securities, shall be accompanied by the following additional
information and documents:
(A) a certificate from such Holder in substantially
the form of Exhibit C hereto certifying that:
(1) such securities are being delivered for
registration in the name of such Holder without
transfer;
(2) such securities are being transferred to
the Company;
<PAGE>
6
(3) such securities are being transferred
pursuant to an effective registration statement under
the Securities Act; or
(4) such securities are being transferred
(w) to a "qualified institutional buyer ("QIB") as
defined in Rule 144A under the Securities Act
pursuant to such Rule 144A, (x) in an offshore
transaction in accordance with Rule 904 under the
Securities Act, (y) in a transaction meeting the
requirements of Rule 144 under the Securities Act
or (z) pursuant to another available exemption from
the registration requirements of the Securities Act;
and
(B) in the case of any transfer described under
clause (a)(ii)(A)(4)(w),(x), (y) and (z) of this Section 2.4,
evidence reasonably satisfactory to the Warrant Agent and the
Company (which may include an opinion of counsel (including
in-house counsel)) as to compliance with the restrictions set
forth in the legend in Section 2.5.
(b) (i) To permit registrations of transfers and exchanges,
the Company shall execute and the Warrant Agent shall countersign Warrant
Certificates as required pursuant to the provisions of this Section 2.4.
(ii) All Warrant Certificates issued upon any
registration of transfer or exchange of Warrants shall be the valid obligations
of the Company, entitled to the same benefits under this Agreement as the
Warrant Certificates surrendered upon such registration of transfer or exchange.
(iii) Prior to due presentment for registration of
transfer of any Warrant, the Warrant Agent and the Company may deem and treat
the Person in whose name any Warrant is registered as the absolute owner of such
Warrant and neither the Warrant Agent nor the Company shall be affected by
notice to the contrary.
(iv) No service charge shall be made to a Holder
for any registration of transfer or exchange upon surrender of any Warrant
Certificate at the office of the Warrant Agent maintained for that purpose.
However, the Company may require payment by the Holder of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Warrant Certificates.
(v) Upon any sale or transfer of Warrants
pursuant to an effective registration statement under the Securities Act,
pursuant to Rule 144 under the Securities Act or pursuant to an opinion of
counsel reasonably satisfactory to the Company that no legend is required, the
Warrant Agent shall permit the Holder thereof to exchange such Warrants for
Warrants represented by Warrant Certificates that do not bear the legend set
forth in Section 2.5 and rescind any restriction on the transfer of such
Warrants.
SECTION 2.5 Legends. Except for Warrant Certificates delivered
pursuant to Section 2.4(b)(v) of this Agreement, each Warrant Certificate
evidencing the Warrants (and all
<PAGE>
7
Warrant Certificates issued in exchange therefor or substitution thereof) and
each certificate representing the Warrant Shares (unless such Warrant Shares are
not Transfer Restricted Securities) shall bear a legend in substantially the
following form (with any appropriate modification for the Warrant Shares):
"THE WARRANTS AND THE WARRANT SHARES (THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION AND SUBJECT TO COMPLIANCE WITH OTHER
APPLICABLE LAWS. THE HOLDER HEREOF, BY ITS ACCEPTANCE HEREOF,
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,
UNLESS PREVIOUSLY REGISTERED UNDER THE SECURITIES ACT, ONLY
(A) TO THE COMPANY; (B) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE); (C) TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A; (D) PURSUANT TO AN OFFSHORE TRANSACTION
COMPLYING WITH RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT; OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT."
SECTION 2.6 Replacement Certificates. If a mutilated Warrant
Certificate is surrendered to the Warrant Agent or if the Holder of a Warrant
Certificate claims that the Warrant Certificate has been lost, destroyed or
wrongfully taken, the Company shall issue and the Warrant Agent shall
countersign a replacement Warrant Certificate if the reasonable requirements of
the Warrant Agent and of Section 8-405 of the Uniform Commercial Code as in
effect in the State of New York are met. If required by the Warrant Agent or the
Company, such Holder shall furnish an indemnity sufficient in the judgment of
the Company and the Warrant Agent to protect the Company and the Warrant Agent
from any loss which either of them may suffer if a Warrant Certificate is
replaced. The Company and the Warrant Agent may charge the Holder for their
expenses in replacing a Warrant Certificate. Every replacement Warrant
Certificate is an additional obligation of the Company.
SECTION 2.7 Temporary Certificates. Until definitive Warrant
Certificates are ready for delivery, the Company may prepare and the Warrant
Agent shall countersign temporary Warrant Certificates. Temporary Warrant
Certificates shall be substantially in the form of definitive Warrant
Certificates but may have variations that the Company considers appropriate
<PAGE>
8
for temporary Warrant Certificates. Without unreasonable delay, the Company
shall prepare and the Warrant Agent shall countersign definitive Warrant
Certificates and deliver them in exchange for temporary Warrant Certificates.
SECTION 2.8 Cancellation. (a) In the event the Company shall
purchase or otherwise acquire Warrants, the Warrant Certificates in respect
thereof shall thereupon be delivered to the Warrant Agent for cancellation.
(b) The Warrant Agent and no one else shall cancel and dispose
of all Warrant Certificates surrendered for registration of transfer, exchange,
replacement, exercise or cancellation in accordance with its customary
procedures unless the Company directs the Warrant Agent to deliver canceled
Warrant Certificates to the Company. The Company may not issue new Warrant
Certificates to replace Warrant Certificates to the extent they evidence
Warrants which have been exercised or Warrants which the Company has purchased
or otherwise acquired.
ARTICLE 3.
Exercise Terms
SECTION 3.1 Exercise Price. Each Warrant shall initially
entitle the Holder thereof, subject to adjustment pursuant to the terms of this
Agreement, to purchase one share of Common Stock for a per share exercise price
of $0.01 (as the same may be adjusted pursuant to Article 5, the "Exercise
Price").
SECTION 3.2 Exercise Periods. (a) Subject to the terms and
conditions set forth herein, each Warrant shall be exercisable at any time or
from time to time on or after the Closing Date.
(b) No Warrant shall be exercisable after the Expiration Date.
SECTION 3.3 Expiration. A Warrant shall terminate and become
void as of the earlier of (i) the close of business on the Expiration Date or
(ii) the time and date such Warrant is exercised. The Company shall give notice
not less than 90, and not more than 120, days prior to the Expiration Date to
the Holders of all then outstanding Warrants to the effect that the Warrants
will terminate and become void as of the close of business on the Expiration
Date. The Warrants shall terminate and become void after the Expiration Date,
notwithstanding the Company's failure to give such notice.
SECTION 3.4 Manner of Exercise. Warrants may be exercised upon
(i) surrender to the Warrant Agent of the Warrant Certificates, together with
the form of election to purchase Common Stock on the reverse thereof duly filled
in and signed by the Holder thereof and (ii) payment to the Warrant Agent, for
the account of the Company, of the Exercise Price for the number of Warrant
Shares in respect of which such Warrant is then exercised. Such payment shall be
made (i) in cash or by certified or official bank check payable to the order of
the
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9
Company or by wire transfer of funds to an account designated by the Company for
such purpose or (ii) by the surrender (which surrender shall be evidenced by
cancellation of the number of Warrants represented by any Warrant Certificate
presented in connection with a Cashless Exercise) of a Warrant or Warrants
(represented by one or more relevant Warrant Certificates), and without the
payment of the Exercise Price in cash, in exchange for the issuance of such
number of shares of Common Stock equal to the product of (1) the number of
shares of Common Stock for which such Warrant would otherwise then be nominally
exercised if payment of the Exercise Price as of the date of exercise were being
made in cash and (2) the Cashless Exercise Ratio. An exercise of a Warrant in
accordance with the immediately preceding sentence is herein called a "Cashless
Exercise". All provisions of this Agreement shall be applicable with respect to
an exercise of Warrant Certificates pursuant to a Cashless Exercise for less
than the full number of Warrants represented thereby. If the issuance and sale
of the Warrant Shares by the Company to the Holders of the Warrants upon the
exercise of the Warrants would be exempt from the registration requirements of
the Securities Act if effected with a Cashless Exercise (as set forth in a legal
opinion of outside counsel of the Company delivered to the Holders), the Holders
of the Warrants will be required, if the Company is not then otherwise able to
rely on an exemption from the registration requirements of the Securities Act in
connection with the issuance and sale of the Warrant Shares upon exercise of the
Warrants, to effect the exercise of the Warrants solely pursuant to the Cashless
Exercise option. Subject to Section 3.2, the rights represented by the Warrants
shall be exercisable at the election of the Holders thereof either in full at
any time or from time to time in part and in the event that a Warrant
Certificate is surrendered for exercise in respect of less than all the Warrant
Shares purchasable on such exercise at any time prior to the Expiration Date a
new Warrant Certificate exercisable for the remaining Warrant Shares will be
issued. The Warrant Agent shall countersign and deliver the required new Warrant
Certificates, and the Company, at the Warrant Agent's request, shall supply the
Warrant Agent with Warrant Certificates duly signed on behalf of the Company for
such purpose.
SECTION 3.5 Issuance of Warrant Shares. Subject to Section
2.6, upon the surrender of Warrant Certificates and payment of the per share
Exercise Price, as set forth in Section 3.4, the Company shall issue and cause
the registrar and transfer agent, if any, for the Common Stock ("Transfer
Agent") to countersign and deliver to or upon the written order of the Holder
and in such name or names as the Holder may designate, a certificate or
certificates for the number of full Warrant Shares so purchased upon the
exercise of such Warrants or other securities or property to which it is
entitled, registered or otherwise to the Person or Persons entitled to receive
the same, together with cash as provided in Section 3.6 in respect of any
fractional Warrant Shares otherwise issuable upon such exercise. Such
certificate or certificates shall be deemed to have been issued and any Person
so designated to be named therein shall be deemed to have become a holder of
record of such Warrant Shares as of the date of the surrender of such Warrant
Certificates and payment of the per share Exercise Price. The Company may act as
its own Transfer Agent.
SECTION 3.6 Fractional Warrant Shares. The Company shall not
be required to issue fractional Warrant Shares on the exercise of Warrants. If
more than one Warrant shall be exercised in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable upon such
exercise shall be computed on the basis of the aggregate number of
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10
Warrant Shares purchasable pursuant thereto. If any fraction of a Warrant Share
would, except for the provisions of this Section 3.6, be issuable on the
exercise of any Warrant (or specified portion thereof), the Company may, at its
option, pay an amount in cash equal to the Current Market Value for one Warrant
Share on the Business Day immediately preceding the date the Warrant is
exercised, multiplied by such fraction, computed to the nearest whole cent.
