<PAGE>
----------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number: 0-27064
FIRST COMMONWEALTH, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2154228
(State or other jurisdiction of (IRS employer identification
incorporation or organization) number)
444 NORTH WELLS STREET, SUITE 600, CHICAGO, IL 60610
(Address of principal executive offices)
(312) 644-1800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant has (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common Stock, par value $.001 per share, outstanding as of July 26, 1996:
3,367,855 shares
----------------------------------------------
<PAGE>
FIRST COMMONWEALTH, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
PART I. FINANCIAL INFORMATION
--------------------------------
<TABLE>
<CAPTION>
Page
----
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets as of June 30, 1996 and
December 31, 1995............................................... 3
Consolidated Statements of Income for the three and six
months ended June 30, 1996 and 1995............................. 5
Consolidated Statements of Cash Flows for the six months ended
June 30, 1996 and 1995.......................................... 6
Reconciliations of Net Income to Net Cash Provided by
Operating Activities for the six months ended
June 30, 1996 and 1995.......................................... 7
Notes to Consolidated Financial Statements...................... 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 9
</TABLE>
PART II. OTHER INFORMATION
----------------------------
Item 6. Exhibits and Reports on Form 8-K................................ 13
SIGNATURES............................................................... 15
2
<PAGE>
PART I. FINANCIAL INFORMATION
-------------------------------
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
First Commonwealth, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
- -----------------------------------------------------------
(Dollars in Thousands)
ASSETS JUNE 30, 1996 DECEMBER 31, 1995
- ------ ------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 9,272 $12,680
Investments - Short Term 4,121 0
Accounts receivable, net of allowance
of $219 at June 30, 1996 and $197 at
December 31, 1995 1,714 1,751
Other receivables 117 71
Deposit under reinsurance agreement 485 432
Prepaid expenses 1,314 1,290
Prepaid income taxes 404 0
Deferred tax asset 622 665
------- -------
Total current assets 18,049 16,889
------- -------
PROPERTY AND EQUIPMENT, at cost 2,770 2,465
Less - Accumulated depreciation (1,328) (1,086)
------- -------
Property and equipment, net 1,442 1,379
------- -------
OTHER ASSETS:
Restricted cash equivalents and government securities
on deposit, at cost which approximates market 1,077 799
Deposits and other 92 44
------- -------
Total other assets 1,169 843
------- -------
TOTAL ASSETS $20,660 $19,111
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
First Commonwealth, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS - continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable - trade $ 149 $ 364
Accounts payable - dental service providers 407 399
Claims liability 1,395 1,258
Accrued payroll and related costs 643 846
Other accrued expenses 600 720
Current portion of capital lease obligations 0 27
Deferred subscriber revenue 3,841 3,263
Payable under reinsurance agreement 437 389
Accrued preferred dividends and stock
redemption payable 0 14
Income taxes payable 0 0
------- -------
Total current liabilities 7,472 7,280
CAPITAL LEASE OBLIGATIONS, less current portion 0 0
DEFERRED TAX LIABILITY - long-term 125 125
------- -------
Total liabilities 7,597 7,405
------- -------
STOCKHOLDERS' EQUITY:
Preferred stock ($.001 par value; 1,000,000
shares authorized, none issued) 0 0
Common stock ($.001 par value; 15,000,000 shares
authorized, 3,368,240 shares at June 30, 1996
and 3,365,375 shares at December 31, 1995 issued
and outstanding) 3 3
Capital in excess of par value 7,678 7,677
Less 355 shares of common stock held in treasury, at cost (10) 0
Retained earnings 5,392 4,026
------- -------
Total stockholders' equity 13,063 11,706
------- -------
Total liabilities and stockholder's equity $20,660 $19,111
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
First Commonwealth, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED: FOR THE SIX MONTHS ENDED:
----------------------------- -----------------------------
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- ------------- -------------
SUBSCRIBER REVENUE (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Managed Care $ 7,313 $ 6,276 $ 14,410 $ 12,382
Indemnity/PPO 2,558 1,746 5,050 3,379
Fee Income 148 182 332 377
---------- ---------- ---------- ----------
Total Subscriber Revenue 10,019 8,204 19,792 16,138
---------- ---------- ---------- ----------
BENEFIT COVERAGE EXPENSES
Managed Care 4,215 3,614 8,301 7,146
Indemnity/PPO 2,005 1,393 3,945 2,695
Fee Income -- -- -- --
---------- ---------- ---------- ----------
Total Benefit Coverage Expenses 6,220 5,007 12,246 9,841
---------- ---------- ---------- ----------
GROSS MARGIN
Managed Care 3,098 2,662 6,109 5,236
Indemnity/PPO 553 353 1,105 684
Fee Income 148 182 332 377
---------- ---------- ---------- ----------
Total Gross Margin 3,799 3,197 7,546 6,297
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE 2,793 2,357 5,587 4,648
---------- ---------- ---------- ----------
Operating income 1,006 840 1,959 1,649
INTEREST INCOME, net 160 46 322 73
---------- ---------- ---------- ----------
Income before income taxes 1,166 886 2,281 1,722
PROVISION FOR INCOME TAXES 468 354 914 689
---------- ---------- ---------- ----------
NET INCOME $ 698 $ 532 $ 1,367 $ 1,033
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 3,500,668 2,862,176 3,500,053 2,862,176
EARNINGS PER SHARE $0.20 $0.19 $0.39 $0.36
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
First Commonwealth, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED:
JUNE 30, 1996 JUNE 30 , 1995
------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited) (Unaudited)
<S> <C> <C>
Cash received from subscribers $20,468 $16,954
Cash paid to providers of care (7,780) (6,738)
Cash paid to employees, brokers and suppliers (6,487) (5,357)
Claims paid (3,818) (2,036)
Interest paid (1) (3)
Interest received 274 63
Income taxes paid (1,275) (886)
Cash transferred to restricted funds (279) (268)
-------- -------
Net cash provided by operating activities 1,102 1,729
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (306) (230)
Purchase of short-term investment (5,162) 0
Proceeds from short-term investment 1,007 0
-------- -------
Net cash used in investing activities (4,461) (230)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 1 0
Principal payments on capital leases (27) (30)
Purchase of treasury stock (10) 0
Redemption of preferred stock 0 (1)
Payments of preferred dividends (13) (27)
-------- --------
Net cash used in financing activities (49) (58)
-------- --------
Net change in cash and cash equivalents (3,408) 1,441
CASH AND CASH EQUIVALENTS,
beginning of period 12,680 2,706
-------- --------
CASH AND CASH EQUIVALENTS,
end of period $ 9,272 $ 4,147
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
First Commonwealth, Inc. and Subsidiaries
RECONCILIATIONS OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
- -------------------------------------------------------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED:
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
<S> <C> <C>
(Unaudited) (Unaudited)
Net income $1,367 $1,033
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 276 181
(Increase) decrease in assets:
Accounts receivable, net 38 (324)
Other receivables (46) 88
Deposit under reinsurance agreement (53) (322)
Prepaid expenses (24) (157)
Deferred tax asset 43 (317)
Prepaid income taxes (404) 0
Restricted cash equivalents and government
securities (279) (267)
Deposits and other (47) 6
Increase (decrease) in current liabilities:
Accounts payable - trade (216) (69)
Accounts payable - dental service providers 7 41
Claims liability 137 654
Accrued payroll and related costs (203) 35
Other accrued expenses (120) 25
Deferred subscriber revenue 578 804
Payable under reinsurance agreement 48 290
Income taxes payable 0 14
Increase in long-term liabilities:
Long-term deferred tax liability 0 14
------ ------
Net cash provided by operating activities $1,102 $1,729
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
FIRST COMMONWEALTH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
1. Interim Financial Statements
The accompanying consolidated financial statements include the accounts of
First Commonwealth, Inc., together with its subsidiaries and an affiliate
(collectively, the "Company"). All material intercompany transactions and
balances have been eliminated in consolidation.
The consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain notes and other information normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted from the interim financial
statements presented in this quarterly report on Form 10-Q in accordance with
such rules and regulations. In the opinion of the Company's management, the
accompanying consolidated financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary to state fairly the
financial position of the Company as of June 30, 1996, and the results of its
operations and cash flows for the periods indicated. The results of operations
for the three and six months ended June 30, 1996 are not necessarily indicative
of the results to be expected for the full year. The accompanying consolidated
financial statements should be read in conjunction with the Company's financial
statements and notes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1995.
