UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended June 30, 2001
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-11406
KADANT INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of 52-1762325
incorporation or organization) (I.R.S. Employer Identification No.)
245 Winter Street
Waltham, Massachusetts 02451
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 370-1650
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 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.
Class Outstanding at July 30, 2001
---------------------------- ----------------------------
Common Stock, $.01 par value 12,277,147
PART I - Financial Information
Item 1 - Financial Statements
- -----------------------------
KADANT INC.
Consolidated Balance Sheet
(Unaudited)
Assets
June 30, December 30,
(In thousands) 2001 2000
- ---------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $145,755 $ 62,461
Advance to affiliate 3,498 5,704
Available-for-sale investments, at quoted market value
(amortized cost of $17,434 and $86,104) 17,434 86,137
Accounts receivable, less allowances of $3,026 and $2,182 34,686 43,866
Unbilled contract costs and fees 9,436 8,029
Inventories:
Raw materials and supplies 13,896 13,218
Work in process 6,684 4,825
Finished goods (includes $1,874 and $3,765 at customer locations) 15,180 15,034
Deferred tax asset 9,517 8,879
Other current assets 4,722 3,625
-------- --------
260,808 251,778
-------- --------
Property, Plant, and Equipment, at Cost 69,413 67,646
Less: Accumulated depreciation and amortization 40,734 38,064
-------- --------
28,679 29,582
-------- --------
Other Assets (Note 5) 12,130 13,755
-------- --------
Goodwill (Note 10) 117,025 119,100
-------- --------
$418,642 $414,215
======== ========
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KADANT INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
June 30, December 30,
(In thousands except share amounts) 2001 2000
- ---------------------------------------------------------------------------------------------------------
Current Liabilities:
Current maturities of long-term obligations $ 562 $ 562
Accounts payable 24,449 21,921
Accrued income taxes 7,354 4,986
Accrued payroll and employee benefits 7,005 7,727
Accrued warranty costs 4,645 5,666
Deferred revenue 2,117 3,600
Customer deposits 2,545 3,476
Other accrued expenses 13,967 12,433
Common stock of subsidiary subject to redemption (at redemption value) 17,026 17,026
Due to parent company and affiliated companies 789 1,284
-------- --------
80,459 78,681
-------- --------
Deferred Income Taxes and Other Deferred Items 7,987 8,042
-------- --------
Long-term Obligations:
Subordinated convertible debentures 153,000 153,000
Notes payable 1,141 1,650
-------- --------
154,141 154,650
-------- --------
Minority Interest (Note 5) 293 2,209
-------- --------
Shareholders' Investment:
Common stock, $.01 par value, 150,000,000 shares authorized;
12,732,455 shares issued (Note 7) 127 127
Capital in excess of par value 77,507 77,231
Retained earnings 139,098 133,522
Treasury stock at cost, 455,146 shares (Note 7) (20,758) (20,758)
Deferred compensation (20) (36)
Accumulated other comprehensive items (Notes 2 and 6) (20,192) (19,453)
-------- --------
175,762 170,633
-------- --------
$418,642 $414,215
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
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KADANT INC.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
--------------------------
June 30, July 1,
(In thousands except per share amounts) 2001 2000
- ---------------------------------------------------------------------------------------------------------
Revenues $56,732 $60,565
------- -------
Costs and Operating Expenses:
Cost of revenues 36,084 37,930
Selling, general, and administrative expenses (Notes 9 and 10) 14,585 15,749
Research and development expenses 1,871 1,953
Gain on sale of property - (971)
------- -------
52,540 54,661
------- -------
Operating Income 4,192 5,904
Interest Income 1,812 2,691
Interest Expense (1,871) (1,865)
------- -------
Income Before Provision for Income Taxes and Minority Interest 4,133 6,730
Provision for Income Taxes 1,736 2,775
Minority Interest (Income) Expense (Note 5) (50) 45
------- -------
Net Income $ 2,447 $ 3,910
======= =======
Basic and Diluted Earnings per Share (Notes 3 and 7) $ .20 $ .32
======= =======
Weighted Average Shares (Notes 3 and 7):
Basic 12,277 12,257
======= =======
Diluted 12,294 12,301
======= =======
The accompanying notes are an integral part of these consolidated financial statements.
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KADANT INC.
Consolidated Statement of Income
(Unaudited)
Six Months Ended
--------------------------
June 30, July 1,
(In thousands except per share amounts) 2001 2000
- ---------------------------------------------------------------------------------------------------------
Revenues $115,632 $118,487
-------- --------
Costs and Operating Expenses:
Cost of revenues 72,280 72,537
Selling, general, and administrative expenses (Notes 9 and 10) 30,441 31,580
Research and development expenses 3,663 3,816
Gain on sale of property - (971)
-------- --------
106,384 106,962
-------- --------
Operating Income 9,248 11,525
Interest Income 3,953 5,194
Interest Expense (3,744) (3,755)
-------- --------
Income Before Provision for Income Taxes, Minority
Interest, and Cumulative Effect of Change in Accounting
Principle 9,457 12,964
Provision for Income Taxes 3,955 5,300
Minority Interest (Income) Expense (Note 5) (74) 194
-------- --------
Income Before Cumulative Effect of Change in Accounting
Principle 5,576 7,470
Cumulative Effect of Change in Accounting Principle (net of
income taxes of $580) - (870)
-------- --------
Net Income $ 5,576 $ 6,600
======== ========
Basic and Diluted Earnings per Share Before Cumulative
Effect of Change in Accounting Principle (Notes 3 and 7) $ .45 $ .61
======== ========
Basic and Diluted Earnings per Share (Notes 3 and 7) $ .45 $ .54
======== ========
Weighted Average Shares (Notes 3 and 7):
Basic 12,277 12,253
======== ========
Diluted 12,292 12,310
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
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KADANT INC.
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
-------------------------
June 30, July 1,
(In thousands) 2001 2000
- --------------------------------------------------------------------------------------------------------
Operating Activities:
Net income $ 5,576 $ 6,600
Adjustments to reconcile net income to net cash provided
by operating activities:
Cumulative effect of change in accounting principle - 870
Depreciation and amortization 4,720 4,842
Provision for losses on accounts receivable 635 742
Minority interest (income) expense (Note 5) (74) 194
Gain on sale of property - (971)
Other noncash items (190) (43)
Changes in current accounts, excluding the effects of
acquisitions and dispositions:
Accounts receivable 7,674 12,295
Inventories and unbilled contract costs and fees (4,808) (2,326)
Other current assets (2,705) (40)
Accounts payable 2,535 (775)
Other current liabilities (65) (10,865)
-------- --------
Net cash provided by operating activities 13,298 10,523
-------- --------
Investing Activities:
Acquisitions, net of cash acquired - (2,998)
Acquisition of capital equipment and technology - (1,200)
Proceeds from sale of property - 3,909
Advances (to) from affiliate, net 2,206 (14,039)
Purchases of available-for-sale investments - (18,500)
Proceeds from maturities of available-for-sale investments 68,671 33,549
Purchases of property, plant, and equipment (2,390) (2,689)
Payments received on note for sale of property 1,200 -
Other, net 46 2
-------- --------
Net cash provided by (used in) investing activities 69,733 (1,966)
-------- --------
Financing Activities:
Net proceeds from issuance of Company and subsidiary common stock 321 448
Repayments of long-term obligations (509) -
-------- --------
Net cash provided by (used in) financing activities (188) 448
-------- --------
Exchange Rate Effect on Cash 451 (2,486)
-------- --------
Increase in Cash and Cash Equivalents 83,294 6,519
Cash and Cash Equivalents at Beginning of Period 62,461 39,254
-------- --------
Cash and Cash Equivalents at End of Period $145,755 $ 45,773
======== ========
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KADANT INC.
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Six Months Ended
-------------------------
June 30, July 1,
(In thousands) 2001 2000
- --------------------------------------------------------------------------------------------------------
Noncash Activities:
Fair value of assets of acquired companies $ - $ 5,285
Cash paid for acquired companies - (3,411)
Note payable for acquired companies - (795)
-------- --------
Liabilities assumed of acquired companies $ - $ 1,079
======== ========
Amounts forgiven in exchange for the 49% minority interest
in NEXT Fiber Products (Note 5) $ 2,053 $ -
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
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KADANT INC.
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been prepared
by Kadant Inc., (the Company, formerly Thermo Fibertek Inc.) (Note 7) without
audit and, in the opinion of management, reflect all adjustments of a normal
recurring nature necessary for a fair statement of the financial position at
June 30, 2001, the results of operations for the three- and six-month periods
ended June 30, 2001, and July 1, 2000, and the cash flows for the six-month
periods ended June 30, 2001, and July 1, 2000. Interim results are not
necessarily indicative of results for a full year.
Historical financial results have been restated to reflect the adoption of
Securities and Exchange Commission Staff Accounting Bulletin No. 101 "Revenue
Recognition in Financial Statements" effective as of January 2, 2000. The
consolidated balance sheet presented as of December 30, 2000, has been derived
from the consolidated financial statements that have been audited by the
Company's independent public accountants. The consolidated financial statements
and notes are presented as permitted by Form 10-Q and do not contain certain
information included in the annual financial statements and notes of the
Company. The consolidated financial statements and notes included herein should
be read in conjunction with the financial statements and notes included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 30,
2000, filed with the Securities and Exchange Commission.
2. Comprehensive Income
Comprehensive income combines net income and "other comprehensive items"
that represent certain amounts that are reported as components of shareholders'
investment in the accompanying balance sheet, including foreign currency
translation adjustments, unrealized net of tax gains and losses on
available-for-sale investments, and deferred gains and losses on foreign
currency contracts (Note 6). During the second quarter of 2001 and 2000, the
Company had comprehensive income of $803,000 and comprehensive loss of $255,000,
respectively. During the first six months of 2001 and 2000, the Company had
comprehensive income of $4,838,000 and $1,389,000, respectively.
3. Earnings per Share
Basic and diluted earnings per share were calculated as follows:
Three Months Ended Six Months Ended
----------------------- -----------------------
June 30, July 1, June 30, July 1,
(In thousands except per share amounts) 2001 2000 2001 2000
- ---------------------------------------------------------------------------------------------------------
Basic
Income Before Cumulative Effect of
Change in Accounting Principle $ 2,447 $ 3,910 $ 5,576 $ 7,470
Cumulative Effect of Change in Accounting
Principle (net of income taxes of $580) - - - (870)
------- ------- ------- -------
Net Income $ 2,447 $ 3,910 $ 5,576 $ 6,600
------- ------- ------- -------
Weighted Average Shares 12,277 12,257 12,277 12,253
------- ------- ------- -------
Basic Earnings per Share:
Income Before Cumulative Effect of Change
in Accounting Principle $ .20 $ .32 $ .45 $ .61
Change in Accounting Principle - - - (.07)
------- ------- ------- -------
$ .20 $ .32 $ .45 $ .54
======= ======= ======= =======
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KADANT INC.
3. Earnings per Share (continued)
Three Months Ended Six Months Ended
------------------------ -----------------------
June 30, July 1, June 30, July 1,
(In thousands except per share amounts) 2001 2000 2001 2000
- ---------------------------------------------------------------------------------------------------------
Diluted
Income Before Cumulative Effect of Change
in Accounting Principle $ 2,447 $ 3,910 $ 5,576 $ 7,470
Cumulative Effect of Change in
Accounting Principle (net of income
taxes of $580) - - - (870)
------- ------- ------- -------
Net Income $ 2,447 $ 3,910 $ 5,576 $ 6,600
Effect of Majority-owned Subsidiary's
Dilutive Securities - (3) - (7)
------- ------- ------- -------
Income Available to Common Shareholders,
as Adjusted $ 2,447 $ 3,907 $ 5,576 $ 6,593
------- ------- ------- -------
Weighted Average Shares 12,277 12,257 12,277 12,253
Effect of Stock Options 17 44 15 57
------- ------- ------- -------
Weighted Average Shares, as Adjusted 12,294 12,301 12,292 12,310
------- ------- ------- -------
Diluted Earnings per Share:
Income Before Cumulative Effect of
Change in Accounting Principle $ .20 $ .32 $ .45 $ .61
Change in Accounting Principle - - - (.07)
------- ------- ------- -------
$ .20 $ .32 $ .45 $ .54
======= ======= ======= =======
Options to purchase 401,400 and 194,200 shares of common stock for the
second quarter of 2001 and 2000, respectively, and 415,900 and 186,000 shares of
common stock for the first six months of 2001 and 2000, respectively, were not
included in the computation of diluted earnings per share because the options'
exercise prices were greater than the average market price for the common stock
and their effect would be antidilutive.
In addition, the computation of diluted earnings per share for each period
excludes the effect of assuming the conversion of the Company's $153,000,000
principal amount of 4 1/2% subordinated convertible debentures, convertible at
$60.50 per share, because the effect would be antidilutive.
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KADANT INC.
4. Business Segment Information
Three Months Ended Six Months Ended
----------------------- ------------------------
June 30, July 1, June 30, July 1,
(In thousands) 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------
Revenues:
Pulp and Papermaking Equipment and
Systems $ 54,686 $ 58,821 $110,673 $114,018
Composite and Fiber-based Products (a) 2,046 1,746 4,959 4,479
Intersegment sales elimination (b) - (2) - (10)
-------- -------- -------- --------
$ 56,732 $ 60,565 $115,632 $118,487
======== ======== ======== ========
Income Before Provision for Income Taxes,
Minority Interest, and Cumulative Effect of
Change in Accounting Principle:
Pulp and Papermaking Equipment and Systems $ 6,404 $ 7,169 $ 13,383 $ 14,054
Composite and Fiber-based Products (a) (1,253) (738) (2,236) (1,041)
Corporate (c) (959) (527) (1,899) (1,488)
-------- -------- -------- --------
Total Operating Income 4,192 5,904 9,248 11,525
Interest Income (Expense), Net (59) 826 209 1,439
-------- -------- -------- --------
$ 4,133 $ 6,730 $ 9,457 $ 12,964
======== ======== ======== ========
Capital Expenditures:
Pulp and Papermaking Equipment and Systems $ 348 $ 352 $ 732 $ 720
Composite and Fiber-based Products 864 969 1,658 1,969
-------- -------- -------- --------
$ 1,212 $ 1,321 $ 2,390 $ 2,689
======== ======== ======== ========
(a) Reflects the sale of the Company's fiber-recovery and water-clarification services plant in September 2000.
(b) Intersegment sales are accounted for at prices that are representative of transactions with unaffiliated
parties.
(c) Primarily general and administrative expenses. Includes gain on sale of property of $1.0 million in the
2000 periods.
5. Acquisition of Composites Venture Minority Interest
In January 2001, the Company's Thermo Fibergen subsidiary acquired the
outstanding 49% equity interest in NEXT Fiber Products, Inc. from the minority
investors (the Seller). Next Fiber Products was a joint venture formed in 1999
to develop, produce, and market fiber-based composite products primarily for the
building industry. In exchange for the 49% minority interest, Thermo Fibergen
agreed to forgive $2,053,000 due from the Seller, which related to the Seller's
investment in NEXT Fiber Products. The excess of assigned fair value of net
assets acquired from the buyout over the acquisition costs resulted in a
reduction in the intangible asset recorded at the time of Thermo Fibergen's
initial investment in NEXT Fiber Products.
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KADANT INC.
6. Recent Accounting Pronouncement
Effective in the first quarter of 2001, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 133 "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133, as amended, requires that all
derivatives, including forward currency exchange contracts, be recognized on the
balance sheet at fair value. Derivatives that are not hedges must be recorded at
fair value through earnings. If a derivative is a hedge, depending on the nature
of the hedge, changes in the fair value of the derivative are either offset
against the change in fair value of the hedged item through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The Company records in earnings immediately the extent to which a
hedge is not effective in achieving offsetting changes in fair value. Adoption
of SFAS No. 133 in the first quarter of 2001 did not have a material effect on
the Company's financial position and results of operations.
Forward currency exchange contracts are used primarily by the Company to
hedge certain operational ("cash-flow" hedges) and balance sheet ("fair value"
hedges) exposures resulting from changes in currency exchange rates. Such
exposures primarily result from portions of the Company's operations and assets
that are denominated in currencies other than the functional currencies of the
businesses conducting the operations or holding the assets. The Company enters
into these currency exchange contracts to hedge anticipated product sales and
recorded accounts receivable made in the normal course of business, and
accordingly, the hedges are not speculative in nature. The Company does not hold
or transact in financial instruments for purposes other than risk management.
The Company records its currency exchange contracts at fair value in its
consolidated balance sheet as other current assets or other accrued expenses
and, for cash flow hedges, the related gains or losses on these contracts are
deferred as a component of other comprehensive items. These deferred gains and
losses are recognized in income in the period in which the underlying
anticipated transaction occurs. Unrealized gains and losses resulting from the
impact of currency exchange rate movements on fair value hedges are recognized
in earnings in the period in which the exchange rates change and offset the
currency gains and losses on the underlying exposure being hedged.
7. Name Change and Reverse Stock Split
The Company changed its name to Kadant Inc., traded under the ticker
symbol "KAI" on the American Stock Exchange, and effected a one-for-five reverse
split of its common stock on July 12, 2001. The name change and reverse stock
split were approved by the Company's shareholders at the annual meeting of the
shareholders on May 15, 2001. All share and per share information, including the
conversion price of the Company's subordinated debt, has been restated to
reflect the reverse stock split.
8. Spin Off
On January 31, 2000, Thermo Electron announced that, as part of a major
reorganization plan, it planned to spin off its equity interest in the Company
as a dividend to Thermo Electron shareholders. In February 2001, Thermo Electron
received a favorable ruling from the Internal Revenue Service regarding the spin
off. The IRS required that the Company raise additional equity capital in a
public offering within one year of the spin off in the range of 10 to 20 percent
of its outstanding shares. The offering will also support the Company's current
business plan, which includes the repayment of debt, acquisitions, strategic
partnerships, and investment in additional capacity for its composites business.
On July 9, 2001, the Thermo Electron board of directors declared a dividend of
all of its equity interest in the Company. The dividend was distributed on
August 8, 2001 (Spinoff Date) to Thermo Electron shareholders of record on July
30, 2001. The distribution was on the basis of 0.0612 share of Company common
stock for each share of Thermo Electron common stock outstanding.
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KADANT INC.
9. Corporate Services Agreement
Prior to the spin off, the Company and Thermo Electron were parties to a
corporate services agreement under which Thermo Electron's corporate staff
provided certain administrative services for which the Company was assessed an
annual fee equal to 0.8% of the Company's consolidated revenues. Effective April
2001, the fee under this agreement was reduced to 0.6% for the fiscal quarter
ending June 30, 2001, and effective July 1, 2001, the fee was reduced to 0.4% of
the Company's consolidated revenues for the fiscal quarter ending September 29,
2001. The corporate services agreement terminated as of the Spinoff Date and was
replaced by a transition services agreement (Note 10).