SECTION 3.7 Reservation of Warrant Shares. The Company shall
at all times keep reserved out of its authorized shares of Common Stock a number
of shares of Common Stock sufficient to provide for the exercise of all
outstanding Warrants. The Transfer Agent for the Common Stock shall at all times
until the Expiration Date, or the time at which all Warrants have been exercised
or canceled, reserve such number of authorized shares as shall be required for
such purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent. All Warrant Shares which may be issued upon exercise of Warrants
shall, upon issue, be fully paid, nonassessable, free of preemptive rights and
free from all taxes, liens, charges and security interests with respect to the
issue thereof. The Company will supply such Transfer Agent with duly executed
Common Stock certificates for such purpose and will itself provide or otherwise
make available any cash which may be payable as provided in Section 3.6. The
Company will furnish to such Transfer Agent a copy of all notices of adjustments
and certificates related thereto transmitted to each Holder.
Before taking any action which would cause an adjustment
pursuant to Article 5 to reduce the Exercise Price below the then par value (if
any) of the Common Stock, the Company shall take any and all legal action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock at
the Exercise Price as so adjusted. Notwithstanding the provisions of Article 5,
the Exercise Price shall not be below $.01 per share of Common Stock.
The Company covenants that all shares of Common Stock which
may be issued upon exercise of Warrants will, upon issue, be fully paid,
nonassessable, free of preemptive rights, free from all taxes and free from all
liens, charges and security interests, created by or through the Company, with
respect to the issue thereof.
SECTION 3.8 Compliance with Law. If any shares of Common Stock
required to be reserved for purposes of exercise of Warrants require, under any
other Federal or state law or applicable governing rule or regulation of any
national securities exchange, registration with or approval of any governmental
authority, or listing on any such national securities exchange before such
shares may be issued upon exercise, the Company will cause such shares to be
duly registered or approved by such governmental authority or listed on the
relevant national securities exchange.
SECTION 3.9 Taxes. The Company=s obligation to deliver shares
of Common Stock or other securities or property upon the exercise of the
Warrants or to make any other payment to the Holders under this Agreement shall
be subject to the satisfaction of all applicable Federal, state, local and
foreign tax withholding requirements.
<PAGE>
11
ARTICLE 4.
Release of Warrants
SECTION 4.1 Terms of Release. In accordance with the
provisions of this Section 4.1, over time, the Holders will become entitled to
receive Warrants. The aggregate number of Warrants to which the Holders will be
entitled will be, as of the Closing Date, equal to 1.0% of the fully diluted
Common Stock as of the Closing Date and, accordingly, the Company will issue to
the Initial Holder on the date hereof Warrants initially exercisable for the
purchase of 10.1 shares of Common Stock.
If on August 31, 1999 (the "Warrant Release Date"), any of the
Redeemable Preferred Stock shall be outstanding, the Company will execute, and
upon the written order of the Company, the Warrant Agent will countersign and
deliver to the Holders, pro rata, additional Warrants such that the total number
of Warrants issued as of the Warrant Release Date (including the Warrants issued
upon the issuance of the Preferred Stock) will represent, in the aggregate, the
right to purchase 3.0% of the fully diluted Common Stock as of August 31, 1999;
provided, however, that if prior to August 31, 1999, the Company (i) has filed a
registration statement with the SEC with respect to an offering by the Company
of securities the proceeds of which are to be used to finance the redemption of
the Redeemable Preferred Stock (the "Redemption") or (ii) certifies in an
Officer's Certificate delivered to the Holders that (x) it is in the process of
preparing an offering memorandum with respect to an unregistered offering,
pursuant to Rule 144A under the Securities Act or otherwise (a "Rule 144A
Offering"), of securities the proceeds of which are to be used to finance the
Redemption and (y) it intends to circulate such offering memorandum to investors
within 30 calendar days of the date of such Officer's Certificate, then the
Warrant Release Date shall be postponed to October 15, 1999 (the "Extension
Date"). If immediately following the Extension Date any of the Redeemable
Preferred Stock shall be outstanding, the Company will execute, and upon the
written order of the Company, the Warrant Agent will countersign and deliver to
the Holders, pro rata, additional Warrants on such day such that the total
number of Warrants issued (including the Warrants issued upon the issuance of
the Preferred Stock) will represent, in the aggregate, the right to purchase
3.0% of the fully diluted Common Stock as of the Extension Date.
If on January 1, 2000 (the "Second Warrant Release Date") any
of the Redeemable Preferred Stock shall be outstanding, the Company will
execute, and upon the written order of the Company, the Warrant Agent will
countersign and deliver to the Holders, pro rata, additional Warrants such that
the total number of Warrants issued as of the Second Warrant Release Date
(including Warrants previously issued on August 31, 1999 or the Extension Date,
as applicable) will represent, in the aggregate, the right to purchase 5.0% of
the fully diluted Common Stock as of January 1, 2000; provided, however, that if
prior to January 1, 2000, the Company (i) has filed a registration statement
with the SEC with respect to an offering by the Company of securities the
proceeds of which are to be used to finance the Redemption or (ii) certifies in
an Officer's Certificate delivered to the Holders that (x) it is in the process
of preparing an offering memorandum with respect to a Rule 144A Offering of
securities the proceeds of which are to be used to finance the Redemption and
(y) it intends to circulate such offering memorandum to investors within 30
calendar days of the date of such Officer's
<PAGE>
12
Certificate, then the Second Warrant Release Date shall be postponed to March
15, 2000 (the "Second Extension Date"). If immediately following the Second
Extension Date any of the Redeemable Preferred Stock shall be outstanding, the
Company will execute, and upon the written order of the Company, the Warrant
Agent will countersign and deliver to the Holders, pro rata, additional Warrants
on such day such that the total number of Warrants issued (including Warrants
previously issued upon the initial issuance of the Redeemable Preferred Stock
and on August 31, 1999 or the Extension Date, as applicable) will represent, in
the aggregate, the right to purchase 5.0% of the fully diluted Common Stock as
of the Second Extension Date.
For purposes of this Section 4.1, by way of clarification the
term "fully diluted" shall not give effect to warrants issued to the management
of Stellex Aerospace, Inc. as of December 31, 1998 or options issued or issuable
under the Company's subsidiary stock option plans.
SECTION 4.2 Holder Put Right. If at any time on or after
August 31, 2004 the Common Stock is not registered under Section 12(b) or 12(g)
of the Exchange Act and a Holder continues to hold Warrants issued or issuable
pursuant to this Agreement, such Holder (or his representative) may, but is not
obligated to, elect on not more than one occasion to require the Company to
purchase all or any portion of the Warrants held by such Holder (the "Put") by
delivery of written notice (the "Put Notice") to the Company. The Put Notice
shall set forth the number of Warrants to be acquired from the Holder, the
aggregate consideration to be paid for such Warrants (if known), and the time
and place for the closing of the transaction (which shall not be less than 30
nor more than 60 days after the Put Notice is received by the Company). The
purchase price paid by the Company for Warrants purchased upon exercise of the
Put shall be the then Current Market Value of the Common Stock issuable upon
exercise of such Warrants less the aggregate Exercise Price of such Warrants.
ARTICLE 5.
Antidilution Provisions
<PAGE>
SECTION 5.1 Changes in Common Stock. In the event that at any
time or from time to time after the date hereof the Company shall (i) pay a
dividend or make a distribution on its Common Stock in shares of its Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock or (iv) increase or
decrease the number of shares of Common Stock outstanding by reclassification of
its Common Stock, then the number of shares of Common Stock purchasable upon
exercise of each Warrant immediately after the happening of such event shall be
adjusted so that, after giving effect to such adjustment, the Holder of each
Warrant shall be entitled to receive the number of shares of Common Stock upon
exercise that such Holder would have owned or have been entitled to receive had
such Warrants been exercised immediately prior to the happening of the events
described above (or, in the case of a dividend or distribution of Common Stock,
immediately prior to the record date therefor), and the Exercise Price for each
Warrant shall be adjusted in inverse proportion. An adjustment made pursuant to
this Section 5.1 shall become effective immediately after the effective date,
retroactive to the record date therefor in the case of a dividend or
distribution in shares of Common Stock, and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification.
SECTION 5.2 Cash Dividends and Other Distributions. In case at
any time or from time to time after the date hereof the Company shall distribute
to holders of Common Stock (i) any dividend or other distribution of cash,
evidences of its indebtedness, shares of its capital stock or any other
properties or securities or (ii) any options, warrants or other rights to
subscribe for or purchase any of the foregoing (other than, in each case set
forth in (i) and (ii), (x) any dividend or distribution described in Section 5.1
or (y) any rights, options, warrants or securities described in Section 5.3)
then the number of shares of Common Stock purchasable upon the exercise of each
Warrant shall be increased to a number determined by multiplying the number of
shares of Common Stock purchasable upon the exercise of such Warrant immediately
prior to the record date for any such dividend or distribution by a fraction,
the numerator of which shall be the Current Market Value per share of Common
Stock on the record date for such distribution, and the denominator of which
shall be such Current Market Value per share of Common Stock less the sum of (x)
any cash distributed per share of Common Stock and (y) the fair value (the "Fair
Value") (as determined in good faith by the Board, whose determination shall be
evidenced by a Board resolution filed with the Warrant Agent, a copy of which
will be sent to Holders upon request) of the portion, if any, of the
distribution applicable to one share of Common Stock consisting of evidences of
indebtedness, shares of stock, securities, other property, warrants, options or
subscription of purchase rights (notwithstanding the foregoing, if the Fair
Value per share of Common Stock in the above formula equals or exceeds the
Current Market Value per share of Common Stock in the above formula, then the
Current Market Value per share of Common Stock shall be equal to the Fair Value
per share of the Common Stock on the record date as determined in good faith by
the Board and described in a Board resolution filed with the Warrant Agent); and
the Exercise Price shall be adjusted to a number determined by dividing the
Exercise Price immediately prior to such record date by the above fraction. Such
adjustments shall be made whenever any distribution is made and shall become
effective as of the date of distribution, retroactive to the record date for any
such distribution; provided, however, that the Company is not required to make
an adjustment pursuant to this Section 5.2 if at the time of such distribution
the Company makes the same distribution to Holders of Warrants as it makes to
<PAGE>
14
holders of Common Stock pro rata based on the number of shares of Common Stock
for which such Warrants are exercisable (whether or not currently exercisable).
No adjustment shall be made pursuant to this Section 5.2 which shall have the
effect of decreasing the number of shares of Common Stock purchasable upon
exercise of each Warrant or increasing the Exercise Price.
