-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wvs1Y16JqARzj8Pkm56rixORoTJAoDVYtT6R12v/JPwl2r6yAapmbf35H/nZ+0Gt wgDV+CwD5BBcm8AfVpX1sQ== 0000075042-98-000006.txt : 19980723 0000075042-98-000006.hdr.sgml : 19980723 ACCESSION NUMBER: 0000075042-98-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980704 FILED AS OF DATE: 19980722 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OSHKOSH B GOSH INC CENTRAL INDEX KEY: 0000075042 STANDARD INDUSTRIAL CLASSIFICATION: APPAREL & OTHER FINISHED PRODS OF FABRICS & SIMILAR MATERIAL [2300] IRS NUMBER: 390519915 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13365 FILM NUMBER: 98669455 BUSINESS ADDRESS: STREET 1: 112 OTTER AVE STREET 2: P O BOX 300 CITY: OSHKOSH STATE: WI ZIP: 54901 BUSINESS PHONE: 4142318800 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 4, 1998 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 0-13365 OshKosh B'Gosh, Inc. (Exact name of registrant as specified in charter) Delaware 39-0519915 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 112 Otter Avenue, Oshkosh, Wisconsin 54901 (Address of principal executive offices) (Zip Code) (920) 231-8800 (Registrant's telephone number) Effective January 1, 1998, the Company changed its fiscal year from a calendar year to a 52/53-week year ending on the Saturday closest to December 31 (January 2, 1999 for fiscal 1998). 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 July 4, 1998, there were outstanding 8,439,579 shares of Class A Common Stock and 1,176,607 shares of Class B Common Stock. FORM 10-Q OSHKOSH B'GOSH, INC. AND SUBSIDIARIES INDEX Page Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets-July 4, 1998 and December 31, 1997 3 Unaudited Condensed Consolidated Statements of Income-Three Month and Six Month Periods Ended July 4, 1998 and June 30, 1997 4 Unaudited Condensed Consolidated Statements of Cash Flow-Three Month and Six Month Periods Ended July 4, 1998 and June 30, 1997 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 7 Part II. Other Information 12 Signatures 13 OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Dollars in thousands) July 4, December 31, 1998 1997 * (unaudited) Assets Current assets Cash and cash equivalents $ 810 $ 13,779 Short-term investments -- 8,700 Accounts receivable 28,831 23,278 Inventories 75,772 68,226 Prepaid expenses & other current assets 3,767 1,265 Deferred income taxes 15,100 15,800 Total current assets 124,280 131,048 Property, plant & equipment 67,640 62,192 Less accumulated depreciation and amortization 32,389 29,237 Net property, plant & equipment 35,251 32,955 Non-current deferred income taxes 5,100 5,500 Other assets 5,285 5,285 Total assets $169,916 $174,788 Liabilities and shareholders'equity Current liabilities Accounts payable $ 3,621 $ 10,273 Accrued expenses 41,871 38,013 Total current liabilities 45,492 48,286 Employee benefit plan liabilities 13,962 13,345 Shareholders' equity Preferred stock -- -- Common stock: Class A 84 87 Class B 12 12 Retained earnings 110,366 113,058 Total shareholders' equity 110,462 113,157 Total liabilities and shareholders' equity $169,916 $174,788 *Condensed from audited financial statements. See notes to condensed consolidated financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income (In thousands, except per share amounts) (Unaudited) Three Month Period Ended Six Month Period Ended July 4, June 30, July 4, June 30, 1998 1997 1998 1997 Net sales $ 82,288 $ 71,144 $184,823 $168,507 Cost of products sold 49,512 47,362 114,658 112,431 Gross profit 32,776 23,782 70,165 56,076 Selling, general and administrative expenses 29,700 26,292 60,362 53,659 Royalty income, net (1,542) (1,206) (3,796) (3,012) Operating income (loss) 4,618 (1,304) 13,599 5,429 Other income (expense): Interest expense (87) (97) (172) (129) Interest income 259 672 497 1,065 Miscellaneous (23) (17) (74) (145) Other income -- net 149 558 251 791 Income (loss) before taxes 4,767 (746) 13,850 6,220 Income taxes (benefit) 1,936 (300) 5,678 2,490 Net income (loss) $ 2,831 $ (446) $ 8,172 $ 3,730 Net income (loss) per common share Basic $ 0.29 $ (0.04) $ 0.83 $ 0.32 Diluted $ 0.29 $ (0.04) $ 0.82 $ 0.32 Weighted average common shares outstanding Basic 9,754 11,686 9,810 11,731 Diluted (including share equivalents) 9,902 11,716 9,943 11,747 Cash dividends per common share Class A $ 0.07 $ 0.07 $ 0.14 $ 0.14 Class B $ 0.06 $ 0.06 $ 0.12 $ 0.12 See notes to condensed consolidated financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flow (Dollars in thousands) (Unaudited) Six Month Period Ended July 4, June 30, 1998 1997 Cash flows from operating activities Net income for the period $ 8,172 $ 3,730 Depreciation 4,081 4,465 Provision for deferred income taxes 1,100 2,200 Items in income not affecting cash 1,096 173 Changes in current assets (15,601) 2,249 Changes in current liabilities (2,470) (5,005) Net cash provided by (used