<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED June 30, 1997
COMMISSION FILE NUMBER 000-21043
PACIFIC GATEWAY EXCHANGE, INC.
------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-3134065
(State of Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification Number)
533 Airport Blvd, Suite 505, Burlingame, California, 94010
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (415) 375 6700
--------------
None
----
(Former name, former address and
former fiscal year if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
As of July 31, 1997, the number of the registrant's Common Shares of $.0001
par value outstanding was 18,938,000.
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PACIFIC GATEWAY EXCHANGE, INC.
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I - FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated condensed balance sheets as of
June 30, 1997 and December 31, 1996 3
Consolidated condensed statements of operations
for the three-and six-month periods ended
June 30, 1997 and 1996 4
Consolidated condensed statements of cash flows for
the six-month periods ended June 30, 1997 and 1996 5
Notes to consolidated condensed financial statements 6
Item 2: Management's discussion and analysis of financial
condition and results of operations 8
Part II - OTHER INFORMATION
Item 4: Submission of matters to a vote of security holders
Item 5: Other information
Item 6: Exhibits and reports on Form 8-K 12
</TABLE>
2
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PACIFIC GATEWAY EXCHANGE, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 27,375 $ 45,563
Accounts receivable, net of allowance for doubtful accounts
of $3,178 in 1997 and $1,679 in 1996 35,631 25,145
Accounts receivable, related party 2,490 3,066
Prepaid expenses 873 729
Deferred income tax 1,322 1,184
----------- ------------
Total current assets 67,691 75,687
Property and equipment, net 50,083 27,636
Goodwill 627 -
Deposits and other assets 1,223 493
----------- ------------
Total assets $ 119,624 $ 103,816
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 47,443 $ 36,472
Accrued liabilities 1,705 1,304
Income taxes payable 420 2,493
Other liabilities 616 367
Current portion of capitalized lease obligations 234 -
----------- ------------
Total current liabilities 50,418 40,636
Long-term portion of capitalized lease obligations 304 -
Deferred income tax 702 708
----------- ------------
Total liabilities 51,424 41,344
----------- ------------
Stockholders' Equity:
Preferred stock, $.0001 par value, authorized
5,000,000 shares, no shares issued - -
Common stock, $.0001 par value, authorized 50,000,000 shares,
issued 19,081,560 shares, outstanding 18,938,000 shares
in 1997 and issued 19,040,050 shares, outstanding 18,896,490
shares in 1996 2 2
Additional paid in capital 55,337 55,113
Retained earnings 13,261 7,757
Less cost of common stock held in treasury,
143,560 shares in 1997 and 1996 400 400
----------- ------------
Total stockholders' equity 68,200 62,472
----------- ------------
Total liabilities and stockholders' equity $ 119,624 $ 103,816
=========== ============
</TABLE>
See Accompanying Notes to Consolidated Condensed Financial Statements
3
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PACIFIC GATEWAY EXCHANGE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except net income per share)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30,
-------------------- -----------------------
1997 1996 1997 1996
--------- --------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C>
Revenues $ 59,404 $ 31,310 $ 106,928 $ 58,790
Revenues - related party 3,782 5,423 7,709 10,183
--------- --------- ---------- ----------
Total revenues 63,186 36,733 114,637 68,973
Cost of long distance services 51,967 32,649 95,108 61,779
--------- --------- ---------- ----------
Gross margin 11,219 4,084 19,529 7,194
--------- --------- ---------- ----------
Selling, general and administrative expenses 5,618 2,250 9,443 4,206
Depreciation 1,267 478 2,120 863
--------- --------- ---------- ----------
Total operating expenses 6,885 2,728 11,563 5,069
--------- --------- ---------- ----------
Operating income 4,334 1,356 7,966 2,125
Other income 168 - 168 -
Interest income (expense), net 527 (94) 1,015 (246)
--------- --------- ---------- ----------
Income before income taxes 5,029 1,262 9,149 1,879
Provision for income taxes 1,987 500 3,645 750
--------- --------- ---------- ----------
Net income $ 3,042 $ 762 $ 5,504 $ 1,129
========= ========= ========= ==========
Net income per share, primary and
fully diluted $ 0.16 $ 0.05 $ 0.28 $ 0.08
========= ========= ========= ==========
Weighted average number of common shares
outstanding 19,518 14,091 19,628 14,190
========= ========= ========= ==========
</TABLE>
See Accompanying Notes to Financial Statements.
4
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PACIFIC GATEWAY EXCHANGE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------------------
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Operating Activities:
Net Income $ 5,504 $ 1,130
Adjustments to net income:
Depreciation 2,055 863
Noncash items (17) -
Bad debts provision 1,499 270
Changes in operating assets and liabilities, net of
business acquisition
Accounts receivable (11,359) (9,263)
Accounts receivable, related party 576 -
Notes and advances receivable - 105
Prepaid Expenses (56) -
Deferred tax asset (138) (154)
Deposits and other assets (730) (360)
Accounts payable 7,803 15,859
Accrued liabilities 401 (570)
Other liabilities 249 (84)
Deferred tax liability (6) -
Income taxes payable (2,247) (572)
------------ ------------
Net cash provided by operating activities 3,534 7,224
------------ ------------
Investing Activities:
Purchase of property and equipment (22,049) (5,236)
Repurchase of stock - (401)
Acquisition of business, net of cash acquired 222 -
------------ ------------
Net cash used in investing activities (21,827) (5,637)
------------ ------------
Financing Activities:
Repayments on revolving lines of credit, related party - (2,118)
Repayments on capital lease obligations (78) -
Exercise of stock options 183 -
------------ ------------
Net cash provided by (used in) financing activities 105 (2,118)
------------ ------------
Net decrease in cash and cash equivalents (18,188) (531)
Cash and cash equivalents at beginning of the period 45,563 1,792
------------ ------------
Cash and cash equivalents at end of the period $ 27,375 $ 1,261
============ ============
</TABLE>
See Accompanying Notes to Consolidated Condensed Financial Statements
5
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) GENERAL
- -----------
The financial statements included herein are unaudited and have been prepared in
accordance with generally accepted accounting principles for interim financial
reporting and Securities Exchange Commission ("SEC") regulations. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion of
management, the financial statements reflect all adjustments (of a normal and
recurring nature) which are necessary to present fairly the financial position,
results of operations and cash flows for the interim periods. These financial
statements should be read in conjunction with the annual report on Form 10-K of
Pacific Gateway Exchange, Inc. (the "Company" or "Pacific Gateway") for the year
ended December 31, 1996. The results for the three and six month periods ended
June 30, 1997, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997.
(2) ACCOUNTING FOR INTERNATIONAL LONG DISTANCE TRAFFIC
- -------------------------------------------------------
The Company has entered into operating agreements with 37 telecommunications
carriers in 26 different countries under which international long distance
traffic is both delivered and received. Under these agreements, the foreign
carriers are contractually obligated to adhere to the policy of the Federal
Communications Commission (the "FCC"), whereby traffic from the foreign country
is routed to international carriers, such as the Company, in the same proportion
as traffic carried into the country. Mutually exchanged traffic between the
Company and foreign carriers is settled through a formal settlement policy that
generally extends over a six-month period at an agreed upon rate. The Company
records the amount due to the foreign partner as an expense in the period the
traffic is delivered. Of the agreements the Company had in service at June 30,
1997, 13 agreements provided that the Company generally must wait up to six
months before it actually receives the proportional return traffic. For these
agreements, the Company recognizes a loss in the period in which it sells to a
customer because the amount due to the foreign partner generally exceeds the
amount the Company charges its customers. As a result, a significant increase
in traffic with one or more of the carriers with which the Company must wait up
to six months to receive return traffic may cause the Company to report a net
loss in the accounting period in which such increase occurred. Historically,
when the return traffic is received in the future period, the Company generally
realized a gross margin on the return traffic that, when combined with the prior
period loss on the outbound traffic, has resulted in a gross profit on the total
transaction. Although the Company can reasonably estimate the revenue it will
receive under the FCC's proportional share policy, there is no guarantee that
there will be traffic delivered back to the United States or what impact changes
in either future settlement rates or changes in foreign exchange rates will have
on net payments made and revenue received.
(3) ACQUISITIONS
- -----------------
The Company acquired 70% of the outstanding shares in Rustelnet. The acquisition
was accounted for by the purchase method and accordingly the results of
operations of the acquired businesses have been included in the accompanying
consolidated financial statements from the date of acquisition. The price was
$36,000 with Rustelnet having cash balances of $257,000 at the time. Rustelnet
is a provider of enhanced services to the Russian market. The fair value of net
liabilities acquired in the acquisition was $158,000. The excess of purchase
price over the estimated fair value of $627,000 has been allocated to goodwill.
Goodwill is being amortized on a straight line basis over a 10 year period.
6
<PAGE>
(4) NEW ACCOUNTING PRONOUNCEMENTS
- ----------------------------------
In December, 1996, the FASB issued SFAS No. 128, "Earnings per Share," which is
effective for both the interim periods and annual periods ending after December
15, 1997. SFAS 128 establishes standards for computing and presenting earnings
per share (EPS). This statement replaces the presentation of primary EPS with a
presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. The Company does not expect the impact on the financial
statements to be material.
On June 30, 1997, the Financial Accounting Standards Board issue Statement of
Financial Accounting Standards ("SPAS") No. 130, "Reporting Comprehensive
Income." This statement established standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. SPAS 130 is effective for fiscal years beginning after
December 15, 1997, and requires restatement of earlier periods presented.
Management is currently evaluating the SPAS 130.
On June 30, 1997, the Financial Accounting Standards Board Issued Statement of
Financial Accounting Standards ("SPAS") No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This statement establishes standards for
the way that a public enterprise reports information about operating segments in
annual financial statements and segments in interim financial reports issued to
shareholders. SPAS 131 is restatement of earlier periods presented. Management
is currently evaluating the requirements of SPAS 131.
7
<PAGE>
ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Quarterly Report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, including statements
regarding expected future revenue from delayed proportional return traffic from
foreign partners pursuant to certain operating agreements. Forward-looking
statements are statements other than historical information or statements of
current condition. Some forward looking statements may be identified by use of
such terms as "believes," "anticipates," "intends," or "expects." These
forward-looking statements relate to the plans, objectives and expectations of
the Company for future operations. In light of the risks and uncertainties
inherent in all future projections, the inclusion of forward-looking statements
in this report should not be regarded as a representation by the Company or any
other person that the objectives or plans of the Company will be achieved. The
Company's revenues and results of operations are difficult to forecast and could
differ materially from those projected in the forward-looking statements as a
result of numerous factors including the following: (i) changes in international
settlement rates; (ii) changes in the ratios between outgoing and incoming
traffic; (iii) foreign currency fluctuations; (iv) termination of certain
operating agreements or inability to enter into additional operating agreements;
(v) inaccuracies in the Company's forecast of traffic growth; (vi) changes in or
developments under domestic or foreign laws, regulations, licensing requirements
or telecommunication standards; (vii) foreign political or economic instability;
(viii) changes in the availability of transmission facilities; (ix) loss of the
services of key officers, such as Howard A. Neckowitz, Chairman of the Board,
President and Chief Executive Officer or Gail E. Granton, Executive Vice
President, International Business Development and Secretary; (x) loss of a
customer which provides significant revenues to the Company; (xi) highly
competitive market conditions in the industry; or (xii) concentration of credit
risk. The foregoing review of important factors should not be considered as
exhaustive; the Company undertakes no obligation to release publicly the results
of any future revisions it may make to forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
The following table sets forth income statement data as a percentage of revenues
for the period indicated.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------- ----------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Total revenues 100.0% 100.0% 100.0% 100.0%
Cost of long distance services 82.2% 88.9% 83.0% 89.6%
------ ------ ------ ------
Gross margin 17.8% 11.1% 17.0% 10.4%
------ ------ ------ ------
Selling, general and 8.9% 6.1% 8.2% 6.1%
administrative expenses
Depreciation 2.0% 1.3% 1.8% 1.3%
------ ----- ------ -----
Total operating expenses 10.9% 7.4% 10.1% 7.3%
------ ----- ------ -----
Operating income 6.9% 3.7% 6.9% 3.1%
Other income 0.3% 0.0% 0.1% 0.0%
Interest income (expense), net 0.8% -0.3% 0.9% -0.4%
------ ------ ------ -----
Income before income taxes 8.0% 3.4% 8.0% 2.7%
Provision for income taxes 3.2% 1.4% 3.2% 1.1%
------ ------ ------ -----
Net income 4.8% 2.1% 4.8% 1.6%
====== ====== ====== ======
</TABLE>
8
<PAGE>
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996.
Revenues: Total revenues in the three months ended June 30, 1997, increased 72%
to $63.2 million from $36.7 million in the three months ended June 30, 1996. The
increase was the result of several factors, including increased sales to
existing customers, due to an increase in the number of operating agreements to
37 at June 30, 1997 from 27 at June 30, 1996 and an increase in the number of
customers to 106 at June 30, 1997 from 61 at June 30, 1996. As a result, total
minutes have increased 80.5% from the same quarter last year while the average
price per minute charged to customers has slightly declined to 28 cents in the
second quarter compared to 29 cents in the same quarter last year. The change in
the terminating country mix with significantly different rates per minute, the
reduction in the rates received for the traffic terminating in and transiting
the US and the increase in the incidental US domestic terminating traffic, are
factors influencing the average customer price per minute. During the second
quarter (as in all prior quarters), Pacific Gateway sent more minutes out than
it received under its operating agreements. Because the same rate is charged by
the foreign carrier to terminate calls in their country as the Company charges,
the foreign carrier to terminate calls in the United States declining rates have
an adverse effect on revenue and estimated return traffic revenue backlog, but,
as a result of sending more calls out than the Company receives, declining
rates improve the gross margin received on the entire transaction of a minute
delivered with such foreign carriers.
