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<SEC-DOCUMENT>0000950131-97-006148.txt : 19971014

<SEC-HEADER>0000950131-97-006148.hdr.sgml : 19971014

ACCESSION NUMBER:     0000950131-97-006148

CONFORMED SUBMISSION TYPE:   10-Q

PUBLIC DOCUMENT COUNT:       3

CONFORMED PERIOD OF REPORT:  19970831

FILED AS OF DATE:     19971010

SROS:         NYSE

 

FILER:

 

    COMPANY DATA:

       COMPANY CONFORMED NAME:          MATERIAL SCIENCES CORP

       CENTRAL INDEX KEY:           0000755003

       STANDARD INDUSTRIAL CLASSIFICATION:    COATING, ENGRAVING & ALLIED SERVICES [3470]

       IRS NUMBER:              952673173

       STATE OF INCORPORATION:         DE

       FISCAL YEAR END:         0228

 

    FILING VALUES:

       FORM TYPE:    10-Q

       SEC ACT:     

       SEC FILE NUMBER:  001-08803

       FILM NUMBER:      97694311

 

    BUSINESS ADDRESS:

       STREET 1:     2300 E PRATT BLVD

       CITY:         ELK GROVE VILLAGE

       STATE:        IL

       ZIP:          60007

       BUSINESS PHONE:       8474398270

</SEC-HEADER>

<DOCUMENT>

<TYPE>10-Q

<SEQUENCE>1

<DESCRIPTION>FORM 10-Q DATED 08/31/1997

<TEXT>

 

<PAGE>

 

                      SECURITIES AND EXCHANGE COMMISSION

 

                            Washington, D.C. 20549

 

 

                                   FORM 10-Q

 

 

              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

                      THE SECURITIES EXCHANGE ACT OF 1934

 

                For the quarterly period ended August 31, 1997

                         Commission File Number 1-8803

 

 

                         MATERIAL SCIENCES CORPORATION

            (Exact name of Registrant as specified in its charter)

 

 

 

Delaware                                   95-2673173

(State or other jurisdiction               (IRS employer identification

of incorporation or organization)          number)

 

 

2200 East Pratt Boulevard

Elk Grove Village, Illinois                60007

(Address of principal                      (Zip code)

executive offices)

 

  Registrant's telephone number, including area code:  (847) 439-8270

 

 

Indicate by check mark whether the registrant (1) has filed all reports required

to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during

the preceding 12 months (or for such shorter period that the registrant was

required to file such reports), and (2) has been subject to such filing

requirements for the past 90 days.

 

 

Yes   ___X___       No______

 

 

As of October 8, 1997, there were outstanding 15,350,855 shares of common

stock, $.02 par value.

<PAGE>

 

                         MATERIAL SCIENCES CORPORATION

 

                                   FORM 10-Q

 

                     For The Quarter Ended August 31, 1997

 

 

 

                        PART I.  FINANCIAL INFORMATION

 

 

 

Item 1.  Financial Statements

- -----------------------------

 

 (a) Financial statements of Material Sciences Corporation and Subsidiaries

 

 (b) Summarized income statement information for Walbridge Coatings, An Illinois

     Partnership

 

 

 

                                       2

<PAGE>

Consolidated Statements of Income (Unaudited)

Material Sciences Corporation and Subsidiaries

<TABLE>

<CAPTION>

 

 

 

                                                Three Months Ended                       Six Months Ended

                                                    August 31,                               August 31,

(In thousands, except per share data)        1997                1996                 1997              1996

- ------------------------------------------ --------            --------             --------          --------

<S>                                       <C>                 <C>                  <C>               <C>    

Net Sales (1)                              $ 70,541            $ 70,420             $143,637          $139,304

Cost of Sales                                53,757              51,137              109,262           102,512

                                           --------            --------             --------          --------

Gross Profit                               $ 16,784            $ 19,283             $ 34,375          $ 36,792

Selling, General and Administrative

  Expenses                                   12,937              11,934               26,139            23,398

                                           --------            --------             --------          --------

Income from Operations                     $  3,847            $  7,349             $  8,236          $ 13,394

                                           --------            --------             --------          --------

Other (Income) and Expense:

   Interest Income                         $    (46)           $    (69)            $    (75)         $   (135)

   Interest Expense                           1,045                 142                2,058               142

   Equity in Results of Partnership             344                 595                 (158)              481

   Other, Net                                  (267)               (227)                (527)             (456)

                                           --------            --------             --------          --------

     Total Other Expense, Net              $  1,076            $    441             $  1,298          $     32

                                           --------            --------             --------          --------

Income Before Income Taxes                 $  2,771            $  6,908             $  6,938          $ 13,362

Income Taxes                                  1,067               2,660                2,672             5,145

                                           --------            --------             --------          --------

Net Income                                 $  1,704            $  4,248             $  4,266          $  8,217

                                           ========            ========             ========          ========

 

Net Income Per Common and Common

  Equivalent Share                         $   0.11            $   0.27             $   0.28          $   0.53

                                           ========            ========             ========          ========

Weighted Average Number of Common and

  Common Equivalent Shares Outstanding       15,485              15,620               15,461            15,586

                                           ========            ========             ========          ========

</TABLE>

 

The accompanying notes are an integral part of these statements.

 

                                       3

 

<PAGE>

 

Consolidated Balance Sheets

Material Sciences Corporation and Subsidiaries

 

<TABLE>

<CAPTION>

                                                                           August 31,    February 28,

                                                                              1997           1997

(In thousands)                                                             Unaudited       Audited

- -----------------------------------------------------------------------    ----------    ------------

<S>                                                                        <C>           <C>

Assets:

    Current Assets:

        Cash and Cash Equivalents                                           $  1,946       $  2,116

        Receivables:

            Trade, Less Reserves of $2,556 and $2,271, Respectively (2)       35,087         35,944

            Current Portion of Partnership Note                                  761            767

            Income Taxes                                                       1,123          1,249

        Prepaid Expenses                                                       3,978          2,791

        Inventories                                                           35,248         30,952

        Prepaid Taxes                                                          1,186          1,186

                                                                            --------       --------

            Total Current Assets                                            $ 79,329       $ 75,005

                                                                            --------       --------

    Gross Property, Plant and Equipment                                     $255,392       $242,340

    Accumulated Depreciation and Amortization                                (96,638)       (87,954)

                                                                            --------       --------

            Net Property, Plant and Equipment                               $158,754       $154,386

                                                                            --------       --------

    Other Assets:

        Investment in Partnership                                           $ 10,921       $ 10,759

        Partnership Note Receivable, Less Current Portion                          -            374

        Intangible Assets, Net                                                13,869         12,837

        Other                                                                    482            728

                                                                            --------       --------

            Total Other Assets                                              $ 25,272       $ 24,698

                                                                            --------       --------

            Total Assets                                                    $263,355       $254,089

                                                                            ========       ========

Liabilities:

    Current Liabilities:

        Current Portion of Long-Term Debt                                   $  4,089       $  3,750

        Accounts Payable                                                      22,300         24,092

        Accrued Payroll Related Expenses                                       7,750          9,838

        Accrued Expenses                                                       6,602          6,171

                                                                            --------       --------

            Total Current Liabilities                                       $ 40,741       $ 43,851

                                                                            --------       --------

    Long-Term Liabilities:

        Deferred Income Taxes                                               $ 11,323       $ 11,392

        Long-Term Debt, Less Current Portion                                  63,047         54,761

        Accrued Superfund Liability                                            4,026          4,071

        Other                                                                  6,822          6,641

                                                                            --------       --------

            Total Long-Term Liabilities                                     $ 85,218       $ 76,865

                                                                            --------       --------

Shareowners' Equity:

    Preferred Stock (3)                                                     $      -       $      -

    Common Stock (4)                                                             326            325

    Additional Paid-In Capital                                                50,925         50,142

    Treasury Stock at Cost (5)                                                (8,545)        (7,518)

    Retained Earnings                                                         94,690         90,424

                                                                            --------       --------

            Total Shareowners' Equity                                       $137,396       $133,373

                                                                            --------       --------

            Total Liabilities and Shareowners' Equity                       $263,355       $254,089

                                                                            ========       ========

</TABLE>

 

The accompanying notes are an integral part of these statements.