2. Earnings Per Share
Earnings per share is calculated by dividing net income by the weighted
average number of shares of common stock outstanding during the period plus (i)
the number of shares of common stock into which the Series B Preferred Stock was
converted upon the occurrence of the initial public offering for periods solely
prior to the initial public offering; (ii) the dilutive effect of stock options;
and (iii) the dilutive effect of all shares issued and shares subject to options
granted at prices below the public offering price of $15.00 per share within one
year prior to the initial filing date of the registration statement for the
initial public offering.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
consolidated financial statements and notes thereto.
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
Total subscriber revenue increased by $1.8 million, or 22.1%, to $10.0
million in the three months ended June 30, 1996 from $8.2 million in the three
months ended June 30, 1995. This increase is primarily attributable to
increased enrollment in the Company's managed care and indemnity/PPO dental
plans. Managed care revenue increased by $1.0 million, or 16.5%, to $7.3 million
in the three months ended June 30, 1996 from $6.3 million in the same period in
1995, primarily due to a 11.3% increase in new members and, to a lesser extent,
a shift toward managed care products with higher benefit and premium levels.
Indemnity/PPO revenue increased $812,000 to $2.6 million in 1996 from $1.7
million in 1995, primarily as a result of adding new indemnity/PPO plan members.
In addition, in 1996, Indemnity/PPO revenue now includes revenue from the PPO
component of the Company's new Managed Choice/SM/ Triple Option product which
was introduced January 1, 1996.
Total gross margin increased by $602,000, or 18.8%, to $3.8 million in the
three months ended June 30, 1996 from $3.2 million in the three months ended
June 30, 1995. Total gross margin as a percentage of revenue was 37.9% in 1996
as compared to 39.0% in 1995. This percentage decline was primarily the result
of an increasing percentage of revenue being generated by the Company's
indemnity/PPO products, which have a significantly lower gross margin percentage
than the Company's managed care products. Managed care gross margin as a
percentage of revenue was 42.4% in 1996 as compared to 42.4% in 1995. The
indemnity/PPO gross margin as a percentage of indemnity/PPO revenue increased to
21.6% in 1996 from 20.2% in 1995. This improved indemnity/PPO gross margin is
the result of favorable claims experience and increased premium rates charged
for the Company's indemnity/PPO plans.
SG&A expenses increased by $436,000, or 18.5%, to $2.8 million for the
three months ended June 30, 1996 from $2.4 million for the three months ended
June 30, 1995. As a percentage of revenue, SG&A expenses dropped to 27.9% for
1996 from 28.7% for 1995. The change is primarily the result of economies of
scale in meeting the administrative needs of increased enrollment due to the
relatively fixed nature of certain SG&A expenses as well as higher revenues
relative to the SG&A expenses associated with indemnity/PPO plans. Commissions
to independent brokers increased 20.2% during the three months ended June 30,
1996 as compared to the three months ended June 30, 1995, as a result of the
increased revenue from small to medium size employer markets. As a percentage
of total revenue, commissions for the three months ended June 30, 1996 declined
to 5.0% from 5.3% for the same period in 1995 as a result of a lower commissions
associated with the Company's growing indemnity/PPO business.
9
<PAGE>
Operating income increased by $166,000, or 19.8%, to $1.0 million for the
three months ended June 30, 1996 from $840,000 for the three months ended June
30, 1995. As a percentage of revenue, operating income was 10.0% in 1996 as
compared to 10.2% in 1995. The decline was due primarily to the lower gross
margin, partially offset by the lower SG&A as a percentage of revenue.
Interest income increased by $114,000 to $160,000 for the three months
ended June 30, 1996 from $46,000 for the three months ended June 30, 1995 as a
result of an improved cash position during the period as well as the investment
of proceeds from the initial public offering.
The effective tax rate for the three months ended June 30, 1996 and 1995
was 40.0%.
Net income increased by $166,000, or 31.2%, to $698,000 for the three
months ended June 30, 1996 from $532,000 for the three months ended June 30,
1995.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Total subscriber revenue increased by $3.7 million, or 22.6%, to $19.8
million in the six months ended June 30, 1996 from $16.1 million in the six
months ended June 30, 1995. This increase is primarily attributable to
increased enrollment in the Company's managed care and indemnity/PPO dental
plans. Managed care revenue increased by $2.0 million, or 16.4%, to $14.4
million in the six months ended June 30, 1996 from $12.4 million in the same
period in 1995, primarily due to a 11.3% increase in new members and, to a
lesser extent, a shift toward managed care products with higher benefit and
premium levels. Indemnity/PPO revenue increased $1.7 million to $5.1 million
in 1996 from $3.4 million in 1995, primarily as a result of adding new
indemnity/PPO plan members.
Total gross margin increased by $1.2 million, or 19.8%, to $7.5 million in
the six months ended June 30, 1996 from $6.3 million in the six months ended
June 30, 1995. Total gross margin as a percentage of revenue was 38.1% in 1996
as compared to 39.0% in 1995. This percentage decline was primarily the result
of an increasing percentage of revenue being generated by the Company's
indemnity/PPO products, which have a significantly lower gross margin percentage
than the Company's managed care products. Managed care gross margin as a
percentage of revenue was 42.4% in 1996 as compared to 42.3% in 1995. The
indemnity/PPO gross margin as a percentage of indemnity/PPO revenue increased to
21.9% in 1996 from 20.2% in 1995. This improved indemnity/PPO gross margin is
the result of favorable claims experience and increased premium rates charged
for the Company's indemnity/PPO plans.
SG&A expenses increased by $939,000, or 20.2%, to $5.6 million for the six
months ended June 30, 1996 from $4.6 million for the six months ended June 30,
1995. As a percentage of revenue, SG&A expenses dropped to 28.2% for 1996 from
28.8% for 1995. The change is primarily the result of economies of scale in
meeting the administrative needs of increased enrollment due to the relatively
fixed nature of certain SG&A expenses as well as higher revenues relative to the
SG&A expenses associated with indemnity/PPO plans. Commissions to independent
brokers increased 20.6% during the six months ended June 30, 1996 as compared to
the six months ended
10
<PAGE>
June 30, 1995, as a result of the increased revenue from small to medium size
employer markets. As a percentage of total revenue, commissions for the six
months ended June 30, 1996 declined to 4.9% from 5.4% for the same period in
1995 as a result of a lower commissions associated with the Company's growing
indemnity/PPO business.
Operating income increased by $310,000, or 18.8%, to $2.0 million for the
six months ended June 30, 1996 from $1.6 million for the six months ended June
30, 1995. As a percentage of revenue, operating income was 9.9% in 1996 as
compared to 10.2% in 1995. The decline was due primarily to the lower gross
margin, partially offset by the lower SG&A as a percentage of revenue.
Interest income increased by $249,000 to $322,000 for the six months ended
June 30, 1996 from $73,000 for the six months ended June 30, 1995 as a result of
an improved cash position during the period as well as the investment of
proceeds from the initial public offering.
The effective tax rate for the six months ended June 30, 1996 and 1995 was
40.0%.
Net income increased by $334,000, or 32.3%, to $1.4 million for the six
months ended June 30, 1996 from $1.0 million for the six months ended June 30,
1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating cash requirements for the six months ended June 30,
1996 have been met principally through operating cash flows. The primary uses of
cash have been for operating activities and capital investments in the business.
The Company believes that cash generated from operations, together with its
increased capital of $6.6 million from the proceeds of the initial public
offering in November 1995, will be adequate to finance its anticipated operating
needs for the foreseeable future.
Cash flows from operating activities were $1.1 million and $1.7 million for
the six months ended June 30, 1996, and 1995, respectively. The Company
primarily receives premium payments in advance of disbursing managed care
dentist capitation payments and indemnity claims payments. Cash balances in
excess of current needs are invested in interest-bearing accounts or cash
equivalents. Cash flows from operations consist primarily of subscriber premiums
and investment income net of capitation payments to network dentists, claims
paid, brokers' commissions, general and administrative expenses and income
taxes.
Cash used in investing activities was $4.5 million and $230,000 for the six
months ended June 30, 1996 and 1995, respectively. The increase in cash used in
the first six months of 1996 relates primarily to a net of $4.2 million used to
purchase short term investment grade securities (securities which mature between
3 months and 12 months). Capital expenditures were $306,000 for the six months
ended June 30, 1996 and $230,000 for the six months ended June 30, 1995,
respectively, for furniture, leasehold improvements, and equipment as the
Company has expanded their leased office space.
11
<PAGE>
Cash used in financing activities was $49,000 and $58,000 for the six
months ended June 30, 1996 and 1995, respectively, primarily for payments on
capital leases and dividends on preferred stock.
