UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 0-28402
ARADIGM CORPORATION
(Exact name of registrant as specified in its charter)
California 94-3133088
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
26219 Eden Landing Road, Hayward, CA 94545
(Address of principal executive offices including zip code)
(510) 783-0100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days. Yes X No
Indicate the number of shares outstanding of each
of the issuer's classes of common stock, as of the
latest practicable date.
Common Stock, no par value 11,764,660 shares
(Class) (Outstanding at April 22, 1998)
ARADIGM CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS Page
No.
Statements of Operations (Unaudited)
Three months ended March 31, 1998 and 1997 3
Balance Sheets
March 31, 1998 (Unaudited) and 4
December 31, 1997
Statements of Cash Flows (Unaudited)
Three months ended March 31, 1998
and 1997 5
Notes to Unaudited Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 8
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES 11
ABOUT MARKET RISK
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
Signature 12
Exhibits 13
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARADIGM CORPORATION STATEMENTS OF OPERATIONS
(In thousands, except share and per share information)
Three months ended March 31,
1998 1997
(unaudited)
Contract revenues $ 2,752 $ 570
Expenses:
Research and 4,407 2,524
development
General and 2,356 915
administrative
Total expenses 6,763 3,439
Loss from operations (4,011) (2,869)
Interest income 319 382
Interest expense (90) (14)
Net loss $ (3,782) $ (2,501)
Basic and diluted net $ (0.36) $ (0.25)
loss per share
Shares used in computing
basic and diluted net
loss per share 10,611,040 10,209,242
See accompanying notes.
ARADIGM CORPORATION
BALANCE SHEETS
(In thousands, except share information)
March 31, December 31,
1998 1997
(unaudited)
ASSETS
Current assets:
Cash and cash $ 19,360 $ 15,517
equivalents
Short-term investments 7,192 8,788
Receivables 115 261
Inventories 366 520
Other current assets 476 409
Total current assets 27,509 25,495
Property and equipment,net 6,785 4,417
Notes receivable from 226 303
officers
Other assets 79 79
Total assets $ 34,599 $ 30,294
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,489 $ 1,505
Accrued clinical and 122 -
other studies
Accrued compensation 1,143 728
Deferred revenue 12,595 6,339
Other accrued
liabilities 696 342
Current portion of capital
lease obligations and
equipment loans 617 582
Total current
liabilities 17,662 9,496
Noncurrent portion of
capital lease obligations
and equipment loans 1,987 2,139
Commitments and
contingencies
Shareholders' equity:
Common stock, no par
value, 40,000,000 shares
authorized; issued and
outstanding shares: March 54,967 54,976
31, 1998 - 10,611,040;
December 31, 1997 -
10,632,133
Shareholder notes
receivable (344) (386)
Deferred compensation (52) (104)
Accumulated deficit (39,621) (35,827)
Total shareholders'
equity 14,950 18,659
Total liabilities and
shareholders' equity $ 34,599 $ 30,294
See accompanying notes.
ARADIGM CORPORATION
STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(In thousands)
Three months ended
March 31,
1998 1997
(unaudited)
Cash flows from operating
activities
Net loss $(3,782) $(2,501)
Adjustments to reconcile net
loss to
cash used in operating
activities:
Depreciation and amortization 253 133
Amortization of deferred 52 51
compensation
Changes in assets and
liabilities:
Receivables 146 -
Inventories and other current 87 (393)
assets
Other assets - 7
Accounts payable 984 200
Accrued liabilities 891 (841)
Deferred revenue 6,256 (13)
Cash provided by (used in)
operating activities 4,887 (3,357)
Cash flows from investing
activities
Capital expenditures (2,621) (132)
Purchases of available-for-sale
investments (4,826) (17,587)
Proceeds from maturities of
available-for-sale investments 6,410 17,344
Cash used in investing
activities (1,037) (375)
Cash flows from financing
activities
Proceeds from issuance of common
stock, net - -
Proceeds from repayments of
shareholder notes 33 13
Notes receivable from officers 77 (3)
Proceeds from equipment loans - -
Payments on lease obligations
and equipment loans (117) (75)
Cash used in financing
activities (7) (65)
Net increase (decrease) in cash
and cash equivalents 3,843 (3,797)
Cash and cash equivalents at
beginning of period 15,517 18,554
Cash and cash equivalents at end
of period $19,360 $14,757
Supplemental investing and
financing activities
Common stock issued in exchange
for notes receivable $ - $ -
Common stock repurchased upon
cancellation of shareholder
notes $ 9 $ 9
Acquisition of equipment under
capital leases $ - $ -
See accompanying notes.
ARADIGM CORPORATION
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
March 31, 1998
1. Organization and Summary of Significant Accounting
Policies
Organization and Basis of Presentation
Aradigm Corporation (the OCompanyO) was incorporated in
California in January 1991. Since inception, Aradigm has been
engaged in the development and commercialization of non
invasive pulmonary drug delivery systems. The Company does
not anticipate receiving significant revenue from the sale
of products in the upcoming year. Principal activities to date have
included obtaining financing, recruiting management and technical
personnel, securing operating facilities, conducting research and
development, and expanding commercial production capabilities. These
factors indicate that the Company's ability to continue its research,
development and commercialization activities is dependent upon the
ability of management to obtain additional financing as required.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
Cash Equivalents and Investments
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
The Company places its cash and cash equivalents in money market
funds, commercial paper and corporate master notes. The Company's
short-term investments consist of corporate notes with maturities
ranging from three to twelve months.
The Company classifies its investments as available-forsale.
Available-for-sale investments are recorded at fair value with
unrealized gains and losses reported in the statement of
shareholders' equity. Fair values of investments are based on quoted
market prices, where available. Realized gains and losses, which
have been immaterial to date, are included in interest and other
income and are derived using the specific identification method for
determining the cost of investments sold. Dividend and interest
income is recognized when earned.
Depreciation and Amortization
The Company records property and equipment at cost and calculates
depreciation using the straight-line method over the estimated useful
lives of the respective assets, generally four to seven years.
Machinery and equipment acquired under capital leases is amortized
over the useful lives of the assets. Leasehold improvements are
amortized over the shorter of the term of the lease or useful life of
the improvement.
Revenue Recognition
Contract revenues consist of revenue from collaboration agreements
and feasibility studies. The Company recognizes revenue ratably under
the agreements as costs are incurred. Deferred revenue represents the
portion of research payments received that has not been earned. In
accordance with contract terms, up-front and milestone payments from
collaborative research agreements are considered reimbursements for
costs incurred under the agreements and, accordingly, are generally
deferred when received and recognized as revenue based on actual
efforts expended over the remaining terms of the agreements. Non-
refundable signing or license fee payments that are not dependent on
future performance under collaborative agreements are recognized as
revenue when received. Costs of contract revenue approximate such
revenue and are included in research and development expenses.
Net Loss Per Share
Basic net loss per share has been computed using the weighted average
number of shares of common stock outstanding during the period. At
March 31, 1998 and 1997, outstanding stock options and other stock
equivalents are not included as their effect would be antidilutive.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130 ("SFAS 130"),
"Reporting Comprehensive Income," and Statement of Financial
Accounting Standards No. 131 ("SFAS 131"), "Disclosures about
Segments of an Enterprise and Related Information," which require
additional disclosures to be adopted beginning in the first quarter
of 1998 and on December 31, 1998, respectively.
Under SFAS 130, the Company is required to display comprehensive
income and its components as part of the Company's full set of
financial statements. Comprehensive income is comprised of net
income and other comprehensive income. The measurement and
presentation of net income will not change. Other comprehensive
income includes certain changes in equity of the Company that are
excluded from net income. Specifically, SFAS 130 requires unrealized
holding gains and losses on the Company's available-for-sale
securities, which are currently reported separately in shareholders'
equity, to be included in other comprehensive income. During the
first quarter of 1998 and 1997, total comprehensive income did not
differ materially from net income reported for those periods.
SFAS 131 requires that the Company report financial and descriptive
information about its reportable operating segments. The Company is
evaluating the impact, if any, of SFAS 131 on its financial statement
disclosures, but does not believe the additional disclosure will be
material to the financial statements.
Subsequent Event
In April 1998, the Company raised $12 million through a private sale
of 1.1 million newly-issued shares of its common stock to a select
group of institutional investors.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The discussion below contains forward-looking statements that
are based on the beliefs of the Company's management, as well as
assumptions made by, and information currently available to, the
Company's management. The Company's future results, performance or
achievements could differ materially from those expressed in, or
implied by, any such forward-looking statements as a result of
certain factors, including, but not limited to, those discussed in
this section as well as in the section entitled "Risk Factors" and
elsewhere in the Company's Form 10-K filed with the Securities and
Exchange Commission on March 24, 1998.