 

 

                                       4

 

<PAGE>

 

Consolidated Statements of Cash Flows (Unaudited)

Material Sciences Corporation and Subsidiaries

 

<TABLE>

<CAPTION>

                                                                           Three Months Ended       Six Months Ended

                                                                               August 31,              August 31,

(In thousands)                                                              1997        1996        1997        1996

- ----------------------------------------------------------------------    --------    --------    --------    --------

<S>                                                                       <C>         <C>         <C>         <C> 

Cash Flows From:

Operating Activities:

Net Income                                                                $  1,704    $  4,248    $  4,266    $  8,217

Adjustments to Reconcile Net Income to Net Cash Used in

    Operating Activities:

    Depreciation and Amortization                                            4,688       3,801       9,368       7,464

    Benefit for Deferred Income Taxes                                          (27)        (74)        (69)       (148)

    Compensatory Effect of Stock Plans                                         (52)        130          31         280

    Other, Net                                                                 344         595        (160)        481

                                                                          --------    --------    --------    --------

        Operating Cash Flow Prior to Changes in Assets and Liabilities    $  6,657    $  8,700    $ 13,436    $ 16,294

                                                                          --------    --------    --------    --------

Changes in Assets and Liabilities:

    Receivables                                                           $  1,633    $ (2,312)   $   (220)   $ (6,046)

    Income Taxes Receivable                                                 (1,123)       (673)        126         725

    Prepaid Expenses                                                          (278)        245      (1,146)        (94)

    Inventories                                                             (1,633)         47      (2,602)     (2,125)

    Accounts Payable                                                           196        (250)     (1,866)     (1,315)

    Accrued Expenses                                                           808       1,141      (1,751)     (2,135)

    Other, Net                                                                  48         180         102         (64)

                                                                          --------    --------    --------    --------

        Cash Flow from Changes in Assets and Liabilities                  $   (349)   $ (1,622)   $ (7,357)   $(11,054)

                                                                          --------    --------    --------    --------

            Net Cash Provided by Operating Activities                     $  6,308    $  7,078    $  6,079    $  5,240

                                                                          --------    --------    --------    --------

Investing Activities:

Capital Expenditures, Net                                                 $ (4,726)   $(14,051)   $(12,921)   $(26,492)

Acquisitions, Net of Cash Acquired                                          (1,129)          -      (1,129)     (2,489)

Investment in Partnership                                                     (459)       (672)     (1,004)       (877)

Distribution from Partnership                                                1,374         375       1,374         375

Other Long-Term Assets                                                         149         119         197         289

                                                                          --------    --------    --------    --------

            Net Cash Used in Investing Activities                         $ (4,791)   $(14,229)   $(13,483)   $(29,194)

                                                                          --------    --------    --------    --------

Financing Activities:

Net Proceeds (Payments) Under Lines of Credit                             $ (1,200)   $  6,500    $(11,300)   $ 23,700

Proceeds from Senior Notes                                                       -           -      20,000           -

Payments to Settle Debt                                                       (452)       (404)     (1,192)       (844)

Purchase of Treasury Stock                                                       -           -      (1,027)          -

Sale of Common Stock                                                            48         100         753         676

                                                                          --------    --------    --------    --------

            Net Cash Provided by (Used in) Financing Activities           $ (1,604)   $  6,196    $  7,234    $ 23,532

                                                                          --------    --------    --------    --------

Net Decrease in Cash                                                      $    (87)   $   (955)   $   (170)   $   (422)

Cash and Cash Equivalents at Beginning of Period                             2,033       3,912       2,116       3,379

                                                                          --------    --------    --------    --------

Cash and Cash Equivalents at End of Period                                $  1,946    $  2,957    $  1,946    $  2,957

                                                                          ========    ========    ========    ========

Supplemental Cash Flow Disclosures:

    Subordinated Notes Issued for Acquisitions                            $  1,117    $      -    $  1,117    $  1,500

    Cash Portion of Acquisitions and Related Costs                           1,129           -       1,129       2,489

                                                                          --------    --------    --------    --------

    Total Consideration Paid for Acquisitions                             $  2,246    $      -    $  2,246    $  3,989

                                                                          ========    ========    ========    ========

</TABLE>

 

The Changes in Assets and Liabilities above for the three months and six months

ended August 31, 1997, are net of assets and liabilities acquired.

 

       The accompanying notes are an integral part of these statements.

 

 

                                       5

 

<PAGE>

 

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         MATERIAL SCIENCES CORPORATION

 

 

 

The data for the three and six months ended August 31, 1997 and 1996 have not

been audited by independent public accountants but, in the opinion of the

Company, reflect all adjustments (consisting of only normal, recurring

adjustments) necessary for a fair presentation of the information at those dates

and for those periods. The financial information contained in this report should

be read in conjunction with the Company's 1997 Annual Report to Shareowners and

Annual Report on Form 10-K. Certain prior year amounts have been reclassified to

conform with the fiscal 1998 presentation.

 

(1)  During the six month periods ending August 31, 1997 and 1996, the Company

     derived approximately 20.4% and 20.9%, respectively, of its sales from fees

     billed to the Partnership by a subsidiary of the Company for operating the

     Walbridge, Ohio facility.

 

(2)  Includes trade receivables due from the Partnership of $2,596 at August 31,

     1997 and $2,256 at February 28, 1997.

 

(3)  Preferred Stock, $1.00 Par Value; 10,000,000 Shares Authorized; 1,000,000

     Designated Series B Junior Participating Preferred; None Issued.

 

(4)  Common Stock, $.02 Par Value; 40,000,000 Shares Authorized; 16,282,048

     Shares Issued and 15,302,400 Shares Outstanding at August 31, 1997 and

     16,256,132 Shares Issued and 15,339,384 Shares Outstanding at February 28,

     1997.

 

(5)  Treasury Stock at Cost; 979,648 Shares at August 31, 1997 and 916,748

     Shares at February 28, 1997.

 

(6)  During the second quarter of fiscal 1998, the Company purchased designated

     assets of a specialty films distribution business in Australia and the

     remaining 51% interest of a joint venture in Singapore. Consideration for

     the purchases, including transaction costs, was $1,117 in subordinated

     notes ("Notes") and $1,129 in cash. The Notes bear interest at a rate of 9%

     per annum. The notes mature in three equal installments with the first Note

     becoming due annually beginning on July 19, 1998. The acquisitions have

     been accounted for under the purchase method of accounting.

 

                                       6

<PAGE>

 

Summarized Income Statement Information (Unaudited)

Walbridge Coatings, An Illinois Partnership

 

<TABLE>

<CAPTION>

                                   Three Months Ended           Six Months Ended

                                       August 31,                  August 31,

(In thousands)                     1997          1996          1997          1996

- ----------------------------    ----------    ----------    ----------    ----------

<S>                             <C>           <C>           <C>           <C>   

Net Revenues                     $16,656       $16,317       $34,991       $34,383

 

Gross Profit                         141           342         1,764         1,159

 

Income (Loss) from Operations       (499)         (279)          372           (92)

 

Net Income (Loss)                   (637)         (552)           45          (721)

 

 

NOTE:  The Net Income (Loss) shown above does not directly correlate to the

       Equity in Results of Partnership shown in the Company's Statement of

       Income due to certain contractual allocation requirements of the

       Partnership. The Company's primary financial benefit from participation

       in the Partnership is in the form of revenues from operating the

       Walbridge, Ohio facility. These revenues are included in the Company's

       net sales.

 

</TABLE>

                                       7

<PAGE>

                         MATERIAL SCIENCES CORPORATION

 

                                   FORM 10-Q

 

                     For the Quarter Ended August 31, 1997

 

 

                        PART I.  FINANCIAL INFORMATION

 

 

Item 2.  Management's Discussion and Analysis of Financial Condition and Results

of Operations

 

Material Sciences Corporation ("MSC" or "Company") operates in one business

segment comprised of the following four product groups: laminates and

composites, specialty films, coil coating and electrogalvanizing. The following

table provides a summary of net sales and the percent of net sales of MSC's

product groups.

 

<TABLE>

<CAPTION>

 

 

 

 

Net Sales Summary                                Quarter Ended August 31,

- ---------------------          ------------------------------------------------------------

                                          1997                             1996

                               -------------------------       ----------------------------

Product Group:                    Dollars       Percent           Dollars          Percent

                               -----------      -------        ------------        --------

<S>                             <C>             <C>             <C>                <C>   

  Laminates and Composites      $ 14,747         20.9%          $ 17,021             24.2%

  Specialty Films                 11,608         16.5%            11,178             15.9%

  Coil Coating                    29,718         42.1%            28,332             40.2%

  Electrogalvanizing              14,468         20.5%            13,889             19.7%

                                --------        -----            -------            -----

                                $ 70,541        100.0%          $ 70,420            100.0%

                                ========        =====           ========            =====

 

 

 

                                                Six Months Ended August 31,

                               ------------------------------------------------------------

                                          1997                             1996

                               -------------------------       ----------------------------

Product Group:                   Dollars        Percent           Dollars          Percent

                               -----------      --------       ------------        --------

 

  Laminates and Composites      $ 31,833          22.2%         $ 32,479             23.3%

  Specialty Films                 23,018          16.0%           21,327             15.3%

  Coil Coating                    59,445          41.4%           56,446             40.5%

  Electrogalvanizing              29,341          20.4%           29,052             20.9%

                                --------         -----          --------            -----

                                $143,637         100.0%         $139,304            100.0%

                                ========         =====          ========            =====

 

 

 

</TABLE>

<PAGE>

 

RESULTS OF OPERATIONS

- ---------------------

 

Net Sales

 

Net sales in the second quarter of fiscal 1998 increased 0.2% over the same

period last year. Sales of specialty films increased by 3.8%; coil coating 4.9%;

and electrogalvanizing 4.2%. Laminates and composites sales decreased by 13.4%

compared to last fiscal year's second quarter.  For the six-month period ended

August 31, 1997, sales were 3.1% higher than the first six months of last year.

Sales of specialty films increased by 7.9%; coil coating 5.3%; and

electrogalvanizing 1.0%.  Laminates and composites sales decreased by 2.0%

compared to the prior year's six months.

 

Laminates and Composites

 

Sales of laminates and composites products decreased 13.4% in the second quarter

of fiscal 1998, as compared to the same quarter last year.  The decrease was

largely due to lower shipments of disc brake noise dampers to the replacement

market, as well as a decrease in sales of Specular+(R).  These shortfalls were

offset, in part, by higher sales of Polycore Composites(R) to both the computer

and appliance markets.  On a six-month basis, sales in this product group

decreased 2.0% for the same prior period.  An overall softness in the reflective

lighting market is the major contributor to the lower sales of Specular+ for the

first half of the year, offset, in part, by higher demand for Polycore

Composites in the appliance, automotive, and computer markets.