10. Subsequent Events
Plan and Agreement of Distribution
In connection with the spin off, the Company and Thermo Electron have
entered into a plan and agreement of distribution. The agreement provides, among
other things, for restrictions relating to the Company's ability to use cash or
incur debt during the time that Thermo Electron continues to guarantee the
Company's $153.0 million, 4 1/2% subordinated convertible debentures due 2004,
and Thermo Fibergen's obligations to redeem the outstanding shares of Thermo
Fibergen that are not held by the Company. These restrictions include financial
covenants requiring (1) the ratio of the Company's net indebtedness to net
capitalization not to exceed 40% and (2) the sum of the Company's (a) operating
income (excluding restructuring and other unusual items (such as gains on sales
of assets) included in operating income), (b) amortization of goodwill and other
intangible assets, and (c) interest income, to be at least four times greater
than interest expense. In the event that the Company fails to comply with the
financial covenants and has not cured its noncompliance within the applicable
cure period, the Company will be obligated to relieve Thermo Electron of its
obligations under all of its outstanding guarantees of the Company's performance
and payment in connection with the Company's debentures and Thermo Fibergen's
obligations to redeem outstanding shares of Thermo Fibergen common stock. If
required to satisfy this obligation to Thermo Electron, the Company could, among
other things, refinance the Company's debentures, conduct an exchange offer for
the Company's debentures or all of Thermo Fibergen's common stock subject to
outstanding Thermo Fibergen redemption rights, or repay in full the underlying
obligation. In addition, in the event that the Company undergoes a change in
control, the Company has agreed to fully cash collateralize or back with one or
more letters of credit all of the Company's obligations under the debentures and
in connection with the redemption of outstanding shares of Thermo Fibergen
common stock. The Company is in compliance with all covenants of the agreement.
Transition Services Agreement
In connection with the spin off, the Company and Thermo Electron have
entered into a transition services agreement. The agreement provides that Thermo
Electron will continue to provide the Company with certain administrative
services until December 29, 2001. The Company will pay a fee under this
agreement equal to 0.4% and 0.2% of the Company's consolidated revenues for the
fiscal quarters ending September 29, 2001 and December 29, 2001, respectively,
plus out-of-pocket and third party expenses. The Company believes the charges
under the transition services agreement are reasonable and the terms of the
agreement are fair to the Company.
Tax Matters Agreement
Prior to the spin off, the Company and Thermo Electron were parties to a
tax allocation agreement under which the Company and its subsidiaries were
included in the consolidated federal and state income tax returns filed by
Thermo Electron. The tax allocation agreement provided that in years in which
these entities had taxable income, the Company would pay to Thermo Electron
amounts comparable to the taxes the Company would have paid if the Company had
filed separate tax returns. In years in which these entities included a loss,
Thermo Electron would reimburse the Company the amount that the Company would
have received if the Company had filed separate tax returns. The tax allocation
agreement terminated as of the Spinoff Date and the Company and Thermo Electron
entered into a tax matters agreement.
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KADANT INC.
10. Subsequent Events (continued)
The tax matters agreement requires, among other things, that the Company
file its own income tax returns for tax periods beginning immediately after the
Spinoff Date. In addition, the tax matters agreement requires that the Company
indemnify Thermo Electron, but not the stockholders of Thermo Electron, against
liability for taxes resulting from (a) the conduct of the Company's business
following the distribution or (b) the failure of the distribution to Thermo
Electron stockholders of shares of the Company's common stock or of the Viasys
Healthcare Inc. common stock to continue to qualify as a tax-free spin-off under
Section 355 of the Internal Revenue Code as a result of certain actions that the
Company takes following the distribution. Thermo Electron has agreed to
indemnify the Company against taxes resulting from the conduct of Thermo
Electron's business prior to and following the distribution or from the failure
of the distribution of shares of the Company's common stock to the Thermo
Electron stockholders to continue to qualify as a tax-free spin off other than
as a result of some actions that the Company may take following the
distribution. Although not anticipated, if any of the Company's
post-distribution activities causes the distribution to become taxable, the
Company could incur liability to Thermo Electron and/or various taxing
authorities, which could adversely affect the Company's results of operations,
financial position and cash flows.
Stock Option Exchange
In connection with the spin off, options to purchase shares of Thermo
Electron common stock held by the Company's employees were exchanged for options
to purchase 566,900 shares of the Company's common stock. The resulting options
in the Company's common stock maintained their intrinsic value, and their
original option periods and vesting provisions in accordance with the
methodology set forth in the Financial Accounting Standards Board (FASB)
Interpretation No. 44 "Accounting for Certain Transactions Involving Stock
Compensation."
Preferred Stock
On May 15, 2001, at the annual meeting of the Company's shareholders, the
shareholders voted to approve an amendment, previously adopted by the Company's
Board of Directors, to the Company's Certificate of Incorporation to authorize
5,000,000 shares of preferred stock, $.01 par value per share, for issuance by
the Company's Board of Directors without further shareholder approval.
Subsequently, the Board of Directors designated 15,000 shares of such preferred
stock as Series A junior participating preferred stock for issuance under the
Company's Shareholder Rights Plan (see below). The charter amendment effecting
these actions was incorporated into the Company's restated Certificate of
Incorporation filed on August 7, 2001.
Shareholder Rights Plan
In connection with the spin off, the Company's Board of Directors adopted
a shareholder rights plan. Under the plan, one right was distributed as of the
close of business on August 6, 2001, for each share of the Company's common
stock outstanding at that time. The rights plan is designed to provide
shareholders with fair and equal treatment in the event of an unsolicited
attempt to acquire the Company. At the time of distribution, the rights were
attached to the Company's outstanding common stock and are not separately
transferable or exercisable. The rights will become exercisable if a person
acquires 15 percent or more of the Company's common stock, or a tender or
exchange offer is commenced for 15 percent or more of the Company's common
stock, unless, in either case, the transaction was approved by the Company's
board of directors. If the rights become exercisable, each right will initially
entitle the Company's shareholders to purchase .0001 of a share of the Company's
Series A junior participating preferred stock, $.01 par value, at an exercise
price of $75. In addition, except with respect to transactions approved by the
Company's board of directors, if the Company is involved in a merger or other
transaction with another company in which it is not the surviving corporation,
or the Company sells or transfers 50 percent or more of its assets or earning
power to another company, each right (other than rights owned by the acquirer)
will entitle its holder to purchase $75 worth of the common stock of the
acquirer at half the market value at that time. The Company is entitled to
redeem the rights at $.001 per right at any time prior to the tenth business day
(or later, if so determined by the board of directors) after the acquisition of
15 percent or more of the Company's common stock. Unless the rights are redeemed
or exchanged earlier, they will expire on July 16, 2011.
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KADANT INC.
10. Subsequent Events (continued)
Recent Accounting Pronouncement
In July 2001, the Financial Accounting Standards Board released for
issuance Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No.
141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. SFAS No. 142 changes the accounting
for goodwill from an amortization method to an impairment-only approach. Under
SFAS No. 142, effective for the fiscal year beginning December 30, 2001,
amortization of goodwill to earnings will cease and instead, the carrying value
of goodwill will be evaluated for impairment on at least an annual basis.
Amortization of goodwill, on an after-tax basis, for the three-month and
six-month periods ended June 30, 2001, was $588,000 and $1,172,000,
respectively. The Company is evaluating the impact of these standards and has
not yet determined the effect, if any, of adoption of the impairment requirement
on its financial statements.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks,
"estimates," and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause our results
to differ materially from those indicated by such forward-looking statements,
including those detailed under the heading "Risk Factors" in the Information
Statement filed with the Securities and Exchange Commission as Exhibit 99.1 to
our Current Report on Form 8-K on August 6, 2001.
Overview
We operate in two segments: the Pulp and Papermaking Equipment and Systems
(Papermaking Equipment) segment and the Composite and Fiber-based Products
segment. We are a leading designer and manufacturer of stock-preparation systems
and equipment, papermaking machine accessories and water-management systems for
the pulp and paper industry. We have been in operation for more than 100 years
and have a large, stable customer base that includes most paper manufacturers in
the world. We also have one of the largest installed bases of equipment in the
pulp and paper industry, which provides us with a relatively stable, higher
margin, spare parts and consumables business. In addition, we manufacture and
market composite and fiber-based products, including composite building
products.
Prior to our incorporation, we operated as a division of Thermo Electron
Corporation. We were incorporated in Delaware in November 1991 as a wholly owned
subsidiary of Thermo Electron. We conducted an initial public offering of our
common stock in November 1992 and became a majority-owned subsidiary of Thermo
Electron. On July 12, 2001, we changed our name from Thermo Fibertek Inc. to
Kadant Inc., and on August 8, 2001, we were spunoff from Thermo Electron and
became a fully independent public company (Note 9).
Pulp and Papermaking Equipment and Systems Segment
Our Papermaking Equipment segment designs and manufactures
stock-preparation equipment, paper machine accessories and water-management
systems for the paper and paper recycling industries. Principal products
manufactured by this segment include:
- custom-engineered systems and equipment for the preparation of
wastepaper for conversion into recycled paper;
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KADANT INC.
Overview (continued)
- accessory equipment and related consumables important to the efficient
operation of papermaking machines; and
- water-management systems essential for the continuous cleaning of
papermaking machine fabrics and the draining, purifying and recycling
of process water for paper sheet and web formation.
Composite and Fiber-based Products Segment
Our Composite and Fiber-based Products segment, represented by our Thermo
Fibergen subsidiary, consists of our composite building and fiber-based product
lines. We develop, produce and market fiber-based composite building products,
primarily for the building industry, used for such applications as soundwalls,
privacy fencing, decking and roof tiles. We also employ patented technology to
produce biodegradable absorbing granules from papermaking byproducts. These
granules are primarily used as agricultural carriers.
In January 2001, we acquired the remaining 49% equity interest that we did
not already own in NEXT Fiber Products, which is responsible for our composite
building products line. We established a composite building products
manufacturing facility in Green Bay, Wisconsin, and began limited production at
the facility in 2000.
Prior to September 2000, this segment owned and operated a plant that
provided water-clarification and fiber-recovery services to a host mill on a
long-term contract basis. The plant, which we began operating in July 1998,
cleaned and recycled water and long fiber for reuse in the papermaking process.
We sold this plant to the host mill in September 2000, although we intend to
continue operating in this line of business and are pursuing other
fiber-recovery projects.
Dryers and Pollution-control Equipment Segment
Prior to February 1999, we also operated in the Dryers and
Pollution-control Equipment segment, which consisted of our Thermo Wisconsin
Inc. subsidiary. This segment manufactured and marketed dryers and
pollution-control equipment for the printing, papermaking and converting
industries. In February 1999, we sold our Thermo Wisconsin subsidiary for $13.6
million in cash.
International Sales
During 2000, approximately 49% of our sales were to customers outside the
United States, principally in Europe. We generally seek to charge our customers
in the same currency as our operating costs. However, our financial performance
and competitive position can be affected by currency exchange rate fluctuations
affecting the relationship between the U.S. dollar and foreign currencies. We
reduce our exposure to currency fluctuations through the use of forward currency
exchange contracts. We may enter into forward contracts to hedge certain firm
purchase and sale commitments denominated in currencies other than our
subsidiaries' functional currencies. These contracts principally hedge
transactions denominated in U.S. dollars, French francs and Canadian dollars.
Industry Outlook
Our products are primarily sold to the pulp and paper industry. The paper
industry is currently in a relatively severe down cycle, with falling pulp and
paper prices and decreased capital spending. As a consequence, the industry has
gone through a major consolidation. As paper companies continue to consolidate,
they frequently reduce capacity. This trend, along with paper companies' actions
to quickly reduce operating rates and restrict capital spending programs when
they perceive weakness in their markets, has adversely affected our business. We
expect that there
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KADANT INC.
Overview (continued)
will continue to be a significant amount of downtime in the pulp and paper
industry in 2001. This, coupled with the strong U.S. dollar and high energy
costs, will continue to produce a weak market environment that will soften
demand for our products in the foreseeable future. Our results for 2001 and
possibly 2002 will be affected by the ongoing weak market conditions in the pulp
and paper industry. In the longer term, we expect the consolidation in the paper
industry and improved capacity management will be favorable both to paper
companies and to their suppliers. In light of these factors, we expect earnings
in the third quarter of 2001 for the company overall to be in the range of $.15
to $.20 per share, on revenues of $55 to $60 million. For the year 2001, we
expect earnings per share of $.80 to $.90, on revenues of $225 to $230 million.
Looking ahead to 2002, we estimate earnings for the year to increase to $.90 to
$1.05 per share by focusing on a more favorable product mix that includes
higher-margin aftermarket sales and reducing operating expenses in our
businesses that serve the pulp and paper industry, as well as lowering operating
losses in the composites business. Revenues in 2002 are expected to be between
$225 and $230 million. In the Composite and Fiber-based Products segment, we
expect our growth will primarily come from our recently introduced composite
building products line, which consists of soundwall systems, decking, privacy
fencing and roofing tiles. Although startups are difficult to forecast, our
estimate of revenues from this business for each of the remaining quarters in
2001 is $300,000 to $500,000, and for the year 2001 just below $2 million.
Revenues in 2002 are expected to be $4 to $6 million from sales of composites.
These results represent our lower expectations as we work to expand our
distribution network for these fiber-based building materials. We believe that
the market for composite building products will grow as consumer awareness of
the advantages of these products increases their acceptance as an alternative to
traditional wood products.
Results of Operations
Second Quarter 2001 Compared With Second Quarter 2000
- -----------------------------------------------------
Revenues
Revenues decreased to $56.7 million in the second quarter of 2001 from
$60.6 million in the second quarter of 2000. The unfavorable effects of currency
translation due to the strengthening in value of the U.S. dollar relative to
other currencies in countries in which we operate decreased revenues at the
Papermaking Equipment segment by $1.0 million in the second quarter of 2001.
Pulp and Papermaking Equipment and Systems Segment. Excluding the results
of acquisitions and the effect of currency translation, revenues in our
Papermaking Equipment segment decreased $3.4 million, or 6%. Revenues from that
segment's accessories and water management product lines decreased $1.7 million
and $1.3 million, respectively, primarily as a result of a decrease in demand in
North America due to adverse market conditions. Revenues from the Papermaking
Equipment segment's stock-preparation equipment product line decreased $0.3
million as a result of a decrease in sales in North America, which was largely
offset by an increase in sales in Europe. We expect relatively little growth in
2001 in North America due to weak demand, while Europe is expected to be
slightly stronger. We expect to see stronger demand for our products and systems
in developing markets, such as China.
Composite and Fiber-based Products Segment. The Composite and Fiber-based
Products segment revenues increased $0.3 million, primarily due to $0.4 million
of sales from its recently introduced composite building products and $0.3
million increase in sales from the fiber-based products business. These
increases were offset in part by a $0.4 million decrease in revenues as a result
of the sale of the fiber-recovery and water-clarification services plant in
September 2000.
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KADANT INC.
Second Quarter 2001 Compared With Second Quarter 2000 (continued)
- -----------------------------------------------------
Gross Profit Margin
The gross profit margin decreased to 36% in the second quarter of 2001
from 37% in the second quarter of 2000. The gross profit margin decreased at the
Composite and Fiber-based Products segment, primarily due to the absence in 2001
of higher-margin revenues from the fiber-recovery and water-clarification
services plant, as well as negative gross profit margins as a result of startup
efforts at its new composite building products business. The gross profit margin
was unchanged at 37% at the Papermaking Equipment segment in the second quarters
of 2001 and 2000.
Other Operating Expenses
Selling, general, and administrative expenses as a percentage of revenues
remained unchanged at 26% in the second quarters of 2001 and 2000. Selling,
general, and administrative expenses decreased to $14.6 million in 2001 from
$15.7 million in 2000 due to decreased general and administrative expenses in
the Papermaking Equipment segment and the absence in the 2001 period of a $0.6
million charge for a customer dispute expensed in 2000. Prior to the spin off,
the Company and Thermo Electron were parties to a corporate services agreement
under which Thermo Electron's corporate staff provided certain administrative
services, for which the Company was assessed an annual fee equal to 0.8% of the
Company's consolidated revenues. Effective April 2001, the fee under this
agreement was reduced to 0.6%, 0.4%, and 0.2% for the fiscal quarters ending
June 30, 2001, September 29, 2001, and December 29, 2001, respectively, plus
out-of-pocket and third party expenses. The corporate services agreement
terminated as of the Spinoff Date and was replaced by a transition services
agreement with the same fee structure (Notes 9 and 10).
Research and development expenses decreased slightly to $1.9 million in
the second quarter of 2001, compared with $2.0 million in the second quarter of
2000, or 3% of revenues in both periods. We expect research and development
expenses to increase as we develop new products at our composite building
products business.
Gain on Sale of Property
In June 2000, the Company sold its interest in a tissue mill for $3.9
million in cash, resulting in a pretax gain of $1.0 million.
Interest Income and Expense
Interest income decreased to $1.8 million in the second quarter of 2001
from $2.7 million in the second quarter of 2000, due to lower average invested
balances and lower prevailing interest rates. We expect interest income to
decrease in 2001 as a result of lower cash balances due to the September 2000
redemption and the expected September 2001 redemption of Thermo Fibergen's
common stock, as well as lower prevailing interest rates. Interest expense was
unchanged at $1.9 million in the second quarters of 2001 and 2000.
Income Taxes
The effective tax rate was 42% in the second quarter of 2001, compared
with 41% in the second quarter of 2000. The effective tax rates exceeded the
statutory federal income tax rate primarily due to the impact of state income
taxes and nondeductible expenses.
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KADANT INC.
Second Quarter 2001 Compared With Second Quarter 2000 (continued)
- -----------------------------------------------------
Minority Interest
Minority interest income in the second quarter of 2001 primarily
represents the minority investors' share of losses in our majority-owned
subsidiaries. Minority interest expense in the second quarter of 2000 primarily
represents accretion of Thermo Fibergen's common stock subject to redemption,
offset in part by the minority investors' share of losses in Thermo Fibergen's
NEXT Fiber Products subsidiary.
Contingency
Sequa Corporation has made a claim in arbitration against us for $3.5
million for alleged breach of the contract pursuant to which Sequa purchased the
stock of our subsidiary, Thermo Wisconsin Inc., in February 1999. We have denied
the charges and are defending the matter vigorously. In the opinion of
management, the ultimate resolution of this matter will not materially affect
our financial statements.
First Six Months 2001 Compared With First Six Months 2000
- ---------------------------------------------------------
Revenues
Revenues decreased to $115.6 million in the first six months of 2001 from
$118.5 million in the first six months of 2000. The unfavorable effects of
currency translation due to the strengthening in value of the U.S. dollar
relative to other currencies in countries in which we operate decreased revenues
at the Papermaking Equipment segment by $3.0 million in the first six months of
2001.
Pulp and Papermaking Equipment and Systems Segment. Excluding the results
of acquisitions and the effect of currency translation, revenues in our
Papermaking Equipment segment decreased $1.1 million, or 1%. Revenues from that
segment's stock-preparation equipment product line increased $3.2 million
primarily as a result of an increase in sales in Europe, offset in part by a
decrease in sales in North America. Revenues from the Papermaking Equipment
segment's accessories and water management product lines decreased $3.2 million
and $0.9 million, respectively, primarily as a result of a decrease in demand in
North America due to adverse market conditions.