The Company's business is subject to significant risks
including, but not limited to, the success of its research and
development efforts, its dependence on corporate partners for
marketing and distribution resources, obtaining and enforcing patents
important to the Company's business, clearing the lengthy and
expensive regulatory process and possible competition from other
products. Even if the Company's products appear promising at various
stages of development they may not reach the market or may not be
commercially successful for a number of reasons. Such reasons
include, but are not limited to, the possibilities that the potential
products will be found to be ineffective during clinical trials, fail
to receive necessary regulatory approvals, be difficult to
manufacture on a large scale, be uneconomical to market, be precluded
from commercialization by proprietary rights of third parties or may
not gain acceptance from health care professionals and patients.
Readers are cautioned not to place undue reliance on the forward-
looking statements contained herein, which reflect management's
analysis only as of the date hereof.
The Company undertakes no obligation to publicly release the
results of any revision to these forward-looking statements which may
be made to reflect events or circumstances occurring after the date
hereof or to reflect the occurrence of unanticipated events.
Overview
Since its inception in 1991, Aradigm has been engaged in the
development of pulmonary drug delivery systems. As of March 31, 1998,
the Company had an accumulated deficit of $39.6 million. The Company
has been unprofitable since inception and expects to incur additional
operating losses over at least the next several years as the
Company's research and development efforts, preclinical and clinical
testing activities and manufacturing scale-up efforts expand and as
the Company plans and builds its late-stage clinical and early
commercial production capabilities. To date, Aradigm has not sold
any products and does not anticipate receiving significant revenue
from products in 1998. The sources of working capital have been
equity financing, financing of equipment acquisitions, interest
earned on investments of cash and revenues from research and
feasibility agreements and development contracts.
Results of Operations
Three Months Ended March 31, 1998 and 1997
Contract Revenue. Contract revenue for the three-month period
ended March 31, 1998 increased to $2.8 million from $570,000 for the
same period in 1997. The increase in revenue was due primarily to the
development and commercialization agreement that was executed with
SmithKline Beecham in September 1997 to develop and commercialize a
pulmonary delivery system for providing breakthrough pain relief
using narcotic analgesics. Under the terms of the agreement, Aradigm
could receive up to approximately $30 million in milestones and
development payments by the time the first product is commercialized.
Additional milestones and development costs would be paid if
SmithKline Beecham and Aradigm decided to develop additional narcotic
analgesics for delivery with the AERx Pain Management System.
Research and Development Expenses. Research and development
expenses for the three-month period ended March 31, 1998 increased to
$4.4 million from $2.5 million for the same period in 1997. The
increase was attributable primarily to the hiring of additional
scientific personnel and expenses associated with the expansion of
research and development efforts on the AERx system. These expenses
represent proprietary research expenses as well as the costs related
to contract research revenue and include salaries and benefits of
scientific and development personnel, laboratory supplies, consulting
services and the expenses associated with the development of
manufacturing processes. The Company expects research and development
spending to increase significantly over the next few years as the
Company continues to expand its research and development activities
to support current and potential future collaborations and initiates
commercial manufacturing of the AERx system.
General and Administrative Expenses. General and administrative
expenses for the three-month period ended March 31, 1998 increased to
$2.4 million from $915,000 for the same period in 1997. The increase
was attributable primarily to support of the Company's increased
research efforts, additional facilities expense, administrative
staffing, business development and marketing activities. The Company
expects to incur greater general and administrative expenses in the
future as it expands its operations and increases its efforts to
develop collaborative relationships with corporate partners.
Interest Income. Interest income for the three-month
period ended March 31, 1998 decreased to $319,000 from $382,000 for
the same period in 1997 as a result of lower weighted average cash
and investment balances during the three-month period ended March 31,
1998.
Interest Expense. Interest expense for the three-month period
ended March 31, 1998 increased to $90,000 from $14,000 for the same
period in 1997 as a result of higher outstanding capital lease and
equipment loan balances under the Company's equipment lines of
credit.
Liquidity and Capital Resources
The Company has financed its operations since inception
primarily through private placements and public offerings of its
capital stock, proceeds from financings of equipment acquisitions,
contract research revenue and interest earned on investments. As of
March 31, 1998, the Company had received approximately $54.6 million
in net proceeds from sales of its capital stock. The Company also
has a $5.0 million equipment line of credit, of which approximately
$2.9 million remains available for purchases through September 1998.
As of March 31, 1998, the Company had cash, cash equivalents and
investments of approximately $26.6 million.
Net cash provided by operating activities in the three months
ended March 31, 1998, was $4.9 million compared to net cash used of
$3.4 million in the same period in 1997. The increase resulted
primarily from increases in deferred revenue, accounts payable and
accrued liabilities offset partially by an increase in net loss of
$1.3 million.
Net cash used in investing activities in the three months ended
March 31, 1998, was $1.0 million compared to $375,000 used in the
same period in 1997. The increase resulted primarily from the
Company's expenditures made for capital equipment offset partially by
increased receipt of net proceeds from investment maturities.
Net cash used in financing activities in the three
months endied March 31, 1998 of $7,000 resulted primarily from the
repayment of capital lease obligations offset partially by the
receipt of repayments of shareholder notes. Net cash used in
financing activities in the three months ended March 31, 1997 of
$65,000 resulted primarily from the Company's repayment of capital
lease obligations.
The development of the Company's technology and proposed
products will require a commitment of substantial funds to conduct
the costly and time-consuming research and preclinical and clinical
testing activities necessary to develop and refine such technology
and proposed products and to bring any such products to market. The
Company's future capital requirements will depend on many factors,
including continued progress in the research and development of the
Company's technology and drug delivery systems, the ability of the
Company to establish and maintain favorable collaborative
arrangements with others, progress with preclinical studies and
clinical trials, the time and costs involved in obtaining regulatory
approvals, the cost of development and the rate of scale-up of the
Company's production technologies, the cost involved in preparing,
filing, prosecuting, maintaining and enforcing patent claims and the
need to acquire licenses or other rights to new technology.
The Company expects that its existing capital resources,
committed funding from its existing corporate partnership with
SmithKline Beecham and projected interest income will enable the
Company to maintain current and planned operations through at least
the first half of 1999. However, there can be no assurance that the
Company will not need to raise substantial additional capital to fund
its operations prior to such time. There can be no assurance that
additional financing will be available on acceptable terms or at all.
The Company's cash requirements, however, may vary materially from
those now planned because of results of research and development
efforts, including capital expenditures and funding preclinical and
clinical trials and manufacturing capacity for preclinical, clinical
and full scale manufacturing requirements of the AERx system. The
Company may seek additional funding through collaborations or through
public or private equity or debt financings. However, there cannot be
any assurance that additional financing can be obtained on acceptable
terms, or at all. If additional funds are raised by issuing equity
securities, dilution to shareholders may result. If adequate funds
are not available, the Company may be required to delay, to reduce
the scope of, or to eliminate one or more of its research and
development programs, or to obtain funds through arrangements with
collaborative partners or other sources that may require the Company
to relinquish rights to certain of its technologies or products that
the Company would not otherwise relinquish.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Changes in Securities
Pursuant to a Lease between the Company and Hayward Point Eden
I Limited Partnership ("Hayward"), dated January 28, 1998 (the
"Lease"), the Company agreed to issue a warrant to purchase
60,000 shares of Common Stock of the Company (the "Warrant")
to Hayward in connection with the execution of the Lease. The
Warrant will have an exercise price of $10.16 per share and
will be exercisable for a period of seven years from the
Initial Exercise Date (as defined in the Lease). The Warrant
will be issued in reliance on Section 4(2) of the Securities
Act of 1933, as amended.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Item Description
3.1 Bylaws of the Company, as amended
10.1* 1996 Equity Incentive Plan, as amended
10.2* Employee Stock Purchase Plan, as amended
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule
_____________
* Filed as an exhibit to the Company's Proxy Statement
filed on April 16, 1998 and incorporated herein by
reference.
(b) Reports on Form 8-K
The Company did not file any reports on Form
8-K during the quarter ended March 31, 1998.
SIGNATURE
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.
Dated: May 14, 1998
ARADIGM CORPORATION
(Registrant)
/S/ MARK A. OLBERT
Mark A. Olbert
Vice President, Finance and
Administration
and Chief Financial Officer
ARADIGM CORPORATION
FORM 10-Q
INDEX TO EXHIBITS
Exhibit Number Description
3.1 Bylaws of the Company, as amended
10.1* 1996 Equity Incentive Plan, as amended
10.2* Employee Stock Purchase Plan, as amended
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule
_____________________
* Filed as an exhibit to the Company's Proxy Statement
filed on April 16, 1998 and incorporated herein by
reference.
Exhibit 3.1
AMENDED AND RESTATED BYLAWS
OF
ARADIGM CORPORATION
(A California Corporation)
Table of Contents Page
ARTICLE I
Offices 1.
Section 1. Principal Office 1.
Section 2. Other Offices 1.
ARTICLE II
Corporate Seal 1.
Section 3. Corporate Seal 1.
ARTICLE III
Shareholders' Meetings and Voting Rights 1.
Section 4. Place of Meetings 1.
Section 5. Annual Meeting 2.