in) operating activities (3,622) 7,812 Cash flows from investing activities Additions to property, plant and equipment (6,672) (2,965) Proceeds from disposal of assets 157 1,765 Sale (purchase) of short-term investments, net 8,700 (1,630) Other (341) (1,958) Net cash provided by (used in) investing activities 1,844 (4,788) Cash flows from financing activities Cash dividends paid (1,347) (1,619) Common shares issued, net 493 -- Repurchase of common shares (10,337) (1,691) Net cash used in financing activities (11,191) (3,310) Net decrease in cash and cash equivalents $ (12,969) $ (286) See notes to condensed consolidated financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) Note 1. Basis of Preparation The condensed financial statements included herein have been prepared by the Company without audit. However, the foregoing statements contain all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of Company management, necessary to present fairly the financial position as of July 4, 1998, the results of operations for the three-month and six-month periods ended July 4, 1998 and June 30, 1997, and cash flows for the six-month periods ended July 4, 1998 and June 30, 1997. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's 1997 Annual Report. Effective January 1, 1998, the Company changed its fiscal year from a calendar year to a 52/53-week year ending on the Saturday closest to December 31 (January 2, 1999 for fiscal 1998). Each quarter will generally consist of a 13-week period ending on a Saturday. Due to the conversion to a 52/53-week year, the first quarter of 1998 consisted of 13 weeks and 3 days. Accordingly, the six-month period ended July 4, 1998 was four days longer than the comparative period in fiscal 1997. Note 2. Inventories A summary of inventories follows: July 4, December 31, 1998 1997 (Dollars in thousands) Finished goods $ 64,290 $ 49,400 Work in process 8,914 14,782 Raw materials 2,568 4,044 Total $ 75,772 $ 68,226 The replacement cost of inventory exceeds the above LIFO costs by $14,498 and $14,138 at July 4, 1998 and December 31, 1997, respectively. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, selected Company income statement data expressed as a percentage of net sales. As a Percentage of Net Sales for the Three Month Period Ended Six Month Period Ended July 4, 1998 June 30, 1997 July 4, 1998 June 30, 1997 Net sales 100.0% 100.0% 100.0% 100.0% Cost of products sold 60.2% 66.6% 62.0% 66.7% Gross profit 39.8% 33.4% 38.0% 33.3% Selling, general and administrative expenses 36.1% 37.0% 32.7% 31.8% Royalty income, net (1.9%) (1.8%) (2.1%) (1.7%) Operating income (loss) 5.6% (1.8%) 7.4% 3.2% Other income, net 0.2% 0.8% 0.1% 0.5% Income (loss) before income taxes 5.8% (1.0%) 7.5% 3.7% Income taxes 2.4% (0.4%) 3.1% 1.5% Net income (loss) 3.4% (0.6%) 4.4% 2.2% Net Sales Consolidated net sales for the three month period ended July 4, 1998 were $82.3 million, a $11.2 million increase (15.8%) over 1997 second quarter net sales of $71.1 million. Consolidated net sales for the six month period ended July 4, 1998 were $184.8 million, a $16.3 million increase (9.7%) from net sales of $168.5 million for the first six months of 1997. The Company's net sales for the three month and six month periods ended July 4, 1998 and June 30, 1997 are summarized as follows: Net Sales (in millions) Domestic Wholesale Retail International Total Three month period ended: July 4, 1998 $ 41.7 $ 39.6 $ 1.0 $ 82.3 June 30, 1997 34.0 35.7 1.4 71.1 Increase (decrease) 7.7 3.9 (0.4) 11.2 Percent increase (decrease) 22.6% 10.9% (28.6%) 15.8% Six month period ended: July 4, 1998 $105.8 $ 76.2 $ 2.8 $ 184.8 June 30, 1997 96.3 68.5 3.7 168.5 Increase (decrease) 9.5 7.7 (0.9) 16.3 Percent increase (decrease) 9.9% 11.2% (24.3%) 9.7% The Company's domestic wholesale unit shipments for the three month and six month periods ended July 4, 1998 were up 16.7% and 9.5%, respectively, over the corresponding three month and six month periods of 1997. The second quarter 1998 increase in unit shipments and sales dollars were the result of increased demand for both the Company's fashion and classics product offerings. Unit shipments for the first six months of 1998 were also favorably impacted by the Company's change in its fiscal year to a 52/53-week period ending on the Saturday closest to December 31. As a result, the Company's first six months of 1998 ended July 4, which resulted in an additional two days of wholesale shipments as compared to the six months ended June 30, 1997. The Company currently anticipates a unit sales increase in the 4% to 6% range for the second half of 1998 as compared to 1997. The Company's second quarter 1998 retail sales increase resulted from a combination of an 8.2% comparable store sales gain and sales volume from stores opened subsequent to June 30, 1997. Second quarter 1998 comparable store sales were favorably impacted by a later