<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1998 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number: 0-28236
INVISION TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3123544
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7151 GATEWAY BOULEVARD, NEWARK, CA 94560
(Address of principal executive offices, including zip code)
(510) 739-2400
(Registrant's telephone number, including area code)
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___
On June 30, 1998, there were 12,009,672 shares of the Registrant's Common
Stock outstanding.
1
<PAGE>
INVISION TECHNOLOGIES, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
ITEM PAGE
- - ---- ----
<S> <C>
PART I: FINANCIAL INFORMATION
1. Condensed Consolidated Financial Statements (unaudited)
a. Condensed Consolidated Balance Sheets - June 30, 1998 and
December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . .3
b. Condensed Consolidated Statements of Income - Three months
and six months ended June 30, 1998 and 1997 . . . . . . . . . .4
c. Condensed Consolidated Statements of Cash Flows - Six months
ended June 30, 1998 and 1997. . . . . . . . . . . . . . . . . .5
d. Notes to Condensed Consolidated Financial Statements. . . . . .6
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . . . . . . .8
PART II. OTHER INFORMATION
2. Changes in Securities and Use of Proceeds. . . . . . . . . . . . .17
4. Submission of Matters To a Vote of Security Holders. . . . . . . .17
5. Other Information. . . . . . . . . . . . . . . . . . . . . . . . .18
6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . .19
Signature Page. . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
</TABLE>
2
<PAGE>
INVISION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,337 $ 14,111
Restricted cash 302 1,556
Short-term investments 2,020 5,079
Accounts receivable 20,673 16,847
Inventories 11,642 10,781
Other current assets 1,130 531
-------- --------
Total current assets 48,104 48,905
Long-term restricted cash 800 800
Property and equipment, net 7,798 7,180
Other assets 939 366
-------- --------
$ 57,641 $ 57,251
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,950 $ 5,097
Accrued liabilities 4,084 4,032
Short-term debt 3,989 4,168
Deferred revenue 520 3,376
Current maturities of long-term obligations 420 426
-------- --------
Total current liabilities 13,963 17,099
-------- --------
Long-term obligations 1,222 1,336
-------- --------
Stockholders' equity:
Common stock, $0.001 par value, 20,000 shares
authorized; 12,010 and 11,906 issued and
outstanding 12 12
Additional paid-in capital 57,024 56,602
Deferred stock compensation expense (165) (199)
Accumulated deficit (13,727) (17,599)
Treasury stock, at cost (81 shares in 1998) (688) --
-------- --------
Total stockholders' equity 42,456 38,816
-------- --------
$ 57,641 $ 57,251
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
INVISION TECHNOLOGIES, INC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 15,432 $ 13,408 $ 31,312 $ 22,785
Cost of revenues 9,114 6,693 17,288 11,401
-------- -------- -------- --------
Gross profit 6,318 6,715 14,024 11,384
-------- -------- -------- --------
Operating expenses:
Research and development 1,622 2,348 3,309 3,427
Sales and marketing 1,576 1,511 3,238 2,843
General and administrative 1,621 1,514 3,430 3,029
-------- -------- -------- --------
Total operating expenses 4,819 5,373 9,977 9,299
-------- -------- -------- --------
Income from operations 1,499 1,342 4,047 2,085
Interest expense (24) (261) (82) (288)
Interest and other income, net 201 180 435 202
-------- -------- -------- --------
Income before provision for income taxes 1,676 1,261 4,400 1,999
Provision for income taxes 64 349 528 474
-------- -------- -------- --------
Net income $ 1,612 $ 912 $ 3,872 $ 1,525
-------- -------- -------- --------
-------- -------- -------- --------
Net income per share:
Basic $ 0.13 $ 0.08 $ 0.32 $ 0.15
-------- -------- -------- --------
-------- -------- -------- --------
Diluted $ 0.13 $ 0.08 $ 0.30 $ 0.13
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average shares outstanding:
Basic 12,050 10,892 12,036 10,391
Diluted 12,895 11,962 12,900 11,488
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
INVISION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------------
1998 1997
---------- ----------
<S> <C> <C>
Net cash used in operating activities $ (3,521) $ (1,329)
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (1,428) (2,665)
Sales (purchases) of short-term investments, net 3,059 (17,737)
Release of restricted cash 1,254 --
Additions to other assets (573) --
---------- ----------
Net cash provided by (used in) investing activities 2,312 (20,402)
---------- ----------
Cash flows from financing activities:
Proceeds from debt financing -- 2,244
Repayments of debt, net (299) (36)
Repurchases of common stock (688) --
Proceeds from issuance of common stock, net 422 21,259
---------- ----------
Net cash provided by (used in) financing activities (565) 23,467
---------- ----------
Net increase (decrease) in cash and cash equivalents for the period (1,774) 1,736
Cash and cash equivalents at beginning of period 14,111 2,363
---------- ----------
Cash and cash equivalents at end of period $ 12,337 $ 4,099
---------- ----------
---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 114 $ 2
Income taxes paid $ 733 $ --
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying interim unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles and with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not contain all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, the
accompanying unaudited condensed consolidated financial statements reflect
all adjustments (consisting only of normal recurring adjustments) considered
necessary for fair presentation. These financial statements should be read
in conjunction with the audited consolidated financial statements of InVision
Technologies Inc. and its subsidiaries (the "Company") as of December 31,
1997 and 1996 and for each of the three years in the period ended December
31, 1997, including notes thereto, included in the Company's Annual Report on
Form 10-K (Commission File No. 0-20815).
Operating results for the three month and six month periods ended June
30, 1998 may not necessarily be indicative of the results that may be
expected for the year ended December 31, 1998 or any other future period.
2. NET INCOME PER SHARE
In December 1997, the Company adopted Statement of Financial Accounting
Standards No. 128 ("FAS 128"), "Earnings Per Share." All historical earnings
per share information has been restated as required by FAS 128.
Basic earnings per share is computed by dividing income available to
common stockholders by the weighted-average common shares outstanding for the
period. Diluted earnings per share reflects the weighted-average common
shares outstanding plus the potential effect of dilutive securities or
contracts which are convertible to common shares such as options, warrants,
convertible debt and preferred stock.
The following is a reconciliation between the components of the
basic and diluted net income per share calculations for the periods presented
below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three months ended June 30,
-------------------------------------------------------
1998 1997
-------------------------- -------------------------
Per Per
Share Share
Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic net income per share:
Income available to
Common Stockholders $1,612 12,050 $0.13 $ 912 10,892 $ 0.08
Effect of dilutive securities:
Options 845 1,070
Diluted net income per share: --------------- -----------------
Income available to Common
Stockholders plus assumed
conversions $1,612 12,895 $0.13 $ 912 11,962 $ 0.08
--------------- -----------------
--------------- -----------------
<CAPTION>
Six months ended June 30,
-------------------------------------------------------
1998 1997
-------------------------- -------------------------
Per Per
Share Share
Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic net income per share:
Income available to
Common Stockholders $3,872 12,036 $ 0.32 $1,525 10,391 $0.15
Effect of dilutive securities:
Options 864 1,097
Diluted net income per share: --------------- ---------------
Income available to Common
Stockholders plus assumed
conversions $3,872 12,900 $ 0.30 $1,525 11,488 $0.13
--------------- ----------------
--------------- ----------------
</TABLE>
The computation of diluted net income per share for the quarter and six
months ended June 30, 1998 does not include 239,223 shares and 236,719
shares, respectively, because to do so would have been anti-dilutive for the
periods presented.
6
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. ACCOUNTS RECEIVABLE
The components of accounts receivable consist of the following
(in thousands):
JUNE 30, DEC. 31,
1998 1997
-------- --------
Billed $16,395 $11,009
Unbilled 4,278 5,838
-------- --------
$20,673 $16,847
-------- --------
-------- --------
4. INVENTORIES
The components of inventory consist of the following (in thousands):
JUNE 30, DEC. 31,
1997 1998
-------- --------
Raw material and purchased components $5,993 $6,817
Work-in-process 5,077 3,290
Finished goods 572 674
-------- -------
$11,642 $10,781
-------- --------
-------- --------
5. PROPERTY AND EQUIPMENT
The components of property and equipment consist of the following (in
thousands):
JUNE 30, DEC. 31,
1998 1997
-------- --------
Machinery and Equipment $4,367 $3,626
Self constructed assets 2,827 2,249
Furniture and fixtures 1,045 976
Leasehold improvements 2,911 2,872
-------- --------
11,150 9,723
Less: accumulated depreciation (3,352) (2,543)
-------- --------
$7,798 $7,180
-------- --------
-------- --------
6. FOLLOW-ON EQUITY OFFERING
In May 1997, the Company sold 1,875,000 shares of Common Stock in an
underwritten public offering at $12.00 per share generating net proceeds to
the Company of approximately $21.2 million including proceeds from the
underwriters over-allotment option exercised in June 1997.
7
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES. WHEN USED IN THIS DISCUSSION, THE WORDS
"ANTICIPATE," "BELIEVE," "ESTIMATE," AND "EXPECT" AND SIMILAR EXPRESSIONS AS
THEY RELATE TO THE COMPANY OR ITS MANAGEMENT ARE INTENDED TO IDENTIFY SUCH
FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THE RESULTS EXPRESSED IN, OR
IMPLIED BY, THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE RISKS RELATED TO MARKET ACCEPTANCE OF
THE COMPANY'S CURRENT PRODUCTS AND NEW PRODUCTS IN DEVELOPMENT, FLUCTUATIONS
IN THE COMPANY'S QUARTERLY AND ANNUAL OPERATING RESULTS, THE LOSS OF ORDERS
OF THE COMPANY'S PRODUCTS OR THE FAILURE TO OBTAIN ADDITIONAL ORDERS, LOSS OF
ANY OF THE COMPANY'S SOLE SOURCE SUPPLIERS, INTENSE COMPETITION, RELIANCE ON
LARGE ORDERS, CONCENTRATION OF THE COMPANY'S CUSTOMERS, RISKS RELATED TO THE
LENGTHY SALES CYCLES FOR THE COMPANY'S PRODUCTS, BUDGETING AND FUNDING
LIMITATIONS OF THE COMPANY'S CUSTOMERS AND PROSPECTIVE CUSTOMERS, AS WELL AS
SUCH OTHER RISKS AS ARE DESCRIBED UNDER "BUSINESS RISKS" AND IN THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997.
OVERVIEW
InVision Technologies, Inc. ("InVision," or together with its
subsidiaries, the "Company") designs, manufactures and markets explosive
detection systems based on advanced CT technology. InVision was formed in
September 1990 to design and develop the CTX 5000 and remained in the
development stage through December 1994. In March 1994, InVision received its
first commercial order for a CTX 5000 system from the Brussels International
Airport in Belgium and since such time has received orders for a total of 133
systems of which a total of 117 had been shipped as of June 30, 1998. Today
the Company markets its more advanced CTX 5000 and CTX 5500 explosive
detection systems (the "CTX 5000 Series") and has other products under
development.
On September 30, 1997, InVision acquired Quantum Magnetics, Inc.,
("Quantum") a privately held developer of explosive detection equipment based
on quadrupole resonance technology. The transaction has been accounted for
as a pooling of interests in the quarter ended September 30, 1997; therefore,
all prior periods have been restated to include Quantum's results. Quantum
is currently a development stage company with products in the prototype stage
and a recent order from the FAA to supply two QSCAN-500 advanced technology
systems with an option for three more units. Quantum is also a leading
supplier of research and development services in the area of magnetic sensing
and detection technologies to a number of government agencies.
For the three month and six month periods ended June 30, 1998, the
Company had revenues of $15.4 million and $31.3 million, respectively, and as
of June 30, 1998 had backlog equipment orders, service agreements and R&D
contracts of approximately $25 million.
The Company considers research and development to be a vital part of its
operating discipline and continues to dedicate substantial resources for
research to enhance the performance, functionality and reliability of its
explosive detection systems based on "CT" or CAT Scan technology. At June 30,
1998, the Company had 108 full-time employees engaged in research and
development activities while also using the services of 16 specialized
contract employees and consultants in this area. Total research and
development expenditures by the Company are partially offset by amounts
reimbursed by the FAA and other government and private agencies under
development contracts and grants. The Company believes that investment in
research and development in absolute dollars will increase substantially to
meet its future needs regardless of the level of funding received from the
FAA. During the six months ended June 30, 1998 and 1997, the Company spent
$8.1 million and $5.8 million, respectively, on research and development
activities. Of these amounts, $4.8 million and $2.4 million, respectively,
were funded by the FAA and other government and private agencies under
development contracts and grants. To the extent that contract and grant
receipts decline in the future, research and development expenditures borne
by the Company would increase, and the Company expects that its results of
operations would be adversely impacted.
8
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
In any given fiscal year, the Company's revenues have principally
consisted, and the Company believes will continue to consist, of orders of
multiple units from a limited number of customers. During the first six
months of 1998, approximately $21.2 million, or 68%, of the Company's
revenues, were generated from sales to the Company's largest customer, the
U.S. government. During the fiscal year ended December 31, 1997, revenues
from the Company's largest customer, the U.S. government, were approximately
$32.1 million, or 54%, of the Company's revenues.