Section 6. Postponement of Annual
Meeting 2.
Section 7. Special Meetings 2.
Section 8. Notice of Meetings 2.
Section 9. Manner of Giving Notice 3.
Section 10. Quorum and Transaction of
Business 4.
Section 11. Adjournment and Notice of
Adjourned Meetings 4.
Section 12. Waiver of Notice, Consent
to Meeting or Approval of
Minutes 5.
Section 13. Action by Written Consent
Without a Meeting 5.
Section 14. Voting 6.
Section 15. Persons Entitled to Vote
or Consent 7.
Section 16. Proxies 7.
Section 17. Inspectors of Election 7.
ARTICLE IV
Board of Directors 8.
Section 18. Powers 8.
Section 19. Number of Directors 8.
Section 20. Election Of Directors,
Term, Qualifications 9.
Section 21. Resignations 9.
Section 22. Removal 9.
Section 23. Vacancies 9.
Section 24. Regular Meetings 10.
Section 25. Participation by
Telephone 10.
Section 26. Special Meetings 10.
Section 27. Notice of Meetings 10.
Section 28. Place of Meetings 11.
Section 29. Action by Written
Consent Without a
Meeting 11.
Section 30. Quorum and Transaction of
Business 11.
Section 31. Adjournment 11.
Section 32. Organization 11.
Section 33. Compensation 11.
Section 34. Committees 12.
ARTICLE V
Officers 13.
Section 35. Officers 13.
Section 36. Appointment 13.
Section 37. Inability to Act 13.
Section 38. Resignations 13.
Section 39. Removal 13.
Section 40. Vacancies 13.
Section 41. Chairman of the Board 13.
Section 42. President 14.
Section 43. Vice Presidents 14.
Section 44. Secretary 14.
Section 45. Chief Financial Officer 15.
Section 46. Compensation 16.
ARTICLE VI
Contracts, Loans, Bank Accounts, Checks
and Drafts 16.
Section 47. Execution of Contracts
and Other Instruments 16.
Section 48. Loans 16.
Section 49. Bank Accounts 16.
Section 50. Checks, Drafts, Etc. 17.
ARTICLE VII
Certificates for Shares and Their Transfer 17.
Section 51. Certificate for Shares 17.
Section 52. Transfer on the Books 17.
Section 53. Lost, Destroyed and
Stolen Certificates 18.
Section 54. Issuance, Transfer and
Registration of Shares 18.
ARTICLE VIII
Inspection of Corporate Records 18.
Section 55. Inspection by Directors 18.
Section 56. Inspection by
Shareholders 18.
Section 57. Written Form 19.
ARTICLE IX
Miscellaneous 20.
Section 58. Fiscal Year 20.
Section 59. Annual Report 20.
Section 60. Record Date 20.
Section 61. Bylaw Amendments 21.
Section 62. Construction and
Definition 21.
ARTICLE X
Indemnification 21.
Section 63. Indemnification of
Directors, Officers,
Employees And Other
Agents 21.
ARTICLE XI
Loans of Officers and Others 25.
Section 64. Certain Corporate Loans
and Guaranties 25.
ARTICLE XII
Right of First Refusal 25.
Section 65. Right of First Refusal 25.
AMENDED AND RESTATED BYLAWS
OF
ARADIGM CORPORATION
(A California Corporation)
ARTICLE I
Offices
Section 1. Principal Office. The principal executive
office of the corporation shall be located at such place as
the Board of Directors may from time to time authorize. If
the principal executive office is located outside this state,
and the corporation has one or more business offices in this
state, the board of directors shall fix and designate a
principal business office in the State of California.
Section 2. Other Offices. Additional offices of the
corporation shall be located at such place or places, within
or outside the State of California, as the Board of Directors
may from time to time authorize.
ARTICLE II
Corporate Seal
Section 3. Corporate Seal. If the Board of Directors
adopts a corporate seal such seal shall have inscribed
thereon the name of the corporation and the state and date of
its incorporation. If and when a seal is adopted by the
Board of Directors, such seal may be engraved, lithographed,
printed, stamped, impressed upon, or affixed to any contract,
conveyance, certificate for shares, or other instrument
executed by the corporation.
ARTICLE III
Shareholders' Meetings and Voting Rights
Section 4. Place of Meetings of shareholders shall be
held at the principal executive office of the corporation, or
at any other place, within or outside the State of
California, which may be fixed either by the Board of
Directors or by the written consent of all persons entitled
to vote at such meeting, given either before or after the
meeting and filed with the Secretary of the Corporation.
Section 5. Annual Meeting. The annual meeting of the
shareholders of the corporation shall be held on any date and
time which may from time to time be designated by the Board
of Directors. At such annual meeting, directors shall be
elected and any other business may be transacted which may
properly come before the meeting.
Section 6. Postponement of Annual Meeting. The Board
of Directors and the President shall each have authority to
hold at an earlier date and/or time, or to postpone to a
later date and/or time, the annual meeting of shareholders.
Section 7. Special Meetings.
(a) Special meetings of the shareholders, for any
purpose or purposes, may be called by the Board of Directors,
the Chairman of the Board of Directors, the President, or the
holders of shares entitled to cast not less than ten percent
(10%) of the votes at the meeting.
(b) Upon written request to the Chairman of the
Board of Directors, the President, any vice president or the
Secretary of the corporation by any person or persons (other
than the Board of Directors) entitled to call a special
meeting of the shareholders, such officer forthwith shall
cause notice to be given to the shareholders entitled to
vote, that a meeting will be held at a time requested by the
person or persons calling the meeting, such time to be not
less than thirty-five (35) nor more than sixty (60) days
after receipt of such request. If such notice is not given
within twenty (20) days after receipt of such request, the
person or persons calling the meeting may give notice thereof
in the manner provided by law or in these bylaws. Nothing
contained in this Section 7 shall be construed as limiting,
fixing or affecting the time or date when a meeting of
shareholders called by action of the Board of Directors may
be held.
Section 8. Notice of Meetings. Except as otherwise may
be required by law and subject to subsection 7(b) above,
written notice of each meeting of shareholders shall be given
to each shareholder entitled to vote at that meeting (see
Section 15 below), by the Secretary, assistant secretary or
other person charged with that duty, not less than ten (10)
(or, if sent by third class mail, thirty (30)) nor more than
sixty (60) days before such meeting.
Notice of any meeting of shareholders shall state the
date, place and hour of the meeting and,
(a) in the case of a special meeting, the general
nature of the business to be transacted, and no other
business may be transacted at such meeting;
(b) in the case of an annual meeting, the general
nature of matters which the Board of Directors, at the time
the notice is given, intends to present for action by the
shareholders;
(c) in the case of any meeting at which directors
are to be elected, the names of the nominees intended at the
time of the notice to be presented by management for
election; and
(d) in the case of any meeting, if action is to be
taken on any of the following proposals, the general nature
of such proposal:
(1) a proposal to approve a transaction
within the provisions of California Corporations Code,
Section 310 (relating to certain transactions in which a
director has an interest);
(2) a proposal to approve a transaction
within the provisions of California Corporations Code,
Section 902 (relating to amending the Articles of
Incorporation of the corporation);
(3) a proposal to approve a transaction
within the provisions of California Corporations Code,
Sections 181 and 1201 (relating to reorganization);
(4) a proposal to approve a transaction
within the provisions of California Corporations Code,
Section 1900 (winding up and dissolution);
(5) a proposal to approve a plan of
distribution within the provisions of California Corporations
Code, Section 2007 (relating to certain plans providing for
distribution not in accordance with the liquidation rights of
preferred shares, if any).
At a special meeting, notice of which has been
given in accordance with this Section, action may not be
taken with respect to business, the general nature of which
has not been stated in such notice. At an annual meeting,
action may be taken with respect to business stated in the
notice of such meeting, given in accordance with this
Section, and, subject to subsection 8(d) above, with respect
to any other business as may properly come before the
meeting.
Section 9. Manner of Giving Notice. Notice of any
meeting of shareholders shall be given either personally or
by first-class mail, or, if the corporation has outstanding
shares held of record by 500 or more persons (determined as
provided in California Corporations Code Section 605) on the
record date for such meeting, third-class mail, or
telegraphic or other written communication, addressed to the
shareholder at the address of that shareholder appearing on
the books of the corporation or given by the shareholder to
the corporation for the purpose of notice. If no such
address appears on the corporation's books or is given,
notice shall be deemed to have been given if sent to that
shareholder by first-class mail or telegraphic or other
written communication to the corporation's principal
executive office, or if published at least once in a
newspaper of general circulation in the county where that
office is located. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the
mail or sent by telegram or other means of written
communication.
If any notice addressed to a shareholder at the address
of that shareholder appearing on the books of the corporation
is returned to the corporation by the United States Postal
Service marked to indicate that the United States Postal
Service is unable to deliver the notice to the shareholder at
that address, all future notices shall be deemed to have been
duly given without further mailing if these shall be
available to the shareholder on written demand by the
shareholder at the principal executive office of the
corporation for a period of one year from the date of the
giving of the notice.