Easter selling season (during April) as compared to 1997 (during March). The Company's increase in retail sales for the first six months of 1998 resulted from a combination of a 9.3% comparable store sales gain and sales volume from newly opened stores. Comparable store sales for 1998 were also favorably impacted by increased sales of Genuine Girl and Genuine Blues branded products for the entire period. These bigger sizes were introduced during the first quarter of 1997. For the remainder of 1998, the Company currently anticipates comparable store sales gains in the middle single digit range. At July 4, 1998 the Company operated 121 domestic OshKosh retail stores, including 113 outlet stores and 8 showcase stores. During the second quarter of 1998, the Company opened 3 outlet stores and closed 2 existing stores. At June 30, 1997, the Company operated 114 domestic OshKosh retail stores, including 108 outlet stores and 6 showcase stores. Current Company plans for the remainder of 1998 call for the addition of 5 retail stores. Gross Profit The Company's gross profit margin as a percent of net sales improved to 39.8% in the second quarter of 1998, compared to 33.4% in the second quarter of 1997. For the six month period ended July 4, 1998, gross profit margin as a percent of net sales was 38.0%, compared to 33.3% for the first six months of 1997. This gross profit margin improvement was due primarily to continued implementation and execution of the Company's sourcing strategy, improved operating efficiencies at the Company's domestic sewing facilities and the Company's continuing focus on product design and development activities. The Company's current 1998 sourcing plan indicates that approximately 41% of units will be produced at the Company's domestic facilities as compared to 47% in 1997. Selling, General, and Administrative Expenses (S,G&A) S,G&A expenses for the three month and six month periods ended July 4, 1998 increased $3.4 million and $6.7 million over the three and six month periods ended June 30, 1997, respectively. As a percentage of net sales, S,G,&A expenses were 36.1% and 32.7% for the three month and six month periods ended July 4, 1998 as compared to 37.0% and 31.8% in the comparable periods of 1997. The increase in S,G,&A expenses relates primarily to a combination of continued expansion of the Company's retail operations, increased volume of wholesale unit shipments, and expansion of the Company's brand enhancing activities. Royalty Income The Company licenses the use of its trade name to selected licensees in the U.S. and in foreign countries. Royalty income for the three month and six month periods ended July 4, 1998 increased $.3 million (27.9%) and $.8 million (26.0%) over the three and six month periods ended June 30, 1997, respectively. These increases resulted primarily from increased royalty income generated from domestic licensees. As a result of the Company's decisions to not renew its domestic outerwear license (which expired in May 1998) and its Japanese license arrangement (which ended in March 1998), the Company currently anticipates its royalty income for the third quarter of 1998 to be down from the third quarter of 1997. Operating Income As a result of the factors described above, the Company's operating income (loss) for the three month and six month periods ended July 4, 1998 increased to $4.6 million and $13.6 million as compared to ($1.3) million and $5.4 million for the comparable periods in 1997. Income Taxes The Company's effective tax rate for the three month and six month periods ended July 4, 1998 was approximately 41% as compared to 40% in 1997. Net Income Per Common Share The computation of net income per common share for the second quarter and first six months of 1998 reflected a lower number of weighted average outstanding shares as compared to the same periods in 1997, primarily as a result of the Company's Dutch auction tender offer which was completed in August 1997. SEASONALITY OF BUSINESS The Company's business is seasonal, with highest sales and income in the third quarter, which is the Company's peak wholesale shipping period and a major retail selling season at its retail outlet stores. The Company's second quarter sales and income are the lowest, both because of relatively low domestic wholesale unit shipments and relatively modest retail store sales during this period. The Company anticipates this seasonality trend to continue to impact 1998 quarterly sales and income. Second quarter 1998 operating results are not necessarily indicative of anticipated quarterly results throughout the balance of the year. FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY At July 4, 1998 the Company's cash, cash equivalents and short- term investments were $.8 million, compared to $22.5 million at December 31, 1997 and $42.6 million at June 30, 1997. Net working capital at July 4, 1998 was $78.8 million as compared to $82.8 million at the end of 1997 and $106.3 million at June 30, 1997. The Company's current ratio was 2.7 to 1 at July 4, 1998, and at the end of 1997, compared to 3.8 to 1 at June 30, 1997. The reduction in cash, cash equivalents and short-term investments, net working capital, and current ratio at July 4, 1998 compared to June 30, 1997 is attributable primarily to the Company's stock repurchases, offset in part by cash generated from operations. Accounts receivable at July 4, 1998 were $28.8 million compared to $20.9 million at June 30, 1997. This increase in accounts receivable related primarily to a combination of increased wholesale sales resulting from the second quarter of 1998 ending on July 4, 1998, along with much higher sales of the Company's classics line in June 1998. Inventories at July 4, 1998 were $75.8 million, compared to $60.8 million at June 30, 1997. Management believes that at July 4, 1998 inventory levels are generally appropriate for anticipated business activities for the remainder of 1998. The Company's capital expenditures for the first six months of 1998 of $6.7 million compares to $3.0 million for the first six months of 1997. This increase is primarily due to the Company's upgrade of its distribution systems and Whitehouse, Tennessee distribution facilities. Capital expenditures for all of 1998 are currently planned to be in the range of $13.0 million, including approximately $8.0 million related to the distribution system and facilities project. On August 25, 1997, the Company's Board of Directors authorized a 500,000 share repurchase program of the Company's Class A common stock. During the second quarter of 1998, the Company repurchased 272,300 shares of its Class A common stock under this program for approximately $10.3 million. Through July 4, 1998, the Company has repurchased a total of 413,800 shares of its Class A common stock under this repurchase program for approximately $14.9 million. At July 4, 1998 and June 30, 1997 the Company had no outstanding long-term debt. The Company believes that its cash and cash equivalents at July 4, 1998, credit facilities, along with cash generated from operations, will be sufficient to finance the Company's seasonal working capital needs and planned capital expenditures for the remainder of 1998. OTHER FACTORS THAT MAY AFFECT FUTURE PERFORMANCE This Form 10-Q contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are based on current assumptions and expectations that involve risks and uncertainties. Actual results may differ materially. The Company's future results of operations and financial position can be influenced by such factors as the level of consumer spending for apparel, particularly in the children's wear segment, overall consumer acceptance of the Company's product styling, the financial strength of the retail industry, including, but not limited to, business conditions and the general economy, competitive factors, risk of non-payment of accounts receivable, failure of Company suppliers to timely deliver needed raw materials, as well as risk associated with foreign operations. In addition, the inability to ship Company products within agreed timeframes due to unanticipated manufacturing delays or the failure of Company contractors to deliver products within scheduled timeframes, are risk factors in ongoing business. As a part of the Company's product sourcing strategy, it routinely contracts for apparel products produced by contractors in Asia. If the current financial and related difficulties were to adversely impact the Company's contractors in the Asian region, it could disrupt the supply of products contracted for by the Company. The forward-looking statements included herein are only made as of the date of this report. The Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. The registrant's annual meeting of stockholders was held on May 1, 1998 (the "1998 Annual Meeting"). A majority of the shares of each class of the registrant's Common Stock, represented in person or by proxy, was required to constitute a quorum for action to be taken by such class. A total of 7,863,890 shares of Class A Common Stock and 992,175 shares of Class B Common Stock were represented, in person or by proxy, at the 1998 Annual Meeting, constituting a quorum of each class. With respect to the proposal to amend stock dividend provisions of the Company's Certificate of Incorporation, the following votes were cast in favor of and withheld: Votes in favor Votes withheld Broker non-votes Class B Common Stock 967,316 50 24,809 With respect to the election of Class A Directors, the following votes were cast in favor of and withheld with respect to the following management nominees: Nominee Votes in favor Votes withheld Broker non-votes Orren J. Bradley 7,785,788 78,102 0 Jerry M. Hiegel 7,785,288 78,602 0 With respect to the election of Class B