The Company markets its products both directly through internal sales
personnel and indirectly through authorized agents, distributors and systems
integrators. In the United States, the Company markets its CTX 5000 Series
primarily through direct sales personnel. Internationally, the Company
utilizes both a direct sales force and authorized agents to sell its
products. During the six months ended June 30, 1998 and the year ended
December 31, 1997, international sales represented 35% and 46% respectively,
of the Company's revenues.
The sales cycle of the CTX 5000 Series is often lengthy due to the
protracted approval process that typically accompanies large capital
expenditures and the time required to manufacture the CTX 5000 Series and
install and assimilate the CTX 5000 Series. Typically, six to twelve months
may elapse between a new customer's initial evaluation of the Company's
system and the execution of a contract. Another three months to a year may
elapse prior to shipment of the CTX 5000 Series as the customer site is
prepared and the CTX 5000 Series is manufactured. During this period the
Company expends substantial funds and management resources but recognizes no
associated revenue.
The Company recognizes revenue upon shipment unless extended acceptance
criteria exist, in which case revenue is recognized upon completion of such
acceptance criteria. The Company typically requires significant customer
deposits and progress payments in advance of shipment on customer purchase
orders. Provision for estimated installation, training and warranty costs is
recorded at the time revenue is recognized. Systems typically carry a
one-year warranty.
9
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
RESULTS OF OPERATIONS
The following table sets forth certain income and expenditure items from
the Company's condensed consolidated statements of operations expressed as a
percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ----------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 59.1 49.9 55.2 50.0
------- ------- ------- -------
Gross profit 40.9 50.1 44.8 50.0
------- ------- ------- -------
Operating expenses:
Research and development 10.5 17.5 10.6 15.0
Sales and marketing 10.2 11.3 10.3 12.5
General and administrative 10.5 11.3 11.0 13.3
------- ------- ------- -------
Total operating expenses 31.2 40.1 31.9 40.8
------- ------- ------- -------
Income from operations 9.7 10.0 12.9 9.2
Interest expense (0.2) (1.9) (0.3) (1.3)
Interest and other income, net 1.3 1.3 1.4 0.9
------- ------- ------- -------
Income before provision for income taxes 10.8 9.4 14.0 8.8
Provision for income taxes 0.4 2.6 1.7 2.1
------- ------- ------- -------
Net income 10.4 % 6.8% 12.3% 6.7%
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
CURRENT QUARTER COMPARED TO PRIOR YEAR QUARTER
REVENUES. The Company's revenues are comprised of system revenues,
which include sales of the CTX 5000 Series, accessories, installation and
configuration, and maintenance related to product support.
Revenues increased by 15.1% to $15.4 million for the second quarter of
1998, compared to $13.4 million in the second quarter of 1997. This increase
was primarily the result of the growth in unit shipments generated from the
54 unit order by the FAA in December 1996 and continuing shipments into
international markets. In the second quarter of 1998, the company shipped
17 units (10 units to the FAA and 7 units to international customers),
compared to 13 units (4 units to the FAA and 9 units to international
customers), in the second quarter of 1997. The Company typically ships
against a backlog of orders for its products. The backlog (excluding R&D
contracts) as of June 30, 1998 was $18.2 million, compared to $62.1 million
as of June 30, 1997.
Quantum research and development contracts were reported as revenues
prior to the acquisition by Invision. All Quantum research and development
revenues have been classified as a reduction to research and development
expense to conform with the Company's policy.
10
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
GROSS PROFIT. Cost of revenues primarily consists of purchased
materials procured for use in the assembly of the Company's products, as well
as manufacturing labor, overhead and warranty costs. In any given period the
Company's gross profit may be affected by several factors, including product
configuration, location of the installation, and complexity of integration
into various airport environments. Gross profit decreased 5.9% to $6.3
million in the second quarter of 1998 from $6.7 million in the second quarter
of 1997. Gross margins were 40.9% and 50.1%, respectively. The decrease in
gross margins was primarily due to configurations of units shipped and volume
discounts in the second quarter of 1998 that resulted in lower average
selling prices of systems shipped during the period. In the absence of any
unusual circumstances or events, the Company expects the average selling
prices and gross margins of systems to increase in future quarters.
RESEARCH AND DEVELOPMENT. Research and development expenditures consist
primarily of compensation paid to personnel engaged in research and
development activities, amounts paid for outside services, and costs of
materials utilized in the development of hardware products, including
prototype units. All software and hardware research and development costs are
expensed as incurred. Beginning in 1991, total research and development
expenditures by the Company have been partially offset by amounts reimbursed
by the FAA and other government and private agencies under development
contracts and grants. These services are provided on both a cost and cost
plus basis. The Company believes that research and development expenditures
in absolute dollars will increase substantially in the future regardless of
the level of funding received from the FAA.
Net research and development expenses would have been $2.1 million in
the second quarter of 1998 without the capitalization of software development
costs in accordance with Statement of Financial Accounting Standards No. 86
("FAS 86"), "Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed." Under FAS 86, software production costs for
computer software that is to be used as an integral part of a product or
process are to be capitalized once technological feasibility has been
established for the software and all research and development activities for
the other components of the product or process have been completed. No
software development costs were capitalized in the second quarter of 1997
because research and development on the new product line had not been
completed. Before considering the impact of software capitalization, gross
research and development expenditures increased by 30.3% to $4.3 million in
the second quarter of 1998 from $3.3 million in the second quarter of 1997.
Of these amounts, $2.1 million and $0.9 million, respectively, were funded by
research and development contracts and grants from the FAA and other
governmental and private entities. As a percentage of revenues, net research
and development expenditures decreased to 10.5% in the second quarter of 1998
from 17.5% in the second quarter of 1997. The increase in research and
development expenditures is primarily the result of personnel additions and
increased spending on engineering materials and services.
SALES AND MARKETING. Sales and marketing expenditures consist primarily
of compensation paid to direct and indirect sales and marketing personnel,
payments to consultants, travel related to the sales process, and other
selling and distribution costs.
Sales and marketing expenditures increased by 4.3% to $1.6 million in
the second quarter of 1998 from $1.5 million in the second quarter of 1997.
As a percentage of revenues, sales and marketing expenditures decreased to
10.2% in the second quarter of 1998 from 11.3% in the second quarter of 1997.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of compensation paid to administrative personnel, including
directors, payments to consultants, professional service fees, and travel and
other general expenses.
General and administrative expenses increased by 7.1% to $1.6 million in
the second quarter of 1998 from $1.5 million in the second quarter of 1997.
As a percentage of revenues, general and administrative expenses decreased to
10.5% in the second quarter of 1998 from 11.3% in the second quarter of 1997.
The increase in general and administrative expenses in absolute dollars is
primarily the result of personnel additions and increased professional and
consulting costs associated with the Company's growth, increased insurance
costs, and increased costs of operations associated with being a publicly
traded company.
INTEREST EXPENSE. Interest expense decreased to $24,000 in the second
quarter of 1998 from $261,000 in the second quarter of 1997. Interest expense
in the first six months of 1997 consists primarily of a non-cash charge
resulting from the amortization of a loan warrant discount.
11
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
INTEREST AND OTHER INCOME, NET. Interest and other income, net,
increased to $201,000 in the second quarter of 1998 from $180,000 in the
second quarter of 1997. The 1998 amount consists primarily of interest
income for the quarter and results from the significantly higher cash and
short-term investment balances in the second quarter of 1998 as compared to
the same quarter in 1997.
PROVISION FOR INCOME TAXES. The Company revised the effective tax rate in
the second quarter of 1998 based on current estimates for the year. The
provision for income taxes of $64,000 in the quarter reflects the effects of
the cumulative adjustment based on an effective tax rate of 12.0% for the
year.
CURRENT SIX MONTH PERIOD COMPARED TO PRIOR SIX MONTH PERIOD
REVENUES. Revenues increased by 37.4% to $31.3 million for the first
six months of 1998, compared to $22.8 million in the first six months of
1997. This increase was primarily the result of the growth in unit shipments
generated from the 54 unit order by the FAA in December 1996 and continuing
shipments into international markets. In the first half of 1998, the Company
shipped 33 units (22 units to the FAA and 11 units to international
customers), compared to 22 units (9 units to the FAA and 13 units to
international customers), in the first half of 1997. The Company typically
ships against a backlog of orders for its products. The backlog (excluding
R&D contracts) as of June 30, 1998 was $18.2 million, compared to $62.1
million as of June 30, 1997.
Quantum research and development contracts were reported as revenues
prior to the acquisition by Invision. All Quantum research and development
revenues have been classified as a reduction to research and development
expense to conform with the Company's policy.
GROSS PROFIT. Gross profit increased 23.2% to $14.0 million in the
first six months of 1998 from $11.4 million in the first six months of 1997.
Gross margins were 44.8% and 50.0%, respectively. The decrease in gross
margin percentage was primarily due to configurations of units shipped and
volume discounts in the second quarter of 1998 that resulted in lower average
selling prices of systems shipped during the quarter. In the absence of any
unusual circumstances or events, the Company expects the average selling
prices and gross margins of systems to increase in future periods.
RESEARCH AND DEVELOPMENT. Beginning in 1991, research and development
expenditures by the Company have been partially offset by amounts reimbursed
by the FAA and other government and private agencies under development
contracts and grants. These services are provided on both a cost and cost
plus basis. The Company believes that research and development expenditures
in absolute dollars will increase substantially in the future regardless of
the level of funding received from the FAA.
Net research and development expenses would have been $3.8 million in
the first six months of 1998 without the capitalization of software
development costs in accordance with FAS 86. No software development costs
were capitalized in the first six months of 1997 because research and
development on the new product line had not been completed. Before
considering the impact of software capitalization, gross research and
development expenditures increased by 48.3% to $8.6 million in the first six
months of 1998 from $5.8 million in the first six months of 1997. Of these
amounts, $4.8 million and $2.4 million, respectively, were funded by research
and development contracts and grants from the FAA and other governmental and
private entities. As a percentage of revenues, net research and development
expenditures decreased to 10.6% in the first six months of 1998 from 15.0% in
the first six months of 1997. The increase in research and development
expenditures is primarily the result of personnel additions and increased
spending on engineering materials and services.
SALES AND MARKETING. Sales and marketing expenses increased by 13.9% to
$3.2 million in the first six months of 1998 from $2.8 million in the first
six months of 1997. As a percentage of revenues, sales and marketing expenses
decreased to 10.3% in the first six month period of 1998 from 12.5% in the
first six months of 1997. The increased level of spending in the first six
months of 1998 reflects higher commissions and other direct selling expenses
resulting from the increase in revenues, as well as increases in staffing.
12
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
GENERAL AND ADMINISTRATIVE. General and administrative expenses
increased by 13.2% to $3.4 million in the first six months of 1998 from $3.0
million in the first six months of 1997. As a percentage of revenues, general
and administrative expenses decreased to 11.0% in the first six months of
1998 from 13.3% in the first six months of 1997. The increase in general and
administrative expenses in absolute dollars is primarily the result of
personnel additions and increased professional and consulting costs
associated with the Company's growth, increased insurance costs, and
increased costs of operations associated with being a publicly traded company.
INTEREST EXPENSE. Interest expense decreased to $82,000 for the first
six months of 1998 from $288,000 for the first six months of 1997. Interest
expense in the first six months of 1997 consists primarily of a non-cash
charge resulting from the amortization of a loan warrant discount.
INTEREST AND OTHER INCOME, NET. Interest and other income, net,
increased to $435,000 in the first six months of 1998 from $202,000 in the
first six months of 1997. The 1998 amount consists primarily of interest
income for the period and results from the significantly higher cash and
short-term investment balances in the first six months of 1998 as compared to
the same period in 1997.
PROVISION FOR INCOME TAXES. The provision for income taxes was $528,000
in the first six months of 1998 and $474,000 in the first six months of 1997,
representing an effective tax rate of 12.0% and 23.7%. The Company's
effective tax rate of 12.0% in the first half of 1998 is lower than the
statutory tax rates primarily due to the utilization of net operating loss
and other credit carryforwards. At December 31, 1997 the Company had federal
net operating loss carryforwards of approximately $13.7 million available to
reduce future federal taxable income and $2.0 million available to reduce
State taxable income. The Company's net operating loss carry-forwards expire
from 2005 to 2011.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily
through private sales of $16.5 million of Preferred and Common Stock (of
which $5.6 million represents indebtedness converted to equity), the sale of
$9.5 million of Common Stock in the Company's initial public offering in
April 1996, the sale of $21.2 million in the Company's follow-on offering in
May 1997 and short-term borrowings under a working capital line of credit. At
June 30, 1998, the Company had $14.4 million in cash, cash equivalents and
short-term investments, compared to $19.2 million in cash, cash equivalents
and short-term investments at December 31, 1997.
Net cash used in operating activities was $3.5 million in the first six
months of 1998, compared to $1.3 million for the first six months of 1997.
Cash used in operating activities in the first six months of 1998 primarily
resulted from net income of $3.9 million and the non-cash effect from
depreciation and amortization of $0.8 million, offset by an increase in
accounts receivable due to the timing of revenues (i.e., late in the second
quarter of 1998), a decrease in deferred revenues and an increase in
inventory.
Net cash provided by investing activities was $2.3 million in the first
six months of 1998, compared to $20.4 million used in investing activities in
the first six months of 1997. Net cash provided by investing activities
primarily resulted from the sale of short-term investments and release of
restricted cash, partially offset by the purchase of capital equipment and
additions to other assets. The Company has no significant capital
spending or purchase commitments other than normal purchase commitments and
commitments under leases. The Company had $2.0 million in short-term
investments at June 30, 1998.