Composite and Fiber-based Products Segment. The Composite and Fiber-based
Products segment revenues increased $0.5 million, primarily due to $1.3 million
of sales from its recently introduced composite building products. This increase
was offset in part by a $0.7 million decrease in revenues as a result of the
sale of the fiber-recovery and water-clarification services plant in September
2000.
Gross Profit Margin
The gross profit margin decreased to 37% in the first six months of 2001
from 39% in the first six months of 2000. The gross profit margin decreased at
the Composite and Fiber-based Products segment, due to an increase of
approximately $0.4 million in the cost of natural gas at the fiber-based
products business in the first six months of 2001, the absence in 2001 of
higher-margin revenues from the fiber-recovery and water-clarification services
plant and negative gross profit margins as a result of startup efforts at its
new composite building products business. The gross profit margin was unchanged
at 39% at the Papermaking Equipment segment in the first six months of 2001 and
2000.
Other Operating Expenses
Selling, general, and administrative expenses as a percentage of revenues
remained relatively unchanged at 26% in the first six months of 2001 compared
with 27% in 2000. Selling, general, and administrative expenses decreased to
$30.4 million in 2001 from $31.6 million in 2000 due to the reasons discussed in
the results of operations for the second quarter.
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KADANT INC.
First Six Months 2001 Compared With First Six Months 2000 (continued)
- ---------------------------------------------------------
Research and development expenses decreased slightly to $3.7 million in
the first six months of 2001, compared with $3.8 million in the first six months
of 2000, or 3% of revenues in both periods.
Gain on Sale of Property
In June 2000, the Company sold its interest in a tissue mill for $3.9
million in cash, resulting in a pretax gain of $1.0 million.
Interest Income and Expense
Interest income decreased to $4.0 million in the first six months of 2001
from $5.2 million in the first six months of 2000, due to lower average invested
balances and lower prevailing interest rates. Interest expense was relatively
unchanged at $3.7 million in the first six months of 2001 compared with $3.8
million in the first six months of 2000.
Income Taxes
The effective tax rate was 42% in the first six months of 2001 and 41% in
the first six months of 2000. The effective tax rates exceeded the statutory
federal income tax rate primarily due to the impact of state income taxes and
nondeductible expenses.
Minority Interest
Minority interest income in the first six months of 2001 primarily
represents the minority investors' share of losses in our majority-owned
subsidiaries. Minority interest expense in the first six months of 2000
primarily represents accretion of Thermo Fibergen's common stock subject to
redemption, offset in part by the minority investors' share of losses in Thermo
Fibergen's NEXT Fiber Products subsidiary.
Cumulative Effect of Change in Accounting Principle
In accordance with the requirements of Securities and Exchange Commission
Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements,"
we adopted the pronouncement as of January 2, 2000, and recorded a charge in the
first quarter of 2000 representing the cumulative effect of the change in
accounting principle of $0.9 million, net of an income tax benefit of $0.6
million.
Liquidity and Capital Resources
Consolidated working capital was $180.3 million at June 30, 2001, compared
with $173.1 million at December 30, 2000. Included in working capital are cash,
cash equivalents, and available-for-sale investments of $163.2 million at June
30, 2001, compared with $148.6 million at December 30, 2000. In addition, we had
$3.5 million and $5.7 million invested in an advance to affiliate as of June 30,
2001 and December 30, 2000, respectively. Of the total cash, cash equivalents,
and available-for-sale investments at June 30, 2001, $12.0 million and $7.3
million was held by our majority-owned Thermo Fibergen and Fiberprep Inc.
subsidiaries, respectively, and the remainder was held by us and our wholly
owned subsidiaries. At June 30, 2001, $45.6 million of our cash, cash
equivalents, and available-for-sale investments was held by our foreign
subsidiaries.
During the first six months of 2001, $13.3 million of cash was provided by
operating activities compared with $10.5 million in the first six months of
2000. A decrease in accounts receivable provided cash of $7.7 million, primarily
in the Papermaking Equipment segment's accessories and stock-preparation product
lines due to improved collection efforts and the timing of payments, and to a
lesser extent, the Company's overall decrease in revenues.
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KADANT INC.
Liquidity and Capital Resources (continued)
Inventories and unbilled contract costs and fees used cash of $4.8 million,
primarily in the accessories and stock-preparation product lines, including $3.4
million related to an increase in inventories, and $1.4 million related to an
increase in unbilled contract costs and fees, due to the timing of billings.
Cash of $2.7 million was used for an increase in other current assets, primarily
in the accessories and stock-preparation product lines and, to a lesser extent,
an increase in deferred tax asset at the Composite and Fiber-based Products
segment. An increase in accounts payable provided $2.5 million of cash primarily
in the accessories and stock-preparation product lines due to the timing of
payments.
Our investing activities, excluding available-for-sale investments and
advance to affiliate activity, used $1.1 million of cash in the first six months
of 2001, compared with $3.0 million in the first six months of 2000. During the
first six months of 2001, we purchased property, plant, and equipment for $2.4
million, including $1.7 million at Thermo Fibergen, offset in part by collection
of $1.2 million from a note receivable related to Thermo Fibergen's September
2000 sale of its fiber-recovery and water-clarification systems plant.
Our financing activities used $0.2 million of cash in the first six months
of 2001, compared with $0.4 million of cash provided by financing activities in
2000. During the first six months of 2001, we used $0.5 million to fund the
repayment of a long-term obligation, offset in part by $0.3 million of cash
provided by the issuance of Company and subsidiary common stock.
During the month of September 2000, the initial redemption period, holders
of Thermo Fibergen's common stock and common stock redemption rights surrendered
2,713,951 shares of Thermo Fibergen's common stock at a redemption price of
$12.75 per share, for a total $34.6 million. Thermo Fibergen used available
working capital to fund the payment and retired these shares immediately
following the redemption. Holders of a redemption right have the option to
require Thermo Fibergen to redeem one share of Thermo Fibergen's common stock at
a redemption price of $12.75 per share in September 2001, the next and final
redemption period. A redemption right may only be exercised if the holder owns a
share of Thermo Fibergen's common stock at the same time. As of June 30, 2001,
there were 2,001,049 redemption rights outstanding and 1,119,499 shares of
Thermo Fibergen's common stock held by persons other than us. To the extent the
number of rights exceeds the number of shares of Thermo Fibergen's common stock
held by persons other than us, the maximum redemption value that Thermo Fibergen
would be required to pay is an amount equal to the redemption price of $12.75
per share times the total number of shares of Thermo Fibergen's common stock
outstanding held by persons other than us at the time of the redemption. At June
30, 2001, we expect this amount will not exceed $17.0 million. The redemption
rights are guaranteed, on a subordinated basis, by Thermo Electron, subject to
certain conditions included in a plan and agreement of distribution (Note 10),
but we are required to reimburse Thermo Electron if they make any payment under
the guarantee. In addition, we have agreed to lend Thermo Fibergen up to $15
million on commercially reasonable terms for the September 2001 redemption
obligation and for working capital needs.
At June 30, 2001, we had $76.6 million of undistributed foreign earnings
that could be subject to tax if remitted to the U.S. We do not currently intend
to repatriate undistributed foreign earnings into the U.S., and do not expect
that this will have a material adverse effect on our current liquidity.
During the remainder of 2001, we plan to make expenditures for property,
plant, and equipment of approximately $3.0 million. Included in this amount is
$1.4 million for Thermo Fibergen, which intends to make capital expenditures to
develop and expand its fiber-based composites business. This business will
continue to require a significant amount of capital investment as the business
grows. Our ability to use our cash and to incur additional debt will be limited
by financial covenants in our post-distribution agreements with Thermo Electron
(Note 10). We believe that our existing resources are sufficient to meet the
capital requirements of our existing operations for the foreseeable future.
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KADANT INC.
Liquidity and Capital Resources (continued)
In compliance with the IRS ruling on the spin off, we intend to issue
equity in the range of 10 to 20 percent of our outstanding common stock within
one year of the distribution to support our current business plan, which
includes the repayment of debt, acquisitions, strategic partnerships and
investment in additional capacity for our composite building products business
(Note 8).
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
Our exposure to market risk from changes in interest rates, equity prices,
and foreign currency exchange rates has not changed materially from our exposure
at year-end 2000.
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
On May 15, 2001, at the Annual Meeting of Stockholders, the stockholders
elected four incumbent directors to a one-year term expiring in 2002. The
Directors elected at the meeting were: Francis L. McKone, Donald E. Noble,
William A. Rainville, and Richard F. Syron. Mr. McKone and Mr. Noble each
received 58,022,645 shares voted in favor of his election and 9,509 shares voted
against. Mr. Rainville received 58,022,149 shares voted in favor of his
election and 10,005 shares voted against. Dr. Syron received 58,022,600 shares
voted in favor of his election and 9,554 shares voted against. No abstentions
or broker "non-votes" were recorded in the election of directors. The voting
results reported in this item have not been restated to reflect the Company's
one-for-five reverse stock split.
At the Annual Meeting, the stockholders also approved proposals 2 through
11, amendments to our certificate of incorporation (the "Charter Proposals"), as
follows:
- Proposal 2, to authorize the issuance of "blank check" preferred stock;
55,979,725 shares in favor, 207,884 shares against, 3,356 shares
abstained, and 1,841,189 broker non-votes;
- Proposal 3, to require the affirmative vote of either (A) a majority of
the directors present at a meeting of our Board of Directors (the
"Board") at which a quorum is present or (B) the holders of at least
75% of the votes which all the stockholders would be entitled to cast,
to adopt, amend, alter, or repeal the By-laws of the Company;
56,019,131 shares in favor, 169,154 shares against, 2,680 shares
abstained, and 1,841,189 broker non-votes;
- Proposal 4, to fix the minimum size of the Board at three directors and
establish a classified Board having three classes with staggered
three-year terms; 56,008,432 shares in favor, 180,123 shares against,
2,410 shares abstained, and 1,841,189 broker non-votes;
- Proposal 5, to allow the removal of directors only for cause and only
upon the affirmative vote of the holders of at least 75% of the votes
cast in any annual election of the directors or class of directors and
provide that any vacancy on the Board be filled only be a vote of the
majority of directors then in office; 56,009,673 shares in favor,
179,162 shares against, 2,130 shares abstained, and 1,841,189 broker
non-votes;
- Proposal 6, to require advance notice of stockholder nominations for
election of directors and other business to be brought by stockholders
before a meeting of stockholders in the manner provided by our By-laws;
57,835,387 shares in favor, 193,918 shares against, 2,849 shares
abstained, and no broker non-votes;
- Proposal 7, to eliminate the ability of stockholders to take action by
written consent without a meeting; 56,061,661 shares in favor, 125,982
shares against, 3,322 shares abstained, and 1,841,189 broker non-votes;
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KADANT INC.
Item 4 - Submission of Matters to a Vote of Security Holders (continued)
- ------------------------------------------------------------
- Proposal 8, to limit the ability to call special meetings of the
stockholders to the Board, the chairman of the board and the chief
executive officer or, if none, the president of the Company and to
limit business transacted at any special meeting of stockholders to
matters relating to the purposes stated in the notice calling that
meeting; 57,898,404 shares in favor, 130,202 shares against, 3,548
shares abstained, and no broker non-votes;
- Proposal 9, to effect a reverse split of our Common Stock, $.01 par
value per share, pursuant to which each five shares of Common Stock
then outstanding would be converted into one share of Common Stock;
57,864,547 shares in favor, 165,155 shares against, 2,452 shares
abstained, and no broker non-votes;
- Proposal 10, to change the name of the Company to "Kadant Inc.";
57,944,338 shares in favor, 85,321 shares against, 2,495 shares
abstained, and no broker non-votes; and
- Proposal 11, to consolidate the foregoing amendments and to update the
language of the certificate of incorporation to eliminate certain
ambiguities and to more closely follow the Delaware General Corporate
Law and current corporate practice; 56,017,706 shares in favor, 168,420
shares against, 4,839 shares abstained, and 1,841,189 broker non-votes.
In addition, the stockholders approved the amendment of our equity
incentive plan to increase the number of shares of Common Stock available under
the plan by 8,000,000 shares, as follows: 55,930,032 shares were voted in favor,
259,045 shares were voted against, 1,888 shares abstained, and 1,841,189 broker
non-votes were recorded. The stockholders also approved the amendment of our
employee stock purchase plan to increase the number of shares of Common Stock
available under the plan by 750,000 shares and to extend the term of the plan to
November 1, 2010, as follows: 56,072,468 shares were voted in favor of the
proposal, 116,243 shares were voted against, 2,254 shares abstained, and
1,841,189 broker non-votes were recorded.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
(b) Reports on Form 8-K
On June 19, 2001, the Company filed a Current Report on Form 8-K with
respect to certain corporate transactions affecting the Company.
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KADANT INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized as of the 14th day of August 2001.
KADANT INC.
/s/ Thomas M. O'Brien
--------------------------------------
Thomas M. O'Brien
Chief Financial and Accounting Officer
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KADANT INC.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- --------------------------------------------------------------------------------
3.1 Amended and Restated Certificate of Incorporation of the Company,
as filed with the Secretary of State of the State of Delaware on
August 7, 2001.
3.2 By-Laws of the Company, as amended and restated.
4.1 Rights Agreement, dated as of July 16, 2001, between the Company
and American Stock Transfer & Trust Company, which includes as
Exhibit A the Form of Certificate of Designations, as Exhibit B
the Form of Rights Certificate, and as Exhibit C the Summary of
Rights to Purchase Preferred Stock (filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K [File No. 1-11406], filed
with the Commission on July 17, 2001), and incorporated herein by
reference.
10.1 Form of Indemnification Agreement between the Company and its
directors and officers.
10.2 Form of Executive Retention Agreement between the Company and its
executive officers (Each executive officer has a two-year
agreement, except Mr. William A. Rainville, who has a three-year
agreement).
10.3 Plan and Agreement of Distribution, dated as of August 3, 2001,
between the Company and Thermo Electron Corporation (filed as
Exhibit 99.3 to the Company's Current Report on Form 8-K [File
No. 1-11406] filed with the Commission on August 6, 2001), and
incorporated in this document by reference.
10.4 Transition Services Agreement, dated as of August 3, 2001,
between the Company and Thermo Electron Corporation (filed as
Exhibit 99.5 to the Company's Current Report on Form 8-K [File
No. 1-11406] filed with the Commission on August 6, 2001), and
incorporated herein by reference.
10.5 Tax Matters Agreement, dated as of August 8, 2001, between the
Company and Thermo Electron Corporation (filed as Exhibit 99.4 to
the Company's Current Report on Form 8-K [File No. 1-11406] filed
with the Commission on August 6, 2001), and incorporated herein
by reference.
Exhibit 10.2
EXECUTIVE RETENTION AGREEMENT
THIS AGREEMENT by and between KADANT INC., a Delaware corporation (the
"Company"), and _________________ (the "Executive") is made as of ****, ****
(the "Effective Date").
WHEREAS, the Company recognizes that, as is the case with many
publicly-held corporations, the possibility of a change in control of the
Company exists and that such possibility, and the uncertainty and questions
which it may raise among key personnel, may result in the departure or
distraction of key personnel to the detriment of the Company and its
stockholders;
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that appropriate steps should be taken to reinforce and encourage the
continued employment and dedication of the Company's key personnel without
distraction from the possibility of a change in control of the Company and
related events and circumstances; and
NOW, THEREFORE, as an inducement for and in consideration of the
Executive remaining in its employ, the Company agrees that the Executive shall
receive the severance benefits set forth in this Agreement in the event the
Executive's employment with the Company is terminated under the circumstances
described below subsequent to a Change in Control (as defined in Section 1.1).
1. Key Definitions.
As used herein, the following terms shall have the following respective
meanings:
1.1 "Change in Control" means an event or occurrence set forth in
any one or more of subsections (a) through (d) below (including an event or
occurrence that constitutes a Change in Control under one of such subsections
but is specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership of any capital stock of the Company if, after such acquisition, such
Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) 40% or more of either (i) the then-outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then-outstanding securities of the Company entitled
to vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change in Control: (i) any
acquisition by the Company, (ii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (iii) any acquisition by any corporation pursuant
to a transaction which complies with clauses (i) and (ii) of subsection (c) of
this Section 1.1; or
(b) such time as the Continuing Directors (as defined below)
do not constitute a majority of the Board (or, if applicable, the Board of
Directors of a successor corporation to the Company), where the term "Continuing
Director" means at any date a member of the Board (i) who was a member of the
Board on the date of the execution of this Agreement or (ii) who was nominated
or elected subsequent to such date by at least a majority of the directors who
were Continuing Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from this clause (ii)
any individual whose initial assumption of office occurred as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by
or on behalf of a person other than the Board; or
(c) the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving the Company or a sale or
other disposition of all or substantially all of the assets of the Company in
one or a series of transactions (a "Business Combination"), unless, immediately
following such Business Combination, each of the following two conditions is
satisfied: (i) all or substantially all of the individuals and entities who were
the beneficial owners of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors,
respectively, of the resulting or acquiring corporation in such Business
Combination (which shall include, without limitation, a corporation which as a
result of such transaction owns the Company or substantially all of the
Company's assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the "Acquiring
Corporation") in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, respectively; and (ii)
no Person (excluding the Acquiring Corporation or any employee benefit plan (or
related trust) maintained or sponsored by the Company or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 40% or more of the then
outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such corporation
entitled to vote generally in the election of directors; or
(d) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
1.2 "Change in Control Date" means the first date during the Term (as
defined in Section 2) on which a Change in Control occurs. Anything in this
Agreement to the contrary notwithstanding, if (a) a Change in Control occurs,
(b) the Executive's employment with the Company is terminated prior to the date
on which the Change in Control occurs, and (c) it is reasonably demonstrated by
the Executive that such
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termination of employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change in Control or (ii) otherwise
arose in connection with or in anticipation of a Change in Control, then for all
purposes of this Agreement the "Change in Control Date" shall mean the date
immediately prior to the date of such termination of employment.
1.3 "Cause" means the Executive's willful engagement in illegal
conduct or gross misconduct after the Change in Control Date which is materially
and demonstrably injurious to the Company. For purposes of this Section 1.3, no
act or failure to act by the Executive shall be considered "willful" unless it
is done, or omitted to be done, in bad faith and without reasonable belief that
the Executive's action or omission was in the best interests of the Company.
1.4 "Good Reason" means the occurrence, without the Executive's
written consent, of any of the events or circumstances set forth in clauses (a)
through (g) below. Notwithstanding the occurrence of any such event or
circumstance, such occurrence shall not be deemed to constitute Good Reason if,
prior to the Date of Termination specified in the Notice of Termination (each as
defined in Section 3.2(a)) given by the Executive in respect thereof, such event
or circumstance has been fully corrected and the Executive has been reasonably
compensated for any losses or damages resulting therefrom (provided that such
right of correction by the Company shall only apply to the first Notice of
Termination for Good Reason given by the Executive).