Directors, the following votes were cast in favor of and withheld with respect to the following management nominees: Nominee Votes in favor Votes withheld Broker non-votes Douglas W. Hyde 990,915 1,260 0 Michael D. Wachtel 990,915 1,260 0 David L. Omachinski 990,915 1,260 0 Steve R. Duback 990,915 1,260 0 Shirley A. Dawe 990,915 1,260 0 William F. Wyman 990,915 1,260 0 Stig A. Kry 990,915 1,260 0 Directors are elected by a plurality of the votes of the shares of the class entitled to elect such directors, present in person or represented by proxy at the meeting. "Plurality" means that the individuals who receive the largest number of votes are elected as directors up to the maximum number of directors to be chosen at the meeting. There were no nominees for director other than management's nominees identified above. Accordingly, each such nominee received a plurality of the votes cast by shares of the class indicated and, therefore, was elected. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3.1 Certificate of Incorporation of OshKosh B'Gosh, Inc. as restated, May 7, 1998. (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OSHKOSH B'GOSH, INC. Date: 7/22/98 /S/DOUGLAS W. HYDE Chairman of the Board, President Chief Executive Officer and Director Date: 7/22/98 /S/DAVID L. OMACHINSKI Vice President-Finance, Treasurer Chief Financial Officer and Director EX-27 2
5 6-MOS JAN-02-1999 JUL-04-1998 810,000 0 33,829,000 4,998,000 75,772,000 124,280,000 67,640,000 32,389,000 169,916,000 45,492,000 0 0 0 96,000 110,366,000 169,916,000 184,823,000 184,823,000 114,658,000 60,362,000 74,000 0 172,000 13,850,000 5,678,000 8,172,000 0 0 0 8,172,000 0.83 0.82
EX-3 3 Composite Showing All Amendments through 5/7/98 RESTATED CERTIFICATE OF INCORPORATION OF OSHKOSH B'GOSH, INC. The following Restated Certificate of Incorporation of OSHKOSH B'GOSH, INC. was duly adopted by vote of the stockholders pursuant to the authority and provisions of Sections 242 and 245 of the Delaware General Corporation Law to supersede and take the place of the existing Certificate of Incorporation of the Corporation and all amendments thereto. The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of Delaware on March 1, 1929 and the name under which the Corporation was originally incorporated is OSHKOSH OVERALL COMPANY. The text of the Certificate of Incorporation as amended and supplemented heretofore is further amended hereby to read as herein set forth in full: FIRST: The name of the Corporation is OSHKOSH B'GOSH, INC. SECOND: The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, and County of New Castle, Delaware 19801. The name of the Corporation's registered agent at such address is The Corporation Trust Company. THIRD: The nature of the business or purposes 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: A. STOCK. The total number of shares of stock which the Corporation shall have the authority to issue is Thirty-Four Million Seven Hundred Fifty Thousand (34,750,000) Shares itemized by classes as follows: 1. Thirty-three Million Seven Hundred Fifty Thousand (33,750,000) shares of Common Stock, one cent ($.01) par value, divided into the following classes: (a) Thirty Million (30,000,000) Shares of Class A Common Stock (the "Class A Common Stock"); and (b) Three Million Seven Hundred Fifty Thousand (3,750,000) Shares of Class B Common Stock (the "Class B Common Stock") (The Class A Common Stock and the Class B Common Stock are hereinafter collectively referred to as the "Common Stock"). 2. One Million (1,000,000) Shares of Preferred Stock, one cent ($.01) par value (the "Preferred Stock"). B. THE COMMON STOCK 1. Whenever any Dividend shall be paid by the Corporation on the Common Stock, such Dividend shall be paid so that the Dividend per share on the Class A Common Stock shall equal one hundred fifteen percent (115%) of the Dividend per share on the Class B Common Stock. As used herein, the term "Dividend" shall mean any dividend paid by the Corporation in cash or other assets except to the extent a dividend is payable in shares of any class of the capital stock of this Corporation or options, warrants or rights to acquire, or securities convertible into or exercisable for, such shares (a "Stock Dividend"). In calculating the amount of any Dividend payable on the Class A Common Stock, such Dividend shall be rounded to the closest one quarter of one cent ($.0025). No Stock Dividends or other distributions shall be declared or paid by the Corporation on the Common Stock in shares of Common Stock or options, warrants or rights to acquire, or securities convertible into or exchangeable for, shares of Common Stock, except Stock Dividends or other distribution payable to all holders of the holders of Common Stock ratably according to the number of shares of Common Stock held by them, in shares of Class A Common Stock (or options, warrants or rights to acquire, or securities