Gross margin: Gross margin increased 174.7% to $11.2 million from $4.1
million. As a percentage of revenue, gross margin increased from 11.1% in the
prior period to 17.8% in the current period. The increase in margin results
from savings derived from a reduction in our transit or resale rates on our non-
direct countries, a reduction in the foreign access charges on our direct
routes, and a reduction in our domestic termination rates in the US. These
savings were offset by the effects of an increase in the estimated return
traffic revenue backlog which adversely effects the current gross margin. The
cost of long distance service increased to $52.0 million in the three months
ended June 30, 1997 from $32.6 million in the three months ended June 30, 1996.
This increase in costs represents growth in outbound traffic on new and existing
routes in advance of receiving proportional return traffic, resulting in an
increase in the estimated delayed proportional return traffic backlog amount at
June 30, 1997.
Selling General and Administrative Expenses: As a percentage of revenues,
selling, general and administrative expenses increased from 6.1% in the prior
period to 8.9% in the current period and the actual expenses increased 149.7% to
$5.6 million from $2.3 million. This increase was due primarily to increased
personnel and sales commission expenses. The increase in personnel expenses was
directly related to the increase in employees to 67 at June 30, 1997 from 40 at
June 30, 1996. The increase in sales commission expenses was primarily due to
increased revenues. Additionally, the UK and Russian offshore subsidiaries, the
international 800 and travel services programs, the retail
marketing programs and the New York technical center expansion are all currently
in roll-out phases.
Depreciation: Depreciation increased 165.1% to $1.3 million from $478,000. As
a percentage of revenues, depreciation was 2.0% of revenue for the quarter ended
June 30 1997, and 1.3% for the same period in 1996. The increase in the dollar
amount was primarily due to depreciation of additional transmission facilities
acquired over the year.
Income Tax: Income taxes increased to $2.0 million from $500,000, primarily
due to increased operating income. The effective tax rate was 39.6% in 1996 and
39.5% in 1997.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996.
Revenues: Total revenues in the six months ended June 30, 1997, increased
66.2% to $114.6 million from $68.9 million in the six months ended June 30,
1996. The increase was primarily the result of both
9
<PAGE>
increased sales to existing customers, due to an increase in the number of
operating agreements to 37 at June 30, 1997 from 27 at June 30, 1996, and an
increase in the number of customers to 106 at June 30, 1997 from 61 at June 30,
1996.
Gross margin: Gross margin increased 171.5% to $19.5 million from $7.2
million. As a percentage of revenue, gross margin increased from 10.4% in the
prior period to 17.0% in the current period. This percentage increase was
primarily a result of an increase of 74.1% in the total minutes. The cost of
long distance service increased to $95.1 million in the six months ended June
30, 1997 from $61.8 million in the six months ended June 30, 1996.
Selling General and Administrative Expenses: As a percentage of revenues,
selling, general and administrative expenses increased from 6.1% in the prior
period to 8.2% in the current period and the actual expenses increased 124.5% to
$9.4 million from $4.2 million. This increase was due primarily to increased
personnel and sales commission expenses. The increase in personnel expenses was
directly related to the increase in employees to 67 at June 30, 1997 from 40 at
June 30, 1996. The increase in sales commission expenses was primarily due to
increased revenues. Additionally, the UK and Russian offshore subsidiaries ,the
international 800 and travel services programs and the retail marketing programs
are all currently in roll-out phases.
Depreciation: Depreciation increased 145.7% to $2.1 million from $863,000. As
a percentage of revenues, depreciation increased from 1.3% in the prior period
to 1.8% in the current period. The increase in dollar amount was primarily due
to depreciation of additional transmission facilities acquired between June 30,
1996 and June 30, 1997.
Income Tax: Income taxes increased to $3.6 million from $750,000, primarily
due to increased operating income. The effective tax rate was 39.9% in 1996 and
39.8% in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its rapid growth, including its capital expenditures,
through funds received in July, 1996 from its initial public offering. The
length of the Company's accounts payable turnover is partially due to its
accounts payable with foreign partners which generally have 180 day terms as a
result of the six month lag inherent in the international telecommunications
service settlement process.
Net cash provided by operating activities was $3.5 million for the six months
ended June 30, 1997 and $7.2 million for the six months ended June 30, 1996.
This decrease was primarily as a result of a decrease in accounts payable which
exceeded the increases in accounts receivable.
Net cash used in investing activities was $21.8 million for the six months ended
June 30, 1997 and $5.6 million for the six months ended June 30, 1996.
Substantially all of these expenditures were for the acquisition of partial
ownership interests in international fiber optic cable transmission systems and
related equipment.
Net cash provided by financing activities was $0.1 million for the six months
ended June 30, 1997 and net cash used in financing activities was $2.1 million
for the six months ended June 30, 1996. The line of credit with a major
shareholder was put in place in 1995, but was repaid in the second quarter of
1996.
At June 30, 1997, the Company had outstanding commitments of $7.2 million for
the acquisition of additional ownership in digital undersea fiber optic cables
and network equipment. The Company believes that the net proceeds from its
initial public offering in the third quarter of 1996, together with cash
provided by operating activities and other existing sources of liquidity, will
be sufficient to meet its outstanding capital commitments and its expected
capital expenditures and working capital needs through the end of 1997. However,
the Company may raise additional funds through an equity offering or other
financing arrangements to fund growth potential to the extent management
identifies opportunities that are beneficial for the Company.
10
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OTHER OPERATING DATA
- --------------------
The information set forth below illustrates management's estimate of the amount
of revenue derived from the proportional delayed return traffic which certain
carriers are contractually obligated to provide to the Company within six months
of the Company delivering certain outbound calls. See Note 2 to the Notes to
the Financial Statements. The estimated delayed return traffic revenue is based
on the anticipated ratios between the outgoing and incoming traffic and
anticipated settlement rates. The information concerning estimated delayed
return traffic revenue backlog contains "forward looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and 21E of the Securities
Exchange Act of 1934. The actual results and actual amounts of delayed return
traffic revenue could differ materially from the estimated amounts reflected
herein as a result of numerous factors, including, but not limited to, changes
in international settlement rates, changes in ratios between outgoing and
incoming traffic, foreign currency fluctuations, termination of certain
operating agreements and changes in US tax law.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues received in current period
from delayed return traffic/(1)/ 5,908 3,100 10,790 6,142
Estimated delayed return traffic revenue
backlog at end of period/(2)/ 14,102 10,946 /(5)/ 14,102 10,946 /(5)/
Estimated delayed return traffic revenue
backlog at end of preceding period/(3)/ 13,948 8,400 13,719 6,142
Increase in estimated revenues from
delayed return traffic/(4)/ 154 2,546 383 4,804
</TABLE>
(1) REPRESENTS REVENUE RECORDED IN THE CURRENT PERIOD FROM CERTAIN OF THE
COMPANY'S OPERATING AGREEMENTS WHICH REQUIRE THE COMPANY TO WAIT UP TO SIX
MONTHS TO RECEIVE THE RETURN TRAFFIC. SEE NOTE 2 OF THE FINANCIAL
STATEMENTS.
(2) THE AMOUNT AS OF THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1997 AND
JUNE 30, 1996 REFLECTS MANAGEMENT'S ESTIMATE OF THE REVENUE TO BE RECEIVED
BY THE COMPANY FROM DELAYED RETURN TRAFFIC DURING THE SIX MONTHS ENDING
DECEMBER 31, 1997 AND DECEMBER 31, 1997, SUCH ESTIMATE BEING BASED ON THE
ANTICIPATED RATIOS BETWEEN OUTGOING AND INCOMING TRAFFIC, ANTICIPATED
SETTLEMENT RATES AND FORECAST FOREIGN EXCHANGE RATES.
(3) TO REFLECT THE INCREASE IN DELAYED RETURN TRAFFIC REVENUE FOR EACH
RESPECTIVE PERIOD, THE INFORMATION PRESENTED REFLECTS, FOR THE PURPOSE OF
COMPUTING SUCH INCREASE, THE AMOUNT OF THE ESTIMATED RETURN TRAFFIC REVENUE
FOR THE PRECEDING PERIOD.
(4) THE INCREASE IN THE AMOUNT OF ESTIMATED DELAYED RETURN TRAFFIC REVENUE
DURING THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996, IS
(1) FOR THE QUARTER ENDED JUNE 30, 1997, THE DIFFERENCE BETWEEN THE AMOUNT
OF ESTIMATED DELAYED RETURN TRAFFIC REVENUE BACKLOG AT JUNE 30, 1997 AND
MARCH 31, 1997, (2) FOR THE SIX MONTHS ENDED JUNE 30, 1997, THE DIFFERENCE
BETWEEN THE AMOUNT OF ESTIMATED DELAYED RETURN TRAFFIC REVENUE BACKLOG AT
JUNE 30, 1997 AND DECEMBER 31, 1996, (3) FOR THE QUARTER ENDED JUNE 30,
1996, THE DIFFERENCE BETWEEN THE AMOUNT OF ESTIMATED DELAYED RETURN TRAFFIC
REVENUE BACKLOG AT JUNE 30, 1996 AND MARCH 31, 1996 AND (4) FOR THE SIX
MONTHS ENDED JUNE 30, 1996, THE DIFFERENCE BETWEEN THE AMOUNT OF ESTIMATED
DELAYED RETURN TRAFFIC REVENUE BACKLOG AT JUNE 30, 1996 AND DECEMBER 31,
1995. THE AMOUNT OF
11
<PAGE>
THE INCREASE REFLECTS MANAGEMENT'S ESTIMATE OF SUCH REVENUE EARNED IN THE
PARTICULAR SIX MONTH PERIOD, ALTHOUGH NOT REPORTED ON THE COMPANY'S
FINANCIAL STATEMENTS UNTIL UP TO SIX MONTHS LATER, UNDER THE OPERATING
AGREEMENTS WHICH REQUIRE THE COMPANY TO WAIT UP TO SIX MONTHS BEFORE SUCH
REVENUE IS ACTUALLY RECEIVED PURSUANT TO THE CONTRACTUAL OBLIGATION OF
FOREIGN CARRIERS TO DELIVER SUCH RETURN TRAFFIC. HISTORICALLY THE COMPANY
HAS REALIZED AN AFTER TAX NET MARGIN OF APPROXIMATELY 50% ON THE AMOUNT OF
SUCH REVENUES WHEN THESE ARE RECEIVED.
(5) AT THE END OF EACH QUARTER, THE COMPANY DETERMINES THE ACTUAL AMOUNT OF
DELAYED RETURN TRAFFIC REVENUE RECEIVED FOR EACH PRECEDING SIX MONTH PERIOD
AND USES THIS ACTUAL AMOUNT AS THE "ESTIMATED" RETURN TRAFFIC BACKLOG FOR
THE PERIOD ENDING SIX MONTHS EARLIER. AS A RESULT, IN EACH CURRENT QUARTER
AND THE IMMEDIATELY PRECEDING QUARTER, THE AMOUNTS REPRESENT ESTIMATES.
HOWEVER, IN THE PRECEDING COMPARISON PERIOD, THE DELAYED RETURN BACKLOG
REPRESENTS THE AMOUNT THAT THE COMPANY ACTUALLY RECEIVED IN THE ENSUING SIX
MONTHS.
PART II. OTHER INFORMATION
Item 1. Legal proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of stockholders was held on May 16,
1997.
The following tables set forth information regarding the number of
votes for, against, withheld, or abstaining and broker non-votes,
with respect to each matter presented at the meeting.
1. Both nominees for Class I director were elected as follows:
WITHHOLD
NOMINEES FOR AUTHORITY
-------- --- ---------
Charles M. Dalfen 17,147,194 1,600
Barry J. Volante 17,147,194 1,600
2. Both nominees for Class II director were elected as follows:
WITHHOLD
NOMINEES FOR AUTHORITY
-------- ---- ---------
Gail E. Granton 17,147,194 1,600
James J. Junewicz 17,147,194 1,600
3. The nominee for Class III director was elected as follows:
12
<PAGE>
<TABLE>
<CAPTION>
WITHHOLD
NOMINEES FOR AUTHORITY
-------- --- ---------
<S> <C> <C>
Howard A. Neckowitz 17,147,194 1,600
4. The amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of common stock from Twenty-five
Million (25,000,000) shares to Fifty Million (50,000,000) shares and to
increase the number of authorized shares Preferred Stock from One Million
(1,000,000) shares to Five Million (5,000,000,) shares was approved as
follows:
BROKER
FOR AGAINST ABSTAIN NON-VOTE
--- ------- ------- --------
<S> <C> <C> <C>
14,653,889 1,379,191 2,500 1,113,464
5. The amendment to the Company's Certificate of Incorporation to
provide for the division of The Board of Directors into classes of
directors with staggered terms was approved as follows:
BROKER
FOR AGAINST ABSTAIN NON-VOTE
--- ------- ------- --------
14,437,832 1,595,823 1,675 1,113,464
6. The amendment to the Company's Certificate of Incorporation to
require all stockholder action to be taken at a meeting of stockholders was
approved as follows:
BROKER
FOR AGAINST ABSTAIN NON-VOTE
--- ------- ------- --------
14,451,587 1,593,207 2,450 1,101,550
7. The Company's Long-Term Incentive Plan was approved as follows:
BROKER
FOR AGAINST ABSTAIN NON-VOTE
--- ------- ------- --------
14,890,175 1,437,985 5,840 814,794
8. The selection of Coopers & Lybrand L.L.P. as the Company's
independent auditors for the fiscal year ending December 31, 1997 was
approved as follows:
BROKER
FOR AGAINST ABSTAIN NON-VOTE
--- ------- ------- --------
17,141,129 5,265 2,400 0
</TABLE>
Item 5. Other Information
13
<PAGE>
In December, 1994, the Company advanced $38,000 and in April, 1997
the Company advanced $9,250 to Mr. Fred Weismiller, an executive
officer of the Company. In September, 1996 the Company advanced
$15,000 to Mr. Robert Craver, an executive officer of the Company.