SECTION 5.3 Rights Issue. In the event that at any time or
from time to time after the date hereof the Company shall issue, sell,
distribute or otherwise grant any rights to subscribe for or to purchase, or any
options or warrants for the purchase of, or any securities convertible or
exchangeable into, Common Stock to all holders of Common Stock, entitling such
holders to subscribe for or purchase shares of Common Stock or stock or
securities convertible into Common Stock, whether or not immediately
exercisable, convertible or exchangeable, as the case may be, and the price per
share of Common Stock issuable upon exercise, conversion or exchange thereof is
lower at the record date for such issuance than the then Current Market Value
per share of Common Stock, the number of shares of Common Stock thereafter
purchasable or issuable upon the exercise of the Warrants shall be determined by
multiplying such number of shares of Common Stock by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights, options, warrants or securities plus the
number of additional shares of Common Stock offered for subscription or purchase
or into or for which such securities are convertible or exchangeable, and the
denominator of which shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights, options, warrants or securities plus the
total number of shares of Common Stock which could be purchased at the Current
Market Value with the aggregate consideration received through issuance of such
rights, warrants, options, or convertible securities. In the event of any such
adjustment, the Exercise Price shall be adjusted to a number determined by
dividing the Exercise Price immediately prior to such date of issuance by the
aforementioned fraction. Such adjustment shall be made whenever such rights,
options or warrants are issued and shall become effective retroactively
immediately after the record date for the determination of stockholders entitled
to receive such rights, options, warrants or securities. No adjustment shall be
made pursuant to this Section 5.3 which shall have the effect of decreasing the
number of shares of Common Stock purchasable upon exercise of each Warrant or of
increasing the Exercise Price.
If the Company at any time shall issue two or more securities
as a share and one or more of such securities shall be rights, options or
warrants for or securities convertible or exchangeable into, Common Stock
subject to this Section 5.3, the consideration allocated to each such security
shall be determined in good faith by the Board of Directors of the Company.
SECTION 5.4 Reclassification; Combination; Liquidation. (a)
Except as provided in Section 5.4(b), in the event of any reclassification or
change of outstanding shares of Common Stock issuable upon exercise of the
Warrants (other than as set forth in Section 5.1 above and other than a change
in par value, or from par value to no par value, or from no par value to par
value or as a result of a subdivision or Combination), the Holders shall have
the right to receive upon exercise of the Warrants such number of shares of
capital stock or other securities or property which such Holder would have been
entitled to receive had such Warrant been exercised immediately prior to such
event. Unless paragraph (b) is applicable to a Combination, the Company shall
provide that the surviving or acquiring Person (the "Successor Company") in such
Combination will enter into an agreement with the Warrant Agent
<PAGE>
15
confirming the Holders' rights pursuant to this Section 5.4(a) and providing for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 5. The provisions of this Section
5.4(a) shall similarly apply to successive Combinations involving any Successor
Company.
(b) In the event of (i) a Combination where consideration to
Holders of Common Stock in exchange for their shares is payable solely in cash,
or (ii) the dissolution, liquidation or winding-up of the Company, then the
holders of the Warrants will be entitled to receive distributions on an equal
basis with the holders of Common Stock or other securities issuable upon
exercise of the Warrants, as if the Warrants had been exercised immediately
prior to such event, less the Exercise Price.
In case of any Combination described in this Section 5.4(b),
the surviving or acquiring Person and, in the event of any dissolution,
liquidation or winding-up of the Company, the Company, shall deposit promptly
with the Warrant Agent the funds, if any, necessary to pay to the Holders of the
Warrants the amounts to which they are entitled as described above. After such
funds and the surrendered Warrant Certificates are received, the Warrant Agent
shall make payment to the Holders by delivering a check in such amount as is
appropriate (or, in the case of consideration other than cash, such other
consideration as is appropriate) to such Person or Persons as it may be directed
in writing by the Holders surrendering such Warrants.
SECTION 5.5 Tender Offers: Exchange Offers. In the event that
the Company or any subsidiary of the Company shall purchase shares of Common
Stock pursuant to a tender offer or an exchange offer for a price per share of
Common Stock that is greater than the then Current Market Value per share of
Common Stock in effect at the end of the trading day immediately preceding the
day on which such tender offer or exchange offer expires, then the Company, or
such subsidiary of the Company, shall offer to purchase Warrants for comparable
consideration per share of Common Stock based on the number of shares of Common
Stock which the Holders of such Warrants would receive upon exercise of such
Warrants; provided, however, if a tender offer is made for only a portion of the
outstanding shares of Common Stock, then such offer shall be made for Warrants
in the same pro rata proportion.
SECTION 5.6 Issuance of Additional Shares of Common Stock. If
at any time the Company shall issue or sell any additional shares of Common
Stock (other than any issuance or sale pursuant to (x) a DeMinimus Non-Affiliate
Sale or (y) a sale to a third-party equity investor the proceeds of which are
used to redeem all of the outstanding Redeemable Preferred Stock) for
consideration in an amount per additional share of Common Stock less than the
Current Market Value, then the number of shares of Common Stock for which a
Warrant is exercisable shall be adjusted to equal the product obtained by
multiplying the number of shares of Common Stock for which a Warrant is
exercisable immediately prior to such issue or sale by a fraction (A) the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such issue or sale, and (B) the denominator of which shall be
the sum of (1) the number of shares of Common Stock outstanding immediately
prior to such issue or sale, and (2) the number of shares of Common Stock which
could be purchased at the Current Market Value with the aggregate consideration
received from the issuance or sale of the additional shares of Common Stock. For
the purposes of this Section 5.6, the date as of which the Current Market
<PAGE>
16
Value per share of Common Stock shall be computed shall be the earlier of (a)
the date on which the Company shall enter into a firm contract for the issuance
of such additional shares of Common Stock or (b) the date of actual issuance of
such additional shares of Common Stock. This Section 5.6 shall not apply to the
following:
(i) any of the transactions described in Section 5.1
or the issuance of shares of Common Stock pursuant to any transaction
described in Sections 5.2 through 5.5;
(ii) the issuance of shares of Common Stock (or
securities convertible or exchangeable into or exercisable for Common
Stock) in connection with acquisitions of assets or businesses other
than to Affiliates of the Company;
(iii) the issuance of shares of Common Stock in
connection with (a) the exercise of Warrants or (b) the conversion,
exercise or exchange of any options, warrants or other securities
convertible into or exchangeable for Common Stock which are issued
after the date hereof and in compliance with all other applicable
provisions of this Agreement;
(iv) the issuance of shares of Common Stock pursuant
to any option, warrant or other convertible or exchangeable security
outstanding on the date hereof;
(v) the issuance of shares of Common Stock in a bona
fide public offering pursuant to a firm commitment underwriting by a
nationally recognized investment banking firm; and
(vi) the issuance of options, or shares of Common
Stock pursuant to any option, under any employee benefit, compensation
or incentive plan approved by a majority of the Board of Directors of
the Company.
SECTION 5.7 Other Events. If any event occurs as to which the
foregoing provisions of this Article 5 are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board, fairly
and adequately protect the purchase rights of the Warrants in accordance with
the essential intent and principles of such provisions, then the Board shall
make such adjustments in the application of such provisions, in accordance with
such essential intent and principles, as shall be reasonably necessary, in the
good faith opinion of the Board, to protect such purchase rights as aforesaid,
but in no event shall any such adjustment have the effect of increasing the
Exercise Price or decreasing the number of shares of Common Stock subject to
purchase upon exercise of any Warrant.
SECTION 5.8 Current Market Value. For the purpose of any
computation of Current Market Value under this Section 5, Section 4.2 and
Section 3.6, the "Current Market Value" per share of Common Stock at any date
shall be (x) for purposes of Section 3.6, the closing price on the Business Day
immediately prior to the date of the exercise of the applicable Warrant pursuant
to Section 3 and (y) in all other cases, the average of the daily closing prices
for the shorter of (i) the 20 consecutive trading days ending on the last full
trading day on the
<PAGE>
17
exchange or market specified in the second succeeding sentence prior to the Time
of Determination (as defined below) and (ii) the period commencing on the date
next succeeding the first public announcement of the issuance, sale,
distribution or granting in question through such last full trading day prior to
the Time of Determination. The term "Time of Determination" as used herein shall
be the time and date of the earlier to occur of (A) the date as of which the
Current Market Value is to be computed and (B) the last full trading day on such
exchange or market before the commencement of "ex-dividend" trading in the
Common Stock relating to the event giving rise to the adjustment required by
this Section 5. The closing price for any day shall be the last reported sale
price regular way or, in case no such reported sale takes place on such day, the
average of the closing bid and asked prices regular way for such day, in each
case (1) on the principal national securities exchange on which the shares of
Common Stock are listed or to which such shares are admitted to trading or (2)
if the Common Stock is not listed or admitted to trading on a national
securities exchange, in the over-the-counter market as reported by the Nasdaq
National Market or any comparable system or (3) if the Common Stock is not
listed on the Nasdaq National Market or a comparable system, as furnished by two
members of the NASD selected from time to time in good faith by the Board of
Directors of the Company for that purpose. In the absence of all of the
foregoing, or if for any other reason the Current Market Value per share cannot
be determined pursuant to the foregoing provisions of this Section 5.8, the
Current Market Value per share shall be (A) the fair market value thereof
determined in good faith in the most recently completed arm's-length transaction
between the Company and a Person other than an Affiliate of the Company (a
"Non-Affiliate Sale") and the closing of which occurs on such date or shall have
occurred within the three months preceding such date or (B) if no transaction
shall have occurred on such date or within such three-month period, the fair
market value thereof as determined in good faith by the Board in its good faith
exercise of its fiduciary duties to the equityholders of the Company, including
the Holders, unless the Holders of a majority of the outstanding Warrants
disagree with such determination, in which case the fair market value shall be
determined by an independent investment bank of nationally recognized standing
selected by the Company in good faith. The Company shall pay the fees and
expenses of any investment bank involved in the determination of Current Market
Value.
SECTION 5.9 Superseding Adjustment. Upon the expiration of any
rights, options, warrants or conversion or exchange privileges which resulted in
the adjustments pursuant to this Article 5, if any thereof shall not have been
exercised, the number of Warrant Shares purchasable upon the exercise of each
Warrant shall be readjusted as if (A) the only shares of Common Stock issuable
upon exercise of such rights, options, warrants, conversion or exchange
privileges were the shares of Common Stock, if any, actually issued upon the
exercise of such rights, options, warrants or conversion or exchange privileges
and (B) shares of Common Stock actually issued, if any, were issuable for the
consideration actually received by the Company upon such exercise plus the
aggregate consideration, if any, actually received by the Company for the
issuance, sale or grant of all such rights, options, warrants or conversion or
exchange privileges whether or not exercised and the Exercise Price shall be
readjusted inversely; provided, however, that no such readjustment shall (except
by reason of an intervening adjustment under Section 5.1) have the effect of
decreasing the number of Warrant Shares purchasable upon the exercise of each
Warrant or increase the Exercise Price by an amount in excess of the amount of
the adjustment initially made in respect of the issuance, sale or grant of such
rights, options, warrants or conversion or exchange privileges.
