<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Period Ended September 30, 1997
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: 0-20765
SUNRISE ASSISTED LIVING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 54-1746596
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
9401 LEE HIGHWAY, SUITE 300
FAIRFAX, VIRGINIA 22031
(Address of principal executive offices)
(703) 273-7500
(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 periods that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
As of October 30, 1997, there were 18,799,925 shares of the
Registrant's Common Stock outstanding.
================================================================================
<PAGE> 2
SUNRISE ASSISTED LIVING, INC.
FORM 10-Q
SEPTEMBER 30, 1997
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 1997 and
December 31, 1996 3
Consolidated Statements of Operations for the three months
ended September 30, 1997 and 1996 and nine months ended
September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
</TABLE>
2
<PAGE> 3
SUNRISE ASSISTED LIVING, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---------------------------------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $112,582 $101,811
Accounts receivable, less allowance of $1,300
and $927 3,720 1,522
Marketable securities - 8,322
Prepaid and other current assets 2,408 2,394
---------------- ---------------
Total current assets 118,710 114,049
Property and equipment, net 353,657 216,711
Investment 7,614 5,750
Restricted cash and cash equivalents 1,808 1,720
Deferred financing costs, net 6,102 2,967
Other assets 5,969 1,642
---------------- ---------------
Total assets $493,860 $342,839
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 10,430 $ 8,331
Deferred revenue 1,690 2,021
Other current liabilities 694 103
Current maturities of long-term debt 1,401 772
---------------- ---------------
Total current liabilities 14,215 11,227
Notes payable to affiliated partnerships 94 1,421
Interests in unconsolidated partnerships and
minority interests 558 1,049
Long-term debt, less current maturities 288,416 143,318
---------------- ---------------
Total liabilities 303,283 157,015
Preferred stock, $0.01 par value, 10,000,000 shares
authorized, no shares issued and outstanding - -
Common stock, $0.01 par value, 60,000,000 shares
authorized, 18,799,450 and 18,529,869 shares issued
and outstanding in 1997 and 1996 188 185
Contributed capital 204,196 201,274
Accumulated deficit (13,807) (15,635)
---------------- ---------------
Total stockholders' equity 190,577 185,824
---------------- ---------------
Total liabilities and stockholders' equity $493,860 $342,839
================ ===============
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See accompanying notes.
3
<PAGE> 4
SUNRISE ASSISTED LIVING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenue $24,264 $11,567 $59,463 $32,567
Operating expenses:
Facility operating 14,541 6,825 35,937 19,368
Facility development and pre-rental 1,086 688 3,907 1,338
General and administrative 2,672 2,549 8,028 6,962
Depreciation and amortization 2,956 1,063 6,533 2,867
Facility lease 775 34 1,062 98
------------- ------------- ------------- -------------
22,030 11,159 55,467 30,633
Income from operations 2,234 408 3,996 1,934
Other income (expense):
Interest income 2,093 1,189 5,014 1,889
Interest expense (3,080) (2,115) (7,346) (7,537)
------------- ------------- ------------- -------------
Total other expense (987) (926) (2,332) (5,648)
Equity in earnings of unconsolidated
partnerships and minority interests 71 28 164 117
Unusual charge (Note 7) - - - (981)
------------- ------------- ------------- -------------
Net income (loss) $1,318 $ (490) $ 1,828 $ (4,578)
============= ============= ============= =============
Net income (loss) per share data:
- ---------------------------------
Primary:
Net income (loss) per common and common
equivalent share $ 0.07 $ (0.03) $ 0.09 $ (0.59)
============= ============= ============= =============
Weight average number of common and common
equivalent shares outstanding 20,078,422 14,251,413 19,738,760 9,850,170
============= ============= ============= =============
Fully diluted:
Net income per common and common
equivalent share $ 0.07 $ 0.09
============= =============
Weighted average number of common and common
equivalent shares outstanding 20,155,192 20,014,426
============= =============
</TABLE>
See accompanying notes.
4
<PAGE> 5
SUNRISE ASSISTED LIVING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30,
1997 1996
-----------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 1,828 $ (4,578)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Equity in earnings of unconsolidated partnerships and minority
interests (165) (117)
Provision for bad debts 373 369
Depreciation and amortization 6,532 2,867
Amortization of financing costs and discount on long-term debt 793 522
Changes in operating assets and liabilities:
(Increase) decrease:
Accounts receivable (2,571) (1,449)
Prepaid and other current assets (14) 1,557
Other assets (5,264) (491)
Increase (decrease):
Accounts payable and accrued expenses 2,099 329
Deferred revenue (331) 46
Other liabilities 591 (119)
-------------- -------------
Net cash provided by (used in) operating activities 3,871 (1,064)
INVESTING ACTIVITIES:
Increase in restricted cash and cash equivalents (88) (95)
Acquisition of interests in facilities (262) (18)
Investment in property and equipment (141,731) (52,853)
Purchases of investments (1,864) (88,377)
Proceeds from maturities of marketable securities 8,322 55,483
Distribution from investment in unconsolidated partnerships 88 183
-------------- -------------
Net cash used in investing activities (135,535) (85,677)
FINANCING ACTIVITIES:
Dividends paid - (348)
Net proceeds from initial public offering of common stock - 104,296
Organization costs paid (328) (123)
Net proceeds from sale of Series B exchangeable preferred stock - 10,000
Redemption of Series B exchangeable preferred stock - (10,000)
Net proceeds from exercised options 2,926 141
Distributions to partners - (390)
Net investment of minority interests - (41)
Additional borrowings under long-term debt 203,670 23,647
Repayment of long-term debt (58,405) (16,891)
Financing costs paid (4,101) (1,415)
Advance to affiliate - (1,746)
Repayment of related party note payable (1,327) (114)
-------------- -------------
Net cash provided by financing activities 142,435 107,016
-------------- -------------
Net increase in cash and cash equivalents 10,771 20,275
Cash and cash equivalents at beginning of period 101,811 6,252
-------------- -------------
Cash and cash equivalents at end of period $ 112,582 $ 26,527
============== =============
</TABLE>
See accompanying notes.
5
<PAGE> 6
SUNRISE ASSISTED LIVING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared by the Company and include all normal recurring adjustments which are,
in the opinion of management, necessary for a fair presentation of the results
for the three- and nine-month periods ended September 30, 1997 and 1996
pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X.
Certain information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. These
consolidated financial statements should be read in conjunction with the
Company's consolidated financial statements and the notes thereto for the year
ended December 31, 1996 included in the Company's 1996 Annual Report to
Stockholders. Operating results for the three- and nine-month period ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1997. Unless the context
indicates otherwise, the Company means Sunrise Assisted Living, Inc. and its
consolidated subsidiaries.
Certain 1996 balances have been reclassified to conform with the 1997
presentation.
2. LONG-TERM DEBT
Long-term debt was $289.8 million at September 30, 1997, excluding
notes payable to affiliated entities, compared to $144.1 million at December
31, 1996. On June 6, 1997, the Company issued and sold $150 million aggregate
principal amount of 5 1/2% convertible subordinated notes due 2002 (the
"Notes"). The Notes bear interest at 5 1/2% per annum from June 6, 1997,
payable semiannually on June 15 and December 15 of each year, commencing
December 15, 1997. The conversion price is $37.1875 (equivalent to a
conversion rate of 26.89 shares per $1,000 principal amount of the Notes). The
Notes mature on June 15, 2002. The Notes are redeemable at the option of the
Company commencing June 15, 2000, at specified premiums. The holders of the
Notes may require the Company to repurchase the Notes upon a Change of Control
(as defined) of the Company. The net proceeds to the Company from the sale of
the Notes, after deducting underwriting discounts and offering expenses, were
approximately $145.6 million. On June 10, 1997, the Company used $57.7 million
of the net proceeds to pay down floating rate indebtedness from four financial
institutions at a weighted average interest rate of 8.4%. The Company also has
renegotiated interest rate reductions from LIBOR plus 2.75% to corresponding
U.S. Treasuries plus 1.00% on $15.7 million of credit facilities.
The Company has an $86.8 million dollar multi-property mortgage (the
"Multi-Property Mortgage"), collateralized by a blanket first mortgage on all
assets of a subsidiary of the Company, which consists of 15 facilities. The
Multi-Property Mortgage consists of two separate debt classes: Class (A) in
the amount of $65.0 million bears a fixed interest rate of 8.56% and is
interest only until the maturity date of May 31, 2001; Class (B) in the
amount of $21.8 million bears a variable interest rate. In June 1996, the
interest rate applicable to the floating rate debt was reduced from LIBOR plus
5.75% to LIBOR plus 3.75% and effective March 4, 1997, it was further reduced
to LIBOR plus 1.75%.
6
<PAGE> 7
SUNRISE ASSISTED LIVING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
2. LONG-TERM DEBT (CONTINUED)
A subsidiary of the Company has obtained a $90.0 million line of
credit for construction and interim loans to finance the development of up to
10 assisted living facilities of a wholly-owned subsidiary of the Company (see
Note 8). The Company guaranteed the repayment of all amounts outstanding under
this credit facility. The credit facility is for a term of five years and is
secured by cross-collateralized first mortgages on the real property and
improvements and first liens on all other assets of the subsidiary. Advances
under the facility bear interest at LIBOR plus 1.5%. On June 10, 1997, the
Company paid down $31.9 million of the outstanding loan balance using proceeds
received from the sale of the Notes. As of September 30, 1997, there were
$700,000 of advances outstanding under this facility and available credit
remaining of $57.4 million.