13
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Net cash used in financing activities was $565,000 in the first six
months of 1998, compared to the $23.5 million provided by financing
activities in the first six months of 1997. Net cash used in financing
activities in the first six months of 1998 primarily resulted from the
repurchase of common stock at prevailing market prices and the repayment
debt, partially offset by proceeds from sales under the employee stock
purchase plan and exercises of incentive stock options. Future repurchases of
the Company's common stock would be based on market conditions and evaluated
on a case by case basis.
In April 1998, the Company renewed its two one-year revolving line of
credit agreements with Silicon Valley Bank. The first agreement provides for
maximum borrowings in an amount up to the lower of 80% of domestic eligible
accounts receivable or $4.5 million. Borrowings under this agreement bear
interest at the bank's prime rate (8.50% at June 30, 1998). The second
agreement is partially guaranteed by the Export-Import Bank of the United
States and provides for maximum borrowings in an amount up to the lower of
the sum of 90% of eligible export accounts receivable plus 70% of eligible
raw materials and work-in-process inventory designated for export customers
or $4.5 million. Borrowings under this agreement bear interest at the bank's
prime rate (8.50% at June 30, 1998). Borrowings under both agreements are
secured by all of the Company's assets other than its intellectual property.
The agreements expire in April 1999 and require that the Company maintain
certain financial ratios and levels of tangible net worth and profitability
and also prohibit the Company from paying cash dividends. Proceeds of loans
under both lines of credit may be used for general corporate purposes. As of
June 30, 1998, the Company had borrowings of $4.0 million.
In April 1998, the Company renewed its committed equipment line of credit
with Silicon Valley Bank that transforms into a term loan (computer equipment
- - - 36 months; furniture and fixtures - 60 months) after drawdown. The agreement
expires in April 1999 and provides for borrowings up to $1.75 million.
Borrowings under this agreement bear interest at the bank's prime rate (8.50%
at June 30, 1998) and are secured by the assets purchased or financed. As of
June 30, 1998, the Company had borrowings of $1.25 million under the
agreement.
The Company believes that existing cash and cash equivalents of $12.3
million as of June 30, 1998, short-term investments of $2.0 million, and
available borrowings under the Company's line of credit agreements will be
sufficient to finance its working capital and capital expenditure
requirements for at least the next 12 months.
BUSINESS RISKS
The Company's quarterly revenues have fluctuated significantly in the
past and are expected to fluctuate significantly in the future. These
fluctuations are the result of a variety of factors, including the Company's
delivery cycle, variations in product configuration, timing of orders, and
suitability of client sites. The Company's cost of revenues fluctuates from
quarter to quarter consistent with fluctuations in such revenues. In
addition, the Company's gross margins may be affected by, among other
factors, the configuration of systems sold, the mix between system and add-on
sales, and the breakdown between domestic and international sales.
The quarter ended March 31, 1997 was the Company's first profitable
quarter since inception. Although the Company has reported a profit in each
subsequent quarter, there can be no assurance that the Company will continue
to be profitable on a quarterly basis or annual basis. The Company's past
operating results have been, and its future operating results will be,
subject to fluctuations resulting from a number of factors, including the
timing and announcement of orders, delays in shipments caused by customer
readiness or integration issues, the timing of new or enhanced product
offerings by the Company or its competitors and the certification of certain
of these products, the mix between sales to domestic and international
customers, market acceptance of any new or enhanced version of the Company's
products, availability of key components, the Company's ability to rapidly
increase production, and fluctuations in demand driven by general conditions
impacting the aviation security industry beyond the control of the Company.
The Company's revenues in any period are generally derived from a limited
number of customers, a high percentage of which are public agencies which are
subject to legislative budgeting and other limitations, including with
respect to its largest customer, the U.S. Government, the risk that the FAA
may not complete the reconciliation of reprogrammed funds under the current
budget to purchase additional explosive detection systems ("EDS") in fiscal
1998 or that Congress may not appropriate the proposed $100 million of funds
to purchase EDS equipment in fiscal 1999 or that, if appropriated, a
substantial portion of the funds will not be used to purchase the Company's
products. The Company may also choose to reduce prices or increase spending
in response to competition or to pursue new market opportunities, all of
which may adversely affect the Company's business, financial condition and
results of operations.
14
<PAGE>
INVISION TECHNOLOGIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The Company regularly evaluates acquisition opportunities and is likely
to make acquisitions in the future. Future acquisitions by the Company
could result in potentially dilutive issuances of equity securities, the
incurrence of debt and contingent liabilities and amortization expenses
related to goodwill and other intangible assets, which could materially
adversely affect the Company's results of operations. The Company's
management has had limited experience in assimilating acquired organizations.
No assurance can be given as to the ability of the Company to integrate
successfully any operations, personnel or products that have been acquired or
that might be acquired in the future, and the failure of the Company to do so
could have a material adverse effect on the Company's results of operations.
Substantially all of InVision's customers and a high percentage of
Quantum's research and development customers to date have been public
agencies or quasi-public agencies. In contracting with public agencies, the
Company is subject to public agency contract requirements which vary from
jurisdiction to jurisdiction and are subject to budgetary processes and
expenditure constraints. Budgetary allocations for explosive detection
systems are dependent, in part, upon governmental policies which fluctuate
from time to time in response to political and other factors, including the
public's perception of the threat of commercial airline bombings. Many
domestic and foreign government agencies have experienced budget deficits
that have led to decreased capital expenditures in certain areas. The
Company's results of operations may be subject to substantial
period-to-period fluctuations as a result of these and other factors
affecting capital spending. A reduction of funding for explosive detection
technology deployment could materially and adversely affect the Company's
business, financial condition or results of operations. Future sales to
public agencies will depend, in part, on the Company's ability to meet public
agency contract requirements, certain of which may be onerous or even
impossible for the Company to satisfy. In addition, public agency contracts
are frequently awarded only after formal competitive bidding processes, which
have been and may continue to be protracted, and typically contain provisions
that permit cancellation in the event that funds are unavailable to the
public agency. There can be no assurance that the Company will be awarded any
of the contracts for which its products are bid or, if awarded, that
substantial delays or cancellations of purchases will not result from
protests initiated by losing bidders.
YEAR 2000 COMPLIANCE. The CTX 5000 Series contains installed computer
systems and software products which are coded to accept only two digit
entries in the date code field. Beginning in the year 2000, these date code
fields will need to accept four digit entries to distinguish 21st century
dates from 20th century dates. While uncertainty exists concerning the
potential effects associated with such compliance, the Company does not
believe that year 2000 compliance will result in a material adverse effect on
its financial condition or results of operations.
The Company also currently uses software and related computerized information
systems that will be affected by the date change in the year 2000. The year
2000 issue exists because many computer systems and applications currently
utilize two-digit date fields, rather than four-digit date fields, to define
the applicable year. When the millenium date change occurs, date-sensitive
systems will recognize the year 2000 as the year 1900, or not at all. This
inability to recognize or properly treat the year 2000 may result in systems
failure or cause systems to process critical financial and operational
information incorrectly.
Based on ongoing assessments, the Company has determined that it will be
required to modify or upgrade portions of its computer software so that its
computer systems will properly use and recognize dates beyond December 31,
1999. Based on preliminary information compiled by the Company, the Company
does not believe that the costs of addressing the year 2000 issue will be
material to the Company. Other factors that may affect the Company's costs in
addressing the year 2000 issue include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, and similar uncertainties.
The Company expects to complete all year 2000 programming changes during
fiscal 1999. The estimated costs of and time frame related to this project
are based on estimates of the Company's management, and there can be no
assurance that actual costs will not differ materially from the current
expectations. In addition, the Company's ability to interface with its
customers, particularly with respect to electronic data interchange programs,
may be impacted by the failure of its customers to make the appropriate
upgrades or modifications to their programs to address the year 2000 issue.
Nevertheless, the Company does not expect that the costs of addressing
potential problems relating to the year 2000 issue will have a material
adverse impact on the Company's financial position, results of operations or
cash flows in future periods. Although the Company plans to devote the
necessary resources to resolve all significant year 2000 issues in a timely
manner, if such processing issues are not resolved in a timely manner, the
year 2000 issue could have a material impact on the operations and financial
conditions of the Company.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company recently amended Section 5 of its Bylaws to revise the time
period in which stockholders who wish to bring matters or propose nominees for
director at the Company's annual meeting must give advance notice. Under the
amended bylaw, such advance notice must be received by the Company between 60
and 90 days of the first anniversary of the preceding year's annual meeting
date, subject to certain adjustments in the event that such anniversary date
differs by more than 30 days from the current year annual meeting date. This
amendment does not affect the advance notice and other requirements for
including stockholder proposals in the Company's proxy statement under the
Securities Exchange Act of 1934, which are governed by such Act and the rules
and regulations thereunder.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1998 Annual Meeting of the Stockholders was held May 28, 1998.
Matters voted at that meeting were:
(i) The election of the Class II directors to hold office until 2001
Annual Meeting of Stockholders and until their successors are
elected and qualified.
(ii) The amendment of the Company's Equity Incentive Plan, to increase
the aggregate number of shares of Common Stock authorized for
issuance by 400,000 shares to 2,621,818 shares.
(iii) The ratification of the selection of Pricewaterhouse Coopers LLP as
independent auditors of the Company for its fiscal year ending
December 31, 1998.
Tabulations for each proposal were as follows:
Proposal I. Election of Class II Directors
Director For Withheld
-------- --- --------
DR. GIOVANNI LANZARA 7,115,104 84,650
AMBASSADOR MORRIS D. BUSBY 7,115,929 83,825
Proposal II. Amendment of the Company's Equity Incentive Plan
For Against Abstain
--- ------- -------
6,754,046 383,154 62,554
Proposal III. Ratification of the selection of
PricewaterhouseCoopers LLP
For Against Abstain
--- ------- -------
7,142,388 13,331 44,035
Continuing Directors:
Dr. Sergio Magistri, the Class I director, and Dr. Douglas P. Boyd
and Dr. Bruno Trezza, the Class III directors, continued as
directors following the Annual Meeting.
ITEM 5. OTHER INFORMATION
Pursuant to the Company's bylaws, stockholders who wish to bring matters
or propose nominees for director at the Company's 1999 annual meeting of
stockholders must provide specified information to the Company between
February 27, 1999 and March 29, 1999 (unless such matters are included in the
Company's proxy statement pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended). However, if the date of the 1999 annual
meeting of stockholders is held on a date more than 30 days from May 28,
1999, such specified information must be provided to the Company not earlier
than the close of business on the 90th day prior to the 1999 annual meeting
and not later than the close of business on the later of the 60th day prior
to such annual meeting or, in the event public announcement of the date of
such annual meeting is first made by the Company fewer than 70 days prior to
the date of the 1999 annual meeting, the close of business on the 10th day
following the day on which public announcement of the date of the 1999 annual
meeting is first made by the Company.
16
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.2 Bylaws of Registrant, as amended
10.25 Loan Modification Agreement, dated April 15, 1998, to the
Domestic Loan and Security Agreement, dated
February 20, 1997, and the Export-Import Bank Loan and
Security Agreement, dated February 20, 1997, between the
Registrant and Silicon Valley Bank
10.26 Release of Security Agreement, dated April 15, 1998, for
the release of security interest in the Registrant's
trademarked works set forth in the Intellectual Property
Security Agreement, dated February 20, 1997, between the
Registrant and Silicon Valley Bank
10.27 Release of Security Agreement, dated April
15, 1998, for the release of security interest in the
Registrant's patented works set forth in the Intellectual
Property Security Agreement, dated February 20, 1997,
between the Registrant and Silicon Valley Bank
10.28 Negative Pledge Agreement, dated April 15,
1998, covering all of the Registrant's Intellectual Property
between the Registrant and Silicon Valley Bank
10.29 Consent Letter, dated June 1, 1998, from
Silicon Valley Bank for the Registrant's Stock Repurchase
Program in connection with the Loan and Security Agreements,
dated February 20, 1997, and as amended by the Loan
Modification Agreement, dated April 15, 1998, between the
Registrant and Silicon Valley Bank
27 Financial Data Schedule
(b) The Registrant filed no Reports on Form 8-K during the quarter ended
June 30, 1998.
17
<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.
INVISION TECHNOLOGIES, INC.
Date: August 14, 1998 /s/ Sergio Magistri
-------------------
Dr. Sergio Magistri
President and Chief Executive Officer
(PRINCIPAL EXECUTIVE OFFICER)
Date: August 14, 1998 /s/ Curtis P. DiSibio
-------------------
Curtis P. DiSibio
Senior Vice President and Chief Financial Officer
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
18
<PAGE>
BYLAWS
OF
INVISION TECHNOLOGIES, INC.