 

Specialty Films

 

During the second quarter of fiscal 1998, sales of specialty films increased

3.8% over the same period last year.  For the first six months, specialty films

sales increased 7.9%, as compared to the first six months of last fiscal year.

For both periods, the increase was primarily due to higher sales of high

performance solar control window film and shipments of sputter coated films for

the imaging and printing industries.  In addition, during the second quarter,

the Company completed the acquisitions of a distribution business in Australia,

as well as the remaining 51% interest of a joint venture in Singapore, further

strengthening its position in this market.

 

Coil Coating

 

Coil coating sales during the second quarter of fiscal 1998 grew 4.9% over the

same quarter last year.  The major contributors to the growth were increases in

sales to the transportation and building products markets, offset, in part, by

lower sales to the swimming pool and appliance markets.  For the six months

ended August 31, 1997, sales were 5.3% higher than the same period last fiscal

year.  The increase in sales for the six-month period was due to an increase in

the transportation and appliance markets, offset, in part, by lower sales to the

swimming pool market.

 

Electrogalvanizing

 

MSC participates in the electrogalvanizing market through Walbridge Coatings

(the "Partnership"), a partnership among subsidiaries of MSC, Bethlehem Steel

Corporation

 

                                       9

<PAGE>

 

("Bethlehem") and Inland Steel Industries, Inc. ("Inland").  MSC's

net sales for electrogalvanizing consists of various fees charged to the

Partnership for operating the facility.  Bethlehem and Inland are primarily

responsible for the sales and marketing activities of the Partnership.  The

Company's primary financial benefits from the Partnership are the revenues

billed to Walbridge Coatings for operating the facility.  These revenues

represent 20.4% and 20.9% of the Company's net sales in the first six months of

fiscal 1998 and 1997, respectively. The profitability for operating the facility

was comparable to the Company's overall operating results.  Under the equity

method of accounting, the Company includes its portion of the Partnership shown

in the Consolidated Statements of Income.  The amounts do not directly correlate

to the Company's 50% ownership interest due to contractual allocation

requirements of the Partnership agreement.  The Company's potential alternatives

upon expiration of the Partnership term in June 1998 include, among other

things, extension of the Partnership, purchase of the facility, or sale of the

facility.  The partners are actively discussing the various alternatives.  The

Company believes its investment in the Partnership is realizable.

 

MSC's electrogalvanizing sales in the second quarter of fiscal 1998 increased

4.2% over the second quarter last year even though volume declined 5.4% to

103,351 tons for the period.  A shift in the product mix to higher value-added

organically coated materials contributed to the increase in sales which more

than offset the decline in volume.  The volume reduction was primarily a result

of the annual maintenance shutdown taking a planned two weeks as compared to one

week in the prior year.  For the six months of fiscal 1998, sales increased 1.0%

and volume decreased 4.1% to 225,831 tons from 235,416 tons over the same period

in the prior fiscal year.  Again, the increase in sales and lower volume was due

to a change in product mix, as well as the extended maintenance shutdown.

 

The sales and marketing responsibilities of the Partnership are split between

Bethlehem and Inland at 76% and 24%, respectively.  During the first six months

of fiscal 1998, Inland utilized 16.2% of available production line time rather

than its full 24% share.  Bethlehem and other customers utilized this additional

available line time.  In fiscal 1998, the Company expects more production line

time will be utilized by customers other than Bethlehem and Inland.  Inland is

reviewing its future involvement in the Partnership, and therefore, there is no

assurance that Inland will utilize its full 24% of available line time on a

long-term basis.  The Company believes that any short-term disruption in volume

that might be caused by a reduction in Inland's line time requirements could

eventually be replaced by additional volume from Bethlehem and other customers.

 

Gross Profit

 

The Company's gross profit margin was 23.8% in the second quarter of fiscal 1998

as compared to 27.4% in the same period last year.  For the first six months of

fiscal 1998, gross profit margin was 23.9% versus 26.4% last year.  The decrease

in gross profit margin for the quarter and six months was primarily due to

inefficiencies and start-up expenses associated with the new coil coating line

in Elk Grove Village, Illinois, changes in the product mix, and underabsorption

of production costs due to recent capacity additions in our coil coating,

laminates and composites, and specialty films areas.

 

                                      10

<PAGE>

 

Selling, General and Administrative Expenses

 

Selling, general and administrative ("SG&A") expenses were 18.3% of sales in the

second quarter of fiscal 1998 as compared to 16.9% of sales for the same period

last fiscal year. For the six months ended August 31, 1997, SG&A expenses

increased to 18.2% of sales from 16.8% of sales for the same period in fiscal

1997.  For the second quarter, the increase in SG&A is largely due to an

increase in powder coating development initiatives, as well as the acquisitions

of the specialty films distribution business in Australia and the remaining

interest in a joint venture in Singapore.  On a year to date basis, SG&A was

also affected by one-time expenses of approximately $500 incurred for the

investigation of previously announced accounting irregularities, in addition to

the Company's ongoing strategic marketing efforts.

 

Total Other Expense, Net and Income Taxes

 

Total other expense, net was  $1,076 and $1,298 during the second quarter and

first six months of fiscal 1998, respectively, versus $441 and $32 for the

second quarter and first six months of fiscal 1997.  The increase in expense was

attributable to an increase in interest expense due to less capitalized

interest, higher debt levels, and fixed interest rates that are higher than

actual fiscal 1997 variable interest rates.  The increase in interest expense

was partially offset by an increase in equity in results of partnership due to

the Company receiving the profit allocation on third party sales.  MSC's

effective income tax rate was approximately 38.5% during the second quarter and

first six months of fiscal 1998 and fiscal 1997.

 

LIQUIDITY AND CAPITAL RESOURCES

- -------------------------------

 

During the second quarter of fiscal 1998, MSC generated $6,308 of cash from

operating activities compared to $7,078 in the second quarter last year. The

decrease in cash generation is due mainly to lower net income, offset, in part,

by higher depreciation and amortization and improvements in working capital as

compared to last year.  For the six months of fiscal 1998, operating activities

generated $6,079 of cash versus $5,240 last year.  The increase in cash

utilization is due mainly to higher depreciation and amortization and

improvements in working capital as compared to the prior year, offset, in part

by lower net income.

 

MSC's capital expenditures during the second quarter and first six months of

fiscal 1998 were $4,726 and $12,921, respectively, versus $14,051 and $26,492,

respectively, last fiscal year.  Included in the prior fiscal periods was higher

spending for the new coil coating facility in Elk Grove Village, Illinois,

versus this fiscal year.  In the second quarter ended August 31, 1997, the

Company purchased designated assets of a specialty films distribution business

in Australia and the remaining interest in a joint venture in Singapore for

$2,246 in cash and subordinated notes.  On a year to date basis, investments

were made in the construction of a new coating and laminating line at the San

Diego, California facility which was commissioned during the second quarter of

fiscal 1998.

 

MSC's total debt increased at August 31, 1997, to $67,136  from $58,511 at

fiscal year end due mainly to capital investments, the Company's stock

repurchase program, and the acquisitions of the distribution businesses for the

specialty films area.  As of August 31, 1997, the Company maintains three

unsecured lines of credit totaling $75,000.  There was $3,700 outstanding under

these lines of credit as of August 31, 1997.  The Company has executed letters

of credit totaling $4,759 against these lines leaving available lines of credit

of $66,541 at August 31,

 

                                      11

<PAGE>

 

1997. On February 15, 1997, MSC authorized the issuance and sale of $50,000

Senior Notes ("Notes"). As of May 31, 1997, the Notes were issued and funded.

The Company believes that its cash flow from operations, together with available

financing and cash on hand will be sufficient to fund its working capital needs,

capital expenditure program, and debt amortization.

 

The Company previously announced the signing of a letter of intent to acquire

certain assets of Pinole Point Steel Company and Colorstrip, Inc., which have

now merged and are now known as Colorstrip, Inc.   Located in San Francisco,

California, the combined company operates a hot-dip galvanizing line and

produces prepainted metal on its coil coating line.  Although the term of the

letter of intent has expired, the parties are continuing their discussions.  Any

transaction is subject to completion of satisfactory due diligence. There can be

no assurance that definitive agreements will be executed or that the transaction

will be consummated.

 

On April 9, 1997, a plaintiff claiming to represent a class of Material Sciences

Corporation shareowners filed a complaint in the United States District Court

for the Northern District of Illinois.  The purported class includes shareowners

who purchased MSC shares between April 18, 1996 and April 7, 1997 and who

allegedly suffered injury as a result of the accounting irregularities announced

on April 7, 1997.  The plaintiff claims that the Company and certain of its

officers violated the federal securities laws by making material misstatements

in the Company's publicly filed financial reports.  On August 25, 1997, a class

action complaint was filed in the Circuit Court of Cook County, Illinois. The

complaint claims the Company violated the Illinois Consumer Fraud and Deceptive

Practices Act as a result of false, misleading and deceptive representations and

omissions of material facts relating to the Company's financial position during

the period April 18, 1996 to April 6, 1997.  The amount of both claims are

uncertain.  The Company believes that the claims are without merit and intends

to vigorously defend the lawsuits.  However, there can be no assurance with

respect to the outcome of the litigation.  No amounts have been provided in the

accompanying financial statements for these claims.

 

The Company has a capital lease obligation, which was $4,413 as of August 31,

1997, relating to a facility which the Company subleases to the Partnership.  In

addition, throughout the term of the Partnership, the Company is contingently

responsible for 50% of the Partnership's financing requirements, including the

Company's share (approximately $1,250) of $2,500 in Partnership financing loans

from third parties at August 31, 1997.

