0000950149-95-000454.txt : 19950809 0000950149-95-000454.hdr.sgml : 19950809 ACCESSION NUMBER: 0000950149-95-000454 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950808 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEI ELECTRONICS INC CENTRAL INDEX KEY: 0000851478 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 710455756 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17885 FILM NUMBER: 95559711 BUSINESS ADDRESS: STREET 1: ONE POST ST STREET 2: STE 2500 CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 4159564477 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED JULY 1, 1995 1 UNITED STATES 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 July 1, 1995 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 0-17885 B E I E L E C T R O N I C S, I N C. (Exact name of Registrant as specified in its charter) Delaware 71-0455756 -------------------------------- ------------------------------------ (State of incorporation) (I.R.S. Employer Identification No.) One Post Street, Suite 2500 San Francisco, California 94104 ---------------------------------------- (Address of principal executive offices) (415) 956-4477 ------------------------------- (Registrant's telephone number) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock: $.001 Par Value, 6,778,504 shares as of July 13, 1995 Page 1 of 16 2 BEI ELECTRONICS , INC. AND SUBSIDIARIES INDEX
PART 1. FINANCIAL INFORMATION PAGE --------------------- ---- Item 1. Financial Statements Condensed Consolidated Balance Sheets--July 1, 1995 and October 1, 1994 3 Condensed Consolidated Statements of Operations--Quarter and Nine 4 Months ended July 1, 1995 and July 2, 1994 Condensed Consolidated Statements of Cash Flows--Nine Months ended July 5 1, 1995 and July 2, 1994 Notes to Condensed Consolidated Financial Statements--July 1, 1995 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of 11 Operations PART II. OTHER INFORMATION ----------------- Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Amended By-Laws of the Company as of May 25, 1995 15 Fourth Amendment to Credit Agreement 15 Financial Data Schedule 15 (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the quarter ended July 1, 1995. SIGNATURES 16 ----------
Page 2 of 16 3 BEI ELECTRONICS, INC. AND SUBSIDIARIES PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS
July 1, October 1, 1995 1994 (Unaudited) (Note) (dollars in thousands) -------------------------------------------------------------------------------------------------------------- ASSETS Cash and cash equivalents $8,945 $4,197 Trade receivables - net 19,813 18,503 Inventories - net (See Note B) 26,860 33,185 Other current assets 3,210 4,903 -------- -------- Total current assets 58,828 60,788 Property, plant and equipment - net 27,993 29,270 Acquired Technology (See Note D) 8,168 5,621 Goodwill 4,906 5,156 Other assets - net 10,446 11,597 -------- -------- $110,341 $112,432 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Trade accounts payable $4,700 $7,826 Accrued expenses and other liabilities 14,802 11,951 Federal and state income taxes 86 -- Current portion of long-term debt 294 822 -------- -------- Total current liabilities 19,882 20,599 Long-term debt, less current portion 30,191 30,421 Deferred income taxes and other liabilities 3,065 3,583 Stockholders' equity less treasury stock 57,203 57,829 -------- -------- $110,341 $112,432 ======== ========
See notes to condensed consolidated financial statements. Note: The balance sheet at October 1, 1994 has been derived from the audited consolidated balance sheet at that date. Page 3 of 16 4 BEI ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Quarter Ended Nine Months Ended ---------------------------------------------------- July 1, July 2, July 1, July, 2 1995 1994 1995 1994 (dollars in thousands except per share amounts) ------------------------------------------------------------------------------------------------------------- Net sales $36,634 $41,699 $109,863 $99,401 Cost of sales 25,776 30,309 80,403 69,914 ---------------------------------------------------- 10,858 11,390 29,460 29,487 Selling, general and administrative expenses 8,335 8,768 25,260 26,653 Research, development and related expenses 1,273 1,812 3,601 5,137 ---------------------------------------------------- Income (loss) from operations 1,250 810 599 (2,303) Interest expense 612 557 1,890 1,622 Other income 141 29 813 837 ---------------------------------------------------- Income (loss) before income taxes 779 282 (478) (3,088) Provision (benefit) for income taxes 376 105 (34) (1,221) ---------------------------------------------------- Net income (loss) $403 $177 ($444) ($1,867) ==================================================== Earnings (loss) per common share and common share equivalents $0.06 $0.03 ($0.07) ($0.28) =================================================== Weighted average shares outstanding 7,017 6,822 6,746 6,694 =================================================== Dividends per common share $0.02 $0.02 $0.06 $0.06 ===================================================
See notes to condensed consolidated financial statements. Page 4 of 16 5 BEI ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended ------------------------------------- July 1, July, 2 1995 1994 (dollars in thousands) ------------------------------------------------------------------------------------------------------------- Net cash provided (used) by operating activities $8,998 ($1,379) Cash flows from investing activities: Purchases of property, plant and equipment (2,970) (8,210) (Decrease) Increase in other assets 8 (1,139) ------ ------- Net cash used in investing activities (2,962) (9,349) Cash flows from financing activities: Borrowings from line of credit 6,000 -- Payments on line of credit (6,000) -- Proceeds from long term debt -- 12,200 Payments on long term debt (928) (1,750) Proceeds from issuance of common stock 178 289 Purchase of treasury stock (133) (171) Payment of cash dividends (405) (399) ------ ------- Net cash (used) provided by financing activities (1,288) 10,169 ------ ------- Net increase (decrease) in cash and cash equivalents 4,748 (559) Cash and cash equivalents at beginning of period 4,197 1,572 ------ ------- Cash and cash equivalents at end of period $8,945 $1,013 ====== =======
See notes to condensed consolidated financial statements. Page 5 of 16 6 BEI ELECTRONICS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) July 1, 1995 NOTE A -- BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending September 30, 1995. For further information, refer to the consolidated financial statements and footnotes thereto in the Company's annual report on Form 10-K for the year ended October 1, 1994. NOTE B--INVENTORIES
July 1, October 1, 1995 1994 (dollars in thousands) ------------------------------------------------------------------------------------------------------------- Finished products $1,573 $2,515 Work in process 5,674 5,570 Materials 9,486 9,047 Costs incurred under long-term contracts, including U.S. Government contracts 29,454 36,054 Unapplied progress payments (19,327) (20,001) ------- ------- Net inventories $26,860 $33,185 ======== =======
Page 6 of 16 7 NOTE C--EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENTS
Quarter Ended Nine Months Ended ----------------------------------------------- July 1, July, 2 July 1, July 2, 1995 1994 1995 1994 (dollars in thousands except per share amounts) ------------------------------------------------------------------------------------------------------------- Weighted average shares outstanding 6,796 6,685 6,746 6,694 Net effect of dilutive stock options based on the treasury stock method 221 137 -- -- ----------------------------------------------- Total weighted average shares outstanding 7,017 6,822 6,746 6,694 =============================================== Net income (loss) $403 $177 ($444) ($1,867) =============================================== Earnings (loss) per common share and common share equivalents $0.06 $0.03 ($0.07) ($0.28) ===============================================
Earnings per common share and common share equivalents are computed by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. Loss per common share is based on the weighted average number of common shares only, as any assumption of conversion of options would be antidilutive. NOTE D--CONTINGENCIES AND LITIGATION In connection with the acquisition of assets from Systron Donner Corporation during fiscal 1990, BEI Systron Donner Company assumed an obligation to pay former shareholders of General Precision Industries (GPI) $4.3 million if certain levels of confirmed orders and shipments are achieved for products developed using technology acquired from GPI in 1986 under a license agreement which expires in 2003. The technology acquired was assigned a value of $ 5.6 million for the purchase price allocation for the acquisition. In September of 1991, the Licensor of the patent on which the Company's quartz technology is based advised the Company that royalties in excess of the amounts previously paid by the Company were due. The amount of royalties involved was approximately $400,000. The Company advised the Licensor that based on its understanding of the license agreement no additional amounts were due. The Licensor alleged that nonpayment of the royalties due would give the Licensor the right to terminate the license agreement. The parties were unable to resolve these differences. Accordingly, the Company elected to exercise the provision of the license agreement which required arbitration of any disputes between the parties to the agreement. Page 7 of 16 8 In June of 1993, the Company and the Licensor filed briefs with the arbitration Panel. The Licensor alleged in its brief that the amount of royalties, milestone payments and accrued interest due as of September 30, 1992 was approximately $10.0 million (including the $4.3 million described above), and asked the arbitration Panel to rule that the license could be terminated based on noncompliance by the Company with the terms of the license agreement. The Company has asked the arbitration Panel to rule that the amounts of the royalties paid by the Company had been properly determined by the Company, that the original license agreement should be reformed to reduce the royalties due on future sales as a result of failure by the Licensor to disclose certain matters which significantly impacted the Company's timely ability to employ the licensed patent on production units and that the license was not subject to termination. The arbitration process is ongoing. The arbitration Panel bifurcated the issues in the arbitration, and issued an interim ruling in February 1995. In that interim ruling, which will become final at the close of the arbitration, the Panel concluded that the license agreement was not subject to termination, that non-recurring engineering revenues were not royalty-bearing, and that $1 million of the $4.3 million discussed above is due only if certain conditions are met in the future. The Panel also concluded that the Company is entitled to ownership of an accelerometer that the former Shareholders developed. Payment of the $3.3 million balance will depend on the Panel's ruling on the Company's request for an equitable offset and on other factors. The second phase of the arbitration will involve quantification of additional royalty amounts due for unit sales of product using the acquired technology, and will also involve other matters including the Company's request for an equitable offset and parties' respective claims for attorneys' fees. Management has vigorously defended its rights under the license agreement, and while the final outcome of this matter cannot be determined with certainty, management believes, taking all factors into account and after consultation with legal counsel, that this matter will not result in a material adverse impact on