<PAGE>
18
SECTION 5.10 Minimum Adjustment. The adjustments required by
the preceding Sections of this Article 5 shall be made whenever and as often as
any specified event requiring an adjustment shall occur, except that no
adjustment of the number of shares of Common Stock purchasable upon exercise of
Warrants that would otherwise be required shall be made (except in the case of a
subdivision or combination of shares of Common Stock, as provided for in Section
5.1) unless and until such adjustment either by itself or with other
adjustments not previously made increases or decreases by at least 1% of the
number of shares of Common Stock purchasable upon exercise of Warrants
immediately prior to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount shall be carried forward and made as
soon as such adjustment, together with other adjustments required by this
Article 5 and not previously made, would result in a minimum adjustment. For the
purpose of any adjustment, any specified event shall be deemed to have occurred
at the close of business on the date of its occurrence. In computing adjustments
under this Article 5, fractional interests in Common Stock shall be taken into
account to the nearest one-hundredth of a share.
SECTION 5.11 Notice of Adjustment. Whenever the Exercise Price
or the number of shares of Common Stock and other property, if any, purchasable
upon exercise of Warrants is adjusted, as herein provided, the Company shall
deliver to the Warrant Agent a certificate of the Chief Financial Officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated (including a description
of the basis on which the Board of Directors of the Company determined the fair
market value of any evidences of indebtedness, other securities or property or
warrants or other subscription or purchase rights), and specifying the Exercise
Price and the number of shares of Common Stock purchasable upon exercise of
Warrants after giving effect to such adjustment. The Company shall promptly
cause the Warrant Agent to mail a copy of such certificate to each Holder in
accordance with Section 8.5. The Warrant Agent shall be entitled to rely on such
certificate and shall be under no duty or responsibility with respect to any
such certificate, except to exhibit the same from time to time to any Holder
desiring an inspection thereof during reasonable business hours. The Warrant
Agent shall not at any time be under any duty or responsibility to any Holder to
determine whether any facts exist which may require any adjustment of the
Exercise Price or the number of shares of Common Stock or other stock or
property, purchasable on exercise of the Warrants, or with respect to the nature
or extent of any such adjustment when made, or with respect to the method
employed in making such adjustment or the validity or value of any shares of
Common Stock.
SECTION 5.12 Notice of Certain Transactions. In the event that
the Company shall propose (a) to pay any dividend payable in securities of any
class to the holders of its Common Stock or to make any other distribution to
the holders of its Common Stock, (b) to offer the holders of its Common Stock
rights to subscribe for or to purchase any securities convertible into shares of
Common Stock or shares of Common Stock or shares of stock of any class or any
other securities, rights or options, (c) to effect any reclassification of its
Common Stock, capital reorganization or Combination or (d) to effect the
voluntary or involuntary dissolution, liquidation or winding-up of the Company,
or in the event of a tender offer or exchange offer described in Section 5.5,
the Company shall within 5 Business Days send to the Warrant Agent and the
Warrant Agent shall within 5 Business Days send the Holders a notice (in such
form as shall be furnished to the Warrant Agent by the Company) of such proposed
action or offer, such
<PAGE>
19
notice to be mailed by the Warrant Agent to the Holders at their addresses as
they appear in the Certificate Register, which shall specify the record date for
the purposes of such dividend, distribution or rights, or the date such issuance
or event is to take place and the date of participation therein by the holders
of Common Stock, if any such date is to be fixed, and shall briefly indicate the
effect of such action on the Common Stock and on the number and kind of any
other shares of stock and on other property, if any, and the number of shares of
Common Stock and other property, if any, purchasable upon exercise of each
Warrant and the Exercise Price after giving effect to any adjustment which will
be required as a result of such action. Such notice shall be given by the
Company as promptly as possible and, in the case of any action covered by clause
(a) or (b) above, at least 5 Business Days prior to the record date for
determining holders of the Common Stock for purposes of such action and, in the
case of any other such action, at least 10 Business Days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of Common Stock, whichever shall be the earlier.
SECTION 5.13 Adjustment to Warrant Certificate. The form of
Warrant Certificate need not be changed because of any adjustment made pursuant
to this Article 5, and Warrant Certificates issued after such adjustment may
state the same Exercise Price and the same number of shares of Common Stock as
are stated in any Warrant Certificates issued prior to the adjustment. The
Company, however, may at any time in its sole discretion make any change in the
form of Warrant Certificate that it may deem appropriate to give effect to such
adjustments and that does not affect the substance of the Warrant Certificate,
and any Warrant Certificate thereafter issued or countersigned, whether in
exchange or substitution for an outstanding Warrant Certificate or otherwise,
may be in the form as so changed.
ARTICLE 6.
Rights of Holders
SECTION 6.1 Registration Rights. The Holders of the Warrants
and the registered holders of the Warrant Shares shall be entitled to the
registration rights set forth in Exhibit D.
ARTICLE 7.
Warrant Agent
SECTION 7.1 Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act as agent for the Company in accordance with
provisions of this Agreement and the Warrant Agent hereby accepts such
appointment.
7.2 Rights and Duties of Warrant Agent. (a) In acting under
this Warrant Agreement and in connection with the Warrant Certificates, the
Warrant Agent is acting solely as
<PAGE>
20
agent of the Company and does not assume any obligation or relationship or
agency or trust for or with any of the Holders of Warrant Certificates or
beneficial owners of Warrants.
(b) Counsel. The Warrant Agent may consult with counsel
satisfactory to it, and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in accordance with the advice of such counsel.
(c) Documents. The Warrant Agent shall be protected and shall
incur no liability for or in respect of any action taken or thing suffered by it
in reliance upon any Warrant Certificate, notice, direction, consent,
certificate, affidavit, statement or other paper or document reasonably believed
by it to be genuine and to have been presented or signed by the proper parties.
(d) No Implied Obligations. The Warrant Agent shall be
obligated to perform only such duties as are herein and in the Warrant
Certificates specifically set forth and no implied duties or obligations shall
be read into this Agreement or the Warrant Certificates against the Warrant
Agent. The Warrant Agent shall not be under any obligation to take any action
hereunder which may tend to involve it in any expense or liability for which it
does not receive indemnity if such indemnity is reasonably requested. The
Warrant Agent shall not be accountable or under any duty or responsibility for
the use by the Company of any of the Warrant Certificates countersigned by the
Warrant Agent and delivered by it to the Holders or on behalf of the Holders
pursuant to this Agreement or for the application by the Company of the proceeds
of the Warrants. The Warrant Agent shall have no duty or responsibility in case
of any default by the Company in the performance of its covenants or agreements
contained herein or in the Warrant Certificates or in the case of the receipt of
any written demand from a Holder with respect to such default, including any
duty or responsibility to initiate or attempt to initiate any proceedings at law
or otherwise.
(e) Not Responsible for Adjustments or Validity of Stock. The
Warrant Agent shall not at any time be under any duty or responsibility to any
Holder to determine whether any facts exist that may require an adjustment of
the number of shares of Common Stock purchasable upon exercise of each Warrant
or the Exercise Price, or with respect to the nature or extent of any adjustment
when made, or with respect to the method employed, or herein or in any
supplemental agreement provided to be employed, in making the same. The Warrant
Agent shall not be accountable with respect to the validity or value of any
shares of Common Stock or of any securities or property which may at any time be
issued or delivered upon the exercise of any Warrant or upon any adjustment
pursuant to Article 5, and it makes no representation with respect thereto. The
Warrant Agent shall not be responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver any shares of Common Stock or
stock certificates upon the surrender of any Warrant Certificate for the purpose
of exercise or upon any adjustment pursuant to Article 5, or to comply with any
of the covenants of the Company contained in Article 5.
(f) Proof of Actions Taken. Whenever in the performance of its
duties under this Warrant Agreement the Warrant Agent shall deem it necessary or
desirable that any fact or
<PAGE>
21
matter be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed conclusively to be proved and
established by a certificate signed by an Officer and delivered to the Warrant
Agent; and such certificate shall be full authorization to the Warrant Agent for
any action taken or suffered in good faith by it under the provisions of this
Warrant Agreement in reliance upon such certificate.
SECTION 7.3 Individual Rights of Warrant Agent. The Warrant
Agent and any stockholder, director, officer or employee of the Warrant Agent
may buy, sell or deal in any of the Warrants or other securities of the Company
or its Affiliates or become pecuniarily interested in transactions in which the
Company or its Affiliates may be interested, or contract with or lend money to
the Company or its Affiliates or otherwise act as fully and freely as though it
were not the Warrant Agent under this Agreement. Nothing herein shall preclude
the Warrant Agent from acting in any other capacity for the Company or for any
other legal entity.
SECTION 7.4 Warrant Agent's Disclaimer. The Warrant Agent
shall not be responsible for and makes no representation as to the validity or
adequacy of this Agreement or the Warrant Certificates and it shall not be
responsible for any statement in this Agreement or the Warrant Certificates
other than its countersignature thereon.
SECTION 7.5 Indemnity. The Company shall indemnify the Warrant
Agent against any loss, liability or expense (including agents' and attorneys'
fees and expenses) incurred by it without gross negligence or bad faith on its
part arising out of or in connection with the acceptance or performance of its
duties under this Agreement. The Warrant Agent shall notify the Company promptly
of any claim for which it may seek indemnity. The Company need not reimburse any
expense or indemnify against any loss or liability incurred by the Warrant Agent
through wilful misconduct, gross negligence or bad faith. The Company's payment
obligations pursuant to this Section 7.5 shall survive the resignation or
removal of the Warrant Agent and the termination of this Agreement.
SECTION 7.6 Compensation. The Company agrees to pay the
Warrant Agent reasonable compensation for all services rendered by the Warrant
Agent in the performance of its duties under this Warrant Agreement, and to
reimburse the Warrant Agent for all expenses, taxes and governmental charges and
other charges of any kind and nature incurred by the Warrant Agent in the
performance of its duties under this Warrant Agreement.
SECTION 7.7 Successor Warrant Agent. (a) The Company agrees
for the benefit of the Holders that there shall at all times be a Warrant Agent
hereunder until all the Warrants have been exercised or are no longer
exercisable.
(b) Resignation and Removal. The Warrant Agent may at any time
resign by giving written notice to the Company of such intention on its part,
specifying the date on which its desired resignation shall become effective;
provided, however, that such date shall not be less than 60 days after the date
on which such notice is given unless the Company otherwise agrees.