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended June
30, 1997. The Exhibits filed as part of this report are listed
below:
3.1 Amended and Restated Certificate of Incorporation, as amended
May 20, 1997.
3.2 Amended and Restated Bylaws
4.1 Amended and Restated Certificate of Incorporation, as amended
May 20, 1997
4.2 Amended and Restated Bylaws
10.1 1997 Long-Term Incentive Plan
11 Computation of Per Share Earnings
27 Financial Data Schedule
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PACIFIC GATEWAY EXCHANGE, INC.
Dated: August 14, 1997
By: /s/ Howard A. Neckowitz
------------------------
Howard A. Neckowitz
President and CEO
(Authorized Signatory)
By: /s/ Sandra Grey
----------------
Sandra Grey
Chief Financial Officer
(Principal Financial and
Accounting Officer )
15
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
PACIFIC GATEWAY EXCHANGE, INC.
The following Amended and Restated Certificate of Incorporation of Pacific
Gateway Exchange, Inc. amends and restates the provisions of and supersedes the
Certificate of Incorporation filed with the Secretary of State of the State of
Delaware on August 8, 1991 in its entirety.
ARTICLE I
The name of the corporation is Pacific Gateway Exchange, Inc. (the
"Corporation").
ARTICLE II
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE III
The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the Corporation is authorized to issue is Twenty Six
Million (26,000,000) shares. Twenty-Five Million (25,000,000) shares shall be
Common Stock, $.0001 par value per share, and One Million (1,000,000) shares
shall be Preferred Stock, $.0001 par value per share.
At the effective time of this amendment and without further action on the
part of the Corporation or the holders of its stock, each One (1) share of
Common Stock of the Corporation outstanding or held in treasury immediately
prior thereto shall be changed and converted into Nine Hundred Forty (940) fully
paid and nonassessable shares of Common Stock of the Corporation, and at such
time each holder of record of Common Stock shall, without further action, be and
become the holder of Nine Hundred Forty (940) shares of Common Stock for each
one (1) share of Common Stock held of record immediately prior thereto. No
fractional shares shall be issued as a result of such stock split and in lieu of
any fractional shares, the Corporation shall pay cash equal to such fraction
multiplied by the fair market value of the Common Stock as determined by the
Board of Directors of the Corporation.
<PAGE>
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors of this Corporation is hereby authorized, within the
limitations and restrictions prescribed by law or stated in this Certificate of
Incorporation, and by filing a certificate pursuant to applicable law of the
State of Delaware, to provide for the issuance of Preferred Stock in series and
(i) to establish from time to time the number of shares to be included in each
such series; (ii) to fix the voting powers, designations, powers, preferences
and relative, participating, optional or other rights of the shares of each such
series and the qualifications, limitations or restrictions thereof, including
but not limited to, the fixing or alteration of the dividend rights, dividend
rate, conversion rights, conversion rates, voting rights, rights and terms of
redemption (including sinking fund provisions), the redemption price or prices,
and the liquidation preferences of any wholly unissued series subsequent to the
issue of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
ARTICLE IV
The address of the Corporation's registered office in the State of Delaware
is The Prentice-Hall Corporation System, Inc., 32 Loockerman Square, Suite
L-100, in the City of Dover, County of Kent. The name of its registered agent at
such address is The Prentice-Hall Corporation System, Inc.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the Corporation.
ARTICLE VII
The number of directors which will constitute the whole Board of Directors
of the Corporation shall be as specified in the Bylaws of the Corporation.
ARTICLE VIII
The election of directors need not be by written ballot except and to the
extent provided in the Bylaws of the Corporation.
2
<PAGE>
ARTICLE IX
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any statutory provision) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors or in
the Bylaws of the Corporation.
ARTICLE X
A. To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
B. The Corporation shall indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer or employee of
the Corporation or any predecessor of the Corporation, or serves or served at
any other enterprise as a director, officer or employee at the request of the
Corporation or any predecessor to the Corporation.
C. Neither any amendment nor repeal of this Article X, nor the adoption
of any provision of this Certification of Incorporation inconsistent with this
Article X, shall eliminate or reduce the effect of this Article X in respect of
any matter occurring, or any cause of action, suit or claim that, but for this
Article X, would accrue or arise, prior to such amendment, repeal or adoption of
an inconsistent provision.
ARTICLE XI
Advance notice of new business and stockholder nominations for the election
of directors shall be given in the manner and to the extent provided in the
Bylaws of the Corporation.
ARTICLE XII
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
The foregoing Amended and Restated Certificate of Incorporation has been
duly adopted by the stockholders of the corporation in accordance with the
provisions of Section 242 and 245 of the General Corporate Law of the State of
Delaware, as amended.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this certificate on
October 18, 1995.
/s/ Howard A. Neckowitz
----------------------------------
Howard A. Neckowitz, President
/s/ Gail Granton
----------------------------------
Gail Granton, Secretary
The undersigned certify under penalty of perjury that they have read the
foregoing Amended and Restated Certificate of Incorporation and know the
contents thereof, and that the statements therein are true.
Executed at Burlingame, California on October 18, 1995.
/s/ Howard A. Neckowitz
----------------------------------
Howard A. Neckowitz, President
/s/ Gail Granton
-----------------------------------
Gail Granton, Secretary
4
<PAGE>
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PACIFIC GATEWAY EXCHANGE, INC.
-----------------------------------------
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
-----------------------------------------
I, Gail E. Granton, Secretary of PACIFIC GATEWAY EXCHANGE, INC., a
corporation existing under the laws of the State of Delaware, do hereby certify
as follows:
FIRST: That the name of the corporation is Pacific Gateway Exchange, Inc.
SECOND: That the Amended and Restated Certificate of Incorporation of the
corporation was filed by the Secretary of the State of Delaware on the 10th day
of October, 1995.
THIRD: That the first paragraph of Article III of the Amended and Restated
Certificate of Incorporation of said Corporation has been amended in its
entirety to read as follows:
"The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the Corporation is authorized to issue is Fifty-Five
Million (55,000,000) shares. Fifty Million (50,000,000) shares shall be
Common Stock, $.0001 par value per share, and Five Million (5,000,000)
shares shall be Preferred Stock, $.0001 par value per share."
<PAGE>
FOURTH: That the Amended and Restated Certificate of Incorporation of
said Corporation has been amended by adding a second and third paragraph to
Article VII to read as follows:
"The directors shall be divided into three classes, designated by
Class I, Class II and Class III. At the 1997 annual meeting of
stockholders, Class I directors shall be elected for a term expiring at
the 1998 annual meeting of stockholders, Class II directors for a term
expiring at the 1999 annual meeting of stockholders and Class III
directors for a term expiring at the 2000 annual meeting of stockholders.
At each succeeding annual meeting of stockholders, successors to
directors whose terms expire at that annual meeting shall be of the same
class as the directors they succeed and shall be elected for three-year
terms. If the number of directors is decreased by resolution of the Board
of Directors pursuant to Article II Section 2.1 of the Corporation's
Bylaws, in no case shall that decrease shorten the term of any incumbent
director. Vacancies in the Board of Directors may be filled by a majority
of the directors then in office, though less than a quorum, and directors
so chosen shall hold office for a term expiring at the next annual
meeting of stockholders.
Notwithstanding anything contained in this Certificate of
Incorporation or the Corporation's Bylaws to the contrary, the
affirmative vote of the holders of at least sixty-six and two-thirds
percent (66 2/3%) of the outstanding shares entitled to vote shall be
required to amend or repeal, or adopt any provision inconsistent with,
this Article VII."
FIFTH: That the Amended and Restated Certificate of Incorporation of said
Corporation has been amended by adding a second and third paragraph to Article
IX to read as follows:
"No action required to be taken or which may be taken at any
annual or special meeting of the stockholders of the Corporation may be
taken by stockholders without a meeting, and the power of stockholders to
consent in writing, without a meeting, to the taking of any action is
specifically denied.
2
<PAGE>
Notwithstanding anything contained in this Certificate of
Incorporation or the Corporation's Bylaws to the contrary, the affirmative
vote of the holders of at least sixty-six and two-thirds percent (66 2/3%)
of the outstanding shares entitled to vote shall be required to amend or
repeal, or adopt any provision inconsistent with, this Article IX."
SIXTH: That such amendments have been duly adopted in accordance with the
provisions of the General Corporation Law of the State of Delaware by the
majority vote of the holders of all outstanding shares entitled to vote thereon,
all in accordance with the provisions of Section 242 of the General Corporation
Law.
IN WITNESS WHEREOF, I have signed this certificate this 19th day of May,
1997.
PACIFIC GATEWAY EXCHANGE, INC.
By: /s/ Gail E. Granton
------------------------------------
Its: Secretary
3
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
PACIFIC GATEWAY EXCHANGE, INC.
<PAGE>
ARTICLE I
---------
STOCKHOLDERS
------------
<TABLE>
<S> <C>
Section 1.1 Annual Meeting........................................ 1
--------------
Section 1.2 Special Meetings...................................... 1
----------------
Section 1.3 Notice of Meetings.................................... 1
------------------
Section 1.4 Quorum................................................ 2
------
Section 1.5 Conduct of the Stockholders' Meeting.................. 2
------------------------------------
Section 1.6 Conduct of Business................................... 2
-------------------
Section 1.7 Notice of Stockholder Business........................ 3
------------------------------
Section 1.8 Proxies and Voting.................................... 3
------------------
Section 1.9 Stock List............................................ 4
----------
ARTICLE II
----------
BOARD OF DIRECTORS
------------------
Section 2.1 Number and Term of Office............................. 4
-------------------------
Section 2.2 Vacancies and Newly Created Directorships............. 4
-----------------------------------------
Section 2.3 Removal............................................... 4
-------
Section 2.4 Regular Meetings...................................... 5
----------------
Section 2.5 Special Meetings...................................... 5
----------------
Section 2.6 Quorum................................................ 5
------
Section 2.7 Participation in Meetings by Conference Telephone..... 5
-------------------------------------------------
Section 2.8 Conduct of Business................................... 5
-------------------
Section 2.9 Powers................................................ 5
------
Section 2.10 Compensation of Directors............................. 6
-------------------------
Section 2.11 Nomination of Director Candidates..................... 6
---------------------------------
ARTICLE III
-----------
COMMITTEES
----------
Section 3.1 Committees of the Board of Directors.................. 7
------------------------------------
Section 3.2 Conduct of Business................................... 7
-------------------
ARTICLE IV
----------
OFFICERS
--------
Section 4.1 Generally............................................. 8
---------
Section 4.2 Chairman of the Board................................. 8
---------------------
Section 4.3 President............................................. 8
---------
Section 4.4 Vice President........................................ 8
--------------
Section 4.5 Treasurer............................................. 8
---------
Section 4.6 Secretary............................................. 9
---------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 4.7 Delegation of Authority............................... 9
-----------------------
Section 4.8 Removal............................................... 9
-------
Section 4.9 Action With Respect to Securities of Other
------------------------------------------
Corporations.......................................... 9
------------
ARTICLE V
---------
STOCK
---------
Section 5.1 Certificates of Stock................................. 9
---------------------
Section 5.2 Transfers of Stock.................................... 9
------------------
Section 5.3 Record Date........................................... 9
-----------
Section 5.4 Lost, Stolen or Destroyed Certificates................ 10
--------------------------------------
Section 5.5 Regulations........................................... 10
-----------
ARTICLE VI
----------
NOTICES
---------
Section 6.1 Notices............................................... 10
-------
Section 6.2 Waivers............................................... 10
-------
ARTICLE VII
-----------
MISCELLANEOUS
-------------
Section 7.1 Facsimile Signatures.................................. 10
--------------------
Section 7.2 Corporate Seal........................................ 11
--------------
Section 7.3 Reliance Upon Books, Reports and Records.............. 11
----------------------------------------
Section 7.4 Fiscal Year........................................... 11
-----------
Section 7.5 Time Periods.......................................... 11
------------
Section 7.6 Execution of Corporate Contracts and Instruments...... 11
------------------------------------------------
Section 7.7 Checks, Drafts, Etc................................... 11
--------------------
ARTICLE VIII
------------
INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
Section 8.1 Right to Indemnification.............................. 11
------------------------
Section 8.2 Right of Claimant to Bring Suit....................... 12
-------------------------------
Section 8.3 Non-Exclusivity of Rights............................. 13
-------------------------
Section 8.4 Indemnification Contracts............................. 13
-------------------------
Section 8.5 Insurance............................................. 13
---------
Section 8.6 Effect of Amendment................................... 13
-------------------
ARTICLE IX
----------
AMENDMENTS
----------
Section 9.1 Amendment of Bylaws................................... 13
-------------------
</TABLE>
<PAGE>
PACIFIC GATEWAY EXCHANGE, INC.