A subsidiary of the Company has received a commitment for a $51.0
million revolving construction credit facility. The Company closed $32.1
million of the total commitment. The credit facility provides for construction
and interim loans to finance the development of up to seven assisted living
facilities. The Company has agreed to guarantee the repayment of all amounts
outstanding under this credit facility. The credit facility is for a term of
five years and is secured by cross-collateralized first mortgages on the real
property and liens on receivables. Advances under the credit facility bear
variable interest rates based upon LIBOR plus 2.25% to LIBOR plus 2.60%. As of
September 30, 1997, there were $4.7 million of advances outstanding under this
facility.
The Company has entered into a swap transaction whereby effective
during the period June 18, 1998 through June 18, 2001, outstanding advances of
up to $19.0 million LIBOR floating rate debt bear interest at a fixed rate
based on a fixed LIBOR base rate of 7.3%. The Company has entered into another
swap transaction whereby effective during the period August 20, 1997 through
April 1, 2003, outstanding advances of up to $7.0 million under LIBOR floating
rate debt bear interest at a fixed LIBOR base rate of 7.14%.
3. STOCK OPTION PLANS
The Company has stock option plans providing for the grant of
incentive and non-qualified stock options to employees, directors, consultants
and advisors for a fixed number of shares with an exercised price generally
equal to the fair value of the shares at the date of grant. The Company
accounts for stock options grants in accordance with APB Opinion No. 25,
Accounting for Stock Issued to the Employees and accordingly recognizes no
compensation expense for the stock option grants.
7
<PAGE> 8
SUNRISE ASSISTED LIVING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
3. STOCK OPTION PLANS (CONTINUED)
A summary of the Company's stock option activity and related
information as of September 30, 1997, are presented below:
<TABLE>
<CAPTION>
WEIGHTED-
SHARES AVERAGE
FIXED OPTIONS (000) EXERCISE PRICE
- --------------------------------- ------------------------------------
<S> <C> <C>
Outstanding - December 31, 1996 2,557 $17.79
Granted 1,103 25.57
Exercised (270) 10.85
Forfeited (177) 22.25
- --------------------------------- --------------
Outstanding - September 30, 1997 3,213
==============
Exercisable - September 30, 1997 657
==============
</TABLE>
The following table summarizes information about stock options
outstanding at September 30, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------------------------------------------
Weighted- Weighted- Weighted
Number Average Average Number Average
Range of Outstanding Remaining Exercise exercisable Exercise
Exercise Prices (000) Contractual Life Price (000) Price
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 3.00 to 8.00 523 7.68 $ 6.38 339 $ 6.95
10.50 to 20.00 580 8.56 16.46 233 17.44
21.50 to 25.63 1,907 9.38 25.00 70 25.07
29.94 to 33.38 203 9.90 30.86 15 32.50
---------------- --------------
$ 3.00 to 33.38 3,213 657
================ ==============
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
The Company's previously announced growth objectives include
developing at least 55 new Sunrise model assisted living facilities with an
additional resident capacity of more than 4,500 by the end of 1999. To date,
the Company has completed development of 18 such facilities with a resident
capacity of 1,618 (Alexandria, VA, Norwood, MA, Wayne, NJ, Wayland, MA,
Westfield, NJ, Rockville, MD, Philadelphia, PA (3), Old Tappan, NJ, Morris
Plains, NJ, Severna Park, MD (2), Springfield, VA, Oakton, VA, Petaluma, CA,
Blue Bell, PA, and Columbia, MD) and has 19 facilities currently under
construction with a resident capacity of 1,701. The Company also has entered
into contracts to purchase 31 additional sites and to lease three additional
sites. The Company is pursuing additional development opportunities and also
plans to acquire additional facilities as market conditions warrant.
8
<PAGE> 9
SUNRISE ASSISTED LIVING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
5. ACQUISITIONS
On January 10, 1997, the Company entered into three purchase and sale
agreements, giving the Company the right to purchase three properties in
California for $17.6 million. One property was leased by the Company on April
1, 1997 and subsequently acquired on August 19, 1997 for $7.4 million, and the
remaining two properties that are currently under construction were acquired by
the Company on February 24, 1997 and August 19, 1997, respectively, for a total
purchase price of $10.2 million.
On May 1, 1997, the Company purchased the minority 50% interest held
by an unrelated third party in the Raleigh facility. The purchase price of
approximately $1.0 million was based on a buy-out schedule specified in the
operating agreement of the limited liability company that holds title to the
property. The Raleigh facility is now 100% owned by the Company.
On February 5, 1997, the Company acquired a 120-unit assisted and
independent living facility in Valencia, California. The acquisition price was
$13.8 million in cash. The pro forma unaudited results of operations for the
nine-month periods ended September 30, 1997 and 1996, assuming consummation of
each purchase as of January 1, are as follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------
1997 1996
--------------- --------------
<S> <C> <C>
Operating revenue $ 60,286 $ 36,626
Net income (loss) $ 1,993 $ (3,682)
Primary net income per weighted average common
share outstanding $ 0.10 -
Fully diluted net income per weighted average
common share outstanding $ 0.10 -
</TABLE>
6. NET INCOME PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of outstanding stock options and warrants will be
excluded. The impact is expected to result in primary net income (loss) per
share for the three months ended September 30, 1997 and 1996 of $0.07 and
$(0.03) per share, respectively; and primary net income (loss) per share for
the nine months ended September 30, 1997 and 1996 of $0.10 and $(0.48) per
share, respectively. The impact of statements 128 on the calculation of fully
diluted earnings per share for these quarters is not expected to be material.
The Company's per share calculations are based upon the weighted
average number of shares of Common Stock outstanding. Pursuant to the
requirements of the Securities and Exchange
9
<PAGE> 10
SUNRISE ASSISTED LIVING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
6. NET INCOME PER SHARE (CONTINUED)
Commission (SEC) staff accounting bulletin No. 83, options to purchase Common
Stock issued at prices below the initial public offering price during the
twelve months immediately preceding the initial filing of the registration
statement relating to the offering have been included in the 1996 computation
of net loss per share as if they were outstanding for all periods presented
prior to the offering (using the treasury method assuming repurchase of common
stock at the estimated offering price). Other shares issuable upon the
exercise of stock options or conversion of redeemable convertible preferred
stock have been excluded from the 1996 computation because the effect of their
inclusion would be anti-dilutive. Subsequent to the Company's offering,
options and warrants under the treasury stock method and convertible
subordinated notes under the if-converted method are included to the extent
they are dilutive.
7. UNUSUAL CHARGE
To avoid a possible change in the Company's ability to continue to
manage two facilities resulting from the reduction in the ownership interest in
the Company of Paul J. Klaassen, the Company's Chairman of the Board, Chief
Executive Officer and co-founder, and Teresa M. Klaassen, the Company's
Executive Vice President and co-founder (collectively, the "Klaassens")
following the Company's June 1996 initial public offering, the Company made a
$1,000,000 cash payment to the third-party limited partner in these two
facilities in June 1996. The payment was made in exchange for the transfer to
the Company by the third-party of additional 1% partnership interests in each
facility with a total book value of $18,700 and the elimination of any
requirement for the Klaassens to maintain a specified ownership interest in the
Company.
8. SUBSEQUENT EVENT
The Company obtained a commitment on November 3, 1997 (subject to
completion of final definitive agreements) from a financial institution for a
$200.0 million line of credit. This commitment is an expansion of the $90.0
million line of credit (see Note 2) for a wholly owned subsidiary of the
Company. The expanded facility is for general corporate purposes including the
construction and development of assisted living facilities. The Company will
guarantee the repayment of all amounts outstanding under this facility. The
facility is for a term of three years with the right to extend, and is secured
by cross collateralized first mortgages on the real property and improvements
and first liens on all assets of the subsidiary. Advances under the facility
bear interest from LIBOR plus 1.0% to 1.5%.
On October 16, 1997, a wholly owned subsidiary of the Company became a
member of a limited liability company ("LLC") with an unrelated third party in
which the Company's subsidiary will own a 9% minority interest. The purpose of
the LLC is to develop, construct, and own assisted living facilities. The
Company loaned the LLC $15 million to help finance initial development and
construction.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's discussion and analysis contains certain forward-looking
statements relating to the Company's development and acquisition programs over
the next three years that involve risks and uncertainties. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including, among
others, development and construction risks, acquisition risks, licensing risks,
business conditions, risks of downturns in economic conditions generally,
satisfaction of closing conditions and availability of financing for
development and acquisitions. Unless the context suggests otherwise,
references herein to the "Company" or "Sunrise" means Sunrise Assisted Living,
Inc. and its subsidiaries.
OVERVIEW
The Company is a leading provider of assisted living services to the
elderly. The Company currently operates 54 facilities in 11 states with a
capacity of approximately 4,850 residents, including 48 facilities owned by the
Company or in which it has ownership interests and six facilities managed for
third parties. The Company also operates two skilled nursing facilities owned
by a third party.
The Company reported net income of $1.3 million, or $0.07 per share,
on revenue of $24.3 million for the three months ended September 30, 1997,
compared to a net loss of $0.5 million or $(0.03) per share, on revenue of
$11.6 million for the three months ended September 30, 1996. The Company
reported net income of $1.8 million, or $0.09 per share, on revenue of $59.5
million for the nine months ended September 30, 1997, compared to a net loss of
$4.6 million, or $(0.59) per share, on revenue of $32.6 million for the nine
months ended September 30, 1996, including an unusual charge of $1.0 million.