convertible into or exchangeable for, shares of Class A Common Stock) to holders of that class of stock and shares of Class B Common Stock (or options, warrants or rights to acquire, or securities convertible into or exchangeable for, shares of Class B Common Stock) to holders of that class of stock. If any Stock Dividends or other distributions shall be declared or paid by the Corporation on the Common Stock in any securities other than shares of Common Stock or options, warrants or rights to acquire, or securities convertible into or exchangeable for, shares of Common Stock, such Stock Dividends or other distributions shall be payable to all holders of Common Stock ratably according to the number of shares of Common Stock held by them, without any distinction between holders of Class A Common Stock and holders of Class B Common Stock. 2. The holders of Class A Common Stock shall not be entitled to any vote on any matters except: (a) as may be required by law; and (b) that the Class A Common Stock shall have one vote for each share for the election and removal of the Class A Directors voting as a separate class. The "Class A Directors" shall be that number of Directors which constitutes twenty five percent (25%) of the authorized number of members of the Board of Directors, including, for all purposes, the Class A Directors and any Directors which are entitled to be elected by the holders of any Preferred Stock. If twenty five percent (25%) of the authorized number of Directors is not a whole number, then the number of Class A Directors shall be rounded to the closest whole number of Directors, but not less than one (1). In determining the closest whole number, any number which includes a fraction equal to .5 shall be deemed to be the next highest whole number. 3. The holders of Class B Common Stock shall be entitled to one vote for each share of Class B Common Stock on all matters except the election of Class A Directors. 4. In case of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of Class A Common Stock shall be entitled to receive out of the assets of the Corporation in money or money's worth the sum of Seven and 50/100 Dollars ($7.50) per share, (the "First Common Payment"), subject to adjustment in the event of any subdivisions, combinations, stock splits or stock dividends involving shares of the Class A Common Stock, before any of such assets shall be paid or distributed to holders of Class B Common Stock, and if the assets of the Corporation shall be insufficient to pay the holders of all of the Class A Common Stock then outstanding share of the Class A Common Stock shall share ratably in such assets in proportion to the amounts which would be payable with respect to Class A Common Stock if the First Common Payment was paid in full. 5. After payment in full of the First Common Payment, the holders of Class B Common Stock shall be entitled to receive out of the remaining assets of the Corporation in money or money's worth the sum of Seven and 50/100 Dollars ($7.50) per share (the "Second Common Payment"), subject to adjustment in the event of any subdivisions, combinations, stock splits or stock dividends involving shares of the Class B Common Stock, before any of such remaining assets shall be paid or distributed to holders of the Class A Common Stock, and if the remaining assets of the Corporation shall be insufficient to pay the holders of all of the Class B Common Stock then outstanding the entire Second Common Payment, the holders of each outstanding share of the Class B Common Stock shall share ratably in such assets in proportion to the amounts which would be payable with respect to Class B Common Stock if the Second Common Payment was paid in full. 6. After payment in full of the First Common Payment and the Second Common Payment, any further payments on the liquidation, dissolution or winding up of the business of the Corporation shall be on an equal basis as to all of the shares of Common Stock then outstanding. 7. Except as to the matters expressly set forth above, the Class A Common Stock and the Class B Common Stock shall be identical in all respects. 8. Conversion. (a) Each holder of shares of Class B Common Stock shall have the right, exercisable at any time, and from time to time, at the holder's option, to convert each share of Class B Common Stock so held into one (1) fully paid and nonassessable share of Class A Common Stock. This right shall be exercised by the surrender of the certificate(s) representing the share(s) of Class B Common Stock to be converted to the agent then maintained by the Corporation for the registration or transfer of shares of Class B Common Stock (the "Conversion Agent") (or, if no Conversion Agent has been appointed or is then acting, to the principal executive offices of the Corporation (to the attention of the Secretary of the Corporation)), at any time during normal business