the financial position of the Company. During a vendor survey conducted by BEI Defense Systems Company in the first quarter of fiscal 1994, a component used in the HYDRA 70 rocket motor was identified as being produced by a process that differed from the one that the vendor had certified. Subsequent to the survey and BEI's evaluation of alternative acceptable processes, BEI's customer, the U.S. Government, was notified of the potentially non-conforming material. The customer, as required by applicable contract provisions, notified Justice Department and Defense Department investigators. Management also conducted an internal investigation to determine the facts and appropriateness of follow-up actions. Due to these investigations, delivery of certain completed rockets motors was delayed beginning in late December 1993. Subsequently, the customer agreed to accept the completed but undelivered rocket motors and the Company agreed to replace the affected parts under warranty. During the fourth quarter of fiscal 1994, the Company began rework under warranty and substantial deliveries of rocket motors were completed prior to year end. Page 8 of 16 9 For previously delivered rocket motors, the customer has conducted extensive tests on the potentially non-conforming part to determine whether required levels of performance and reliability are achieved by the affected part. On the basis of Government test results disclosed to the Company during June 1995, there is no evidence that the non-conforming materials as delivered by the Company are inferior to materials produced by the approved process. The report concluded that the materials will perform acceptably and that there is no need to restrict the service life of the rockets as manufactured by the Company. The outcome of the Justice Department portion of the investigation is not presently determinable. No provision has been made in the accompanying financial statements for any liability that may result from this matter. In October 1993, the State of California filed a first amended complaint against a division of the Company and fifty-two other defendants. The complaint seeks recovery of response costs incurred by the State at a waste oil recycling facility in Commerce, California (the "Site"). The Company has joined a group of defendants who are potentially parties for the Site (the "PRP Group"). The PRP Group is proceeding with analysis of past work performed at the Site and preparing a Remedial Action Plan for the Site. Currently, the estimated cost of the remedial actions proposed for the Site range from $500,000 to $1,200,000. The PRP Group is also conducting settlement negotiations with the State. Since filing its First Amended Complaint, the State has claimed that its past costs associated with the Site are $3,100,000. The division of the Company against which the claim is asserted was acquired from Systron Donner Corporation in 1990. In connection with that acquisition, Systron Donner agreed to indemnify the Company against any claims, damages and expenses in excess of $100,000 arising in connection with certain environmental matters. Management believes such indemnification will encompass this claim. While the outcome of this matter cannot be determined with certainty, management believes that the ultimate resolution will not have a material adverse impact on the financial position of the Company. In October 1993, CooperSurgical, Inc., a subsidiary of The Cooper Companies, filed a complaint in the Chancery Division of the Superior Court of New Jersey for unspecified damages alleging unfair competition due to actions by BEI Medical Systems, Richard Turner, its president, a former employee of The Cooper Companies, and others. On May 16, 1994, the court granted a partial summary judgment in favor of the plaintiff and issued an injunction against the defendants restraining them from selling certain products until June 20, 1996. In September 1994, BEI Medical Systems filed a motion to vacate the May 16, 1994 order. On November 28, 1994, the court vacated the restraint order. Management has vigorously defended its rights in this action and believes after discussion with legal counsel that the CooperSurgical claims are exaggerated. Expert witnesses for BEI have prepared a formal response to the CooperSurgical damage claims which was submitted in February 1995. BEI's experts stated that if CooperSurgical were entitled to damages, those Page 9 of 16 10 damages would total less than $100,000, and would be more than offset by BEI Medical Systems' counterclaim against CooperSurgical. A trial date of November 13, 1995 has been set. While the outcome of this matter cannot be determined at this time, management believes, taking known factors into account and after consultation with legal counsel, that this matter will not result in a material adverse impact on the financial position of the Company. The Company has pending various legal actions arising in the normal course of business. None of these legal actions are expected to have a material effect on the Company's operating results or financial condition. Page 10 of 16 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth, for the fiscal periods indicated, the percentage of net sales represented by certain items in the Company's Consolidated Statements of Operations.
Quarter Ended Nine Months Ended ---------------------------------------------------- July 1, July 2, July 1, July 2, 1995 1994 1995 1994 -------------------------------------------------------------------------------------------------------- Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales 70.4 72.7 73.2 70.3 ----- ----- ----- ----- Gross profit 29.6 27.3 26.8 29.7 Operating expenses Selling, general and administrative expenses 22.7 21.0 23.0 26.8 Research, development and related expenses 3.5 4.3 3.3 5.2 ----- ----- ----- ----- Income (loss) from operations 3.4 1.9 0.5 (2.3) Interest expense 1.7 1.3 1.6 1.6 Other income 0.4 0.1 0.7 0.8 ----- ----- ----- ----- Income (loss) before income taxes 2.1 0.7 (0.4) (3.1) Provision (credit) for income taxes 1.0 0.3 0.0 (1.2) ----- ----- ----- ----- Net income (loss) 1.1% 0.4% (0.4)% (1.9)% ===== ===== ===== =====
QUARTER ENDED JULY 1, 1995 AND JULY 2, 1994 Net sales for the quarter ended July 1, 1995 decreased $5.1 million or 12.1% from the same period in fiscal 1994. Defense Systems segment net sales decreased $8.8 million or 45.2% in the third quarter of fiscal 1995 compared to the same period in the prior year. The decrease was primarily related to the higher than normal shipments in the third quarter of fiscal 1994 which resulted from shipments which had been on hold during the first half of fiscal 1994. In January 1995, the Company was advised that the U.S. Army's fiscal 1996 to fiscal 1998 HYDRA 70 Systems procurement had been awarded to a competing bidder. The award has not yet been finalized due to ongoing protests by the Company's joint bidder, Alliant Techsystems, and another unsuccessful bidder. Shortly before filing this report, the Company received preliminary information from Alliant Techsystems indicating that its protest of the Hydra 70 procurement would be upheld. The information available was not sufficient to enable BEI management to determine what effect this ruling will have on the Company's HYDRA 70 business. The HYDRA 70 Systems contract represented greater than 90 percent of Defense Systems segment revenue during fiscal 1994 and a similar Page 11 of 16 12 level through the third quarter of fiscal 1995. The existing HYDRA 70 backlog of approximately $39 million which is scheduled for shipments into fiscal 1996 represents a similar portion of the total Defense Systems backlog. As the HYDRA 70 Systems contract nears completion in fiscal 1996, revenues of the Defense Systems segment can be expected to decline substantially unless there is a change in the Army's announced plan. Sensors & Systems segment sales volume increased $3.7 million or 18.6% from the third quarter of 1994. The higher net sales were due primarily to increases in several commercial product lines, specifically industrial and automotive products and the timing of deliveries under government contracts. Consolidated cost of sales as a percentage of net sales was lower in the third quarter of fiscal 1995 versus the comparable period of fiscal 1994. Defense Systems segment volume was only half that of the prior year causing its higher cost of sales percentage to less significantly impact the consolidated results. Offsetting this, cost of sales as a percentage of net sales in the Sensors and Systems segment experienced an increase over the prior year due primarily to increased costs on certain government funded development contracts. The Company's gross profit margins from sales to the U.S. Government for military and space products are generally lower than gross profit margins from sales of commercial and industrial products. The margins on contracts performed by the Defense Systems segment vary considerably. As a result, profitability from Defense Systems' revenue has varied significantly depending on the contract mix in any period. The existing backlog in the Defense Systems segment has gross margins that are very low by historical standards, but are similar to fiscal 1994 gross margins on similar Defense Systems products. Management is continuing measures to reduce costs for the HYDRA 70 program. Downward pressure on gross profit margins will continue, especially for military contracts. Selling, general and administrative expenses as a percentage of net sales increased in the third quarter of fiscal 1995 versus the comparable period of fiscal 1994, due to reduced sales volume. However, total selling, general and administrative expenses declined $0.4 million or approximately 5% primarily due to Corporate expense reductions partially offset by spending in the Sensors and Systems segment to support sales growth. Research, development and related expenses as a percentage of net sales for the third quarter of fiscal 1995 showed a decrease from the same period in fiscal 1994 due to cutbacks in Company funded efforts on products with government and defense applications, as well as elimination of a separate Corporate Research Development function. Page 12 of 16 13 NINE MONTHS ENDED JULY 1, 1995 AND JULY 2, 1994 Net sales for the first nine months of fiscal 1995 increased $10.5 million or 10.5% from the prior year. Sensors and Systems segment net sales for the nine month period ended July 1, 1995 increased $7.3 million or 12.4% from the first nine months of fiscal 1994. The increased net sales were due primarily to the growth of sales in commercial product lines, specifically industrial and automotive products. In addition, there were gains in governmental contract sales, reflecting timing of shipments. Defense Systems segment net sales for the nine month period ended July 1, 1995 increased $2.8 million or 8.4% from the first nine months of fiscal 1994. The increase was caused principally by the volume of unit deliveries of HYDRA 70 products. Consolidated cost of sales as a percentage of net sales increased in the first nine months of fiscal 1995 from the comparable period of fiscal 1994. Defense Systems segment sales were up 8.4% from the prior year causing its higher cost of sales percentage to impact the consolidated results. Additionally, cost of sales as a percentage of net sales in the Sensors and Systems segment experienced an increase over the prior year due primarily to increased costs on certain government funded contracts. Medical Systems segment cost of sales as a percentage of net sales was essentially unchanged. Selling, general and administrative expenses as a percentage of net sales decreased in the first nine months of fiscal 1995 versus the comparable period of fiscal 1994, due primarily to the increased volume of total net sales and due to reduced levels of spending, primarily in the Defense Systems