A DELAWARE CORPORATION
AMENDED AND RESTATED BYLAWS
ARTICLE I
---------
STOCKHOLDERS
------------
Section 1.1 Annual Meeting. An annual meeting of the stockholders, for
----------- --------------
the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, on such date, and at such time as the Board of
Directors shall each year fix, which date shall be within thirteen subsequent to
the later of the date of incorporation or the last annual meeting of
stockholders.
Section 1.2 Special Meetings. Special meetings of the stockholders, for
----------- ----------------
any purpose or purposes prescribed in the notice of the meeting, may be called
only (i) by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there
exists any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption) or (ii) by the
holders of not less than 50% of all shares entitled to cast votes at the
meeting, voting together as a single class and shall be held at such place, on
such date, and at such time as they shall fix. Business transacted at special
meetings shall be confined to the purpose or purposes stated in the notice.
Section 1.3 Notice of Meetings. Written notice of the place, date, and
----------- ------------------
time of all meetings of the stockholders shall be given, not less than ten (10)
nor more than sixty (60) days before the date on which the meeting is to be
held, to each stockholder entitled to vote at such meeting, except as otherwise
provided herein or required by law (meaning, here and hereinafter, as requited
from time to time by the Delaware General Corporation Law or the Certificate of
Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date, and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
1
<PAGE>
Section 1.4 Quorum. At any meeting of the stockholders, the holders of
----------- ------
a majority of all of the shares of the stock entitled to vote at the meeting,
present in person or by the proxy, shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by law.
If a quorum shall fail to attend any meeting, the chairman of the meeting
or the holders of a majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date,
or time.
If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present constituting a quorum, then except as otherwise required by law, those
present at such adjourned meeting shall constitute a quorum, and all matters
shall be determined by a majority of the votes cast at such meeting.
Section 1.5 Conduct of the Stockholders' Meeting. At every meeting of
----------- ------------------------------------
the stockholders, the Chairman, if there is such an officer, or if not, the
President of the Corporation, or in his absence the Vice President designated by
the President, or in the absence of such designation any Vice President, or in
the absence of the President or any Vice President, a chairman chosen by the
majority of the voting shares represented in person or by proxy, shall act as
Chairman. The Secretary of the Corporation or a person designated by the
Chairman shall act as Secretary of the meeting. Unless otherwise approved by
the Chairman, attendance at the stockholders' meeting is restricted to
stockholders of record, persons authorized in accordance with Section 8 of these
Bylaws to act by proxy, and officers of the Corporation.
Section 1.6 Conduct of Business. The Chairman shall call the meeting to
----------- -------------------
order, establish the agenda, and conduct the business of the meeting in
accordance therewith or, at the Chairman's discretion, it may be conducted
otherwise in accordance with the wishes of the stockholders in attendance. The
date and time of the opening and closing of the polls for each matter upon which
the stockholders will vote at the meeting shall be announced at the meeting.
The Chairman shall also conduct the meeting in an orderly manner, rule on
the precedence of and procedure on, motions and other procedural matters, and
exercise discretion with respect to such procedural matters with fairness and
good faith toward all those entitled to take part. The Chairman may impose
reasonable limits on the amount of time taken up at the meeting on discussion in
general or on remarks by any one stockholder. Should any person in attendance
become unruly or obstruct the meeting proceedings, the Chairman shall have the
power to have such person removed from participation. Notwithstanding anything
in the Bylaws to the contrary, no business shall be conducted at a meeting
except in accordance with the procedures set forth in this Section 1.6 and
Section 1.7, below. The Chairman of a meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting and in accordance with the provisions of this Section 1.6 and
Section 1.7, and if he should so determine, he shall so declare to the meeting
and any such business not properly brought before the meeting shall not be
transacted.
2
<PAGE>
Section 1.7 Notice of Stockholder Business. At an annual or special
------------ ------------------------------
meeting of the stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought before a
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
properly brought before the meeting by or at the direction of the Board of
Directors, (c) properly brought before an annual meeting by a stockholder, or
(d) properly brought before a special meeting by a stockholder, but if, and only
if, the notice of a special meeting provides for business to be brought before
the meeting by stockholders. For business to be properly brought before a
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation. To be timely, a stockholder
proposal to be presented at an annual meeting shall be received at the
Corporation's principal executive offices not less than 120 calendar days in
advance of the date that the Corporation's (or the Corporation's predecessor's)
proxy statement was released to stockholders in connection with the previous
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, or in the event of a special meeting, notice by the
stockholder to be timely must be received not later than the close of business
on the tenth day following the day on which such notice of the date of the
meeting was mailed or such public disclosure was made. A stockholder's notice
to the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual or special meeting (a) a brief description of the
business desired to be brought before the annual or special meeting and the
reasons for conducting such business at the special meeting, (b) the name and
address, as they appear on the Corporation's books, of the stockholder proposing
such business, (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such business.
Section 1.8 Proxies and Voting. At any meeting of the stockholders,
----------- ------------------
every stockholder entitled to vote may vote in person or by proxy authorized by
an instrument in writing or by a transmission permitted by law filed in
accordance with the procedure established for the meeting. No stockholder may
authorize more than one proxy for his shares.
Each stockholder shall have one vote for every share of stock entitled to
vote which is registered in his or her name on the record date for the meeting,
except as otherwise provided herein or required by law.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefor by a stockholder entitled to vote or his or her proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballots, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballots shall be counted by an inspector or inspectors
appointed by the chairman of the meeting.
3
<PAGE>
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law, all other matters shall be determined by a
majority of the votes cast.
Section 1.9 Stock List. A complete list of stockholders entitled to
----------- ----------
vote at any meeting of stockholders, arranged in alphabetical order for each
class of stock and showing the address of each such stockholder and the number
of shares registered in his or her name, shall be open to the examination of any
such stockholder, for any purpose germane to the meeting, during ordinary
business hours for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or if not so specified, at the
place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
ARTICLE II
----------
BOARD OF DIRECTORS
------------------
Section 2.1 Number and Term of Office. The number of directors shall
----------- -------------------------
initially be five (5) and, thereafter, shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption). All directors shall hold
office until the expiration of the term for which they were elected and until
their respective successors are elected, except in the case of the death,
resignation or removal of any director.
Section 2.2 Vacancies and Newly Created Directorships. Newly created
----------- -----------------------------------------
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification or other cause (other than removal from office by a
vote of the stockholders) may be filled only by a majority vote of the directors
then in office, though less than a quorum, and directors so chosen shall hold
office for a term expiring at the next annual meeting of stockholders. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Section 2.3 Removal. Subject to the rights of holders of any series of
----------- -------
Preferred Stock then outstanding, any directors, or the entire Board of
Directors may be removed from office for cause only, by the affirmative vote of
the holders of at least a majority of the voting power of all of the then
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class.
Vacancies in the Board of Directors resulting from such removal may be filled by
a majority of the directors then in office, though less than a quorum, as
provided in Article II, Section 2.2 above or by the stockholders. Directors so
chosen shall hold office for a term expiring at the next annual meeting of
stockholders.
4
<PAGE>
Section 2.4 Regular Meetings. Regular meetings of the Board of
----------- ----------------
Directors shall be held at such place or places, on such date or dates, and at
such time or times as shall have been established by the Board of Directors and
publicized among all directors. A notice of each regular meeting shall not be
required.
Section 2.5 Special Meetings. Special meetings of the Board of
----------- ----------------
Directors may be called by one-third of the directors then in office (rounded up
to the nearest whole number) or by the chief executive officer and shall be held
at such place, on such date, and at such time as they or he or she shall fix.
Notice of the place, date, and time of each such special meeting shall be given
each director by whom it is not waived by mailing written notice not fewer than
five (5) days before the meeting or by telegraphing or personally delivering the
same not fewer than twenty-four (24) hours before the meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at a
special meeting.
Section 2.6 Quorum. At any meeting of the Board of Directors, a
----------- ------
majority of the total number of authorized directors shall constitute a quorum
for all purposes. If a quorum shall fail to attend any meeting, a majority of
those present may adjourn the meeting to another place, date, or time, without
further notice or waiver thereof.
Section 2.7 Participation in Meetings by Conference Telephone. Members
----------- -------------------------------------------------
of the Board of Directors, or of any committee thereof, may participate in a
meeting of such Board or 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 such participation shall constitute presence in
person at such meeting.
Section 2.8 Conduct of Business. At any meeting of the Board of
----------- -------------------
Directors, business shall be transacted in such order and manner as the Board
may from time to time determine, and all matters shall be determined by the vote
of a majority of the directors present, except as otherwise provided herein or
required by law. Action may be taken by the Board of Directors without a
meeting if all members thereof consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors.
Section 2.9 Powers. The Board of Directors may, except as otherwise
----------- ------
required by law, exercise all such powers and do all such acts and things as may
be exercised or done by the Corporation, including, without limiting the
generality of the foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or privileges on
such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it may
determine, of written obligations of every kind, negotiable or non-negotiable,
secured or unsecured, and to do all things necessary in connection therewith;
(4) To remove any officer of the Corporation with or without cause, and
from time to time to devolve the powers and duties of any officer upon any other
person for the time being;
5
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(5) To confer upon any officer of the Corporation the power to appoint,
remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock, option, stock purchase, bonus or
other compensation plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the Corporation
and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent with these
bylaws, for the management of the Corporation's business and affairs.
Section 2.10 Compensation of Directors. Directors, as such, may receive,
------------ -------------------------
pursuant to resolution of the Board of Directors, fixed fees and other
compensation for their services as directors, including, without limitation,
their services as members of committees of the Board of Directors.
Section 2.11 Nomination of Director Candidates. Subject to the rights of
------------ ---------------------------------
holders of any class or series of Preferred Stock then outstanding, nominations
for the election of Directors may be made by the Board of Directors or a proxy
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 generally may nominate one or more persons
for election as Directors at a meeting only if timely notice of such
stockholder's intent to make such nomination or nominations has been given in
writing to the Secretary of the Corporation. To be timely, a stockholder
nomination for a director to be elected at an annual meeting shall be received
at the Corporation's principal executive offices not less than 120 calendar days
in advance of the date that the Corporation's (or the Corporation's
Predecessor's) Proxy statement was released to stockholders in connection with
the previous 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, or in the event of a nomination for
director to be elected at a special meeting, notice by the stockholders to be
timely must be received not later than the close of business on the tenth day
following the day on which such notice of the date of the special meeting was
mailed or such public disclosure was made. Each such notice shall set forth:
(a) the name and address of the stockholder who intends to make the nomination
and of the person or persons to be nominated; (b) a representation that the
stockholder is a holder of record of stock of the Corporation entitled to vote
for the election of Directors on the date of such notice and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (c) 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; (d) 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
6
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to be nominated, by the Board of Directors; and (e) the consent of each nominee
to serve as a director of the Corporation if so elected.
In the event that a person is validly designated as a nominee in accordance
with this Section 2.11 and shall thereafter become unable or unwilling to stand
for election to the Board of Directors, the Board of Directors or the
stockholder who proposed such nominee, as the case may be, may designate a
substitute nominee upon delivery, not fewer than five days prior to the date of
the meeting for the election of such nominee, of a written notice to the
Secretary setting forth such information regarding such substitute nominee as
would have been required to be delivered to the Secretary pursuant to this
Section 2.11 had such substitute nominee been initially proposed as a nominee.
Such notice shall include a signed consent to serve as a director of the
Corporation, if elected, of each such substitute nominee.
If the chairman of the meeting for the election of Directors determines
that a nomination of any candidate for election as a Director at such meeting
was not made in accordance with the applicable provisions of this Section 2.11,
such nomination shall be void; provided, however, that nothing in this Section
2.11 shall be deemed to limit any voting rights upon the occurrence of dividend
arrearages provided to holders of Preferred Stock pursuant to the Preferred
Stock designation for any series of Preferred Stock.
ARTICLE III
-----------
COMMITTEES
----------
Section 3.1 Committees of the Board of Directors. The Board of
----------- ------------------------------------
Directors, by a vote of a majority of the whole Board, may from time to time
designate committees of the Board, with such lawfully delegable powers and
duties as it thereby confers, to serve at the pleasure of the Board and shall,
for those committees and any others provided for herein, elect a director or
directors to serve as the member or members, designating, if it desires, other
directors as alternate members who may replace any absent or disqualified member
at any meeting of the committee. Any committee so designated may exercise the
power and authority of the Board of Directors to declare a dividend, to
authorize the issuance of stock or to adopt a certificate of ownership and
merger pursuant to Section 253 of the Delaware General Corporation Law if the
resolution which designates the committee or a supplemental resolution of the
Board of Directors shall so provide. In the absence or disqualification of any
member of any committee and any alternate member in his place, the member or
members of the committee present at the meeting and not disqualified from
voting, whether or not he or she or they constitute a quorum, may by unanimous
vote appoint another member of the Board of Directors to act at the meeting in
the place of the absent or disqualified member.
Section 3.2 Conduct of Business. Each committee may determine the
----------- -------------------
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings; one-
third of the authorized members shall constitute a quorum unless
7
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the committee shall consist of one or two members, in which event one member
shall constitute a quorum; and all matters shall be determined by a majority
vote of the members present. Action may be taken by any committee without a
meeting if all members thereof consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings of such committee.
ARTICLE IV
----------
OFFICERS
--------
Section 4.1 Generally. The officers of the Corporation shall consist of
----------- ---------
a President, one or more Vice Presidents, a Secretary and a Treasurer. The
Corporation may also have, at the discretion of the Board of Directors, a
Chairman of the Board and such other officers as may from time to time be
appointed by the Board of Directors. Officers shall be elected by the Board of
Directors, which shall consider that subject at its first meeting after every
annual meeting of stockholders. Each officer shall hold office until his or her
successor is elected and qualified or until his or her earlier resignation or
removal. The Chairman of the Board, if there shall be such an officer, and the
President shall each be members of the Board of Directors. Any number of
offices may be held by the same person.