 

MSC continues to participate in the implementation of settlements with the

government for the clean-up of various Superfund sites. For additional

information, refer to MSC's Form 10-K for the fiscal year ended February 28,

1997.

 

                                      12

<PAGE>

 

                         MATERIAL SCIENCES CORPORATION

 

                                   FORM 10-Q

 

                     For the Quarter Ended August 31, 1997

 

 

 

                          PART II. OTHER INFORMATION

 

 

 

 

Item 4. Submission of Matters to a Vote of Security Holders

- -----------------------------------------------------------

 

     On July 17, 1997, the Company held its Annual Meeting of Shareowners.

 

     Jerome B. Cohen, Roxanne J. Decyk, Eugene W. Emmerich, G. Robert Evans, E.

F. Heizer, Jr., J. Frank Leach, Gerald G. Nadig, Irwin P. Pochter, and Howard B.

Witt, being nine nominees named in the Company's Proxy Statement, dated June 16,

1997, were elected at the Annual Meeting to serve as the Board of Directors by a

majority vote of shareowners. No votes were cast for any other person. The

details of the vote were as follows:

 

<TABLE>

<CAPTION>

       Name                  For               Against

       ----                  ---               -------

<S>                        <C>                 <C>

Jerome B. Cohen            12,934,124          1,265,397

Roxanne J. Decyk           12,932,166          1,267,355

Eugene W. Emmerich         12,934,203          1,265,318

G. Robert Evans            13,454,701            744,820

E. F. Heizer, Jr.          12,934,292          1,265,229

J. Frank Leach             13,468,385            731,136

Gerald G. Nadig            13,472,764            726,757

Irwin P. Pochter           12,931,801          1,267,720

Howard B. Witt             13,470,689            728,832

</TABLE>

 

     On August 5, 1997, subsequent to the election of the Board of Directors,

Mr. J. Frank Leach passed away. The Company does not currently plan to replace

Mr. Leach's position on the Board of Directors.

 

     Approved by a majority vote of shareowners was the proposal to increase the

number of authorized shares of common stock of the Company from 20,000,000 to

40,000,000 which enhances the Company's flexibility in connection with possible

future actions such as stock splits, acquisitions, and other corporate matters.

The details of the vote were as follows:

 

<TABLE>

<CAPTION>

      For                 Against                Abstain

      ---                 -------                -------

   <S>                   <C>                     <C>

   12,202,866            1,933,898                62,757

</TABLE>

 

                                      13

<PAGE>

 

     Approved by a majority vote of the shareowners was the proposal to amend

the 1992 Omnibus Stock Awards Plan for Key Employees to increase the number of

shares of common stock issuable thereunder by 150,000 shares. The Plan provides

incentives to the key employees of the Company through rewards linked to the

performance of the Company's common stock. The details of the vote were as

follows:

 

<TABLE>

<CAPTION>

     For                  Against                  Abstain

     ---                  -------                  -------

  <S>                     <C>                      <C>

  7,822,920              6,307,065                  69,536

</TABLE>

 

     Approved by a majority vote of the shareowners was the proposal to amend

the Employee Stock Purchase Plan to increase the aggregate number of shares of

the Company's common stock that may be awarded thereunder by 600,000 shares. The

Plan provides incentives to participating employees to create value for the

Company by giving them direct ownership interest in the Company. The details of

the vote were as follows:

 

<TABLE>

<CAPTION>

     For                  Against                  Abstain

     ---                  -------                  -------

  <S>                     <C>                      <C>

  13,391,608              740,769                   67,144

</TABLE>

 

Item 6.  Exhibits and Reports on Form 8-K

- -----------------------------------------

 

     (a)3     Restated Certificate of Incorporation

 

     (a)27    Financial Data Schedule

 

     (b)      Reports on Form 8-K

              -------------------

 

              No reports on Form 8-K were filed during the quarter for which

              this report is filed.

 

                                      14

<PAGE>

 

                                 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, in Elk Grove Village, State of Illinois,

on the 8th day of October, 1997.

 

 

 

                                           MATERIAL SCIENCES CORPORATION

 

 

                                             By:  /s/ Gerald G. Nadig

                                                  ---------------------------

                                                     Gerald G. Nadig

                                                     President and Chief

                                                     Executive Officer

 

 

 

                                             By:  /s/ James J. Waclawik, Sr.

                                                  ---------------------------

                                                     James J. Waclawik, Sr.

                                                     Vice President,

                                                     Chief Financial Officer

                                                     and Secretary

 

                                      15

<PAGE>

 

                         MATERIAL SCIENCES CORPORATION

 

                         Quarterly Report on Form 10-Q

 

 

                               Index to Exhibits

 

<TABLE>

<CAPTION>

                                                     Sequentially

Exhibit Number      Description of Exhibit          Numbered Page

- --------------      ----------------------          -------------

<S>                 <C>                             <C>

     3              Restated Certificate of

                    Incorporation

 

     27             Financial Data Schedule (1)

</TABLE>

 

 

(1) Appears only in the electronic filing of this report with the Securities

    and Exchange Commission.

</TEXT>

</DOCUMENT>

<DOCUMENT>

<TYPE>EX-3

<SEQUENCE>2

<DESCRIPTION>RESTATED CERTIFICATE OF INCORPORATION

<TEXT>

 

<PAGE>

 

                                CERTIFICATE OF

 

                     RESTATED CERTIFICATE OF INCORPORATION

 

                                      OF

 

                         MATERIAL SCIENCES CORPORATION

 

                                 *  *  *  *  *

 

          James J. Waclawik, Sr., being the Vice President, Chief Financial

Officer and Secretary of Material Sciences Corporation, a corporation duly

organized and existing under and by virtue of the General Corporation Law of the

State of Delaware (the "Corporation"), DOES HEREBY CERTIFY as follows:

 

     FIRST:  The Corporation filed its original Certificate of Incorporation

with the Delaware Secretary of State on September 21, 1982 (as amended, the

"Certificate of Incorporation") under the name of M.S.C. Merger Co.

 

     SECOND:  The Corporation changed its name to Material Sciences Corporation

on October 31, 1983 in connection with the filing of a Certificate of Merger,

which merged "Material Sciences Corporation," a California corporation, with and

into the Corporation.

 

     THIRD:  The Restated Certificate of Incorporation attached hereto as

Exhibit A was duly adopted by the Board of Directors of the Corporation in

accordance with Section 245 of the General Corporation.

 

     FOURTH:  In accordance with the provisions of Section 245 of the General

Corporation Law of the State of Delaware, approval of the Corporation's

stockholders is not required with respect to the adoption of the Restated

Certificate of Incorporation.

 

                                 *  *  *  *  *

<PAGE>

 

 

     IN WITNESS WHEREOF, the undersigned, being the Vice President, Chief

Financial Officer and Secretary hereinabove named, for the purpose of restating

and integrating the Certificate of Incorporation pursuant to the General

Corporation Law of the State of Delaware, under penalty of perjury does hereby

declare and certify that is the act and deed of the Corporation and the facts

stated herein are true, and accordingly has hereunto signed this Certificate of

Restated Certificate of Incorporation this 25th day of September, 1997.

 

 

                                               MATERIAL SCIENCES CORPORATION,

                                               a Delaware Corporation

 

 

                                          By:  /s/ James J. Waclawik, Sr.

                                               --------------------------

                                               James J. Waclawik, Sr.

                                               Vice President, Chief Financial

                                               Officer and Secretary

 

<PAGE>

 

                                  EXHIBIT A

 

                     RESTATED CERTIFICATE OF INCORPORATION

                                      OF

                         MATERIAL SCIENCES CORPORATION

 

 Adopted in accordance with Section 245 of the General Corporation Law of the

State of Delaware.  This Restated Certificate of Incorporation only restates and

  integrates and does not further amend the provisions of  the Certificate of

  Incorporation of this Corporation as heretofore amended or supplemented and

  there is no discrepancy between those provisions and the provisions of this

                    Restated Certificate of Incorporation.

 

The name of the corporation is Material Sciences Corporation and the name under

which the corporation was originally incorporated is M.S.C. Merger Co.  The date

 of filing of its original Certificate of Incorporation with the Secretary of

                         State was September 21, 1982.

 

                                --------------

 

                                  ARTICLE ONE

 

     The name of the Corporation is Material Sciences Corporation (hereinafter

referred to as the "Corporation").

 

 

                                  ARTICLE TWO

 

     The address of the Corporation's registered office in the State of Delaware

is 1209 Orange Street in the City of Wilmington, County of New Castle.  The

name of the Corporation's registered agent at such address is The Corporation

Trust Company.

 

 

                                 ARTICLE THREE

 

     The nature of the business to be conducted or promoted and the purposes of

the Corporation are to engage in any lawful act or activity for which

corporations may be organized under the General Corporation Law of the State of

Delaware.

 

 

                                  ARTICLE FOUR

 

     The total number of shares of all classes of capital stock which the

Corporation shall have authority to issue is 50,000,000 shares, consisting of:

 

               10,000,000 shares of preferred stock of the par value of $1.00

               per share ("preferred stock"); and       

<PAGE>

 

               40,000,000 shares of common stock of the par value of $.02 per

               share ("common stock").