As of June 30, 1996, the Company had cash and cash equivalents of $9.3
million as well as short term investments of $4.1 million and no long-term debt
outstanding. In addition, the Company has a $500,000 unsecured revolving line of
credit facility which expired June 30, 1996, which has not been drawn upon
during the past three years. Any outstanding indebtedness under the line of
credit will bear interest at a rate equal to the prime rate. To the extent the
Company makes acquisitions, a portion of the purchase price may be financed
through borrowings.
Under applicable insurance laws of the states in which the Company conducts
business, the Company's subsidiaries operating in the particular state are
required to maintain a minimum level of net worth and reserves. The Company may
be required from time to time to invest funds in one or more of its subsidiaries
to meet regulatory requirements, or to expand its operations into new geographic
areas. In addition, applicable laws generally limit the ability of the Company's
subsidiaries to pay dividends to the extent that required regulatory capital or
surplus would be impaired.
IMPACT OF INFLATION
The Company does not believe the impact of inflation has significantly
affected the Company's operations.
12
<PAGE>
PART II. OTHER INFORMATION
-----------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
At the Annual Meeting of Shareholders of the Company, held on May 23,
1996, the following numbers of votes were cast for the matters
indicated:
1. Election of one Class I director of the Company.
<TABLE>
<CAPTION>
----------------------------------------------------------------
Nominee For Withhold Broker Non-Vote
----------------------------------------------------------------
<S> <C> <C> <C>
David C. Seidman 2,662,238 3,947 - 0 -
----------------------------------------------------------------
</TABLE>
2. Proposal to Approve the 1995 Long-Term Incentive Plan of the
Company.
<TABLE>
<CAPTION>
----------------------------------------------------------------
For Against Abstain Broker Non-Vote
----------------------------------------------------------------
<S> <C> <C> <C>
2,287,553 324,935 7,297 76,410
---------------------------------------------------------------
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORMS 8-K
(a) Exhibits:
3.1 Second Restated Certificate of Incorporation of the Company,
as amended, is hereby incorporated by reference to Exhibit
3.1 as filed with the Company's Registration Statement on
Form S-1, as amended (Registration No. 33-97426)
3.2 Restated Bylaws of the Company, as amended as of May 23, 1996
10.1 First Commonwealth, Inc. 1995 Long-Term Incentive Plan, as
amended as of April 26, 1996, is hereby incorporated by
reference to Annex A to the registrant's definitive proxy
statement as filed with the Securities and Exchange
Commission on April 29, 1996
10.2 Stock Exchange Agreement, dated July 18, 1996, by and among
First Commonwealth, Inc. and the Shareholders of Smileage
Dental Services, Inc., is hereby incorporated by reference to
Exhibit 2.1 to the Company's Form 8-K dated August 2, 1996
13
<PAGE>
10.3 Registration Rights Agreement, dated July 18, 1996, between
First Commonwealth, Inc. and the Holders of Registrable
Securities Referred to Therein, is hereby incorporated by
reference to Exhibit 99.1 to the Company's Form 8-K dated
August 2, 1996
10.4 Wisconsin Dental Provider Network Agreement, dated July 18,
1996, between Smileage Dental Services, Inc. and Smileage
Dental Care, Inc., is hereby incorporated by reference to
Exhibit 99.2 to the Company's Form 8-K dated August 2, 1996
11 Statement Regarding Computation of Net Earnings Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter ended June 30, 1996:
None
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed by the undersigned,
thereunto duly authorized.
FIRST COMMONWEALTH, INC.
(Registrant)
Date: August 13, 1996 By: /s/ Christopher C. Multhauf
--------------------------------------
Christopher C. Multhauf
Chairman and Chief Executive Officer
Date: August 13, 1996 By: /s/ David W. Mulligan
--------------------------------------
David W. Mulligan
President, Secretary and Chief
Operating Officer
Date: August 13, 1996 By: /s/ Scott B. Sanders
--------------------------------------
Scott B. Sanders
Chief Financial Officer and
Treasurer (Principal Financial and
Accounting Officer)
15
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
3.1 -- Second Restated Certificate of Incorporation of the Company, as
amended, is hereby incorporated by reference to Exhibit 3.1 as
filed with the Company's Registration Statement on Form S-1, as
amended (Registration No. 33-97426)
3.2 -- Restated Bylaws of the Company, as amended as of May 23, 1996
10.1 -- First Commonwealth, Inc. 1995 Long-Term Incentive Plan, as
amended as of April 26, 1996, is hereby incorporated by reference
to Annex A to the registrant's definitive proxy statement as
filed with the Securities and Exchange Commission on April 29,
1996
10.2 -- Stock Exchange Agreement, dated July 18, 1996, by and among First
Commonwealth, Inc. and the Shareholders of Smileage Dental
Services, Inc., is hereby incorporated by reference to Exhibit
2.1 to the Company's Form 8-K, dated August 2, 1996
10.3 -- Registration Rights Agreement, dated July 18, 1996, between First
Commonwealth, Inc. and the Holders of Registrable Securities
Referred to Therein, is hereby incorporated by reference to
Exhibit 99.1 to the Company's Form 8-K, dated August 2, 1996
10.4 -- Wisconsin Dental Provider Network Agreement, dated July 18, 1996,
between Smileage Dental Services, Inc. and Smileage Dental Care,
Inc., is hereby incorporated by reference to Exhibit 99.2 to the
Company's Form 8-K, dated August 2, 1996
11 -- Statement Regarding Computation of Net Earnings Per Share
27 -- Financial Data Schedule
16
<PAGE>
Exhibit 3.2
RESTATED BY-LAWS
OF
FIRST COMMONWEALTH, INC.
(AS AMENDED AS OF MAY 23, 1996)
ARTICLE I
STOCKHOLDERS MEETINGS
---------------------
SECTION 1.1 ANNUAL MEETINGS.
---------------
An annual meeting of stockholders shall be held for the election of
directors at such date, time and place as may be fixed by resolution of the
Board of Directors from time to time.
SECTION 1.2 SPECIAL MEETINGS. Special meetings of stockholders for
any purpose or purposes may be called at any time only by the Chairman of the
Board, if any, the President, the Board of Directors or by a majority of the
Board of Directors, and by no other person. The business transacted at a
special meeting of stockholders shall be limited to the purpose or purposes for
which such meeting is called, except as otherwise determined by the Board of
Directors or the chairman of the meeting.
SECTION 1.3 NOTICE OF MEETINGS. A written notice of each annual or
special meeting of stockholders shall be given stating the place, date and time
of the meeting, and, in the case of a special meeting, the purpose or purposes
for which the meeting is called. Unless otherwise provided by law, the
Certificate of Incorporation or these By-laws, as such may be amended or
restated from time to time, such notice of meeting shall be given not less than
ten nor more than 60 days before the date of the meeting to each stockholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be given when deposited in the mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
Corporation.
SECTION 1.4 ADJOURNMENTS. Any annual or special meeting of
stockholders may be adjourned from time to time to reconvene at the same or some
other place, and notice need not be given of any such adjourned meeting if the
date, time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting any business may be transacted
which might have been transacted at the original meeting. If the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the adjourned meeting in
accordance with Section 1.3.
SECTION 1.5 QUORUM. Except as otherwise provided by law, the
Certificate of Incorporation or these By-laws, as such may be amended or
restated from time to time, the presence in person or by proxy of the holders of
stock having a majority of the votes which could be cast by the holders of all
outstanding stock entitled to vote at the meeting shall constitute a quorum at
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meeting of stockholders. In the absence of a quorum, the stockholders so
present may, by the affirmative vote of the holders of stock having a majority
of the votes which could be cast by all such holders, adjourn the meeting from
time to time in the manner provided in Section 1.4 of these By-laws until a
quorum is present. If a quorum is present when a meeting is convened, the
subsequent withdrawal of stockholders, even though less than a quorum remains,
shall not affect the ability of the remaining stockholders lawfully to transact
business.
SECTION 1.6 ORGANIZATION. Meetings of stockholders shall be presided
over by the Chairman of the Board, if any, or if there is none or in his or her
absence, by the President, or in his or her absence, by a chairman designated by
the Board of Directors, or in the absence of such designation by a chairman
chosen at the meeting. The Secretary shall act as secretary of the meeting, but
in his or her absence the chairman of the meeting may appoint any person to act
as secretary of the meeting.
SECTION 1.7 VOTING.
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(a) Except as otherwise provided by the Certificate of Incorporation, as
such may be amended or restated from time to time, each stockholder entitled to
vote at any meeting of stockholders shall be entitled to one vote for each share
of stock held by such stockholder which has voting power on the matter in
question.