segment, with further reductions in the Medical Systems segment and Corporate. Spending in the Defense Systems segment was cut back due to the anticipated decline in future HYDRA 70 systems activity. Medical Systems segment cut back spending due to continuing delays in new product introductions and to reduce operating losses. Sensors and Systems segment increased spending at those commercial operations experiencing volume growth. Research, development and related expenses for the first nine months of fiscal 1995 decreased as a percentage of net sales from the same period in fiscal 1994 primarily due to the elimination of a separate Corporate Research and Development function and additional focus of commercial product development efforts in the Sensors and Systems segment, eliminating some programs while increasing emphasis on automotive sensors. Interest expense increased from the first nine months of fiscal 1994 due mainly to a higher borrowing base resulting from use of the credit line and the issuance of $11.2 million of Senior Notes during November 1994. Page 13 of 16 14 Other income decreased slightly for the nine months ended July 1, 1995 versus the comparable period of fiscal 1994 due primarily to a decrease in royalty income from a technology licensing agreement offset partially by increased interest income on invested cash balances. Income taxes vary from the expected rate due primarily to the effects of state income taxes. LIQUIDITY AND CAPITAL RESOURCES During the first nine months of fiscal 1995, total cash provided by operations was $9.0 million, including the net loss of $0.4 million. Sources of cash from operations primarily consisted of a $6.3 million reduction in net inventories due to the resumption of normal progress payments for materials used in the HYDRA 70 program in addition to the positive impact of non-cash charges to income from depreciation and amortization of $6.3 million. Cash flows from operations were reduced as a result of a decrease in trade accounts payable of $3.1 million and an increase in net trade receivables of $1.3 million. Cash used for investing activities of $3.0 million consisted primarily of capital expenditures in the first half of the fiscal year. In management's opinion, the level of capital expenditures for fiscal 1995 is consistent with the current volume of business. Cash flows for financing activities included the short term borrowing and repayment of $6.0 million on the Company's line of credit. The Company and the Bank have agreed to renew the bank credit line effective June 1, 1995 for one year under similar terms. The Company had no material capital commitments at July 1, 1995. In 1991, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("FAS") No. 107 "Disclosures About Fair Value of Financial Instruments." The Company will be required to adopt FAS 107 in fiscal year 1996. Accordingly, the Company plans to adopt FAS 107 when required, and will disclose the fair value for all of its financial instruments, if practicable. Based on the financial condition of the Company at July 1, 1995, management believes that the existing cash balances, cash generated from operations, and the available line of credit will be sufficient to meet the Company's planned needs for the foreseeable future. If the Company requires additional capital, it anticipates that such capital will be provided by bank or other borrowings, although there can be no assurances that funds will be available on terms as favorable as those applicable to the Company's currently outstanding debt. EFFECTS OF INFLATION Management believes that, for the periods presented, inflation has not had a material effect on the Company's operations. Page 14 of 16 15 BEI ELECTRONICS, INC. AND SUBSIDIARIES PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Listing of Exhibits 3.1 By-Laws of BEI Electronics, Inc. (as amended through May 25, 1995). 10.1 Fourth Amendment to Credit Agreement, dated June 1, 1995, between BEI Electronics, Inc., BEI Sensors & Systems Company, Inc., Defense Systems Company, Inc., and BEI Medical Systems Company, Inc. and Canadian Imperial Bank of Commerce. 27 Financial Data Schedule. Page 15 of 16 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized in the City of San Francisco, County of San Francisco, State of California, on August 8, 1995. BEI ELECTRONICS, INC. By: /s/ Robert R. Corr ----------------------------------------- Robert R. Corr Treasurer and Controller (Principal Accounting Officer) Page 16 of 16 17 EXHIBIT INDEX Ex. 3.1 By-Laws of BEI Electronics, Inc. Ex. 10.1 Fourth Amendment to Credit Agreement Ex. 27 Financial Data Schedule EX-3.1 2 BY-LAWS OF BEI 1 Exhibit 3.1 BY-LAWS OF BEI ELECTRONICS, INC. (AS AMENDED THROUGH MAY 25, 1995) 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I -- Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1. Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 2. Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II -- Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 3. Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE III -- Stockholders' Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 4. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 5. Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 6. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 7. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 8. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 9. Adjournment and Notice of Adjourned Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 10. Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 11. Beneficial Owners of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 12. List of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 13. Action without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 14. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE IV -- Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 15. Number and Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 16. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 17. Classes of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 18. Newly Created Directorships and Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 19. Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 20. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 21. Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 22. Quorum and Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 23. Action without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 24. Fees and Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 25. Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 26. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 ARTICLE V -- Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 27. Officers Designated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
i. 3 TABLE OF CONTENTS (CONTINUED)
PAGE ---- Section 28. Tenure and Duties of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 29. Delegation of Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 30. Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 31. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE VI -- Execution of Corporate Instruments and Voting of Securities Owned by the Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 32. Execution of Corporate Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 33. Voting of Securities Owned by the Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE VII -- Shares of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 34. Form and Execution of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 35. Lost Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 36. Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 37. Fixing Record Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 38. Registered Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE VIII -- Other Securities of the Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 39. Execution of Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE IX -- Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 40. Declaration of Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 41. Dividend Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE X -- Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 42. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE XI -- Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 43. Indemnification of Directors, Officers, Employees and Other Agents . . . . . . . . . . . . . . 18
ii. 4 TABLE OF CONTENTS (CONTINUED)
PAGE ---- ARTICLE XII -- Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 44. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE XIII -- Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 45. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE XIV -- Loans to Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 46. Loans to Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
iii. 5 BY-LAWS OF BEI ELECTRONICS, INC. (A DELAWARE CORPORATION) ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE. The registered office of the corporation in the State of Delaware shall be in the City of Dover, County of Kent. (Del. Code Ann., tit. 8, Section 131) SECTION 2. OTHER OFFICES. The corporation shall also have and maintain an office or principal place of business in San Francisco, California, at such place as may be fixed by the Board of Directors, and 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. (Del. Code Ann., tit. 8, Section 122(8)) ARTICLE II CORPORATE SEAL SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die bearing the name of the corporation and the inscription, "Corporate Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE III STOCKHOLDERS' MEETINGS SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the corporation shall be held at such place, either within or without the State of Delaware, as may be designated from time to time by the Board of Directors, or, if not so designated, then at the office of the corporation required to be maintained pursuant to Section 2 hereof. (Del. Code Ann., tit. 8, Section 211(a)) SECTION 5. ANNUAL MEETING. (a) The annual meeting of the stockholders of the corporation, for the purpose of election of Directors and for such other business as may lawfully 1. 6 come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors. (b) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be: (A) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (B) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (C) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation not less than one hundred twenty (120) calendar days in advance of the date of the corporation's proxy statement released to stockholders in connection with the previous year's annual meeting of stockholders; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) days from the date contemplated at the time of the previous year's proxy statement, notice by the stockholder to be timely must be so received a reasonable time before the solicitation is made. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the corporation's books, of the stockholder proposing such business, (iii) the class and number of shares of the corporation which are beneficially owned by the stockholder, (iv) any material interest of the stockholder in such business and (v) any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, in his capacity as a proponent to a stockholder proposal. Notwithstanding the foregoing, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholders' meeting, stockholders must provide notice as required by the regulations promulgated under the Securities and Exchange Act of 1934, as amended. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this paragraph (b). The chairman of the annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting and in accordance with the provisions of this paragraph (b), and, if he should so determine, he shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted. (Del. Code Ann., tit. 8: Paragraph 211(b)) (c) Only persons who are nominated in accordance with the procedures set forth in this paragraph (c) shall be eligible for election as Directors. Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors or by any stockholder of the corporation entitled to vote in the election of Directors at the meeting who complies with the notice procedures set forth in this paragraph (c). Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing 2. 7 to the Secretary of the corporation in accordance with the provisions of paragraph (b) of this Section 5. Such stockholder's notice shall set forth (i) as to each person, if any, whom the stockholder proposes to nominate for election or re-election as a Director: (A) the name, age, business address and residence address of such person, (B) the principal occupation or employment of such person, (C) the class and number of shares of the corporation which are beneficially owned by such person, (D) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, and (E) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such person's written consent to being named in the proxy statement, if any, as a nominee and to serving as a Director if elected); and (ii) as to such stockholder giving notice, the information required to be provided pursuant to paragraph (b) of this Section 5. At the request of the Board of Directors, any person nominated by a stockholder for election as a Director shall furnish to the Secretary of the corporation that information required to be set forth in the stockholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a Director of the corporation unless nominated in accordance with the procedures set forth in this paragraph (c). The chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and if he should so determine, he shall so declare at the meeting and the defective nomination shall be disregarded. (Del. Code Ann., tit. 8, Sections 212, 214). SECTION 6. SPECIAL MEETINGS. (a) Special meetings of the stockholders of the corporation may be called, for any purpose or purposes, by (i) the Chairman of the Board, (ii) the President, (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption) or (iv) by the holders of shares entitled to cast not less than ten percent (10%) of the votes at the meeting, and shall be held at such place, on such date, and at such time as they or he shall fix. (b) If a special meeting is called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the Chairman of the Board, the President, any Vice President, or the Secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The officer receiving the request shall cause notice to be promptly given to the stockholders entitled to vote, in accordance with the provisions of Section 7 of these Bylaws, that a meeting will be held not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after the receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph (b) shall be 3. 8 construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held. SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or the Certificate of Incorporation, written notice of each meeting of stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, such notice to specify the place, date and hour and purpose or purposes of the meeting. Notice of the time, place and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof, either before or after such meeting, and will be waived by any stockholder by his attendance thereat in person or by proxy, except when the stockholder 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. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given. (Del. Code Ann., tit. 8, Sections 222, 229) SECTION 8. QUORUM. At all meetings of stockholders, except where otherwise provided by statute or by the Certificate of Incorporation, or by these Bylaws, the presence, in person or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. Any shares, the voting of which at said meeting has been enjoined, or which for any reason cannot be lawfully voted at such meeting, shall not be counted to determine a quorum at such meeting. In the absence of a quorum any meeting of stockholders may be adjourned, from time to time, either by the chairman of the meeting or by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, all action taken by the holders of a majority of the voting power represented at any meeting at which a quorum is present shall be valid and binding upon the corporation; provided, however, that 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. Where a separate vote by a class or classes is required, a majority of the outstanding shares of such class or classes, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter and the affirmative vote of the majority (plurality, in the case of the election of Directors) of shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class. (Del. Code Ann., tit. 8, Section 216) SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares represented thereat. When a meeting is adjourned to another time or place, notice need not be given of the 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 4. 9 been transacted at the original meeting. If the adjournment is for more than thirty (30) 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. (Del. Code Ann., tit. 8, Section 222(c)) SECTION 10. VOTING RIGHTS. For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the corporation on the record date, as provided in Section 12 of these Bylaws, shall be entitled to vote at any meeting of stockholders. Except as may be otherwise provided in the Certificate of Incorporation or these Bylaws, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. Every person entitled to vote or execute consents shall have the right to do so either in person or by an agent or agents authorized by a written proxy executed by such person or his duly authorized agent, which proxy shall be filed with the Secretary at or before the meeting at which it is to be used. An agent so appointed need not be a stockholder. No proxy shall be voted after three (3) years from its date of creation unless the proxy provides for a longer period. All elections of Directors shall be by written ballot, unless otherwise provided in the Certificate of Incorporation. (Del. Code Ann., tit. 8, Sections 211(e), 212(b)) SECTION 11. BENEFICIAL OWNERS OF STOCK. (a) If shares or other securities having voting power stand of record in the names of two (2) or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two (2) or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the majority so voting binds all; (c) if more than one (1) votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or may apply to the Delaware Court of Chancery for relief as provided in the General Corporation Law of Delaware, Section 217(b). If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of this subsection (c) shall be a majority or even-split in interest. (Del. Code Ann., tit. 8, Section 217(b)) (b) Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the corporation he has expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. (Del. Code Ann., tit. 8, Section 217(a)). SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, 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 5. 10 business hours, for a period of at least ten (10) 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 specified, at the place where the meeting is to be held. The list shall be produced and kept at the time and place of meeting during the whole time thereof, and may be inspected by any stockholder who is present. (Del. Code Ann., tit. 8, Section 219(a)) SECTION 13. ACTION WITHOUT MEETING. (a) Any action required by statute to be taken at any annual or special meeting of the stockholders, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, are 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. (b) Every written consent shall bear the date of signature of each stockholder who signs the consent, and no written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated consent delivered to the Corporation in the manner herein required, written consents signed by a sufficient number of stockholders to take action are 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 a corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. (Del. Code Ann., tit. 8, Section 228) (c) 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. If the action which is consented to is such as would have required the filing of a certificate under any section of the General corporation Law of Delaware if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the General Corporation Law of Delaware. SECTION 14. ORGANIZATION. (a) At every meeting of stockholders, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or, if the President is absent, the most senior Vice President present, or in the absence of any such officer, a chairman of the meeting chosen by a majority in interest of the stockholders entitled to vote, present in person or by proxy, shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary directed to do so by the President, shall act as secretary of the meeting. (b) The Board of Directors of the corporation shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if 6. 11 any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies, and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. Unless, and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure. ARTICLE IV DIRECTORS SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of directors of the corporation shall be fixed from time to time by the Board of Directors either by a resolution or a bylaw duly adopted by the Board of Directors. The number of directors presently authorized is seven (7). Directors need not be stockholders unless so required by the Certificate of Incorporation. If for any cause, the Directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these Bylaws. No reduction of the authorized number of Directors shall have the effect of removing any Director before the Director's term of office expires, unless such removal is made pursuant to the provisions of Section 20 hereof. (Del. Code Ann., tit. 8, Sections 141(b), 211(b), (c)) SECTION 16. POWERS. The powers of the corporation shall be exercised, its business conducted and its property controlled by the Board of Directors, except as may be otherwise provided by statute or by the Certificate of Incorporation (Del. Code Ann., tit. 8, Section 141(a)) SECTION 17. CLASSES OF DIRECTORS. The Board of Directors shall be divided into three classes: Class I, Class II and Class III, which shall be as nearly equal in number as possible. Each director shall serve for a term ending on the date of the third annual meeting of stockholders following the annual meeting at which the director was elected; provided, however, that each initial director in Class I shall hold office until the annual meeting of stockholders in 1990; each initial director in Class II shall hold office until the annual meeting of stockholders in 1991; and each initial director in Class III shall hold office until the annual meeting of stockholders in 1992. Notwithstanding the foregoing provisions of this section, each director shall serve until his successor is duly elected and qualified or until his death, resignation or removal. (Del. Code Ann., tit. 8, Section 141(d)) 7. 12 SECTION 18. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. In the event of any increase or decrease in the authorized number of directors, the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors so as to maintain such classes as nearly equal in number as possible. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled either (i) by the affirmative vote of the holders of a majority of the voting power of the then-outstanding shares of the Company's capital stock; or (ii) by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the authorized Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successors shall have been elected and qualified. SECTION 19. RESIGNATION. Any Director may resign at any time by delivering his written resignation to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors. When one or more Directors shall resign from the Board of Directors, effective at a future date, a majority of the Directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each Director so chosen shall hold office for the unexpired portion of the term of the Director whose place shall be vacated and until his successor shall have been duly elected and qualified. (Del. Code Ann., tit. 8, Sections 141(b), 223(d)) SECTION 20. REMOVAL. Any director, or the entire Board of Directors, may be removed from office, (a) with cause by the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of the Company's capital stock, voting together as a single class; or (b) without cause, by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of the Company's capital stock. (Del. Code Ann., tit. 8, Section 141(k)) SECTION 21. MEETINGS. (a) ANNUAL MEETINGS. The annual meeting of the Board of Directors shall be held immediately after the annual meeting of stockholders and at the place where such meeting is held. No notice of an annual meeting of the Board of Directors shall be necessary and such meeting shall be held for the purpose of electing officers and transacting such other business as may lawfully come before it. (b) REGULAR MEETINGS. Except as hereinafter otherwise provided, regular meetings of the Board of Directors shall be held in the office of the corporation required to be 8. 13 maintained pursuant to Section 2 hereof. Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board of Directors may also be held at any place within or without the State of Delaware which has been determined by the Board of Directors. (Del. Code Ann., tit. 8, Section 141(g)) (c) SPECIAL MEETINGS. Unless otherwise restricted by the Certificate of Incorporation, special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware whenever called by the President or a majority of the Directors. (Del. Code Ann., tit. 8, Section 141(g)) (d) TELEPHONE MEETINGS. Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting. (Del. Code Ann., tit. 8, Section 141(i)) (e) NOTICE OF MEETINGS. Written notice of the time and place of all special meetings of the Board of Directors shall be given at least one (1) day before the date of the meeting. Notice of any meeting may be waived in writing at any time before or after the meeting and will be waived by any Director by attendance thereat, except when the Director 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. (Del. Code Ann., tit. 8, Section 229) (f) WAIVER OF NOTICE. The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum is present and if, either before or after the meeting, each of the Directors not present signs a written waiver of notice, or a consent to holding such meeting, or an approval of the minutes thereof. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in any written waiver of notice or consent unless so required by the Certificate of Incorporation or these Bylaws. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. (Del. Code Ann., tit. 8, Section 229) SECTION 22. QUORUM AND VOTING. (a) Unless the Certificate of Incorporation requires a greater number and except with respect to indemnification questions arising under Section 43 hereof, for which a quorum shall be one-third of the exact number of Directors fixed from time to time in accordance with Section 15 hereof, but not less than one (1), a quorum of the Board of Directors shall consist of a majority of the exact number of Directors fixed from time to time in accordance with Section 15 of these Bylaws, but not less than one (1); provided, however, at any meeting whether a quorum be present or otherwise, a majority of the Directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of 9. 14 Directors, without notice other than by announcement at the meeting. (Del. Code Ann., tit. 8, Section 141(b)) (b) At each meeting of the Board of Directors at which a quorum is present all questions and business shall be determined by a vote of a majority of the Directors present, unless a different vote be required by law, the Certificate of Incorporation or these Bylaws. (Del. Code Ann., tit. 8, Section 141(b)) SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and such writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. (Del. Code Ann., tit. 8, Section 141(f)) SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors, including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors. Nothing herein contained shall be construed to preclude any Director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefor. (Del. Code Ann., tit. 8, Section 141(h)) SECTION 25. COMMITTEES. (a) EXECUTIVE COMMITTEE. The Board of Directors may by resolution passed by a majority of the whole Board of Directors, appoint an Executive Committee to consist of one (1) or more members of the Board of Directors. The Executive Committee, to the extent permitted by law and specifically granted by the Board of Directors, shall have and may exercise when the Board of Directors is not in session all powers of the Board of Directors in the management of the business and affairs of the corporation, including, without limitation, the power and authority to declare a dividend or to authorize the issuance of stock, except such committee shall not have the power or authority to amend the Certificate of Incorporation, to adopt an agreement of merger or consolidation, to recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, to recommend to the stockholders of the corporation a dissolution of the corporation or a revocation of a dissolution or to amend these Bylaws. (Del. Code Ann., tit. 8, Section 141(c)) (b) OTHER COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, from time to time appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall consist of one (1) or more members of the Board of Directors, and shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committees, but in no event shall such committee have the powers denied to the Executive Committee in these Bylaws. (Del. Code Ann., tit. 8, Section 141(c)) 10. 15 (c) TERM. The members of all committees of the Board of Directors shall serve a one (1) year term. The Board of Directors, subject to the provisions of subsections (a) or (b) of this Section 25, may at any time increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee member shall terminate on the date of his death or voluntary resignation from the committee or from the Board of Directors. The Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors 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, and, in addition, in the absence or disqualification of any 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 the place of any such absent or disqualified member. (Del. Code Ann., tit. 8, Section 141(c)) (d) MEETINGS. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Section 24 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any Director who is a member of such committee, upon written notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of written notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time before or after the meeting and will be waived by any Director by attendance thereat, except when the Director attends such special 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. A majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee. (Del. Code Ann., tit. 8, Section Section 141(c), 229) SECTION 26. ORGANIZATION. At every meeting of the Directors, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or if the President is absent, the most senior Vice President, or, in the absence of any such officer, a chairman of the meeting chosen by a majority of the Directors present, shall preside over the meeting. The Secretary, or in his absence, an Assistant Secretary directed to do so by the President, shall act as secretary of the meeting. 11. 16 ARTICLE V OFFICERS SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall be the Chairman of the Board of Directors, the President, one or more Vice Presidents, the Secretary and the Chief Financial Officer or Treasurer, all of whom shall be elected at the annual organizational meeting of the Board of Directors. The order of the seniority of the Vice Presidents shall be in the order of their nomination, unless otherwise determined by the Board of Directors. The Board of Directors may also appoint one or more Assistant Secretaries, Assistant Treasurers, and such other officers and agents with such powers and duties as it shall deem necessary. The Board of Directors may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of offices of the corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the corporation shall be fixed by or in the manner designated by the Board of Directors. (Del. Code Ann., tit. 8, Section Section 122(5), 142(a), (b)) SECTION 28. TENURE AND DUTIES OF OFFICERS. (a) GENERAL. All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors. (Del. Code Ann., tit. 8, Section 141(b), (e)) (b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of Directors, if appointed and present, shall preside at all meetings of the stockholders and the Board of Directors. The Chairman of the Board of Directors shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. If there is no President, then the Chairman of the Board of Directors shall also serve as the Chief Executive Officer of the corporation and shall have the powers and duties prescribed in paragraph (c) of this Section 28. (Del. Code Ann., tit. 8, Section 142(a)) (c) DUTIES OF PRESIDENT. The President shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board of Directors has been appointed and is present. The President shall be the Chief Executive Officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. The President shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. (Del. Code Ann., tit. 8, Section 142(a)) (d) DUTIES OF VICE PRESIDENTS. The Vice Presidents, in the order of their seniority, may assume and perform the duties of the President in the absence or disability of the 12. 17 President or whenever the office of President is vacant. The Vice Presidents shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. (Del. Code Ann., tit. 8, Section 142(a)) (e) DUTIES OF SECRETARY. The Secretary shall attend all meetings of the stockholders and of the Board of Directors, and shall record all acts and proceedings thereof in the minute book of the corporation. The Secretary may give notice in conformity with these Bylaws of all meetings of the stockholders, and of all meetings of the Board of Directors and any committee thereof requiring notice. The Secretary shall perform all other duties given him in these Bylaws and other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The President may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. (Del. Code Ann., tit. 8, Section 142(a)) (f) DUTIES OF CHIEF FINANCIAL OFFICER OR TREASURER. The Chief Financial Officer or Treasurer shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner, and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the President. The Chief Financial Officer or Treasurer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation. The Chief Financial Officer or Treasurer shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. The President may direct any Assistant Treasurer to assume and perform the duties of the Chief Financial Officer or Treasurer in the absence or disability of the Chief Financial Officer or Treasurer, and each Assistant Treasurer shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. (Del. Code Ann., tit. 8, Section 142(a)) SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof. SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving written notice to the Board of Directors or to the President or to the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the corporation under any contract with the resigning officer.