hours, accompanied by written notice of such holder's election to convert and (if so required by the Corporation or the Conversion Agent) by instruments of transfer, in form satisfactory to the Corporation and the Conversion Agent, duly executed by the holder or by his duly authorized attorney, and by transfer tax stamps or funds therefor if required pursuant to paragraph (e) of this subsection 8. (b) As promptly as practicable after the surrender for conversion of a certificate(s) representing shares of Class B Common Stock in the manner provided in paragraph (a) of this subsection 8, and the payment in cash of any amount required by the provisions of paragraphs (a) and (e) of this subsection 8, the Corporation shall deliver or cause to be delivered, at the office of the Conversion Agent (or, if no Conversion Agent has been appointed or is acting, at its principal executive offices) to the holder of the surrendered certificate(s) (or upon the written order of the holder), a new certificate or certificates representing the number of shares of Class A Common Stock issuable upon such conversion, issued in such name or names as such holder may direct. Except as otherwise provided herein, a conversion shall be deemed to have been made immediately prior to the close of business on the date of the surrender of the certificate representing shares of Class B Common Stock. All rights of the holder of the surrendered shares, as a holder of such shares, shall cease at the time the conversion is deemed to occur, and the person or persons in whose name or names the certificate or certificates representing the shares of Class A Common Stock are to be issued shall be treated for all purposes as having become the record holder or holders of such shares of Class A Common Stock at the time the conversion is deemed to occur. If a surrender occurs on a date when the stock transfer books of the Corporation are closed, the conversion shall not be deemed to have occurred until immediately prior to the close of business on the next succeeding day on which such stock transfer books are open. (c) No adjustments in respect of dividends, voting rights or liquidation preferences of the Class A Common Stock or the Class B Common Stock shall be made upon the conversion of any shares of the Class B Common Stock into shares of Class A Common Stock; provided, however, that if a share of Class B Common Stock shall be converted subsequent to the record date for the payment of a dividend or other distribution on shares of Common Stock but prior to such payment, the registered holder of such share of Class B Common Stock at the close of business on such record date shall be entitled, notwithstanding the conversion, to receive the dividend or other distribution payable with respect to such share of Class B Common Stock on the date set for payment of such dividend or other distribution (and the person or persons in whose name or names the certificate or certificates representing the share of Class A Common Stock are to be issued in connection with such conversion shall not be entitled to any dividend or other distribution payable with respect to the share of Class A Common Stock received in such conversion). (d) The Corporation covenants that it will at all times reserve and keep available, solely for the purpose of issuance upon the conversion of outstanding shares of Class B Common Stock into shares of Class A Common Stock, such number of shares of Class A Common Stock as shall be issuable upon the conversion of all outstanding shares of Class B Common Stock; provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of the conversion of the shares of Class B Common Stock by delivery of purchased shares of Class A Common Stock or by delivery of shares of Class A Common Stock which are held in the treasury of the Corporation. The Corporation covenants that all shares of Class A Common Stock which shall be issued upon conversion of the shares of the Class B Common Stock, will, upon issue, be fully paid and nonassessable and not subject to any preemptive rights, except as otherwise required by applicable law. (e) The issuance of certificates for shares of Class A Common Stock upon conversion of shares of Class B Common Stock shall be made without charge for any stamp or similar tax in respect to such issuance. Notwithstanding the foregoing, however, if any certificate for shares of Class A Common Stock is to be issued in a name other than that of the holder of the shares of Class B Common Stock to be converted therefor, such holder shall pay to the Corporation the amount of any tax which may be payable in respect of any transfer involved in the issuance of the shares of Class A Common Stock or shall establish to the satisfaction of the Corporation that such tax has been paid. (f) Notwithstanding any other provisions in this article FOURTH, when the number of outstanding shares of