Without the one-time unusual charge, the Company's net loss for the nine months
ended September 30, 1996 would have been $3.6 million.
The Company has obtained a commitment on October 24, 1997 (subject to
certain conditions) from a financial institution for a $200.0 million line of
credit. This commitment is an expansion of a $90.0 million line of credit (see
Note 2) for a wholly owned subsidiary of the Company. The expanded facility is
for general corporate purposes including the construction and development of
assisted living facilities. The Company will guarantee the repayment of all
amounts outstanding under this facility. The facility is for a term of three
years with the right to extend, and is secured by cross collateralized first
mortgages on the real property and improvements and first liens on all assets
of the subsidiary. Advances under the facility will bear interest from LIBOR
plus 1.0% to 1.5%. The Company also has renegotiated interest rate reductions
from LIBOR plus 2.75% to corresponding U.S. Treasuries plus 1.00% on $15.7
million of credit facilities.
On June 6, 1997, the Company issued and sold $150.0 million aggregate
principal amount of 5 1/2% convertible subordinated notes due 2002 (the
"Notes"). The Notes bear interest at 5 1/2% per annum from June 6, 1997,
payable semiannually on June 15 and December 15 of each year, commencing
December 15, 1997. The conversion price is $37.1875 (equivalent to a
conversion rate of 26.89 shares per $1,000 principal amount of the Notes). The
Notes mature on June 15, 2002. The Notes are redeemable at the option of the
Company commencing June 15, 2000, at specified premiums. The holders of the
Notes may require the Company to repurchase the Notes upon a Change of Control
(as defined) of the Company. The net proceeds to the Company from the sale of
the Notes, after deducting underwriting discounts and offering expenses, were
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
approximately $145.6 million. On June 10, 1997, the Company used $57.7 million
of the net proceeds to pay down floating rate indebtedness from four financial
institutions at a weighted average interest rate of 8.4%. The Company expects
to use the balance of the net proceeds to fund continued development of new
Sunrise model facilities and for possible acquisitions, as well as for working
capital and general corporate purposes.
On May 1, 1997, the Company purchased the minority 50% interest held
by an unrelated third party in its Raleigh facility. The purchase price of
approximately $1.0 million was based on a buy-out schedule provided in the
operating agreement of the limited liability company that holds title to the
property. The Raleigh facility is now 100% owned by the Company.
On February 5, 1997, the Company acquired a 120-unit assisted and
independent living facility in Valencia, California. The acquisition price was
$13.8 million in cash. On January 10, 1997, the Company entered into three
purchase and sale agreements, giving the Company the right to purchase three
properties in California for $17.6 million. One property was leased by the
Company on April 1, 1997 and was subsequently acquired on August 19, 1997 for
$7.4 million. The remaining two properties are currently under construction and
were acquired by the Company on February 24, 1997 and August 19, 1997,
respectively, for a total purchase price of $10.2 million.
On October 8, 1996, the Company completed its acquisition of five
properties located in the southeast United States for an aggregate purchase
price of $34.0 million in cash with no debt assumed. The five facilities
consist of 498 total units providing primarily independent and assisted living
services.
In addition to the acquisitions mentioned above, results for the
quarter and year to date ended September 30, 1997 include the operations of 18
Sunrise developed facilities with a combined resident capacity of approximately
1,616 opened in 1996 and 1997:
<TABLE>
<CAPTION>
FACILITY LOCATION DATE OPENED
<S> <C> <C>
Sunrise of Raleigh Raleigh, NC February 1996
Sunrise of Blue Bell Blue Bell, PA October 1996
Sunrise of Columbia Columbia, MD December 1996
Sunrise of Hunter Mill Oakton, VA February 1997
Sunrise of Petaluma Petaluma, CA March 1997
Sunrise of Springfield Springfield, VA May 1997
Sunrise of Severna Park (2) facilities Severna Park, MD May 1997
Sunrise of Morris Plains Morris Plains, NJ May 1997
Sunrise of Old Tappan Old Tappan, NJ June 1997
Sunrise of Granite Run Granite Run, PA June 1997
Sunrise of Abington (2) facilities Abington, PA June 1997
Sunrise of Rockville Rockville, MD July 1997
Sunrise of Alexandria Alexandria, VA August 1997
Sunrise of Wayne Wayne, NJ September 1997
Sunrise of Norwood Norwood, MA September 1997
Sunrise of Wayland Wayland, MA September 1997
</TABLE>
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
In addition, the Company opened a Sunrise model facility in October
1997, in Westfield, NJ.
The Company's previously announced growth objectives include
developing at least 55 new Sunrise model assisted living facilities with an
additional resident capacity of more than 4,500 by the end of 1999. To date,
the Company has completed development of 18 such facilities with a resident
capacity of 1,618 and has 19 facilities currently under construction with a
resident capacity of 1,701. The Company has also entered into contracts to
purchase 31 additional sites and to lease three additional sites. The Company
is pursing additional development opportunities and also plans to acquire
additional facilities as market conditions warrant.
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1996
Operating Revenue. Operating revenue for the three months ended
September 30, 1997 increased 109.8% to $24.3 million from $11.6 million for the
three months ended September 30, 1996 due primarily to the growth in resident
fees. Resident fees (including community fees) and fees for Basic Care
(assistance with activities of daily living and other personalized support
services), Assisted Living Plus Care ("Plus Care") (additional specialized care
and services to residents with low acuity medical needs), and Alzheimer's Care
(specialized care and services to residents with Alzheimer's disease or other
forms of dementia) for the three months ended September 30, 1997 increased
$12.3 million compared to the three months ended September 30, 1996. This
increase was due primarily to the inclusion, for the three months ended
September 30, 1997, of $8.0 million of total revenue generated from the
openings of eighteen Sunrise developed facilities and additional total revenue
of $4.5 million generated from the operations of acquired facilities. The
remaining increase of $0.2 million was attributed to changes in average
resident occupancy, average daily rate, and management services income.
Average resident occupancy for owned facilities operated by the
Company for at least 12 months or that have achieved stabilization of 95%
("Stabilized Facilities"), increased to 94.4% for the three months ended
September 30, 1997 from 93.8% for the three months ended September 30, 1996.
The average daily resident fee (excluding community fees) for Stabilized
Facilities decreased to $78 in the three months ended September 30, 1997 from
$82 in the three months ended September 30, 1996. This decrease is due to the
inclusion of acquired facilities with a combined average daily resident fee
(excluding community fees) of $66 in the three months ended September 30, 1997.
Acquired facilities have a greater number of independent living units, which
accounts for the lower average resident fee at the acquired facilities.
Excluding acquired facilities, the average daily resident fee (excluding
community fees) increased to $84 in the three months ended September 30, 1997
due to an increase in the Basic Care rate and an increase in the number of
residents receiving Plus care number and Alzheimer's Care Services.
Operating Expenses. Operating expenses for the three months ended
September 30, 1997 increased by 97.4% to $22.0 million from $11.2 million for
the three months ended September 30, 1996. The increase in operating expenses
for the quarter ended September 30, 1997 was attributable primarily to the
growth in facility operating, development and pre-rental, and depreciation and
amortization expenses.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Facility operating expenses for the three months ended September 30,
1997, increased 113.0% to $14.5 million from $6.8 million in the three months
ended September 30, 1996. As a percentage of operating revenue, facility
operating expenses in the three months ended September 30, 1997, increased to
59.9% from 59.0% in the three months ended September 30, 1996. Of the $7.7
million increase, $7.8 million was attributable to expenses from the operations
of acquired and new Sunrise developed facilities. Facility operating expenses
at existing facilities decreased $0.1 million.
Facility development and pre-rental expenses for the three months
ended September 30, 1997 increased $0.4 million to $1.1 million from $0.7
million for the three months ended September 30, 1996. This was due to a $0.4
million increase in facility pre-rental costs, a $1.1 million increase in
non-capitalized labor plus related development costs offset, in part, by an
increase in other capitalized expenses of $1.1 million. Such increases reflect
the additional cumulative number of facilities currently under construction and
under contract of 53 compared to 37 as of September 30, 1996.
General and administrative expenses in the three months ended
September 30, 1997 increased 4.8% to $2.7 million from $2.5 million in the
three months ended September 30, 1996. As a percentage of operating revenue,
general and administrative expenses in the three months ended September 30,
1997, decreased to 11.0% from 22.0% in the three months ended September 30,
1996, reflecting higher operating revenue in the 1997 period. The $0.1 million
increase in general and administrative expenses in the three months ended
September 30, 1997 was related to a $0.2 million increase in labor costs,
primarily attributable to hiring and training additional staff, and a $0.1
million decrease in other corporate expenses.
Depreciation and amortization in the three months ended September 30,
1997 compared to the three months ended in September 30, 1996 increased $1.9
million, or 178%, to $3.0 million primarily due to acquisitions and the opening
of new Sunrise developed facilities.
Facility lease expense represents rent expense on five facilities that
are leased but not owned by the Company. Three of these facilities were
developed by the Company and opened in the second and third quarters of 1997.
The Company leased another facility on April 1, 1997, which was subsequently
acquired on August 19, 1997.
Other income (expense). Interest income increased to $2.1 million for
the three months ended September 30, 1997 compared to $1.2 million for the
three months ended September 30, 1996. This increase was due primarily to the
investment of funds received from the Company's initial public offering and
follow-on public offering completed during 1996, as well as funds received from
the Notes issued and sold in June 1997. Interest expense increased for the
three months ended September 30, 1997 to $3.1 million from $2.1 million for the
three months ended September 30, 1996. Of this increase, $2.2 million was due
to accrued interest on the $150.0 million aggregate principal amount of the
Notes, offset, in part, by an increase in capitalized interest of $1.2 million.