Section 4.2 Chairman of the Board. The Chairman of the Board, if there
----------- ---------------------
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors, and exercise and perform such other powers and duties as may
be from time to time assigned to him by the Board of Directors or prescribed by
these bylaws.
Section 4.3 President. The President shall be the chief executive
----------- ---------
officer of the Corporation. Subject to the provisions of these bylaws and to
the direction of the Board of Directors, he or she shall have the responsibility
for the general management and control of the business and affairs of the
Corporation and shall perform all duties and have all powers which are commonly
incident to the office of chief executive or which are delegated to him or her
by the Board of Directors. He or she shall have power to sign all stock
certificates, contracts and other instruments of the Corporation which are
authorized and shall have general supervision and direction of all of the other
officers, employees and agents of the Corporation.
Section 4.4 Vice President. Each Vice President shall have such
------------ --------------
powers and duties as may be delegated to him or her by the Board of Directors.
One Vice President shall be designated by the Board to perform the duties and
exercise the powers of the President in the event of the President's absence or
disability.
Section 4.5 Treasurer. Unless otherwise designated by the Board of
----------- ---------
Directors, the Chief Financial Officer of the Corporation shall be the
Treasurer. The Treasurer shall have the responsibility for maintaining the
financial records of the Corporation and shall have custody of all monies and
securities of the Corporation. He or she shall make such disbursements of the
funds of the Corporation as are authorized and shall render from time to time an
account of all
8
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such transactions and of the financial condition of the Corporation. The
Treasurer shall also perform such other duties as the Board of Directors may
from time to time prescribe.
Section 4.6 Secretary. The Secretary shall issue all authorized notices
----------- ---------
for, and shall keep, or cause to be kept, minutes of all meetings of the
stockholders, the Board of Directors, and all committees of the Board of
Directors. He or she shall have charge of the corporate books and shall perform
such other duties as the Board of Directors may from time to time prescribe.
Section 4.7 Delegation of Authority. The Board of Directors may from
----------- -----------------------
time to time delegate the powers or duties of any officer to any other officers
or agents, notwithstanding any provision hereof.
Section 4.8 Removal. Any officer of the Corporation may be removed at
----------- -------
any time, with or without cause, by the Board of Directors.
Section 4.9 Action With Respect to Securities of Other Corporations.
----------- -------------------------------------------------------
Unless otherwise directed by the Board of Directors, the President or any
officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V
---------
STOCK
-----
Section 5.1 Certificates of Stock. Each stockholder shall be entitled
----------- ---------------------
to a certificate signed by, or in the name of the Corporation by, the President
or a Vice President, and by the Secretary or an Assistant Secretary, or the
Treasurer or an Assistant Treasurer, certifying the number of shares owned by
him or her. Any of or all the signatures on the certificate may be facsimile.
Section 5.2 Transfers of Stock. Transfers of stock shall be made only
----------- ------------------
upon the transfer books of the Corporation kept at an office of the Corporation
or by transfer agents designated to transfer shares of the stock of the
Corporation. Except where a certificate is issued in accordance with Section 4
of Article V of these bylaws, an outstanding certificate for the number of
shares involved shall be surrendered for cancellation before a new certificate
is issued therefor.
Section 5.3 Record Date. The Board of Directors may fix a record date,
----------- -----------
which shall not be more than sixty (60) nor fewer than ten (10) days before the
date of any meeting of stockholders, nor more than sixty (60) days prior to the
time for the other action hereinafter described, as of which there shall be
determined the stockholders who are entitled: to notice of or
9
<PAGE>
to vote at any meeting of stockholders or any adjournment thereof; to receive
payment of any dividend or other distribution or allotment of any rights; or to
exercise any rights with respect to any change, conversion or exchange of stock
or with respect to any other lawful action.
Section 5.4 Lost, Stolen or Destroyed Certificates. In the event of the
----------- --------------------------------------
loss, theft or destruction of any certificate of stock, another may be issued in
its place pursuant to such regulations as the Board of Directors may establish
concerning proof of such loss, theft or destruction and concerning the giving of
a satisfactory bond or bonds of indemnity.
Section 5.5 Regulations. The issue, transfer, conversion and
----------- -----------
registration of certificates of stock shall be governed by such other
regulations as the Board of Directors may establish.
ARTICLE VI
----------
NOTICES
-------
Section 6.1 Notices. Except as otherwise specifically provided herein
----------- -------
or required by law, all notices required to be given to any stockholder,
director, officer, employee or agent shall be in writing and may in every
instance be effectively given by hand delivery to the recipient thereof, by
depositing such notice in the mails, postage paid, or by sending such notice by
prepaid telegram, mailgram, telecopy or commercial courier service. Any such
notice shall be addressed to such stockholder, director, officer, employee or
agent at his or her last known address as the same appears on the books of the
Corporation. The time when such notice shall be deemed to be given shall be the
time such notice is received by such stockholder, director, officer, employee or
agent, or by any person accepting such notice on behalf of such person, if hand
delivered, or the time such notice is dispatched, if delivered through the mails
or be telegram or mailgram.
Section 6.2 Waivers. A written waiver of any notice, signed by a
----------- -------
stockholder, director, officer, employee or agent, whether before or after the
time of the event for which notice is to be given, shall be deemed equivalent to
the notice required to be given to such stockholder, director, officer, employee
or agent. Neither the business nor the purpose of any meeting need be specified
in such a waiver.
ARTICLE VII
-----------
MISCELLANEOUS
-------------
Section 7.1 Facsimile Signatures. In addition to the provisions for use
----------- --------------------
of facsimile signatures elsewhere specifically authorized in these bylaws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors or a committee thereof.
10
<PAGE>
Section 7.2 Corporate Seal. The Board of Directors may provide a
----------- --------------
suitable seal, containing the name of the Corporation, which seal shall be in
the charge of the Secretary. If and when so directed by the Board of Directors
or a committee thereof, duplicates of the seal may be kept and used by the
Treasurer or by an Assistant Secretary or Assistant Treasurer.
Section 7.3 Reliance Upon Books, Reports and Records. Each director,
----------- ----------------------------------------
each member of any committee designated by the Board of Directors, and each
officer of the Corporation shall, in the performance of his duties, be fully
protected in relying in good faith upon the books of account or other records of
the Corporation, including reports made to the Corporation by any of its
officers, by an independent certified public accountant, or by an appraiser
selected with reasonable care.
Section 7.4 Fiscal Year. The fiscal year of the Corporation shall be as
----------- -----------
fixed by the Board of Directors.
Section 7.5 Time Periods. In applying any provision of these bylaws
----------- ------------
which require that an act be done or not done a specified number of days prior
to an event or that an act be done during a period of a specified number of days
prior to an event, calendar days shall be used, the day of the doing of the act
shall be excluded, and the day of the event shall be included.
Section 7.6 Execution of Corporate Contracts and Instruments. The Board
----------- ------------------------------------------------
of Directors may authorize any officer or officers, agent or agents, to enter
into any contract or execute any instrument in the name of and on behalf of the
Corporation, and such authority may be general or confined to specific
instances. Unless so authorized by the Board of Directors or by these Bylaws,
no officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose.
Section 7.7 Checks, Drafts, Etc. All checks, drafts or other orders for
----------- --------------------
payment of money, notes or other evidence of indebtedness, issued in the name of
or payable to the Company, shall be signed or endorsed by such person or persons
and in such manner as, from time to time, shall be determined by resolution of
the Board of Directors.
ARTICLE VIII
------------
INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
Section 8.1 Right to Indemnification. Each person who was or is made a
----------- ------------------------
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
("proceeding"), by reason of the fact that he or she or a person of 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 or employee of another corporation, or of a Partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is
11
<PAGE>
alleged action in an official capacity as a director, officer or employee or in
any other capacity while serving as a director, officer or employee, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by Delaware Law, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said Law
permitted the Corporation to provide prior to such amendment) against all
expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties, amounts paid or to be paid in settlement and amounts
expended in seeking indemnification granted to such person under applicable law,
this bylaw or any agreement with the Corporation) reasonably incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer or employee and
shall inure to the benefit of his or her heirs, executors and administrators;
provided, however that, except as provided in Section 8.2 of this Article VIII,
- -------- -------
the Corporation shall indemnify any such person seeking indemnity in connection
with an action, suit or proceeding (or part thereof) initiated by such person
only if (a) such indemnification is expressly required to be made by law, (b)
the action, suit or proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation, (c) such indemnification is provided by the
Corporation, in its sole discretion, pursuant to the powers vested in the
Corporation under the Delaware General Corporation Law, or (d) the action, suit
or proceeding (or part thereof) is brought to establish or enforce a right to
indemnification under an indemnity agreement or any other statute or law or
otherwise as required under Section 145 of the Delaware General Corporation Law.
Such right shall be a contract right and shall include the right to be paid by
the Corporation expenses incurred in defending any such proceeding in advance of
its final disposition; provided, however, that, unless the Delaware General
-------- -------
Corporation Law then so prohibits, the payment of such expenses
incurred by a director or officer of the Corporation in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
tendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of such proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it should be determined ultimately that such
director or officer is not entitled to be indemnified under this Section or
otherwise.
Section 8.2 Right of Claimant to Bring Suit. If a claim under Section 1
----------- -------------------------------
of this Article VIII is not paid in full by the Corporation within ninety (90)
days after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if such suit is not frivolous or brought in bad
faith, the claimant shall be entitled to be paid also the expense of prosecuting
such claim. The burden of proving such claim shall be on the claimant. It
shall be a defense to any such action (other then an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered to this
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the Delaware General Corporation Law for the Corporation to
indemnify the claimant for the amount claimed. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to
12
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have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that claimant has not met the applicable
standard of conduct.
Section 8.3 Non-Exclusivity of Rights. The rights conferred on any
----------- -------------------------
person in Sections 1 and 2 shall not be exclusive of any other right which such
persons may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 8.4 Indemnification Contracts. The Board of Directors is
----------- -------------------------
authorized to enter into a contract with any director, officer, employee or
agent of the Corporation, or any person serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including employee
benefit plans, providing for indemnification rights equivalent to or, if the
Board of Directors so determines, greater than, those provided for in this
Article VIII.
Section 8.5 Insurance. The Corporation shall maintain insurance to the
----------- ---------
extent reasonably available, at its expense, to protect itself and any such
director, officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the Delaware
General Corporation law.
Section 8.6 Effect of Amendment. Any amendment, repeal or modification
----------- -------------------
of any provision of this Article VIII by the stockholders and the directors of
the Corporation shall not adversely affect any right or protection of a director
or officer of the Corporation existing at the time of such amendment, repeal or
modification.
ARTICLE IX
----------
AMENDMENTS
----------
Section 9.1 Amendment of Bylaws. The Board of Directors is expressly
----------- -------------------
empowered to adopt, amend or repeal Bylaws of the Corporation. Any adoption,
amendment or repeal of Bylaws of the Corporation by the Board of Directors shall
require the approval of a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously authorized directorships
at the time any resolution providing for adoption, amendment or repeal is
presented to the Board). The stockholders shall also have power to adopt, amend
or repeal the Bylaws of the Corporation.
13
<PAGE>
EXHIBIT 10.1
LONG TERM INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1................................................................... 1
GENERAL................................................................... 1
1.1. Purpose............................................................ 1
1.2. Participation...................................................... 1
SECTION 2................................................................... 1
OPTIONS................................................................... 1
2.1. Definition......................................................... 1
2.2. Eligibility........................................................ 1
2.3. Price.............................................................. 2
2.4. Exercise........................................................... 2
2.5. Post-Exercise Limitations.......................................... 2
2.6. Expiration Date.................................................... 2
2.7. Reload Provision................................................... 3
SECTION 3................................................................... 3
STOCK APPRECIATION RIGHTS................................................. 3
3.1. Definition......................................................... 3
3.2. Eligibility........................................................ 3
3.3. Exercise........................................................... 3
3.4. Settlement of Award................................................ 4
3.5. Post-Exercise Limitations.......................................... 4
3.6. Expiration Date.................................................... 4
SECTION 4................................................................... 4
STOCK AWARDS.............................................................. 4
4.1. Definition......................................................... 4
4.2. Eligibility........................................................ 4
4.3. Terms and Conditions of Awards..................................... 5
SECTION 5................................................................... 5
STOCK PURCHASE PROGRAM.................................................... 5
5.1. Purchase of Stock.................................................. 5
5.2. Matching Shares.................................................... 5
5.3. Restrictions on Shares............................................. 5
SECTION 6................................................................... 6
PERFORMANCE UNITS......................................................... 6
6.1. Definition......................................................... 6
6.2. Eligibility........................................................ 6
6.3. Terms and Conditions of Awards..................................... 6
6.4. Settlement......................................................... 6
6.5. Termination during Performance Period.............................. 6
SECTION 7................................................................... 7
OPERATION AND ADMINISTRATION.............................................. 7
7.1. Effective Date..................................................... 7
7.2. Shares Subject to Plan............................................. 7
7.3. Individual Limits on Awards........................................ 7
7.4. Adjustments to Shares.............................................. 7
7.5. Limit on Distribution.............................................. 9
7.6. Liability for Cash Payments........................................ 9
7.7. Performance-Based Compensation..................................... 9
7.8. Withholding........................................................ 9
7.9. Transferability.................................................... 9
7.10. Notices........................................................... 10
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
7.11. Form and Time of Elections........................................ 10
7.12. Agreement With Company............................................ 10
7.13. Limitation of Implied Rights...................................... 10
7.14. Evidence.......................................................... 10
7.15. Action by Company or Related Company.............................. 10
7.16. Gender and Number................................................. 10
SECTION 8................................................................... 11
COMMITTEE................................................................. 11
8.1. Administration..................................................... 11
8.2. Selection of Committee............................................. 11
8.3. Powers of Committee................................................ 11
8.4. Delegation by Committee............................................ 11
8.5. Information to be Furnished to Committee........................... 11
8.6. Liability and Indemnification of Committee......................... 11
SECTION 9................................................................... 12
CHANGE IN CONTROL......................................................... 12
SECTION 10.................................................................. 13
AMENDMENT AND TERMINATION................................................. 13
APPENDIX A
AWARDS TO NONEMPLOYEE DIRECTORS........................................... 14
</TABLE>
(ii)
<PAGE>
PACIFIC GATEWAY EXCHANGE, INC.