(Del. Code Ann., tit. 8, Section 142(b)) 13. 18 SECTION 31. REMOVAL. Any officer may be removed from office at any time, either with or without cause, by the vote or written consent of a majority of the Directors in office at the time, or by any committee or superior officers upon whom such power of removal may have been conferred by the Board of Directors. ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING of Securities Owned by the Corporation SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the corporation any corporate instrument or document, or to sign on behalf of the corporation the corporate name without limitation, or to enter into contracts on behalf of the corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the corporation. (Del. Code Ann., tit. 8, Section Section 103(a), 142(a), 158) Unless otherwise specifically determined by the Board of Directors or otherwise required by law, promissory notes, deeds of trust, mortgages and other evidences of indebtedness of the corporation, and other corporate instruments or documents requiring the corporate seal, and certificates of shares of stock owned by the corporation, shall be executed, signed or endorsed by the Chairman of the Board of Directors, or the President or any Vice President, and by the Secretary or Chief Financial Officer or Treasurer or any Assistant Secretary or Assistant Treasurer. All other instruments and documents requiring the corporate signature, but not requiring the corporate seal, may be executed as aforesaid or in such other manner as may be directed by the Board of Directors. (Del. Code Ann., tit. 8, Section Section 103(a), 142(a), 158) All checks and drafts drawn on banks or other depositaries on funds to the credit of the corporation or in special accounts of the corporation shall be signed by such person or persons as the Board of Directors shall authorize so to do. Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. (Del. Code Ann., tit. 8, Section Section 103(a), 142(a), 158). SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and other securities of other corporations owned or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairman of the Board of Directors, the President, or any Vice President. (Del. Code Ann., tit. 8, Section 123) 14. 19 ARTICLE VII SHARES OF STOCK SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the shares of stock of the corporation shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the corporation shall be entitled to have a certificate signed by or in the name of the corporation by the Chairman of the Board of Directors, or the President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the corporation. Where such certificate is countersigned by a transfer agent other than the corporation or its employee, or by a registrar other than the corporation or its employee, any other signature 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 with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Each certificate shall state upon the face or back thereof, in full or in summary, all of the designations, preferences, limitations, restrictions on transfer and relative rights of the shares authorized to be issued. (Del. Code Ann., tit. 8, Section 158) SECTION 35. LOST CERTIFICATES. A new certificate or certificates may be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. The corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require or to give the corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen, or destroyed. (Del. Code Ann., tit. 8, Section 167) SECTION 36. TRANSFERS. (a) Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a properly endorsed certificate or certificates for a like number of shares. (Del. Code Ann., tit. 8, Section 201, tit. 6, Section 8-401(1)) (b) The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware. (Del. Code Ann., tit. 8, Section 160 (a)) 15. 20 SECTION 37. FIXING RECORD DATES. (a) 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, in advance, 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 (60) nor less than ten (10) 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 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. 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. (b) 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, in advance, 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 (10) 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 stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by 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 a 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 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. (c) 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, in advance, 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 (60) days prior to such action. If no record date is fixed, 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. (Del. Code Ann., tit. 8, Section 213) SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive 16. 21 dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. (Del. Code Ann., tit. 8, Section Section 213(a), 219) ARTICLE VIII OTHER SECURITIES OF THE CORPORATION SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and other corporate securities of the corporation, other than stock certificates (covered in Section 33), may be signed by the Chairman of the Board of Directors, the President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Chief Financial Officer or Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the corporation or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the corporation. ARTICLE IX DIVIDENDS SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. (Del. Code Ann., tit. 8, Section Section 170, 173) SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board of 17. 22 Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the Board of Directors shall think conducive to the interests of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. (Del. Code Ann., tit. 8, Section 171) ARTICLE X FISCAL YEAR SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall end on the nearest Saturday to the 30th day of September of each year and begin on the following day or at such other times as may be fixed by resolution of the Board of directors. ARTICLE XI INDEMNIFICATION SECTION 43. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS. (a) DIRECTORS. The corporation shall indemnify its Directors and executive officers to the fullest extent not prohibited by the Delaware General Corporation Law; provided, however, that the corporation may limit the extent of such indemnification by individual contracts with its Directors and executive officers; and, provided, further, that the corporation shall not be required to indemnify any Director or executive officer in connection with any proceeding (or part thereof) initiated by such person or any proceeding by such person against the corporation or its Directors, officers, employees or other agents unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the corporation or (iii) such indemnification is provided by the corporation, in its sole discretion, pursuant to the powers vested in the corporation under the Delaware General Corporation Law. (b) OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation shall have power to indemnify its other officers, employees and other agents as set forth in the Delaware General Corporation Law. (c) GOOD FAITH. (1) For purposes of any determination under this Bylaw, a Director or executive officer shall be deemed to have 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, with respect to any criminal action or proceeding, to have had no reasonable cause to believe that his conduct was 18. 23 unlawful, if his action is based on information, opinions, reports and statements, including financial statements and other financial data, in each case prepared or presented by: (i) one or more officers or employees of the corporation whom the Director or executive officer believed to be reliable and competent in the matters presented; (ii) counsel, independent accountants or other persons as to matters which the Director or executive officer believed to be within such person's professional competence; and (iii) with respect to a Director, a committee of the Board upon which such Director does not serve, as to matters within such Committee's designated authority, which committee the Director believes to merit confidence; so long as, in each case, the Director or executive officer acts without knowledge that would cause such reliance to be unwarranted. (2) The termination of any 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 proceeding, that he had reasonable cause to believe that his conduct was unlawful. (3) The provisions of this paragraph (c) shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth by the Delaware General Corporation Law. (d) EXPENSES. The corporation shall advance, prior to the final disposition of any proceeding, promptly following request therefor, all expenses incurred by any Director or executive officer in connection with such proceeding upon receipt of an undertaking by or on behalf of such person to repay said amounts if it should be determined ultimately that such person is not entitled to be indemnified under this Bylaw or otherwise. Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph (e) of this Bylaw, no advance shall be made by the corporation if a determination is reasonably and promptly made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to the proceeding, or (2) if such quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, that the facts known to the decision making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation. 19. 24 (e) ENFORCEMENT. Without the necessity of entering into an express contract, all rights to indemnification and advances to Directors and executive officers under this Bylaw shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the corporation and the Director or executive officer. Any right to indemnification or advances granted by this Bylaw to a Director or executive officer shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. The claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting his claim. The corporation shall be entitled to raise as a defense to any such action that the claimant has not met the standards of conduct that make it permissible under the Delaware General Corporation Law for the corporation to indemnify the claimant for the amount claimed. 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 action that indemnification of the claimant is proper in the circumstances because he 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 legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. (f) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by this Bylaw shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaws, 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 office. The corporation is specifically authorized to enter into individual contracts with any or all of its Directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by the Delaware General Corporation Law. (g) SURVIVAL OF RIGHTS. The rights conferred on any person by this Bylaw shall continue as to a person who has ceased to be a Director, officer, employee or other agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (h) INSURANCE. To the fullest extent permitted by the Delaware General Corporation Law, the corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Bylaw. (i) AMENDMENTS. Any repeal or modification of this Bylaw shall only be prospective and shall not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the corporation. 20. 