Section 10. Quorum and Transaction of Business.
(a) At any meeting of the shareholders, a
majority of the shares entitled to vote, represented in
person or by proxy, shall constitute a quorum. If a quorum
is present, the affirmative vote of the majority of shares
represented at the meeting and entitled to vote on any matter
shall be the act of the shareholders, unless the vote of a
greater number or voting by classes is required by law or by
the Articles of Incorporation, and except as provided in
subsection (b) below.
(b) The shareholders present at a duly called or
held meeting of the shareholders at which a quorum is present
may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, provided that any action taken
(other than adjournment) is approved by at least a majority
of the shares required to constitute a quorum.
(c) In the absence of a quorum, no business other
than adjournment may be transacted, except as described in
subsection (b) above.
Section 11. Adjournment and Notice of Adjourned
Meetings. Any meeting of shareholders may be adjourned from
time to time, whether or not a quorum is present, by the
affirmative vote of a majority of shares represented at such
meeting either in person or by proxy and entitled to vote at
such meeting.
In the event any meeting is adjourned, it shall not be
necessary to give notice of the time and place of such
adjourned meeting pursuant to Sections 8 and 9 of these
bylaws; provided that if any of the following three events
occur, such notice must be given:
(a) announcement of the adjourned meeting's time
and place is not made at the original meeting which it
continues or
(b) such meeting is adjourned for more than forty
five (45) days from the date set for the original meeting or
(c) a new record date is fixed for the adjourned
meeting.
At the adjourned meeting, the corporation may transact
any business which might have been transacted at the original
meeting.
Section 12. Waiver of Notice, Consent to Meeting or
Approval of Minutes
(a) Subject to subsection (b) of this Section, the
transactions of any meeting of shareholders, however called
and noticed, and wherever held, shall be as valid as though
made at a meeting duly held after regular call and notice, if
a quorum is present either in person or by proxy, and if,
either before or after the meeting, each of the persons
entitled to vote but not present in person or by proxy signs a
written waiver of notice or a consent to holding of the
meeting or an approval of the minutes thereof.
(b) A waiver of notice, consent to the holding of a
meeting or approval of the minutes thereof need not specify
the business to be transacted or transacted at nor the purpose
of the meeting; provided that in the case of proposals
described in subsection (d) of Section 8 of these bylaws, the
general nature of such proposals must be described in any such
waiver of notice and such proposals can only be approved by
waiver of notice, not by consent to holding of the meeting or
approval of the minutes.
(c) All waivers, consents and approvals shall be
filed with the corporate records or made a part of the minutes
of the meeting.
(d) A person's attendance at a meeting shall con
stitute waiver of notice of and presence at such meeting,
except when such person objects at the beginning of the
meeting to transaction of any business because the meeting is
not lawfully called or convened and except that attendance at
a meeting is not a waiver of any right to object to the
consideration of matters which are required by law or these
bylaws to be in such notice (including those matters described
in subsection (d) of Section 8 of these
bylaws), but are not so included if such person expressly
objects to consideration of such matter or matters at any
time during the meeting.
Section 13. Action by Written Consent Without a
Meeting. Any action which may be taken at any meeting of
shareholders may be taken without a meeting and without prior
notice if written consents setting forth the action so taken
are signed by the holders of the outstanding shares having
not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and
voted.
Directors may not be elected by written consent except
by unanimous written consent of all shares entitled to vote
for the election of directors; provided that any vacancy on
the Board of Directors (other than a vacancy created by
removal) which has not been filled by the board of directors
may be filled by the written consent of a majority of
outstanding shares entitled to vote for the election of
directors.
Any written consent may be revoked pursuant to
California Corporations Code Section 603(c) prior to the time
that written consents of the number of shares required to
authorize the proposed action have been filed with the
Secretary. Such revocation must be in writing and will be
effective upon its receipt by the Secretary.
If the consents of all shareholders entitled to vote
have not been solicited in writing, and if the unanimous
written consent of all such shareholders shall not have been
received, the Secretary shall give prompt notice of any
corporate action approved by the shareholders without a
meeting to those shareholders entitled to vote on such
matters who have not consented thereto in writing. This
notice shall be given in the manner specified in Section 8 of
these bylaws. In the case of approval of (i) a transaction
within the provisions of California Corporations Code,
Section 310 (relating to certain transactions in which a
director has an interest), (ii) a transaction within the
provisions of California Corporations Code, Section 317
(relating to indemnification of agents of the corporation),
(iii) a transaction within the provisions of California
Corporations Code, Sections 181 and 1201 (relating to
reorganization), and (iv) a plan of distribution within the
provisions of California Corporations Code, Section 2007
(relating to certain plans providing for distribution not in
accordance with the liquidation rights of preferred shares,
if any), the notice shall be given at least ten (10) days
before the consummation of any action authorized by that
approval.
Section 14. Voting. Voting at any meeting of
shareholders need not be by ballot; provided, however, that
elections for directors must be by ballot if balloting is
demanded by a shareholder at the meeting and before the
voting begins.
Every person entitled to vote at an election for
directors may cumulate the votes to which such person is
entitled, i.e., such person may cast a total number of votes
equal to the number of directors to be elected multiplied by
the number of votes to which such person's shares are
entitled, and may cast said total number of votes for one or
more candidates in such proportions as such person thinks
fit; provided, however, no shareholder shall be entitled to
so cumulate such shareholder's votes unless the candidates
for which such shareholder is voting have been placed in
nomination prior to the voting and a shareholder has given
notice at the meeting, prior to the vote, of an intention to
cumulate votes. In any election of directors, the candidates
receiving the highest number of votes, up to the number of
directors to be elected, are elected.
Except as may be otherwise provided in the Articles of
Incorporation or by law, and subject to the foregoing
provisions regarding the cumulation of votes, each
shareholder shall be entitled to one vote for each share
held.
Any shareholder may vote part of such shareholder's
shares in favor of a proposal and refrain from voting the
remaining shares or vote them against the proposal, other
than elections to office, but, if the shareholder fails to
specify the number of shares such shareholder is voting
affirmatively, it will be conclusively presumed that the
shareholder's approving vote is with respect to all shares
such shareholder is entitled to vote.
No shareholder approval, other than unanimous approval
of those entitled to vote, will be valid as to proposals
described in subsection 8(d) of these bylaws unless the
general nature of such business was stated in the notice of
meeting or in any written waiver of notice.
Section 15. Persons Entitled to Vote or Consent. The
Board of Directors may fix a record date pursuant to Section
60 of these bylaws to determine which shareholders are
entitled to notice of and to vote at a meeting or consent to
corporate actions, as provided in Sections 13 and 14 of these
bylaws. Only persons in whose name shares otherwise entitled
to vote stand on the stock records of the corporation on such
date shall be entitled to vote or consent.
If no record date is fixed:
(a) The record date for determining shareholders
entitled to notice of or to vote at a meeting of shareholders
shall be at the close of business on the business day next
preceding the day notice is given or, if notice is waived, at
the close of business on the business day next preceding the
day on which the meeting is held;
(b) The record date for determining shareholders
entitled to give consent to corporate action in writing
without a meeting, when no prior action by the Board of
Directors has been taken, shall be the day on which the first
written consent is given;
(c) The record date for determining shareholders
for any other purpose shall be at the close of business on
the day on which the Board of Directors adopts the resolution
relating thereto, or the sixtieth (60th) day prior to the
date of such other action, whichever is later.
A determination of shareholders of record entitled to
notice of or to vote at a meeting of shareholders shall apply
to any adjournment of the meeting unless the Board of
Directors fixes a new record date for the adjourned meeting;
provided, however, that the Board of Directors shall fix a
new record date if the meeting is adjourned for more than
forty-five (45) days from the date set for the original
meeting.
Shares of the corporation held by its subsidiary or
subsidiaries (as defined in California Corporations Code,
Section 189(b)) are not entitled to vote in any matter.
Section 16. Proxies. Every person entitled to vote or
execute consents may do so either in person or by one or more
agents authorized to act by a written proxy executed by the
person or such person's duly authorized agent and filed with
the Secretary of the corporation; provided that no such proxy
shall be valid after the expiration of eleven (11) months
from the date of its execution unless otherwise provided in
the proxy. The manner of execution, suspension, revocation,
exercise and effect of proxies is governed by law.
Section 17. Inspectors of Election. Before any
meeting of shareholders, the Board of Directors may appoint
any persons, other than nominees for office, to act as
inspectors of election at the meeting or its adjournment. If
no inspectors of election are so appointed, the chairman of
the meeting may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election at
the meeting. The number of inspectors shall be either one
(1) or three (3). If inspectors are appointed at a meeting
on the request of one or more shareholders or proxies, the
majority of shares represented in person or proxy shall
determine whether one (1) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to
appear or fails or refuses to act, the chairman of the
meeting may, and upon the request of any shareholder or a
shareholder's proxy shall, appoint a person to fill that
vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and
the voting power of each, the shares represented at the
meeting, the existence of a quorum, and the authenticity,
validity, and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and
questions in any way arising in connection with the right to
vote;
(d) Count and tabulate all votes or consents; (e)
Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to
conduct the election or vote with fairness to all
shareholders.