(b) Voting at meetings of stockholders need not be by written ballot and
need not be conducted by inspectors of election unless so required by Section
1.9 of these By-laws or so determined by the holders of stock having a majority
of the votes which could be cast by the holders of all outstanding stock
entitled to vote which are present in person or by proxy at such meeting. Unless
otherwise provided in the Certificate of Incorporation, as such may be amended
or restated from time to time, directors shall be elected by a plurality of the
votes cast in the election of directors. Each other question shall, unless
otherwise provided by law, the Certificate of Incorporation or these By-laws, as
such may be amended or restated from time to time, be decided by the vote of the
holders of stock having a majority of the votes which could be cast by the
holders of all stock entitled to vote on such question which are present in
person or by proxy at the meeting.
(c) Stock of the Corporation standing in the name of another corporation
and entitled to vote may be voted by such officer, agent or proxy as the by-laws
or other internal regulations of such other corporation may prescribe or, in the
absence of such provision, as the board of directors or comparable body of such
other corporation may determine.
(d) Stock of the Corporation standing in the name of a deceased person, a
minor, an incompetent or a debtor in a case under Title 11, United States Code,
and entitled to vote may be voted by an administrator, executor, guardian,
conservator, debtor-in-possession or trustee, as the case may be, either in
person or by proxy, without transfer of such shares into the name of the
official or other person so voting.
(e) A stockholder whose voting stock of the Corporation is pledged shall
be entitled to vote such stock unless on the transfer records of the Corporation
the pledgor has expressly
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empowered the pledgee to vote such shares, in which case only the pledgee,
or such pledgee's proxy, may represent such shares and vote thereon.
(f) If voting stock is held of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, tenants by the entirety or otherwise, or if two or more persons have
the same fiduciary relationship respecting the same shares, unless the Secretary
is given written notice to the contrary and is furnished with a copy of the
instrument or order appointing them or creating the relationship wherein it is
so provided, their acts with respect to voting shall have the following effect:
(i) if only one votes, such act binds all; (ii) if more than one vote, the act
of the majority so voting binds all; and (iii) if more than one votes, but the
vote is evenly split on any particular matter each faction may vote such stock
proportionally, or any person voting the shares, or a beneficiary, if any, may
apply to the Court of Chancery of the State of Delaware or such other court as
may have jurisdiction to appoint an additional person to act with the persons so
voting the stock, which shall then be voted as determined by a majority of such
persons and the person appointed by the Court. If the instrument so filed shows
that any such tenancy is held in unequal interests, a majority or even split for
the purpose of this subsection shall be a majority or even split in interest.
(g) Stock of the Corporation belonging to the Corporation, or to another
corporation a majority of the shares entitled to vote in the election of
directors of which are held by the Corporation, shall not be voted at any
meeting of stockholders and shall not be counted in the total number of
outstanding shares for the purpose of determining whether a quorum is present.
Nothing in the Section 1.7 shall limit the right of the Corporation to vote
shares of stock of the Corporation held by it in a fiduciary capacity.
SECTION 1.8 PROXIES.
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(a) Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for such stockholder by proxy filed
with the Secretary before or at the time of the meeting. No such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by filing with the Secretary an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date.
(b) A stockholder may authorize another person or persons to act for such
stockholder as proxy (i) by executing a writing authorizing such person or
persons to act as such, which execution may be accomplished by such stockholder
or such stockholder's authorized officer, director, partner, employee or agent
(or, if the stock is held in a trust or estate, by a trustee, executor or
administrator thereof) signing such writing or causing his or her signature to
be affixed to such writing by any reasonable means, including, but not limited
to, facsimile signature, or (ii) by transmitting or authorizing the transmission
of a telegram, cablegram or other means of electronic transmission (a
"Transmission") to the person who will be the holder of the proxy or to a proxy
solicitation firm, proxy support service organization or like agent duly
authorized by the person who
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will be the holder of the proxy to receive such Transmission; provided that any
such Transmission must either set forth or be submitted with information from
which it can be determined that such Transmission was authorized by such
stockholder.
(c) Any inspector or inspectors appointed pursuant to Section 1.9 of
these By-Laws shall examine Transmissions to determine if they are valid. If no
inspector or inspectors are so appointed, the Secretary or such other person or
persons as shall be appointed from time to time by the Board of Directors shall
examine Transmissions to determine if they are valid. If it is determined a
Transmission is valid, the person or persons making that determination shall
specify the information upon which such person or persons relied. Any copy,
facsimile telecommunication or other reliable reproduction of such a writing or
Transmission may be substituted or used in lieu of the original writing or
Transmission for any and all purposes for which the original writing or
Transmission could be used; provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or Transmission.
SECTION 1.9 VOTING PROCEDURES AND INSPECTORS OF ELECTIONS.
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(a) If the Corporation has a class of voting stock that is (i) listed on
a national securities exchange, (ii) authorized for quotation on an interdealer
quotation system of a registered national securities association or (iii) held
of record by more than 2,000 stockholders, the Board of Directors shall, in
advance of any meeting of stockholders, appoint one or more inspectors
(individually an "Inspector," and collectively the "Inspectors") to act at such
meeting and make a written report thereof. The Board of Directors may designate
one or more persons as alternate Inspectors to replace any Inspector who shall
fail to act. If no Inspector or alternate is able to act at such meeting, the
chairman of the meeting shall appoint one or more other persons to act as
Inspectors. Each Inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath faithfully to execute the duties of
Inspector with strict impartiality and according to the best of his or her
ability.
(b) The Inspectors shall (i) ascertain the number of shares of stock of
the Corporation outstanding and the voting power of each, (ii) determine the
number of shares of stock of the Corporation present in person or by proxy at
such meeting and the validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the Inspectors and
(v) certify their determination of the number of such shares present in person
or by proxy at such meeting and their count of all votes and ballots. The
Inspectors may appoint or retain other persons or entities to assist them in the
performance of their duties.
(c) The date and time of the opening and the closing of the polls for
each matter upon which the stockholders will vote at a meeting shall be
announced at such meeting. No ballots, proxies or votes, nor any revocations
thereof or changes thereto, shall be accepted by the Inspectors after the
closing of the polls unless the Court of Chancery of the State of Delaware upon
application by any stockholder shall determine otherwise.
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(d) In determining the validity and counting of proxies and ballots, the
Inspectors shall be limited to an examination of the proxies, any envelopes
submitted with such proxies, any information referred to in paragraphs (b) and
(c) of Section 1.8 of these By-laws, ballots and the regular books and records
of the Corporation, except that the Inspectors may consider other reliable
information for the limited purpose of reconciling proxies and ballots submitted
by or on behalf of banks, brokers, their nominees or similar persons which
represent more votes than the holder of a proxy is authorized by a stockholder
of record to cast or more votes than such stockholder holds of record. If the
Inspectors consider other reliable information for the limited purpose permitted
herein, the Inspectors, at the time they make their certification pursuant to
paragraph (b) of this Section 1.9, shall specify the precise information
considered by them, including the person or persons from whom such information
was obtained, when and the means by which such information was obtained and the
basis for the Inspectors' belief that such information is accurate and reliable.
SECTION 1.10 FIXING DATE OF DETERMINATION OF STOCKHOLDERS OF RECORD.
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(a) In order that the corporation may determine the stockholders entitled
(i) to notice of or to vote at any meeting of stockholders or any adjournment
thereof, (ii) to receive payment of any dividend or other distribution or
allotment of any rights, (iii) to exercise any rights in respect of any change,
conversion or exchange of stock or (iv) to take, receive or participate in any
other action, the Board of Directors may fix a record date, which shall not be
earlier than the date upon which the resolution fixing the record date is
adopted by the Board of Directors and which (1) in the case of a determination
of stockholders entitled to notice of or to vote at any meeting of stockholders
or adjournment thereof, shall, unless otherwise required by law, be not more
than 60 nor less than ten days before the date of such meeting; (2) in the case
of a determination of stockholders entitled to express consent to corporate
action in writing without a meeting, shall be not more than ten days after the
date upon which the resolution fixing the record date is adopted by the Board of
Directors; and (3) in the case of any other action, shall be not more than 60
days before such action.
(b) If no record date is fixed, (i) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; and (ii) the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
(c) A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting,
but the Board of Directors may fix a new record date for the adjourned meeting.
SECTION 1.11 LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary
shall prepare, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period
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of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of stockholders or
the books of the corporation, or to vote in person or by proxy at any meeting
of stockholders.
SECTION 1.12 STOCKHOLDER PROPOSALS AND BOARD NOMINATIONS.