25 (j) SAVING CLAUSE. If this Bylaw or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each Director and executive officer to the full extent not prohibited by any applicable portion of this Bylaw that shall not have been invalidated, or by any other applicable law. (k) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the following definitions shall apply: (1) The term "proceeding" shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative. (2) The term "expenses" shall be broadly construed and shall include, without limitation, court costs, attorneys' fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding. (3) The term the "corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Bylaw with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. (4) References to a "director," "officer," "employee," or "agent" of the corporation shall include, without limitation, situations where such person is serving at the request of the corporation as a director, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise. (5) References to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this Bylaw. 21. 26 ARTICLE XII NOTICES SECTION 44. NOTICES. (a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of these Bylaws, notice is required to be given to any stockholder, it shall be given in writing, timely and duly deposited in the United States mail, postage prepaid, and addressed to his last known post office address as shown by the stock record of the corporation or its transfer agent. (Del. Code Ann., tit. 8, Section 222) (b) NOTICE TO DIRECTORS. Any notice required to be given to any Director may be given by the method stated in subsection (a), or by facsimile, telex or telegram, except that such notice other than one which is delivered personally shall be sent to such address as such Director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post office address of such Director. (c) ADDRESS UNKNOWN. If no address of a stockholder or Director be known, notice may be sent to the office of the corporation required to be maintained pursuant to Section 2 hereof. (d) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a duly authorized and competent employee of the corporation or its transfer agent appointed with respect to the class of stock affected, specifying the name and address or the names and addresses of the stock- holder or stockholders, or Director or Directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall be conclusive evidence of the statements therein contained. (Del. Code Ann., tit. 8, Section 222) (e) TIME NOTICES DEEMED GIVEN. All notices given by mail, as above provided, shall be deemed to have been given as at the time of mailing and all notices given by facsimile, telex or telegram shall be deemed to have been given as of the sending time recorded at time of transmission. (f) METHODS OF NOTICE. It shall not be necessary that the same method of giving notice be employed in respect of all Directors, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others. (g) FAILURE TO RECEIVE NOTICE. The period or limitation of time within which any stockholder may exercise any option or right, or enjoy any privilege or benefit, or be required to act, or within which any Director may exercise any power or right, or enjoy any privilege, pursuant to any notice sent him in the manner above provided, shall not be affected or extended in any manner by the failure of such stockholder or such Director to receive such notice. 22. 27 (h) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or Bylaws of the corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of the Delaware General Corporation Law, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. (i) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice is required to be given, under any provision of law or the Certificate of Incorporation or Bylaws of the corporation, to any stockholder to whom (i) notice of two consecutive annual meetings, and all notices of meetings or of the taking of action by written consent without a meeting to such person during the period between such two consecutive annual meetings, or (ii) all, and at least two, payments (if sent by first class mail) of dividends or interest on securities during a twelve month period, have been mailed addressed to such person at his address as shown on the records of the Corporation and have been returned undeliverable, the giving of such notice to such person shall not be required. Any action or meeting which shall be taken or held without notice to such person shall have the same force and effect as if such notice had been duly given. If any such person shall deliver to the corporation a written notice setting forth his then current address, the requirement that notice be given to such person shall be reinstated. In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of the Delaware General Corporation Law, the certificate need not state that notice was not given to persons to whom notice was not required to be given pursuant to this paragraph. (Del. Code Ann, tit. 8, Section 230 ) ARTICLE XIII AMENDMENTS SECTION 45. AMENDMENTS. Except as otherwise set forth in paragraph (i) of Section 43 of these Bylaws, these Bylaws may be amended or repealed and new Bylaws adopted by the stockholders entitled to vote. The Board of Directors shall also have the power, if such power is conferred upon the Board of Directors by the Certificate of Incorporation, to adopt, amend or repeal Bylaws (including, without limitation, the amendment of any Bylaw setting forth the number of Directors who shall constitute the whole Board of Directors). (Del. Code Ann., tit. 8, Section Section 109(a), 122(6)) 23. 28 ARTICLE XIV LOANS TO OFFICERS SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiaries, including any officer or employee who is a Director of the corporation or its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the corporation. The loan, guarantee or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this Section 46 shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. (Del. Code Ann., tit. 8, Section 143) 24. EX-10.1 3 FOURTH AMENDMENT TO CREDIT AGREEMENT 1 Exhibit 10.1 BEI ELECTRONICS, INC. FOURTH AMENDMENT TO CREDIT AGREEMENT This FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated as of June 1, 1995 and entered into by and among BEI Electronics, Inc., a Delaware corporation, BEI Sensors & Systems Company, Inc., a Delaware corporation, Defense Systems Company, Inc., a Delaware corporation, and BEI Medical Systems Company, Inc., a Delaware corporation (each a "Borrower" and collectively the "Borrowers"), the financial institutions listed on the signature pages hereof (each a "Lender" and collectively the "Lenders"), CIBC Inc., as agent for the Lenders (the "Agent"), and Canadian Imperial Bank of Commerce, as the Designated Issuer, and is made with reference to that certain Credit Agreement dated as of June 1, 1993, as amended by the First Amendment to Credit Agreement dated as of September 3, 1993, as amended by the Second Amendment to Credit Agreement and Limited Waiver dated as of April 1, 1994, and as amended by the Third Amendment to Credit Agreement dated as of September 30, 1994 (as so amended, the "Credit Agreement") by and among the Borrowers, the Lenders, the Agent and the Designated Issuer. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, the Borrowers have requested an extension of the Maturity Date of the Credit Agreement, and the Lenders, the Agent and the Designated Issuer have so agreed; WHEREAS, the Borrowers, the Lenders, the Agent and the Designated Issuer desire to amend the Credit Agreement as set forth below; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: 1. Amendments to the Credit Agreement. 1.1 Amendments to Section 1.01: Defined Terms. 1.1.1 The following definitions in Section 1.01 of the Credit Agreement are hereby amended in to read in their entirety as follows: "'Consolidated Adjusted EBITDA': For any period, the sum of the amounts for such period of, without duplication, (i) Consolidated Net Income (or Consolidated Net Losses), plus (ii) Consolidated Interest Expense, plus (iii) provisions for taxes based on income, plus (iv) depreciation expense, plus (v) amortization expense, plus (vi) any charges or expenses related to the GPI 1 2 Settlement incurred subsequent to the quarter ending March 31, 1995, but not in excess of $2,500,000, minus (vii) Consolidated Capital Expenditures, all of the foregoing as determined on a consolidated basis for BEI and its consolidated Subsidiaries in accordance with GAAP." "' Consolidated Capital Expenditures': For any period, the dollar amount of purchases of property, plant and equipment reflected in the consolidated statement of cash flow of BEI and its consolidated Subsidiaries for such period, excluding, however, expenditures of insurance proceeds received as the result of damage or destruction of the property being replaced." "' Consolidated Tangible Net Worth': For any period, the sum of stockholders' equity of BEI and its consolidated Subsidiaries plus Intangible Assets acquired by BEI and its consolidated Subsidiaries after the date hereof as a result of an Acquisition in an amount not to exceed $5,000,000 in the aggregate. Consolidated Tangible Net Worth shall be calculated without giving effect to any foreign currency translation adjustments." "' Maturity Date': June 3, 1996." "' Revolving Commitment': The amount of $15,000,000 as such amount may be reduced pursuant to Sections 2.01(c) and (d)." 1.1.2 The following definitions are added to Section 1.01 of the Credit Agreement in appropriate alphabetical order: "' Adjusted Consolidated Net Losses': For any period, the sum of the amounts for such period of (i) Consolidated Net Loss, plus (ii) any expenses or charges related to the GPI Settlement, but not in excess of $2,500,000 plus (iii) any expenses or charges related to the discontinued operations of Defense Systems Company, Inc., but not in excess of $3,500,000, all of the foregoing as determined on a consolidated basis for BEI and its consolidated Subsidiaries in accordance with GAAP." "' GPI Settlement': The resolution, whether by settlement, arbitration award or otherwise, of the dispute between BEI and certain former shareholders of General Precision Industries relating to royalties, milestone payments, interest and related payments asserted to be payable in connection with the license of certain technology to BEI." 1.2 Amendments to Section 2.05: Letters of Credit. 1.2.1 Section 2.05(a) of the Credit Agreement is hereby amended by deleting the amount "$7,000,000" in clause (iii) thereof and replacing it with the amount "$5,000,000". 2 3 1.3 Amendments to Section 6.02: Negative Covenants. 1.3.1 Section 6.02(a) of the Credit Agreement is hereby amended to read in its entirety as follows: "(a) Current Ratio. Permit the ratio of Consolidated Current Assets to Consolidated Current Liabilities at any time to be less than 1.50 to 1.00." 1.3.2 Section 6.02(b) of the Credit Agreement is hereby amended to read in its entirety as follows: "(b) Consolidated Tangible Net Worth. Permit Consolidated Tangible Net Worth as at the end of any fiscal quarter of BEI to be less than the sum of (i) $33,000,000 plus (ii) 75% of Consolidated Net Income for each fiscal quarter of BEI commencing with the fiscal quarter ending July 1, 1995, plus (iii) 100% of the Net Proceeds of any Equity Issuance by BEI in excess of $5 Million Dollars ($5,000,000) after June 1, 1995." 1.3.3 Section 6.02(d) of the Credit Agreement is hereby amended to read in its entirety as follows: "(d) Interest Coverage Ratio. As of the end of any fiscal quarter of BEI, permit the ratio of Consolidated Adjusted EBITDA for the number of fiscal quarters then ended specified below to Consolidated Interest Expense for such number of fiscal quarters to be less than the correlative ratio set forth below:
Period Ratio ------ ----- Three Fiscal Quarters ending July 1, 1995 1.25 : 1.00 Four Fiscal Quarters ending September 30, 1995 1.25 : 1.00 Four Fiscal Quarters ending December 30, 1995 1.60 : 1.00 Four Fiscal Quarters ending on the last day of any fiscal quarter thereafter 2.00 : 1.00"