(a) the assignment to the Executive of duties
inconsistent in any material respect with the Executive's position (including
status, offices, titles and reporting requirements), authority or
responsibilities in effect immediately prior to the earliest to occur of (i) the
Change in Control Date, (ii) the date of the execution by the Company of the
initial written agreement or instrument providing for the Change in Control or
(iii) the date of the adoption by the Board of Directors of a resolution
providing for the Change in Control (with the earliest to occur of such dates
referred to herein as the "Measurement Date") or a material diminution in such
position, authority or responsibilities;
(b) a reduction in the Executive's annual base salary as
in effect on the Measurement Date or as the same was or may be increased
thereafter from time to time;
(c) the failure by the Company to (i) continue in
effect any material compensation or benefit plan or program (including without
limitation any life insurance, medical, health and accident or disability plan
and any vacation or automobile program or policy) (a "Benefit Plan") in which
the Executive participates or which is applicable to the Executive immediately
prior to the Measurement Date, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to such plan
or program, (ii) continue the Executive's participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable than
the basis existing immediately prior to the Measurement Date (iii) award cash
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bonuses to the Executive in amounts and in a manner substantially consistent
with past practice in light of the Company's financial performance or (iv)
continue to provide any material fringe benefit enjoyed by Executive immediately
prior to the Measurement Date;
(d) a change by the Company in the location at which the
Executive performs his or her principal duties for the Company to a new
location that is both (i) outside a radius of 50 miles from the Executive's
principal residence immediately prior to the Measurement Date and (ii) more than
30 miles from the location at which the Executive performed his or her principal
duties for the Company immediately prior to the Measurement Date; or a
requirement by the Company that the Executive travel on Company business to a
substantially greater extent than required immediately prior to the Measurement
Date;
(e) the failure of the Company to obtain the agreement from
any successor to the Company to assume and agree to perform this Agreement, as
required by Section 6.1;
(f) a purported termination of the Executive's employment which
is not effected pursuant to a Notice of Termination satisfying the requirements
of Section 3.2(a); or
(g) any failure of the Company to pay or provide to the
Executive any portion of the Executive's compensation or benefits due under
any Benefit Plan within seven days of the date such compensation or benefits are
due, or any material breach by the Company of this Agreement or any employment
agreement with the Executive.
The Executive's right to terminate his or her employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness.
1.5 "Disability" means the Executive's absence from the full-time
performance of the Executive's duties with the Company for 180 consecutive
calendar days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.
2. Term of Agreement. This Agreement, and all rights and obligations of
the parties hereunder, shall take effect upon the Effective Date and shall
expire upon the first to occur of (a) the expiration of the Term (as defined
below) if a Change in Control has not occurred during the Term, (b) the date 18
months after the Change in Control Date, if the Executive is still employed by
the Company as of such later date, or (c) the fulfillment by the Company of all
of its obligations under Sections 4 and 5.2 if the Executive's employment with
the Company terminates within 18 months following the Change in Control Date.
"Term" shall mean the period commencing as of the Effective Date and continuing
in effect through December 31, 2004; provided, however, that commencing on
January 1, 2004 and each January 1, thereafter, the Term shall be
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automatically extended for one additional year unless, not later than 90 days
prior to the scheduled expiration of the Term (or any extension thereof), the
Company shall have given the Executive written notice that the Term will not be
extended.
3. Employment Status; Termination Following Change in Control.
3.1 Not an Employment Contract. The Executive acknowledges that
this Agreement does not constitute a contract of employment or impose on the
Company any obligation to retain the Executive as an employee and that this
Agreement does not prevent the Executive from terminating employment at any
time. If the Executive's employment with the Company terminates for any reason
and subsequently a Change in Control shall occur, the Executive shall not be
entitled to any benefits hereunder except as otherwise provided pursuant to
Section 1.2.
3.2 Termination of Employment.
(a) If the Change in Control Date occurs during the Term, any
termination of the Executive's employment by the Company or by the Executive
within 18 months following the Change in Control Date (other than due to the
death of the Executive) shall be communicated by a written notice to the other
party hereto (the "Notice of Termination"), given in accordance with Section 7.
Any Notice of Termination shall: (i) indicate the specific termination provision
(if any) of this Agreement relied upon by the party giving such notice, (ii) to
the extent applicable, set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) specify the Date of
Termination (as defined below). The effective date of an employment termination
(the "Date of Termination") shall be the close of business on the date specified
in the Notice of Termination (which date may not be less than 15 days or more
than 120 days after the date of delivery of such Notice of Termination), in the
case of a termination other than one due to the Executive's death, or the date
of the Executive's death, as the case may be. In the event the Company fails to
satisfy the requirements of Section 3.2(a) regarding a Notice of Termination,
the purported termination of the Executive's employment pursuant to such Notice
of Termination shall not be effective for purposes of this Agreement.
(b) The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting any such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(c) Any Notice of Termination for Cause given by the Company
must be given within 90 days of the occurrence of the event(s) or
circumstance(s) which constitute(s) Cause. Prior to any Notice of Termination
for Cause being given (and prior to any termination for Cause being effective),
the Executive shall
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be entitled to a hearing before the Board of Directors of the Company at which
the Executive may, at the Executive's election, be represented by counsel and at
which the Executive shall have a reasonable opportunity to be heard. Such
hearing shall be held on not less than 15 days prior written notice to the
Executive stating the Board of Directors' intention to terminate the Executive
for Cause and stating in detail the particular event(s) or circumstance(s) which
the Board of Directors believes constitutes Cause for termination.
(d) Any Notice of Termination for Good Reason given by the
Executive must be given within 90 days of the occurrence of the event(s) or
circumstance(s) which constitute(s) Good Reason.
4. Benefits to Executive.
4.1 Stock Acceleration. If the Change in Control Date occurs
during the Term, then, effective upon the Change in Control Date, (a) each
outstanding option to purchase shares of Common Stock of the Company held by the
Executive shall become immediately exercisable in full and will no longer be
subject to a right of repurchase by the Company and (b) each outstanding
restricted stock award shall be deemed to be fully vested and will no longer be
subject to a right of repurchase by the Company.
4.2 Compensation. If the Change in Control Date occurs during the
Term and the Executive's employment with the Company terminates within 18 months
following the Change in Control Date, the Executive shall be entitled to the
following benefits:
(a) Termination Without Cause or for Good Reason. If the
Executive's employment with the Company is terminated by the Company (other than
for Cause, Disability or Death) or by the Executive for Good Reason within 18
months following the Change in Control Date, then the Executive shall be
entitled to the following benefits:
(i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the following
amounts:
(1) the sum of (A) the Executive's base salary through
the Date of Termination, (B) the product of (x) the annual bonus paid or payable
(including any bonus or portion thereof which has been earned but deferred) for
the most recently completed fiscal year and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (C) the amount of any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued vacation pay, in each case to the
extent not previously paid (the sum of the amounts described in clauses (A),
(B), and (C) shall be hereinafter referred to as the "Accrued Obligations"); and
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(2) the amount equal to (A) [three, two, one]
multiplied by (b) the sum of (x) the Executive's highest annual base salary in
any twelve-month period (on a rolling basis) during the five-year period prior
to the Change in Control Date and (y) the Executive's highest annual bonus in
any twelve-month period (on a rolling basis) during the five-year period prior
to the Change in Control Date.
(ii) for [three, two, one] years after the Date of
Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue to
provide benefits to the Executive and the Executive's family at least equal to
those which would have been provided to them if the Executive's employment had
not been terminated, in accordance with the applicable Benefit Plans in effect
on the Measurement Date or, if more favorable to the Executive and the
Executive's family, in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies; provided,
however, that if the Executive becomes reemployed with another employer and is
eligible to receive a particular type of benefits (e.g., health insurance
benefits) from such employer on terms at least as favorable to the Executive and
the Executive's family as those being provided by the Company, then the Company
shall no longer be required to provide those particular benefits to the
Executive and the Executive's family;
(iii) to the extent not previously paid or provided, the
Company shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is eligible to
receive following the Executive's termination of employment under any plan,
program, policy, practice, contract or agreement of the Company and its
affiliated companies (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits"); and
(iv) for purposes of determining eligibility (but not
the time of commencement of benefits) of the Executive for retiree benefits to
which the Executive is entitled, the Executive shall be considered to have
remained employed by the Company until [three/two/one] years after the Date of
Termination.
(b) Resignation without Good Reason; Termination for Death or
Disability. If the Executive voluntarily terminates his or her employment with
the Company within 18 months following the Change in Control Date, excluding a
termination for Good Reason, or if the Executive's employment with the Company
is terminated by reason of the Executive's death or Disability within 18 months
following the Change in Control Date, then the Company shall (i) pay the
Executive (or the Executive's estate, if applicable), in a lump sum in cash
within 30 days after the Date of Termination, the Accrued Obligations and (ii)
timely pay or provide to the Executive the Other Benefits.
(c) Termination for Cause. If the Company terminates the
Executive's employment with the Company for Cause within 18 months following the
Change in Control Date, then the Company shall (i) pay the Executive, in a lump
sum in cash within 30 days after the Date of Termination, the sum of (A) the
Executive's annual
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base salary through the Date of Termination and (B) the amount of any
compensation previously deferred by the Executive, in each case to the extent
not previously paid, and (ii) timely pay or provide to the Executive the Other
Benefits.
4.3 Taxes.
(a) In the event that the Company undergoes a "Change in
Ownership or Control" (as defined below), and thereafter, the Executive becomes
eligible to receive "Contingent Compensation Payments" (as defined below) the
Company shall, as soon as administratively feasible after the Executive becomes
so eligible determine and notify the Executive (with reasonable detail regarding
the basis for its determinations) (i) which of the payments or benefits due to
the Executive following such Change in Ownership or Control constitute
Contingent Compensation Payments, (ii) the amount, if any, of the excise tax
(the "Excise Tax") payable pursuant to Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), by the Executive with respect to such
Contingent Compensation Payment and (iii) the amount of the "Gross-Up Payment"
(as defined below) due to the Executive with respect to such Contingent
Compensation Payment. Within 30 days after delivery of such notice to the
Executive, the Executive shall deliver a response to the Company (the "Executive
Response") stating either (A) that the Executive agrees with the Company's
determination pursuant to the preceding sentence or (B) that the Executive
disagrees with such determination, in which case the Executive shall indicate
which payment and/or benefits should be characterized as a Contingent
Compensation Payment, the amount of the Excise Tax with respect to such
Contingent Compensation Payment and the amount of the Gross-Up Payment due to
the Executive with respect to such Contingent Compensation Payment. If the
Executive states in the Executive Response that the Executive agrees with the
Company's determination, the Company shall make the Gross-Up Payment to the
Executive within three business days following delivery to the Company of the
Executive Response. If the Executive states in the Executive Response that the
Executive disagrees with the Company's determination, then, for a period of 15
days following delivery of the Executive Response, the Executive and the Company
shall use good faith efforts to resolve such dispute. If such dispute is not
resolved within such 15-day period, such dispute shall be settled exclusively by
arbitration in Boston, Massachusetts, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The Company shall, within
three business days following delivery to the Company of the Executive Response,
make to the Executive those Gross-Up Payments as to which there is no dispute
between the Company and the Executive regarding whether they should be made.
The balance of the Gross-Up Payments shall be made within three business days
following the resolution of such dispute. The amount of any payments to be made
to the Executive following the resolution of such dispute shall be increased by
the amount of the accrued interest thereon computed at the prime rate announced
from time to time by The Wall Street Journal compounded monthly from the date
that such payments originally were due. In the event that the Executive fails to
deliver an Executive Response on or before the required date, the Company's
initial determination shall be final.
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(b) For purposes of this Section 4.3, the following
terms shall have the following respective meanings:
(i) "Change in Ownership or Control" shall mean a
change in the ownership or effective control of the Company or in the ownership
of a substantial portion of the assets of the Company determined in accordance
with Section 280G(b)(2) of the Code.
(ii) "Contingent Compensation Payment" shall mean any
payment (or benefit) in the nature of compensation that is made or supplied to a
"disqualified individual" (as defined in Section 280G(c) of the Code) and that
is contingent (within the meaning of Section 280G(b)(2)(A)(i) of the Code) on a
Change in Ownership or Control of the Company.
(iii) "Gross-Up Payment" shall mean an amount equal to
the sum of (i) the amount of the Excise Tax payable with respect to a Contingent
Compensation Payment and (ii) the amount necessary to pay all additional taxes
imposed on (or economically borne by) the Executive (including the Excise Taxes,
state and federal income taxes and all applicable withholding taxes)
attributable to the receipt of such Gross-Up Payment. For purposes of the
preceding sentence, all taxes attributable to the receipt of the Gross-Up
Payment shall be computed assuming the application of the maximum tax rates
provided by law.
4.4 Outplacement Services. In the event the Executive is
terminated by the Company (other than for Cause, Disability or Death), or the
Executive terminates employment for Good Reason, within 18 months following the
Change in Control Date, the Company shall provide outplacement services through
one or more outside firms of the Executive's choosing up to an aggregate of
$[25,000, 20,000, 15,000] with such services to extend until the earlier of (i)
12 months following the termination of Executive's employment or (ii) the date
the Executive secures full time employment.
4.5 Mitigation. The Executive shall not be required to mitigate
the amount of any payment or benefits provided for in this Section 4 by seeking
other employment or otherwise. Further, except as provided in Section
4.2(a)(ii), the amount of any payment or benefits provided for in this Section 4
shall not be reduced by any compensation earned by the Executive as a result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company or otherwise.
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5. Disputes.
5.1 Settlement of Disputes; Arbitration. All claims by the
Executive for benefits under this Agreement shall be directed to and determined
by the Board of Directors of the Company and shall be in writing. Any denial by
the Board of Directors of a claim for benefits under this Agreement shall be
delivered to the Executive in writing and shall set forth the specific reasons
for the denial and the specific provisions of this Agreement relied upon. The
Board of Directors shall afford a reasonable opportunity to the Executive for a
review of the decision denying a claim. Any further dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration in Boston, Massachusetts, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
5.2 Expenses. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal, accounting and other fees and expenses which
the Executive may reasonably incur as a result of any claim or contest
(regardless of the outcome thereof) by the Company, the Executive or others
regarding the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive regarding the amount of any payment or benefits
pursuant to this Agreement), plus in each case interest on any delayed payment
at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the
Code.
6. Successors.
6.1 Successor to Company. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company expressly to
assume and agree to perform this Agreement to the same extent that the Company
would be required to perform it if no such succession had taken place. Failure
of the Company to obtain an assumption of this Agreement at or prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
constitute Good Reason if the Executive elects to terminate employment, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean the Company as defined above and any
successor to its business or assets as aforesaid which assumes and agrees to
perform this Agreement, by operation of law or otherwise.
6.2 Successor to Executive. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amount would still
be payable to the Executive or the Executive's family hereunder if the Executive
had continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to the executors,
personal representatives or administrators of the Executive's estate.
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7. Notice. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) prepaid via a reputable
nationwide overnight courier service, in each case addressed to the Company, at
245 Wyman Street, Waltham, Massachusetts and to the Executive at the Executive's
principal residence as currently reflected on the Company's records (or to such
other address as either the Company or the Executive may have furnished to the
other in writing in accordance herewith). Any such notice, instruction or
communication shall be deemed to have been delivered five business days after it
is sent by registered or certified mail, return receipt requested, postage
prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service. Either party may give any notice, instruction or
other communication hereunder using any other means, but no such notice,
instruction or other communication shall be deemed to have been duly delivered
unless and until it actually is received by the party for whom it is intended.
8. Miscellaneous.
8.1 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
8.2 Injunctive Relief. The Company and the Executive agree that
any breach of this Agreement by the Company is likely to cause the Executive
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the Executive
shall have the right to specific performance and injunctive relief.
8.3 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts, without regard to conflicts of law principles.
8.4 Waivers. No waiver by the Executive at any time of any breach
of, or compliance with, any provision of this Agreement to be performed by the
Company shall be deemed a waiver of that or any other provision at any
subsequent time.
8.5 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but both of which together shall
constitute one and the same instrument.
8.6 Tax Withholding. Any payments provided for hereunder shall be
paid net of any applicable tax withholding required under federal, state or
local law.
8.7 Entire Agreement. This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or
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warranties, whether oral or written, by any officer, employee or representative
of any party hereto in respect of the subject matter contained herein; and any
prior agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and cancelled.
8.8 Amendments. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
KADANT INC.
-------------------------------------
By: William A. Rainville
President and Chief Executive Officer
EXECUTIVE
-----------------------------------------
[NAME OF EXECUTIVE]
Exhibit 10.1
KADANT INC.
INDEMNIFICATION AGREEMENT
This Agreement, made and entered into this **th day of ***, ****
("Agreement"), by and between Kadant Inc., a Delaware corporation (the
"Company"), and *** ("Indemnitee"):
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to, and activities on behalf of, the corporation;
WHEREAS, uncertainties relating to the continued availability of
adequate directors and officers liability insurance ("D&O Insurance") and
uncertainties relating to indemnification have increased the difficulty of
attracting and retaining such persons;
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that the difficulty in attracting and retaining such persons is
detrimental to the best interests of the Company's stockholders and that the
Company should act to assure such persons that there will be increased certainty
of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company to
obligate itself contractually to indemnify such persons so that they will serve
or continue to serve the Company free from undue concern that they will not be
so indemnified;
WHEREAS, Indemnitee is willing to serve, continue to serve and/or take
on additional service for or on behalf of the Company on the condition that he
or she be so indemnified and that such indemnification be so guaranteed;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. Services by Indemnitee. Indemnitee agrees to serve or continue to
serve as a director or officer of the Company. This Agreement shall not
impose any obligation on Indemnitee or the Company to continue Indemnitee's
position with the Company beyond any period otherwise applicable.
2. Indemnity. The Company shall indemnify, and shall advance
Expenses (as hereinafter defined) to, Indemnitee as provided in this Agreement
and to the fullest extent permitted by law.
3. General. Indemnitee shall be entitled to the rights of indemnification
provided in this Section 3 if, by reason of his or her Corporate Status (as
hereinafter defined), Indemnitee is, or is threatened to be made, a party to
any threatened, pending, or
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completed action, suit, arbitration, alternative dispute resolution proceeding,
investigation, administrative hearing or other proceeding whether civil,
criminal, administrative or investigative (other than an action, suit or
proceeding covered by Section 4 hereof). Pursuant to this Section 3, Indemnitee
shall be indemnified against Expenses, judgments, penalties, fines and/or
amounts paid in settlement incurred by Indemnitee or on his or her behalf in
connection with such action, suit, arbitration, alternative dispute resolution
proceeding, investigation, administrative hearing or other proceeding whether
civil, criminal, administrative or investigative or any claim, issue or matter
therein and whether or not Indemnitee is made a party thereto, if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
4. Proceedings by or in the Right of the Company. In the case of any
threatened, pending or completed action, suit or proceeding by or in the right
of the Company, indemnification shall be made to the maximum extent permitted
under Delaware law.