 

          The designations, voting powers, preferences and relative,

participating, optional and other special rights, and the qualifications,

limitations or restrictions thereof, of such stock shall be as follows:

 

 

                                       I

                                PREFERRED STOCK

 

          1.   Shares of preferred stock may be issued in one or more series at

such time or times, and for such consideration or considerations, as the Board

of Directors may determine.  All shares of any one series of preferred stock

shall be identical with each other in all respects, except that shares of any

one series issued at different times may differ as to dates from which dividends

thereon may be cumulative.  All series shall rank equally and be identical in

all respects, except as permitted by the provisions of Section 2 of this

Division I.

 

          2.   The Board of Directors is expressly authorized at any time, and

from time to time, to provide for the issuance of shares of preferred stock in

one or more series with such voting powers, designations, preferences and

relative, participating, optional or other special rights, and such

qualifications, limitations or restrictions thereof, as shall be stated and

expressed in the resolution or resolutions providing for the issue thereof

adopted by the Board of Directors, and as are not stated and expressed in this

Certificate of Incorporation (or any amendment thereto), including, but not

limited to, determination of any of the following:

 

          (a) the distinctive designation and number of shares comprising such

     series, which number may (except where otherwise provided by the Board of

     Directors in creating such series) be increased or decreased (but not below

     the number of shares then outstanding) from time to time by like action of

     the Board of Directors;

 

          (b) the dividend rate or rates on the shares of such series and the

     preferences, if any, over any other series (or of any other series over

     such series) with respect to dividends; the terms and conditions upon which

     and the periods in respect of which dividends shall be payable, whether and

     upon what conditions such dividends shall be cumulative and, if cumulative,

     the date or dates from which dividends shall accumulate;

 

          (c) the voting powers, full or limited, if any, of the shares of such

     series, and under what conditions, if any, the shares of such series (alone

     or together with the shares of one or more other series having similar

     provisions) shall be entitled to vote separately as a class (i) for the

     election of one or more directors of the Corporation or (ii)  upon other

     matters;

 

          (d) whether the shares of such series shall be redeemable, the

     limitations and restrictions with respect to such redemptions, the time or

     times when, the price or prices at

           

                                      -2-

<PAGE>

 

     which and the manner in which such shares shall be redeemable, including

     the manner of selecting shares of such series for redemption if less than

     all shares are to be redeemed;

 

          (e) the rights to which the holders of shares of such series shall be

     entitled, and the preferences, if any, over any other series (or of any

     other series over such series), upon the voluntary or involuntary

     liquidation, dissolution, distribution of assets or winding up of the

     Corporation, which rights may vary depending on whether such liquidation,

     dissolution, distribution or winding up is voluntary or involuntary, and,

     if voluntary, may vary at different dates;

 

          (f) whether the shares of such series shall be subject to the

     operation of a purchase, retirement or sinking fund, and, if so, whether

     and upon what conditions such purchase, retirement or sinking fund shall be

     cumulative or noncumulative, the extent to which and the manner in which

     such fund shall be applied to the purchase or redemption of the shares of

     such series, including the price or prices at which the shares may be

     purchased or redeemed, or to other corporate purposes and the terms and

     provisions relative to the operation thereof;

 

          (g) whether the shares of such series shall be convertible into or

     exchangeable for shares of stock of any other class or classes, or of any

     other series of the same class, and, if so convertible or exchangeable, the

     price or prices or the rate or rates of conversion or exchange and the

     method, if any, of adjusting the same, and any other terms and conditions

     of such conversion or exchange;

 

          (h) whether the issuance of additional shares of preferred stock shall

     be subject to restrictions as to issuance, or as to the powers, preferences

     or other rights of any other series; and

 

          (i) any other preferences, privileges and powers, and relative,

     participating, optional or other special rights, and qualifications,

     limitations or restrictions of such series, as the Board of Directors may

     deem advisable and as shall not be inconsistent with the provisions of this

     Certificate of Incorporation, as the same may be amended from time to time.

 

                           *     *     *     *     *

 

          The Board of Directors of the Corporation pursuant to the authority

vested in it by Article Four, Division I (Preferred Stock) above has designated

a series of preferred stock as follows:

 

          Section 1.  Designation and Amount.  The shares of such series shall

be designated as "Series B Junior Participating Preferred Stock" (the "Series B

Preferred Stock"), and the number of shares constituting such series shall be

1,000,000.  Such number of shares may be increased by resolution of the Board of

Directors.

                       

                                      -3-

<PAGE>

 

          Section 2.  Dividends and Distributions.

                      ---------------------------

 

          (A) (i)  Subject to the prior rights of any other series of Preferred

     Stock ranking prior to the Series B Preferred Stock as to dividends, the

     holders of shares of Series B Preferred Stock shall be entitled to receive,

     when, as and if declared by the Board of Directors out of funds legally

     available for the purpose, quarterly dividends payable in cash on the last

     day of May, August, November, and February 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 B Preferred Stock, in

     an amount per share (rounded to the nearest cent) equal to the greater of

     (a) $10.00 or (b) the Adjustment Number (as defined below) times the

     aggregate per share amount of all cash dividends, and the Adjustment Number

     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, par value

     $0.02 per share, of the Corporation (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 B Preferred Stock.  The "Adjustment

     Number" shall initially be 100.  In the event the Corporation shall at any

     time on or after July 2, 1996 (i) declare or pay any dividend on Common

     Stock payable in shares of Common Stock, (ii) subdivide the outstanding

     shares of Common Stock (by reclassification or otherwise) into a greater

     number of shares of Common Stock or (iii) combine the outstanding Common

     Stock into a smaller number of shares, then in each such case the

     Adjustment Number in effect to which holders of shares of Series B

     Preferred Stock were entitled immediately prior to such event shall be

     adjusted by multiplying such Adjustment Number in effect 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.

 

              (ii) The Corporation shall declare a dividend or distribution on

          the Series B Preferred Stock as provided in this paragraph (A)

          immediately after it declares a dividend or distribution on the Common

          Stock (other than a dividend payable in shares of Common Stock);

          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 $10.00 per share on the Series B

          Preferred Stock shall nevertheless be payable on such subsequent

          Quarterly Dividend Payment Date.

 

          (B) Dividends shall begin to accrue and be cumulative on outstanding

     shares of Series B Preferred Stock from the Quarterly Dividend Payment Date

     next preceding the date of issue of such shares of Series B Preferred

     Stock, 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

                  

                                      -4-

<PAGE>

 

     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

     B 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 B 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 of Directors may fix a

     record date for the determination of holders of shares of Series B

     Preferred Stock entitled to receive payment of a dividend or distribution

     declared thereon, which record date shall be no more than 60 days prior to

     the date fixed for the payment thereof.

 

          Section 3.  Voting Rights.  The holders of shares of Series B

Preferred Stock shall have the following voting rights:

 

          (A) Each share of Series B Preferred Stock shall entitle the holder

     thereof to a number of votes equal to the Adjustment Number on all matters

     submitted to a vote of the stockholders of the Corporation.

 

          (B) Except as otherwise provided herein, in the Corporation's

     Certificate of Incorporation, as amended, or by-laws, as amended, or by

     law, the holders of shares of Series B Preferred Stock and the holders of

     shares of Common Stock shall vote together as one class on all matters

     submitted to a vote of stockholders of the Corporation.

 

          (C)  (i)  If at any time dividends on any shares of Series B Preferred

     Stock shall be in arrears in an amount equal to at least six quarterly

     dividends thereon, the occurrence of such contingency shall mark the

     beginning of a period (herein called a "default period") which shall extend

     until such time when all accrued and unpaid dividends for all previous

     quarterly dividend periods and for the current quarterly dividend period on

     all shares of Series B Preferred Stock then outstanding shall have been

     declared and paid or set apart for payment.  During each default period,

     the holders of Preferred Stock (including holders of the Series B Preferred

     Stock) upon which these or like voting rights have been conferred and are

     exercisable (the "Voting Preferred Stock") with dividends in arrears in an

     amount equal to six quarterly dividends thereon voting as a class,

     irrespective of series, shall have the right to elect two Directors.

 

               (ii) During any default period, such voting right of the holders

          of Series B Preferred Stock may be exercised initially at a special

          meeting called pursuant to subparagraph (iii) of this Section 3(C) or

          at any annual meeting of stockholders, and thereafter at annual

          meetings of stockholders, provided that neither such voting right nor

          the right of the holders of Series B Preferred Stock as hereinafter

          provided to increase in certain cases the authorized number of

          Directors shall be exercised unless the holders of one-third in number

          of shares of Voting Preferred Stock outstanding shall be present in

          person or by proxy.  The absence of a quorum of the holders of Common

          Stock shall not affect the exercise by the holders of Voting Preferred

          Stock

             

                                      -5-

<PAGE>

 

          of such voting right.  At any meeting at which the holders of Voting

          Preferred Stock shall initially exercise such voting right during an

          existing default period, they shall have the right, voting separately

          as a class, to elect Directors to fill such vacancies, if any, in the

          Board of Directors as may then exist up to two Directors or, if such

          voting right is exercised at an annual meeting, to elect two

          Directors.  If the number of Directors which may be otherwise elected

          at any annual meeting or a special meeting does not permit the holders

          of the Voting Preferred Stock to elect two Directors as provided

          herein, the holders of Voting Preferred Stock, voting separately as a

          class, shall have the right to make such increase in the number of

          Directors as shall be necessary to permit the election by them of the

          required number. After the holders of Voting Preferred Stock shall

          have exercised their right to elect Directors in any default period

          and during the continuance of such default period, the number of

          Directors shall not be increased or decreased except with the approval

          of the holders of Voting Preferred Stock voting separately as a class.