Class B Common Stock falls below two percent (2%) of the aggregate number of shares of Class A Common Stock and Class B Common Stock then outstanding, (i) all of the outstanding shares of Class A Common Stock and Class B Common Stock shall be deemed, without further act on anyone's part, to be immediately and automatically converted into an equal number of shares of Common Stock, with all shares of such Common Stock having equal rights as to dividends, voting rights and liquidation, (ii) stock certificates formerly representing outstanding shares of Class A Common Stock and Class B Common Stock shall thereupon and thereafter be deemed to represent a like number of shares of Common Stock, and (iii) subsections 1, 2, 3, 4, 5, 6, 7 and 8(a), (b), (c), (d) and (e) of this Section B of Article FOURTH of this Restated Certificate of Incorporation shall be void and of no effect. 9. The rights of the Common Stock under this Section B of this Article Fourth of this Restate Certificate of Incorporation are subject to the provisions below concerning the Preferred Stock. B. THE PREFERRED STOCK The Preferred Stock may be issued in series, and authority is vested in the Board of Directors, from time to time, to establish and designate series and to fix the variations in the powers, preferences, rights, qualifications, limitations or restrictions of any series of the Preferred Stock, but only with respect to: 1. the dividend rate or rates and the preferences, if any, over any other class or series (or of any other class or series over such class or series) with respect to dividends, the terms and conditions upon which and the periods in respect of which dividends shall be payable, whether and upon what conditions such dividends shall be cumulative and, if cumulative, the date or dates from which dividends shall accumulate; 2. the price and terms and conditions on which shares may be redeemed; 3. the amount payable upon shares in the event of voluntary or involuntary liquidation; 4. sinking fund provisions for the redemption or purchase of shares; 5. the terms and conditions on which shares may be converted into shares of any other class or series of the same or any other class of stock of the Corporation, if the shares of any series are issued with the privilege of conversion; and 6. voting rights, if any Except as to the matters expressly set forth above, all series of the Preferred Stock shall have the same preferences, limitations and relative rights and shall rank equally, share ratably and be identical in all respects as to all matters. All shares of any one series of the Preferred Stock shall be alike in every particular. D. GENERAL The number of authorized shares of any class of the capital stock of the Corporation may be increased or decreased (but not below the number of shares of such class then outstanding) by the affirmative vote of the holders of a majority of the outstanding Class B Common Stock. FIFTH: The Corporation is to have perpetual existence. SIXTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the bylaws of the Corporation. SEVENTH: Meetings of stockholders may be held within or without the State of Delaware, as the bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the bylaws of the Corporation. Elections of Directors need not be by written ballot unless the bylaws of the Corporation shall so provide. EIGHTH: The holders of any stock of the Corporation, or the holders or any class or series of class thereof, shall have no preemptive rights. NINTH: The Corporation reserves the right 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. TENTH: Any merger or consolidation of the Corporation with or into any other corporation; or any sale, lease, exchange or other disposition of all or substantially all of the assets of the Corporation to or with any other corporation, person or entity, shall require the affirmative vote of the holders of at least two-thirds of the outstanding shares of the Class B Common Stock and at least two-thirds of the outstanding shares of any other class of the capital stock of the Corporation issued and outstanding and entitled to vote thereon. This Article TENTH may not be amended or rescinded except by the affirmative vote of the holders of at least two- thirds of the outstanding shares of Class B Common Stock and at least two-thirds of the outstanding shares of any other class of the capital stock of the Corporation issued and outstanding and entitled to vote thereon, at any regular or special meeting of the stockholders if notice of the proposed alteration or amendment be contained in the notice of the meeting. ELEVENTH: No director of this corporation shall be personally liable to the corporation or its stockholders for monetary damage for breach of his 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 Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. -----END PRIVACY-ENHANCED MESSAGE-----