<PAGE>
22
(c) The Company to Appoint Successor. In case at any time the
Warrant Agent shall resign, or shall be removed, or shall become incapable of
acting, or shall be adjudged a bankrupt or insolvent, or shall commence a
voluntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or under any other applicable Federal or state bankruptcy,
insolvency or similar law or shall consent to the appointment of or taking
possession by a receiver, custodian, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Warrant Agent or its property or affairs, or
shall make an assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts generally as they become due, or shall take
corporate action in furtherance of any such action, or a decree or order for
relief by a court having jurisdiction in the premises shall have been entered in
respect of the Warrant Agent in an involuntary case under the Federal bankruptcy
laws, as now or hereafter constituted, or any other applicable Federal or State
bankruptcy, insolvency or similar law; or a decree order by a court having
jurisdiction in the premises shall have been entered for the appointment of a
receiver, custodian, liquidator, assignee, trustee, sequestrator (or similar
official) of the Warrant Agent or of its property or affairs, or any public
officer shall take charge or control of the Warrant Agent or of its property or
affairs for the purpose of rehabilitation, conservation, winding up of or
liquidation, a successor Warrant Agent, qualified as aforesaid, shall be
appointed by the Company by an instrument in writing, filed with the successor
Warrant Agent. Upon the appointment as aforesaid of a successor Warrant Agent
and acceptance by the successor Warrant Agent of such appointment, the Warrant
Agent shall cease to be Warrant Agent hereunder; provided, however, that in the
event of the resignation of the Warrant Agent hereunder, such resignation shall
be effective on the earlier of (i) the date specified in the Warrant Agent's
notice of resignation and (ii) the appointment and acceptance of a successor
Warrant Agent hereunder.
(d) Successor To Expressly Assume Duties. Any successor
Warrant Agent appointed hereunder shall execute, acknowledge and deliver to its
predecessor and to the Company an instrument accepting such appointment
hereunder, and thereupon such successor Warrant Agent, without any further act,
deed or conveyance, shall become vested with all the rights and obligations of
such predecessor with like effect as if originally named as Warrant Agent
hereunder, and such predecessor, upon payment of its charges and disbursements
then unpaid, shall thereupon become obligated to transfer, deliver and pay over,
and such successor Warrant Agent shall be entitled to receive, all monies,
securities and other property on deposit with or held by such predecessor, as
Warrant Agent hereunder.
(e) Successor by Merger. Any corporation into which the
Warrant Agent hereunder may be merged or consolidated, or any corporation
resulting from any merger or consolidation to which the Warrant Agent shall be a
party, or any corporation to which the Warrant Agent shall sell or otherwise
transfer all or substantially all the corporate agency business of the Warrant
Agent, provided that it shall be qualified as aforesaid, shall be the successor
Warrant Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto.
ARTICLE 8.
Miscellaneous
<PAGE>
23
SECTION 8.1 Financial Reports. Upon request, the Company shall
provide the Warrant Agent and Holders with copies of any annual, quarterly or
current reports filed by the Company under the Exchange Act or, if none, copies
of financial information given to its senior lenders, if any.
SECTION 8.2 Persons Benefitting. This Agreement is for the
benefit of the Initial Holder and any other Holder from time to time of the
Warrants and the Warrant Shares. Nothing in this Agreement is intended or shall
be construed to confer upon any Person other than the Company, the Warrant Agent
and the Holders any right, remedy or claim under or by reason of this agreement
or any part hereof.
SECTION 8.3 Rights of Holders. Except as otherwise
specifically required herein, holders of unexercised Warrants are not entitled
(i) to receive dividends or other distributions, (ii) to receive notice of or
vote at any meeting of the stockholders, (iii) to consent to any action of the
stockholders, (iv) to receive notice of any other proceedings of the Company or
(v) to exercise any other rights as stockholders of the Company.
SECTION 8.4 Amendment. This Agreement may be amended by the
parties hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective provision
contained herein or making any other provisions with respect to matters or
questions arising under this Agreement as the Company and the Warrant Agent may
deem necessary or desirable; provided, however, that such action shall not
affect adversely the rights of the Holders. Any amendment or supplement to this
Agreement that has or would have an adverse effect on the interests of the
Holders shall require the written consent of the Holders of a majority of the
outstanding Warrants or, if no Warrants are outstanding, the Initial Holder. The
consent of each Holder affected shall be required for any amendment pursuant to
which the Exercise Price would be increased or the number of Warrant Shares
purchasable upon exercise of Warrants would be decreased (other than pursuant to
adjustments provided herein). In determining whether the Holders of the required
number of Warrants have concurred in any direction, waiver or consent, Warrants
owned by the Company or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company shall
be disregarded and deemed not to be outstanding, except that, for the purpose of
determining whether the Warrant Agent shall be protected in relying on any such
direction, waiver or consent, only Warrants which the Warrant Agent knows are so
owned shall be so disregarded. Also, subject to the foregoing, only Warrants
outstanding at the time shall be considered in any such determination.
SECTION 8.5 Notices. Any notice or communication shall be in
writing and delivered in person, mailed by first-class mail or telecopied by
confirmed telecopy addressed as follows:
<PAGE>
24
if to the Company: Stellex Technologies, Inc.
680 Fifth Avenue
New York, NY 10019
Attention: William L. Remley
Michael D. Schenker
Telecopy: 212-931-5252
Telephone: 212-931-5205
with a copy to: Winston & Strawn
200 Park Avenue
New York, NY 10166
Attention: Daniel A. Ninivaggi
if to the Warrant Agent: HSBC Bank USA
140 Broadway, 12th Floor
New York, New York 10005
Attention: Corporate Trust Administration
Telecopy: 212-658-6425
Telephone: 212-658-6029
if to the Initial Holder: SG Cowen Securities Corporation
1221 Avenue of the Americas
New York, NY 10020
Attention: David Apple
Telecopy: 212-278-6178/5460
Telephone: 212-278-5353
The Company or the Warrant Agent or the Initial Holder by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed
to the Holder at the Holder's address as it appears on the Certificate Register
and shall be sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 8.6 GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THIS AGREEMENT AND THE WARRANT CERTIFICATES.
SECTION 8.7 Successors. All agreements of the Company in this
Agreement and the Warrant Certificates shall bind its successors. All agreements
of the Warrant Agent in
<PAGE>
25
this Agreement shall bind its successors. Any transferee or assignee of Warrants
or Warrant from time to time shall have the same rights as a Holder hereunder to
which the Initial Holder would otherwise be entitled.
SECTION 8.8 Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
SECTION 8.9 Table of Contents. The table of contents and
headings of the Articles and Sections of this Agreement have been inserted for
convenience of reference only, are not intended to be considered a part hereof
and shall not modify or restrict any of the terms or provisions hereof.
SECTION 8.10 Severability. The provisions of this Agreement
are severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
<PAGE>
26
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first written above.
STELLEX TECHNOLOGIES, INC.
By:
------------------------------
Name:
Title:
HSBC BANK USA, as Warrant Agent
By:
------------------------------
Name:
Title:
<PAGE>
TO WARRANT AGREEMENT
EXHIBIT A
FORM OF FACE OF WARRANT CERTIFICATE
THE WARRANTS AND THE WARRANT SHARES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AND SUBJECT TO
COMPLIANCE WITH OTHER APPLICABLE LAWS. THE HOLDER HEREOF, BY ITS ACCEPTANCE
HEREOF, AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, UNLESS
PREVIOUSLY REGISTERED UNDER THE SECURITIES ACT, ONLY (A) TO THE COMPANY; (B)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER (IF AVAILABLE); (C) TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A; (D) PURSUANT TO AN OFFSHORE TRANSACTION COMPLYING WITH
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT: OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
No. __ Certificate for ___ Warrants
WARRANTS TO PURCHASE COMMON STOCK OF
STELLEX TECHNOLOGIES, INC.
THIS CERTIFIES THAT, ____________, or its registered assigns,
is the registered holder of the number of Warrants set forth above (the
"Warrants"). Each Warrant entitles the registered holder thereof (the "Holder"),
at its option and subject to the provisions contained herein and in the Warrant
Agreement referred to below, to purchase from Stellex Technologies, Inc., a
Delaware corporation (the "Company"), one share of common stock of the Company
(the "Common Stock") at the per share exercise price of $0.01 (the "Exercise
Price"), or by Cashless Exercise referred to below. This Warrant Certificate
shall terminate and become void as of the close of business on August 31, 2010
(the "Expiration Date") or upon the exercise hereof as to all the shares of
Common Stock subject hereto. The number of shares purchasable upon exercise of
the Warrants and the Exercise Price per share shall be subject to adjustment
from time to time as set forth in the Warrant Agreement.
This Warrant Certificate is issued under and in accordance
with a Warrant Agreement dated as of April 22, 1999 (the "Warrant Agreement"),
between the Company and HSBC Bank USA (the "Warrant Agent", which term includes
any successor Warrant Agent
<PAGE>
2
under the Warrant Agreement), and is subject to the terms and provisions
contained in the Warrant Agreement, to all of which terms and provisions the
Holder of this Warrant Certificate consents by acceptance hereof. The Warrant
Agreement is hereby incorporated herein by reference and made a part hereof.
Reference is hereby made to the Warrant Agreement for a full statement of the
respective rights, limitations of rights, duties and obligations of the Company,
the Warrant Agent and the Holders of the Warrants. Capitalized terms used but
not defined herein shall have the meanings ascribed thereto in the Warrant
Agreement. A copy of the Warrant Agreement may be obtained for inspection by the
Holder hereof upon written request to the Warrant Agent at 140 Broadway, 12th
Floor, New York, New York 10005.
Subject to the terms of the Warrant Agreement, the Warrants
may be exercised in whole or in part (i) by surrender of this Warrant
Certificate with the form of election to purchase Warrant Shares attached hereto
duly executed and with the simultaneous payment of the Exercise Price in cash
(subject to adjustment) to the Warrant Agent for the account of the Company at
the office of the Warrant Agent or (ii) by Cashless Exercise. Payment of the
Exercise Price in cash shall be made in cash or by certified or official bank
check payable to the order of the Company or by wire transfer of funds to an
account designated by the Company for such purpose. Payment by Cashless Exercise
shall be made by the surrender of a Warrant or Warrants represented by one or
more Warrant Certificates and without payment of the Exercise Price in cash, in
exchange for the issuance of such number of shares of Common Stock equal to the
product of (1) the number of shares of Common Stock for which such Warrant would
otherwise then be nominally exercised if payment of the Exercise Price were
being made in cash and (2) the Cashless Exercise Ratio.
As provided in the Warrant Agreement and subject to the terms
and conditions therein set forth, the Warrants shall be exercisable at any time
or from time to time on or after April 22, 1999 under the terms of the Warrant
Agreement; provided, however, that no Warrant shall be exercisable after the
Expiration Date.
Generally, in the event of any reclassification or change of
outstanding shares of Common Stock issuable upon exercise of the Warrants, the
Holder hereof will be entitled to receive upon exercise of the Warrants the
shares of capital stock or other securities or other property of such surviving
entity as such Holder would have been entitled to receive upon or as the result
of such event had the Holder exercised its Warrants immediately prior to such
event; provided, however, that in the event that the Company enters into a
Combination and in connection with such Combination consideration to holders of
Common Stock in exchange for their shares is payable solely in cash, or in the
event of the dissolution, liquidation or winding-up of the Company, the Holder
hereof will be entitled to receive distributions on an equal basis with the
holders of Common Stock or other securities issuable upon exercise of the
Warrants, as if the Warrants had been exercised immediately prior to such
events, less the Exercise Price.