ARTICLE IV
Board of Directors
Section 18. Powers. Subject to the provisions of law
or any limitations in the Articles of Incorporation or these
bylaws, as to action required to be approved by the
shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate
powers shall be exercised, by or under the direction of the
Board of Directors. The Board of Directors may delegate the
management of the day-to-day operation of the business of the
corporation to a management company or other person, provided
that the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised under the
ultimate direction of the Board of Directors.
Section 19. Number of Directors. The authorized number
of directors of the corporation shall be not less than a
minimum of five (5) nor more than a maximum of nine (9)
(which maximum number in no case shall be greater than two
times said minimum, minus one) and the number of directors
presently authorized is eight (8). The exact number of
directors shall be set within these limits from time to time
(a) by approval of the Board of Directors, or (b) by the
affirmative vote of a majority of the shares represented and
voting at a duly held meeting at which a quorum is present
(which shares voting affirmatively also constitute at least a
majority of the required quorum) or by the written consent of
shareholders pursuant to Section 13 hereinabove.
Any amendment of these bylaws changing the maximum or
minimum number of directors may be adopted only by the
affirmative vote of a majority of the outstanding shares
entitled to vote; provided, an amendment reducing the minimum
number of directors to less than five (5), cannot be adopted
if votes cast against its adoption at a meeting or the shares
not consenting to it in the case of action by written consent
are equal to more than 16-2/3 percent of the outstanding
shares entitled to vote.
No reduction of the authorized number of directors
shall remove any director prior to the expiration of such
director's term of office.
Section 20. Election Of Directors, Term,
Qualifications. The directors shall be elected at each
annual meeting of shareholders to hold office until the next
annual meeting. Each director, including a director elected
or appointed to fill a vacancy, shall hold office either
until the expiration of the term for which elected or
appointed and until a successor has been elected and
qualified, or until his death, resignation or removal.
Directors need not be shareholders of the corporation.
Section 21. Resignations. Any director of the
corporation may resign effective upon giving written notice
to the Chairman of the Board, the President, the Secretary or
the Board of Directors of the corporation, unless the notice
specifies a later time for the effectiveness of such
resignation. If the resignation specifies effectiveness at a
future time, a successor may be elected pursuant to Section
23 of these bylaws to take office on the date that the
resignation becomes effective.
Section 22. Removal. The Board of Directors may
declare vacant the office of a director who has been declared
of unsound mind by an order of court or who has
been convicted of a felony.
The entire Board of Directors or any individual director
may be removed from office without cause by the affirmative
vote of a majority of the outstanding shares entitled to vote
on such removal; provided, however, that unless the entire
Board is removed, no individual director may be removed when
the votes cast against such director's removal, or not
consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election at
which the same total number of votes cast were cast (or, if
such action is taken by written consent, all shares entitled
to vote were voted) and the entire number of directors
authorized at the time of such director's most recent
election were then being elected.
Section 23. Vacancies. A vacancy or vacancies on the
Board of Directors shall be deemed to exist in case of the
death, resignation or removal of any director, or upon
increase in the authorized number of directors or if
shareholders fail to elect the full authorized number of
directors at an annual meeting of shareholders or if, for
whatever reason, there are fewer directors on the Board of
Directors, than the full number authorized. Such vacancy or
vacancies, other than a vacancy created by the removal of a
director, may be filled by a majority of the remaining
directors, though less than a quorum, or by a sole remaining
director. A vacancy created by the removal of a director may
be filled only by the affirmative vote of a majority of the
shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also
constitute at least a majority of the required quorum) or by
the written consent of shareholders pursuant to Section 13
hereinabove. The shareholders may elect a director at any
time to fill any vacancy not filled by the directors. Any
such election by written consent, other than to fill a
vacancy created by removal, requires the consent of a
majority of the outstanding shares entitled to vote. Any such
election by written consent to fill a vacancy created by
removal requires the consent of all of the outstanding shares
entitled to vote.
If, after the filling of any vacancy by the directors,
the directors then in office who have been elected by the
shareholders constitute less than a majority of the directors
then in office, any holder or holders of an aggregate of five
percent (5%) or more of the shares outstanding at that time
and having the right to vote for such directors may call a
special meeting of shareholders to be held to elect the
entire Board of Directors. The term of office of any
director shall terminate upon such election of a successor.
Section 24. Regular Meetings. Regular meetings of the
Board of Directors shall be held at such times, places and
dates as fixed in these bylaws or by the Board of Directors;
provided, however, that if the date for such a meeting falls
on a legal holiday, then the meeting shall be held at the
same time on the next succeeding full business day. Regular
meetings of the Board of Directors held pursuant to this
Section 24 may be held without notice.
Section 25. Participation by Telephone. Members of the
Board of Directors may participate in a meeting through use
of conference telephone or similar communications equipment,
so long as all members participating in such
meeting can hear one another. Such participation constitutes
presence in person at such meeting.
Section 26. Special Meetings. Special meetings of the
Board of Directors for any purpose may be called by the
Chairman of the Board or the President or any vice president
or the Secretary of the corporation or any two (2) directors.
Section 27. Notice of Meetings. Notice of the date,
time and place of all meetings of the Board of Directors,
other than regular meetings held pursuant to Section 24 above
shall be delivered personally, orally or in writing, or by
telephone or telegraph to each director, at least forty-eight
(48) hours before the meeting, or sent in writing to each
director by first-class mail, charges prepaid, at least four
(4) days before the meeting. Such notice may be given by the
Secretary of the corporation or by the person or persons who
called a meeting. Such notice need not specify the purpose
of the meeting. Notice of any meeting of the Board of
Directors need not be given to any director who signs a
waiver of notice of such meeting, or a consent to holding the
meeting or an approval of the minutes thereof, either before
or after the meeting, or who attends the meeting without
protesting prior thereto or at its commencement such
director's lack of notice. All such waivers, consents and
approvals shall be filed with the corporate records or made a
part of the minutes of the meeting.
Section 28. Place of Meetings. Meetings of the Board
of Directors may be held at any place within or without the
state which has been designated in the notice of the meeting
or, if not stated in the notice or there is no notice,
designated in the bylaws or by resolution of the Board of
Directors.
Section 29. Action by Written Consent Without a
Meeting. Any action required or permitted to be taken by the
Board of Directors may be taken without a meeting, if all
members of the Board of Directors individually or
collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the
proceedings of the Board of Directors. Such action by
written consent shall have the same force and effect as a
unanimous vote of such directors.
Section 30. Quorum and Transaction of Business. A
majority of the authorized number of directors shall
constitute a quorum for the transaction of business. Every
act or decision done or made by a majority of the authorized
number of directors present at a meeting duly held at which a
quorum is present shall be the act of the Board of Directors,
unless the law, the Articles of Incorporation or these bylaws
specifically require a greater number. A meeting at which a
quorum is initially present may continue to transact
business, notwithstanding withdrawal of directors, if any
action taken is approved by at least a majority of the number
of directors constituting a quorum for such meeting. In the
absence of a quorum at any meeting of the Board of Directors,
a majority of the directors present may adjourn the meeting,
as provided in Section 31 of these bylaws.
Section 31. Adjournment. Any meeting of the Board of
Directors, whether or not a quorum is present, may be
adjourned to another time and place by the affirmative vote
of a majority of the directors present. If the meeting is
adjourned for more than twenty-four (24) hours, notice of
such adjournment to another time or place shall be given
prior to the time of the adjourned meeting to the directors
who were not present at the time of the adjournment.
Section 32. Organization. The Chairman of the Board
shall preside at every meeting of the Board of Directors, if
present. If there is no Chairman of the Board or if the
Chairman is not present, a Chairman chosen by a majority of
the directors present shall act as chairman. The Secretary
of the corporation or, in the absence of the Secretary, any
person appointed by the Chairman shall act as secretary of
the meeting.
Section 33. Compensation. Directors and members of
committees may receive such compensation, if any, for their
services, and such reimbursement for expenses, as may be
fixed or determined by the Board of Directors.
Section 34. Committees. The Board of Directors may,
by resolution adopted by a majority of the authorized number
of directors, designate one or more committees, each
consisting of two (2) or more directors, to serve at the
pleasure of the Board of Directors. The Board of Directors,
by a vote of the majority of authorized directors, may
designate one or more directors as alternate members of any
committee, to replace any absent member at any meeting of
such committee. Any such committee shall have authority to
act in the manner and to the extent provided in the
resolution of the Board of Directors, and may have all the
authority of the Board of Directors in the management of the
business and affairs of the corporation, except with respect
to:
(a) the approval of any action for which
shareholders' approval or approval of the outstanding shares
also is required by the California Corporations Code;
(b) the filling of vacancies on the Board of
Directors or any of its committees;
(c) the fixing of compensation of directors for
serving on the Board of Directors or any of its committees;
(d) the adoption, amendment or repeal of these
bylaws;
(e) the amendment or repeal of any resolution of
the Board of Directors which by its express terms is not so
amendable or repealable;
(f) a distribution to shareholders, except at a
rate or in a periodic amount or within a price range
determined by the Board of Directors; or
(g) the appointment of other committees of the
Board of Directors or the members thereof.