5. Indemnification for Expenses of a Party who is Wholly or Partly
Successful. Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his or her Corporate Status, a party to and is
successful, on the merits or otherwise, in any action, suit, arbitration,
alternative dispute resolution proceeding, investigation, administrative hearing
or other proceeding whether civil, criminal, administrative or investigative,
Indemnitee shall be indemnified against all Expenses incurred by Indemnitee or
on his or her behalf in connection therewith. If Indemnitee is not wholly
successful but is successful, on the merits or otherwise, as to one or more but
less than all claims, issues or matters in such action, suit, arbitration,
alternative dispute resolution proceeding, investigation, administrative hearing
or other proceeding whether civil, criminal, administrative or investigative,
the Company shall indemnify Indemnitee against all Expenses incurred by
Indemnitee or on his or her behalf in connection with each successfully resolved
claim, issue or matter. For purposes of this Section and without limitation, the
termination of any claim, issue or matter by dismissal, or withdrawal with or
without prejudice, shall be deemed to be a successful result as to such claim,
issue or matter.
6. Advance of Expenses. The Company shall advance all Expenses incurred
by or on behalf of Indemnitee in connection with any action, suit, arbitration,
alternative dispute resolution proceeding, investigation, administrative hearing
or other proceeding involving his or her Corporate Status whether civil,
criminal, administrative or investigative within twenty (20) days after the
receipt by the Company of a statement or statements from Indemnitee requesting
such advance or advances from time to time, whether prior to or after final
disposition of such action, suit, arbitration, alternative dispute resolution
proceeding, investigation, administrative hearing or other proceeding whether
civil, criminal, administrative or investigative. Such statement or statements
shall reasonably evidence the Expenses incurred by Indemnitee and shall include
or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to
repay any
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Expenses advanced if it shall ultimately be determined that Indemnitee is not
entitled to be indemnified against such Expenses, which undertaking shall be
accepted by or on behalf of the Company without reference to the financial
ability of Indemnitee to make repayment.
7. Procedure for Determination of Entitlement to Indemnification.
(a) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board in writing that
Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant to
Section 7(a) hereof, a determination, if required (but only to the extent
required) by applicable law as a precondition to payment, with respect to
Indemnitee's entitlement thereto shall be made in the specific case: (i) if a
Change in Control (as hereinafter defined) shall have occurred, by Independent
Counsel (as hereinafter defined) in a written opinion to the Board, a copy of
which shall be delivered to Indemnitee (unless Indemnitee shall request that
such determination be made by the Board or the stockholders, in which case the
determination shall be made in the manner provided below in clauses (ii) or
(iii)); (ii) if a Change of Control shall not have occurred, (A) by the Board by
a majority vote of Disinterested Directors (as hereinafter defined), even if
less than a quorum, or (B) by a committee of Disinterested Directors designated
by a majority vote of Disinterested Directors, even if less than a quorum, or
(C) if the Disinterested Directors so direct, by Independent Counsel in a
written opinion to the Board, a copy of which shall be delivered to Indemnitee
or (D) by the stockholders of the Company; or (iii) as provided in Section 8(b)
of this Agreement; and, if it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within ten (10) days after
such determination. Indemnitee shall cooperate with the person, persons or
entity making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorney's fees and disbursements) incurred by
Indemnitee in so cooperating shall be borne by the Company (irrespective of the
determination as to Indemnitee's entitlement to indemnification) and the Company
hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 7(b) of this Agreement,
the Independent Counsel shall be selected as provided in this Section 7(c). If a
Change of Control shall not have occurred, the Independent Counsel shall be
selected by the Board,
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and the Company shall give written notice to Indemnitee advising him or her of
the identity of the Independent Counsel so selected. If a Change of Control
shall have occurred, the Independent Counsel shall be selected by Indemnitee
(unless Indemnitee shall request that such selection be made by the Board, in
which event the preceding sentence shall apply), and Indemnitee shall give
written notice to the Company advising it of the identity of the Independent
Counsel so selected. In either event, Indemnitee or the Company, as the case may
be, may, within seven (7) days after such written notice of selection shall have
been given, deliver to the Company or to Indemnitee, as the case may be, a
written objection to such selection. Such objection may be asserted only on the
ground that the Independent Counsel so selected does not meet the requirements
of "Independent Counsel" as defined in Section 14 of this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. If such written objection is made, the Independent Counsel so
selected may not serve as Independent Counsel unless and until a court has
determined that such objection is without merit. If, within twenty (20) days
after submission by Indemnitee of a written request for indemnification pursuant
to Section 7(a) hereof, no Independent Counsel shall have been selected or if
selected, shall have been objected to, in accordance with this Section 7(c),
either the Company or Indemnitee may petition the Court of Chancery of the State
of Delaware or other court of competent jurisdiction for resolution of any
objection which shall have been made by the Company or Indemnitee to the other's
selection of Independent Counsel and/or for the appointment as Independent
Counsel of a person selected by the Court or by such other person as the Court
shall designate, and the person with respect to whom an objection is favorably
resolved or the person so appointed shall act as Independent Counsel under
Section 7(b) hereof. The Company shall pay reasonable fees and expenses of
Independent Counsel incurred in connection with its acting in such capacity
pursuant to Section 7(b) hereof. The Company shall pay any and all reasonable
fees and expenses incident to the procedures of this Section 7(c), regardless of
the manner in which such Independent Counsel was selected or appointed. Upon the
due commencement of any judicial proceeding or arbitration pursuant to Section
9(a) of this Agreement, Independent Counsel shall be discharged and relieved of
any further responsibility in such capacity (subject to the applicable standards
of professional conduct then prevailing).
8. Presumptions and Effect of Certain Proceedings.
(a) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person, persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 7(a) of this
Agreement, and the Company shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
(b) If the person, persons or entity empowered or selected under Section
7 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made such determination within sixty (60) days
after receipt by the Company of the
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request therefor, the requisite determination of entitlement to indemnification
shall be deemed to have been made and Indemnitee shall be entitled to such
indemnification, absent (i) a misstatement by Indemnitee of a material fact, or
an omission of a material fact necessary to make Indemnitee's statement not
materially misleading, in connection with the request for indemnification, or
(ii) a prohibition of such indemnification under applicable law; provided,
however, that such 60-day period may be extended for a reasonable time, not to
exceed an additional thirty (30) days, if the person, persons or entity making
the determination with respect to entitlement to indemnification in good faith
requires such additional time for the obtaining or evaluating of documentation
and/or information relating thereto; and provided, further, that the foregoing
provisions of this Section 8(b) shall not apply (i) if the determination of
entitlement to indemnification is to be made by the stockholders pursuant to
Section 7(b) of this Agreement and if (A) within fifteen (15) days after receipt
by the Company of the request for such determination the Board has resolved to
submit such determination to the stockholders for their consideration at an
annual meeting thereof to be held within one hundred twenty (120) days after
such receipt and such determination is made thereat, or (B) a special meeting of
stockholders is called within fifteen (15) days after such receipt for the
purpose of making such determination, such meeting is held for such purpose
within one hundred five (105) days after having been so called and such
determination is made thereat, or (ii) if the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 7(b) of
this Agreement.
(c) The termination of any action, suit, arbitration, alternative
dispute resolution proceeding, investigation, administrative hearing or other
proceeding whether civil, criminal, administrative or investigative or of any
claim, issue or matter therein by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not (except as otherwise
expressly provided in this Agreement) of itself adversely affect the right of
Indemnitee to indemnification or create a presumption that Indemnitee did not
act in good faith and in a manner which Indemnitee reasonably believed to be in
or not opposed to the best interests of the Company or, with respect to any
criminal action or proceeding, that Indemnitee had reasonable cause to believe
that his or her conduct was unlawful.
9. Remedies of Indemnitee.
(a) In the event that (i) a determination is made pursuant to Section 7
of this Agreement that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 6
of this Agreement, (iii) the determination of entitlement to indemnification is
to be by Independent Counsel pursuant to Section 7(b) of this Agreement and such
determination shall not have been made and delivered in a written opinion within
ninety (90) days after receipt by the Company of the request for
indemnification, (iv) payment of indemnification is not made pursuant to Section
5 of this Agreement within ten (10) days after receipt by the Company of a
written request therefor, or (v) payment of indemnification is not made within
ten (10) days after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made pursuant to
Section
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8 of this Agreement, Indemnitee shall be entitled to an adjudication in an
appropriate court of the State of Delaware, or in any other court of competent
jurisdiction, of Indemnitee's entitlement to such indemnification or advancement
of Expenses. Alternatively, Indemnitee, at his or her option, may seek an award
in arbitration to be conducted by a single arbitrator pursuant to the rules of
the American Arbitration Association. Indemnitee shall commence such proceeding
seeking an adjudication or an award in arbitration within one hundred eighty
(180) days following the date on which Indemnitee first has the right to
commence such proceeding pursuant to this Section 9(a). The Company shall not
oppose Indemnitee's right to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant to
Section 7 of this Agreement that Indemnitee is not entitled to indemnification,
any judicial proceeding or arbitration commenced pursuant to this Section 9
shall be conducted in all respects as a de novo trial, or arbitration, on the
merits and Indemnitee shall not be prejudiced by reason of that adverse
determination. If a Change of Control shall have occurred, in any judicial
proceeding or arbitration commenced pursuant to this Section 9 the Company shall
have the burden of proving that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have been made
pursuant to Section 7 or 8 of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 9, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 9 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 9, seeks a
judicial adjudication of or an award in arbitration to enforce Indemnitee's
rights under, or to recover damages for breach of, this Agreement, Indemnitee
shall be entitled to recover from the Company, and shall be indemnified by the
Company against, any and all expenses (of the types described in the definition
of Expenses in Section 14 of this Agreement) actually and reasonably incurred by
him or her in such judicial adjudication or arbitration, but only if Indemnitee
prevails therein. If it shall be determined in said judicial adjudication or
arbitration that Indemnitee is entitled to receive part but not all of the
indemnification or advancement of expenses sought, the expenses incurred by
Indemnitee in connection with such judicial adjudication or arbitration shall be
appropriately prorated.
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10. Security. To the extent requested by Indemnitee and approved by the
Board, the Company shall at any time and from time to time provide security to
Indemnitee for the Company's obligations hereunder through an irrevocable bank
line of credit, funded trust or other collateral. Any such security, once
provided to Indemnitee, may not be revoked or released without the prior written
consent of Indemnitee.
11. Non-Exclusivity; Duration of Agreement; Insurance; Subrogation.
(a) The rights of indemnification and to receive advancement of Expenses
as provided by this Agreement are in addition to and shall not be deemed
exclusive of any other rights to which Indemnitee may at any time be entitled
under applicable law, the Company's certificate of incorporation or by-laws, any
other agreement, a vote of stockholders or a resolution of directors, or
otherwise. Without limiting the foregoing, the Company shall indemnify
Indemnitee to the fullest extent permitted under Delaware law. This Agreement
shall continue until and terminate upon the later of (a) ten (10) years after
the date that Indemnitee shall have ceased to serve as a director or officer of
the Company or director, officer or other fiduciary of any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
which Indemnitee served at the request of the Company; or (b) the final
termination of all pending actions, suits, arbitrations, alternative dispute
resolution proceedings, investigations, administrative hearings or other
proceedings whether civil, criminal, administrative or investigative in respect
of which Indemnitee is granted rights of indemnification or advancement of
Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to
Section 9 of this Agreement relating thereto. This Agreement shall be binding
upon the Company and its successors and assigns and shall inure to the benefit
of Indemnitee and his or her heirs, executors and administrators.
(b) To the extent that the Company maintains D&O Insurance, Indemnitee
shall be covered by such D&O Insurance in accordance with its terms to the
maximum extent of the coverage available for any director or officer under such
policy or policies.
(c) In the event of any payment under this Agreement, the Company shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
12. Severability; Reformation. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation, each portion
of any Section of this
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Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
13. Exception to Right of Indemnification or Advancement of Expenses.
Notwithstanding any other provision of this Agreement, Indemnitee shall not be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any action, suit or proceeding, or any claim therein, initiated,
brought or made by Indemnitee (i) against the Company, unless a Change in
Control shall have occurred, or (ii) against any person other than the Company,
unless approved in advance by the Board.
14. Definitions. For purposes of this Agreement:
(a) "Change in Control" means an event or occurrence set forth in any
one or more of subsection (i) through (iv) below (including an event or
occurrence that constitutes a Change in Control under one of such subsections
but is specifically exempted from another such subsection):
(i) the acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership of any capital stock of the Company if, after such
acquisition, such Person beneficially owns (within the meaning of Rule
13d-3 promulgated under the Exchange Act) 40% or more of either (A) the
then-outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (B) the combined voting power of the
then-outstanding securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (i), the
following acquisitions shall not constitute a Change in Control: (A) any
acquisition by the Company, (B) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (C) any acquisition by any
corporation pursuant to a transaction which complies with clauses (A)
and (B) of subsection (iii) of this Section 14(a); or
(ii) such time as the Continuing Directors (as defined below) do
not constitute a majority of the Board (or, if applicable, the Board of
Directors of a successor corporation to the Company), where the term
"Continuing Director" means at any date a member of the Board (A) who
was a member of the Board on August 8, 2001 or (B) who was nominated or
elected subsequent to such date by at least a majority of the directors
who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded form
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this clause (B) any individual whose initial assumption of office
occurred as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents, by or on behalf of a
person other than the Board; or
(iii) the consummation of a merger, consolidation,
reorganization, recapitalization or statutory share exchange involving
the Company or a sale or other disposition of all or substantially all
of the assets of the Company in one or a series of transactions (a
"Business Combination"), unless, immediately following such Business
Combination, each of the following two conditions is satisfied: (A) all
or substantially all of the individuals and entities who were the
beneficial owners of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of
the then-outstanding shares of common stock and the combined voting
power of the then-outstanding securities entitled to vote generally in
the election of directors, respectively, of the resulting or acquiring
corporation in such Business Combination (which shall include, without
limitation, a corporation which as a result of such transaction owns the
Company or substantially all of the Company's assets either directly or
through one or more subsidiaries) (such resulting or acquiring
corporation is referred to herein as the "Acquiring Corporation") in
substantially the same proportions as their ownership, immediately prior
to such Business Combination, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities, respectively; and (B) no
Person (excluding the Acquiring Corporation or any employee benefit plan
(or related trust) maintained or sponsored by the Company or by the
Acquiring Corporation) beneficially owns, directly or indirectly, 40% or
more of the then outstanding shares of common stock of the Acquiring
Corporation, or of the combined voting power of the then-outstanding
securities of such corporation entitled to vote generally in the
election of directors; or
(iv) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company; or
(b) "Corporate Status" describes the status of a person who is or was or
has agreed to become a director of the Company, or is or was an officer or
fiduciary of the Company or a director, officer or fiduciary of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which such person is or was serving at the request of the Company.
(c) "Disinterested Director" means a director of the Company who is not
and was not a party to the action, suit, arbitration, alternative dispute
resolution proceeding, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative in respect
of which indemnification is sought by Indemnitee.
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(d) "Expenses" shall include all reasonable attorneys' fees, retainers,
court costs, transcript costs, fees and expenses of experts, including but not
limited to fees and expenses of investment bankers and/or consultants which the
Company has authorized Indemnitee to hire and attorneys for such experts, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, deliver service fees, a reasonable per diem fee to compensate
Indemnitee for his or her professional time and all other disbursements or
expenses of the types customarily incurred in connection with prosecuting,
defending, preparing to prosecute or defend or investigating an action, suit,
arbitration, alternative dispute resolution proceeding, investigation,
administrative hearing or any other proceeding whether civil, criminal,
administrative or investigative.
(e) "Independent Counsel" means a law firm, with over 100 lawyers, that
is experienced in matters of corporation law and neither currently is, nor in
the past five years has been, retained to represent: (i) the Company (including
any subsidiary thereof) or Indemnitee in any matter material to either such
party or (ii) any other party to the action, suit, arbitration, alternative
dispute resolution proceeding, investigation, administrative hearing or any
other proceeding whether civil, criminal, administrative or investigative giving
rise to a claim for indemnification hereunder. Notwithstanding the foregoing,
the term "Independent Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Company or Indemnitee in an
action to determine Indemnitee's rights under this Agreement.
15. Headings. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
16. Modification and Waiver. This Agreement may be amended from time to
time to reflect changes in Delaware law or for other reasons. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by both of the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.
17. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company
in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any matter
which may be subject to indemnification or advancement of Expenses covered
hereunder; provided, however, that the failure to give any such notice shall not
disqualify Indemnitee from indemnification hereunder.
18. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
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(a) If to Indemnitee, to: The address shown beneath
his or her signature on
the last page hereof
(b) If to the Company to: Kadant Inc.
245 Winter Street
Waltham, MA 02451
Attn: Corporate Secretary
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
19. Governing Law. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware.
20. Entire Agreement. This agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of the
subject matter contained herein; and any prior agreement of the parties hereto
in respect of the subject matter contained herein is hereby terminated and
cancelled.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
Attest: KADANT INC.
By: ------------------------ By: -------------------------------------
Sandra L. Lambert William A. Rainville
Secretary President and Chief Executive Officer
INDEMNITEE
-----------------------------------------
Name:
Address:
Exhibit 3.2
AMENDED AND RESTATED BY-LAWS
OF
KADANT INC.
TABLE OF CONTENTS
Page
ARTICLE I STOCKHOLDERS....................................................1
1.1 Place of Meetings...............................................1
1.2 Annual Meeting..................................................1
1.3 Special Meetings................................................1
1.4 Notice of Meetings..............................................1
1.5 Voting List.....................................................1
1.6 Quorum..........................................................2
1.7 Adjournments....................................................2
1.8 Voting and Proxies..............................................2
1.9 Action at Meeting...............................................2
1.10 Nomination of Directors.........................................3
1.11 Notice of Business at Annual Meetings...........................4
1.12 Conduct of Meetings.............................................5
1.13 No Action by Written Consent in Lieu of a Meeting...............6
ARTICLE II DIRECTORS.......................................................6
2.1 General Powers..................................................6
2.2 Number, Election and Qualification..............................6
2.3 Classes of Directors............................................7
2.4 Terms of Office.................................................7
2.5 Allocation of Directors Among Classes in the Event of Increases
or Decreases in the Authorized Number of Directors..............7
2.6 Quorum..........................................................7
2.7 Action at Meeting...............................................7
2.8 Removal.........................................................8
2.9 Vacancies.......................................................8
2.10 Resignation.....................................................8
2.11 Regular Meetings................................................8
2.12 Special Meetings................................................8
2.13 Notice of Special Meetings......................................8
2.14 Meetings by Conference Communications Equipment.................8
2.15 Action by Written Consent.......................................8
2.16 Committees......................................................9
2.17 Compensation of Directors.......................................9
ARTICLE III OFFICERS........................................................9
3.1 Titles..........................................................9
3.2 Election........................................................9
3.3 Qualification...................................................9
3.4 Tenure..........................................................9
3.5 Resignation and Removal........................................10
3.6 Vacancies......................................................10
3.7 Chairman of the Board..........................................10
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3.8 President; Powers of Chief Executive Officer...................10
3.9 Vice Presidents................................................10
3.10 Secretary and Assistant Secretaries............................11
3.11 Treasurer and Assistant Treasurers.............................11
3.12 Salaries.......................................................11
ARTICLE IV CAPITAL STOCK..................................................11
4.1 Issuance of Stock..............................................11
4.2 Certificates of Stock..........................................12
4.3 Transfers......................................................12
4.4 Lost, Stolen or Destroyed Certificates.........................12
4.5 Record Date....................................................12
ARTICLE V GENERAL PROVISIONS.............................................13
5.1 Fiscal Year....................................................13
5.2 Corporate Seal.................................................13
5.3 Waiver of Notice...............................................13
5.4 Voting of Securities...........................................13
5.5 Evidence of Authority..........................................13
5.6 Certificate of Incorporation...................................13
5.7 Transactions with Interested Parties...........................14
5.8 Severability...................................................14
5.9 Pronouns.......................................................14
ARTICLE VI AMENDMENTS.....................................................14
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ARTICLE I
STOCKHOLDERS
1.1 Place of Meetings. All meetings of stockholders shall be held at such
place as may be designated from time to time by the Board of Directors, the
Chairman of the Board or the President or, if not so designated, at the
principal office of the corporation. The Board of Directors may, in its sole
discretion, determine that a meeting shall not be held at any place, but may
instead be held solely by means of remote communication in a manner consistent
with the Delaware General Corporation Law.