AS AMENDED MARCH 9, 1996
AND
AUGUST 11, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Registered Office . . . . . . . . . . . . . . . . . . . 1
Section 2. Other Offices . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II CORPORATE SEAL. . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Corporate Seal. . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III STOCKHOLDERS' MEETINGS. . . . . . . . . . . . . . . . . . 1
Section 4. Place of Meetings . . . . . . . . . . . . . . . . . . . 1
Section 5. Annual Meeting. . . . . . . . . . . . . . . . . . . . . 1
Section 6. Special Meetings. . . . . . . . . . . . . . . . . . . . 3
Section 7. Notice of Meetings. . . . . . . . . . . . . . . . . . . 3
Section 8. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 9. Adjournment and Notice of Adjourned Meetings. . . . . . 4
Section 10. Voting Rights . . . . . . . . . . . . . . . . . . . . . 4
Section 11. Beneficial Owners of Stock. . . . . . . . . . . . . . . 4
Section 12. List of Stockholders. . . . . . . . . . . . . . . . . . 5
Section 13. Organization. . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 14. Number and Term of Office.. . . . . . . . . . . . . . . 6
Section 15. Powers. . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 16. Classes of Directors. . . . . . . . . . . . . . . . . . 6
Section 17. Vacancies.. . . . . . . . . . . . . . . . . . . . . . . 6
Section 18. Resignation.. . . . . . . . . . . . . . . . . . . . . . 6
Section 19. Removal.. . . . . . . . . . . . . . . . . . . . . . . . 7
Section 20. Meetings. . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Annual Meetings.. . . . . . . . . . . . . . . . . . . . 7
(b) Regular Meetings. . . . . . . . . . . . . . . . . . . . 7
(c) Special Meetings. . . . . . . . . . . . . . . . . . . . 7
(d) Telephone Meetings. . . . . . . . . . . . . . . . . . . 7
(e) Notice of Meetings. . . . . . . . . . . . . . . . . . . 7
(f) Waiver of Notice. . . . . . . . . . . . . . . . . . . . 7
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Section 21. Quorum and Voting.. . . . . . . . . . . . . . . . . . . 8
Section 22. Action without Meeting. . . . . . . . . . . . . . . . . 8
Section 23. Fees and Compensation.. . . . . . . . . . . . . . . . . 8
Section 24. Committees. . . . . . . . . . . . . . . . . . . . . . . 8
(a) Executive Committee.. . . . . . . . . . . . . . . . . . 8
(b) Other Committees. . . . . . . . . . . . . . . . . . . . 9
(c) Term. . . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Meetings. . . . . . . . . . . . . . . . . . . . . . . . 9
Section 25. Organization. . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 26. Officers Designated . . . . . . . . . . . . . . . . . . 10
Section 27. Tenure and Duties of Officers . . . . . . . . . . . . . 10
(a) General . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Duties of Chairman of the Board of Directors. . . . . . 10
(c) Duties of President.. . . . . . . . . . . . . . . . . . 10
(d) Duties of Vice Presidents.. . . . . . . . . . . . . . . 11
(e) Duties of Secretary.. . . . . . . . . . . . . . . . . . 11
(f) Duties of Chief Financial Officer or Treasurer. . . . . 11
Section 28. Delegation of Authority.. . . . . . . . . . . . . . . . 11
Section 29. Resignations. . . . . . . . . . . . . . . . . . . . . . 11
Section 30. Removal.. . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF
SECURITIES OWNED BY THE CORPORATION . . . . . . . . . . . 12
Section 31. Execution of Corporate Instruments. . . . . . . . . . . 12
Section 32. Voting of Securities Owned by the Corporation.. . . . . 12
ARTICLE VII SHARES OF STOCK . . . . . . . . . . . . . . . . . . . . . .12
Section 33. Form and Execution of Certificates. . . . . . . . . . . 12
Section 34. Lost Certificates.. . . . . . . . . . . . . . . . . . . 13
Section 35. Transfers.. . . . . . . . . . . . . . . . . . . . . . . 13
Section 36. Fixing Record Dates.. . . . . . . . . . . . . . . . . . 13
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TABLE OF CONTENTS
(CONTINUED)
Section 37. Registered Stockholders.. . . . . . . . . . . . . . . . 14
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION . . . . . . . . . . . 14
Section 38. Execution of Other Securities.. . . . . . . . . . . . . 14
ARTICLE IX DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 39. Declaration of Dividends. . . . . . . . . . . . . . . . 15
Section 40. Dividend Reserve. . . . . . . . . . . . . . . . . . . . 15
ARTICLE X FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . 15
Section 41. Fiscal Year.. . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE XI INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 15
Section 42. Indemnification of Directors, Officers, Employees and
Other Agents. . . . . . . . . . . . . . . . . . . . . .15
(a) Directors and Executive Officers. . . . . . . . . . . . 15
(b) Officers, Employees and Other Agents. . . . . . . . . . 16
(c) Good Faith. . . . . . . . . . . . . . . . . . . . . . . 16
(d) Expenses. . . . . . . . . . . . . . . . . . . . . . . . 16
(e) Enforcement . . . . . . . . . . . . . . . . . . . . . . 17
(f) Non-Exclusivity of Rights . . . . . . . . . . . . . . . 17
(g) Survival of Rights. . . . . . . . . . . . . . . . . . . 17
(h) Insurance.. . . . . . . . . . . . . . . . . . . . . . . 17
(i) Amendments. . . . . . . . . . . . . . . . . . . . . . . 17
(j) Saving Clause.. . . . . . . . . . . . . . . . . . . . . 17
(k) Certain Definitions.. . . . . . . . . . . . . . . . . . 18
ARTICLE XII NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 43. Notices . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Notice to Stockholders. . . . . . . . . . . . . . . . . 19
(b) Notice to Directors . . . . . . . . . . . . . . . . . . 19
(c) Address Unknown . . . . . . . . . . . . . . . . . . . . 19
(d) Affidavit of Mailing. . . . . . . . . . . . . . . . . . 19
(e) Time Notices Deemed Given . . . . . . . . . . . . . . . 19
(f) Methods of Notice . . . . . . . . . . . . . . . . . . . 19
iii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
(g) Failure to Receive Notice . . . . . . . . . . . . . . . 19
(h) Notice to Person with Whom Communication Is Unlawful. . 19
(i) Notice to Person with Undeliverable Address . . . . . . 20
ARTICLE XIII AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . 20
Section 44. Amendments. . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE XIV LOANS TO OFFICERS . . . . . . . . . . . . . . . . . . . . 20
Section 45. Loans to Officers . . . . . . . . . . . . . . . . . . . 20
</TABLE>
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BYLAWS
OF
INVISION TECHNOLOGIES, INC.
(a Delaware corporation)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain an
office or principal place of business in Foster City, California, at such place
as may be fixed by the Board of Directors, and may also have offices at such
other places, both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal, if any, shall consist of
a die bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may
be designated from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting.
To be properly brought before an annual meeting, business must be: (A)
specified in the notice of meeting (or any
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supplement thereto) given by or at the direction of the Board of Directors,
(B) otherwise properly brought before the meeting by or at the direction of
the Board of Directors, or (C) otherwise properly brought before the meeting
by a stockholder. For business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding
year's annual meeting; PROVIDED, HOWEVER, that in the event that no annual
meeting was held in the previous year or the date of the annual meeting has
been changed by more than thirty (30) days from the date contemplated at the
time of the previous year's proxy statement, notice by the stockholder to be
timely must be so received not earlier than the close of business on the
ninetieth (90th) day prior to such annual meeting and not later than the
close of business on the later of the sixtieth (60th) day prior to such
annual meeting or, in the event public announcement of the date of such
annual meeting is first made by the corporation fewer than seventy (70) days
prior to the date of such annual meeting, the close of business on the tenth
(10th) day following the day on which public announcement of the date of such
meeting is first made by the corporation. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting: (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address, as they appear on
the corporation's books, of the stockholder proposing such business, (iii)
the class and number of shares of the corporation which are beneficially
owned by the stockholder, (iv) any material interest of the stockholder in
such business and (v) any other information that is required to be provided
by the stockholder pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "1934 Act"), in his capacity as a proponent to a
stockholder proposal. Notwithstanding the foregoing, in order to include
information with respect to a stockholder proposal in the proxy statement and
form of proxy for a stockholder's meeting, stockholders must provide notice
as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall
be conducted at any annual meeting except in accordance with the procedures
set forth in this paragraph (b). The chairman of the annual meeting shall,
if the facts warrant, determine and declare at the meeting that business was
not properly brought before the meeting and in accordance with the provisions
of this paragraph (b), and, if he should so determine, he shall so declare at
the meeting that any such business not properly brought before the meeting
shall not be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of
the corporation may be made at a meeting of stockholders by or at the
direction of the Board of Directors or by any stockholder of the corporation
entitled to vote in the election of directors at the meeting who complies
with the notice procedures set forth in this paragraph (c). Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the
Secretary of the corporation in accordance with the provisions of paragraph
(b) of this Section 5. Such stockholder's notice shall set forth (i) as to
each person, if any, whom the stockholder proposes to nominate for election
or re-election as a director: (A) the name, age, business address and
residence address of such person, (B) the principal occupation or employment
of such person,
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(C) the class and number of shares of the corporation which are beneficially
owned by such person, (D) a description of all arrangements or understandings
between the stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nominations are to be
made by the stockholder, and (E) any other information relating to such
person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the 1934 Act (including without limitation such person's
written consent to being named in the proxy statement, if any, as a nominee
and to serving as a director if elected); and (ii) as to such stockholder
giving notice, the information required to be provided pursuant to paragraph
(b) of this Section 5. At the request of the Board of Directors, any person
nominated by a stockholder for election as a director shall furnish to the
Secretary of the corporation that information required to be set forth in the
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless
nominated in accordance with the procedures set forth in this paragraph (c).
The chairman of the meeting shall, if the facts warrant, determine and
declare at the meeting that a nomination was not made in accordance with the
procedures prescribed by these Bylaws, and if he should so determine, he
shall so declare at the meeting, and the defective nomination shall be
disregarded.
(d) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document
publicly filed by the corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the 1934 Act.
SECTION 6. SPECIAL MEETINGS. Special meetings of the stockholders of
the corporation may be called, for any purpose or purposes, by (i) the
Chairman of the Board, (ii) the President, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board for adoption) or (iv) by the holders of shares entitled to cast not
less than ten percent (10%) of the votes at the meeting, and shall be held at
such place, on such date, and at such time as they or he shall fix.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of
stockholders shall be given not less than ten (10) nor more than sixty (60)
days before the date of the meeting to each stockholder entitled to vote at
such meeting, such notice to specify the place, date and hour and purpose or
purposes of the meeting. Notice of the time, place and purpose of any
meeting of stockholders may be waived in writing, signed by the person
entitled to notice thereof, either before or after such meeting, and will be
waived by any stockholder by his attendance thereat in person or by proxy,
except when the stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Any
stockholder so waiving notice of such meeting shall be bound by the
proceedings of any such meeting in all respects as if due notice thereof had
been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of
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stock entitled to vote shall constitute a quorum for the transaction of
business. Any shares, the voting of which at said meeting has been enjoined,
or which for any reason cannot be lawfully voted at such meeting, shall not
be counted to determine a quorum at such meeting. In the absence of a quorum
any meeting of stockholders may be adjourned, from time to time, either by
the chairman of the meeting or by vote of the holders of a majority of the
shares represented thereat, but no other business shall be transacted at such
meeting. The stockholders present at a duly called or convened meeting, at
which a quorum is present, may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave
less than a quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, all action taken by the holders of a majority
of the voting power represented at any meeting at which a quorum is present
shall be valid and binding upon the corporation; provided, however, that
Directors shall be elected by a plurality of the votes of the shares present
in person or represented by proxy at the meeting and entitled to vote on the
election of Directors. Where a separate vote by a class or classes is
required, a majority of the outstanding shares of such class or classes,
present in person or represented by proxy, shall constitute a quorum entitled
to take action with respect to that vote on that matter and the affirmative
vote of the majority (plurality, in the case of the election of Directors) of
shares of such class or classes present in person or represented by proxy at
the meeting shall be the act of such class.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting
of stockholders, whether annual or special, may be adjourned from time to
time either by the chairman of the meeting or by the vote of a majority of
the shares represented thereat. When a meeting is adjourned to another time
or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken.
At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the
stock records of the corporation on the record date, as provided in Section
12 of these Bylaws, shall be entitled to vote at any meeting of stockholders.
Except as may be otherwise provided in the Certificate of Incorporation or
these Bylaws, each stockholder shall be entitled to one vote for each share
of capital stock held by such stockholder. Every person entitled to vote or
execute consents shall have the right to do so either in person or by an
agent or agents authorized by a written proxy executed by such person or his
duly authorized agent, which proxy shall be filed with the Secretary at or
before the meeting at which it is to be used. An agent so appointed need not
be a stockholder. No proxy shall be voted after three (3) years from its
date of creation unless the proxy provides for a longer period. All elections
of Directors shall be by written ballot, unless otherwise provided in the
Certificate of Incorporation.
SECTION 11. BENEFICIAL OWNERS OF STOCK.
(a) If shares or other securities having voting power stand of
record in the names of two (2) or more persons, whether fiduciaries, members
of a partnership, joint tenants,
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tenants in common, tenants by the entirety, or otherwise, or if two (2) or
more persons have the same fiduciary relationship respecting the same shares,
unless the Secretary is given written notice to the contrary and is furnished
with a copy of the instrument or order appointing them or creating the
relationship wherein it is so provided, their acts with respect to voting
shall have the following effect: (a) if only one (1) votes, his act binds
all; (b) if more than one (1) votes, the act of the majority so voting binds
all; (c) if more than one (1) votes, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionally, or may apply to the Delaware Court of Chancery for relief as
provided in the General Corporation Law of Delaware, Section 217(b). If the
instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of this
subsection (c) shall be a majority or even-split in interest.