-------------------------------------------
(a) At any annual meeting of the Corporation's stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be (i)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (ii) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (iii) otherwise
properly brought before the meeting by a stockholder in accordance with these
Bylaws. Business may be properly brought before an annual meeting by a
stockholder only if written notice of the stockholder's intent to propose such
business has been delivered, either by personal delivery, United States mail,
first class postage prepaid, or other similar means, to the Secretary of the
Corporation not later than 90 calendar days in advance of the anniversary date
of the release of the Corporation's proxy statement to stockholders in
connection with the preceding year's annual meeting of stockholders, except that
if no annual meeting was held in the previous year or the date of the annual
meeting has been changed by more than 30 calendar days from the date
contemplated at the time of the previous year's proxy statement, a stockholder
proposal shall be received by the Corporation a reasonable time before the
solicitation is made.
(b) Each notice of new business must set forth: (i) the name and address
of the stockholder who intends to raise the new business; (ii) the business
desired to be brought forth at the meeting and the reasons for conducting such
business at the meeting; (iii) a representation that the stockholder is a holder
of record of stock of the Corporation entitled to vote with respect to such
business and intends to appear in person or by proxy at the meeting to move the
consideration of such business; (iv) such stockholder's total beneficial
ownership of the Corporation's voting stock; and (v) such stockholder's interest
in such business. The chairman of the meeting may refuse to acknowledge a
motion to consider any business that he determines was not made in compliance
with the foregoing procedures.
(c) An adjourned meeting, if notice of the adjourned meeting is not
required to be given to stockholders, shall be regarded as a continuation
of the original meeting, and any notice of new business must meet the foregoing
requirements based upon the date on which notice of the date of the original
meeting was given. In the event of an adjourned meeting where notice of the
adjourned meeting is required to be given to stockholders, any notice of new
business made by a stockholder with respect to the adjourned meeting must meet
the foregoing requirements based upon the date on which notice of the date of
the adjourned meeting was given.
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(d) Nominations for the election of directors may be made by the Board of
Directors or a committee appointed by the Board of Directors or by any
stockholder entitled to vote in the election of directors generally. However,
any stockholder entitled to vote in the election of directors may nominate one
or more persons for election as director(s) at a meeting only if written notice
of such stockholder's intent to make such nomination or nominations has been
delivered, either by personal delivery, United States mail, first class postage
prepaid, or other similar means, to the Secretary of the Corporation not later
than (i) with respect to an election to be held at an annual meeting of
stockholders, 90 calendar days in advance of the anniversary date of the release
of the Corporation's proxy statement to stockholders in connection with the
preceding year's annual meeting of stockholders, except that if no annual
meeting was held in the previous year or the date of the annual meeting has been
changed by more than 30 calendar days from the date contemplated at the time of
the previous year's proxy statement, a nominee proposal shall be received by the
Corporation a reasonable time before the solicitation is made, and (ii) with
respect to an election to be held at a special meeting of stockholders for the
election of directors, the close of business on the 10th day following the date
on which notice of such meeting is first given to stockholders.
(e) Each such notice shall set forth: (i) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (ii) a representation that the stockholder is a holder of record
of stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (iii) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (iv) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or intended
to be nominated, by the Board of Directors; and (v) the consent of each nominee
to serve as a director of the Corporation if so elected.
ARTICLE II
BOARD OF DIRECTORS
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SECTION 2.1 NUMBER. The Board of Directors shall consist of such
number of directors as may be determined from time to time by resolution of the
Board of Directors.
SECTION 2.2 ELECTION; RESIGNATION; VACANCIES.
--------------------------------
(a) At each annual meeting at which the term of office of a class of
directors expires, the stockholders shall elect directors of such class each to
hold office until the annual meeting at which the terms of office of such class
of directors expire and the election and qualification of his or her successor,
or until his or her earlier death, resignation or removal.
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(b) Any director may resign at any time by giving written notice to the
Chairman of the Board, if any, the President or the Secretary. Unless otherwise
stated in a notice of resignation, it shall take effect when received by the
officer to whom it is directed, without any need for its acceptance.
(c) Any newly created directorship or any vacancy occurring in the Board
of Directors for any reason may be filled by a majority of the remaining
directors, although less than a quorum, or by a plurality of the votes cast in
the election of directors at a meeting of stockholders. Each director elected
to replace a former director shall hold office until the expiration of the term
of office of the director whom he or she has replaced and the election and
qualification of his or her successor, or until his or her earlier death,
resignation or removal. A director elected to fill a newly created directorship
shall serve until the annual meeting at which the term of office of the class of
directors to which he or she is assigned expires, the election and qualification
of his or her successor, or until his or her earlier death, resignation or
removal.
SECTION 2.3 REGULAR MEETINGS. A regular annual meeting of the Board
of Directors shall be held, without call or notice, immediately after and at the
same place as the annual meeting of stockholders, for the purpose of organizing
the Board of Directors, electing officers and transacting any other business
that may properly come before such meeting. Additional regular meetings of the
Board of Directors may be held without call or notice at such times as shall be
fixed by resolution of the Board of Directors.
SECTION 2.4 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board, if any, the President,
the Secretary, or by a majority of the Board of Directors. Notice of a special
meeting of the Board of Directors shall be given by the person or persons
calling the meeting at least twenty-four hours before the special meeting.
The purpose or purposes of a special meeting need not be stated in the call or
notice.
SECTION 2.5 ORGANIZATION. Meetings of the Board of Directors shall
be presided over by the Chairman of the Board, if any, or if there is none or
in his or her absence, by the President, or in his or her absence by a chairman
chosen at the meeting. The Secretary shall act as secretary of the meeting, but
in his or her absence the chairman of the meeting may appoint any person to act
as secretary of the meeting. A majority of the directors present at a meeting,
whether or not they constitute a quorum, may adjourn such meeting to any other
date, time or place without notice other than announcement at the meeting.
SECTION 2.6 QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of the
Board of Directors a majority of the whole Board of Directors shall constitute a
quorum for the transaction of business. Unless the Certificate of Incorporation
or these By-laws, as such may be amended or restated from time to time,
otherwise provide, the vote of a majority of the directors present at a meeting
at which a quorum is present shall be the act of the Board of Directors.
SECTION 2.7 EXECUTIVE COMMITTEE. Two or more directors of the
Corporation shall be appointed by the Board of Directors to act as an Executive
Committee, provided that the Executive Committee shall include the Chairman of
the Board and Chief Executive Officer and the
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President and Chief Operating Officer of the Corporation, as well as any other
directors of the Corporation which the Board of Directors shall designate. The
Executive Committee shall have and may exercise during intervals between the
meetings of the Board of Directors, all of the powers of the Board of Directors,
except as expressly limited by the Delaware General Corporation Law, or as
otherwise delegated to other committees by these By-laws or by resolution of the
Board of Directors.
SECTION 2.8 STOCK OPTION COMPENSATION COMMITTEE. Two or more directors of
the Corporation shall be appointed by the Board of Directors to act as a Stock
Option Compensation Committee, each of whom shall be an "outside director"
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended. The Stock Option Compensation Committee shall have the power and
authority to consider, review and approve the long-term compensation of officers
and key employees of the Corporation involving the grant of stock options, stock
appreciation rights and other long-term compensation or compensation based on
performance under the Corporation's stock option or other long-term compensation
or incentive plans.
SECTION 2.9 COMPENSATION COMMITTEE. Two or more directors of the
Corporation shall be appointed by the Board of Directors to act as a
Compensation Committee, each of whom shall be a director who is not an employee
of the Corporation or any subsidiary thereof. The Compensation Committee shall
have the power and authority to set the compensation of the officers and other
associates of the Company and shall possess the power and authority to act with
respect to the compensation and benefit plans of the Corporation, other than
long-term compensation plans administered by the Stock Option Compensation
Committee involving the grant of stock options, stock, stock appreciation rights
and other long-term compensation. The Compensation Committee shall also
recommend fees to be paid to members of the Board of Directors for services to
the Corporation.
SECTION 2.10 AUDIT COMMITTEE. Two directors of the Corporation shall
be appointed by the Board of Directors to act as an Audit Committee, each of
whom shall be a director who is not an employee of the Corporation or any
subsidiary thereof. The Audit Committee shall have general oversight
responsibility with respect to the Corporation's financial reporting. In
performing its oversight responsibility, the Audit Committee shall make
recommendations to the Board of Directors as to the selection, retention, or
change in the independent accountants of the Corporation, review with the
independent accountants the scope of their examination and other matters
(relating to both audit and non-audit activities), and review generally the
internal auditing procedures of the Corporation. In undertaking the foregoing
responsibilities, the Audit Committee shall have unrestricted access, if
necessary, to the Corporation's personnel and documents and shall be provided
with the resources and assistance necessary to discharge its responsibilities,
including periodic reports from management assessing the impact of regulation,
accounting, and reporting of other significant matters that may affect the
Corporation. The Audit Committee shall review the financial reporting and
adequacy of internal controls of the Corporation, consult with the internal
auditors and certified public accountants, and from time to time, but not less
than annually, report to the Board of Directors.