Any committee may from time to time provide by
resolution for regular meetings at specified times and
places. If the date of such a meeting falls on a legal
holiday, then the meeting shall be held at the same time on
the next succeeding full business day. No notice of such a
meeting need be given. Such regular meetings need not be
held if the committee shall so determine at any time before
or after the time when such meeting would otherwise have
taken place. Special meetings may be called at any time in
the same manner and by the same persons as stated in Sections
25 and 26 of these bylaws for meetings of the Board of
Directors. The provisions of Sections 24, 27, 28, 29, 30 and
31 of these bylaws shall apply to committees, committee
members and committee meetings as if the words "committee"
and "committee member" were substituted for the word "Board
of Directors", and "director", respectively, throughout such
sections.
ARTICLE V
Officers
Section 35. Officers. The corporation shall have a
Chairman of the Board or a President or both, a Secretary, a
Chief Financial Officer and such other officers with such
titles and duties as the Board of Directors may determine.
Any two or more offices may be held by the same person.
Section 36. Appointment. All officers shall be chosen
and appointed by the Board of Directors; provided, however,
the Board of Directors may empower the chief executive
officer of the corporation to appoint such officers, other
than Chairman of the Board, President, Secretary or Chief
Financial Officer, as the business of the corporation may
require. All officers shall serve at the pleasure of the
Board of Directors, subject to the rights, if any, of an
officer under a contract of employment.
Section 37. Inability to Act. In the case of absence
or inability to act of any officer of the corporation or of
any person authorized by these bylaws to act in such
officer's place, the Board of Directors may from time to time
delegate the powers or duties of such officer to any other
officer, or any director or other person whom it may select,
for such period of time as the Board of Directors deems
necessary.
Section 38.. Resignations. Any officer may resign at
any time upon written notice to the corporation, without
prejudice to the rights, if any, of the corporation under any
contract to which such officer is a party. Such resignation
shall be effective upon its receipt by the Chairman of the
Board, the President, the Secretary or the Board of
Directors, unless a different time is specified in the notice
for effectiveness of such resignation. The acceptance of any
such resignation shall not be necessary to make it effective
unless otherwise specified in such notice.
Section 39. Removal. Any officer may be removed from
office at any time, with or without cause, but subject to the
rights, if any, of such officer under any contract of
employment, by the Board of Directors or by any committee to
whom such power of removal has been duly delegated, or, with
regard to any officer who has been appointed by the chief
executive officer pursuant to Section 36 above, by the chief
executive officer or any other officer upon whom such power
of removal may be conferred by the Board of Directors.
Section 40. Vacancies. A vacancy occurring in any
office for any cause may be filled by the Board of Directors,
in the manner prescribed by this Article of the
bylaws for initial appointment to such office.
Section 41. Chairman of the Board. The Chairman of the
Board, if there be such an officer, shall, if present,
preside at all meetings of the Board of Directors and shall
exercise and perform such other powers and duties as may be
assigned from time to time by the Board of Directors or
prescribed by these bylaws. If no President is appointed,
the Chairman of the Board is the general manager and chief
executive officer of the corporation, and shall exercise all
powers of the President described in Section 42 below.
Section 42. President. Subject to such powers, if
any, as may be given by the Board of Directors to the
Chairman of the Board, if there be such an officer, the
President shall be the general manager and chief executive
officer of the corporation and shall have general supervision
and control over the business and affairs of the corporation,
subject to the control of the Board of Directors. The
President may sign and execute, in the name of the
corporation, any instrument authorized by the Board of
Directors, except when the signing and execution thereof
shall have been expressly delegated by the Board of Directors
or by these bylaws to some other officer or agent of the
corporation. The President shall have all the general powers
and duties of management usually vested in the president of a
corporation, and shall have such other powers and duties as
may be prescribed from time to time by the Board of Directors
or these bylaws. The President shall have discretion to
prescribe the duties of other officers and employees of the
corporation in a manner not inconsistent with the provisions
of these bylaws and the directions of the Board of Directors.
Section 43. Vice Presidents. In the absence or
disability of the President, in the event of a vacancy in the
office of President, or in the event such officer refuses to
act, the Vice President shall perform all the duties of the
President and, when so acting, shall have all the powers of,
and be subject to all the restrictions on, the President. If
at any such time the corporation has more than one vice
president, the duties and powers of the President shall pass
to each vice president in order of such vice president's rank
as fixed by the Board of Directors or, if the vice presidents
are not so ranked, to the vice president designated by the
Board of Directors. The vice presidents shall have such
other powers and perform such other duties as may be
prescribed for them from time to time by the Board of
Directors or pursuant to Sections 35 and 36 of these bylaws
or otherwise pursuant to these bylaws.
Section 44. Secretary. The Secretary shall:
(a) Keep, or cause to be kept, minutes of all
meetings of the corporation's shareholders, Board of
Directors, and committees of the Board of Directors, if any.
Such minutes shall be kept in written form.
(b) Keep, or cause to be kept, at the principal
executive office of the corporation, or at the office of its
transfer agent or registrar, if any, a record of the corpora
tion's shareholders, showing the names and addresses of all
shareholders, and the number and classes of shares held by
each. Such records shall be kept in written form or any
other form capable of being converted into written form.
(c) Keep, or cause to be kept, at the principal
executive office of the corporation, or if the principal
executive office is not in California, at its principal
business office in California, an original or copy of these
bylaws, as amended.
(d) Give, or cause to be given, notice of all
meetings of shareholders, directors and committees of the
Board of Directors, as required by law or by these bylaws.
(e) Keep the seal of the corporation, if any, in
safe custody.
(f) Exercise such powers and perform such duties
as are usually vested in the office of secretary of a
corporation, and exercise such other powers and perform such
other duties as may be prescribed from time to time by the
Board of Directors or these bylaws.
If any assistant secretaries are appointed, the
assistant secretary, or one of the assistant secretaries in
the order of their rank as fixed by the Board of Directors
or, if they are not so ranked, the assistant secretary
designated by the Board of Directors, in the absence or
disability of the Secretary or in the event of such officer's
refusal to act or if a vacancy exists in the office of
Secretary, shall perform the duties and exercise the powers
of the Secretary and discharge such duties as may be assigned
from time to time pursuant to these bylaws or by the Board of
Directors.
Section 45. Chief Financial. The Chief Financial
Officer shall:
(a) Be responsible for all functions and duties of
the treasurer of the corporation.
(b) Keep and maintain, or cause to be kept and
maintained, adequate and correct books and records of account
for the corporation.
(c) Receive or be responsible for receipt of all
monies due and payable to the corporation from any source
whatsoever; have charge and custody of, and be responsible
for, all monies and other valuables of the corporation and be
responsible for deposit of all such monies in the name and to
the credit of the corporation with such depositories as may
be designated by the Board of Directors or a duly appointed
and authorized committee of the Board of Directors.
(d) Disburse or be responsible for the
disbursement of the funds of the corporation as may be
ordered by the Board of Directors or a duly appointed and
authorized committee of the Board of Directors.
(e) Render to the chief executive officer and the
Board of Directors a statement of the financial condition of
the corporation if called upon to do so.
(f) Exercise such powers and perform such duties
as are usually vested in the office of chief financial
officer of a corporation, and exercise such other powers and
perform such other duties as may be prescribed by the Board
of Directors or these bylaws.
If any assistant financial officer is appointed, the
assistant financial officer, or one of the assistant
financial officers, if there are more than one, in the order
of their rank as fixed by the Board of Directors or, if they
are not so ranked, the assistant financial officer designated
by the Board of Directors, shall, in the absence or
disability of the Chief Financial Officer or in the event of
such officer's refusal to act, perform the duties and
exercise the powers of the Chief Financial Officer, and shall
have such powers and discharge such duties as may be assigned
from time to time pursuant to these bylaws or by the Board of
Directors.
Section 46. Compensation. The compensation of the
officers shall be fixed from time to time by the Board of
Directors, and no officer shall be prevented from receiving
such compensation by reason of the fact that such officer is
also a director of the corporation.
ARTICLE VI
Contracts, Loans, Bank Accounts, Checks and Drafts
Section 47. Execution of Contracts and Other
Instruments. Except as these bylaws may otherwise provide,
the Board of Directors or its duly appointed and authorized
committee may authorize any officer or officers, agent or
agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation,
and such authorization may be general or confined to specific
instances. Except as so authorized or otherwise expressly
provided in these bylaws, no officer, agent, or employee
shall have any power or authority to bind the corporation by
any contract or engagement or to pledge its credit or to
render it liable for any purpose or in any amount.