(b) Persons holding stock in a fiduciary capacity shall be
entitled to vote the shares so held. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
corporation he has expressly empowered the pledgee to vote thereon, in which
case only the pledgee, or his proxy, may represent such stock and vote
thereon.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list
of the stockholders entitled to vote at said meeting, arranged in
alphabetical order, showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10)
days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not specified, at the place where the meeting is to be held.
The list shall be produced and kept at the time and place of meeting during
the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 13. ORGANIZATION
(a) At every meeting of stockholders, the Chairman of the Board
of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, the most senior Vice President
present, or in the absence of any such officer, a chairman of the meeting
chosen by a majority in interest of the stockholders entitled to vote,
present in person or by proxy, shall act as chairman. The Secretary, or, in
his absence, an Assistant Secretary directed to do so by the President, shall
act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled
to make such rules or regulations for the conduct of meetings of stockholders
as it shall deem necessary, appropriate or convenient. Subject to such rules
and regulations of the Board of Directors, if any, the chairman of the
meeting shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of
such chairman, are necessary, appropriate or convenient for the proper
conduct of the meeting, including, without limitation, establishing an agenda
or order of business for the meeting, rules and procedures for maintaining
order at the meeting and the safety of those present, limitations on
participation in such meeting to stockholders of record of the corporation
and their duly authorized and constituted proxies, and such other persons as
the chairman shall permit, restrictions on entry to
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the meeting after the time fixed for the commencement thereof, limitations on
the time allotted to questions or comments by participants and regulation of
the opening and closing of the polls for balloting on matters which are to be
voted on by ballot. Unless, and to the extent determined by the Board of
Directors or the chairman of the meeting, meetings of stockholders shall not
be required to be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 14. NUMBER AND TERM OF OFFICE. The authorized number of
Directors shall be fixed in the manner set forth in the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the Directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose
in the manner provided in these Bylaws.
SECTION 15. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
SECTION 16. CLASSES OF DIRECTORS. The Board of Directors shall be
divided into classes in the manner set forth in the Certificate of
Incorporation.
SECTION 17. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, vacancies and newly created directorships resulting from any
increase in the authorized number of Directors may be filled by a majority of
the Directors then in office, although less than a quorum, or by a sole
remaining Director, and each Director so elected shall hold office for the
unexpired portion of the term of the Director whose place shall be vacant and
until his successor shall have been duly elected and qualified. A vacancy in
the Board of Directors shall be deemed to exist under this Section 17 in the
case of the death, removal or resignation of any Director, or if the
stockholders fail at any meeting of stockholders at which Directors are to be
elected (including any meeting referred to in Section 19 below) to elect the
number of Directors then constituting the whole Board of Directors.
SECTION 18. RESIGNATION. Any Director may resign at any time by
delivering his written resignation to the Secretary, such resignation to
specify whether it will be effective at a particular time, upon receipt by
the Secretary or at the pleasure of the Board of Directors. If no such
specification is made, it shall be deemed effective at the pleasure of the
Board of Directors. When one or more Directors shall resign from the Board
of Directors, effective at a future date, a majority of the Directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation
or resignations shall become effective, and each Director so chosen shall
hold office for the unexpired portion of the term of the Director whose place
shall be vacated and until his successor shall have been duly elected and
qualified.
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SECTION 19. REMOVAL. At a special meeting of stockholders called for
the purpose in the manner hereinabove provided, subject to any limitations
imposed by law or the Certificate of Incorporation, the Board of Directors,
or any individual Director, may be removed from office, with or without
cause, and a new Director or Directors elected by a vote of stockholders
holding a majority of the outstanding shares entitled to vote at an election
of Directors.
SECTION 20. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately after the annual meeting of stockholders
and at the place where such meeting is held. No notice of an annual meeting
of the Board of Directors shall be necessary and such meeting shall be held
for the purpose of electing officers and transacting such other business as
may lawfully come before it.
(b) REGULAR MEETINGS. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in any office of the
corporation maintained pursuant to Section 2 hereof. Unless otherwise
restricted by the Certificate of Incorporation, regular meetings of the Board
of Directors may also be held at any place within or without the State of
Delaware which has been determined by the Board of Directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may
be held at any time and place within or without the State of Delaware
whenever called by the President or a majority of the Directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors,
or of any committee thereof, may participate in a meeting by means of
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and
participation in a meeting by such means shall constitute presence in person
at such meeting.
(e) NOTICE OF MEETINGS. Written notice of the time and place of
all special meetings of the Board of Directors shall be given at least one
(1) day before the date of the meeting. Notice of any meeting may be waived
in writing at any time before or after the meeting and will be waived by any
Director by attendance thereat, except when the Director attends the meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called
or noticed, or wherever held, shall be as valid as though had at a meeting
duly held after regular call and notice, if a quorum be present and if,
either before or after the meeting, each of the Directors not present shall
sign a written waiver of notice, or a consent to holding such meeting, or an
approval of the minutes thereof. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the Board of Directors
need be specified in any written waiver of notice or consent unless so
required by the Certificate of Incorporation or these Bylaws. All such
waivers,
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consents or approvals shall be filed with the corporate records or made a
part of the minutes of the meeting.
SECTION 21. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 42 hereof, for which a quorum shall be one-third of the exact number
of Directors fixed from time to time in accordance with Section 14 hereof,
but not less than one (1), a quorum of the Board of Directors shall consist
of a majority of the exact number of Directors fixed from time to time in
accordance with Section 14 of these Bylaws, but not less than one (1);
provided, however, at any meeting whether a quorum be present or otherwise, a
majority of the Directors present may adjourn from time to time until the
time fixed for the next regular meeting of the Board of Directors, without
notice other than by announcement at the meeting.
(b) At each meeting of the Board of Directors at which a quorum
is present all questions and business shall be determined by a vote of a
majority of the Directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
SECTION 22. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board
of Directors or committee, as the case may be, consent thereto in writing,
and such writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.
SECTION 23. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed
sum and expenses of attendance, if any, for attendance at each regular or
special meeting of the Board of Directors and at any meeting of a committee
of the Board of Directors. Nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other capacity as
an officer, agent, employee, or otherwise and receiving compensation
therefor.
SECTION 24. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors, appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and
specifically granted by the Board of Directors, shall have and may exercise
when the Board of Directors is not in session all powers of the Board of
Directors in the management of the business and affairs of the corporation,
including, without limitation, the power and authority to declare a dividend
or to authorize the issuance of stock, except such committee shall not have
the power or authority to amend the Certificate of Incorporation, to adopt an
agreement of merger or consolidation, to recommend to the stockholders the
sale, lease or exchange of all or substantially all of the corporation's
property and assets, to recommend to
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the stockholders of the corporation a dissolution of the corporation or a
revocation of a dissolution or to amend these Bylaws.
(b) OTHER COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, from time to time
appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or
more members of the Board of Directors, and shall have such powers and
perform such duties as may be prescribed by the resolution or resolutions
creating such committees, but in no event shall such committee have the
powers denied to the Executive Committee in these Bylaws.
(c) TERM. The members of all committees of the Board of
Directors shall serve a term coexistent with that of the Board of Directors
which shall have appointed such committee. The Board of Directors, subject
to the provisions of subsections (a) or (b) of this Section 24, may at any
time increase or decrease the number of members of a committee or terminate
the existence of a committee. The membership of a committee member shall
terminate on the date of his death or voluntary resignation from the
committee or from the Board of Directors. The Board of Directors may at any
time for any reason remove any individual committee member and the Board of
Directors may fill any committee vacancy created by death, resignation,
removal or increase in the number of members of the committee. The Board of
Directors may designate one or more Directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any such absent or disqualified member.
(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 24 shall be held at such times and places
as are determined by the Board of Directors, or by any such committee, and
when notice thereof has been given to each member of such committee, no
further notice of such regular meetings need be given thereafter. Special
meetings of any such committee may be held at any place which has been
determined from time to time by such committee, and may be called by any
Director who is a member of such committee, upon written notice to the
members of such committee of the time and place of such special meeting given
in the manner provided for the giving of written notice to members of the
Board of Directors of the time and place of special meetings of the Board of
Directors. Notice of any special meeting of any committee may be waived in
writing at any time before or after the meeting and will be waived by any
Director by attendance thereat, except when the Director attends such special
meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not
lawfully called or convened. A majority of the authorized number of members
of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which
a quorum is present shall be the act of such committee.
SECTION 25. ORGANIZATION. At every meeting of the Directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed
or is absent, the President, or if the
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President is absent, the most senior Vice President, or, in the absence of
any such officer, a chairman of the meeting chosen by a majority of the
Directors present, shall preside over the meeting. The Secretary, or in his
absence, an Assistant Secretary directed to do so by the President, shall act
as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 26. OFFICERS DESIGNATED. The officers of the corporation shall
be the President, one or more Vice Presidents, the Secretary and the Chief
Financial Officer or Treasurer, all of whom shall be elected at the annual
meeting of the Board of Directors. The order of the seniority of the Vice
Presidents shall be in the order of their nomination, unless otherwise
determined by the Board of Directors. The Board of Directors may also
appoint one or more Assistant Secretaries, Assistant Treasurers, and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may also designate a Chairman of the Board
of Directors, which position may (but need not) be an officer of the
corporation, as the Board of Directors may designate from time to time. The
Board of Directors may assign such additional titles to one or more of the
officers as it shall deem appropriate. Any one person may hold any number of
offices of the corporation at any one time unless specifically prohibited
therefrom by law. The salaries and other compensation of the officers of the
corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 27. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly
elected and qualified, unless sooner removed. Any officer elected or
appointed by the Board of Directors may be removed at any time by the Board
of Directors. If the office of any officer becomes vacant for any reason,
the vacancy may be filled by the Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of
Directors shall perform other duties commonly incident to his office and
shall also perform such other duties and have such other powers as the Board
of Directors shall designate from time to time. If there is no President,
then the Chairman of the Board of Directors shall also serve as the Chief
Executive Officer of the corporation and shall have the powers and duties
prescribed in paragraph (c) of this Section 27.
(c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is
present. The President shall be the Chief Executive Officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of
the corporation. The President shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors shall designate from time to time.
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(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents, in the
order of their seniority, may assume and perform the duties of the President
in the absence or disability of the President or whenever the office of
President is vacant. The Vice Presidents shall perform other duties commonly
incident to their office and shall also perform such other duties and have
such other powers as the Board of Directors or the President shall designate
from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all
meetings of the stockholders and of the Board of Directors, and shall record
all acts and proceedings thereof in the minute book of the corporation. The
Secretary shall give notice in conformity with these Bylaws of all meetings
of the stockholders, and of all meetings of the Board of Directors and any
committee thereof requiring notice. The Secretary shall perform all other
duties given him in these Bylaws and other duties commonly incident to his
office and shall also perform such other duties and have such other powers as
the Board of Directors shall designate from time to time. The President may
direct any Assistant Secretary to assume and perform the duties of the
Secretary in the absence or disability of the Secretary, and each Assistant
Secretary shall perform other duties commonly incident to his office and
shall also perform such other duties and have such other powers as the Board
of Directors or the President shall designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER OR TREASURER. The Chief
Financial Officer or Treasurer shall keep or cause to be kept the books of
account of the corporation in a thorough and proper manner, and shall render
statements of the financial affairs of the corporation in such form and as
often as required by the Board of Directors or the President. The Chief
Financial Officer or Treasurer, subject to the order of the Board of
Directors, shall have the custody of all funds and securities of the
corporation. The Chief Financial Officer or Treasurer shall perform other
duties commonly incident to his office and shall also perform such other
duties and have such other powers as the Board of Directors or the President
shall designate from time to time. The President may direct any Assistant
Treasurer to assume and perform the duties of the Chief Financial Officer or
Treasurer in the absence or disability of the Chief Financial Officer or
Treasurer, and each Assistant Treasurer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time.
SECTION 28. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other
officer or agent, notwithstanding any provision hereof.
SECTION 29. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the
person or persons to whom such notice is given, unless a later time is
specified therein, in which event the resignation shall become effective at
such later time. Unless otherwise specified in such notice, the acceptance
of any such resignation shall not be necessary to make it effective. Any
resignation shall be without prejudice to the rights, if any, of the
corporation under any contract with the resigning officer.
SECTION 30. REMOVAL. Any officer may be removed from office at any
time, either with or without cause, by the vote or written consent of a
majority of the Directors in office at
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the time, or by any committee or superior officers upon whom such power of
removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
SECTION 31. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory
officer or officers, or other person or persons, to execute on behalf of the
corporation any corporate instrument or document, or to sign on behalf of the
corporation the corporate name without limitation, or to enter into contracts
on behalf of the corporation, except where otherwise provided by law or these
Bylaws, and such execution or signature shall be binding upon the
corporation.
Unless otherwise specifically determined by the Board of
Directors or otherwise required by law, promissory notes, deeds of trust,
mortgages and other evidences of indebtedness of the corporation, and other
corporate instruments or documents requiring the corporate seal, and
certificates of shares of stock owned by the corporation, shall be executed,
signed or endorsed by the Chairman of the Board of Directors, or the
President or any Vice President, and by the Secretary or Chief Financial
Officer or Treasurer or any Assistant Secretary or Assistant Treasurer. All
other instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on
funds to the credit of the corporation or in special accounts of the
corporation shall be signed by such person or persons as the Board of
Directors shall authorize so to do.