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SECTION 2.11 OTHER COMMITTEES. The Board of Directors may from time to
time, in its discretion, by resolution passed by a majority of the entire Board
of Directors, designate other committees of the Board of Directors (including,
without limitation, a Nominating Committee) consisting of such number of
directors as the Board of Directors shall determine, which shall have and may
exercise such lawfully delegable powers and duties of the Board of Directors as
shall be conferred or authorized by such resolution. The Board of Directors
shall have the power to change at any time the members of any such committee, to
fill vacancies and to dissolve any such committee.
SECTION 2.12 ALTERNATES. The Board of Directors may from time to
time designate from among the directors alternates to serve on any committee of
the Board of Directors to replace any absent or disqualified member at any
meeting of such committee. Whenever a quorum cannot be secured for any meeting
of any committee from among the regular members thereof and designated
alternates, the member or members of such committee present at such meeting and
not disqualified from voting, whether or not constituting a quorum, may
unanimously appoint another director to act at such meeting in place of any
absent or disqualified member.
SECTION 2.13 QUORUM AND MANNER OF ACTING-COMMITTEES. A majority of
the members of any committee of the Board of Directors shall constitute a quorum
for the transaction of business at any meeting of such committee, and the act of
a majority of the members present at any meeting at which a quorum is present
shall be the act of such committee.
SECTION 2.14 COMMITTEE CHAIRMAN, BOOKS AND RECORDS, ETC. The chairman
of each committee of the Board of Directors shall be selected from among the
members of such committee by the Board of Directors.
Each committee shall keep a record of its acts and proceedings, and all
actions of each committee shall be reported to the Board of Directors when
required.
Each committee shall fix its own rules of procedure not inconsistent with
these Bylaws or the resolution of the Board of Directors designating such
committee and shall meet at such times and places and upon such call or notice
as shall be provided by such rules.
SECTION 2.15 TELEPHONIC MEETINGS. Directors, or any committee of
directors designated by the Board of Directors, may participate in a meeting of
the Board of Directors or such committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to this
Section 2.8 shall constitute presence in person at such meeting.
SECTION 2.16 INFORMAL ACTION BY DIRECTORS. Unless otherwise
restricted by the Certificate of Incorporation or these By-laws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board of Directors or such committee, as the case may be, consent thereto in
writing (which may be in counterparts), and the written consent or consents are
filed with the minutes of proceedings of the Board of Directors or such
committee.
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SECTION 2.17 RELIANCE UPON RECORDS. Every director, and every member
of any committee of the Board of Directors, shall, in the performance of his or
her duties, be fully protected in relying in good faith upon the records of the
Corporation and upon such information, opinions, reports or statements presented
to the Corporation by any of its officers or employees, or committees of the
Board of Directors, or by any other person as to matters the director or member
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Corporation, including, but not limited to, such records, information, opinions,
reports or statements as to the value and amount of the assets, liabilities
and/or net profits of the Corporation, or any other facts pertinent to the
existence and amount of surplus or other funds from which dividends might
properly be declared and paid, or with which the Corporation's capital stock
might properly be purchased or redeemed.
SECTION 2.18 INTERESTED DIRECTORS. A director who is directly or
indirectly a party to a contract or transaction with the Corporation, or is a
director or officer of or has a financial interest in any other corporation,
partnership, association or other organization which is a party to a contract or
transaction with the Corporation, may be counted in determining whether a quorum
is present at any meeting of the Board of Directors or a committee thereof at
which such contract or transaction is considered or authorized, and such
director may participate in such meeting and vote on such authorization to the
extent permitted by applicable law, including Section 144 of the General
Corporation Law of the State of Delaware.
SECTION 2.19 COMPENSATION. Unless otherwise restricted by the
Certificate of Incorporation, as such may be amended or restated from time to
time, the Board of Directors shall have the authority to fix the compensation of
directors. The directors shall be paid their reasonable expenses, if any, of
attendance at each meeting of the Board of Directors or a committee thereof and
may be paid a fixed sum for attendance at each such meeting and an annual
retainer or salary for services as a director or committee member. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
SECTION 2.20 PRESUMPTION OF ASSENT. Unless otherwise provided by the
laws of the State of Delaware, a director who is present at a meeting of the
Board of Directors or a committee thereof at which action is taken on any matter
shall be presumed to have assented to the action taken unless his or her dissent
shall be entered in the minutes of such meeting or unless he or she shall file
his or her written dissent to such action with the person acting as secretary of
such meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary immediately after the adjournment of such
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
ARTICLE III
OFFICERS
--------
SECTION 3.1 NUMBER AND DESIGNATION. The officers of the Corporation
shall be a Chairman of the Board, a President, one or more Vice Presidents, a
Secretary and a Treasurer, and
11
<PAGE>
such Assistant Secretaries, Assistant Treasurers or other officers or agents as
may be elected or appointed by the Board of Directors. Any two or more offices
may be held by the same person unless the Certificate of Incorporation or these
Bylaws provide otherwise.
SECTION 3.2 ELECTION AND TERM OF OFFICE. The officers of the Corporation
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after the election of directors. If the election of
officers shall not be held at such meeting, such election shall be held as soon
thereafter as may be convenient. Vacancies may be filled or new offices created
and filled at any meeting of the Board of Directors. Each officer shall hold
office until his or her successor shall have been duly elected and shall have
qualified or until his or her earlier death, resignation or removal.
SECTION 3.3 REMOVAL AND RESIGNATION. Any officer or agent elected or
appointed by the Board of Directors may be removed by the Board of Directors
whenever in its judgment the best interests of the Corporation would be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed. Any officer or agent may resign at any time by
giving written notice to the Board of Directors, to the Chairman of the Board or
to the Secretary. Any such resignation shall take effect at the time of receipt
of such notice or at any later time specified therein; and, unless otherwise
specified therein, acceptance of such resignation shall not be necessary to make
it effective.
SECTION 3.4 VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 3.5 CHAIRMAN OF THE BOARD. The Chairman of the Board shall be the
chief executive officer of the Corporation and shall in general supervise and
control all of the business and affairs of the Corporation. The Chairman of the
Board may execute, alone or with the Secretary or any other officer of the
Corporation authorized by the Board of Directors, any deeds, mortgages, bonds,
contracts or other instruments which the Board of Directors or a committee
thereof has authorized to be executed, except in cases where the execution
thereof shall be expressly delegated by the Board of Directors or a committee
thereof or by these Bylaws to some other officer or agent of the Corporation, or
shall be required by law to be otherwise executed, and in general he or she
shall perform all duties incident to the office of Chairman of the Board and
such other duties as from time to time may be prescribed by the Board of
Directors or a committee thereof. When present, he or she shall preside at all
meetings of the stockholders and of the Board of Directors.
SECTION 3.6 PRESIDENT. The President shall be the chief operating officer
of the Corporation, second only to the Chairman of the Board. In the absence of
the Chairman of the Board or in the event of his or her inability to act as
Chairman of the Board, the President shall perform the duties of the Chairman of
the Board and, when so acting, shall have all the powers of, and be subject to
all the restrictions placed upon the Chairman of the Board. He or she may
execute, alone or with the Secretary or any other officer of the Corporation
authorized by the Board of Directors, any deeds, mortgages, bonds, contracts or
other instruments which the Board of Directors or a committee thereof has
authorized to be executed, except in cases where the execution thereof
12
<PAGE>
shall be expressly delegated by the Board of Directors or a committee thereof or
by these Bylaws to some other officer or agent of the Corporation, or shall be
required by law to be otherwise executed, and in general he or she shall perform
all duties incident to the office of President and such other duties as from
time to time may be prescribed by the Chairman of the Board, the Board of
Directors or a committee thereof.
SECTION 3.7 THE VICE PRESIDENTS. In the absence of the President or in
the event of his or her inability to act, the Vice President (or in the event
there shall be more than one Vice President, the Vice Presidents in the order
determined by the Board of Directors or, if there shall have been no such
determination, then in the order of their election) shall perform the duties of
the President and, when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. The Board of Directors may also
designate certain Vice Presidents as being in charge of designated divisions,
plants or functions of the Corporation's business and add appropriate
descriptions to their titles. In addition, any Vice President shall perform such
duties as from time to time may be assigned to him or her by the Chairman of the
Board, the President or the Board of Directors.