Section 48. Loans. No loans shall be contracted on
behalf of the corporation and no negotiable paper shall be
issued in its name, unless and except as authorized by the
Board of Directors or its duly appointed and authorized
committee. When so authorized by the Board of Directors or
such committee, any officer or agent of the corporation may
effect loans and advances at any time for the corporation
from any bank, trust company, or other institution, or from
any firm, corporation or individual, and for such loans and
advances may make, execute and deliver promissory notes,
bonds or other evidences of indebtedness of the corporation
and, when authorized as aforesaid, may mortgage, pledge,
hypothecate or transfer any and all stocks, securities and
other property, real or personal, at any time held by the
corporation, and to that end endorse, assign and deliver the
same as security for the payment of any and all loans,
advances, indebtedness, and liabilities of the corporation.
Such authorization may be general or confined to specific
instances.
Section 49. Bank Accounts. The Board of Directors or
its duly appointed and authorized committee from time to time
may authorize the opening and keeping of general and/or
special bank accounts with such banks, trust companies, or
other depositories as may be selected by the Board of
Directors, its duly appointed and authorized committee or by
any officer or officers, agent or agents, of the corporation
to whom such power may be delegated from time to time by the
Board of Directors. The Board of Directors or its duly
appointed and authorized committee may make such rules and
regulations with respect to said bank accounts, not
inconsistent with the provisions of these bylaws, as are
deemed advisable.
Section 50. Checks, Drafts, Etc. All checks, drafts or
other orders for the payment of money, notes, acceptances or
other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers,
agent or agents, of the corporation, and in such manner, as
shall be determined from time to time by resolution of the
Board of Directors or its duly appointed and authorized
committee. Endorsements for deposit to the credit of the
corporation in any of its duly authorized depositories may be
made, without counter-signature, by the President or any vice
president or the Chief Financial Officer or any assistant
financial officer or by any other officer or agent of the
corporation to whom the Board of Directors or its duly
appointed and authorized committee, by resolution, shall have
delegated such power or by hand-stamped impression in the
name of the corporation.
ARTICLE VII
Certificates for Shares and Their Transfer
Section 51. Certificate for Shares. Every holder of
shares in the corporation shall be entitled to have a
certificate signed in the name of the corporation by the
Chairman or Vice Chairman of the Board or the President or a
Vice President and by the Chief Financial Officer or an
assistant financial officer or by the Secretary or an
assistant secretary, certifying the number of shares and the
class or series of shares owned by the shareholder. Any or
all of the signatures on the certificate may be facsimile. In
case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if such
person were an officer, transfer agent or registrar at the
date of issue.
In the event that the corporation shall issue any
shares as only partly paid, the certificate issued to
represent such partly paid shares shall have stated thereon
the total consideration to be paid for such shares and the
amount paid thereon.
Section 52. Transfer on the Books. Upon surrender to
the Secretary or transfer agent (if any) of the corporation
of a certificate for shares of the corporation duly endorsed,
with reasonable assurance that the endorsement is genuine and
effective, or accompanied by proper evidence of succession,
assignment or authority to transfer and upon compliance with
applicable federal and state securities laws and if the
corporation has no statutory duty to inquire into adverse
claims or has discharged any such duty and if any applicable
law relating to the collection of taxes has been complied
with, it shall be the duty of the corporation, by its
Secretary or transfer agent, to cancel the old certificate,
to issue a new certificate to the person entitled thereto and
to record the transaction on the books of the corporation.
Section 53. Lost, Destroyed and Stolen Certificates.
The holder of any certificate for shares of the corporation
alleged to have been lost, destroyed or stolen shall notify
the corporation by making a written affidavit or affirmation
of such fact. Upon receipt of said affidavit or affirmation
the Board of Directors, or its duly appointed and authorized
committee or any officer or officers authorized by the board
so to do, may order the issuance of a new certificate for
shares in the place of any certificate previously issued by
the corporation and which is alleged to have been lost,
destroyed or stolen. However, the Board of Directors or such
authorized committee, officer or officers may require the
owner of the allegedly lost, destroyed or stolen certificate,
or such owner's legal representative, to give the corporation
a bond or other adequate security sufficient to indemnify the
corporation and its transfer agent and/or registrar, if any,
against any claim that may be made against it or them on
account of such allegedly lost, destroyed or stolen
certificate or the replacement thereof. Said bond or other
security shall be in such amount, on such terms and
conditions and, in the case of a bond, with such surety or
sureties as may be acceptable to the Board of Directors or to
its duly appointed and authorized committee or any officer or
officers authorized by the Board of Directors to determine
the sufficiency thereof. The requirement of a bond or other
security may be waived in particular cases at the discretion
of the Board of Directors or its duly appointed and
authorized committee or any officer or officers authorized by
the Board of Directors so to do.
Section 54. Issuance, Transfer and Registration of
Shares. The Board of Directors may make such rules and
regulations, not inconsistent with law or with these bylaws,
as it may deem advisable concerning the issuance, transfer
and registration of certificates for shares of the capital
stock of the corporation. The Board of Directors may appoint
a transfer agent or registrar of transfers, or both, and may
require all certificates for shares of the corporation to
bear the signature of either or both.
ARTICLE VIII
Inspection of Corporate Records
Section 55. Inspection by Directors. Every director
shall have the absolute right at any reasonable time to
inspect and copy all books, records, and documents of every
kind of the corporation and any of its subsidiaries and to
inspect the physical properties of the corporation and any of
its subsidiaries. Such inspection may be made by the
director in person or by agent or attorney, and the right of
inspection includes the right to copy and make extracts.
Section 56. Inspection by Shareholders.
(a) Inspection of Corporate Records.
(1) A shareholder or shareholders holding at
least five percent in the aggregate of the outstanding voting
shares of the corporation or who hold at least one percent of
such voting shares and have filed a Schedule 14B with the
United States Securities and Exchange Commission relating to
the election of directors of the corporation
shall have an absolute right to do either or both of the
following:
(A) Inspect and copy the record of
shareholders' names and addresses and shareholdings during
usual business hours upon five business days' prior written
demand upon the corporation; or
(B) Obtain from the transfer agent, if
any, for the corporation, upon five business days' prior
written demand and upon the tender of its usual charges for
such a list (the amount of which charges shall be stated to
the shareholder by the transfer agent upon request), a list
of the shareholders' names and addresses who are entitled to
vote for the election of directors and their shareholdings,
as of the most recent record date for which it has been
compiled or as of a date specified by the shareholder
subsequent to the date of demand.
(2) The record of shareholders shall also be
open to inspection and copying by any shareholder or holder
of a voting trust certificate at any time during usual
business hours upon written demand on the corporation, for a
purpose reasonably related to such holder's interest as a
shareholder or holder of a voting trust certificate.
(3) The accounting books and records and
minutes of proceedings of the shareholders and the Board of
Directors and of any committees of the Board of Directors of
the corporation and of each of its subsidiaries shall be open
to inspection, copying and making extracts upon written
demand on the corporation of any shareholder or holder of a
voting trust certificate at any reasonable time during usual
business hours, for a purpose reasonably related to such
holder's interests as a shareholder or as a holder of such
voting trust certificate.
(4) Any inspection, copying, and making of
extracts under this subsection (a) may be done in person or
by agent or attorney.
(a) Inspection of Bylaws. The original or a copy
of these bylaws shall be kept as provided in Section 44 of
these bylaws and shall be open to inspection by the
shareholders at all reasonable times during office hours. If
the principal executive office of the corporation is not in
California, and the corporation has no principal business
office in the state of California, a current copy of these
bylaws shall be furnished to any shareholder upon written
request.
Section 57. Written Form. If any record subject to
inspection pursuant to Section 56 above is not maintained in
written form, a request for inspection is not complied with
unless and until the corporation at its expense makes such
record available in written form.
ARTICLE IX
Miscellaneous
Section 58. Fiscal Year. Unless otherwise fixed by
resolution of the Board of Directors, the fiscal year of the
corporation shall end on the 31st day of December in each
calendar year.
Section 59. Annual Report.
(a) Subject to the provisions of Section 59(b)
below, the Board of Directors shall cause an annual report to
be sent to each shareholder of the corporation in the manner
provided in Section 9 of these bylaws not later than one
hundred twenty (120) days after the close of the
corporation's fiscal year. Such report shall include a
balance sheet as of the end of such fiscal year and an income
statement and statement of changes in financial position for
such fiscal year, accompanied by any report thereon of
independent accountants or, if there is no such report, the
certificate of an authorized officer of the corporation that
such statements were prepared without audit from the books
and records of the corporation. When there are more than 100
shareholders of record of the corporation's shares, as
determined by Section 605 of the California Corporations
Code, additional information as required by Section 1501(b)
of the California Corporations Code shall also be contained
in such report, provided that if the corporation has a class
of securities registered under Section 12 of the United
States Securities Exchange Act of 1934, that Act shall take
precedence. Such report shall be sent to shareholders at
least fifteen (15) days prior to the next annual meeting of
shareholders after the end of the fiscal year to which it
relates.