Net income (loss). Net income was $1.3 million for the three months
ended September 30, 1997 compared to a net loss of $0.5 million for the three
months ended September 30, 1996. The $1.8 million change was primarily
attributable to a $12.7 million increase in operating revenue, offset, in part,
by a $10.9 million increase in operating expense.
14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
Operating Revenue. Operating revenue for the nine months ended
September 30, 1997 increased 82.6% to $59.5 million from $32.6 million for the
nine months ended September 30, 1996 due primarily to the growth in resident
fees. Resident fees for the nine months ended September 30, 1997 increased
$26.6 million compared to the nine months ended September 30, 1996. This
increase was due primarily to the inclusion, for the nine months ended
September 30, 1997, of additional total revenue of $13.2 million of total
revenue generated from eighteen Sunrise model facilities opened in 1996 and
1997, and $12.8 million generated from the operations of eight acquired
facilities. Additional revenue of $0.9 million was generated by changes in the
average daily rate, average resident occupancy, and management services income.
Average resident occupancy for Stabilized Facilities increased to
94.3% for the nine months ended September 30, 1997 from 89.9% for the nine
months ended September 30, 1996. The average daily resident fee (excluding
community fees) for Stabilized Facilities decreased to $79 in the nine months
ended September 30, 1997 from $82 in the nine months ended September 30, 1996.
The decrease is due to the inclusion of acquired facilities with a combined
average daily resident fee (excluding community fees) of $65 in the nine months
ended September 30, 1996. Excluding acquired facilities, the average daily
resident fee (excluding community fees) increased to $84 in the nine months
ended September 30, 1997 due to an increase in the Basic Care rate and an
increase in the number of residents receiving Plus Care and Alzheimer's Care
services.
Operating Expenses. Operating expenses for the nine months ended
September 30, 1997 increased by 81.1% to $55.5 million from $30.6 million for
the nine months ended September 30, 1996. The increase in operating expenses
was attributable primarily to the growth in facility operating, facility
development and pre-rental and depreciation and amortization expenses.
Facility operating expenses for the nine months ended September 30,
1997 increased 85.6% to $35.9 million from $19.4 million in the nine months
ended September 30, 1996. As a percentage of operating revenue, facility
operating expenses in the nine months ended September 30, 1997 increased to
60.4% from 59.5% in the nine months ended September 30, 1996. The $16.5
million increase, was primarily related to expenses from the operations of
eight acquired and 18 developed facilities.
Facility development and pre-rental expenses for the nine months ended
September 30, 1997 increased $2.6 million to $3.9 million from $1.3 million for
the nine months ended September 30, 1996. This was due to a $1.6 million
increase in facility pre-rental costs, a $3.7 million increase in
non-capitalized labor and related development costs offset, in part, by an
increase in other capitalized expenses of $2.7 million. Such increases reflect
the additional cumulative number of facilities currently under construction and
under contract of 53 compared to 37 as of September 30, 1996.
General and administrative expenses in the nine months ended September
30, 1997 increased 15.3% to $8.0 million from $7.0 million in the nine months
ended September 30, 1996. As a percentage of operating revenue, general and
administrative expenses in the nine months ended September 30, 1997 decreased
to 13.5% from 21.4% in the nine months ended September 30,
15
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
1996. Of the $1.1 million increase in general and administrative expenses in
the nine months ended September 30, 1997, $0.8 million was related to labor
costs, attributable to hiring and training additional staff headquarters and
regional office staff. The remaining $0.3 million was attributable to
increases in various other corporate expenses.
Depreciation and amortization in the nine months ended September 30,
1997 compared to the nine months ended in September 30, 1996 increased $3.6
million, or 127.9%, to $6.5 million from $2.9 million primarily due to the
acquisition of facilities and the opening of eighteen developed facilities.
Facility lease expense represents rent expense on five facilities that
are leased but not owned by the Company. Three of these facilities were
developed by the Company and opened in the second and third quarters of 1997.
The Company leased another facility on April 1, 1997, which was subsequently
acquired on August 19, 1997.
Other income (expense). Interest income increased to $5.0 million for
the nine months ended September 30, 1997 compared to $1.9 million for the nine
months ended September 30, 1996. This increase was due primarily to the
investment of net proceeds received from the Company's initial public offering
and follow-on public offering completed during 1996, as well as net proceeds
received from the issuance and sale of the Notes in June 1997. Interest
expense decreased for the nine months ended September 30, 1997 to $7.3 million
from $7.5 million for the nine months ended September 30, 1996. Of this
decrease, $3.5 million was due to an increase in capitalized interest offset,
in part, by $3.1 million of accrued interest on $150.0 million aggregate
principal amount of Notes and a $0.2 million increase of interest for
additional borrowings.
Net income (loss). The Company had net income of $1.8 million for
the nine months ended September 30, 1997, compared to a net loss of $4.6
million for the nine months ended September 30, 1996. The $6.4 million change
was primarily attributable to a $26.9 million increase in revenue, a $3.3
million decrease in net interest expense and a $1.0 million increase from a one
time unusual charge in 1996 offset, in part, by a $24.8 million increase in
operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has financed its operations from long-term
borrowings, equity offerings and cash generated from operations. At September
30, 1997, the Company had $289.8 million of outstanding debt (excluding notes
payable to affiliates) at a weighted average interest rate of 6.6%. Of such
amount, the Company had $258.6 million of fixed-rate debt (excluding a $1.5
million loan discount) at a weighted average interest rate of 6.5%, and $31.2
million of variable rate debt at a weighted average interest rate of 7.6%.
Increases in prevailing interest rates could increase the Company's interest
payment obligations relating to variable-rate debt.
On June 6, 1997, the Company issued and sold $150.0 million aggregate
principal amount of 5 1/2% convertible subordinated notes due 2002 (the
"Notes"). The Notes bear interest at 5 1/2% per annum from June 6, 1997,
payable semiannually on June 15 and December 15 of each year, commencing
December 15, 1997. The conversion price is $37.1875 (equivalent to a
conversion rate of 26.89 shares per $1,000 principal amount of the Notes). The
Notes will mature on June 15, 2002. The Notes are redeemable at the option of
the Company commencing June 15, 2000, at
16
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
specified premiums. The holders of the Notes may require the Company to
repurchase the Notes upon a Change of Control (as defined) of the Company. The
net proceeds to the Company from the sale of the Notes, after deducting
underwriting discounts and offering expenses, were approximately $145.6
million. On June 10, 1997, the Company used $57.7 million of the net proceeds
to pay down floating rate indebtedness from four financial institutions with a
combined weighted average interest rate of 8.4%. The Company expects to use
the balance of the net proceeds and the recent expansion of an existing credit
facility to fund continued development of new Sunrise model facilities and for
possible acquisitions as well as for working capital and general corporate
purposes.
The Company has also renegotiated interest rate reductions from LIBOR
plus 2.75% to corresponding U.S. Treasuries plus 1.00% on $15.7 million of
credit facilities.
A subsidiary of the Company has received a commitment for a $51.0
million revolving construction credit facility. As of September 30, 1997, the
Company had closed $32.1 million of the total commitment. The credit facility
provides for construction and interim loans to finance the development of up to
seven assisted living facilities. The Company has agreed to guarantee the
repayment of all amounts outstanding under this credit facility. The credit
facility is for a term of five years and is secured by cross-collateralized
first mortgage on the real property and liens on receivables. Advances under
the credit facility bear variable interest rates based upon LIBOR plus 2.25% to
LIBOR plus 2.60%. As of September 30, 1997, there were $4.7 million of
advances outstanding under this facility.
The Company has entered into a swap transaction whereby effective
during the period June 18, 1998 through June 18, 2001, outstanding advances of
up to $19.0 million under LIBOR floating rate debt, bear interest at a fixed
rate based on a fixed LIBOR base rate of 7.3%. The Company has entered into
another swap transaction whereby effective during the period August 20, 1997
through April 1, 2003, outstanding advances of up to $7.0 million under LIBOR
floating rate debt bear interest at a fixed LIBOR base rate of 7.14%.
At September 30, 1997, the Company had approximately $112.6 million in
unrestricted cash and cash equivalents, including $98.5 million in high quality
short-term investments (A1/P1 rated), $104.5 million in net working capital,
and currently has $261.3 million of unused lines of credit.
Working capital increased to $104.5 million at September 30, 1997,
compared to $102.8 million as of December 31, 1996, primarily due to the
proceeds of the Notes, offset, in part, by the Company's continued investment
in the development of Sunrise model facilities.
Net cash provided by operating activities for the nine months ended
September 30, 1997 was approximately $3.9 million as compared to net cash used
in operations of $1.1 million for the nine months ended September 30, 1996.
For the nine months ended September 30, 1997, and 1996, the Company
used cash in investing activities of $135.5 million and $85.7 million,
respectively. Investing activities included $141.7 million and $52.9 million
used for construction of assisted living facilities for each period,
respectively.
17
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Net cash provided by financing activities was $142.4 million and
$107.0 million for the nine months ended September 30, 1997, and 1996,
respectively. Cash provided by financing activities for the nine months ended
September 30, 1997 included $203.7 million in additional borrowings, which
includes the Notes. Cash provided by financing activities for the nine months
ended September 30, 1996 included net proceeds from the Company's initial
public offering of common stock.