SECTION 3.8 THE SECRETARY. The Secretary shall (a) keep the minutes of
proceedings the stockholders, the Board of Directors and any committee of the
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the corporate records and of the seal of
the Corporation; (d) affix the seal of the Corporation or a facsimile thereof,
or cause it to be affixed, and, when so affixed, attest the seal by his or her
signature, to all certificates for shares of capital stock of the Corporation
prior to the issue thereof and to all other documents the execution of which on
behalf of the Corporation under its seal is duly authorized by the Board of
Directors or otherwise in accordance with the provisions of these Bylaws; (e)
keep a register of the post office address of each stockholder, director or
committee member, which shall be furnished to the Secretary by such stockholder,
director or member; (f) have general charge of the stock transfer books of the
Corporation; and (g) in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him or
her by the Chairman of the Board, the President or the Board of Directors.
SECTION 3.9 THE TREASURER. The Treasurer shall have charge and custody of
and be responsible for all funds and securities of the Corporation, receive and
give receipts for moneys due and payable to the Corporation from any source
whatsoever, deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article IV of these Bylaws, disburse the funds of the
Corporation as ordered by the Board of Directors or the Chairman of the Board or
as otherwise required in the conduct of the business of the Corporation and
render to the Chairman of the Board, President or the Board of Directors, upon
request, an accounting of all his or her transactions as Treasurer and a report
on the financial condition of the Corporation. The Treasurer shall in general
perform all the duties incident to the office of Treasurer and such other duties
as from time to time may be assigned to him or her by the Chairman of the Board,
President or the Board of Directors.
13
<PAGE>
SECTION 3.10 ASSISTANT TREASURERS AND SECRETARIES. In the absence of the
Secretary or the Treasurer, as the case may be, or in the event of his or her
inability to act, the Assistant Secretaries and the Assistant Treasurers,
respectively, in the order determined by the Board of Directors (or if there
shall have been no such determination, then in the order of their election),
shall perform the duties and exercise the powers of the Secretary or the
Treasurer, as the case may be. In addition, the Assistant Secretaries and the
Assistant Treasurers shall, in general, perform such duties as may be assigned
to them by the Chairman of the Board, the President, the Secretary, the
Treasurer or the Board of Directors.
SECTION 3.11 SALARIES. The salaries of the officers and agents of the
Corporation shall be fixed from time to time by the Board of Directors or by
such officer as it shall designate for such purpose. No officer shall be
prevented from receiving such salary by reason of the fact that he or she is
also a director of the Corporation.
SECTION 3.12 APPOINTMENTS. In addition to the elected officers described
above, the Chairman of the Board may from time to time designate persons to be
appointed Vice Presidents or bear such other title or titles as the Chairman of
the Board shall specify. The powers and duties of each such appointed person
shall be as prescribed by the Chairman of the Board from time to time. Such
appointed persons shall not be deemed elected or executive officers of the
Corporation. Each such appointed person shall serve until the successor thereof
is appointed or until the earlier resignation or removal of such appointed
person.
ARTICLE IV
STOCK CERTIFICATES AND TRANSFERS
--------------------------------
SECTION 4.1 CERTIFICATE. Every holder of stock shall be entitled to have
a certificate signed by or in the name of the Corporation by the Chairman of the
Board, if any, or the President or a Vice President, and by the Secretary or an
Assistant Secretary, of the Corporation, certifying the number of shares owned
by such stockholder in the Corporation. Any of or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent, or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such officer, transfer agent, or registrar continued to be such at the
date of issue.
SECTION 4.2 LOST, STOLEN OR DESTROYED CERTIFICATES; ISSUANCE OF NEW
CERTIFICATES. The Corporation may issue a new certificate for stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or such stockholder's legal representative, to
give the Corporation a bond sufficient to indemnify it against any claim that
may be made against it on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate.
14
<PAGE>
SECTION 4.3 TRANSFERS OF STOCK. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for stock of the Corporation
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer or, if the relevant stock certificate is claimed to have
been lost, stolen or destroyed, upon compliance with the provisions of Section
4.2 of these By-laws, and upon payment of applicable taxes with respect to such
transfer, and in compliance with any restrictions on transfer applicable to such
stock certificate or the shares represented thereby of which the Corporation
shall have notice and subject to such rules and regulations as the Board of
Directors may from time to time deem advisable concerning the transfer and
registration of stock certificates, the Corporation shall issue a new
certificate or certificates for such stock to the person entitled thereto,
cancel the old certificate and record the transaction upon its books. Transfers
of stock shall be made only on the books of the Corporation by the registered
holder thereof or by such holder's attorney or successor duly authorized as
evidenced by documents filed with the Secretary or transfer agent of the
Corporation. Whenever any transfer of stock shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of transfer
if, when the certificate or certificates representing such stock are presented
to the Corporation for transfer, both the transferor and transferee request the
Corporation to do so.
SECTION 4.4 STOCKHOLDERS OF RECORD. The Corporation shall be entitled to
treat the holder of record of any stock of the Corporation as the holder thereof
and shall not be bound to recognize any equitable or other claim to or interest
in such stock on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise required by the laws of the
State of Delaware.
ARTICLE V
NOTICES
-------
SECTION 5.1 MANNER OF NOTICE. Except as otherwise provided by law, the
Certificate of Incorporation or these By-laws, as such may be amended or
restated from time to time, whenever notice is required to be given to any
stockholder, director or member of any committee of the Board of Directors, such
notice may be given by personal delivery or by depositing it, in a sealed
envelope, in the United States mails, first class, postage prepaid, addressed,
or by delivering it to a telegraph company, charges prepaid, for transmission,
or by transmitting it via telecopier, to such stockholder, director or member,
either at the address of such stockholder, director or member as it appears on
the records of the Corporation or, in the case of such a director or member, at
his or her business address; and such notice shall be deemed to be given at the
time when it is thus personally delivered, deposited, delivered or transmitted,
as the case may be. Such requirement for notice shall also be deemed satisfied,
except in the case of stockholder meetings, if actual notice is received orally
or by other writing by the person entitled thereto as far in advance of the
event with respect to which notice is being given as the minimum notice period
required by law or these By-laws.
15
<PAGE>
SECTION 5.2 DISPENSATION WITH NOTICE.
-------------------------
(a) Whenever notice is required to be given by law, the Certificate of
Incorporation or these By-laws, as such may be amended or restated from time to
time, to any stockholder to whom (i) notice of two consecutive annual meetings
of stockholders, and all notices of meetings of stockholders or of the taking of
action by stockholders by written consent without a meeting to such stockholder
during the period between such two consecutive annual meetings, or (ii) all, and
at least two, payments (if sent by first class mail) of dividends or interest on
securities of the Corporation during a 12-month period, have been mailed
addressed to such stockholder at the address of such stockholder as shown on the
records of the Corporation and have been returned undeliverable, the giving of
such notice to such stockholder shall not be required. Any action or meeting
which shall be taken or held without notice to such stockholder shall have the
same force and effect as if such notice had been duly given. If any such
stockholder shall deliver to the Corporation a written notice setting forth the
then current address of such stockholder, the requirement that notice be given
to such stockholder shall be reinstated.
(b) Whenever notice is required to be given by law, the Certificate of
Incorporation or these By-laws, as such may be amended or restated from time to
time, to any person with whom communication is unlawful, the giving of such
notice to such person shall not be required, and there shall be no duty to apply
to any governmental authority or agency for a license or permit to give such
notice to such person. Any action or meeting which shall be taken or held
without notice to any such person with whom communication is unlawful shall have
the same force and effect as if such notice had been duly given.
SECTION 5.3 WAIVERS OF NOTICE. Any written waiver of notice, signed by the
person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular special meeting of the stockholders, directors, or members of a
committee or directors need be specified in any written waiver of notice.
ARTICLE VI
INDEMNIFICATION
---------------
SECTION 6.1 RIGHT TO INDEMNIFICATION.
------------------------
(a) The Corporation shall indemnify and hold harmless, to the fullest
extent permitted by law as in effect on the date of adoption of these By-laws or
as they may thereafter be amended or restated from time to time, any person who
was or is made or is threatened to be made a party or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (including any action by or in the right of the Corporation) (a
"proceeding") by reason
16
<PAGE>
of the fact that he or she, or a person for whom he or she is the legal
representative, is or was a director, officer or employee of the Corporation or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture or other
enterprise, against any and all liability and loss (including judgments, fines,
penalties and amounts paid in settlement) suffered or incurred and expenses
reasonably incurred by such person (including attorneys' fees and related
expenses); provided that any standard of conduct applicable to whether a
director or officer may be indemnified shall be equally applicable to an
employee under this Article VI. The Corporation shall not be required to
indemnify a person in connection with a proceeding initiated by such person,
including a counterclaim or cross claim, unless the proceeding was authorized by
the Board of Directors.