1.2 Annual Meeting. The annual meeting of stockholders for the election of
directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on a date and at a time designated by
the Board of Directors, the Chairman of the Board or the President (which date
shall not be a legal holiday in the place where the meeting is to be held). If
no annual meeting is held in accordance with the foregoing provisions, the Board
of Directors shall cause the meeting to be held as soon thereafter as is
convenient. If no annual meeting is held in accordance with the foregoing
provisions, a special meeting may be held in lieu of the annual meeting, and any
action taken at that special meeting shall have the same effect as if it had
been taken at the annual meeting, and in such case all references in these
By-laws to the annual meeting of the stockholders shall be deemed to refer to
such special meeting.
1.3 Special Meetings. Special meetings of stockholders for any purpose or
purposes may be called at any time by the Board of Directors, the Chairman of
the Board or the President, but such special meetings may not be called by any
other person or persons. Business transacted at any special meeting of
stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written notice
of each meeting of stockholders, whether annual or special, shall be given not
less than 10 nor more than 60 days before the date of the meeting to each
stockholder entitled to vote at such meeting. Without limiting the manner by
which notice may otherwise be given to stockholders, any notice shall be
effective if given by a form of electronic transmission consented to (in a
manner consistent with the Delaware General Corporation Law) by the stockholder
to whom the notice is given. The notices of all meetings shall state the place,
if any, date and time of the meeting and the means of remote communications, if
any, by which stockholders and proxyholders may be deemed to be present in
person and vote at such meeting. The notice of a special meeting shall state, in
addition, the purpose or purposes for which the meeting is called. If notice is
given by mail, such notice shall be deemed given when deposited in the United
States mail, postage prepaid, directed to the stockholder at such stockholder's
address as it appears on the records of the corporation. If notice is given by
electronic transmission, such notice shall be deemed given at the time specified
in Section 232 of the Delaware General Corporation Law.
1.5 Voting List. The Secretary shall prepare, at least 10 days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any
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stockholder, for any purpose germane to the meeting, for a period of at least 10
days prior to the meeting: (i) on a reasonably accessible electric network,
provided that the information required to gain access to such list is provided
with the notice of the meeting, or (ii) during ordinary business hours, at the
principal place of business of the corporation. If the meeting is to be held at
a place, then the list shall be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present. If the meeting is to be held solely by means of remote
communication, then the list shall also be open to the examination of any
stockholder during the whole time of the meeting on a reasonably accessible
electronic network, and the information required to access such list shall be
provided with the notice of the meeting.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these By-laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person, present by means of remote communications in a
manner, if any, authorized by the Board of Directors in its sole discretion or
represented by proxy, shall constitute a quorum for the transaction of business.
A quorum, once established at a meeting, shall not be broken by the withdrawal
of enough votes to leave less than a quorum.
1.7 Adjournments. Any meeting of stockholders may be adjourned from time to
time to any other time and to any other place at which a meeting of stockholders
may be held under these By-laws by the stockholders present or represented at
the meeting and entitled to vote, although less than a quorum, or, if no
stockholder is present, by any officer entitled to preside at or to act as
secretary of such meeting. It shall not be necessary to notify any stockholder
of any adjournment of less than 30 days if the time and place, if any, of the
adjourned meeting, and the means of remote communication, if any, by which
stockholders and proxyholders may be deemed to be present in person and vote at
such adjourned meeting, are announced at the meeting at which adjournment is
taken, unless after the adjournment a new record date is fixed for the adjourned
meeting. At the adjourned meeting, the corporation may transact any business
which might have been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for each share
of stock entitled to vote held of record by such stockholder and a proportionate
vote for each fractional share so held, unless otherwise provided by law or the
Certificate of Incorporation. Each stockholder of record entitled to vote at a
meeting of stockholders may vote in person (including by means of remote
communications, if any, by which stockholders may be deemed to be present in
person and vote at such meeting) or may authorize another person or persons to
vote for such stockholder by a proxy executed or transmitted in a manner
permitted by the Delaware General Corporation Law by the stockholder or such
stockholder's authorized agent and delivered (including by electronic
transmission) to the Secretary of the corporation. No such proxy shall be voted
upon after three years from the date of its execution, unless the proxy
expressly provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, any matter
other than the election of directors to be voted upon by the stockholders at
such meeting shall be decided by the vote of the holders of shares of stock
having a majority of the votes cast by the holders of all of the shares of stock
present or represented and voting on such matter (or if there
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are two or more classes of stock entitled to vote as separate classes, then in
the case of each such class, the holders of a majority of the stock of that
class present or represented and voting on such matter), except when a different
vote is required by law, the Certificate of Incorporation or these By-laws. When
a quorum is present at any meeting, any election of directors by stockholders
shall be determined by a plurality of the votes cast by the stockholders
entitled to vote on the election.
1.10 Nomination of Directors.
(a) Except for (i) any directors entitled to be elected by the holders
of preferred stock or any other securities of the corporation (other than common
stock) and (ii) any directors elected in accordance with Section 2.9 hereof by
the Board of Directors to fill a vacancy, only persons who are nominated in
accordance with the procedures in this Section 1.10 shall be eligible for
election as directors. Nomination for election to the Board of Directors of the
corporation at a meeting of stockholders may be made (i) by or at the direction
of the Board of Directors or (ii) by any stockholder of the corporation who (x)
complies with the notice procedures set forth in Section 1.10(b) and (y) is a
stockholder of record on the date of the giving of such notice and on the record
date for the determination of stockholders entitled to vote at such meeting.
(b) To be timely, a stockholder's notice must be received by the Secretary
at the principal executive offices of the corporation as follows: (x) in the
case of an election of directors at an annual meeting of stockholders, not less
than 60 days nor more than 90 days prior to the first anniversary of the
preceding year's annual meeting; provided, however, that (i) in the case of the
annual meeting of stockholders of the corporation to be held in 2002 or (ii) in
the event that the date of the annual meeting in any other year is advanced by
more than 20 days, or delayed by more than 60 days, from the first anniversary
of the preceding year's annual meeting, a stockholder's notice must be so
received not earlier than the ninetieth day prior to such annual meeting and not
later than the close of business on the later of (A) the sixtieth day prior to
such annual meeting and (B) the tenth day following the day on which notice of
the date of such annual meeting was mailed or public disclosure of the date of
such annual meeting was made, whichever first occurs; or (y) in the case of an
election of directors at a special meeting of stockholders, not earlier than the
ninetieth day prior to such special meeting and not later than the close of
business on the later of (i) the sixtieth day prior to such special meeting and
(ii) the tenth day following the day on which notice of the date of such special
meeting was mailed or public disclosure of the date of such special meeting was
made, whichever first occurs.
The stockholder's notice to the Secretary shall set forth: (a) as to
each proposed nominee (i) such person's name, age, business address and, if
known, residence address, (ii) such person's principal occupation or employment,
(iii) the class and number of shares of stock of the corporation which are
beneficially owned by such person, and (iv) any other information concerning
such person that must be disclosed as to nominees in proxy solicitations
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended; (b) as to the stockholder giving the notice (i) such stockholder's name
and address, as they appear on the corporation's books, (ii) the class and
number of shares of stock of the corporation which are owned, beneficially and
of record, by such stockholder, (iii) a description of all arrangements or
understandings between such stockholder and each proposed nominee and any other
person or
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persons (including their names) pursuant to which the nomination(s) are to be
made by such stockholder and (iv) a representation that such stockholder intends
to appear in person or by proxy at the meeting to nominate the person(s) named
in its notice; and (c) as to the beneficial owner, if any, on whose behalf the
nomination is being made (i) such beneficial owner's name and address, (ii) the
class and number of shares of stock of the corporation which are beneficially
owned by such beneficial owner, and (iii) a description of all arrangements or
understandings between such beneficial owner and each proposed nominee and any
other person or persons (including their names) pursuant to which the
nomination(s) are to be made. In addition, to be effective, the stockholder's
notice must be accompanied by the written consent of the proposed nominee to
serve as a director if elected. The corporation may require any proposed nominee
to furnish such other information as may reasonably be required to determine the
eligibility of such proposed nominee to serve as a director of the corporation.
(c) The chairman of any meeting shall, if the facts warrant, determine that
a nomination was not made in accordance with the provisions of this Section
1.10, and if he should so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded.
(d) Except as otherwise required by law, nothing in this Section 1.10 shall
obligate the corporation or the Board of Directors to include in any proxy
statement or other stockholder communication distributed on behalf of the
corporation or the Board of Directors information with respect to any nominee
for director submitted by a stockholder.
1.11 Notice of Business at Annual Meetings.
(a) At any 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 (i) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (ii) otherwise properly brought before the meeting by or
at the direction of the Board of Directors, or (iii) properly brought before the
meeting by a stockholder. For business to be properly brought before an annual
meeting by a stockholder, (i) if such business relates to the election of
directors of the corporation, the procedures in Section 1.10 must be complied
with and (ii) if such business relates to any other matter, the stockholder must
(x) have given timely notice thereof in writing to the Secretary in accordance
with the procedures set forth in Section 1.11(b) and (y) be a stockholder of
record on the date of the giving of such notice and on the record date for the
determination of stockholders entitled to vote at such annual meeting.
(b) To be timely, a stockholder's notice must be received by the
Secretary at the principal executive offices of the corporation not less than 60
days nor more than 90 days prior to the first anniversary of the preceding
year's annual meeting; provided, however, that (i) in the case of the annual
meeting of stockholders of the corporation to be held in 2002 or (ii) in the
event that the date of the annual meeting in any other year is advanced by more
than 20 days, or delayed by more than 60 days, from the first anniversary of the
preceding year's annual meeting, a stockholder's notice must be so received not
earlier than the ninetieth day prior to such annual meeting and not later than
the close of business on the later of (A) the sixtieth day prior to such annual
meeting and (B) the tenth day following the day on which notice of the date of
such annual meeting was mailed or public disclosure of the date of such annual
meeting was made, whichever first occurs.
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The 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, and the name and address of the beneficial owner, if
any, on whose behalf the proposal is made, (iii) the class and number of shares
of stock of the corporation which are owned, of record and beneficially, by the
stockholder and beneficial owner, if any, (iv) a description of all arrangements
or understandings between such stockholder or such beneficial owner, if any, and
any other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material interest of the
stockholder or such beneficial owner, if any, in such business, and (v) a
representation that such stockholder intends to appear in person or by proxy at
the annual meeting to bring such business before the meeting. Notwithstanding
anything in these By-laws to the contrary, no business shall be conducted at any
annual meeting of stockholders except in accordance with the procedures set
forth in this Section 1.11; provided that any stockholder proposal which
complies with Rule 14a-8 of the proxy rules (or any successor provision)
promulgated under the Securities Exchange Act of 1934, as amended, and is to be
included in the corporation's proxy statement for an annual meeting of
stockholders shall be deemed to comply with the requirements of this Section
1.11.
(c) The chairman of any meeting shall, if the facts warrant, determine
that business was not properly brought before the meeting in accordance with the
provisions of this Section 1.11, and if he should so determine, he shall so
declare to the meeting and such business shall not be brought before the
meeting.
1.12 Conduct of Meetings.
(a) Chairman of Meeting. Meetings of stockholders shall be presided
over by the Chairman of the Board, if any, or in the Chairman's absence by the
Vice Chairman of the Board, if any, or in the Vice Chairman's absence by the
President, or in the President's absence by a Vice President, or in the absence
of all of the foregoing persons by a chairman designated by the Board of
Directors, or in the absence of such designation by a chairman chosen by vote of
the stockholders at the meeting. The Secretary shall act as secretary of the
meeting, but in the Secretary's absence the chairman of the meeting may appoint
any person to act as secretary of the meeting.
(b) Rules, Regulations and Procedures. The Board of Directors of the
corporation may adopt by resolution such rules, regulations and procedures for
the conduct of any meeting of stockholders of the corporation as it shall deem
appropriate including, without limitation, such guidelines and procedures as it
may deem appropriate regarding the participation by means of remote
communication of stockholders and proxyholders not physically present at a
meeting. Except to the extent inconsistent with such rules, regulations and
procedures as adopted by the Board of Directors, the chairman of any meeting of
stockholders 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 appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board of Directors or
prescribed by the chairman of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) rules and procedures for maintaining order at
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the meeting and the safety of those present; (iii) limitations on attendance at
or participation in the meeting to stockholders of record of the corporation,
their duly authorized and constituted proxies or such other persons as shall be
determined; (iv) restrictions on entry to the meeting after the time fixed for
the commencement thereof; and (v) limitations on the time allotted to questions
or comments by participants. 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 the rules of parliamentary procedure.
(c) Closing of Polls. The chairman of the meeting shall announce at
the meeting when the polls for each matter to be voted upon at the meeting will
be opened and closed. If no announcement is made, the polls shall be deemed to
have opened when the meeting is convened and closed upon the final adjournment
of the meeting. After the polls close, no ballots, proxies or votes or any
revocations or changes thereto may be accepted.
(d) Inspectors of Election. In advance of any meeting of stockholders,
the Board of Directors, the Chairman of the Board or the President shall appoint
one or more inspectors or election to act at the meeting and make a written
report thereof. One or more other persons may be designated as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is present, ready and willing to act at a meeting of stockholders, the
chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Unless otherwise required by law, inspectors may be officers, employees
or agents of the corporation. Each inspector, before entering upon the discharge
of such inspector's duties, shall take and sign an oath faithfully to execute
the duties of inspector with strict impartiality and according to the best of
such inspector's ability. The inspector shall have the duties prescribed by law
and shall take charge of the polls and, when the vote in completed, shall make a
certificate of the result of the vote taken and of such other facts as may be
required by law.
1.13 No Action by Written Consent in Lieu of a Meeting. Stockholders of
the corporation may not take any action by written consent in lieu of a meeting.
ARTICLE II
DIRECTORS
2.1 General Powers. The business and affairs of the corporation shall be
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the corporation except as otherwise provided by law, the
Certificate of Incorporation or these By-laws. In the event of a vacancy in the
Board of Directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full Board until the vacancy is filled.
2.2 Number, Election and Qualification. The number of directors which shall
constitute the whole Board of Directors shall be determined from time to time by
resolution of the Board of Directors, but in no event shall be less than three.
The directors shall be elected at the annual meeting of stockholders by such
stockholders as have the right to vote on such election. Directors need not be
stockholders of the corporation.
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2.3 Classes of Directors. The Board of Directors shall be and is divided
into three classes: Class I, Class II and Class III. No one class shall have
more than one director more than any other class. If a fraction is contained in
the quotient arrived at by dividing the authorized number of directors by three,
then, if such fraction is one-third, the extra director shall be a member of
Class I, and if such fraction is two-thirds, one of the extra directors shall be
a member of Class I and one of the extra directors shall be a member of Class
II, unless otherwise provided by resolution of the Board of Directors.
2.4 Terms of Office. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected; provided, that each initial director in Class I shall
serve for a term expiring at the corporation's annual meeting of stockholders
held in 2002; each initial director in Class II shall serve for a term expiring
at the corporation's annual meeting of stockholders held in 2003; and each
initial director in Class III shall serve for a term expiring at the
corporation's annual meeting of stockholders held in 2004; provided further,
that the term of each director shall continue until the election and
qualification of such director's successor and be subject to such director's
earlier death, resignation or removal.
2.5 Allocation of Directors Among Classes in the Event of Increases or
Decreases in the Authorized Number of Directors. In the event of any increase or
decrease in the authorized number of directors, (i) each director then serving
as such shall nevertheless continue as a director of the class of which such
director is a member until the expiration of such director's current term,
subject to such director's earlier death, resignation or removal and (ii) 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 in accordance with the provisions of Section 2.3. To the extent
possible, consistent with the provisions of Section 2.3, any newly created
directorships shall be added to those classes whose terms of office are to
expire at the latest dates following such allocation, and any newly eliminated
directorships shall be subtracted from those classes whose terms of offices are
to expire at the earliest dates following such allocation, unless otherwise
provided from time to time by resolution of the Board of Directors.
2.6 Quorum. A majority of the directors at any time in office shall
constitute a quorum for the transaction of business. In the event one or more of
the directors shall be disqualified to vote at any meeting, then the required
quorum shall be reduced by one for each director so disqualified, provided that
in no case shall less than one-third of the number of directors fixed pursuant
to Section 2.2 constitute a quorum. If at any meeting of the Board of Directors
there shall be less than such a quorum, a majority of the directors present may
adjourn the meeting from time to time without further notice other than
announcement at the meeting, until a quorum shall be present.
2.7 Action at Meeting. Every act or decision done or made by a majority of
the directors present at a meeting duly held at which a quorum is present shall
be regarded as the act of the Board of Directors unless a greater number is
required by law, by the Certificate of Incorporation or by these By-laws.
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2.8 Removal. Directors of the corporation may be removed only for cause by
the affirmative vote of the holders of at least seventy-five percent (75%) of
the votes which all the stockholders would be entitled to cast in any annual
election of directors.
2.9 Vacancies. Any vacancy in the Board of Directors, however occurring,
including a vacancy resulting from an enlargement of the Board, shall be filled
only by vote of a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. A director elected to fill a vacancy
shall be elected to hold office until the next election of the class for which
such director shall have been chosen, subject to the election and qualification
of such director's successor and to such director's earlier death, resignation
or removal.
2.10 Resignation. Any director may resign by delivering a resignation in
writing or by electronic transmission to the corporation at its principal office
or to the Chairman of the Board, the President or the Secretary. Such
resignation shall be effective upon receipt unless it is specified to be
effective at some later time or upon the happening of some later event.
2.11 Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and place as shall be determined from time to
time by the Board of Directors; provided that any director who is absent when
such a determination is made shall be given notice of the determination. A
regular meeting of the Board of Directors may be held without notice immediately
after and at the same place as the annual meeting of stockholders.
2.12 Special Meetings. Special meetings of the Board of Directors may be
held at any time and place designated in a call by the Chairman of the Board,
the President, two or more directors, or by one director in the event that there
is only a single director in office.