The Company's previously announced three-year growth objectives
include developing at least 55 new Sunrise model assisted living facilities
with an additional resident capacity of more than 4,500 by the end of 1999. To
date, the Company has completed development of 18 such facilities with a
resident capacity of 1,618 (Alexandria, VA, Norwood, MA, Wayne, NJ, Wayland,
MA, Westfield, NJ, Rockville, MD, Philadelphia, PA (3), Old Tappan, NJ, Morris
Plains, NJ, Severna Park, MD (2), Springfield, VA, Oakton, VA, Petaluma, CA,
Blue Bell, PA, and Columbia, MD) and has 19 facilities currently under
construction with a resident capacity of 1,701. The Company has also entered
into contracts to purchase 31 additional sites and to lease three additional
sites. The Company is pursuing additional development opportunities and also
plans to acquire additional facilities as market conditions warrant.
The Company currently estimates that the net proceeds to the Company
from the sale of the Notes, the recent expansion of an existing credit
facility, together with existing working capital, financing commitments and
financing expected to be available, will be sufficient to fund its development
and acquisition programs for at least the next 18 months. The estimated cost
to complete and lease up the 37 remaining new Sunrise model facilities targeted
for completion by the end of 1999 is between $278 million and $370 million.
Additional financing will be required to complete the Company's growth plans
and to refinance existing indebtedness. There can be no assurance that such
financing will be available on acceptable terms.
The Company's financing documents contain financial covenants and
other restrictions that (i) require the Company to meet certain financial tests
and maintain certain escrows of funds, (ii) require that the Company's
founders, Paul Klaassen and Teresa Klaassen, maintain ownership of at least 15%
of the Common Stock and that one of them serves as Chairman of the Board and
Chief Executive Officer of the Company, (iii) require consent for changes in
management or control of the Company, (iv) limit, among other things, the
ability of the Company and certain of its subsidiaries to borrow additional
funds, dispose of assets and engage in mergers or other business combinations,
and (v) prohibit the Company from operating competing facilities within certain
distances from mortgaged facilities.
At September 30, 1997, the Company had stockholders' equity of $190.6
million compared to stockholders' equity of $185.8 million at December 31,
1996. The change resulted primarily from (i) adding the receipt of net
proceeds of $2.9 million from common shares issued from the exercise of stock
options granted, and (ii) adding net income for the nine months ended September
30, 1997 of $1.8 million. At September 30, 1997, the Company had net operating
loss carryforwards for income tax purposes of approximately $14.2 million which
expire from 2010 through 2011.
18
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
SUBSEQUENT EVENTS
The Company obtained a commitment on November 3, 1997 (subject to
completion of final definitive agreements) from a financial institution for a
$200.0 million line of credit. This commitment is an expansion of the $90.0
million line of credit (see Note 2) for a wholly owned subsidiary of the
Company. The expanded facility is for general corporate purposes including the
construction and development of assisted living facilities. The Company will
guarantee the repayment of all amounts outstanding under this facility. The
facility is for a term of three years with the right to extend, and is secured
by cross collateralized first mortgages on the real property and improvements
and first liens on all assets of the subsidiary. Advances under the facility
bear interest from LIBOR plus 1.0% to 1.5%.
On October 16, 1997, a wholly owned subsidiary of the Company jointly
formed a limited liability company ("LLC") with an unrelated third party in
which the Company's subsidiary will own a 9% minority interest. The purpose of
the LLC is to develop, construct, and own assisted living facilities. The
Company loaned the LLC $15 million to help finance initial development and
construction.
IMPACT OF CERTAIN ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of outstanding stock options and warrants will be
excluded. The impact is expected to result in primary net income (loss) per
share for the three months ended September 30, 1997 and 1996 to $0.07 and
$(0.03) per share, respectively; and primary net income (loss) per share for
the nine months ended September 30, 1997 and 1996 to $0.10 and $(0.48) per
share, respectively. The impact of Statement No. 128 on the calculation of
fully diluted earnings per share for these quarters is not expected to be
material.
19
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit Name
----------- ------------
<S> <C>
3 Amended Bylaws
11 Computation of Net Income Per Share
27 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only and is not filed.
</TABLE>
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1997.
20
<PAGE> 21
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.
SUNRISE ASSISTED LIVING, INC.
(Registrant)
Date: November 12, 1997 /S/ David W. Faeder
----------------- ---------------------------------
David W. Faeder
President and Chief Financial
Officer
Date: November 12, 1997 /S/ Larry E. Hulse
----------------- ---------------------------------
Larry E. Hulse
Chief Accounting Officer
21
<PAGE> 22
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit Name Page
- ----------- ------------ ----
<S> <C>
3 Amended Bylaws
11 Computation of Net Income Per Share
27 Financial Data Schedule, which is
submitted electronically to the Securities
and Exchange Commission for information
only and is not filed.
</TABLE>
22
<PAGE> 1
AMENDED AND RESTATED BYLAWS
OF
SUNRISE ASSISTED LIVING, INC.
OFFICES
REGISTERED OFFICE
The initial registered office of the Corporation shall be in
Wilmington, Delaware, and the initial registered agent in charge thereof shall
be Corporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805.
OTHER OFFICES
The Corporation 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 as may be necessary or useful in connection with the
business of the Corporation.
MEETINGS OF STOCKHOLDERS
PLACE OF MEETINGS
All meetings of the stockholders shall be held at such place as may be
fixed from time to time by the Board of Directors, the Chairman of the Board or
the President.
ANNUAL MEETINGS
The Corporation shall hold annual meetings of stockholders, commencing
with the year 1995, on such date and at such time as shall be designated from
time to time by the Board of Directors, the Chairman of the Board or the
President, at which stockholders shall elect successors to that class of
directors whose terms shall have expired and transact such other business as
may properly be brought before the meeting.
SPECIAL MEETINGS
Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute, may be called by the Board of
Directors, the Chairman of the Board or the President of the Corporation, and
shall be called by the President or the Secretary of the Corporation at the
request in writing of stockholders possessing at least 25 percent of the voting
power of the issued and outstanding voting stock of the Corporation entitled to
vote generally for the election of directors. Such request shall include a
statement of the purpose or purposes of the proposed meeting.
NOTICE OF MEETINGS
Notice of any meeting of stockholders, stating the place, date and
hour of the meeting, and (if it is a special meeting) the purpose or purposes
for which the meeting is called, shall be given to each stockholder entitled to
vote at such meeting not less than ten nor more than sixty days before
23
<PAGE> 2
the date of the meeting (except to the extent that such notice is waived or is
not required as provided in the General Corporation Law of the State of
Delaware (the "Delaware General Corporation Law") or these Bylaws). Such
notice shall be given in accordance with, and shall be deemed effective as set
forth in, Section 222 (or any successor section) of the Delaware General
Corporation Law.
WAIVERS OF NOTICE
Whenever the giving of any notice is required by statute, the
Certificate of Incorporation of the Corporation (which shall include any
amendments thereto and shall be hereinafter referred to as so amended as the
"Certificate of Incorporation") or these Bylaws, a waiver thereof, in writing
and delivered to the Corporation, signed by the person or persons entitled to
said notice, whether before or after the event as to which such notice is
required, shall be deemed equivalent to notice. Attendance of a stockholder at
a meeting shall constitute a waiver of notice (1) of such meeting, except when
the stockholder at the beginning of the meeting objects to holding the meeting
or transacting business at the meeting, and (2) (if it is a special meeting) of
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, unless the stockholder
objects to considering the matter at the beginning of the meeting.
BUSINESS AT SPECIAL MEETINGS
Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice (except to the extent that such
notice is waived or is not required as provided in the Delaware General
Corporation Law or these Bylaws).
LIST OF STOCKHOLDERS
After the record date for a meeting of stockholders has been fixed, at
least ten days before such meeting, the officer who has charge of the stock
ledger of the Corporation shall make a list of all stockholders entitled to
vote at the meeting, arranged in alphabetical order and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder for
any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place in the city
where the meeting is to be held, which place is to be specified in the notice
of the meeting, or at the place where the meeting is to be held. Such list
shall also, for the duration of the meeting, be produced and kept open to the
examination of any stockholder who is present at the time and place of the
meeting.
QUORUM AT MEETINGS
Stockholders may take action on a matter at a meeting only if a quorum
exists with respect to that matter. Except as otherwise provided by statute or
by the Certificate of Incorporation, the holders of a majority of the shares
entitled to vote at the meeting, and who are present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business. Where a separate vote by a class or classes is
required, the holders of a majority of the outstanding shares of such class or
classes, who are present in person or represented by proxy, shall constitute a
quorum entitled to take action on that matter. Once a share is represented for
any purpose at a meeting (other than solely to object (1) to holding the
meeting or transacting business at the meeting, or (2) (if it is a special
meeting) to consideration of a particular matter at the meeting that is not
within the purpose or purposes described in the meeting notice), it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for the
adjourned meeting. The holders of a majority of the voting shares represented
at a meeting, whether or not a quorum is present, may adjourn such meeting
from time to time.
24
<PAGE> 3
VOTING AND PROXIES
Unless otherwise provided in the Delaware General Corporation Law or
in the Corporation's Certificate of Incorporation, and subject to the other
provisions of these Bylaws, each stockholder shall be entitled to one vote on
each matter, in person or by proxy, for each share of the Corporation's capital
stock that has voting power and that is held by such stockholder. No proxy
shall be voted or acted upon after three years from its date, unless the proxy
provides for a longer period. A duly executed appointment of proxy shall be
irrevocable if the appointment form states that it is irrevocable and if, and
only as long as, it is coupled with an interest sufficient in law to support an
irrevocable power.