The Company may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges in connection with the transfer
or exchange of the Warrant Certificates pursuant to Section 2.4 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates or the exercise of the
Warrants.
<PAGE>
3
Upon any partial exercise of the Warrants, there shall be
countersigned and issued to the Holder hereof a new Warrant Certificate in
respect of the shares of Common Stock as to which the Warrants shall not have
been exercised. This Warrant Certificate may be exchanged at the office of the
Warrant Agent by presenting this Warrant Certificate properly endorsed with a
request to exchange this Warrant Certificate for other Warrant Certificates
evidencing an equal number of Warrants. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. The Company may, at
its option, pay an amount in cash equal to the Current Market Value for one
share of Common Stock on the date the Warrant is exercised, multiplied by such
fraction, computed to the nearest whole cent.
The Warrants do not entitle any Holder hereof to any of the
rights of a shareholder of the Company. All shares of Common Stock issuable by
the Company upon the exercise of the Warrants shall, upon such issue, be duly
and validly issued and fully paid and non-assessable.
The Holder in whose name the Warrant Certificate is registered
may be deemed and treated by the Company and the Warrant Agent as the absolute
owner of the Warrant Certificate for all purposes whatsoever and neither the
Company nor the Warrant Agent shall be affected by notice to the contrary.
This Warrant Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Warrant Agent.
STELLEX TECHNOLOGIES, INC.
By
-------------------------------------
Name:
Title:
Attest:
-----------------------------
Secretary
DATED:
Countersigned:
HSBC BANK USA
as Warrant Agent,
by
-----------------------------------
Authorized Signatory
<PAGE>
EXHIBIT B
TO
WARRANT AGREEMENT
FORM OF ELECTION TO EXERCISE WARRANT SHARES
(to be executed only upon exercise of
Warrants)
[ ]
The undersigned hereby irrevocably elects to exercise [ ]
Warrants at an exercise price per Warrant (subject to adjustment) of $.01 to
acquire an equal number of shares of Common Stock, no par value of Stellex
Technologies, Inc., on the terms and conditions specified in the within Warrant
Certificate and the Warrant Agreement therein referred to, surrenders this
Warrant Certificate and all right, title and interest therein to
, and directs that the shares of Common Stock deliverable upon
the exercise of such Warrants be registered or placed in the name and at the
address specified below and delivered thereto.
Date: ________________, ____
(1)
-------------------------------------
(Signature of Owner)
-------------------------------------
(Street Address)
-------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
- --------
(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a national
bank or trust company or by a member firm of any national securities
exchange.
<PAGE>
--------------------------------------
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE>
EXHIBIT C
TO
WARRANT AGREEMENT
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of Stellex Technologies,
Inc. (the "Company")
This Certificate relates to __________ Warrants held in
definitive form by _______________ (the "Transferor").
The Transferor has requested the Warrant Agent by written
order to exchange or register the transfer of a Warrant or Warrants. In
connection with such request and in respect of each such Warrant, the Transferor
does hereby certify that the Transferor is familiar with the Warrant Agreement
relating to the above captioned Warrants and that the transfer of this Warrant
does not require registration under the Securities Act of 1933 (the "Securities
Act"), because():
[_] Such Warrant is being acquired for the Transferor's own account without
transfer.
[_] Such Warrant is being transferred to the Company.
[_] Such Warrant is being transferred pursuant to an effective registration
statement under the Securities Act.
[_] Such Warrant is being transferred in a transaction meeting the requirements
of Rule 144 under the Securities Act.
[_] Such Warrant is being transferred to a qualified institutional buyer (as
defined in Rule 144A under the Securities Act), in reliance on Rule 144A.
[_] Such Warrant is being transferred pursuant to an offshore transaction in
accordance with Rule 904 under the Securities Act.
[_] Such warrant is being transferred pursuant to another available
exemption from the registration requirements under the Securities Act.
- --------
(1) Please check applicable box.
<PAGE>
2
The Warrant Agent and the Company are entitled to rely upon
this Certificate and are irrevocably authorized to produce this Certificate or a
copy hereof to any interested party in any administrative or legal proceedings
or official inquiry with respect to the matters covered hereby.
[INSERT NAME OF TRANSFEROR]
by
-------------------------
Date: ____________________
Authorized Representative
<PAGE>
EXHIBIT D
TO
WARRANT AGREEMENT
REGISTRATION RIGHTS OF HOLDERS
OF THE WARRANT SECURITIES
Section 1 Shelf Registration. (a) Upon the occurrence of a
Triggering Event (as defined below), the Company shall use its best efforts to,
as promptly as practicable (but no later than 120 days thereafter), cause to be
declared effective a registration statement on an appropriate form under the
Securities Act relating to (i) any resale or offering of the Warrants, (ii) the
issuance of Warrant Shares upon the exercise of the Warrants and (iii) any
resale or offering of any Warrant Shares that have been issued pursuant to the
Warrants (collectively, such Warrants and such Warrant Shares being referred to
as the "Warrant Securities") by the holders of such Warrant Securities (the
"Holders") from time to time in accordance with the methods of distribution
elected by such Holders and set forth in such registration statement
(hereinafter, a "Shelf Registration Statement"). For purposes hereof, a
"Triggering Event" shall mean the first to occur of (i) the first firm
commitment underwritten public offering of Common Stock (a "Public Offering") by
the Company, pursuant to an effective registration statement under the
Securities Act, (ii) the Common Stock being listed on a national securities
exchange or becoming eligible for quotation in the NASDAQ Market System or (iii)
a written demand for registration hereunder by the Holders of 51% of the
outstanding Warrant Securities at any time after the second anniversary of the
date of the last issuance of the Warrants; provided, however, that the Company
shall not be obligated to file and cause to be declared effective any such Shelf
Registration Statement if the Company shall have delivered to the Warrant Agent
a legal opinion of its outside counsel reasonably satisfactory to the Warrant
Agent, in form and substance satisfactory to counsel to the Warrant Agent, to
the effect that all of the Warrant Securities outstanding and held by
non-affiliates of the Company are freely saleable (i.e., without registration or
prospectus delivery) under the Securities Act of 1933, as amended.
(b) The Company shall use its best efforts to keep such Shelf
Registration Statement continuously effective in order to permit the prospectus
forming part thereof to be usable by Holders for a period that will terminate
when an opinion of the Company=s outside counsel reasonably satisfactory to
counsel to the Warrant Agent is delivered to the Warrant Agent to the effect
that all Warrant Securities outstanding and held by non-affiliates of the
Company are freely saleable (i.e., without registration or prospectus delivery
under the Securities Act of 1933, as amended). The Company shall be deemed not
to have used its best efforts to keep the Shelf Registration Statement effective
during the requisite period if it voluntarily takes any action that would result
in Holders of Warrant Securities covered thereby not being able to offer and
sell such Warrant Securities during that period, unless such action is required
by applicable law, except as provided in Section 2 below.
(c) Notwithstanding any other provisions hereof, the Company
will ensure that (i) any Shelf Registration Statement and any amendment thereto
and any prospectus forming part thereof and any supplement thereof complies in
all material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Shelf Registration Statement and any amendment
<PAGE>
2
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Shelf Registration Statement, and any supplement to such
prospectus, does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements, in the light of
the circumstances under which they were made, not misleading. Notwithstanding
the foregoing, the Company shall not be responsible for any information provided
by any Holder specifically for use in the Shelf Registration Statement, any
prospectus forming part of any Shelf Registration Statement or any supplement to
any such prospectus.
Unless the Holders of a majority of the outstanding Warrant
Securities shall otherwise consent in writing, no other person (including the
Company), other than another Holder, shall be permitted to offer any securities
under any registration pursuant to this Section 1.
Section 2. Effective Registration Statement. A registration
pursuant to Section 1 will not be deemed to have been effected unless the
registration statement relating thereto has become effective under the
Securities Act. The Company may, at any time, delay the filing or suspend the
effectiveness of such registration statement, or without suspending such
effectiveness, instruct the Holders not to sell Warrants or Warrant Shares
included in any such registration statement, without penalty or liability to the
Company, if the Company shall have determined upon the advice of counsel that
the Company would be required to disclose any actions taken or proposed to be
taken by the Company in good faith and for valid business reasons, including
without limitation, the acquisition or divestiture of assets, which disclosure
would have a material adverse effect on the Company or such actions (a
"Suspension Period"), by providing the Holders with written notice of such
Suspension Period and the reasons therefor; provided, however, that the
Suspension Periods referred to above, in the aggregate, do not exceed forty-five
(45) days in the aggregate in any twelve-month period. The Company shall use its
best efforts to provide such notice as soon as practicable and in any event
prior to the commencement of such a Suspension Period.
Section 3. Selection of Underwriters. If any method of
distribution selected by the Holders is in the form of an underwritten offering
under such Shelf Registration Statement, the Holders of a majority of the
outstanding Warrant Securities may select one or more other nationally
recognized firms of investment bankers reasonably acceptable to the Company to
act as manager or co-managers to administer the offering. Under no circumstances
shall (i) there be more than two underwritten offerings of Warrant Securities
pursuant to this Exhibit D or (ii) any underwritten offering of Warrant
Securities include less than 25% of the aggregate Warrant Securities owned by
all Holders.
Section 4. Piggyback Registrations.
(a Each time the Company proposes to register any of its
Common Stock under the Securities Act with respect to an offering by the Company
for its own account or for the account of any of its securityholders on any form
(other than (i) a Registration Statement on Form S-4 or S-8 (or any substitute
form that may be adopted by the SEC) or (ii) a Registration
<PAGE>
3
Statement filed in connection with an exchange offer or offering of securities
solely to the Company's existing securityholders) that would legally permit the
inclusion of Warrant Securities, the Company shall give each Holder prompt
written notice thereof as soon as practicable but in no event not less than 30
days prior to the date the registration statement is filed and shall include in
such registration statement all Warrant Securities requested in writing to be
included therein, subject to the limitations contained in Section 4(b) (a
"Piggy-Back Registration"). Subject to Section 4(b), the Company shall include
in such registration statement all such Warrant Securities so requested to be
included therein pursuant to the piggyback rights granted under this Section
4(a). If such registration is pursuant to an underwritten offering, the Company
shall use its reasonable best efforts to cause the managing underwriter or
underwriters of such proposed offering to permit the Warrant Securities
requested to be included in a Piggy-Back Registration to be included, subject to
Section 4(b), on the same terms and conditions as any Common Stock of the
Company or any other securityholder included therein and to permit the sale or
other disposition of such Warrant Securities in accordance with the intended
method of distribution thereof. The Company will pay all registration expenses
(including any described in Section 1) in connection with each registration of
Warrant Securities requested pursuant to this Section 4, and each Holder shall
pay all underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Warrant Securities pursuant
to a registration statement effected pursuant to this Section 4.
No registration effected under this Section 4, and no failure
to effect a registration under this Section 4, shall relieve the Company of its
obligation to effect a registration pursuant to Section 1 hereof.