 

               (iii)  Unless the holders of Voting Preferred Stock shall, during

          an existing default period, have previously exercised their right to

          elect Directors, the Board of Directors may order, or any stockholder

          or stockholders owning in the aggregate not less than 10% of the total

          number of shares of Voting Preferred Stock then outstanding may

          request the calling of a special meeting of the holders of Voting

          Preferred Stock, which meeting shall thereupon be called by the

          Chairman and Chief Executive Officer, any Vice President or the

          Secretary of the Corporation.  Notice of any such meeting and of any

          annual meeting at which holders of Voting Preferred Stock are entitled

          to specially elect Directors pursuant to this paragraph (C) shall be

          given to each holder of record of Voting Preferred Stock by mailing a

          copy of such notice to him at his last address as the same appears on

          the books of the Corporation. Such meeting shall be called for a time

          not earlier than 20 days and not later than 60 days after such

          request, or in default of the calling of such meeting within 60 days

          after such order or request such meeting may be called on similar

          notice by any stockholder or stockholders owning in the aggregate not

          less than 10% of the total number of shares of Voting Preferred Stock

          then outstanding.  Notwithstanding the provisions of this paragraph

          (C)(iii), no such special meeting shall be called during the period

          within 60 days immediately preceding the date fixed for the next

          annual meeting of the stockholders.

 

               (iv) During any default period after the holders of Voting

          Preferred Stock shall have exercised their rights to elect Directors

          voting as a class, (x) the Directors so elected by the holders of

          Voting Preferred Stock shall continue in effect until their successors

          shall have been elected by such holders or until the expiration of the

          default period, and (y) any vacancy in the Board of Directors may be

          filled by vote of a majority of the remaining Directors theretofore

          elected by the holders of the class or classes of stock which elected

          the Director whose office shall have become vacant.  References in

          this paragraph (C) to Directors elected by the holders of a particular

          class or classes of stock shall include Directors elected by such

          Directors to fill vacancies as provided in clause (y) of the foregoing

          sentence.

                    

                                      -6-

<PAGE>

 

               (v) Immediately upon the expiration of a default period, (x) the

          right of the holders of Voting Preferred Stock as a class to elect two

          Directors shall cease, (y) the term of any Directors so elected by the

          holders of Voting Preferred Stock as a class shall terminate and (z)

          the number of Directors shall be such number as may be provided for in

          the Corporation's by-laws, as amended, or the Certificate of

          Incorporation, as amended, without regard to any increase made

          pursuant to the provisions of paragraph (C) of this Section 3 (such

          number being subject, however, to change thereafter in any manner

          provided by law or in the Certificate of Incorporation or the by-

          laws).  Any vacancies in the Board of Directors effected by the

          Provisions of clauses (y) and (z) in the preceding sentence may be

          filled by a majority of the remaining Directors.

 

          (D) Except as set forth herein, holders of Series B 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.

 

          Section 4.  Certain Restrictions.

                      --------------------

 

          (A) Whenever quarterly dividends or other dividends or distributions

     payable on the Series B 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 B Preferred

     Stock outstanding shall have been paid in full, the Corporation shall not:

 

               (i) declare or pay dividends on, make any other distributions on,

          or redeem or purchase or otherwise acquire for consideration, any

          shares of stock ranking junior (either as to dividends or upon

          liquidation dissolution or winding up) to the Series B Preferred

          Stock;

 

               (ii) declare or pay dividends on 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 B

          Preferred Stock, except dividends paid ratably on the Series B

          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

          any shares of any stock ranking on junior (either as to dividends or

          upon liquidation, dissolution or winding up) to the Series B Preferred

          Stock, except 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 (both as to

          dividends and upon dissolution liquidation or winding up) to the

          Series B Preferred Stock; or

             

                                      -7-

<PAGE>

 

               (iv) purchase or otherwise acquire for consideration any shares

          of Series B Preferred Stock, or any shams of stock ranking on a parity

          with the Series B Preferred Stock, except in accordance with a

          purchase offer made in writing or by publication (as determined by the

          Board of Directors) to all holders of such shams upon such terms as

          the Board of Directors, 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.

 

          Section 5.  Reacquired Shares. Any shares of Series B Preferred Stock

purchased or otherwise acquired by the Corporation in any manner whatsoever

shall be retired and canceled 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

to be created by resolution or resolutions of the Board of Directors subject to

the conditions and restrictions on issuance set forth in the Certificate of

Incorporation.

 

          Section 6.  Liquidation, Dissolution or Winding Up. Upon any

liquidation, dissolution or winding up of the Corporation, no distribution

shall be made (A) to the holders of shares of stock ranking junior (either as to

dividends or upon liquidation, dissolution or winding up) to the Series B

Preferred Stock unless, prior thereto, the holders of shares of Series B

Preferred Stock shall have received the greater of (i) $100 per share, plus an

amount equal to accrued and unpaid dividends and distributions thereon, whether

or not declared, to the date of such payment, and (ii) an aggregate amount per

share equal to the Adjustment Number (as adjusted from time to time pursuant to

Section 2(A) hereof) times the aggregate amount to be distributed per share to

holders of Common Stock, or (B) to the holders of stock ranking on a parity

(either as to dividends or upon liquidation, dissolution or winding up) with the

Series B Preferred Stock, except distributions made ratably on the Series B

Preferred Stock and all other such parity stock in proportion to the total

amounts to which the holders of all such shares are entitled upon such

liquidation, dissolution or winding up.

 

          Section 7.  Consolidation, Merger, etc. 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,

securities, cash or other property, then in any such case the shares of Series B

Preferred Stock then outstanding shall at the same time be similarly exchanged

or changed in an amount per share equal to the Adjustment Number (as adjusted

from time to time pursuant to Section 2(A) hereof) times the aggregate amount of

stock, securities, cash or other property (payable in kind), as the case may be,

into which or for which each share of Common Stock is changed or exchanged.

 

          Section 8.  No Redemption. The shares of Series B Preferred Stock

shall not be redeemable.

 

                                      -8-

<PAGE>

 

          Section 9.  Ranking. The Series B Preferred Stock shall rank junior

to, or pari passu with, all other series of the Corporation's Preferred Stock

subsequently issued, with respect to the payment of dividends and the

distribution of assets, unless the terms of any such series shall provide

otherwise, and shall rank senior to the Common Stock as to such matters.

 

          Section 10.  Amendment. The Certificate of Incorporation of the

Corporation, as heretofore amended, shall not be amended in any manner which

would materially alter or change the powers, preferences or special rights of

the Series B 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 B Preferred Stock, voting together as a single class.

 

 

                           *     *     *     *     *

 

 

                                      II

                                 COMMON STOCK

 

          1.  Shares of common stock may be issued in one or more series at such

time or times, and for such consideration or considerations, as the Board of

Directors shall determine. The Board of Directors is hereby authorized to fix,

state and establish, in the resolution or resolutions providing for the issuance

of any wholly unissued series of common stock, the relative powers, rights,

designations, preferences, qualifications, limitations and restrictions of such

series in relation to any other series of common stock at the time outstanding.

The Board of Directors is also expressly authorized to fix the number of shares

of each such series, but not below the number of shares thereof then

outstanding. The authority of the Board of Directors with respect to each series

of common stock shall include (without limitation) the determination of the

following:

 

          (a)  the dividend rate on the shares of each series, whether dividends

     shall be cumulative, and, if so, from which date or dates, the relative

     rights of priority, if any, with respect to the payment of dividends on the

     shares of each such series;

 

          (b)  whether the shares of one or more series shall have voting rights

     (other than the voting rights provided by law) and, if so, the terms of

     such voting rights;

 

          (c)  whether the shares of one or more series shall have conversion

     privileges, and, if so, the terms and conditions of such conversion,

     including provision for adjustment of the conversion rate upon the

     occurrence of such events as the Board of  Directors may prescribe;

 

          (d)  the rights of the shares of each series in the event of voluntary

     or involuntary liquidation, dissolution or winding up of the Corporation,

     and the relative rights of priority, if any, with respect to the

     distribution of assets on the shares of each such series; and

 

                                      -9-

<PAGE>

 

          (e)  any other preferences, privileges and powers, and relative,

     participating, optional or other special rights, and qualifications,

     limitations or restrictions of such series, as the Board of Directors may

     deem advisable and as shall not be inconsistent with the provisions of this

     Certificate of Incorporation, as the same may be amended from time to time.

 

          2.  Notwithstanding the foregoing, each holder of common stock or any

series of common stock shall be entitled to cast, at all elections of directors

of the Corporation, as many votes as shall equal the number of votes which such

holder would (except for this cumulative voting provision) be entitled to cast

for the election of directors with respect to the shares so held, multiplied by

the number of directors to be elected by such holder, and such holder may cast

all of such votes for a single director or may distribute the votes among two or

more of the directors as the holder deems appropriate.

 

 

                           *     *     *     *    *

 

          The Board of Directors of the Corporation pursuant to the authority

vested in it by Article Four, Division II (Common Stock) above has designated a

series of common stock as follows:

 

          Section 1.  Designation of Series. There is hereby established a

series of common stock, designated Common Stock, which shall have a par value of

$.02 per share.

 

          Section 2.  Number of Shares of Common Stock. The number of shares

constituting the Common Stock is fixed at 40,000,000.

 

          Section 3.  Dividend Provisions.

 

          (a)  The holders of outstanding shares of Common Stock shall be

     entitled to receive, when and as declared by the Board of Directors, out of

     assets at the time legally available therefore, dividends at the rate

     determined by the Board of Directors.