1997 LONG-TERM INCENTIVE PLAN
SECTION 1
GENERAL
1.1. Purpose. The Pacific Gateway Exchange, Inc. 1997 Long-Term Incentive
Plan (the "Plan") has been established by Pacific Gateway Exchange, Inc. (the
"Company") to:
(a) attract and retain employees and other persons providing services to
the Company and the Related Companies (as defined below);
(b) motivate Participants, by means of appropriate incentives, to achieve
long-range goals;
(c) provide incentive compensation opportunities that are competitive
with those of other major corporations; and
(d) further identify Participants' interests with those of the Company's
other stockholders through compensation that is based on the Company's
common stock;
and thereby promote the long-term financial interest of the Company and the
Related Companies, including the growth in value of the Company's equity and
enhancement of long-term stockholder return. The term "Related Company" means
any company during any period in which it is a "subsidiary corporation" (as
that term is defined in Code section 424(f)) with respect to the Company.
1.2. Participation. Subject to the terms and conditions of the Plan, the
Committee (as described in Section 8) shall determine and designate, from time
to time, from among the Eligible Individuals, those persons who will be
granted one or more awards under Sections 2, 3, 4, 5 or 6 of the Plan (an
"Award"), and thereby become "Participants" in the Plan. In the discretion of
the Committee, and subject to the terms of the Plan, a Participant may be
granted any Award permitted under the provisions of the Plan, and more than
one Award may be granted to a Participant. Except as otherwise agreed by the
Company and the Participant, or except as otherwise provided in the Plan, an
Award under the Plan shall not affect any previous Award under the Plan or an
award under any other plan maintained by the Company or the Related Companies.
For purposes of the Plan, the term "Eligible Individual" shall mean any
employee of the Company or a Related Company, any director and any other
person providing material services to the Company or a Related Company.
SECTION 2
OPTIONS
2.1. Definitions. The grant of an "Option" under this Section 2 entitles the
Participant to purchase shares of common stock of the Company ("Stock") at a
price fixed at the time the Option is granted, subject to the terms of this
Section. Options granted under this Section may be either Incentive Stock
Options or Non-Qualified Stock Options, as determined in the discretion of the
Committee. An "Incentive Stock Option" is an Option that is intended to
satisfy the requirements applicable to an "incentive stock option" described
in section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
A "Non-Qualified Stock Option" is an Option that is not intended to be an
Incentive Stock Option.
2.2. Eligibility. The Committee shall designate the Participants to whom
Options are to be granted under this Section and shall determine the number of
shares of Stock subject to each such Option. To the extent that the aggregate
fair market value of Stock with respect to which Incentive Stock Options are
exercisable for the first time by any individual during any calendar year
(under all plans of the Company and all Related Companies) exceeds $100,000,
such options shall be treated as Non-Qualified Stock Options, to the extent
required by section 422 of the Code.
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2.3. Price. The determination and payment of the purchase price of a share
of Stock under each Option granted under this Section shall be subject to the
following:
(a) The purchase price shall be established by the Committee at the time
the Option is granted; provided, however, that in no event shall such price
be less than the par value of a share of Stock on such date; further,
provided, in no event shall the purchase price of a share of Stock under an
Incentive Stock Option be less than the Fair Market Value (defined below)
of a share of stock at the time the Option is granted.
(b) Subject to the following provisions of this subsection, the full
purchase price of each share of Stock purchased upon the exercise of any
Option shall be paid at the time of such exercise and, as soon as
practicable thereafter, a certificate representing the shares so purchased
shall be delivered to the person entitled thereto.
(c) The purchase price shall be payable in cash or in shares of Stock
(valued at Fair Market Value as of the day of exercise) that have been held
by the Participant at least six months, or in any combination thereof, as
determined by the Committee.
(d) A Participant may elect to pay the purchase price upon the exercise
of an Option through a cashless exercise arrangement to the extent provided
by the Committee.
(e) The "Fair Market Value" of a share of Stock of the Company as of any
date shall be the closing price per share of Stock (or the mean of the
closing bid and asked prices of a share, if the Stock is so reported) on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ"), the NASDAQ National Market System or other national or regional
securities exchange or market system on which the Stock is primarily
traded, or, if there shall have been no such sale so reported on that date,
on the last preceding date on which such a sale was so reported
2.4. Exercise. Except as otherwise expressly provided in the Plan, an Option
granted under this Section shall be exercisable in accordance with the
following terms of this subsection:
(a) The terms and conditions relating to exercise of an Option shall be
established by the Committee, and may include, without limitation,
conditions relating to completion of a specified period of service (subject
to paragraph (b) below), achievement of performance standards prior to
exercise of the Option or achievement of Stock ownership objectives by the
Participant. The Committee, in its sole discretion, may accelerate the
vesting of any Option under circumstances designated by it at the time the
Option is granted or thereafter.
(b) No Option may be exercised by a Participant after the Expiration Date
(as defined in subsection 2.6) applicable to that Option.
(c) The exercise of an Option will result in the surrender of the
corresponding rights under a tandem Stock Appreciation Right (as described
in Section 3), if any.
2.5. Post-Exercise Limitations. The Committee, in its discretion, may impose
such restrictions on shares of Stock acquired pursuant to the exercise of an
Option (including stock acquired pursuant to the exercise of a tandem Stock
Appreciation Right) as it determines to be desirable, including, without
limitation, restrictions relating to disposition of the shares and forfeiture
restrictions based on service, performance, Stock ownership by the Participant
and such other factors as the Committee determines to be appropriate.
2.6. Expiration Date. The "Expiration Date" with respect to an Option means
the date established as the Expiration Date by the Committee at the time of
the grant; provided, however, that the Expiration Date with respect to any
Option shall not be later than the earliest to occur of:
(a) the ten-year anniversary of the date on which the Option is granted;
(b) if the Participant's Date of Termination occurs by reason of death or
Disability, the one-year anniversary of such Date of Termination;
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(c) if the Participant's Date of Termination occurs by reason of
Retirement, the three-year anniversary of such Date of Termination; or
(d) if the Participant's Date of Termination occurs for reasons other
than Retirement, death or Disability, the three-month anniversary of such
Date of Termination.
For purposes of the Plan, a Participant's "Date of Termination" shall be the
date on which he both ceases to be an employee of the Company and the Related
Companies and ceases to perform material services for the Company and the
Related Companies, regardless of the reason for the cessation; provided that a
"Date of Termination" shall not be considered to have occurred during the
period in which the reason for the cessation of services is a leave of absence
approved by the Company or the Related Company which was the recipient of the
Participant's services. Except as otherwise provided by the Committee, a
Participant shall be considered to have a "Disability" during the period in
which he is unable, by reason of a medically determinable physical or mental
impairment, to engage in any substantial gainful activity, which condition, in
the opinion of a physician selected by the Committee, is expected to have a
duration of not less than 120 days. "Retirement" of a Participant shall mean
the occurrence of a Participant's Date of Termination after providing at least
five years of service to the Company or the Related Companies and attaining
age 65.
2.7. Reload Provision. In the event the Participant exercises an Option and
pays all or a portion of the purchase price in Stock in the manner permitted
by subsection 2.3, or satisfies withholding obligations in Stock if permitted
under subsection 7.8, such Participant (either pursuant to the terms of the
Option Award, or pursuant to the exercise of Committee discretion at the time
the Option is exercised) may be issued a new Option to purchase additional
shares of Stock equal to the number of shares of Stock surrendered to the
Company in such payment. Such new Option shall have an exercise price equal to
the Fair Market Value per share on the date such new Option is granted, shall
first be exercisable six months from the date of grant of the new Option and
shall have an Expiration Date on the same date as the Expiration Date of the
original Option so exercised by payment of the purchase price or withholding
in shares of Stock.
SECTION 3
STOCK APPRECIATION RIGHTS
3.1. Definition. Subject to the terms of this Section, a "Stock Appreciation
Right" granted under the Plan entitles the Participant to receive, in cash or
Stock (as determined in accordance with subsection 3.4), value equal to all or
a portion of the excess of: (a) the Fair Market Value of a specified number of
shares of Stock at the time of exercise over (b) a specified price designated
at the time the Stock Appreciation Right is granted or, if granted in tandem
with an Option, the exercise price with respect to shares under the tandem
Option.
3.2. Eligibility. Subject to the provisions of the Plan, the Committee shall
designate the Participants to whom Stock Appreciation Rights are to be granted
under the Plan, shall determine the exercise price or a method by which the
price shall be established with respect to each such Stock Appreciation Right
and shall determine the number of shares of Stock on which each Stock
Appreciation Right is based. A Stock Appreciation Right may be granted in
connection with all or any portion of a previously or contemporaneously-
granted Option or not in connection with an Option. If a Stock Appreciation
Right is granted in connection with an Option then, in the discretion of the
Committee, the Stock Appreciation Right may, but need not, be granted in
tandem with the Option.
3.3. Exercise. The exercise of Stock Appreciation Rights shall be subject to
the following:
(a) If a Stock Appreciation Right is not in tandem with an Option, then
the Stock Appreciation Right shall be exercisable in accordance with the
terms established by the Committee in connection with such rights; and may
include, without limitation, conditions relating to completion of a
specified period of service, achievement of performance standards prior to
exercise of the Stock Appreciation Rights or
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achievement of objectives relating to Stock ownership by the Participant.
The Committee, in its sole discretion, may accelerate the vesting of any
Stock Appreciation Right under circumstances designated by it at the time
the Stock Appreciation Right is granted or thereafter. No Stock
Appreciation Right subject to this paragraph may be exercised by a
Participant after the Expiration Date (as defined in subsection 3.6)
applicable to that Stock Appreciation Right.
(b) If a Stock Appreciation Right is in tandem with an Option, then the
Stock Appreciation Right shall be exercisable at the time the tandem Option
is exercisable. The exercise of a Stock Appreciation Right will result in
the surrender of the corresponding rights under the tandem Option.
3.4. Settlement of Award. Upon the exercise of a Stock Appreciation Right,
the value to be distributed to the Participant, in accordance with subsection
3.1, shall be distributed in shares of Stock (valued at their Fair Market
Value at the time of exercise), in cash or in a combination thereof, in the
discretion of the Committee.
3.5. Post-Exercise Limitations. The Committee, in its discretion, may impose
such restrictions on shares of Stock acquired pursuant to the exercise of a
Stock Appreciation Right as it determines to be desirable, including, without
limitation, restrictions relating to disposition of the shares and forfeiture
restrictions based on service, performance, ownership of Stock by the
Participant and such other factors as the Committee determines to be
appropriate.
3.6. Expiration Date. If a Stock Appreciation Right is in tandem with an
Option, then the "Expiration Date" for the Stock Appreciation Right shall be
the Expiration Date for the related Option. If a Stock Appreciation Right is
not in tandem with an Option, then the "Expiration Date" for the Stock
Appreciation Right shall be the date established as the Expiration Date by the
Committee; provided, however, that subject to the following provisions of this
subsection, the Expiration Date with respect to any Stock Appreciation Right
shall not be later than the earliest to occur of:
(a) the ten-year anniversary of the date on which the Stock Appreciation
Right is granted;
(b) if the Participant's Date of Termination occurs by reason of death or
Disability, the one-year anniversary of such Date of Termination; or
(c) if the Participant's Date of Termination occurs by reason of
Retirement, the three-year anniversary of such Date of Termination; or
(d) if the Participant's Date of Termination occurs by reason other than
Retirement, death or Disability, the three-month anniversary of such Date
of Termination.
SECTION 4
STOCK AWARDS
4.1. Definition. Subject to the terms of this Section, a Stock Award under
the Plan is a grant of shares of Stock to a Participant, the earning, vesting
or distribution of which is subject to one or more conditions established by
the Committee. Such conditions may relate to events (such as performance or
continued employment) occurring before or after the date the Stock Award is
granted, or the date the Stock is earned by, vested in or delivered to the
Participant. If the vesting of Stock Awards is subject to conditions occurring
after the date of grant, the period beginning on the date of grant of a Stock
Award and ending on the vesting or forfeiture of such Stock (as applicable) is
referred to as the "Restricted Period". Stock Awards may provide for delivery
of the shares of Stock at the time of grant or may provide for a deferred
delivery date. A Stock Award may, but need not, be made in conjunction with a
cash-based incentive compensation program maintained by the Company and may,
but need not, be in lieu of cash otherwise awardable under such program.
4.2. Eligibility. The Committee shall designate the Participants to whom
Stock Awards are to be granted and the number of shares of Stock that are
subject to each such Award.