(b) For purposes of this Article VI: (i) any reference to "other
enterprise" shall include all plans, programs, policies, agreements, contracts
and payroll practices and related trusts for the benefit of or relating to
employees of the Corporation and its related entities ("employee benefit
plans"); (ii) any reference to "fines", "penalties", "liability" and "expenses"
shall include any excise taxes, penalties, claims, liabilities and reasonable
expenses (including reasonable legal fees and related expenses) assessed against
or incurred by a person with respect to any employee benefit plan; (iii) any
reference to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation or trustee
or administrator of any employee benefit plan which imposes duties on, or
involves services by, such director, officer, employee or agent with respect to
an employee benefit plan, its participants, beneficiaries, fiduciaries,
administrators and service providers; (iv) any reference to serving at the
request of the Corporation as a director, officer, employee or agent of a
partnership or trust shall include service as a partner or trustee; and (v) a
person who acted in good faith and in a manner he or she reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" for purposes of this Article VI.
SECTION 6.2 PREPAYMENT OF EXPENSES. The Corporation may pay or reimburse
the reasonable expenses incurred in defending any proceeding in advance of its
final disposition if the Corporation has received in advance an undertaking by
the person receiving such payment or reimbursement to repay all amounts advanced
if it should be ultimately determined that he or she is not entitled to be
indemnified under this Article VI or otherwise. The Corporation may require
security for any such undertaking.
SECTION 6.3 CLAIMS. If a claim for indemnification or payment of expenses
under this Article VI is not paid in full within 30 days after a written claim
therefor has been received by the Corporation, the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification or payment of expenses under
applicable law.
SECTION 6.4 INSURANCE. The Corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director, officer
or employee of the Corporation or was serving at the request of the Corporation
as a director, officer or employee of
17
<PAGE>
another corporation, partnership, joint venture, trust or other enterprise
(including service with respect to any employee benefit plan) against any
liability asserted against him and incurred by him in any such capacity, whether
or not the Corporation would have the power to indemnify such person against
such liability under this Article VI.
SECTION 6.5 NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by this Article VI shall not be exclusive of any other rights which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation or these By-laws, as such may be amended or restated from time to
time, agreement, vote of stockholders or disinterested directors or otherwise,
and shall continue as to a person who has ceased to be a director, officer or
employee and shall inure to the benefit of the heirs, executors, administrators
and personal representatives of such a person.
SECTION 6.6 OTHER INDEMNIFICATION. The Corporation's obligation, if any, to
indemnify any person who was or is serving at its request as a director,
officer, employee, partner or agent of another corporation, partnership, joint
venture or other enterprise shall be reduced by any amount such person may
collect as indemnification from such other corporation, partnership, joint
venture or other enterprise.
SECTION 6.7 AMENDMENT OR REPEAL. Any repeal or modification of the
foregoing provisions of this Article VI shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
SECTION 6.8 MERGER OR CONSOLIDATION. For purposes of this Article VI,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees, so that any person who is or was a director,
officer or employee of such a constituent corporation, or is or was serving at
the request of such a constituent corporation as a director, officer or employee
of another corporation, partnership, joint venture, trust or other enterprise
(including service with respect to any employee benefit plan), shall stand in
the same position under this Article VI with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
SECTION 6.9 INDEMNIFICATION OF AGENTS. The Corporation may, to the extent
authorized from time to time by the Board of Directors, grant rights to
indemnification and to the advancement of expenses to any agent of the
Corporation to the fullest extent of the provisions of this Article VI with
respect to the indemnification and advancement of expenses of directors,
officers and employees of the Corporation.
18
<PAGE>
ARTICLE VII
GENERAL
-------
SECTION 7.1 FISCAL YEAR. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
SECTION 7.2 SEAL. The corporate seal shall have the name of the Corporation
inscribed thereon and shall be in such form as may be approved from time to time
by the Board of Directors.
SECTION 7.3 FORM OF RECORDS. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs, or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
SECTION 7.4 AMENDMENT OF BY-LAWS BY THE BOARD OF DIRECTORS. These By-Laws
may be altered, amended or repealed, or new By-Laws may be adopted, by the
affirmative vote of a majority of the directors present at any regular or
special meeting of the Board of Directors at which a quorum is present.
SECTION 7.5 AMENDMENT OF THE BY-LAWS BY THE STOCKHOLDERS. These By-Laws may
be altered, amended or repealed, or new By-Laws may be adopted, by the
affirmative vote of the holders of eighty percent (80%) of the shares of the
capital stock of the Corporation issued and outstanding and entitled to vote at
any regular meeting of the stockholders or at any special meeting of the
stockholders, provided notice of such alternation, amendment, repeal or adoption
of new By-Laws shall have been stated in the notice of such meeting.
19
<PAGE>
Exhibit 11
FIRST COMMONWEALTH, INC.
COMPUTATION OF PRIMARY AND FULL DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
EARNINGS PER SHARE
-------------------------------------------------------------
FOR THE THREE MONTHS ENDED: FOR THE SIX MONTHS ENDED:
---------------------------- -------------------------------
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding (1) (2) 3,367,987 1,049,000 3,367,372 1,049,000
Common shares issued to Series B Preferred
Stockholders upon initial public offering (1) 0 1,784,000 0 1,784,000
Additional common share equivalents related to
option exercises within one year of initial public
offering in accordance with SEC Staff Accounting
Bulletin Number 83 (1) (3) 0 0 0 0
Additional common share equivalents related to
option grants within one year of initial public
offering in accordance with SEC Staff Accounting
Bulletin Number 83 (1) (3) (4) 0 0 0 0
Additional common share equivalents related to stock
options assumed to be exercised in accordance with
the treasury stock method (5) (6) (7) 131,760 29,176 131,760 29,176
---------- ---------- ----------- ----------
Total weighted average common and equivalent
shares outstanding 3,499,747 2,862,176 3,499,132 2,862,176
========== ========== =========== ==========
Net income $ 698,000 $ 532,000 $1,367,000 $1,033,000
========== ========== ========== ==========
Earnings per share - Primary $ 0.20 $ 0.19 $ 0.39 $ 0.36
========== ========== ========== ==========
Earnings per share - Fully diluted $ 0.20 $ 0.19 $ 0.39 $ 0.36
========== ========== ========== ==========
</TABLE>
NOTES
(1) Amount computed for purposes of presenting fully diluted earnings per share
is the same as this amount.
(2) For June 30, 1996, includes new shares issued in initial public offering of
530,000 shares on November 16, 1995, as well as converted Series B
preferred shares.
(3) Computed based on initial public offering price of $15 per share.
(4) No stock options were granted less than or equal to one year prior to the
initial public offering date.
(5) Options with an exercise price less than the fair value of common stock
during the period presented are assumed to have been exercised with the
proceeds from the exercise, including tax benefits assumed to have been
realized, being used to purchase treasury shares. The repurchase of
treasury shares is assumed to be at the average market price for purposes
of computing primary earnings per share and the ending market price for
purposes of computing fully diluted earnings per share.
(6) Average and ending fair market values are determined by reference to the
price and date upon which stock options are granted. All such options are
granted at the fair value on the date of the grant.
These prices at the end of each quarter are as follows:
<TABLE>
Period Ended 1996 1995
------------ ------ -----
<S> <C> <C>
31-March $25.75 $1.70
30-June $27.88 $1.70
</TABLE>
(7) The additional share equivalents related to stock options for purposes of
fully diluted earnings per share are 132,681 and 29,176, at June 30, 1996,
and 1995, respectively.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Financial Statements of First Commonwealth, Inc. as of June 30,
1996, and for the six months then ended, 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> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 9,272
<SECURITIES> 4,121
<RECEIVABLES> 1,933
<ALLOWANCES> 219
<INVENTORY> 0
<CURRENT-ASSETS> 18,049
<PP&E> 2,770
<DEPRECIATION> 1,328
<TOTAL-ASSETS> 20,660
<CURRENT-LIABILITIES> 7,472
<BONDS> 0
<COMMON> 0
0
3
<OTHER-SE> 13,060
<TOTAL-LIABILITY-AND-EQUITY> 20,660
<SALES> 0
<TOTAL-REVENUES> 19,792
<CGS> 0
<TOTAL-COSTS> 17,833
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,281
<INCOME-TAX> 914
<INCOME-CONTINUING> 1,367
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,367
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
</TABLE>