 

          (b)  The dividends authorized by subparagraph (a) of this Section 3

     shall not be cumulative, and no rights shall accrue to the holders of

     outstanding shares of Common Stock by reason of the fact that such

     dividends may not have been paid or declared and set aside for payment in

     any prior fiscal quarter or quarters of the Corporation.

 

          Section 4.  Liquidation Preference.

 

          (a)  In the event of any liquidation, dissolution or winding up of

     this Corporation, either voluntary or involuntary, the holders of shares of

     Common Stock shall be entitled to receive an amount per share equal to the

     sum of (i) $5.00 for each outstanding share of Common Stock and (ii) all

     declared but unpaid dividends thereon.

 

                                     -10-

<PAGE>

 

          (b)  If the assets available for distribution are, upon the occurrence

     of an event specified in subparagraph (a) of this Section 4, insufficient

     to permit the payment to the holders of Common Stock of the full

     preferential amount to which they are entitled pursuant to such

     subparagraph, then the entire amount of assets of this Corporation legally

     available for distribution to the holders of Common Stock shall be

     distributed ratably among holders of the Common Stock only, in proportion

     to the number of shares of Common Stock held by each of them.

 

          (c)  Should any assets remain in this Corporation upon completion of

     the distributions required by subparagraph (a) of this Section 4, then the

     holders of Common Stock shall be entitled to a distribution of such

     remaining assets.

 

          (d)  The liquidation preferences and rights provided under this

     Section 4 to the holders of Common Stock by reason of their ownership

     thereof shall be appropriately adjusted by the Board of Directors in the

     event of any stock split, stock dividend or similar capital transaction

     affecting the number of outstanding shares of Common Stock without the

     Corporation's receipt of consideration therefor.

 

          Section 5.   Voting Rights.  The holder of each share of Common

Stock shall have the right to one vote, for each share of Common Stock held, on

all matters requiring shareholder approval under the law of this Corporation's

state of incorporation.  Notwithstanding the foregoing, each holder of shares of

Common Stock shall be entitled to cast, at all elections of directors of this

Corporation, as many votes as shall equal the number of votes which such holder

would (except for this cumulative voting provision) be entitled to cast for the

election of directors with respect to the shares so held, multiplied by the

number of directors to be elected by such holder, and such holder may cast all

of such votes for a single director or may distribute the votes among two or

more of the directors as the holder deems appropriate.

 

 

                           *     *     *     *     *

 

 

                                      III

                                OTHER PROVISIONS

 

          No holder of the capital stock of the Corporation shall have the right

as such holder to purchase or subscribe for any security of the Corporation now

or hereafter authorized or issued. All such securities may be issued and

disposed of by the Board of Directors to such persons, firms, corporations and

associations for such lawful considerations, and on such terms, as the Board of

Directors in its discretion may determine, without first offering the same, or

any part thereof, to the holders of any shares of the capital stock of the

Corporation.

 

                                      -11-

<PAGE>

 

                                 ARTICLE FIVE

 

     No action required to, or which may, be taken at an annual or special

meeting of stockholders of the Corporation may be taken without a meeting, and

the power of the stockholders of the Corporation to act by written consent,

whether pursuant to Section 228 of the General Corporation Law of the State of

Delaware or otherwise, is specifically denied.

 

 

                                  ARTICLE SIX

 

     Special meetings of the stockholders, for any purpose or purposes,

unless otherwise prescribed by statute or by the Certificate of Incorporation,

may be called by the Chairman of the Board, in his discretion, and shall be

called by the Chairman of the Board or the Secretary at the request in writing

of a majority of the directors then holding office, or at the request in writing

of stockholders owning at least the number of shares of the Corporation issued

and outstanding and entitled to cast a majority of the votes at such meeting.

Any such written request shall state the purpose or purposes of the proposed

meeting.

 

 

                                 ARTICLE SEVEN

 

     1.  In addition to any affirmative vote required by law or this

Certificate of Incorporation, the affirmative vote of the holders of that number

of the then outstanding shares of the capital stock of the Corporation entitled

to vote generally in the election of directors (the "Voting Stock"), voting

together as a single class (it being understood that for purposes of this

Article Seven, each share of Voting Stock shall have the number of votes granted

to it pursuant to Article Four of this Certificate of Incorporation), which

equals at least the sum of (i) the number of outstanding shares of Voting Stock

of the Corporation beneficially owned by a "Related Person" (as defined in this

Article Seven) plus (ii) one half of the number of outstanding shares of Voting

Stock of the Corporation held by stockholders other than a Related Person, shall

be required for the approval or authorization of a "Business Combination" (as

defined in this Article Seven) of the Corporation with a Related Person;

provided, however, that the foregoing voting requirement shall not be applicable

(and only such affirmative vote as is required by law or any other provision of

this Certificate of Incorporation shall be applicable) if:

 

          (a) the "Continuing Directors" (as defined in this Article Seven) of

     the Corporation by a majority affirmative vote (i) have expressly approved

     the acquisition of the outstanding shares of Voting Stock of the

     Corporation that caused the Related Person involved in the Business

     Combination to become a Related Person or (ii) have expressly approved the

     Business Combination; or

 

          (b) the Business Combination is solely between the Corporation and

     another corporation, fifty percent or more of the voting stock of which is

     owned by the Corporation and none of which is owned by the Related Person;

     provided that if the Corporation is not the surviving entity, each

     stockholder of the Corporation receives the same type of

 

                                      -12-

<PAGE>

 

     consideration in such transaction in proportion to the number of shares

     owned and the provisions of Articles Five through Seven (inclusive) and

     Article Eleven hereof are continued in effect or adopted by such surviving

     corporation as part of its articles of incorporation or certificate of

     incorporation, as the case may be, without any change; or

 

          (c)  the Business Combination is a merger or consolidation and the

     cash or fair market value (as determined by the Continuing Directors) of

     the property, securities or other consideration to be received per share

     pursuant to the Business Combination by:

 

               (i)  holders of shares of the Corporation's common stock, $.02

          par value per share and designated by the Board of Directors as

          "Common Stock" pursuant to a Certificate filed September 30, 1982, is

          not less than the highest of (1) the highest per share price

          (including any brokerage commissions, transfer taxes and soliciting

          dealers' fees) paid by the Related Person involved in the Business

          Combination in acquiring any of its holdings of the Corporation's

          common stock, $.02 par value per share and so designated as "Common

          Stock", (2) an amount that bears the same percentage relationship to

          the market price of the Corporation's common stock, $.02 par value per

          share and so designated as "Common Stock", immediately prior to the

          announcement of such Business Combination as the highest per share

          price determined in clause (1) above bears to the market price of the

          Corporation's common stock, $.02 par value per share and so designated

          as "Common Stock", immediately prior to the commencement of the

          acquisition of the Corporation's Voting Stock that caused such Related

          Person to become a Related Person, or (3) if the Business Combination

          is announced or effected on or prior to May 31, 1986, $12.63;

 

               (ii) holders of shares of any other series of the corporation's

          common stock is not less than the highest of (1) the highest per share

          price (including any brokerage commissions, transfer taxes and

          soliciting dealers fees) paid by the Related Person involved in the

          Business Combination in acquiring any holdings of shares of such

          series of the Corporation's common stock, (2) in the case of any

          series which is convertible into shares of the Corporation's common

          stock, $.02 par value per share and designated by the Board of

          Directors as "Common Stock" pursuant to a Certificate filed September

          30, 1982, a per share price determined by multiplying the per share

          price applicable to shares of the Corporation's common stock, $.02 par

          value per share and so designated as "Common Stock", pursuant to

          subparagraph l(c)(i) of this Article Seven by an amount equal to the

          number of shares of the Corporation's common stock, $.02 par value per

          share and so designated as "Common Stock," into which one share of

          such other series of the Corporation's common stock may be converted,

          whether or not such conversion is subject to the occurrence of any

          event, or (3) an amount that bears the same percentage relationship to

          the market price of shares of such other series of the Corporation's

          common stock immediately prior to the announcement of such Business

          Combination as the highest per share price determined in clause (1)

          above bears to the market price of shares of such other series of the

          Corporation's common stock immediately prior to the

 

                                      -13-

<PAGE>

 

          commencement of the acquisition of the Corporation's Voting Stock that

          caused such Related Person to become a Related Person; and

 

               (iii)  holders of shares of any other class of Voting Stock is

          not less than the highest of (1) the highest per share price

          (including any brokerage commissions, transfer taxes and soliciting

          dealers' fees) paid by the Related Person involved in the Business

          Combination in acquiring any holdings of any such class of Voting

          Stock, (2) if applicable, the highest preferential amount per share to

          which the holders of shares of such event of any voluntary or

          involuntary liquidation, dissolution or winding up of the Corporation,

          or (3) an amount that bears the same percentage relationship to the

          market price of shares of any such class of Voting Stock immediately

          prior to the announcement of such Business Combination as the highest

          per share price determined in clause (1) above bears to the market

          price of shares of any such class of Voting Stock immediately prior to

          the commencement of the acquisition of the Corporation's Voting Stock

          that caused such Related Person to become a Related Person.

 

     Appropriate adjustments shall be made with respect to clauses (i), (ii) and

     (iii) above for recapitalizations and for stock splits, stock dividends,

     and like distributions.