(b In a registration pursuant to Section 4(a) involving an
underwritten offering, if the managing underwriter or underwriters of such
underwritten offering have informed, in writing, the Company and the Holders
requesting inclusion in such offering that in such underwriter's or
underwriters' opinion the total number of securities which the Company, the
Holders and any other Persons desiring to participate in such registration
intend to include in such offering is such as to adversely affect the success of
such offering, including the price at which such securities can be sold, then
the Company will be required to include in such registration only the amount of
securities which it is so advised should be included in such registration. In
such event: (x) in cases initially involving the registration for sale of
securities for the Company's own account, securities shall be registered in such
offering in the following order of priority: (i) first, the securities which the
Company proposes to register, (ii) second, the securities of other
securityholders of the Company (other than the Permitted Holders) that the
Company proposes to register pursuant to the exercise by such securityholders of
any rights such securityholders may have to request that the Company register
such securities, (iii) third, the Warrant Securities of the Holders and their
assigns and the securities of other securityholders of the Company that the
Company proposes to register; provided, that in the event that the number of
such Warrant Securities and/or securities, as the case may be, exceeds the
amount of securities to be registered, such amount shall be allocated pro rata
among all such requesting holders on the basis of the relative number of Warrant
Securities or securities, as the case may be, each such holder has requested to
be included in such registration and (iv) fourth, the securities of other
Persons entitled to exercise "piggy-back" or "demand" registration rights
pursuant to contractual commitments of the Company (pro rata based on the amount
of securities sought to be registered
<PAGE>
4
by such Persons); and (y) in cases not initially involving the registration for
sale of securities for the Company's own account, securities shall be registered
in such offering as follows: (i) first, the securities of other securityholders
of the Company (other than the Permitted Holders) that the Company proposes to
register pursuant to the exercise by such securityholders of any rights such
securityholders may have to request that the Company register such securities,
(ii) second, the Warrant Securities of the Holders and their assigns and the
securities of other securityholders of the Company that the Company proposes to
register; provided, that in the event that the number of such Warrant Securities
and/or securities, as the case may be, exceeds the amount of securities to be
registered, such amount shall be allocated pro rata among all such requesting
holders on the basis of the relative number of Warrant Securities or securities,
as the case may be, each such holder has requested to be included in such
registration and (iii) third, the securities of other Persons entitled to
exercise "piggy-back" or "demand" registration rights pursuant to contractual
commitments of the Company (pro rata based on the amount of securities sought to
be registered by such Persons) based upon the percentage of the outstanding
securities held by such Person.
(c For purposes of this Section 4, the Company shall enter
into such agreements and take such other actions as the Holders or the
underwriters reasonably request in order to expedite and facilitate the
disposition of Warrant Securities pursuant to this Section 4, including, without
limitation, preparing for, and participating in, such number of "road shows" and
all other customary selling efforts as the underwriters reasonably request in
order to expedite and facilitate such disposition, and generally use its best
efforts to take all other steps necessary to effect the registration and sale of
such Warrant Securities.
In the event of any underwritten offering as to which Holders
of Warrants have participation rights pursuant to this Section 4, the
underwriter(s) or managing underwriter(s) will be chosen by the Company or the
holder of Common Stock initiating the registration, and in no event will the
Holders of Warrants be entitled to select the underwriter(s) or managing
underwriter(s).
Section 5. Tag-Along Rights. (a) So long as the Warrant
Agreement shall remain in effect and the Permitted Holders beneficially own on a
fully diluted basis, directly or indirectly, an aggregate number of shares of
Common Stock equal to not less than forty percent (40%) of the Common Stock
owned, directly or indirectly, by the Permitted Holders on the date hereof, with
respect to any proposed sale to a non-Affiliate (a "Transfer") by the Permitted
Holders (or any one of them) (in such capacity, a "Transferring Shareholder") of
Common Stock permitted hereunder, other than a Public Offering, which, when
added to the aggregate amount of all prior Transfers, is not less than twenty
percent (20%) of the Common Stock owned, directly or indirectly, by the
Permitted Holders on the date hereof, the Transferring Shareholder shall have
the obligation, and each Holder of Warrants and Warrant Shares shall have the
right, to require the proposed transferee to purchase from such Holder (in such
capacity, a "Tagging Shareholder") a number of shares of Warrant Shares up to
the product (rounded up to the nearest whole number) of (i) the quotient
determined by dividing (A) the aggregate number of shares of Common Stock owned
by such Tagging Shareholder by (B) the aggregate number of shares of Common
Stock owned by the Transferring Shareholder and all Tagging Shareholders, and
(ii) the total number of shares of Common Stock proposed to be directly or
indirectly transferred by the Transferring Shareholder to the transferee in the
contemplated Transfer, and at the same price
<PAGE>
5
per share of Common Stock and upon the same terms and conditions (including
without limitation time of payment and form of consideration) as to be paid and
given to the Transferring Shareholder; provided, that upon any Transfer
resulting in a Change of Control, each Holder of Warrants and Warrant Shares
shall have the rights of a Tagging Shareholder pursuant to this Section 5
without regard to the aggregate number of shares theretofore sold by a Permitted
Holder pursuant to any Transfer; provided further, that in order to be entitled
to exercise its right to sell shares of Common Stock to the proposed transferee
pursuant to this Section 5, the Tagging Shareholder must agree to make to the
transferee the same representations, warranties, covenants, indemnities and
agreements as the Transferring Shareholder agrees to make in connection with the
proposed Transfer of the shares of Common Stock of the Transferring Shareholder
insofar as such provisions relate to transfers of securities under the
securities laws, due authorization and other corporate governance matters and
title to the Warrant Shares; provided further, that all representations and
warranties shall be made by the Tagging Shareholder and the Transferring
Shareholder severally and not jointly and that the liability of the Transferring
Shareholder and the Tagging Shareholder (whether pursuant to a representation,
warranty, covenant, indemnification provision or agreement) for liabilities in
respect of the Company shall be evidenced in writings executed by them and the
transferee and shall be borne by each of them on a pro rata basis.
(b The Transferring Shareholder shall give notice to the
Holders of each proposed Transfer giving rise to the rights of the Tagging
Shareholder set forth in the first sentence of Section 5(a) at least 30 days
prior to the proposed consummation of such Transfer, setting forth the number of
shares of Common Stock proposed to be so transferred, the name and address of
the proposed transferee, the proposed amount and form of consideration and other
terms and conditions of payment offered by the proposed transferee, and a
representation that the proposed transferee has been informed of the tag-along
rights provided for in this Section 5 and has agreed to purchase shares of
Common Stock in accordance with the terms hereof. The tag-along rights provided
by this Section 5 must be exercised by the Tagging Shareholder within 10
Business Days following receipt of the notice required by the preceding
sentence, by delivery of a written notice to the Transferring Shareholder
indicating such Tagging Shareholder's desire to exercise its rights and
specifying the number of shares of Common Stock it desires to sell. The
Transferring Shareholder shall be entitled under this Section 5 to Transfer to
the proposed transferee the number of shares of Common Stock equal to the
difference between the number referred to in clause (ii) of paragraph (a) above
and the aggregate number of shares of Common Stock set forth in the written
notice, if any, delivered by the Tagging Shareholder pursuant to the preceding
sentence (up to the maximum number of shares of Common Stock beneficially owned
by such Tagging Shareholder required to be purchased by the proposed transferee
pursuant to the first sentence of Section 5(a)). If the proposed transferee
fails to purchase shares of Common Stock from any Tagging Shareholder that has
properly exercised its tag-along rights under Section 5(a), then the
Transferring Shareholder shall not be permitted to make the proposed Transfer,
and any such attempted Transfer shall be void and of no effect.
If the Tagging Shareholder exercises its rights under Section
5(a), the closing of the purchase of the Common Stock with respect to which such
rights have been exercised shall take place concurrently with the closing of the
sale of the Transferring Shareholder's Common Stock.
<PAGE>
6
Section 6. Drag-Along Rights. So long as the Warrant
Agreement shall remain in effect and the Permitted Holders beneficially own on a
fully diluted basis, directly or indirectly, an aggregate number of shares of
Common Stock not less than forty percent (40%) of the Common Stock equity owned,
directly or indirectly, by the Permitted Holders on the date hereof, if any of
the Permitted Holders receives an offer from a Person (a "Third Party") to
purchase at least 80% of the outstanding shares of Common Stock owned in the
aggregate by the Permitted Holders or a lesser percentage if such shares of
Common Stock represent more than 51% of the outstanding Common Stock of the
Company at such time and such offer is accepted by any such Permitted Holder,
then each Holder hereby agrees that upon request of such Third Party it will
Transfer all Warrant Securities owned by it to such Third Party on the terms of
the offer so accepted by the Permitted Holders, including the same per share
consideration; provided, that the consideration to be received by the Holders
shall be in cash, and in the good faith exercise of its fiduciary duties to the
equityholders of the Company, including the Holders, the Board determines that
the price per share of Common Stock is not less than the fair market value
thereof.
Section 7. Expenses. The Company will pay all expenses
incident to the Company's performance of its obligations hereunder, including
registration and filing fees, fees and expenses of the Company of compliance
with securities or blue sky laws, printing expenses, internal expenses of the
Company (including all salary and expenses of its officers and employees
performing legal or accounting duties), reasonable fees and disbursements of one
firm of attorneys designated pursuant to Section 10 and fees and disbursements
of the Company's independent public accountants. Notwithstanding the foregoing,
the parties hereto hereby agree that the Company shall not be responsible for
the fees and disbursements of any experts or advisors retained by such Holders,
and that in an underwritten offering of Registrable Warrant Shares, the
underwriting discounts and commissions shall be for the account of the Holders.
Section 8. Restrictions on Public Sales by the Company and
Others. If any registration of Warrant Securities shall be in connection with
an underwritten public offering, the Company agrees (subject to exceptions
customary in underwritten public offerings) (i) not to effect any public sale or
distribution of any securities during the 30 days prior to, and during the
90-day period beginning on, the effective date of such registration statement
(except as part of such registration) and (ii) after the date upon which the
Holders receive Warrants representing 5% of the fully diluted Common Stock of
the Company pursuant to Section 4.1 of the Warrant Agreement, that any agreement
entered into after the date of the Warrant Agreement pursuant to which the
Company issues or agrees to issue any privately placed Common Stock shall
contain a provision under which holders of such Common Stock (to the extent that
they own in excess of 5% of the issued and outstanding Common Stock) agree not
to effect any public sale or distribution of any such Common Stock during the
period referred to in the foregoing clause (i).