Unless authorized or ratified by the Board of Directors or within
the agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or for any
amount.
SECTION 32. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock
and other securities of other corporations owned or held by the corporation
for itself, or for other parties in any capacity, shall be voted, and all
proxies with respect thereto shall be executed, by the person authorized so
to do by resolution of the Board of Directors, or, in the absence of such
authorization, by the Chairman of the Board of Directors, the President, or
any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 33. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent
with the Certificate of Incorporation and applicable law. Every holder of
stock in the corporation shall be entitled to have a certificate signed by or
in the name of the corporation by the Chairman of the Board of Directors, or
the
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President or any Vice President and by the Treasurer or Assistant Treasurer
or the Secretary or Assistant Secretary, certifying the number of shares
owned by him in the corporation. Where such certificate is countersigned by
a transfer agent other than the corporation or its employee, or by a
registrar other than the corporation or its employee, any other signature on
the certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued with the same
effect as if he were such officer, transfer agent, or registrar at the date
of issue. Each certificate shall state upon the face or back thereof, in
full or in summary, all of the designations, preferences, limitations,
restrictions on transfer and relative rights of the shares authorized to be
issued.
SECTION 34. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by
the corporation alleged to have been lost, stolen, or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen, or destroyed. The corporation may require, as a
condition precedent to the issuance of a new certificate or certificates, the
owner of such lost, stolen, or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall
require or to give the corporation a surety bond in such form and amount as
it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost,
stolen, or destroyed.
SECTION 35. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any
manner not prohibited by the General Corporation Law of Delaware.
SECTION 36. FIXING RECORD DATES.
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting. If no record date is fixed by the Board of Directors,
the record date for determining stockholders entitled to notice of or to vote
at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or if notice is waived, at
the close of business on the day next preceding the day on which the meeting
is held. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
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(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the
Board of Directors may fix, in advance, a record date, which record date
shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which date shall not be more than
ten (10) days after the date upon which the resolution fixing the record date
is adopted by the Board of Directors. If no record date has been fixed by
the Board of Directors, the record date for determining stockholders entitled
to consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is required by law, shall be the first date
on which a signed written consent setting forth the action taken or proposed
to be taken is delivered to the Corporation by delivery to its registered
office in the State of Delaware, its principal place of business or an
officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed
by the Board of Directors and prior action by the Board of Directors is
required by law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the
close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or
allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix, in advance, a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is
fixed, the record date for determining stockholders for any such purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
SECTION 37. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 38. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 33), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may
be authorized by the Board of Directors, and the corporate seal impressed
thereon or a facsimile of such seal imprinted thereon and attested by the
signature of the Secretary or an Assistant Secretary, or the Chief Financial
Officer or Treasurer or an Assistant Treasurer; provided, however, that where
any such bond, debenture or other corporate security shall be authenticated
by the manual signature of a trustee under an indenture pursuant to which
such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing
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and attesting the corporate seal on such bond, debenture or other corporate
security may be the imprinted facsimile of the signatures of such persons.
Interest coupons appertaining to any such bond, debenture or other corporate
security, authenticated by a trustee as aforesaid, shall be signed by the
Treasurer or an Assistant Treasurer of the corporation or such other person
as may be authorized by the Board of Directors, or bear imprinted thereon the
facsimile signature of such person. In case any officer who shall have
signed or attested any bond, debenture or other corporate security, or whose
facsimile signature shall appear thereon or on any such interest coupon,
shall have ceased to be such officer before the bond, debenture or other
corporate security so signed or attested shall have been delivered, such
bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased
to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 39. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to
law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation.
SECTION 40. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 41. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 42. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS.
(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its Directors and executive officers to the fullest extent not
prohibited by the Delaware General Corporation Law; provided, however, that
the corporation may limit the extent of such indemnification by individual
contracts with its Directors and executive officers; and, provided,
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further, that the corporation shall not be required to indemnify any Director
or executive officer in connection with any proceeding (or part thereof)
initiated by such person or any proceeding by such person against the
corporation or its Directors, officers, employees or other agents unless (i)
such indemnification is expressly required to be made by law, (ii) the
proceeding was authorized by the Board of Directors of the corporation or
(iii) such indemnification is provided by the corporation, in its sole
discretion, pursuant to the powers vested in the corporation under the
Delaware General Corporation Law.
(b) OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation shall
have power to indemnify its other officers, employees and other agents as set
forth in the Delaware General Corporation Law.
(c) GOOD FAITH.
(1) For purposes of any determination under this Bylaw, a
Director or executive officer shall be deemed to have acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe that his conduct was
unlawful, if his action is based on information, opinions, reports and
statements, including financial statements and other financial data, in each
case prepared or presented by:
(i) one or more officers or employees of the
corporation whom the Director or executive officer believed to be reliable
and competent in the matters presented;
(ii) counsel, independent accountants or other persons
as to matters which the Director or executive officer believed to be within
such person's professional competence; and
(iii) with respect to a Director, a committee of
the Board upon which such Director does not serve, as to matters within such
Committee's designated authority, which committee the Director believes to
merit confidence; so long as, in each case, the Director or executive officer
acts without knowledge that would cause such reliance to be unwarranted.
(2) The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that Bthe person did not act in
good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal proceeding, that he had reasonable cause to believe that his conduct
was unlawful.
(3) The provisions of this paragraph (c) shall not be
deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct set forth
by the Delaware General Corporation Law.
(d) EXPENSES. The corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all
expenses incurred by any Director or executive officer in connection with
such proceeding upon receipt of an undertaking by or on behalf of such person
to repay said amounts if it should be determined ultimately that such person
is not entitled to be indemnified under this Bylaw or otherwise.
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(e) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to Directors and
executive officers under this Bylaw shall be deemed to be contractual rights
and be effective to the same extent and as if provided for in a contract
between the corporation and the Director or executive officer. Any right to
indemnification or advances granted by this Bylaw to a Director or executive
officer shall be enforceable by or on behalf of the person holding such right
in any court of competent jurisdiction if (i) the claim for indemnification
or advances is denied, in whole or in part, or (ii) no disposition of such
claim is made within ninety (90) days of request therefor. The claimant in
such enforcement action, if successful in whole or in part, shall be entitled
to be paid also the expense of prosecuting his claim. The corporation shall
be entitled to raise as a defense to any such action that the claimant has
not met the standards of conduct that make it permissible under the Delaware
General Corporation Law for the corporation to indemnify the claimant for the
amount claimed. Neither the failure of the corporation (including its Board
of Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification
of the claimant is proper in the circumstances because he has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the corporation (including its Board of
Directors, independent legal counsel or its stockholders) that the claimant
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that claimant has not met the applicable
standard of conduct.
(f) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested Directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding office. The
corporation is specifically authorized to enter into individual contracts
with any or all of its Directors, officers, employees or agents respecting
indemnification and advances, to the fullest extent not prohibited by the
Delaware General Corporation Law.
(g) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a Director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(h) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or
permitted to be indemnified pursuant to this Bylaw.
(i) AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
(j) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless
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indemnify each Director and executive officer to the full extent not
prohibited by any applicable portion of this Bylaw that shall not have been
invalidated, or by any other applicable law.
(k) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed
and shall include, without limitation, the investigation, preparation,
prosecution, defense, settlement, arbitration and appeal of, and the giving
of testimony in, any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed
and shall include, without limitation, court costs, attorneys' fees, witness
fees, fines, amounts paid in settlement or judgment and any other costs and
expenses of any nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger
which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so
that any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall
stand in the same position under the provisions of this Bylaw with respect to
the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(4) References to a "director," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as
a director, officer, employee, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
(5) References to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references
to "serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties
on, or involves services by, such director, officer, employee, or agent with
respect to an employee benefit plan, its participants, or beneficiaries; and
a person who acted in good faith and in a manner he reasonably believed to be
in the interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this Bylaw.
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ARTICLE XII
NOTICES
SECTION 43. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail,
postage prepaid, and addressed to his last known post office address as shown
by the stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
Director may be given by the method stated in subsection (a), or by
facsimile, telex or telegram, except that such notice other than one which is
delivered personally shall be sent to such address as such Director shall
have filed in writing with the Secretary, or, in the absence of such filing,
to the last known post office address of such Director.
(c) ADDRESS UNKNOWN. If no address of a stockholder or Director
be known, notice may be sent to the office of the corporation required to be
maintained pursuant to Section 2 hereof.
(d) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by
a duly authorized and competent employee of the corporation or its transfer
agent appointed with respect to the class of stock affected, specifying the
name and address or the names and addresses of the stockholder or
stockholders, or Director or Directors, to whom any such notice or notices
was or were given, and the time and method of giving the same, shall be
conclusive evidence of the statements therein contained.
(e) TIME NOTICES DEEMED GIVEN. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing
and all notices given by facsimile, telex or telegram shall be deemed to have
been given as of the sending time recorded at time of transmission.
(f) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all Directors, but one
permissible method may be employed in respect of any one or more, and any
other permissible method or methods may be employed in respect of any other
or others.
(g) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any Director may
exercise any power or right, or enjoy any privilege, pursuant to any notice
sent him in the manner above provided, shall not be affected or extended in
any manner by the failure of such stockholder or such Director to receive
such notice.
(h) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of
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such notice to such person shall not be required and there shall be no duty
to apply to any governmental authority or agency for a license or permit to
give such notice to such person. Any action or meeting which shall be taken
or held without notice to any such person with whom communication is unlawful
shall have the same force and effect as if such notice had been duly given.
In the event that the action taken by the corporation is such as to require
the filing of a certificate under any provision of the Delaware General
Corporation Law, the certificate shall state, if such is the fact and if
notice is required, that notice was given to all persons entitled to receive
notice except such persons with whom communication is unlawful.
(i) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever
notice is required to be given, under any provision of law or the Certificate
of Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of
the taking of action by written consent without a meeting to such person
during the period between such two consecutive annual meetings, or (ii) all,
and at least two, payments (if sent by first class mail) of dividends or
interest on securities during a twelve month period, have been mailed
addressed to such person at his address as shown on the records of the
Corporation and have been returned undeliverable, the giving of such notice
to such person shall not be required. Any action or meeting which shall be
taken or held without notice to such person shall have the same force and
effect as if such notice had been duly given. If any such person shall
deliver to the corporation a written notice setting forth his then current
address, the requirement that notice be given to such person shall be
reinstated. In the event that the action taken by the corporation is such as
to require the filing of a certificate under any provision of the Delaware
General Corporation Law, the certificate need not state that notice was not
given to persons to whom notice was not required to be given pursuant to this
paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 44. AMENDMENTS. Except as otherwise set forth in paragraph (i)
of Section 42 of these Bylaws, these Bylaws may be amended or repealed and
new Bylaws adopted by the stockholders entitled to vote. The Board of
Directors shall also have the power, if such power is conferred upon the
Board of Directors by the Certificate of Incorporation, to adopt, amend or
repeal Bylaws (including, without limitation, the amendment of any Bylaw
setting forth the number of Directors who shall constitute the whole Board of
Directors).
ARTICLE XIV
LOANS TO OFFICERS
SECTION 45. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other
employee of the corporation or of its subsidiaries, including any officer or
employee who is a Director of the corporation or its subsidiaries, whenever,
in the judgment of the Board of Directors, such loan, guarantee or assistance
may reasonably be expected to benefit the corporation. The loan, guarantee
or other assistance may be with or without interest and may be unsecured, or
secured in such manner as the Board of Directors shall approve, including,
without limitation, a pledge of shares of stock of
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the corporation. Nothing in this Section 45 shall be deemed to deny, limit
or restrict the powers of guaranty or warranty of the corporation at common
law or under any statute.
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LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of April 15, 1998,
by and between InVision Technologies, Inc. ("Borrower") whose address is 7151
Gateway Boulevard, Newark, CA 94560 and Silicon Valley Bank ("Bank") whose
address is 3003 Tasman Drive, Santa Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which
may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to,
among other documents, a Loan and Security Agreement, dated February 20,
1997, as may be amended from time to time, (the "Domestic Loan Agreement").
The Domestic Loan Agreement provided for, among other things, a Committed
Line in the original principal amount of Four Million Five Hundred Thousand
Dollars ($4,500,000) (the "Revolving Facility") and a Committed Equipment
Line in the original principal amount of One Million Two Hundred Fifty
Thousand Dollars ($1,250,000) (the "Equipment Facility #1"). Additionally,
Borrower is indebted to Bank pursuant to, among other documents, an
Export-Import Bank Loan and Security Agreement, dated February 20, 1997, as
may be amended from time to time, (the "Exim Loan Agreement"). The Exim Loan
Agreement provided for, among other things, an Exim Committed Line in the
original principal amount of Four Million Five Hundred Thousand Dollars
($4,500,000) (the "Exim Facility"). The Exim Facility is also governed by
the terms of the Borrower Agreement being executed concurrently herewith.