REQUIRED VOTE
When a quorum is present at any meeting of stockholders, all matters
shall be determined, adopted and approved by the affirmative vote (which need
not be by ballot) of the holders of a majority of the shares present in person
or represented by proxy at the meeting and entitled to vote with respect to the
matter, unless the proposed action is one upon which, by express provision of
statutes or of the Certificate of Incorporation, a different vote is specified
and required, in which case such express provision shall govern and control the
decision of such question. Where a separate vote by a class or classes is
required, the affirmative vote of the holders of a majority of the shares of
such class or classes present in person or represented by proxy at the meeting
shall be the act of such class, unless the proposed action is one upon which,
by express provision of statutes or of the Certificate of Incorporation, a
different vote is specified and required, in which case such express provision
shall govern and control the decision of such question. Notwithstanding the
foregoing, 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.
ACTION WITHOUT A MEETING
Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
such stockholders and may not be effected by any consent in writing by such
stockholders, unless such consent is unanimous.
BUSINESS AT ANNUAL MEETING
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 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, a 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 less
than 60 days prior to the meeting; provided, however, that in the event that
less than 75 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must
be so received not later than the close of business on the 15th day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure was made. A stockholder's notice to the Secretary shall
set forth as to each matter the stockholder proposes to bring before the annual
meeting (a) 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, (b) the
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name and address, as they appear on the Corporation's books, of the stockholder
proposing such business, (c) the class and number of shares of the
Corporation's stock which are beneficially owned by the stockholder, and (d)
any material interest of the stockholder in such business. No later than the
tenth day following the date of receipt of a stockholder notice pursuant to
this Section 2.12, the Chairman of the Board of Directors of the Corporation
shall, if the facts warrant, determine and notify in writing the stockholder
submitting such notice that such notice was not made in accordance with the
time limits and/or other procedures prescribed by the Bylaws. If no such
notification is mailed to such stockholder within such ten-day period, such
stockholder notice containing a matter of business shall be deemed to have been
made in accordance with the provisions of this Section 2.12. Notwithstanding
anything in these Bylaws to the contrary, no business shall be conducted at an
annual meeting except in accordance with the procedures set forth in this
Section 2.12.
DIRECTORS
POWERS
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, which may exercise all such
powers of the Corporation and do all such lawful acts and things, subject to
any limitation set forth in the Certificate of Incorporation or as otherwise
may be provided in the Delaware General Corporation Law. The Board of
Directors shall annually elect a Chairman of the Board from among its members
and shall designate, when present, either the Chairman of the Board or the
President to preside at its meetings. If neither the Chairman of the Board nor
the President is present, the Board of Directors may designate another officer
to preside at such meeting. The Chairman of the Board and the President may be
the same person. The Board of Directors may also annually elect one or more
Vice Chairmen from among its members, with such duties as the Board of
Directors shall from time to time prescribe.
NUMBER, CLASSES, ELECTION AND TERM OF OFFICE
As of the closing of the Corporation's initial public offering of
equity securities under the Securities Act of 1933, as amended, the total
number of directors which shall constitute the entire Board of Directors shall
be eight. The term "entire Board of Directors" as used herein shall mean the
total number of directors constituting the entire Board of Directors
irrespective of the number of directors then in office or vacancies.
Thereafter, the total number of directors constituting the entire Board of
Directors shall be determined by resolution of the Board of Directors passed by
the affirmative vote of at least two-thirds of the directors then in office,
provided, that such number shall be consistent with the minimum and maximum
number of directors set forth in the Certificate of Incorporation. Directors
shall be divided into three classes, each consisting of approximately one-third
of the total number of directors, as provided in the Certificate of
Incorporation. At the 1995 annual meeting of stockholders and at each
subsequent annual meeting of stockholders, directors elected to succeed those
whose terms are expiring shall be elected for a term of office to expire at the
third succeeding annual meeting of stockholders and when their respective
successors are duly elected and qualified. Directors shall be elected at
annual meetings of the stockholders, except as provided in Section 3.3 hereof,
and each director elected shall hold office until his successor is elected and
qualified or until his earlier death, resignation or removal. Directors need
not be stockholders.
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VACANCIES
Vacancies and newly created directorships resulting from any increase
in the authorized number of directors elected by all of the stockholders having
the right to vote as a single class may be filled by a majority of the
directors then in office, although fewer than a quorum, or by a sole remaining
director. Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
Certificate of Incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by the sole
remaining director so elected. Each director so chosen shall hold office until
the next election of the class for which such director shall have been chosen,
and until such director's successor is elected and qualified, or until the
director's earlier resignation or removal. In the event that one or more
directors resigns from the Board, 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 until the next election of the class for which such
director shall have been chosen, and until such director's successor is elected
and qualified, or until the director's earlier resignation or removal.
MEETINGS
REGULAR MEETINGS
Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
Board of Directors.
SPECIAL MEETINGS
Special meetings of the Board may be called by the Chairman of the
Board or President on one day's notice to each director, either personally or
by telephone, express delivery service (so that the scheduled delivery date of
the notice is at least one day in advance of the meeting), telegram or
facsimile transmission, and on five days' notice by mail (effective upon
deposit of such notice in the mail). The notice need not describe the purpose
of a special meeting.
TELEPHONE MEETINGS
Members of the Board of Directors may participate in a meeting of the
Board by any communication by means of which all participating directors can
simultaneously hear each other during the meeting. A director participating in
a meeting by this means is deemed to be present in person at the meeting.
ACTION WITHOUT MEETING
Any action required or permitted to be taken at any meeting of the
Board of Directors may be taken without a meeting if the action is taken by all
members of the Board. The action must be evidenced by one or more written
consents describing the action taken, signed by each director, and delivered to
the Corporation for inclusion in the minute book.
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WAIVER OF NOTICE OF MEETING
A director may waive any notice required by statute, the Certificate
of Incorporation or these Bylaws before or after the date and time stated in
the notice. Except as set forth below, the waiver must be in writing, signed
by the director entitled to the notice, and delivered to the Corporation for
inclusion in the minute book. Notwithstanding the foregoing, a director's
attendance at or participation in a meeting waives any required notice to the
director of the meeting unless the director at the beginning of the meeting
objects to holding the meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at the meeting.
QUORUM AND VOTE AT MEETINGS
At all meetings of the Board, a quorum of the Board of Directors
consists of the presence of a majority of the total number of directors
constituting the entire Board of Directors. The affirmative vote of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by statute, the Certificate of Incorporation or these Bylaws.
COMMITTEES OF DIRECTORS
The Board of Directors may by resolution designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. If a member of a committee shall be absent from
any meeting, or disqualified from voting thereat, the remaining member or
members present and not disqualified from voting, whether or not such member or
members constitute a quorum, may, by unanimous vote, appoint another member of
the Board of Directors to act at the meeting in the place of such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of
shares of stock adopted by the Board of Directors pursuant to Section 151(a) of
the Delaware General Corporation Law, fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of any shares of any series), adopting an agreement of
merger or consolidation pursuant to Sections 251, 252, 257, 258, 263 or 264 of
the Delaware General Corporation Law, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, or amending the Bylaws; and
unless the resolutions, these Bylaws or the Certificate of Incorporation
expressly so provide, no such committee shall have the power or authority to
declare a dividend, to authorize the issuance of stock, or to adopt a
certificate of ownership and merger pursuant to Section 253 of the Delaware
General Corporation Law. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the Board
of Directors. Unless otherwise specified in the resolution of the Board of
Directors designating the committee, at all meetings of each such committee of
directors, a majority of the members of the committee shall constitute a quorum
for the transaction of business, and the affirmative vote of a majority of the
members of the committee present at any meeting at which there is a quorum
shall be the act of the committee. Each
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committee shall keep regular minutes of its meetings and report the same to the
Board of Directors, when required.
COMPENSATION OF DIRECTORS
The Board of Directors shall have the authority to fix the
compensation of directors. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
NOMINEES
Only persons who are nominated in accordance with the procedures set
forth in this Section 3.8 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 for the election of directors at the meeting who complies with notice
procedures set forth in this Section 0. 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. To be timely,
a stockholder notice shall be delivered to or mailed and received at the
principal executive office of the Corporation not less than 60 days prior to
the meeting; provided, however, that in the event that less than 75 days'
notice or prior public disclosure of the date of the meeting is given or made
to stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 15th day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a director, (i)
the name, age, business address and residence address of such person, (ii) the
principal occupation or employment of such person, (iii) the class and number
of shares of the Corporation's stock which are beneficially owned by such
person, and (iv) 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 Securities
Exchange Act of 1934, as amended (including without limitation such person's
written consent to be named in the proxy statement as a nominee and to serving
as a director if elected); and (b) as to the stockholder giving the notice (i)
the name and address, as they appear on the Corporation's books, of such
stockholder and (ii) the class and number of shares of the Corporation's stock
which are beneficially owned by such stockholder. At the request of the Board
of Directors, any person nominated by the Board of Directors 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 later than the tenth day following the date of
receipt of a stockholder nomination submitted pursuant to this Section 0, the
Chairman of the Board of Directors of the Corporation shall, if the facts
warrant, determine and notify in writing the stockholder making such nomination
that such nomination was not made in accordance with the time limits and/or
other procedures prescribed by the bylaws. If no such notification is mailed
to such stockholder within such ten-day period, such nomination shall be deemed
to have been made in accordance with the provisions of this Section 0. No
person shall be eligible for election as a director of the Corporation unless
nominated in accordance with the procedures set forth in this Section 0.