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4.3. Terms and Conditions of Awards. Stock Awards granted to Participants
under the Plan shall be subject to the following terms and conditions:
(a) Beginning on the date of grant (or, if later, the date of
distribution) of shares of Stock comprising a Stock Award, and including
any applicable Restricted Period, the Participant as owner of such shares
shall have the right to vote such shares.
(b) Payment of dividends with respect to Stock Awards shall be subject to
the following:
(i) On and after date that a Participant has a fully earned and
vested right to the shares comprising a Stock Award, and the shares
have been distributed to the Participant, the Participant shall have
all dividend rights (and other rights) of a stockholder with respect to
such shares.
(ii) Prior to the date that a Participant has a fully earned and
vested right to the shares comprising a Stock Award, the Committee, in
its sole discretion, may award Dividend Rights with respect to such
shares.
(iii) On and after the date that a Participant has a fully earned and
vested right to the shares comprising a Stock Award, but before the
shares have been distributed to the Participant, the Participant shall
be entitled to Dividend Rights with respect to such shares, at the time
and in the form determined by the Committee.
(iv) A "Dividend Right" with respect to shares comprising a Stock
Award shall entitle the Participant, as of each dividend payment date,
to an amount equal to the dividends payable with respect to a share of
Stock multiplied by the number of such shares. Dividend Rights shall be
settled in cash or in shares of Stock, as determined by the Committee,
shall be payable at the time and in the form determined by the
Committee and shall be subject to such other terms and conditions as
the Committee may determine.
SECTION 5
STOCK PURCHASE PROGRAM
5.1. Purchase of Stock. The Committee may, from time to time, establish one
or more programs under which Participants will be permitted to purchase shares
of Stock under the Plan and shall designate the Participants eligible to
participate under such Stock purchase programs. The purchase price for shares
of Stock available under such programs, and other terms and conditions of such
programs, shall be established by the Committee; provided, however, that with
respect to shares of Stock purchased under a program that does not result in
an award of matching shares (as provided in subsection 5.2), the purchase
price may not be less than 50% of the Fair Market Value of the Stock at the
time of purchase (or, in the Committee's discretion, the average stock value
over a period determined by the Committee), and further provided that the
purchase price may not be less than par value.
5.2. Matching Shares. Except as otherwise provided in subsection 5.1, any
Stock purchase program established by the Committee under this Section may
provide for the award of matching shares of Stock.
5.3. Restrictions on Shares. The Committee may impose such restrictions with
respect to shares purchased under subsection 5.1, or matching shares awarded
pursuant to subsection 5.2, as the Committee determines to be appropriate.
Such restrictions may include, without limitation, restrictions of the type
that may be imposed with respect to Stock Awards under Section 4.
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SECTION 6
PERFORMANCE UNITS
6.1. Definition. Subject to the terms of this Section, the Award of
Performance Units under the Plan entitles the Participant to receive value for
the units at the end of a Performance Period to the extent provided under the
Award. The number of units earned, and the value received for them, will be
contingent on the degree to which the performance measures established at the
time of grant of the Award are met. For purposes of the Plan, the "Performance
Period" with respect to the award of any Performance Units shall be the period
over which the applicable performance is to be measured.
6.2. Eligibility. The Committee shall designate the Participants to whom
Performance Units are to be granted and the number of units subject to each
such Award.
6.3. Terms and Conditions of Awards. For each Participant, the Committee
will determine the value of units, which may be stated either in cash or in
units representing shares of Stock; the performance measures used for
determining whether the Performance Units are earned; the Performance Period
during which the performance measures will apply; the relationship between the
level of achievement of the performance measures and the degree to which
Performance Units are earned; whether, during or after the Performance Period,
any revision to the performance measures or Performance Period should be made
to reflect significant events or changes that occur during the Performance
Period; and the number of earned Performance Units that will be paid in cash
and the number of earned Performance Units to be paid in shares of Stock.
6.4. Settlement. Settlement of Performance Units shall be subject to the
following:
(a) The Committee will compare the actual performance to the performance
measures established for the Performance Period and determine the number of
units as to which settlement is to be made, and the value of such units.
(b) Settlement of units earned shall be wholly in cash, wholly in Stock
or in a combination of the two and distributed in a lump sum or
installments, as determined by the Committee.
(i) For Performance Units stated in units representing shares of
Stock when granted, either one share of Stock will be distributed for
each unit earned or cash will be distributed for each unit earned equal
to either (A) the Fair Market Value of a share of Stock at the end of
the Performance Period or (B) the average Stock value over a period
determined by the Committee.
(ii) For Performance Units stated in cash when granted, the value of
each unit earned will be distributed in its initial cash value or
shares of Stock will be distributed based on the cash value of the
units earned divided by (A) the Fair Market Value of a share of Stock
at the end of the Performance Period or (B) the average Stock value
over a period determined by the Committee.
(c) Shares of Stock distributed in settlement of the units shall be
subject to such vesting requirements and other conditions, if any, as the
Committee shall determine. Such vesting restrictions may include, without
limitation, restrictions of the type that may be imposed with respect to
Stock Awards under Section 4.
6.5. Termination during Performance Period. If a Participant's Date of
Termination occurs during a Performance Period with respect to any Performance
Units granted to him, the Committee may determine that the Participant will be
entitled to settlement of all or any portion of the Performance Units as to
which he would otherwise be eligible and may accelerate the determination of
the value and settlement of such Performance Units or make such other
adjustments as the Committee, in its sole discretion, deems desirable.
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SECTION 7
OPERATION AND ADMINISTRATION
7.1. Effective Date. The Plan shall be effective as of the date it is
adopted by the Board of Directors of the Company (the "Board"); provided,
however, that Awards granted under the Plan prior to its approval by
stockholders will be contingent on approval of the Plan by the Company's
stockholders. The Plan shall be unlimited in duration and, in the event of
Plan termination, shall remain in effect as long as any shares of Stock
awarded under it are outstanding and not fully vested; provided, however, that
no new Awards shall be made under the Plan on or after the tenth anniversary
of the date on which the Plan is adopted by the Board.
7.2. Shares Subject to Plan. The shares of Stock with respect to which
Awards may be made under the Plan shall be shares currently authorized but
unissued or currently held or subsequently acquired by the Company as treasury
shares, including shares purchased in the open market or in private
transactions. Subject to the provisions of subsection 7.4, the number of
shares of Stock which may be issued with respect to Awards under the Plan
shall not exceed 4,000,000 shares in the aggregate. Except as otherwise
provided herein, any shares subject to an Award which for any reason expires
or is terminated without issuance of shares (whether or not cash or other
consideration is paid to a Participant in respect of such shares) shall again
be available under the Plan.
7.3. Individual Limits on Awards. Notwithstanding any other provision of the
Plan to the contrary, no Participant shall receive any Award of an Option or
Stock Appreciation Right under the Plan to the extent that the sum of:
(a) the number of shares of Stock subject to such Award;
(b) the number of shares of Stock subject to all other prior Awards of
Options and Stock Appreciation Rights under the Plan during the one-year
period ending on the date of the Award; and
(c) the number of shares of Stock subject to all other prior stock
options and stock appreciation rights granted to the Participant under
other plans or arrangements of the Company and Related Companies during the
one-year period ending on the date of the Award;
would exceed the Participant's Individual Limit under the Plan. The
determination made under the foregoing provisions of this subsection shall be
based on the shares subject to the awards at the time of grant, regardless of
when the awards become exercisable. Subject to the provisions of subsection
7.4, a Participant's "Individual Limit" shall be 500,000 shares.
7.4. Adjustments to Shares.
(a) If the Company shall effect any subdivision or consolidation of
shares of Stock or other capital readjustment, payment of stock dividend,
stock split, combination of shares or recapitalization or other increase or
reduction of the number of shares of Stock outstanding without receiving
compensation therefor in money, services or property, then the Committee
shall adjust (i) the number of shares of Stock available under the Plan;
(ii) the number of shares available under any individual or other limits;
(iii) the number of shares of Stock subject to outstanding Awards; and (iv)
the per-share price under any outstanding Award to the extent that the
Participant is required to pay a purchase price per share with respect to
the Award.
(b) If the Company is reorganized, merged or consolidated or is party to
a plan of exchange with another corporation, pursuant to which
reorganization, merger, consolidation or plan of exchange, the stockholders
of the Company receive any shares of stock or other securities or property,
or the Company shall distribute securities of another corporation to its
stockholders, there shall be substituted for the shares subject to
outstanding Awards an appropriate number of shares of each class of stock
or amount of other securities or property which were distributed to the
stockholders of the Company in respect of such shares, subject to the
following:
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(i) If the Committee determines that the substitution described in
accordance with the foregoing provisions of this paragraph would not be
fully consistent with the purposes of the Plan or the purposes of the
outstanding Awards under the Plan, the Committee may make such other
adjustments to the Awards to the extent that the Committee determines
such adjustments are consistent with the purposes of the Plan and of
the affected Awards.
(ii) All or any of the Awards may be cancelled by the Committee on or
immediately prior to the effective date of the applicable transaction,
but only if the Committee gives reasonable advance notice of the
cancellation to each affected Participant, and only if either: (A) the
Participant is permitted to exercise the Award for a reasonable period
prior to the effective date of the cancellation; or (B) the Participant
receives payment or other benefits that the Committee determines to be
reasonable compensation for the value of the cancelled Awards.
(iii) Upon the occurrence of a reorganization of the Company or any
other event described in this paragraph (b), any successor to the
Company shall be substituted for the Company to the extent that the
Company and the successor agree to such substitution.
(c) Upon (or, in the discretion of the Committee, immediately prior to)
the sale to (or exchange with) a third party unrelated to the Company of
all or substantially all of the assets of the Company, all Awards shall be
cancelled. If Awards are cancelled under this paragraph, then, with respect
to any affected Participant, either:
(i) the Participant shall be provided with reasonable advance notice
of the cancellation, and the Participant shall be permitted to exercise
the Award for a reasonable period prior to the effective date of the
cancellation; or
(ii) the Participant shall receive payment or other benefits that the
Committee determines to be reasonable compensation for the value of the
cancelled Awards.
The foregoing provisions of this paragraph shall also apply to the sale
of all or substantially all of the assets of the Company to a related
party, if the Committee determines such application is appropriate.
(d) In determining what action, if any, is necessary or appropriate under
the foregoing provisions of this subsection, the Committee shall act in a
manner that it determines to be consistent with the purposes of the Plan
and of the affected Awards and, where applicable or otherwise appropriate,
in a manner that it determines to be necessary to preserve the benefits and
potential benefits of the affected Awards for the Participants and the
Company.
(e) The existence of this Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, any merger or consolidation of the Company, any issue of bonds,
debentures, preferred or prior preference stocks ahead of or affecting the
Company's Stock or the rights thereof, the dissolution or liquidation of
the Company, any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
(f) Except as expressly provided by the terms of this Plan, the issue by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, for cash or property or for labor or
services, either upon direct sale, upon the exercise of rights or warrants
to subscribe therefor or upon conversion of shares or obligations of the
Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof, shall be made with respect to Awards
then outstanding hereunder.
(g) Awards under the Plan are subject to adjustment under this subsection
only during the period in which they are considered to be outstanding under
the Plan. For purposes of this subsection, an Award is considered
"outstanding" on any date if the Participant's ability to obtain all
benefits with respect to the
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Award is subject to limits imposed by the Plan (including any limits
imposed by the Agreement reflecting the Award). The determination of
whether an Award is outstanding shall be made by the Committee.
7.5. Limit on Distribution. Distribution of shares of Stock or other amounts
under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company shall
have no liability to deliver any shares of Stock under the Plan or make any
other distribution of benefits under the Plan unless such delivery or
distribution would comply with all applicable laws and the applicable
requirements of any securities exchange or similar entity.
(b) In the case of a Participant who is subject to Section 16(a) and
16(b) of the Securities Exchange Act of 1934, the Committee may, at any
time, add such conditions and limitations to any Award to such Participant,
or any feature of any such Award, as the Committee, in its sole discretion,
deems necessary or desirable to comply with Section 16(a) or 16(b) and the
rules and regulations thereunder or to obtain any exemption therefrom.
(c) To the extent that the Plan provides for issuance of certificates to
reflect the transfer of shares of Stock, the transfer of such shares may be
effected on a non-certificated basis, to the extent not prohibited by
applicable law or the rules of any stock exchange.
7.6. Liability for Cash Payments. Subject to the provisions of this Section,
each Related Company shall be liable for payment of cash due under the Plan
with respect to any Participant to the extent that such benefits are
attributable to the service rendered for that Related Company by the
Participant. Any disputes relating to liability of a Related Company for cash
payments shall be resolved by the Committee.
7.7. Performance-Based Compensation. To the extent that the Committee
determines that it is necessary or desirable to conform any Awards under the
Plan with the requirements applicable to "Performance-Based Compensation", as
that term is used in Code section 162(m)(4)(C), it may, at or prior to the
time an Award is granted, take such steps and impose such restrictions with
respect to such Award as it determines to be necessary to satisfy such
requirements including, without limitation:
(a) The establishment of performance goals that must be satisfied prior
to the payment or distribution of benefits under such Awards.
(b) The submission of such Awards and performance goals to the Company's
stockholders for approval and making the receipt of benefits under such
Awards contingent on receipt of such approval.
(c) Providing that no payment or distribution be made under such Awards
unless the Committee certifies that the goals and the applicable terms of
the Plan and Agreement reflecting the Awards have been satisfied.