 

          2.   For the purpose of this Article Seven:

 

          (a) The term "Business Combination" shall mean:

 

               (i) any merger or consolidation of the Corporation with or into a

          Related Person;

 

               (ii) any sale, lease, exchange, transfer or other disposition,

          including, without limitation, a mortgage or any other security

          device, of all or any Substantial Part (as defined in this Article

          Seven) of the assets of the Corporation (including, without

          limitation, any voting securities of a subsidiary) or of the assets of

          a subsidiary of the Corporation, to a Related Person in one

          transaction or a series of transactions;

 

               (iii)  any merger or consolidation of a Related Person with or

          into the Corporation or a subsidiary of the Corporation;

 

               (iv) any sale, lease, exchange, transfer or other disposition of

          all or any Substantial Part of the assets of a Related Person to the

          Corporation or a subsidiary of the Corporation;

 

               (v) the issuance of any securities of the Corporation or a

          subsidiary of the Corporation to a Related Person;

 

                                      -14-

<PAGE>

 

               (vi) the acquisition by the Corporation or a subsidiary of the

          Corporation of any securities issued by a Related Person;

 

               (vii)  any reclassification of securities, recapitalization or

          other transaction designed to decrease the number of holders of the

          Corporations voting securities remaining, if there is a Related

          Person;

 

               (viii)  the adoption of any plan or proposal for the liquidation

          or dissolution of the Corporation proposed by or on behalf of the

          Related Person; or

 

               (ix) any agreement, contract or other arrangement providing for

          any transaction herein described in clauses (i) to (viii) of this

          definition of Business Combination.

 

          (b) The term "Related Person" shall mean and include any individual,

     corporation, partnership or other person or entity which, together with its

     "Affiliates" and "Associates" (as those terms are defined as of September

     24, 1984, in Rule 12b-2 of the General Rules and Regulations promulgated

     under the Securities Exchange Act of 1984), in the aggregate, beneficially

     owns twenty percent or more of the outstanding shares of Voting Stock of

     the Corporation, and shall mean and include any Affiliate or Associate of

     such Related Person.

 

          (c) The term "Substantial Part" shall mean more than thirty percent of

     the fair market value of the total assets of the Corporation in question at

     the end of the Corporations most recent fiscal year ending prior to the

     time said determination is made.

 

          (d) The term "Continuing Director" shall mean a director who was a

     member of the Board of Directors of the Corporation immediately prior to

     the time the Related Person involved in a Business Combination became a

     Related Person.

 

          (e) For the purposes of subparagraph l(c) of this Article Seven, the

     term "other consideration to be received" shall include, without

     limitation, capital stock of the Corporation retained by its existing

     public stockholders in the event of a Business Combination in which the

     Corporation is the surviving corporation.

 

          (f) For the purposes of this Article Seven, any corporation, person or

     other entity shall be deemed to be the beneficial owner of any shares of

     the Voting Stock of the Corporation:

 

               (i) which such corporation, person or other entity beneficially

          owns,

 

               (ii) which such corporation, person or other entity has the right

          (whether or not such right is immediately exercisable) to acquire

          pursuant to any agreement, or upon exercise of conversion rights,

          warrants or options, or otherwise,

              

                                     -15-

<PAGE>

 

               (iii)  which are beneficially owned, directly or indirectly

          (including shares deemed owned through application of clause (ii)

          above), (A) by any Affiliate or Associate of such corporation, person

          or other entity, or (B) by any corporation, person or other entity

          acting in concert with it, or

 

               (iv) which are beneficially owned, directly or indirectly

          (including shares deemed owned through application of clause (ii)

          above), by any corporation, person or other entity with which it or

          any Affiliate or Associate of it or any corporation, person or other

          entity acting in concert with it or with any Affiliate or Associate of

          it, has any agreement, arrangement or understanding with respect to

          acquiring, holding, voting or disposing of the Voting Stock of the

          Corporation.

 

          For the purposes of this Article Seven, the outstanding shares of any

class of stock of the Corporation shall include shares deemed owned by a Related

Party through application but shall not include any other shares which may be

issuable pursuant to any agreement, or upon exercise of conversion rights,

warrants or options, or otherwise.

 

          3.   On the basis of information known to the Corporation, the

Continuing Directors, by a majority affirmative vote shall make all

determinations to be made under this Article Seven, including whether (i) a

corporation, person or other entity beneficially owns more than twenty percent

of the outstanding shares of the Voting Stock of the Corporation, or (ii) a

corporation, person or other entity has the right to acquire shares of the

Voting Stock of the Corporation, or (iii) a corporation, person or other entity

is an Affiliate or Associate of another, or (iv) a corporation, person or other

entity has any agreement, arrangement or understanding with respect to

acquiring, holding voting or disposing of the Voting Stock of the Corporation,

or (v) a corporation, person or other entity is acting in concert with any other

corporation, person or other entity, or (vi) a per share consideration proposed

to be paid meets the conditions of subparagraphs l(c)(i), (ii) and (iii) of this

Article Seven; and all such determinations shall be conclusive.

 

          4.   The affirmative vote required by this Article Seven is required

notwithstanding the fact that no vote may be required, or that some lesser

percentage may be specified by law or in any agreement with any national

securities exchange or otherwise.

 

          5.   The provisions set forth at this Article Seven may not be

repealed or amended in any respect, unless such action is approved by the

affirmative vote of the holders of that number of the then outstanding shares of

the Voting Stock of the Corporation, voting together as a single class, which

equals at least the sum of (i) the number of outstanding shares of Voting Stock

of the Corporation beneficially owned by a Related Person plus (ii) one-half of

the number of outstanding shares of Voting Stock of the Corporation held by

stockholders other than a Related Person.

 

 

                                 ARTICLE EIGHT

                                  

          The Board of Directors is authorized to make, alter or repeal the By-

laws of the Corporation.  Election of directors need not be by written ballot.

 

                                     -16-

<PAGE>

 

                                 ARTICLE NINE

 

          The Corporation shall indemnify any person against any liability

arising by reason of the fact that he is or was a director, officer, employee or

agent of the Corporation, or is or was serving at the request of the Corporation

as a director, officer, employee or agent of another enterprise, to the fullest

extent allowed under the General Corporation Law of the State of Delaware.

 

                                  ARTICLE TEN

 

          In addition to any other requirements for amendments to the

Certificate of Incorporation, no amendment to the Certificate of Incorporation

shall amend, alter, change or repeal any of the provisions of Article Five,

Article Six, Article Nine, or this Article Ten, unless the amendment effecting

such amendment, alteration, change or repeal shall be approved by the

affirmative vote of the holders of that number of the then outstanding shares of

the "Voting Stock" (as such term is defined in Article Seven hereof) of the

Corporation, voting together as a single class (it being understood that for

purposes of this Article Ten, each share of Voting Stock shall have the number

of votes granted to it pursuant to Article Four of this Certificate of

Incorporation), which equals at least the sum of (i) the number of outstanding

shares of Voting Stock of the Corporation beneficially owned by a "Related

Person" (as such term is defined and determined in Article Seven hereof) plus

(ii) one-half of the number of outstanding shares of Voting Stock of the

Corporation held by stockholders other than a Related Person.

 

 

                                ARTICLE ELEVEN

 

          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 after approval by the stockholders of this Article 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.  Any repeal or

modification of this Article by the stockholders of the Corporation shall not

adversely affect any right or protection of a director of the Corporation

existing at the time of such repeal or modification.

 

                                     -17-                      

</TEXT>

</DOCUMENT>

<DOCUMENT>

<TYPE>EX-27

<SEQUENCE>3

<DESCRIPTION>FINANCIAL DATA SCHEDULE

<TEXT>

 

<TABLE> <S> <C>

 

<PAGE>

 

<ARTICLE> 5

<LEGEND> This schedule contains summary financial information extracted from

the Consolidated Statements of Income and Consolidated Balance Sheets and is

qualified in its entirety by reference to such financial statements.

</LEGEND>

<MULTIPLIER> 1,000

      

<S>                             <C>

<PERIOD-TYPE>                   6-MOS

<FISCAL-YEAR-END>                         FEB-28-1998

<PERIOD-START>                            MAR-01-1997

<PERIOD-END>                              AUG-31-1997

<CASH>                                          1,946

<SECURITIES>                                        0

<RECEIVABLES>                                  35,087

<ALLOWANCES>                                    2,556

<INVENTORY>                                    35,248

<CURRENT-ASSETS>                               79,329      

<PP&E>                                        255,392     

<DEPRECIATION>                                 96,638   

<TOTAL-ASSETS>                                263,355     

<CURRENT-LIABILITIES>                          40,741   

<BONDS>                                        63,047 

<PREFERRED-MANDATORY>                               0

<PREFERRED>                                         0

<COMMON>                                          326

<OTHER-SE>                                    137,070      

<TOTAL-LIABILITY-AND-EQUITY>                  263,355        

<SALES>                                       143,637         

<TOTAL-REVENUES>                              143,637          

<CGS>                                         109,262         

<TOTAL-COSTS>                                 109,262         

<OTHER-EXPENSES>                                    0      

<LOSS-PROVISION>                                    0     

<INTEREST-EXPENSE>                              2,058      

<INCOME-PRETAX>                                 6,938      

<INCOME-TAX>                                    2,672     

<INCOME-CONTINUING>                             4,266     

<DISCONTINUED>                                      0 

<EXTRAORDINARY>                                     0     

<CHANGES>                                           0 

<NET-INCOME>                                    4,266

<EPS-PRIMARY>                                    0.28

<EPS-DILUTED>                                    0.28

       

 

</TABLE>

</TEXT>

</DOCUMENT>

</SEC-DOCUMENT>

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