2.13 Notice of Special Meetings. Notice of any special meeting of directors
shall be given to each director by the Secretary or by the officer or one of the
directors calling the meeting. Notice shall be duly given to each director (i)
by giving notice to such director in person or by telephone at least 24 hours in
advance of the meeting, (ii) by sending a telegram, telecopy or electronic mail,
or delivering written notice by hand, to such director's last known business,
home or electronic mail address at least 48 hours in advance of the meeting, or
(iii) by sending written notice, via first-class mail or reputable overnight
courier, to such director's last known business or home address at least 72
hours in advance of the meeting. A notice or waiver of notice of a meeting of
the Board of Directors need not specify the purposes of the meeting.
2.14 Meetings by Conference Communications Equipment. Directors may
participate in meetings of the Board of Directors or any committee thereof by
means of conference telephone or other communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation by such means shall constitute presence in person at such meeting.
2.15 Action by Consent. 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 or committee, as the case may be,
consent to the action in writing or by electronic transmission, and the written
consents and electronic transmissions are filed with the minutes of proceedings
of the Board or committee.
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2.16 Committees. The Board of Directors may designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members of the committee present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of law, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation and may authorize the seal of the corporation to be
affixed to all papers which may require it. Each such committee shall keep
minutes and make such reports as the Board of Directors may from time to time
request. Except as the Board of Directors may otherwise determine, any committee
may make rules for the conduct of its business, but unless otherwise provided by
the directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these By-laws for the Board of
Directors.
2.17 Compensation of Directors. Directors may be paid such compensation for
their services and such reimbursement for expenses of attendance at meetings as
the Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
ARTICLE III
OFFICERS
3.1 Titles. The officers of the corporation shall consist of a President, a
Secretary, a Treasurer and such other officers with such other titles as the
Board of Directors may determine, including a Chairman of the Board, a Vice
Chairman of the Board, and one or more Vice Presidents, Assistant Treasurers,
and Assistant Secretaries. The Board of Directors may appoint such other
officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be elected
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder. Any two or more
offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate of
Incorporation or by these By-laws, each officer shall hold office until such
officer's successor is elected and qualified, unless a different term is
specified in the resolution electing or appointing such officer, or until such
officer's earlier death, resignation or removal.
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3.5 Resignation and Removal. Any officer may resign by delivering a written
resignation to the corporation at its principal office or to the Chief Executive
Officer or the Secretary. Such resignation shall be effective upon receipt
unless it is specified to be effective at some later time or upon the happening
of some later event.
Any officer may be removed at any time, with or without cause, by vote
of a majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following such officer's resignation or removal, or any right to
damages on account of such removal, whether such officer's compensation be by
the month or by the year or otherwise, unless such compensation is expressly
provided in a duly authorized written agreement with the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy occurring in any
office for any reason and may, in its discretion, leave unfilled for such period
as it may determine any offices other than those of President, Treasurer and
Secretary. Each such successor shall hold office for the unexpired term of such
officer's predecessor and until a successor is elected and qualified, or until
such officer's earlier death, resignation or removal.
3.7 Chairman of the Board. The Board of Directors may appoint from its
members a Chairman of the Board. If the Board of Directors appoints a Chairman
of the Board, such Chairman shall perform such duties and possess such powers
as are assigned by the Board of Directors and, if the Chairman of the Board is
also designated as the corporation's Chief Executive Officer, shall have the
powers and duties of the Chief Executive Officer prescribed in Section 3.8 of
these By-laws. Unless otherwise provided by the Board of Directors, the Chairman
of the Board shall preside at all meetings of the Board of Directors and
stockholders.
3.8 President; Powers of Chief Executive Officer. Unless the Board of
Directors has designated the Chairman of the Board as the corporation's Chief
Executive Officer, the President shall be the Chief Executive Officer of the
corporation. The Chief Executive Officer shall have general charge and
supervision of the business of the Corporation subject to the direction of the
Board of Directors. The President shall perform such other duties and shall have
such other powers as the Board of Directors and the Chief Executive Officer (if
the Chairman of the Board is serving in such position) may from time to time
prescribe.
3.9 Vice Presidents. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the Chief Executive Officer may
from time to time prescribe. In the event of the absence, inability or refusal
to act of the Chief Executive Officer, the President (if the President is not
the Chief Executive Officer), and then the Vice President (or if there shall be
more than one, the Vice Presidents in the order determined by the Board of
Directors), shall perform the duties of the Chief Executive Officer and when so
performing shall have all the powers of and be subject to all the restrictions
upon the Chief Executive Officer. The Board of Directors may assign to any Vice
President the title of Executive Vice President, Senior Vice President or any
other title selected by the Board of Directors.
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3.10 Secretary and Assistant Secretaries. The Secretary shall perform such
duties and shall have such powers as the Board of Directors or the Chief
Executive Officer may from time to time prescribe. In addition, the Secretary
shall perform such duties and have such powers as are incident to the office of
the secretary, including without limitation the duty and power to give notices
of all meetings of stockholders and special meetings of the Board of Directors,
to attend all meetings of stockholders and the Board of Directors and keep a
record of the proceedings, to maintain a stock ledger and prepare lists of
stockholders and their addresses as required, to be custodian of corporate
records and the corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such
powers as the Board of Directors, the Chief Executive Officer or the Secretary
may from time to time prescribe. In the event of the absence, inability or
refusal to act of the Secretary, the Assistant Secretary (or if there shall be
more than one, the Assistant Secretaries in the order determined by the Board of
Directors) shall perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the chairman of the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform such
duties and shall have such powers as may from time to time be assigned by the
Board of Directors or the Chief Executive Officer. In addition, the Treasurer
shall perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to deposit funds of
the corporation in depositories selected in accordance with these By-laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess such
powers as the Board of Directors, the Chief Executive Officer or the Treasurer
may from time to time prescribe. In the event of the absence, inability or
refusal to act of the Treasurer, the Assistant Treasurer (or if there shall be
more than one, the Assistant Treasurers in the order determined by the Board of
Directors) shall perform the duties and exercise the powers of the Treasurer.
3.12 Salaries. Officers of the corporation shall be entitled to such salaries,
compensation or reimbursement as shall be fixed or allowed from time to time by
the Board of Directors.
ARTICLE IV
CAPITAL STOCK
4.1 Issuance of Stock. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance
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of the authorized capital stock of the corporation held in its treasury may be
issued, sold, transferred or otherwise disposed of by vote of the Board of
Directors in such manner, for such consideration and on such terms as the Board
of Directors may determine.
4.2 Certificates of Stock. Every holder of stock of the corporation shall
be entitled to have a certificate, in such form as may be prescribed by law and
by the Board of Directors, certifying the number and class of shares owned by
such holder in the corporation. Each such certificate shall be signed by, or in
the name of the corporation by, the Chairman or Vice Chairman, if any, of the
Board of Directors, or the President or a Vice President, and the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a facsimile.
Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, these
By-laws, applicable securities laws or any agreement among any number of
stockholders or among such holders and the corporation shall have conspicuously
noted on the face or back of the certificate either the full text of the
restriction or a statement of the existence of such restriction.
There shall be set forth on the face or back of each certificate
representing shares of such class or series of stock of the corporation a
statement that the corporation will furnish without charge to each stockholder
who so requests a copy of the full text of the powers, designations, preferences
and relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
4.3 Transfers. Except as otherwise established by rules and regulations
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the corporation or its transfer agent may reasonably require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these By-laws, the corporation shall be entitled to treat the record
holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote with respect
to such stock, regardless of any transfer, pledge or other disposition of such
stock until the shares have been transferred on the books of the corporation in
accordance with the requirements of these By-laws.
4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a new
certificate of stock in place of any previously issued certificate alleged to
have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation or any
transfer agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders, or entitled to receive payment of any
dividend or other distribution or allotment of
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any rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action. Such record date shall not be more than 60
nor less than 10 days before the date of such meeting, nor more than 60 days
prior to any other action to which such record date relates.
If no record date is fixed, 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 before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. If no record date is fixed, the record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating to such purpose.
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.
ARTICLE V
GENERAL PROVISIONS
5.1 Fiscal Year. Except as from time to time otherwise designated by the
Board of Directors, the fiscal year of the corporation shall end on the Saturday
closest to December 31.
5.2 Corporate Seal. The corporate seal shall be in such form as shall be
approved by the Board of Directors.
5.3 Waiver of Notice. Whenever notice is required to be given by law, by
the Certificate of Incorporation or by these By-laws, a written waiver, signed
by the person entitled to notice or a waiver by electronic transmission by the
person entitled to notice, whether before, at or after the time stated in such
waiver, or the attendance of such person at such meeting shall be deemed
equivalent to such notice.
5.4 Voting of Securities. Except as the Board of Directors may otherwise
designate, the President or the Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
corporation (with or without power of substitution) at any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
5.5 Evidence of Authority. A certificate by the Secretary, or an Assistant
Secretary, or a temporary Secretary, as to any action taken by the stockholders,
directors, a committee or any officer or representative of the corporation shall
as to all persons who rely on the certificate in good faith be conclusive
evidence of such action.
5.6 Certificate of Incorporation. All references in these By-laws to the
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.
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5.7 Transactions with Interested Parties. No contract or transaction
between the corporation and one or more of the directors or officers, or between
the corporation and any other corporation, partnership, association, or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or a committee of the
Board of Directors at which the contract or transaction is authorized or solely
because any such director's or officer's votes are counted for such purpose, if:
(a) The material facts as to the director's or officer's relationship
or interest and as to the contract or transaction are disclosed or are known to
the Board of Directors or the committee, and the Board or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum;
(b) The material facts as to the director's or officer's relationship
or interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the Board of Directors, a
committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
5.8 Severability. Any determination that any provision of these By-laws is
for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-laws.
5.9 Pronouns. All pronouns used in these By-laws shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
ARTICLE VI
AMENDMENTS
These By-laws may be altered, amended or repealed, in whole or in part,
or new By-laws may be adopted by the Board of Directors or by the stockholders
as provided in the Certificate of Incorporation.
Exhibit 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
KADANT INC.
(Originally incorporated under the name Thermo Web Systems Inc. on
November 12, 1991)
First. The name of the Corporation is:
Kadant Inc.
Second. The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
Third. The nature of the business or purposes to be conducted or promoted
by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
Fourth. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 155,000,000 shares, consisting of
(i) 150,000,000 shares of Common Stock, $.01 par value per share ("Common
Stock"), and (ii) 5,000,000 shares of Preferred Stock, $.01 par value per share
("Preferred Stock").
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK
1. General. The voting, dividend and liquidation rights of the holders of
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock shall have voting rights at all
meetings of stockholders, each such holder being entitled to one vote for each
share thereof held by such holder. There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of the State of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock from
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock in one or more series, and in
connection with the creation of any such series, by resolution or resolutions
providing for the issuance of the shares thereof, to determine and fix the
number of shares of such series and such voting powers, full or limited, or no
voting powers, and such designations, preferences and relative participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolution or resolutions, all to the full
extent now or hereafter permitted by the General Corporation Law of the State of
Delaware. Without limiting the generality of the foregoing, the resolution or
resolutions providing for issuance of any series of Preferred Stock may provide
that such series shall be superior or rank equally or be junior to the Preferred
Stock of any other series to the extent permitted by law. Except as otherwise
provided in this Certificate of Incorporation, no vote of the holders of the
Preferred Stock or Common Stock shall be a prerequisite to the designation or
issuance of any shares of any series of the Preferred Stock authorized by and
complying with the conditions of this Certificate of Incorporation, the right to
have such vote being expressly waived by all present and future holders of the
capital stock of the Corporation.
C. Series A Junior Participating Preferred Stock
1. Designation and Amount. The shares of such series shall be designated as
"Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock")
and the number of shares constituting the Series A Preferred Stock shall be
Fifteen Thousand (15,000). Such number of shares may be increased or decreased
by resolution of the Board prior to issuance; provided, that no decrease shall
reduce the number of shares of Series A Preferred Stock to a number less than
the number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
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2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and superior to
the Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of Common Stock and of
any other junior stock, shall be entitled to receive, when, as and if declared
by the Board out of funds of the Corporation legally available for the payment
of dividends, quarterly dividends payable in cash on the last day of each fiscal
quarter of the Corporation in each year (each such date being referred to herein
as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a share
of Series A Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to the greater of (a) $100 or (b) subject to the provision for
adjustment hereinafter set forth, 10,000 times the aggregate per share amount of
all cash dividends, and 10,000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. In the event the Corporation shall
at any time declare or pay any dividend on the Series A Preferred Stock payable
in shares of Series A Preferred Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Series A Preferred Stock (by
reclassification or otherwise than by payment of a dividend in shares of Series
A Preferred Stock) into a greater or lesser number of shares of Series A
Preferred Stock, then in each such case the amount to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event under
clause (b) of the first sentence of this Section 2(A) shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Series A Preferred Stock that were outstanding immediately prior to
such event and the denominator of which is the number of shares of Series A
Preferred Stock outstanding immediately after such event.
(B) The Corporation shall declare a dividend or distribution on
the Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock) and the Corporation
shall pay such dividend or distribution on the Series A Preferred Stock before
the dividend or distribution declared on the Common Stock is paid or set apart;
provided that, in the event no dividend or distribution shall have been declared
on the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $100
per share on the Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
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(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board may fix a record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the payment
thereof.
3. Voting Rights. The holders of shares of Series A Preferred Stock shall
have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder thereof
to 10,000 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the number of votes per share to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. In the event the Corporation shall
at any time declare or pay any dividend on the Series A Preferred Stock payable
in shares of Series A Preferred Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Series A Preferred Stock (by
reclassification or otherwise than by payment of a dividend in shares of Series
A Preferred Stock) into a greater or lesser number of shares of Series A
Preferred Stock, then in each such case the number of votes per share to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Series A Preferred Stock that were
outstanding immediately prior to such event and the denominator of which is the
number of shares of Series A Preferred Stock outstanding immediately after such
event.
(B) Except as otherwise provided herein, in the Corporation's
Certificate of Incorporation or Bylaws, the holders of shares of Series A
Preferred Stock and the holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote together as one
class on all matters submitted to a vote of stockholders of the Corporation.
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(C) (i) If at any time dividends on any Series A Preferred Stock
shall be in arrears in an amount equal to six quarterly dividends thereon, the
holders of the Series A Preferred Stock, voting as a separate series from all
other series of Preferred Stock and classes of capital stock, shall be entitled
to elect two members of the Board in addition to any Directors elected by any
other series, class or classes of securities and the authorized number of
Directors will automatically be increased by two. Promptly thereafter, the Board
of the Corporation shall, as soon as may be practicable, call a special meeting
of holders of Series A Preferred Stock for the purpose of electing such members
of the Board. Such special meeting shall in any event be held within 45 days of
the occurrence of such arrearage.
(ii) During any period when the holders of Series A Preferred
Stock, voting as a separate series, shall be entitled and shall have exercised
their right to elect two Directors, then, and during such time as such right
continues, (a) the then authorized number of Directors shall be increased by
two, and the holders of Series A Preferred Stock, voting as a separate series,
shall be entitled to elect the additional Directors so provided for, and (b)
each such additional Director shall not be a member of any existing class of the
Board, but shall serve until the next annual meeting of stockholders for the
election of Directors, or until his successor shall be elected and shall
qualify, or until his right to hold such office terminates pursuant to the
provisions of this Section 3(C).
(iii) A Director elected pursuant to the terms hereof may be
removed with or without cause by the holders of Series A Preferred Stock
entitled to vote in an election of such Director.
(iv) If, during any interval between annual meetings of
stockholders for the election of Directors and while the holders of Series A
Preferred Stock shall be entitled to elect two Directors, there is no such
Director in office by reason of resignation, death or removal, then, promptly
thereafter, the Board shall call a special meeting of the holders of Series A
Preferred Stock for the purpose of filling such vacancy and such vacancy shall
be filled at such special meeting. Such special meeting shall in any event be
held within 45 days of the occurrence of such vacancy.
(v) At such time as the arrearage is fully cured, and all
dividends accumulated and unpaid on any shares of Series A Preferred Stock
outstanding are paid, and, in addition thereto, at least one regular dividend
has been paid subsequent to curing such arrearage, the term of office of any
Director elected pursuant to this Section 3(C), or his successor, shall
automatically terminate, and the authorized number of Directors shall
automatically decrease by two, the rights of the holders of the shares of the
Series A Preferred Stock to vote as provided in this Section 3(C) shall cease,
subject to renewal from time to time upon the same terms and conditions, and the
holders of shares of the Series A Preferred Stock shall have only the limited
voting rights elsewhere herein set forth.
(D) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
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4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or winding up)
to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board) to all
holders of such shares upon such terms as the Board, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
5. Reacquired Shares. Any shares of Series A Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock subject to
the conditions and restrictions on issuance set forth herein, in the Certificate
of Incorporation, or in any other Certificate of Designations creating a series
of Preferred Stock or any similar stock or as otherwise required by law.
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6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (1) to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received $10,000 per share,
plus an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, provided that the holders
of shares of Series A Preferred Stock shall be entitled to receive an aggregate
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 10,000 times the aggregate amount to be distributed per share to
holders of shares of Common Stock, or (2) to the holders of shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except distributions made ratably
on the Series A Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.
(B) Neither the consolidation, merger or other business
combination of the Corporation with or into any other corporation nor the sale,
lease, exchange or conveyance of all or any part of the property, assets or
business of the Corporation shall be deemed to be a liquidation, dissolution or
winding up of the Corporation for purposes of this Section 6.
(C) In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (1) of paragraph (A) of this Section 6 shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. In the event the Corporation shall
at any time declare or pay any dividend on the Series A Preferred Stock payable
in shares of Series A Preferred Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Series A Preferred Stock (by
reclassification or otherwise than by payment of a dividend in shares of Series
A Preferred Stock) into a greater or lesser number of shares of Series A
Preferred Stock, then in each such case the aggregate amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event
under the proviso in clause (1) of paragraph (A) of this Section 6 shall be
adjusted by multiplying such amount by a fraction, the numerator of which is the
number of shares of Series A Preferred Stock that were outstanding immediately
prior to such event and the denominator of which is the number of shares of
Series A Preferred Stock outstanding immediately after such event.
7. Consolidation, Merger, etc. Notwithstanding anything to the contrary
contained herein, in case the Corporation shall enter into any consolidation,
merger, combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case each share of Series A
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Preferred Stock shall at the same time be similarly exchanged or changed
into an amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 10,000 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into which or
for which each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event. In the event the Corporation shall at any time declare or
pay any dividend on the Series A Preferred Stock payable in shares of Series A
Preferred Stock, or effect a subdivision, combination or consolidation of the
outstanding shares of Series A Preferred Stock (by reclassification or otherwise
than by payment of a dividend in shares of Series A Preferred Stock) into a
greater or lesser number of shares of Series A Preferred Stock, then in each
such case the amount set forth in the first sentence of this Section 7 with
respect to the exchange or change of shares of Series A Preferred Stock shall be
adjusted by multiplying such amount by a fraction, the numerator of which is the
number of shares of Series A Preferred Stock that were outstanding immediately
prior to such event and the denominator of which is the number of shares of
Series A Preferred Stock outstanding immediately after such event.