Hereinafter, the Domestic Loan Agreement and the Exim Loan Agreement shall be
collectively referred to as the "Loan Agreements". Defined terms used but
not otherwise defined herein shall have the same meanings as in the
respective Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to
as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness
is secured by the Collateral as described in the respective Loan Agreements
and an Intellectual Property Security Agreement, dated February 20, 1997 (the
"IP Agreement"). In addition, repayment of the Exim Facility is guaranteed
by the Export-Import Bank of the United States ("Guarantor") pursuant to a
Master Guarantee Agreement (the "Guaranty"). Notwithstanding the foregoing,
pursuant to this Loan Modification Agreement, Bank shall release its security
interest under the IP Agreement in consideration of Borrower executing a
Negative Pledge Agreement stating it shall not pledge its intellectual
property to any party without written permission by Bank.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security
Documents, together with all other documents evidencing or securing the
Indebtedness shall be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. MODIFICATION(S) TO DOMESTIC LOAN AGREEMENT.
1. The following term set forth in Section 1.1 entitled
"Definitions" is hereby amended to read as follows:
"Revolving Maturity Date" means April 20, 1999.
2. Item "(a)" in Section 2.1 entitled "Advances" is hereby amended
in its entirety to read as follows:
(a) Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make Advances to Borrower in an
aggregate amount not to exceed the lesser of (i)
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<PAGE>
the Committed Line minus the face amount of all outstanding
letters of credit (including drawn but unreimbursed letters of
credit) minus the Foreign Exchange Reserve (defined in
Section 2.1.3) or (ii) the Borrowing Base minus the face amount
of all outstanding letters of credit (including drawn but
unreimbursed letters of credit) minus the Foreign Exchange
Reserve. For purposes of this Agreement, "Borrowing Base" shall
mean an amount equal to eighty percent (80%) of Eligible
Accounts. Subject to the terms and conditions of this Agreement,
amounts borrowed pursuant to this Section 2.1 may be repaid and
reborrowed at any time prior to the Revolving Maturity Date.
Notwithstanding the foregoing, provided (A) Borrower is in
compliance with the Liquidity covenant as described in Section
6.14 of the Loan Agreement, and (B) the combined Advances under
the Committed Line and the Exim Committed Line are less than
$5,000,000, then Bank agrees to make Advances to Borrower in an
aggregate amount not to exceed item "(i)" as stated above in this
paragraph.
3. Item "(a)" in Section 2.1.1 entitled "Letters of Credit" is
hereby amended in its entirety to read as follows:
(a) Subject to the terms and conditions of this Agreement, Bank
agrees to issue or cause to be issued letters of credit for the
account of Borrower in an aggregate face amount not to exceed (i)
the lesser of the Committed Line or the Borrowing Base minus (ii)
the then outstanding principal balance of the Advances provided
that the face amount of outstanding letters of credit (including
drawn but unreimbursed letters of credit) shall not in any case
exceed Three Million Dollars ($3,000,000). Each such letter of
credit shall have an expiry date no later than the Revolving
Maturity Date. All such letters of credit shall be, in form and
substance, acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank's form of application
and letter of credit agreement. All amounts actually paid by
Bank in respect of a letter of credit shall, when paid,
constitute an Advance under this Agreement.
4. The following Section is hereby incorporated into the Domestic
Loan Agreement:
SECTION 2.1.5 EQUIPMENT ADVANCES #2.
(a) Through April 15, 1999 Bank will make advances ("Equipment
Advance #2" and, collectively, "Equipment Advances #2") not
exceeding Five Hundred Thousand Dollars ($500,000). To evidence
the Equipment Advance #2 or the Equipment Advances #2, Borrower
shall deliver to Bank, at the time of each Equipment Advance #2
request, an invoice for the equipment to be purchased. The
Equipment Advances #2 may only be used to finance Equipment
and may not exceed 100% of the equipment invoice excluding
taxes, shipping, warranty charges, freight discounts and
installation expense. Software may constitute up to 25% of the
aggregate Equipment Advances #2.
(b) Interest accrues from the date of each Equipment Advance #2
at the rate in Section 2.1.5(d), and shall be payable monthly
for each month through October 15, 1998 (the "First Term Out
Date #2"). Any Equipment Advances #2 that are outstanding on
the First Term Out Date #2 that financed personal computer,
laptops or network equipment will be payable in thirty six (36)
equal monthly installments of principal plus all accrued
interest, beginning on September 15, 1998, and continuing on the
15th of each month thereafter through October 15,
2
<PAGE>
2001. All other Equipment Advances #2 that are outstanding on
the First Term Out Date #2 will be payable in forty eight (48)
equal monthly installments of principal plus all accrued
interest, beginning on September 15, 1998 and continuing on the
15th of each month thereafter through October 15, 2002.
(c) Interest shall accrue from the date of each Equipment
Advance #2 not amortized pursuant to Section 2.1.5(b) at the
rate specified in Section 2.1.5(d), and shall be payable
monthly for each month through April 15, 1999 (the "Second
Term Out Date #2"). Any Equipment Advances #2 that are
outstanding on the Second Term out Date #2 that financed
personal computers, laptops or network equipment, and that
have not been amortized pursuant to Section 2.1.5(b) will be
payable in thirty six (36) equal installments of principal
plus all accrued interest, beginning May 15, 1999 and
continuing on the 15th of each month thereafter through April
15, 2002. All other Equipment Advances that are outstanding
on the Second Term Out Date #2 that have not been amortized
pursuant to Section 2.1.5(b) will be payable in forty eight
(48) equal monthly installments of principal plus all accrued
interest, beginning on May 15, 1999 and continuing on the 15th
of each month thereafter through April 15, 2003. Equipment
Advances #2, once repaid, may not be reborrowed.
(d) Except as set forth in Section 2.3(b), any Equipment
Advances #2 shall bear interest at a floating per annum rate
equal to one quarter of one (0.250) percentage point above the
Prime Rate; provided that Borrower shall have the option
effective on the First Term Out Date #2 and the Second Term
Out Date #2, respectively, to select a fixed rate of interest
as to the amortizing Equipment Advances #2 to be repaid over
the following 36 months and the following 48 months. In each
case, such fixed rate shall be equal to three hundred fifty
(350) basis points above the yield of 36 month Treasury Notes
or 48 month Treasury Note, corresponding to the period of
amortization applicable to each Equipment Advance #2, in all
cases as reported in the Western Edition of The Wall Street
Journal on the date that is one (1) Business Day before the
effective date of the election. Borrower shall give written
notice to Bank to its interest rate election one (1) Business
Day prior to the effective date of such election. If Bank
does not timely receive such notice, then the applicable rate
shall be a floating rate equal to one quarter of one (0.250)
percentage point above the Prime Rate. Borrower may prepay
all or any portion of any Equipment Advances #2 without
penalty or premium, provided that any prepayment of an
Equipment Advance #2 bearing a fixed rate of interest within
the first 18 months of amortization shall be accompanied by a
prepayment fee equal to one quarter of one percent (0.250%) of
the amount of the prepayment.
(e) To obtain an Equipment Advance #2, Borrower must notify
Bank (the notice is irrevocable) by facsimile no later than
3:00 p.m. Pacific time one (1) Business Day before the day on
which the Equipment Advance #2 is to be made. The notice in
the form of Exhibit B (Payment/Advance Form) must be signed by
a Responsible Officer or designee and include a copy of the
invoice for the Equipment being financed.
5. Section 2.2 entitled "Overadvances" is hereby amended in
its entirety to read as follows:
3
<PAGE>
If, at any time or for any reason, the amount of Obligations
owed by Borrower to Bank pursuant to Sections 2.1, 2.1.1,
2.1.2 and 2.1.3 of this Agreement is greater than the lesser
of (i) the Committed Line or (ii) the Borrowing Base, Borrower
shall immediately pay to Bank, in cash, the amount of such
excess.
6. Item "(a)" under Section 2.3 entitled "Interest Rates,
Payments, and Calculations" is hereby amended in its entirety
to read as follows:
Except as set forth in Section 2.3(b), any Advances shall
accrue interest on the outstanding principal balance at a per
annum rate, at Borrower's election, of either (i) the Prime
Rate or (b) two hundred seventy five (275) basis points above
the LIBOR Rate as further detailed in the LIBOR Supplement to
Agreement attached hereto and made a part hereof.
7. The second paragraph under Section 6.3 entitled "Financial
Statement, Reports, Certificates" is hereby amended to read as
follows:
Within twenty (20) days after the last day of each month in
which (i) an Advance is outstanding (and as a condition to
Borrower requesting an Advance) AND (ii) either (A) Borrower
is not in compliance with the Liquidity covenant as described
in Section 6.14 or (B) the aggregate Advances under the
Committed Line and the Exim Committed Line exceed $5,000,000,
Borrower shall deliver to Bank a Borrowing Base Certificate
signed by a Responsible Officer, together with inventory
reports and aged listings of accounts receivable and accounts
payable.
8. The fourth paragraph under Section 6.3 entitled "Financial
Statement, Reports, Certificates" is hereby amended to read as
follows:
Bank shall have a right from time to time hereafter to audit
Borrower's Accounts at Borrower's expense, provided that such
audits will be conducted no more often than once each fiscal
year unless an Event of Default has occurred and is continuing.
9. The Section 6.14 entitled "Debt Service Coverage" is hereby
replaced in its entirety with the following:
6.14 LIQUIDITY. Borrower shall maintain cash plus short term
investments plus 50% of Accounts greater than two times
Advances under the Committed Line, including outstanding
letters of credit (including drawn but unreimbursed letters of
credit). Borrower's compliance of this covenant shall dictate
which borrowing formula shall be implemented in monitoring
Advances under the Revolving Facility as further detailed in
Section 2.1(a). Borrower's failure to comply with this
specific covenant shall not be deemed an Event of Default.
10. The following term is hereby incorporated into Section 1.1
entitled "Definitions":
"LIBOR" means the London Interbank Overseas Rate as described
in the LIBOR Supplement to Agreement attached hereto.
B. MODIFICATION(S) TO EXIM LOAN AGREEMENT.
4
<PAGE>
1. The following term set forth in Section 1.1 entitled
"Definitions" is hereby amended to read as follows:
"Maturity Date" means April 20, 1999.
2. The first paragraph under Section 2.1 entitled "Revolving
Advances" is hereby amended to read as follows:
Subject to the terms and conditions of this Exim Agreement,
Bank agrees to make Advances to Borrower in an amount not to
exceed the lowest of (i) the Exim Committed Line minus the
face amount of the any issued and outstanding letters of
credit (including drawn but unreimbursed letters of credit)
minus the Foreign Exchange Reserve, or (ii) the Borrowing Base
minus the face amount of any issued and outstanding letters of
credit (including drawn but unreimbursed letters of credit)
minus the Foreign Exchange Reserve. For purposes of this Exim
Agreement "Borrowing Base" shall mean an amount equal to (i)
ninety percent (90%) of the Exim Eligible Foreign Accounts and
(ii) seventy percent (70%) of Eligible Foreign Inventory,
minus the amount of any advance payments or deposits made by
Borrower's account debtors.
3. The following Section is hereby incorporated into the Exim
Loan Agreement:
2.1.3 FOREIGN EXCHANGE CONTRACT; FOREIGN EXCHANGE SETTLEMENTS.
Subject to the terms of this Agreement, as amended from time
to time, Borrower may utilize up to $4,500,000 for spot and
future foreign exchange contracts (the "Exchange Contracts").
Borrower shall not request an Exchange Contract at any time it
is not in compliance with any of the terms of this Agreement.
All Exchange Contracts must provide for delivery of settlement
on or before the Maturity Date. The limit available at any
time shall be reduced by the following amounts (the "Foreign
Exchange Reserve") on each day (the "Determination Date"):
(i) on all outstanding Exchange Contracts on which delivery is
to be effected or settlement allowed more than two business
days from the Determination Date, 10% of the gross amount of
the Exchange Contracts; plus (ii) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement
allowed within two business days after the Determination Date,
100% of the gross amount of the Exchange Contracts. In lieu
of the Foreign Exchange Reserve for 100% of the gross amount
of any Exchange Contract, the Borrower may request that Bank
debit Borrower's bank account with Bank for such amount,
provided Borrower has immediately available funds in such
amounts in its bank account.
Bank may, in its discretion, terminate the Exchange Contracts
at any time (a) that an Event of Default occurs or (b) that
there is not sufficient availability under the Exim Committed
Line and Borrower does not have available funds in its bank
account to satisfy the Foreign Exchange Reserve. If Bank
terminates the Exchange Contracts, and without limitation of
the FX Indemnity Provisions (as referred to below), Borrower
agrees to reimburse Bank for any and all fees, costs and
expenses relating thereto or arising in connection therewith.
Borrower shall not permit the total gross amount of all
Exchange Contracts on which delivery is to be effected and
settlement allowed in any two business day period to be more
than $3,000,000 nor shall Borrower permit the total gross
amount of all
5
<PAGE>
Exchange Contracts to which Borrower is a party,
outstanding at any one time, to exceed $4,500,000.
Borrower shall execute all standard form applications and
agreements of Bank in connection with the Exchange Contracts,
and without limiting any of the terms of such applications and
agreements, Borrower will pay all standard fees and charges of
Bank in connection with the Exchange Contracts.
Without limiting any of the other terms of this Agreement or
any such standard form applications and agreement of Bank,
Borrower agrees to indemnify Bank and hold it harmless, from
and against any and all claims, debts, liabilities, demands,
obligations, actions, costs and expenses (including, without
limitation, attorneys' fees of counsel of Bank's choice), of
every nature and description which it may sustain or incur,
based upon, arising out of, or in any way relating to any of
the Exchange Contracts or any transactions relating thereto or
contemplated thereby (collectively referred to as the "FX
Indemnity Provisions").