1.3.4 Section 6.02(f) of the Credit Agreement is hereby amended to read in its entirety as follows: 3 4 "(f) Adjusted Consolidated Net Income. (i) Permit Adjusted Consolidated Net Losses for any fiscal quarter to be greater than $3,000,000. (ii) Permit Adjusted Consolidated Net Losses for any two consecutive fiscal quarters." 1.3.5 Section 6.02(j)(ii) of the Credit Agreement is hereby amended to read in its entirety as follows: "any Borrower or any wholly-owned Subsidiary of a Borrower may acquire the business, property, fixed assets or stock of Persons in a related business (each, an "Acquisition"), provided that (i) immediately following the consummation of any such Acquisition there shall exist no condition or event that constitutes an Event of Default or a Potential Event of Default, (ii) the fair market value of the consideration (whether in the form of cash, assumed liabilities, or debt or equity securities of any Borrower or any Subsidiary of a Borrower) paid in any such Acquisition does not exceed $2,500,000 and (iii) the aggregate fair market value of the consideration (whether in the form of cash, assumed liabilities, or debt or equity securities of any Borrower or any Subsidiary of a Borrower) paid in all such Acquisitions during any fiscal year of BEI does not exceed $12,000,000 in the aggregate; and" 1.4 Amendment to Signature Page. The signature page is hereby amended by deleting the figure "$25,000,000" opposite the name of CIBC Inc. as lender, and replacing it with the figure "$15,000,000". 1.5 Amendment to Exhibit C. Exhibit C to the Credit Agreement is hereby deleted and Exhibit C hereto substituted therefor. 2. Conditions to Effectiveness. This Amendment shall be deemed effective as of June 1, 1995 (the "Fourth Amendment Effective Date") upon the satisfaction of all of the following conditions precedent: 2.1 The Agent shall have received for each Lender and the Designated Issuer counterparts hereof duly executed on behalf of the Borrowers, the Agent and the Lenders (or notice of the approval of this Amendment by the Lenders satisfactory to the Agent shall have been received by the Agent). 4 5 2.2 The Agent shall have received a closing fee in the amount of $50,000. 2.3 All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by the Agent, acting on behalf of the Lenders, and its counsel shall be satisfactory in form and substance to the Agent and such counsel, and the Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as the Agent may reasonably request. 3. Borrowers' Representations and Warranties. In order to induce the Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, the Borrowers represent and warrant to each Lender that the following statements are true, correct and complete: 3.1 Corporate Power and Authority. The Borrowers have all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform their respective obligations under, the Credit Agreement as amended by this Amendment (the "Amended Agreement"). The Certificate of Incorporation and Bylaws of each of the Borrowers have not been amended since September 30, 1994. 3.2 Authorization of Agreements. The execution and delivery of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of the Borrowers. 3.3 No Conflict. The execution and delivery by the Borrowers of this Amendment and the performance by the Borrowers of the Amended Agreement do not and will not contravene (i) any law or regulation binding on or affecting any of the Borrowers or any of their respective Subsidiaries, (ii) the Certificate of Incorporation or Bylaws of any of the Borrowers, (iii) any order, judgment or decree of any court of other agency of government binding on any of the Borrowers or any of their respective Subsidiaries or (iv) any contractual restriction binding on or affecting any of the Borrowers or any of their respective Subsidiaries. 3.4 Governmental Consents. The execution and delivery by the Borrowers of this Amendment and the performance by the Borrowers of the Amended Agreement do not and will not require any authorization or approval of, or other action by, or notice to or filing with any governmental authority or regulatory body. 3.5 Binding Obligation. This Amendment and the Amended Agreement have been duly executed and delivered by the Borrowers and are the 5 6 binding obligations of the Borrowers, enforceable against the Borrowers in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights. 3.6 Absence of Default. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a Potential Event of Default. 4. Miscellaneous. 4.1 Reference to and Effect on the Credit Agreement and the Other Loan Documents. 4.1.1 On and after the Fourth Amendment Effective Date, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. 4.1.2 Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. 4.1.3 Without limiting the generality of the provisions of Section 10.01 of the Credit Agreement, nothing in this Amendment shall be deemed to (a) constitute a waiver of compliance by the Borrowers with respect to any term, provision or condition of the Credit Agreement or any other instrument or agreement referred to therein or (b) prejudice any right or remedy that the Agent or any Lender may now have or may have in the future under or in connection with the Credit Agreement or any other instrument or agreement referred to therein. 4.2 Fees and Expenses. The Borrowers acknowledge that all costs, fees and expenses as described in Section 10.05 of the Credit Agreement incurred by the Agent and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of the Borrowers. 4.3 Headings. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect. 4.4 Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, 6 7 THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. 4.5 Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. BEI ELECTRONICS, INC. By:________________________________ Title:_____________________________ BEI SENSORS & SYSTEMS COMPANY, INC. By:________________________________ Title:_____________________________ DEFENSE SYSTEMS COMPANY, INC By:________________________________ Title:_____________________________ 7 8 BEI MEDICAL SYSTEMS COMPANY, INC. By:_________________________________ Title:______________________________ CIBC INC., Individually and as Agent By:_________________________________ Title:______________________________ CANADIAN IMPERIAL BANK OF COMMERCE, as the Designated Issuer By:_________________________________ Title:______________________________ 8 9 EXHIBIT C [FORM OF COMPLIANCE CERTIFICATE] 1. This Compliance Certificate ("Compliance Certificate") is executed and delivered by BEI Electronics, Inc., a Delaware corporation, BEI Sensors & Systems Company, Inc., a Delaware corporation, Defense Systems Company, Inc., a Delaware corporation, and BEI Medical Systems Company, Inc., a Delaware corporation (collectively, the "Borrowers") to CIBC Inc. (the "Agent") pursuant to Section 6.01(a)(iii)(B) of the Credit Agreement dated as of June 1, 1993 among the Borrowers, the financial institutions named therein, the Agent and Canadian Imperial Bank of Commerce, as amended by the First Amendment to the Credit Agreement dated as of September 3, 1993, and as amended by the Second Amendment to the Credit Agreement and Limited Waiver dated as of April 1, 1994, as amended by the Third Amendment to Credit Agreement dated as of September 30, 1994, and as amended by the Fourth Amendment to Credit Agreement dated as of June 1, 1995 (as so amended and as further amended, restated, supplemented, or modified from time to time, the "Credit Agreement"). Any terms used herein and not defined herein shall have the meanings defined in the Credit Agreement. This Compliance Certificate covers BEI's: Fiscal quarter ended_____________________________, 19__ Fiscal year ended_____________________________, 19__ 2. The following paragraphs set forth calculations in compliance with obligations pursuant to Sections 6.02(a), (b), (c), (d), and (f) of the Credit Agreement, as of the end of the fiscal period set forth in paragraph 1 hereof. A. Current Ratio (Sec. 6.02(a)): (a) Consolidated Current Assets $__________ (b) Consolidated Current Liabilities $__________ Ratio (a) : (b) ____:____ Minimum Permitted Ratio 1.50: 1.00 B. Consolidated Tangible Net Worth (Sec. 6.02(b)): 1. Actual Consolidated Tangible Net Worth (a) Stockholders' equity $__________ minus (b) Intangible Assets $__________ 10 plus (c) Intangible Assets acquired after the date of the Credit Agreement as a result of an Acquisition (not to exceed $5,000,000 in the aggregate) $__________ (a) - (b) + (c) $___________ 2. Minimum Consolidated Tangible Net Worth (a) $33,000,000 $33,000,000 plus (b) 75% of Consolidated Net Income for each fiscal quarter of BEI after July 1, 1995 $__________ plus (c) 100% of the Net Proceeds of any Equity Issuance by BEI in excess of $5,000,000 after June 1, 1995 $_________ (a) + (b) + (c) $__________ Required: 1 greater than or equal to 2 OK/Not OK C. Leverage Ratio (Sec 6.02(c)): (a) Consolidated Liabilities $__________ (b) Consolidated Tangible Net Worth (B1) $__________ Ratio (a) : (b) _____:_____ Maximum Permitted Ratio 1.70 : 1.00 D. Interest Coverage Ratio (Sec. 6.02(d)): (a) Consolidated Adjusted EBITDA (i) Consolidated Net Income (or Consolidated Net Losses) $__________
C-2 11 plus (ii) Consolidated Interest Expense $________ plus (iii) Provisions for taxes based on income $________ plus (iv) Depreciation expense $________ plus (v) Amortization expense $________ plus (vi) Charges and Expenses relating to GPI Settlement incurred after Mach 31, 1995 (not in excess of $2,500,000) $________ minus (vii) Consolidated Capital Expenditures $________ (i) + (ii) + (iii) + (iv) + (v) + (vi) - (vii) $________ (b) Consolidated Interest Expense $________ Ratio (a) : (b) ____:____ Minimum Permitted Ratio Three Fiscal Quarters ending July 1, 1995 1.25 : 1.00 Four Fiscal Quarters ending September 30, 1995 1.25 : 1.00 Four Fiscal Quarters ending December 30, 1995 1.60 : 1.00
C-3 12 Four Fiscal Quarters ending thereafter 2.00 : 1.00 OK/Not OK E. Adjusted Consolidated Net Income (Sec. 6.02(f)): (i) Required: No Adjusted Consolidated Net Losses greater than $3,000,000 in any fiscal quarter OK/Not OK (ii) Required: No two consecutive fiscal quarters with Adjusted Consolidated Net Losses in most recently ended two fiscal quarters OK/Not OK
3. The aggregate amount of Investments made by BEI in BEI Medical Systems Company, Inc. during the fiscal period covered by this Compliance Certificate is $____________. 4. The undersigned has reviewed the terms of the Credit Agreement and has made, or caused to be made under his/her supervision, a review in reasonable detail of the transactions and condition of BEI and its Subsidiaries during the fiscal period covered by this Compliance Certificate. The undersigned does not (either as a result of such review or otherwise) have any knowledge of the existence as of the date of this Compliance Certificate of any condition or event that constitutes an Event of Default or a Potential Event of Default, with the exception set forth below in response to which the Borrowers are taking or propose to take the following actions (if none, so state): ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ 5. This Compliance Certificate is executed on__________, 19___ by the Chief Executive Officer, Chief Financial Officer, Treasurer or Controller of BEI. The undersigned hereby certifies that each and every matter contained herein is derived from the Borrowers' books and records and is, to the best knowledge of the undersigned, true and correct. BEI ELECTRONICS, INC. a Delaware corporation By:_______________________ C-4 EX-27 4 FINANCIAL DATA SCHEDULE
5 1000 9-MOS SEP-30-1995 OCT-02-1994 JUL-01-1995 8,945 0 19,813 0 26,860 58,828 27,993 0 110,341 19,882 30,191 0 0 0 57,203 110,341 109,863 109,863 80,403 80,403 28,861 0 1,890 (478) (34) (444) 0 0 0 (444) (.07) (.07)