8. No Redemption. The shares of Series A Preferred Stock shall not be
redeemable.
9. Rank. The Series A Preferred Stock shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of the Preferred Stock issued either before or after the issuance of
the Series A Preferred Stock, unless the terms of any such series shall provide
otherwise.
10. Amendment. At such time as any shares of Series A Preferred Stock
are outstanding, the Certificate of Incorporation, as amended, of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
11. Fractional Shares. Series A Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders
of Series A Preferred Stock.
Fifth. Except as otherwise provided herein, the Corporation reserves the
right to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter prescribed by
statute and this Certificate of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
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Sixth. In furtherance and not in limitation of the powers conferred upon it
by the laws of the State of Delaware, the Board of Directors shall have the
power to adopt, amend, alter or repeal the Corporation's By-laws. The
affirmative vote of a majority of the directors present at any regular or
special meeting of the Board of Directors at which a quorum is present shall be
required to adopt, amend, alter or repeal the Corporation's By-laws. In addition
to any other vote of the holders of any class or series required by law or this
certificate of incorporation, the affirmative vote of the holders of at least
seventy-five percent (75%) of the votes which all the stockholders would be
entitled to cast in any annual election of directors or class of directors shall
be required for the stockholders to adopt, amend, alter or repeal the
Corporation's By-laws. Notwithstanding any other provisions of law, this
Certificate of Incorporation or the By-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article SIXTH.
Seventh. A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
an improper personal benefit. If the General Corporation Law of the State of
Delaware is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended. No amendment, termination or repeal of this Article SEVENTH or of the
relevant provisions of the General Corporation Law of the State of Delaware or
any other applicable laws shall affect or diminish in any way the protection of
any director provided by the provisions of this Article SEVENTH with respect to
any action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
Eighth.
1. Actions, Suits and Proceedings Other than by or in the Right of the
Corporation. The Corporation shall indemnify each person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that such person is or was, or has agreed to become, a
director or officer of the Corporation, or is or was serving, or has agreed to
serve, at the request of the Corporation, as a director, officer, partner,
employee or trustee of, or in a similar capacity with, another corporation,
partnership, joint venture, trust or other enterprise (including any employee
benefit plan) (all such persons being referred to hereafter as an "Indemnitee"),
or by reason of any action alleged to have been taken or omitted in such
capacity, against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by the Indemnitee or
on the Indemnitee's behalf in connection with such action, suit or proceeding
and
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any appeal therefrom, if the Indemnitee acted in good faith and in a manner the
Indemnitee reasonably believed to be in, or not opposed to, the best interests
of the Corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe the Indemnitee's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the Indemnitee did not act in good faith and
in a manner which the Indemnitee reasonably believed to be in, or not opposed
to, the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that the Indemnitee's
conduct was unlawful.
2. Actions or Suits by or in the Right of the Corporation. The Corporation
shall indemnify any Indemnitee who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that the Indemnitee is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer, partner, employee or trustee
of, or in a similar capacity with, another corporation, partnership, joint
venture, trust or other enterprise (including any employee benefit plan), or by
reason of any action alleged to have been taken or omitted in such capacity,
against all expenses (including attorneys' fees) and, to the extent permitted by
law, judgments and amounts paid in settlement actually and reasonably incurred
by the Indemnitee or on the Indemnitee's behalf in connection with such action,
suit or proceeding and any appeal therefrom, if the Indemnitee acted in good
faith and in a manner the Indemnitee reasonably believed to be in, or not
opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which the Indemnitee shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of Delaware shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, the Indemnitee is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding the
other provisions of this Article EIGHTH, to the extent that an Indemnitee has
been successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article EIGHTH, or in defense
of any claim, issue or matter therein, or on appeal from any such action, suit
or proceeding, the Indemnitee shall be indemnified against all expenses
(including attorneys' fees) actually and reasonably incurred by the Indemnitee
or on the Indemnitee's behalf in connection therewith. Without limiting the
foregoing, if any action, suit or proceeding is disposed of, on the merits or
otherwise (including a disposition without prejudice), without (i) the
disposition being adverse to the Indemnitee, (ii) an adjudication that the
Indemnitee was liable to the Corporation, (iii) a plea of guilty or nolo
contendere by the Indemnitee, (iv) an adjudication that the Indemnitee did not
act in good faith and in a manner the Indemnitee reasonably believed to be in or
not opposed to the best interests of the Corporation, and (v) with respect to
any criminal proceeding, an adjudication that the Indemnitee had reasonable
cause to believe the Indemnitee's conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
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4. Notification and Defense of Claim. As a condition precedent to an
Indemnitee's right to be indemnified, the Indemnitee must notify the Corporation
in writing as soon as practicable of any action, suit, proceeding or
investigation involving the Indemnitee for which indemnity will or could be
sought. With respect to any action, suit, proceeding or investigation of which
the Corporation is so notified, the Corporation will be entitled to participate
therein at its own expense and/or to assume the defense thereof at its own
expense, with legal counsel reasonably acceptable to the Indemnitee. After
notice from the Corporation to the Indemnitee of its election so to assume such
defense, the Corporation shall not be liable to the Indemnitee for any legal or
other expenses subsequently incurred by the Indemnitee in connection with such
action, suit, proceeding or investigation, other than as provided below in this
Section 4. The Indemnitee shall have the right to employ the Indemnitee's own
counsel in connection with such action, suit, proceeding or investigation, but
the fees and expenses of such counsel incurred after notice from the Corporation
of its assumption of the defense thereof shall be at the expense of the
Indemnitee unless (i) the employment of counsel by the Indemnitee has been
authorized by the Corporation, (ii) counsel to the Indemnitee shall have
reasonably concluded that there may be a conflict of interest or position on any
significant issue between the Corporation and the Indemnitee in the conduct of
the defense of such action, suit, proceeding or investigation or (iii) the
Corporation shall not in fact have employed counsel to assume the defense of
such action, suit, proceeding or investigation, in each of which cases the fees
and expenses of counsel for the Indemnitee shall be at the expense of the
Corporation, except as otherwise expressly provided by this Article EIGHTH. The
Corporation shall not be entitled, without the consent of the Indemnitee, to
assume the defense of any claim brought by or in the right of the Corporation or
as to which counsel for the Indemnitee shall have reasonably made the conclusion
provided for in clause (ii) above. The Corporation shall not be required to
indemnify the Indemnitee under this Article EIGHTH for any amounts paid in
settlement of any action, suit, proceeding or investigation effected without the
Corporation's written consent. The Corporation shall not settle any action,
suit, proceeding or investigation in any manner which would impose any penalty
or limitation on the Indemnitee without the Indemnitee's written consent.
Neither the Corporation nor the Indemnitee will unreasonably withhold or delay
its consent to any proposed settlement.
5. Advance of Expenses. Subject to the provisions of Section 6 of this
Article EIGHTH, in the event that the Corporation does not assume the defense
pursuant to Section 4 of this Article EIGHTH of any action, suit, proceeding or
investigation of which the Corporation receives notice under this Article
EIGHTH, any expenses (including attorneys' fees) incurred by an Indemnitee in
defending a civil or criminal action, suit, proceeding or investigation or any
appeal therefrom shall be paid by the Corporation in advance of the final
disposition of such matter; provided, however, that the payment of such expenses
incurred by the Indemnitee in advance of the final disposition of such matter
shall be made only upon receipt of an undertaking by or on behalf of the
Indemnitee to repay all amounts so advanced in the event that it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
by the Corporation as authorized in this Article EIGHTH; and further provided
that no such advancement of expenses shall be made if it is determined (in the
manner described in Section 6) that (i) the Indemnitee did not act in good faith
and in a manner the Indemnitee reasonably believed to be in, or not opposed to,
the best interests of the Corporation, or (ii) with respect to any criminal
action or proceeding, the Indemnitee had reasonable cause to believe the
Indemnitee's conduct was unlawful. Such undertaking shall be accepted without
reference to the financial ability of the Indemnitee to make such repayment.
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6. Procedure for Indemnification. In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article EIGHTH,
the Indemnitee shall submit to the Corporation a written request, including in
such request such documentation and information as is reasonably available to
the Indemnitee and is reasonably necessary to determine whether and to what
extent the Indemnitee is entitled to indemnification or advancement of expenses.
Any such advancement of expenses shall be made promptly, and in any event within
60 days after receipt by the Corporation of the written request of the
Indemnitee, unless with respect to requests under Section 1, 2 or 5 of this
Article EIGHTH the Corporation determines within such 60-day period that the
Indemnitee did not meet the applicable standard of conduct set forth in Section
1, 2 or 5 of this Article EIGHTH, as the case may be. Any such indemnification,
unless ordered by a court, shall be made with respect to requests under Section
1, 2 or 5 only as authorized in the specific case upon a determination by the
Corporation that the indemnification of the Indemnitee is proper because the
Indemnitee has met the applicable standard of conduct set forth in Section 1, 2
or 5, as the case may be. Such determination shall be made in each instance (a)
by a majority vote of the directors of the Corporation consisting of persons who
are not at that time parties to the action, suit or proceeding in question
("disinterested directors"), whether or not constituting a quorum, (b) by a
majority vote of a committee of disinterested directors designated by majority
vote of disinterested directors, whether or not constituting a quorum, (c), if
there are no disinterested directors, or if disinterested directors so direct,
by independent legal counsel (who may, to the extent permitted by law, be
regular legal counsel to the Corporation) in a written opinion, or (d) by the
stockholders of the Corporation.
7. Remedies. The right to indemnification or advances as granted by this
Article EIGHTH shall be enforceable by the Indemnitee in any court of competent
jurisdiction. Neither the failure of the Corporation to have made a
determination prior to the commencement of such action that indemnification is
proper in the circumstances because the Indemnitee has met the applicable
standard of conduct, nor an actual determination by the Corporation pursuant to
Section 6 of this Article EIGHTH that the Indemnitee has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the Indemnitee has not met the applicable standard of conduct. The
Indemnitee's expenses (including attorneys' fees) incurred in connection with
successfully establishing the Indemnitee's right to indemnification, in whole or
in part, in any such proceeding shall also be indemnified by the Corporation.
8. Limitations. Notwithstanding anything to the contrary in this Article
EIGHTH, except as set forth in Section 7 of this Article EIGHTH, the Corporation
shall not indemnify an Indemnitee in connection with a proceeding (or part
thereof) initiated by the Indemnitee unless the initiation thereof was approved
by the Board of Directors of the Corporation. Notwithstanding anything to the
contrary in this Article EIGHTH, the Corporation shall not indemnify an
Indemnitee to the extent such Indemnitee is reimbursed from the proceeds of
insurance, and in the event the Corporation makes any indemnification payments
to an Indemnitee and such Indemnitee is subsequently reimbursed from the
proceeds of insurance, such Indemnitee shall promptly refund such
indemnification payments to the Corporation to the extent of such insurance
reimbursement.
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9. Subsequent Amendment. No amendment, termination or repeal of this
Article EIGHTH or of the relevant provisions of the General Corporation Law of
the State of Delaware or any other applicable laws shall affect or diminish in
any way the rights of any Indemnitee to indemnification under the provisions
hereof with respect to any action, suit, proceeding or investigation arising out
of or relating to any actions, transactions or facts occurring prior to the
final adoption of such amendment, termination or repeal.
10. Other Rights. The indemnification and advancement of expenses provided
by this Article EIGHTH shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to any action in the
Indemnitee's official capacity and as to any action in any other capacity while
holding office for the Corporation, and shall continue as to an Indemnitee who
has ceased to be a director or officer, and shall inure to the benefit of the
estate, heirs, executors and administrators of the Indemnitee. Nothing contained
in this Article EIGHTH shall be deemed to prohibit, and the Corporation is
specifically authorized to enter into, agreements with officers and directors
providing indemnification rights and procedures different from those set forth
in this Article EIGHTH. In addition, the Corporation may grant indemnification
rights to other employees or agents of the Corporation or other persons serving
the Corporation and such rights may be equivalent to, or greater or less than,
those set forth in this Article EIGHTH.
11. Partial Indemnification. If an Indemnitee is entitled under any
provision of this Article EIGHTH to indemnification by the Corporation for some
or a portion of the expenses (including attorneys' fees), judgments, fines or
amounts paid in settlement actually and reasonably incurred by the Indemnitee or
on the Indemnitee's behalf in connection with any action, suit, proceeding or
investigation and any appeal therefrom but not, however, for the total amount
thereof, the Corporation shall nevertheless indemnify the Indemnitee for the
portion of such expenses (including attorneys' fees), judgments, fines or
amounts paid in settlement to which the Indemnitee is entitled.
12. Insurance. The Corporation may purchase and maintain insurance, at its
expense, to protect itself and any director, officer, partner, employee or agent
of the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by such person in any such capacity, or arising out
of such person's status as such, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under the
General Corporation Law of the State of Delaware.
13. Merger or Consolidation. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article EIGHTH with respect to any action, suit,
proceeding or investigation arising out of or relating to any actions,
transactions or facts occurring prior to the date of such merger or
consolidation.
14. Savings Clause. If this Article EIGHTH or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and
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amounts paid in settlement in connection with any action, suit, proceeding or
investigation, whether civil, criminal or administrative, including an action by
or in the right of the Corporation, to the fullest extent permitted by any
applicable portion of this Article EIGHTH that shall not have been invalidated
and to the fullest extent permitted by applicable law.
15. Definitions. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of the State of Delaware shall
have the respective meanings assigned to such terms in such Section 145(h) and
Section 145(i).
16. Subsequent Legislation. If the General Corporation Law of the State of
Delaware is amended after adoption of this Article EIGHTH to expand further the
indemnification permitted to Indemnitees, then this Article EIGHTH shall be
deemed and construed to require the Corporation to indemnify such persons to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as so amended.
Ninth. This Article NINTH is inserted for the management of the business
and for the conduct of the affairs of the Corporation.
1. Number of Directors; Election of Directors. Subject to the rights of
holders of any series of Preferred Stock to elect directors, the number of
directors of the Corporation shall not be less than three. The exact number of
directors within the limitations specified in the preceding sentence shall be
determined from time to time by, or in the manner provided in, the By-laws of
the Corporation. Election of directors need not be by written ballot, except as
and to the extent provided in the By-laws of the Corporation.
2. Classes of Directors. Subject to the rights of holders of any series of
Preferred Stock to elect directors, the Board of Directors shall be and is
divided into three classes: Class I, Class II and Class III. No one class shall
have more than one director more than any other class. If a fraction is
contained in the quotient arrived at by dividing the authorized number of
directors by three, then, if such fraction is one-third, the extra director
shall be a member of Class I, and if such fraction is two-thirds, one of the
extra directors shall be a member of Class I and one of the extra directors
shall be a member of Class II, unless otherwise provided by resolution of the
Board of Directors.
3. Terms of Office. Subject to the rights of holders of any series of
Preferred Stock to elect directors, each director shall serve for a term ending
on the date of the third annual meeting following the annual meeting at which
such director was elected; provided, however, that each director initially
appointed to Class I shall serve for a term expiring at the Corporation's annual
meeting of stockholders held in 2002; each director initially appointed to Class
II shall serve for a term expiring at the Corporation's annual meeting of
stockholders held in 2003; and each director initially appointed to Class III
shall serve for a term expiring at the Corporation's annual meeting of
stockholders held in 2004; provided further, that the term of each director
shall continue until the election and qualification of such director's successor
and be subject to such director's earlier death, resignation or removal.
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4. Allocation of Directors Among Classes in the Event of Increases or
Decreases in the Authorized Number of Directors. In the event of any increase or
decrease in the authorized number of directors, (i) each director then serving
as such shall nevertheless continue as a director of the class of which such
director is a member until the expiration of such director's current term,
subject to such director's earlier death, resignation or removal and (ii) 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 in accordance with the provisions of Section 2 of this Article
NINTH. To the extent possible, consistent with the provisions of Section 2 of
this Article NINTH, any newly created directorships shall be added to those
classes whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution of the Board of Directors.
5. Quorum. A majority of the directors at any time in office shall
constitute a quorum for the transaction of business. In the event one or more of
the directors shall be disqualified to vote at any meeting, then the required
quorum shall be reduced by one for each director so disqualified, provided that
in no case shall less than one-third of the number of directors fixed pursuant
to Section 1 of this Article NINTH constitute a quorum. If at any meeting of the
Board of Directors there shall be less than such a quorum, a majority of the
directors present may adjourn the meeting from time to time without further
notice other than announcement at the meeting, until a quorum shall be present.
6. Action at Meeting. Every act or decision done or made by a majority of
the directors present at a meeting duly held at which a quorum is present shall
be regarded as the act of the Board of Directors unless a greater number is
required by law, by this Certificate of Incorporation, or by the By-laws of the
Corporation.
7. Removal. Subject to the rights of holders of any series of Preferred
Stock to elect directors, directors of the Corporation may be removed only for
cause by the affirmative vote of the holders of at least seventy-five percent
(75%) of the votes which all the stockholders would be entitled to cast in any
annual election of directors or class of directors.
8. Vacancies. Subject to the rights of holders of any series of Preferred
Stock to elect directors, any vacancy or newly-created directorship in the Board
of Directors, however occurring, shall be filled only by vote of a majority of
the directors then in office, although less than a quorum, or by a sole
remaining director and shall not be filled by stockholders. A director elected
to fill a vacancy shall be elected to hold office until the next election of the
class for which such director shall have been chosen, subject to the election
and qualification of such director's successor and subject to such director's
earlier death, resignation or removal.
9. Stockholder Nominations and Introduction of Business, Etc. Advance
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the manner provided by the By-laws of the Corporation.
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10. Amendments to Article. Notwithstanding any other provisions of law,
this Certificate of Incorporation or the By-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article NINTH.
Tenth. Stockholders of the Corporation may not take any action by written
consent in lieu of a meeting. Notwithstanding any other provisions of law, this
Certificate of Incorporation or the By-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article TENTH.
Eleventh. Special meetings of stockholders for any purpose or purposes may
be called at any time by the Board of Directors, the Chairman of the Board, the
Chief Executive Officer or, if the Corporation does not have a Chief Executive
Officer, the President, but such special meetings may not be called by any other
person or persons. Business transacted at any special meeting of stockholders
shall be limited to matters relating to the purpose or purposes stated in the
notice of meeting. Notwithstanding any other provision of law, this Certificate
of Incorporation or the By-laws of the Corporation, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least seventy-five percent (75%) of the votes which all the
stockholders would be entitled to cast in any annual election of directors or
class of directors shall be required to amend or repeal, or to adopt any
provision inconsistent with, this Article ELEVENTH.
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IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which
restates, integrates and amends the Certificate of Incorporation of the
Corporation, and which has been duly adopted in accordance with Section 242 and
245 of the Delaware General Corporation Law, has been executed by its duly
authorized officer this 7th day of August, 2001.
KADANT INC.
By: /s/ Sandra L. Lambert
--------------------------------
Sandra L. Lambert
Secretary