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OFFICERS
POSITIONS
The officers of the Corporation shall be a Chairman of the Board, a
Chief Executive Officer, a President, a Chief Financial Officer, a Secretary
and a Treasurer, and such other officers as the Board of Directors from time to
time may appoint, including one or more Vice Chairpersons, a Chief Operating
Officer, Executive Vice Presidents, a General Counsel, Senior Vice Presidents,
Vice Presidents, Assistant Secretaries and Assistant Treasurers. Each such
officer shall exercise such powers and perform such duties as shall be set
forth below and such other powers and duties as from time to time may be
specified by the Board of Directors or by any officer(s) authorized by the
Board of Directors to prescribe the duties of such other officers. Any number
of offices may be held by the same person, except that in no event shall the
President and the Secretary be the same person. Each of the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, and/or any Executive Vice President or Senior Vice
President may execute bonds, mortgages and other documents under the seal of
the Corporation, except where required or permitted by law to be otherwise
executed and except where the authorization therefor shall be expressly
delegated by the Board of Directors to some other officer or agent of the
Corporation.
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
The Chairman of the Board shall (when present) preside at all meetings
of the Board of Directors and stockholders and shall ensure that all orders and
resolutions of the Board of Directors are carried into effect. Unless the
Board shall designate a person other than the Chairman as the Chief Executive
Officer, the Chairman of the Board shall also be the Chief Executive Officer of
the Corporation, and as such shall have overall executive responsibility and
authority for management of the business, affairs and operations of the
Corporation (subject to the authority of the Board of Directors). As Chief
Executive Officer, the Chairman of the Board shall, in general, perform all
duties incident to the office of a chief executive officer of a corporation,
including those duties customarily performed by the persons holding such
office, and shall perform such other duties as, from time to time, may be
assigned to him or her by the Board of Directors.
PRESIDENT
The President shall have general and active management of the
business, affairs and operations of the Corporation (subject to the direction
of the Chief Executive Officer and the authority of the Board of Directors),
shall ensure that all orders and resolutions of the Board of Directors are
carried into effect, and, in general, shall perform all duties incident to the
office of a president of a corporation, including those duties customarily
performed by the persons holding such office, and shall perform such other
duties as, from time to time, may be assigned to him or her by the Board of
Directors or the Chief Executive Officer.
CHIEF FINANCIAL OFFICER
The Chief Financial Officer of the Corporation shall have general
charge and supervision of the financial affairs of the Corporation, including
budgetary, accounting and statistical methods, and shall approve payment, or
designate others serving under him to approve for payment, all vouchers and
warrants for disbursements of funds, and, in general, shall perform such other
duties as are incident to the office of a chief financial officer of a
corporation, including those duties
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customarily performed by persons occupying such office, and shall perform such
other duties as, from time to time, may be assigned to him or her by the Board
of Directors or the Chief Executive Officer.
CHIEF OPERATING OFFICER
The Chief Operating Officer of the Corporation shall have general
charge and supervision of the day to day operations of the Corporation (subject
to the direction of the Chief Executive Officer and the authority of the Board
of Directors), and, in general, shall perform such other duties as are incident
to the office of a chief operating officer of a corporation, including those
duties customarily performed by persons occupying such office, and shall
perform such other duties as, from time to time, may be assigned to him or her
by the Board of Directors or the Chief Executive Officer.
GENERAL COUNSEL
The General Counsel of the Corporation shall be responsible for
supervising the legal affairs of the Corporation, and, in general, shall
perform such other duties as are incident to the office of a general counsel of
a corporation, including those duties customarily performed by persons
occupying such office, and shall perform such other duties as, from time to
time, may be assigned to him or her by the Board of Directors or the Chief
Executive Officer.
VICE PRESIDENT
In the absence of the Chief Executive Officer and the President or in
the event of the Chief Executive Officer's and the President's failure or
refusal to act, the Vice President (or in the event there be more than one Vice
President, the Vice Presidents in the order designated, or in the absence of
any designation, then in the order of their election) shall perform the duties
of the Chief Executive Officer and the President, and when so acting shall have
all the powers of, and be subject to all the restrictions upon, the Chief
Executive Officer and the President. The Vice President or Vice Presidents, in
general, shall perform such other duties as are incident to the office of a
vice president of a corporation, including those duties customarily performed
by persons occupying such office, and shall perform such other duties as, from
time to time, may be assigned to him or her or them by the Board of Directors
or the Chief Executive Officer. The Board of Directors may designate one or
more Vice Presidents as Executive Vice Presidents or Senior Vice Presidents.
SECRETARY
The Secretary, or an Assistant Secretary, shall attend all meetings of
the Board of Directors and all meetings of the stockholders, and shall record
all the proceedings of the meetings of the stockholders and of the Board of
Directors in a book to be kept for that purpose, and shall perform like duties
for the standing committees, when required. The Secretary shall have custody
of the corporate seal of the Corporation, and the Secretary, or an Assistant
Secretary, shall have authority to affix the same to any instrument requiring
it, and when so affixed it may be attested by the signature of the Secretary or
by the signature of such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by such officer's signature. The Secretary or an
Assistant Secretary may also attest all instruments signed by the Chief
Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer or any Vice President. The Secretary, or an Assistant
Secretary, shall give,
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or cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and, in general, shall perform all duties
as are incident to the office of a secretary of a corporation, including those
duties customarily performed by persons occupying such office, and shall
perform such other duties as, from time to time, may be assigned to him or her
by the Board of Directors, the Chief Executive Officer, the President, the
Chief Operating Officer, the Chief Financial Officer or any Executive Vice
President.
ASSISTANT SECRETARY
The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board of Directors (or if there
shall have been no such determination, then in the order of their election),
shall, in the absence of the Secretary or in the event of the Secretary's
inability or refusal to act or when requested by the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer or any Executive Vice President, perform the duties and
exercise the powers of the Secretary, and, in general, shall perform all duties
as are incident to the office of an assistant secretary of a corporation,
including those duties customarily performed by persons holding such office,
and shall perform such other duties as, from time to time, may be assigned to
him or her or them by the Board of Directors, the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial Officer, any
Executive Vice President or the Secretary. An Assistant Secretary may or may
not be an officer, as determined by the Board of Directors.
TREASURER
The Treasurer shall have responsibility for the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation, and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall also render to the Chief Executive Officer, the
President and the Chief Operating Officer, upon request, and to the Board of
Directors at its regular meetings, or when the Board of Directors so requires,
an account of all financial transactions and of the financial condition of the
Corporation and, in general, shall perform such duties as are incident to the
office of a treasurer of a corporation, including those customarily performed
by persons occupying such office, and shall perform all other duties as, from
time to time, may be assigned to him or her by the Board of Directors, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer or any Executive Vice President.
ASSISTANT TREASURER
The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors (or if
there shall have been no such determination, then in the order of their
election), shall, in the absence of the Treasurer or in the event of the
Treasurer's inability or refusal to act, perform the duties and exercise the
powers of the Treasurer, and, in general, shall perform all duties as are
incident to the office of an assistant treasurer of a corporation, including
those duties customarily performed by persons occupying such office, and shall
perform such other duties as, from time to time, may be assigned to him or them
by the Board of Directors, the Chief Executive Officer, the President, the
Chief Operating Officer, the Chief Financial Officer, any Executive Vice
President or by the Treasurer. An Assistant Treasurer may or may not be an
officer, as determined by the Board of Directors.
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TERM OF OFFICE
The officers of the Corporation shall hold office until their
successors are chosen and qualify or until their earlier resignation or
removal. Any officer may resign at any time upon written notice to the
Corporation. Any officer elected or appointed by the Board of Directors may be
removed at any time, with or without cause, by the affirmative vote of a
majority of the directors constituting the entire Board of Directors.
COMPENSATION
The compensation of officers of the Corporation shall be fixed by the
Board of Directors or by any officer(s) authorized by the Board of Directors to
prescribe the compensation of such other officers.
FIDELITY BONDS
The Corporation may secure the fidelity of any or all of its officers
or agents by bond or otherwise.
CAPITAL STOCK
CERTIFICATES OF STOCK; UNCERTIFICATED SHARES
The shares of the Corporation shall be represented by certificates,
provided that the Board of Directors may provide by resolution that some or all
of any or all classes or series of the Corporation's stock shall be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates, and upon request
every holder of uncertificated shares, shall be entitled to have a certificate
(representing the number of shares registered in certificate form) signed in
the name of the Corporation by the Chairman of the Board, President or any Vice
President, and by the Treasurer, Secretary or any Assistant Treasurer or
Assistant Secretary of the Corporation. Any or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent or registrar
whose signature or facsimile signature appears on a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
The Board of Directors, Chairman of the Board, Chief Executive
Officer, President, Chief Financial Officer or Secretary may direct a new
certificate of stock to be issued in place of any certificate theretofore
issued by the Corporation and alleged to have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming that the
certificate of stock has been lost, stolen or destroyed. When authorizing such
issuance of a new certificate, the Board or any such officer may, as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or certificates, or such owner's legal
representative, to advertise the same in such manner as the Board or such
officer shall require and/or to give the Corporation a bond or indemnity, in
such sum or on such terms and conditions as the Board or such officer may
direct, as indemnity against any claim that may be made against the Corporation
on account of the
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certificate alleged to have been lost, stolen or destroyed or on account of the
issuance of such new certificate or uncertificated shares.