4. Item "(a)" entitled "Interest Rate" under Section 2.3 entitled
"Interest Rates, Payments, and Calculations" is hereby
amended, effective as of this date, in its entirety to read as
follows:
Except as provided in Section 2.3(b), any Advances under this
Exim Agreement shall bear interest at a rate equal to the
Prime Rate.
C. MODIFICATION(S) TO LOAN AGREEMENTS.
1. Section 6.10 entitled "Tangible Net Worth" is hereby amended
in its entirety to read as follows:
Borrower shall maintain, as of the last day of each fiscal
quarter, a Tangible Net Worth of not less than Thirty Million
Dollars ($30,000,000) plus seventy-five percent of the net
proceeds from the sale of Borrower's equity securities after
March 31, 1998.
2. Section 6.11 entitled "Profitability" is hereby amended in its
entirety to read as follows:
Borrower shall be profitable for each fiscal quarter and at
fiscal year end, except Borrower may suffer a loss not to
exceed $600,000 for one fiscal quarter in any fiscal year.
D. RELEASE OF IP AGREEMENT.
1. As an accommodation to Borrower and for good and valuable
consideration, including Bank's agreement to release its
security interest in all of Borrower's Intellectual Property,
Bank, with this Loan Modification Agreement, has agreed to
release its security interest in Borrower's Intellectual
Property Collateral granted under the IP Agreement and to
cancel the IP Agreement. In consideration of such release of
security interest and cancellation of the IP Agreement,
Borrower shall execute a negative pledge agreement covering
all of Borrower's Intellectual Property (the "Negative
Pledge"). Such Negative Pledge Agreement shall include
6
<PAGE>
[Loan Modification Agreement]
Borrower's agreement it shall not to encumber any of its
Intellectual Property assets without the prior written consent
of Bank.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby
amended wherever necessary to reflect the changes described above.
5. PAYMENT OF FEE. Borrower shall pay Bank the Export-Import
Bank fees in the amount of Sixty Seven Thousand Five Hundred Dollars
($67,500) (the "Exim Fee") plus a Domestic Loan Fee in the amount of Eleven
Thousand Two Hundred Fifty Dollars ($11,250) (the "Domestic Loan Fee") plus
an Equipment Loan Fee in the amount of Two Thousand Five Hundred Dollars
($2,500) (the "Equipment Loan Fee") plus all out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and
pledgor signing below) agrees that, as of the date hereof, it has no defenses
against the obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor
signing below) understands and agrees that in modifying the existing
Indebtedness, Bank is relying upon Borrower's representations, warranties,
and agreements, as set forth in the Existing Loan Documents. Except as
expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Indebtedness pursuant to
this Loan Modification Agreement in no way shall obligate Bank to make any
future modifications to the Indebtedness. Nothing in this Loan Modification
Agreement shall constitute a satisfaction of the Indebtedness. It is the
intention of Bank and Borrower to retain as liable parties all makers and
endorsers of Existing Loan Documents, unless the party is expressly released
by Bank in writing. No maker, endorser, or guarantor will be released by
virtue of this Loan Modification Agreement. The terms of this paragraph apply
not only to this Loan Modification Agreement, but also to all subsequent loan
modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification
Agreement is conditioned upon Borrower's payment of the Exim Fee, the
Domestic Loan Fee and the Equipment Loan Fee along with an executed copy of
the Negative Pledge.
This Loan Modification Agreement is executed as of the date
first written above.
BORROWER: BANK:
INVISION TECHNOLOGIES, INC. SILICON VALLEY BANK
By: /s/ Curtis P. DiSibio By: /s/ D. Edward Wohlleb
---------------------------- ----------------------------
Name: Curtis P. DiSibio Name: D. Edward Wohlleb
-------------------------- --------------------------
Title: Chief Financial Officer Title: Vice President
------------------------- --------------------------
7
<PAGE>
RELEASE OF SECURITY AGREEMENT COVERING
INTERESTS IN INVISION TECHNOLOGIES, INC.
Silicon Valley Bank ("Secured Party"), hereby releases its security
interest in the interests of InVision Technologies, Inc. in the trademarked
works set forth on Schedule A attached hereto, created by that certain
Intellectual Property Security Agreement executed by InVision Technologies,
Inc. in favor of Secured Party recorded with the United States Patent and
Trademark Office on March 4, 1997, in Reel/Frame 1560/0460.
Dated: April 15, 1998 SILICON VALLEY BANK
By: _______________________
Name: ______________________
Title: _____________________
ACKNOWLEDGMENT
STATE OF CALIFORNIA )
)ss.
COUNTY OF SANTA CLARA )
On ____________________ before me, ________________________, personally
appeared ______________________, personally known to me to be the person whose
name is subscribed to the within instrument and acknowledged to me that he/she
executed the same in his/her authorized capacity, and that by his/her signature
on the instrument the person, or the entity on behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
_________________________________
Notary Public in and for said County and
State
My Commission Expires ____________________________
<PAGE>
EXHIBIT "A"
TRADEMARKS
Description Registration Number Registration Date
Invision 2,030,463 01/14/97
2
<PAGE>
RELEASE OF SECURITY AGREEMENT COVERING
INTERESTS IN INVISION TECHNOLOGIES, INC.
Silicon Valley Bank ("Secured Party"), hereby releases its security
interest in the interests of InVision Technologies, Inc. in the patented
works set forth on Schedule A attached hereto, created by that certain
Intellectual Property Security Agreement executed by InVision Technologies,
Inc. in favor of Secured Party recorded with the United States Patent and
Trademark Office on March 4, 1997, in Reel/Frame 8376/0896.
Dated: April 15, 1998 SILICON VALLEY BANK
By: ________________________
Name: ______________________
Title: _______________________
ACKNOWLEDGMENT
STATE OF CALIFORNIA )
)ss.
COUNTY OF SANTA CLARA )
On ____________________ before me, ________________________, personally
appeared ______________________, personally known to me to be the person
whose name is subscribed to the within instrument and acknowledged to me that
he/she executed the same in his/her authorized capacity, and that by his/her
signature on the instrument the person, or the entity on behalf of which the
person acted, executed the instrument.
WITNESS my hand and official seal.
_________________________________
Notary Public in and for said County and
State
My Commission Expires ____________________________
<PAGE>
EXHIBIT "A"
PATENTS
Description Registration # Registration Date
Automatic concealed object detection system 5,367,552 11/22/94
having a pre-scan stage
Automatic concealed object detection system 5,182,764 01/26/93
having a pre-scan stage
2
<PAGE>
NEGATIVE PLEDGE AGREEMENT
This Negative Pledge Agreement is made as of April 15, 1998, by and
between InVision Technologies, Inc. ("Borrower") and Silicon Valley Bank
("Bank").
In connection with, among other documents, the Loan and Security Agreement (the
"Loan Documents") dated February 20, 1997 between Borrower and Bank, Borrower
agrees as follows:
1. Borrower shall not sell, transfer, assign, mortgage, pledge,
lease, grant a security interest in, or encumber any of
Borrower's Intellectual Property, including, without limitation,
the following:
a. Any and all copyright rights, copyright applications,
copyright registrations and like protections in each work
or authorship and derivative work thereof, whether
published or unpublished and whether or not the same also
constitutes a trade secret, now or hereafter existing,
created, acquired or held;
b. All mask works or similar rights available for the
protection of semiconductor chips, now owned or hereafter
acquired;
c. Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software
products now or hereafter existing, created, acquired or
held;
d. Any and all design rights which may be available to Borrower
now or hereafter existing, created, acquired or held;
e. All patents, patent applications and like protections
including, without limitation, improvements, divisions,
continuations, renewals, reissues, extensions and
continuations-in-part of the same, including without
limitation the patents and patent applications;
f. Any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same
and like protections, and the entire goodwill of the
business of Borrower connected with and symbolized by such
trademarks, including without limitation;
g. Any and all claims for damages by way of past, present and
future infringements of any of the rights included above,
with the right, but not the obligation, to sue for and
collect such damages for said use or infringement of the
intellectual property rights identified above;
h. All licenses or other rights to use any of the Copyrights,
Patents, Trademarks or mask works, and all license fees and
royalties arising from such use to the extent permitted by
such license or rights; and
i. All amendments, extensions, renewals and extensions of any
of the Copyrights, Trademarks, Patents, or mask works; and
<PAGE>
j. All proceeds and products of the foregoing, including
without limitation all payments under insurance or any
indemnity or warranty payable in respect of any of the
foregoing;
Notwithstanding the foregoing, the parties agree that Borrower
may: (i) in the ordinary course of its business license its
Intellectual Property to purchasers of its products and to
agents, distributors and independent contractors who provide
maintenance, support and training to such purchasers in
connection with such products and enter into standard software
escrow agreements with such purchasers; and (ii) license its
Intellectual Property in connection with any joint venture,
collaboration, strategic alliance, research and development
partnerships and arrangements; and (iii) license any of its
Intellectual Property not related to its current business.
2. It shall be an event of default under the Loan Documents between
Borrower and Bank if there is a breach of any term of this
Negative Pledge Agreement.
3. Capitalized terms used but not otherwise defined herein shall
have the same meaning as in the Loan Documents.
BORROWER:
INVISION TECHNOLOGIES, INC.
By: /s/ Curtis P. DiSibio
---------------------------
Name: Curtis P. DiSibio
-------------------------
Title: Chief Financial Officer
------------------------
BANK:
SILICON VALLEY BANK
By: /s/ D. Edward Wohlleb
--------------------------
Name: D. Edward Wohlleb
------------------------
Title: Vice President
-----------------------
<PAGE>
June 1, 1998
Mr. Curtis P. DiSibio
Vice President & CFO
Invision Technologies, Inc.
7151 Gateway Blvd.
Newark, CA 94560
RE: Invision Technologies Stock Repurchase Program
Dear Curt:
This letter is written in connection with that certain a Loan and Security
Agreement between Silicon Valley Bank (the "Bank") and Invision Technologies
Inc. ("Borrower"), dated as of February 20, 1997, and other related loan
documents (as amended from time to time, collectively, the "Credit Agreement").
Borrower has notified Bank of its intention to repurchase up to $3,000,000 worth
of its common stock before September 30, 1998 (the "Transaction"). Borrower has
requested that Bank approve the Transaction, the consummation of the which might
otherwise constitute a default under the Negative Covenants section of the
Credit Agreement.
This letter will serve as Bank's consent to the Transaction. Bank's consent
to the Transaction (1) in no way shall be deemed an agreement by the Bank to
waive the above-described covenants other than the defaults that may occur by
virtue of the Transaction, (2) shall not limit or impair the Bank's right to
demand strict performance of the covenants set forth in the Credit Agreement
following consummation of the Transaction and (3) shall not limit or impair the
Bank's right to demand strict performance of all other covenants set forth in
the Credit Agreement, at all times.
By signing below and returning a copy of this letter to Bank, Borrower
acknowledges that the Credit Agreement is hereby modified in accordance with the
provisions set forth above. Borrower further understands and agrees that in
modifying the Credit Agreement, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Credit Agreement. Except as
expressly modified pursuant to this letter, the terms of the Credit Agreement
shall remain unchanged and in full force and effect. Bank's agreement to modify
the Credit Agreement in accordance with the provisions set forth in this letter
in no way shall obligate Bank to make any future waivers or modifications to
the Credit Agreement. Nothing in this letter shall constitute a satisfaction of
the Borrower's indebtedness to Bank. It is the intention of Bank and Borrower
to retain as liable parties all makers and endorsers of the Credit Agreement,
unless the party is expressly released by in writing. No maker, endorser or
guarantor will be released by virtue of this letter. The terms of this
paragraph apply not only to this letter, but also to all subsequent loan
modification agreements.
Very truly yours,
/s/ D. Edward Wohlleb
D. Edward Wohlleb, Vice President
SILICON VALLEY BANK
<PAGE>
Mr. Curtis P. DiSibio
Invision Technologies, Inc.
June 1, 1998
Page 2
Accepted:
By executing below, the undersigned acknowledges and confirms the effectiveness
of this letter to consent to the Transaction.
By: /s/ Curtis P. DiSibio
---------------------------
Its: Chief Financial Officer
--------------------------
Dated: June 8, 1998
-----------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONDENSED CONSOLIDATED BALANCE SHEETS, STATEMENTS OF OPERATIONS AND
STATEMENTS OF CASH FLOW INCLUDED IN THE COMPANY'S QUARTERLY REPORT ON FORM
10-Q FOR THE PERIOD ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 12337
<SECURITIES> 2020
<RECEIVABLES> 20673
<ALLOWANCES> 0
<INVENTORY> 11642
<CURRENT-ASSETS> 48104
<PP&E> 11112
<DEPRECIATION> 3314
<TOTAL-ASSETS> 57641
<CURRENT-LIABILITIES> 13963
<BONDS> 0
0
0
<COMMON> 12
<OTHER-SE> 42444
<TOTAL-LIABILITY-AND-EQUITY> 57641
<SALES> 31312
<TOTAL-REVENUES> 31312
<CGS> 17288
<TOTAL-COSTS> 9977
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82
<INCOME-PRETAX> 4400
<INCOME-TAX> 528
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3872
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.30
</TABLE>