Section 9. Registration Procedures. If and whenever the
Company is required to use its best efforts to effect or cause the registration
of any Warrant Securities under the Securities Act as provided herein, the
Company will, as expeditiously as possible:
<PAGE>
7
(a use its best efforts to file as promptly as possible a
registration statement on any form for which the Company then qualifies
or which counsel for the Company shall deem appropriate, as the case
may be, and which form shall be available for the sale of the Warrant
Securities in accordance with the intended methods of distribution
thereof, and use its best efforts to cause such registration statement
to become and remain effective as promptly as practicable; provided,
however, that before filing with the SEC a registration statement or
prospectus or any amendments or supplements thereto, the Company will
(i) furnish to one counsel selected by the Holders of a majority of
Warrant Securities, and one counsel selected by the sole underwriter,
managing underwriter or co-managing underwriter, as the case may be, of
the Warrant Securities covered by such registration statement, copies
of all such documents proposed to be filed, which documents will be
subject to the review of each such counsel, and (ii) notify each Holder
and each underwriter, if any, of the Warrant Securities covered by each
registration statement of any stop order issued or threatened by the
SEC and take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered;
(b prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period specified in Section 1 above (but
not before the expiration of the 90-day period referred to in Section
4(3) of the Securities and Exchange Act of 1934 and Rule 174
thereunder, if applicable), and comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such registration statement during such period in accordance
with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c furnish to each Holder and each underwriter, if any, of
the Warrant Securities covered by such registration statement such
number of copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits thereto) and
the prospectus included in such registration statement (including each
preliminary prospectus), in conformity with the requirements of the
Securities Act, and such other documents as any such Holder or
underwriter may reasonably request in order to facilitate the
disposition of the Warrant Securities owned by such Holder;
(d use its best efforts to register or qualify such Warrant
Securities under such other securities or blue sky laws of such United
States jurisdictions as any Holder and each underwriter, if any, of the
Warrant Securities covered by such registration statement reasonably
requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder and each such
underwriter, if any, to consummate the disposition in such
jurisdictions of the Warrant Securities owned by such Holder or
underwritten by such underwriter; provided, however, that the Company
will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but
for this paragraph (d), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
<PAGE>
8
(e use its best efforts to cause the Warrant Securities
covered by such registration statement to be registered with or
approved by such other United States governmental agencies or
authorities as may be necessary by virtue of the business and
operations of the Company to enable the Holder or Holders and each
underwriter, if any, thereof to consummate the disposition of such
Warrant Securities; subject, however, to the proviso set forth in
paragraph (d) above;
(f immediately notify each Holder and each underwriter, if
any, of the Warrant Securities, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event if as a result of such event the prospectus
included in such registration statement contains an untrue statement of
a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
and the Company will promptly prepare and furnish to each such Holder
and underwriter a supplement or amendment to such prospectus so that,
as thereafter delivered to the purchasers of such Warrant Securities,
such prospectus will not contain an untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(g enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other
customary actions as the Holders of a majority of the Warrant
Securities being sold or each underwriter, if any, retained by such
Holders reasonably request in order to expedite or facilitate the
disposition of such Warrant Securities, including customary
indemnification;
(h make available for inspection by any Holder of Warrant
Securities covered by such registration statement, each underwriter, if
any, participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by any
such Holder or underwriter (collectively, the "Inspectors"), all
pertinent financial and other records, pertinent corporate documents
and properties of the Company and its subsidiaries as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's and its subsidiaries' officers,
directors and employees to supply all information and respond to all
inquiries reasonably requested by any such Inspector in connection with
such registration statement (provided that the Inspectors enter into
appropriate confidentiality agreements with the Company and agree to be
bound by confidentiality agreements to which the Company is subject);
(i in the case of an underwritten offering only, obtain a
"cold comfort" letter from the Company's independent public accountants
in customary form and covering such matters of the type customarily
covered by "cold comfort" letters as the Holders of a majority of the
Warrant Securities being sold and each underwriter, if any, reasonably
request;
(j otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably
<PAGE>
9
practicable, an earnings statement covering a period of at least 12
months, beginning with the first month after the effective date of the
registration statement (as the term "effective date" is defined in
Rule 158(c) under the Securities Act), which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder.
The Company recognizes that by undertaking to use its best
efforts to effect registration of any Warrant Securities that it may incur
substantial accounting, legal and other expenses and may be required (by the
SEC, each underwriter, if any, or otherwise) to provide information (which could
be of interest to the Company's competitors, customers and suppliers) regarding
its business, compensation of executives and other matters which it might
otherwise not publicly disclose.
The Company may require each Holder as to which any
registration is being effected to furnish to the Company such information
regarding such Holder and the distribution of such Warrant Securities that is
necessary for the filing of the Shelf Registration as the Company may from time
to time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in subdivision (f)
hereof, such Holder will forthwith discontinue disposition of Warrant Securities
pursuant to the registration statement covering such Warrant Securities until
such Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by subdivision (f) hereof, and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense) all copies, other
than permanent file copies, then in such Holder's possession of the prospectus
covering such Warrant Securities current at the time of receipt of such notice.
Section 10. Indemnification. (a) Indemnification by the
Company. In the event of any registration of any securities of the Company under
the Securities Act, the Company and its subsidiaries, jointly and severally,
will, and hereby do, indemnify and hold harmless, to the full extent permitted
by law, each of the Holders of any Warrant Securities covered by such
registration statement, its directors and officers, general partners, limited
partners and managing directors (and directors, officers, general partners,
limited partners and managing directors thereof), each such person who
participates as an underwriter in the offering or sale of such securities and
each other person, if any, who controls, is controlled by or is under common
control with such Holder or any such underwriter within the meaning of the
Securities Act, against any and all losses, claims, damages or liabilities,
joint or several, and reasonable expenses (including any amounts paid in any
settlement effected with the Company's consent) to which such Holder, any such
director or officer or general or limited partner or managing director or any
such underwriter or controlling person may become subject under the Securities
Act, state securities or blue sky laws, common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) or expenses arise out of or are based upon (a) any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities Act,
any preliminary, final or summary prospectus contained therein, or any amendment
or supplement thereto or (b) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the
<PAGE>
10
Company and its subsidiaries, jointly and severally, will reimburse such Holder
and each such director, officer, general partner, limited partner, managing
director, underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending such
loss, claim, liability, action or proceeding; provided, however, that the
Company and its subsidiaries shall not be liable in any such case to any
indemnified person to the extent that any such loss, claim, damage, liability
(or action or proceeding in respect thereof) or expense arises out of or is
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement or amendment or supplement
thereto or in any such preliminary, final or summary prospectus in reliance upon
and in conformity with written information furnished to the Company through an
instrument duly executed by any indemnified person specifically stating that it
is for use in the preparation thereof; and provided further, however, that the
Company will not be liable to any person who participates as an underwriter in
the offering or sale of Warrant Securities or any other person, if any, who
controls, is controlled by or is under common control with such underwriter
within the meaning of the Securities Act, under the indemnity agreement in this
Section 10 with respect to any preliminary prospectus as amended or supplemented
as the case may be, to the extent that any such loss, claim, damage or liability
of such underwriter or such other person results from the fact that such
underwriter sold Warrant Securities to a person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the final
prospectus or of the final prospectus as then amended or supplemented (including
any documents incorporated by reference therein), whichever is most recent, if
the Company has previously furnished copies thereof to such underwriter and such
final prospectus as then amended or supplemented has corrected any such
misstatement or omission. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Holder or any such
director, officer, general partner, limited partner, managing director,
underwriter or controlling person and shall survive the transfer of such
securities by such Holder. To the extent the indemnity provided in this Section
10 relates to persons participating as an underwriter in an offering or sale of
securities, such indemnity shall be superseded by any indemnification agreement
entered into in connection with the registration, offering and sale of the
Warrant Securities.
(b Indemnification by the Holders. The Company may require,
as a condition to including any Warrant Securities in any registration statement
filed in accordance with Section 1 hereof, that the Company shall have received
an undertaking reasonably satisfactory to it from the Holders, to severally
indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 10) the Company and its shareholders,
affiliates, directors, officers and controlling persons and all other
prospective sellers and their respective directors, officers, general and
limited partners, managing directors and their respective controlling persons
with respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement, if such statement
or alleged statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company or its
representatives through an instrument duly executed by or on behalf of such
Holder specifically stating that it is for use in the preparation of such
registration statement, preliminary, final or summary prospectus or amendment or
supplement, or a document incorporated by reference into any of the foregoing.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the
<PAGE>
11
Company or any of the Holders of any of their respective directors, officers,
general or limited partners, managing directors or controlling persons and shall
survive the transfer of such securities by such Holder.
(c Notice of Claims, etc. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 10, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, promptly give written
notice to the latter of the commencement of such action; provided, however, that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subsections of this Section 10, except to the extent the indemnifying party is
prejudiced thereby. In case any such claim or action is brought against an
indemnified party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties exists in
respect of such claim, the indemnifying party will be entitled to participate in
and, jointly with any other indemnifying party similarly notified, to assume the
defense thereof, to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party for
any legal or other expenses subsequently incurred by the latter in connection
with the defense thereof, unless in such indemnified party's reasonable judgment
a conflict of interest between such indemnified and indemnifying parties arises
in respect of such claim after the assumption of the defense thereof, and the
indemnifying party will not be subject to any liability for any settlement made
without its consent (which consent shall not be unreasonably withheld). No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation. An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by an indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest exists
between such indemnified party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of such additional counsel or counsels.
(d Contribution. If the indemnification provided for in this
Section 10 is unavailable or insufficient to hold harmless an indemnified party
under Section 10(a) or (b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and such Holder on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or to any
Holders' information supplied by such Holder on the other, the intent of the
parties and their relative knowledge, access to information and
<PAGE>
12
opportunity to correct or prevent such untrue statement or omission. The Company
and the Holders agree that it would not be just and equitable if contributions
pursuant to this Section 10(d) were to be determined by pro rata allocation
(even if the Holders were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 10(d) shall be deemed to include, for
purposes of this Section 10(d), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 10(d), no Holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Warrant Securities sold by such Holder to any purchaser
exceeds the amount of any damages which such Holder has otherwise paid or become
liable to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e Other Indemnification. Indemnification similar to that
specified in the preceding subsections of this Section 10 (with appropriate
modifications) shall be given by the Company and each Holder with respect to any
required registration or other qualification of securities under any Federal or
state law or regulation of governmental authority other than the Securities Act.
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,280
<SECURITIES> 0
<RECEIVABLES> 29,095
<ALLOWANCES> 291
<INVENTORY> 65,838
<CURRENT-ASSETS> 107,628
<PP&E> 66,321
<DEPRECIATION> 9,363
<TOTAL-ASSETS> 300,020
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<BONDS> 100,000
0
11,450
<COMMON> 50
<OTHER-SE> (1,976)
<TOTAL-LIABILITY-AND-EQUITY> 300,020
<SALES> 49,613
<TOTAL-REVENUES> 49,613
<CGS> 36,422
<TOTAL-COSTS> 44,716
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<INTEREST-EXPENSE> 4,816
<INCOME-PRETAX> 130
<INCOME-TAX> 69
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