RECORD DATE
ACTIONS BY STOCKHOLDERS
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders, the Board of Directors
may fix 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 days nor less than ten 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 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, unless the Board of Directors fixes a new record date for the
adjourned meeting.
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 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 ten 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 the Delaware General Corporation 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 in the manner prescribed
by Section 213(b) of the Delaware General Corporation Law. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by the Delaware General Corporation 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.
PAYMENTS
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 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 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.
STOCKHOLDERS OF RECORD
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,
to receive notifications, to vote as such owner,
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and to exercise all the rights and powers of an owner. The Corporation 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 may be provided by the
Delaware General Corporation Law.
INDEMNIFICATION
AUTHORIZATION OF INDEMNIFICATION
Each person who was or is a party or is threatened to be made a party
to or is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative and
whether by or in the right of the Corporation or otherwise (a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee,
partner (limited or general) or agent of another corporation or of a
partnership, joint venture, limited liability company, trust or other
enterprise, including service with respect to an employee benefit plan, shall
be (and shall be deemed to have a contractual right to be) indemnified and held
harmless by the Corporation (and any successor to the Corporation by merger or
otherwise) to the fullest extent authorized by, and subject to the conditions
and (except as provided herein) procedures set forth in the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but any such
amendment shall not be deemed to limit or prohibit the rights of
indemnification hereunder for past acts or omissions of any such person insofar
as such amendment limits or prohibits the indemnification rights that said law
permitted the Corporation to provide prior to such amendment), against all
expenses, liabilities and losses (including attorneys' fees, judgments, fines,
ERISA taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith;
provided, however, that the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person (except for a suit or action pursuant to Section 0 hereof) only if
such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. Persons who are not directors or officers of the Corporation
may be similarly indemnified in respect of such service to the extent
authorized at any time by the Board of Directors of the Corporation. The
indemnification conferred in this Section 0 also shall include the right to be
paid by the Corporation (and such successor) the expenses (including attorneys'
fees) incurred in the defense of or other involvement in any such proceeding in
advance of its final disposition; provided, however, that, if and to the extent
the Delaware General Corporation Law requires, the payment of such expenses
(including attorneys' fees) incurred by a director or officer in advance of the
final disposition of a proceeding shall be made only upon delivery to the
Corporation of an undertaking by or on behalf of such director or officer to
repay all amounts so paid in advance if it shall ultimately be determined that
such director or officer is not entitled to be indemnified under this Section 0
or otherwise; and provided further, that, such expenses incurred by other
employees and agents may be so paid in advance upon such terms and conditions,
if any, as the Board of Directors deems appropriate.
RIGHT OF CLAIMANT TO BRING ACTION AGAINST THE CORPORATION
If a claim under Section 0 is not paid in full by the Corporation
within sixty days after a written claim has been received by the Corporation,
the claimant may at any time thereafter bring an action against the Corporation
to recover the unpaid amount of the claim and, if successful in whole or in
part, the claimant shall be entitled to be paid also the expense of prosecuting
such
35
<PAGE> 14
action. It shall be a defense to any such action (other than an action brought
to enforce a claim for expenses incurred in connection with any proceeding in
advance of its final disposition where the required undertaking, if any is
required, has been tendered to the Corporation) that the claimant has not met
the standards of conduct which make it permissible under the Delaware General
Corporation Law for the Corporation to indemnify the claimant for the amount
claimed or is otherwise not entitled to indemnification under Section 0 but the
burden of proving such defense shall be on the Corporation. The failure of the
Corporation (in the manner provided under the Delaware General Corporation Law)
to have made a determination prior to or after the commencement of such action
that indemnification of the claimant is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in the Delaware
General Corporation Law shall not be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
Unless otherwise specified in an agreement with the claimant, an actual
determination by the Corporation (in the manner provided under the Delaware
General Corporation Law) after the commencement of such action that the
claimant has not met such applicable standard of conduct shall not be a defense
to the action, but shall create a presumption that the claimant has not met the
applicable standard of conduct.
NON-EXCLUSIVITY
The rights to indemnification and advance payment of expenses provided
by Section 0 hereof shall not be deemed exclusive of any other rights to which
those seeking indemnification and advance payment of expenses may be entitled
under any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action
in another capacity while holding such office.
SURVIVAL OF INDEMNIFICATION
The indemnification and advance payment of expenses and rights thereto
provided by, or granted pursuant to, Section 0 hereof shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee, partner or agent and shall inure to the
benefit of the personal representatives, heirs, executors and administrators of
such person.
INSURANCE
The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, partner (limited or general )or agent of another
corporation or of a partnership, joint venture, limited liability company,
trust or other enterprise, against any liability asserted against such person
or incurred by such person in any such capacity, or arising out of such
person's status as such, and related expenses, whether or not the Corporation
would have the power to indemnify such person against such liability under the
provisions of the Delaware General Corporation Law.
36
<PAGE> 15
GENERAL PROVISIONS
INSPECTION OF BOOKS AND RECORDS
Any stockholder, in person or by attorney or other agent, shall, upon
written demand under oath stating the purpose thereof, have the right during
the usual hours for business to inspect for any proper purpose the
Corporation's stock ledger, a list of its stockholders, and its other books and
records, and to make copies or extracts therefrom. A proper purpose shall mean
a purpose reasonably related to such person's interest as a stockholder. In
every instance where an attorney or other agent shall be the person who seeks
the right to inspection, the demand under oath shall be accompanied by a power
of attorney or such other writing which authorizes the attorney or other agent
to so act on behalf of the stockholder. The demand under oath shall be
directed to the Corporation at its registered office or at its principal place
of business.
DIVIDENDS
The Board of Directors may declare dividends upon the capital stock of
the Corporation, subject to the provisions of the Certificate of Incorporation
and the laws of the State of Delaware.
RESERVES
The directors of the Corporation may set apart, out of the funds of
the Corporation available for dividends, a reserve or reserves for any proper
purpose and may abolish any such reserve.
EXECUTION OF INSTRUMENTS
All checks, drafts or other orders for the payment of money, and
promissory notes of the Corporation shall be signed by such officer or officers
or such other person or persons as the Board of Directors may from time to time
designate.
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
SEAL
The corporate seal shall be in such form as the Board of Directors
shall approve. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
PRONOUNS
All pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine, neuter, singular or plural, as the identity of the
person or entity may require.
AMENDMENTS
The Board of Directors or the stockholders may from time to time
adopt, amend or repeal the Bylaws of the Corporation. Such action by the Board
of Directors shall require the affirmative vote of at least two-thirds of the
directors then in office at a duly constituted meeting of the Board
37
<PAGE> 16
of Directors called for such purpose. Such action by the stockholders shall
require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of stock of the Corporation entitled to vote thereon at a
duly constituted meeting of stockholders called for such purpose.
* * * * *
38
<PAGE> 1
EXHIBIT 11 COMPUTATION OF NET INCOME (LOSS) PER SHARE (IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
----------------------------------------------------------
Primary: 1997 1996 1997 1996
- -------- ------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding 18,727 14,251 18,654 9,562
Net effect of dilutive stock options and
warrants-based on the treasury stock
method using average market price 1,351 1,085 288
------------- ------------ ---------- -----------
Totals 20,078 14,251 19,739 9,850
============= ============ ========== ===========
Net income (loss) $ 1,318 $(490) $ 1,828 $ (4,578)
Dividends preference attributable to Series
A Convertible Preferred stock (Note 1) - - - (858)
Dividends attributable to Series B
Exchangeable Preferred Stock (Note 2) - - - (348)
------------- ------------ ---------- -----------
Net income (loss) attributable to common shares $ 1,318 $ (490) $ 1,828 $ (5,784)
============= ============ ========== ===========
Per share amount $ 0.07 $ (0.03) $ 0.09 $ (0.59)
============= ============ ========== ===========
Fully diluted:
- --------------
Weighted average common shares
outstanding 18,727 18,654
Net effect of dilutive stock options and
warrants-based on the treasury stock
method using quarter-end market price which is
greater than average market price 1,428 1,360
------------- ----------
Totals 20,155 20,014
============= ==========
Net income attributable to common shares $ 1,318 $ 1,828
============= ==========
Per share amount $ 0.07 $ 0.09
============= ==========
</TABLE>
Note 1 - The dividend preference was eliminated upon conversion of Series A
Convertible Preferred Stock into Common Stock upon completion of the
Company's initial public offering on June 5, 1996.
Note 2 - The Series B Exchangeable Stock was redeemed in full on June 5, 1996
using a portion of the net proceeds from the initial public
offering.
39
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 112,582
<SECURITIES> 0
<RECEIVABLES> 5,020
<ALLOWANCES> 1,300
<INVENTORY> 0
<CURRENT-ASSETS> 118,710
<PP&E> 377,037
<DEPRECIATION> 23,380
<TOTAL-ASSETS> 493,860
<CURRENT-LIABILITIES> 14,215
<BONDS> 288,416
0
0
<COMMON> 188
<OTHER-SE> 190,389
<TOTAL-LIABILITY-AND-EQUITY> 493,860
<SALES> 0
<TOTAL-REVENUES> 59,463
<CGS> 0
<TOTAL-COSTS> 55,467
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 373
<INTEREST-EXPENSE> 7,346
<INCOME-PRETAX> 1,828
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,828
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,828
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