To the extent that the Committee determines that the foregoing requirements
relating to Performance-Based Compensation do not apply to Awards under the
Plan because the Awards constitute Options or Stock Appreciation Rights, the
Committee may, at the time the Award is granted, conform the Awards to
alternative methods of satisfying the requirements applicable to Performance-
Based Compensation.
7.8. Withholding. All Awards and other payments under the Plan are subject
to withholding of all applicable taxes, which withholding obligations may be
satisfied, with the consent of the Committee, through the surrender of shares
of Stock which the Participant already owns or to which a Participant is
otherwise entitled under the Plan.
7.9. Transferability. Awards under the Plan are not transferable except as
designated by the Participant by will or by the laws of descent and
distribution. To the extent that the Participant who receives an Award under
the Plan has the right to exercise such Award, the Award may be exercised
during the lifetime of the Participant only by the Participant.
Notwithstanding the foregoing provisions of this subsection, the Committee may
permit
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Awards under the Plan to be transferred to or for the benefit of the
Participant's family (including, without limitation, to a trust for the
benefit of a Participant's family), subject to such limits as the Committee
may establish. In no event shall an Incentive Stock Option be transferable to
the extent that such transferability would violate the requirements applicable
to such option under Code section 422.
7.10. Notices. Any notice or document required to be filed with the
Committee under the Plan will be properly filed if delivered or mailed by
registered mail, postage prepaid, to the Committee, in care of the Company, at
its principal executive offices. The Committee may, by advance written notice
to affected persons, revise such notice procedure from time to time. Any
notice required under the Plan (other than a notice of election) may be waived
by the person entitled to notice.
7.11. Form and Time of Elections. Unless otherwise specified herein, each
election required or permitted to be made by any Participant or other person
entitled to benefits under the Plan, and any permitted modification or
revocation thereof, shall be in writing filed with the Committee at such
times, in such form, and subject to such restrictions and limitations, not
inconsistent with the terms of the Plan, as the Committee shall require.
7.12. Agreement With Company. At the time of an Award to a Participant under
the Plan, the Committee may require a Participant to enter into an agreement
with the Company (the "Agreement") in a form specified by the Committee,
agreeing to the terms and conditions of the Plan and to such additional terms
and conditions, not inconsistent with the Plan, as the Committee may, in its
sole discretion, prescribe.
7.13. Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of the
Plan, acquire any right in or title to any assets, funds or property of the
Company or any Related Company whatsoever, including, without limitation,
any specific funds, assets, or other property which the Company or any
Related Company, in its sole discretion, may set aside in anticipation of a
liability under the Plan. A Participant shall have only a contractual right
to the amounts, if any, payable under the Plan, unsecured by any assets of
the Company and any Related Company. Nothing contained in the Plan shall
constitute a guarantee by the Company or any Related Company that the
assets of such companies shall be sufficient to pay any benefits to any
person.
(b) The Plan does not constitute a contract of employment, and selection
as a Participant will not give any employee the right to be retained in the
employ of the Company or any Related Company, nor any right or claim to any
benefit under the Plan, unless such right or claim has specifically accrued
under the terms of the Plan. Except as otherwise provided in the Plan, no
Award under the Plan shall confer upon the holder thereof any right as a
stockholder of the Company prior to the date on which he fulfills all
service requirements and other conditions for receipt of such rights and
shares of Stock are registered in his name.
7.14. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting
on it considers pertinent and reliable, and signed, made or presented by the
proper party or parties.
7.15. Action by Company or Related Company. Any action required or permitted
to be taken by the Company or any Related Company shall be by resolution of
its board of directors, or by action of one or more members of the board
(including a committee of the board) who are duly authorized to act for the
board or (except to the extent prohibited by applicable law or the rules of
any stock exchange) by a duly authorized officer of the company.
7.16. Gender and Number. Where the context admits, words in any gender shall
include any other gender, words in the singular shall include the plural and
the plural shall include the singular.
10
<PAGE>
SECTION 8
COMMITTEE
8.1. Administration. The authority to control and manage the operation and
administration of the Plan shall be vested in a committee (the "Committee") in
accordance with this Section 8.
8.2. Selection of Committee. The Committee shall be selected by the Board,
and shall consist of not fewer than two members of the Board or such greater
number as may be required for compliance with Rule 16b-3 issued under the
Securities Exchange Act of 1934.
8.3. Powers of Committee. The authority to manage and control the operation
and administration of the Plan shall be vested in the Committee, subject to
the following:
(a) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to select employees to receive Awards, to
determine the time or times of receipt, to determine the types of Awards
and the number of shares covered by the Awards, to establish the terms,
conditions, performance criteria, restrictions, and other provisions of
such Awards, and to cancel or suspend Awards. In making such Award
determinations, the Committee may take into account the nature of services
rendered by the respective employee, his present and potential contribution
to the Company's success and such other factors as the Committee deems
relevant.
(b) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to determine the extent to which Awards under the
Plan will be structured to conform to the requirements applicable to
Performance-Based Compensation, and to take such action, establish such
procedures, and impose such restrictions at the time such Awards are
granted as the Committee determines to be necessary or appropriate to
conform to such requirements.
(c) The Committee will have the authority and discretion to interpret the
Plan, to establish, amend and rescind any rules and regulations relating to
the Plan, to determine the terms and provisions of any agreements made
pursuant to the Plan and to make all other determinations that may be
necessary or advisable for the administration of the Plan.
(d) Any interpretation of the Plan by the Committee and any decision made
by it under the Plan is final and binding on all persons.
(e) Except as otherwise expressly provided in the Plan, where the
Committee is authorized to make a determination with respect to any Award.
8.4. Delegation by Committee. Except to the extent prohibited by applicable
law or the rules of any stock exchange, the Committee may allocate all or any
portion of its responsibilities and powers to any one or more of its members
and may delegate all or any part of its responsibilities and powers to any
person or persons selected by it. Any such allocation or delegation may be
revoked by the Committee at any time.
8.5. Information to be Furnished to Committee. The Company and Related
Companies shall furnish the Committee with such data and information as may be
required for it to discharge its duties. The records of the Company and
Related Companies as to an employee's or Participant's employment (or other
provision of services), termination of employment (or cessation of the
provision of services), leave of absence, reemployment and compensation shall
be conclusive on all persons unless determined to be incorrect. Participants
and other persons entitled to benefits under the Plan must furnish the
Committee such evidence, data or information as the Committee considers
desirable to carry out the terms of the Plan.
8.6. Liability and Indemnification of Committee. No member or authorized
delegate of the Committee shall be liable to any person for any action taken
or omitted in connection with the administration of the Plan unless
attributable to his own fraud or willful misconduct; nor shall the Company or
any Related Company be liable to any person for any such action unless
attributable to fraud or willful misconduct on the part of a director or
11
<PAGE>
employee of the Company or Related Company. The Committee, the individual
members thereof, and persons acting as the authorized delegates of the
Committee under the Plan, shall be indemnified by the Company against any and
all liabilities, losses, costs and expenses (including legal fees and
expenses) of whatsoever kind and nature which may be imposed on, incurred by
or asserted against the Committee or its members or authorized delegates by
reason of the performance of a Committee function if the Committee or its
members or authorized delegates did not act dishonestly or in willful
violation of the law or regulation under which such liability, loss, cost or
expense arises. This indemnification shall not duplicate but may supplement
any coverage available under any applicable insurance.
SECTION 9
CHANGE IN CONTROL
Except as otherwise provided in the Plan or in the agreement reflecting the
applicable Award, ten days prior to the occurrence of a Change in Control (i)
all outstanding Options and Stock Appreciation Rights shall become immediately
exercisable, (ii) all shares of Restricted Stock and Performance Stock shall
become fully vested, (iii) all vesting restrictions imposed under subsection
6.3 (relating to restrictions on shares purchased by Participants and matching
shares) shall cease to apply, and (iv) Performance Units may be paid out in
such manner and amounts as determined by the Committee; provided, however,
such vesting, lapse of restrictions and payments shall be contingent upon the
consummation of the Change in Control. For purposes of the Plan, a "Change in
Control" shall be deemed to occur on the earliest of the existence of one of
the following events:
(a) the acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more of either the then
outstanding shares of common stock of the Company entitled to vote
generally in the election of directors, but excluding, for this purpose,
any such acquisition by the Company or any of its subsidiaries, or any
employee benefit plan (or related trust) of the Corporation, or any
corporation with respect to which, following such acquisition, more than
50% of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the common stock and voting securities of the
Company immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition, of
the then outstanding shares of common stock of the Company or the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors, as the case may
be;
(b) individuals who, as of the date hereof, constitute the Board (as of
the date hereof the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board, provided that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened
"election contest" relating to the election of the directors of the Company
(as such term is used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act); or
(c) approval by the Company's shareholders of a reorganization, merger or
consolidation of the Company, in each case, with respect to which all or
substantially all of the individuals and entities who were the respective
beneficial owners of the common stock and voting securities of the Company
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly and indirectly, more than 50% of, respectively, the then
outstanding shares of common stock or the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
12
<PAGE>
such reorganization, merger or consolidation, or of a complete liquidation
or dissolution of the Company or of the sale or other disposition of all or
substantially all of the assets of the Company.
SECTION 10
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan, provided that,
subject to subsection 7.4 (relating to certain adjustments to shares), no
amendment or termination may materially adversely affect the rights of any
Participant or beneficiary under any Award made under the Plan prior to the
date such amendment is adopted by the Board.
13
<PAGE>
APPENDIX A
AWARDS TO NONEMPLOYEE DIRECTORS
1. Eligible Directors. Each director of the Company who is not an employee
of the Company or Related Company and who does not own stock possessing more
than 3% of the total combined voting power of all classes of stock of the
Company (a "Nonemployee Director") shall be eligible for awards under this
Appendix A.
2. Option Award. Each individual who is a Nonemployee Director upon his or
her initial election or appointment to the Board shall be awarded an Option to
purchase 20,000 shares of Stock upon such initial election or appointment (an
"Initial Option"). Thereafter, on each subsequent anniversary of such election
or appointment, if the Nonemployee Director is then a member of the Board, the
Nonemployee Director shall be awarded an Option to purchase 10,000 shares of
Stock (an "Annual Option"). Nonemployee Directors who were first appointed to
the Board prior to the effective date of this Plan and received an Initial
Option under the Pacific Gateway Exchange, Inc. 1995 Stock Option Plan (the
"1995 Plan") shall be eligible for Annual Options under this Plan on the
anniversary of the Initial Option awarded under the 1995 Plan, to the extent
that the Company determines that Annual Awards will no longer be made under
the 1995 Plan.
3. Exercise Price. The exercise price per share with respect to an Option
awarded under this Appendix A shall be the Fair Market Value of a share of
Stock on the date such Option is awarded.
4. Vesting. Each Option granted under this Appendix A shall become
exercisable with respect to 25% of the shares awarded on the first anniversary
of the grant date, and with respect to an additional 25% of the shares awarded
on each subsequent anniversary of the grant date. All outstanding Options
awarded under this Appendix A shall become immediately exercisable upon a
Change in Control of the Company.
5. Expiration. The Expiration Date with respect to any Option awarded under
this Appendix A shall be the earliest to occur of:
(a) the ten-year anniversary of the date on which the Option is granted;
(b) if the Nonemployee Director's service on the Board terminates by
reason of death or Disability, the one-year anniversary of such termination
of service;
(c) if the Nonemployee Director's service on the Board terminates for any
reason other than death or Disability, the three-month anniversary of such
termination of service.
6. Other Terms and Conditions. Except as provided in this Appendix A, the
Option shall be subject to all of the terms and conditions of the Plan.
14
<PAGE>
PACIFIC GATEWAY EXCHANGE, INC.
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(in thousands, except net income per share)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------ -------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
COMPUTATION OF EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE:
Average shares outstanding 18,938 13,992 18,938 14,028
Add:
Common stock equivalent of stock
options and warrants 580 99 690 162
------ ------ ------ ------
19,518 14,091 19,628 14,190
====== ====== ====== ======
Net income 3,042 762 5,504 1,129
====== ====== ====== ======
Primary net income per share 0.16 0.05 0.28 0.08
====== ====== ====== ======
COMPUTATION OF EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
ASSUMING FULL DILUTION:
Average shares outstanding 18,938 13,992 18,938 14,028
Add:
Common stock equivalent of stock
options and warrants 622 99 675 162
------ ------ ------ ------
19,560 14,091 19,613 14,190
====== ====== ====== ======
Net income 3,042 762 5,504 1,129
====== ====== ====== ======
Fully diluted net income per share 0.16 0.05 0.28 0.08
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 27,375 27,375
<SECURITIES> 0 0
<RECEIVABLES> 35,631 35,631
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 67,691 75,687
<PP&E> 55,916 55,916
<DEPRECIATION> 5,833 5,833
<TOTAL-ASSETS> 119,624 119,624
<CURRENT-LIABILITIES> 50,148 50,148
<BONDS> 304 304
0 0
0 0
<COMMON> 55,339 55,339
<OTHER-SE> (400) (400)
<TOTAL-LIABILITY-AND-EQUITY> 119,624 119,624
<SALES> 63,186 114,637
<TOTAL-REVENUES> 63,186 114,637
<CGS> 51,967 95,108
<TOTAL-COSTS> 51,967 95,108
<OTHER-EXPENSES> 5,618 9,443
<LOSS-PROVISION> 1,267 2,120
<INTEREST-EXPENSE> (527) (1,015)
<INCOME-PRETAX> 5,029 9,149
<INCOME-TAX> 1,987 3,645
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,042 5,504
<EPS-PRIMARY> 0.16 0.28
<EPS-DILUTED> 0.16 0.28
</TABLE>