(b) If and so long as there are fewer than 100
holders of record of the corporation's shares, the
requirement of sending of an annual report to the
shareholders of the corporation is hereby expressly waived.
Section 60. Record Date. The Board of Directors may
fix a time in the future as a record date for the
determination of the shareholders entitled to notice of or to
vote at any meeting or entitled to receive payment of any
dividend or other distribution or allotment of any rights or
entitled to exercise any rights in respect of any change,
conversion or exchange of shares or entitled to exercise any
rights in respect of any other lawful action. The record
date so fixed shall not be more than sixty (60) days nor less
than ten (10) days prior to the date of the meeting nor more
than sixty (60) days prior to any other action or event for
the purpose of which it is fixed. If no record date is
fixed, the provisions of Section 15 of these bylaws shall
apply with respect to notice of meetings, votes, and consents
and the record date for determining shareholders for any
other purpose shall be at the close of business on the day on
which the Board of Directors adopts the resolutions relating
thereto, or the sixtieth (60th) day prior to the date of such
other action or event, whichever is later.
Only shareholders of record at the close of business on
the record date shall be entitled to notice and to vote or to
receive the dividend, distribution or allotment of rights or
to exercise the rights, as the case may be, notwithstanding
any transfer of any shares on the books of the corporation
after the record date, except as otherwise provided in the
Articles of Incorporation, by agreement or by law.
Section 61. Bylaw Amendments. Except as otherwise
provided by law or Section 19 of these bylaws, these bylaws
may be amended or repealed by the Board of Directors or by
the affirmative vote of a majority of the outstanding shares
entitled to vote, including, if applicable, the affirmative
vote of a majority of the outstanding shares of each class or
series entitled by law or the Articles of Incorporation to
vote as a class or series on the amendment or repeal or
adoption of any bylaw or bylaws; provided, however, after
issuance of shares, a bylaw specifying or changing a fixed
number of directors or the maximum or minimum number or
changing from a fixed to a variable board or vice versa may
only be adopted by approval of the outstanding shares as
provided herein.
Section 62. Construction and Definition. Unless the
context requires otherwise, the general provisions, rules of
construction, and definitions contained in the California
Corporations Code shall govern the construction of these
bylaws.
Without limiting the foregoing, "shall" is mandatory
and "may" is permissive.
ARTICLE X
Indemnification
Section 63. Indemnification of Directors, Officers,
Employees And Other Agents.
(a) Directors. The corporation shall indemnify
its directors to the fullest extent not prohibited by the
California General Corporation Law; provided, however, that
the corporation may limit the extent of such indemnification
by individual contracts with its directors; and, provided,
further, that the corporation shall not be required to
indemnify any director in connection with any proceeding (or
part thereof) initiated by such person or any proceeding by
such person against the corporation or its directors,
officers, employees or other agents unless (i) such
indemnification is expressly required to be made by law, (ii)
the proceeding was authorized by the board of directors of
the corporation or (iii) such indemnification is provided by
the corporation, in its sole discretion, pursuant to the
powers vested in the corporation under the California General
Corporation Law.
(b) Officers, Employees and Other Agents. The
corporation shall have power to indemnify its officers,
employees and other agents as set forth in the California
General Corporation Law.
(c) Determination by the Corporation. Promptly
after receipt of a request for indemnification hereunder (and
in any event within 90 days thereof) a reasonable, good faith
determination as to whether indemnification of the director
is proper under the circumstances because each director has
met the applicable standard of care shall be made by:
(1) a majority vote of a quorum consisting of
directors who are not parties to such proceeding;
(2) if such quorum is not obtainable, by
independent legal counsel in a written opinion; or
(3) approval or ratification by the
affirmative vote of a majority of the shares of this
corporation represented and voting at a duly held meeting at
which a quorum is present (which shares voting affirmatively
also constitute at least a majority of the required quorum)
or by written consent of a majority of the outstanding shares
entitled to vote; where in each case the shares owned by the
person to be indemnified shall not be considered entitled to
vote thereon.
(d) Good Faith.
(1) For purposes of any determination under
this bylaw, a director shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in the
best interests of the corporation and its shareholders, and,
with respect to any criminal action or proceeding, to have
had no reasonable cause to believe that his conduct was
unlawful, if his action is based on information, opinions,
reports and statements, including financial statements and
other financial data, in each case prepared or presented by:
(A) one or more officers or employees of
the corporation whom the director believed to be reliable and
competent in the matters presented;
(B) counsel, independent accountants or
other persons as to matters which the director believed to be
within such person's professional competence; and
(C) a committee of the Board upon which
such director does not serve, as to matters within such
committee's designated authority, which committee the
director believes to merit confidence; so long as, in each
case, the director acts without knowledge that would cause
such reliance to be unwarranted.
(2) The termination of any proceeding by
judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent shall not, of itself,
create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in
the best interests of the corporation and its shareholders or
that he had reasonable cause to believe that his conduct was
unlawful.
(3) The provisions of this paragraph (d)
shall not be deemed to be exclusive or to limit in any way
the circumstances in which a person may be deemed to have met
the applicable standard of conduct set forth by the
California General Corporation Law.
(e) Expenses. The corporation shall advance,
prior to the final disposition of any proceeding, promptly
following request therefor, all expenses incurred by any
director in connection with such proceeding upon receipt of
an undertaking by or on behalf of such person to repay said
amounts if it shall be determined ultimately that such person
is not entitled to be indemnified under this bylaw or
otherwise.
(f) Enforcement. Without the necessity of
entering into an express contract, all rights to
indemnification and advances to directors under this bylaw
shall be deemed to be contractual rights and be effective to
the same extent and as if provided for in a contract between
the corporation and the director. Any right to
indemnification or advances granted by this bylaw to a
director shall be enforceable by or on behalf of the person
holding such right in the forum in which the proceeding is or
was pending or, if such forum is not available or a
determination is made that such forum is not convenient, in
any court of competent jurisdiction if (i) the claim for
indemnification or advances is denied, in whole or in part,
or (ii) no disposition of such claim is made within ninety
(90) days of request therefor. The claimant in such
enforcement action, if successful in whole or in part, shall
be entitled to be paid also the expense of prosecuting his
claim. The corporation shall be entitled to raise as a
defense to any such action (other than an action brought to
enforce a claim for expenses incurred in connection with any
proceeding in advance of its final disposition when the
required undertaking has been tendered to the corporation)
that the claimant has not met the standards of conduct that
make it permissible under the California General Corporation
Law for the corporation to indemnify the claimant for the
amount claimed. Neither the failure of the corporation
(including its board of directors, independent legal counsel
or its shareholders) to have made a determination prior to
the commencement of such action that indemnification of the
claimant is proper in the circumstances because he has met
the applicable standard of conduct set forth in the
California General Corporation Law, nor an actual
determination by the corporation (including its board of
directors, independent legal counsel or its shareholders)
that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a
presumption that claimant has not met the applicable standard
of conduct.
(g) Non-Exclusivity of Rights. To the fullest
extent permitted by the corporation's Articles of
Incorporation and the California General Corporation Law, the
rights conferred on any person by this bylaw shall not be
exclusive of any other right which such person may have or
hereafter acquire under any statute, provision of the
Articles of Incorporation, bylaws, agreement, vote of
shareholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in
another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts
with any or all of its directors, officers, employees or
agents respecting indemnification and advances, to the
fullest extent permitted by the California General
Corporation Law and the corporation's Articles of
Incorporation.
(h) Survival of Rights. The rights conferred on
any person by this bylaw shall continue as to a person who
has ceased to be a director and shall inure to the benefit of
the heirs, executors and administrators of such a person.
(i) Insurance. The corporation, upon approval by
the board of directors, may purchase insurance on behalf of
any person required or permitted to be indemnified pursuant
to this bylaw.
(j) Amendments. Any repeal or modification of
this bylaw shall only be prospective and shall not affect the
rights under this bylaw in effect at the time of the alleged
occurrence of any action or omission to act that is the cause
of any proceeding against any agent of the corporation.
(k) Employee Benefit Plans. The corporation shall
indemnify the directors and officers of the corporation who
serve at the request of the corporation as trustees,
investment managers or other fiduciaries of employee benefit
plans to the fullest extent permitted by the California
General Corporation Law.
(l) Saving Clause. If this bylaw or any portion
hereof shall be invalidated on any ground by any court of
competent jurisdiction, then the corporation shall
nevertheless indemnify each director to the fullest extent
permitted by any applicable portion of this bylaw that shall
not have been invalidated, or by any other applicable law.
(m) Certain Definitions. For the purposes of
this bylaw, the following definitions shall apply:
(1) The term "proceeding" shall be broadly
construed and shall include, without limitation, the
investigation, preparation, prosecution, defense, settlement
and appeal of any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative.
(2) The term "expenses" shall be broadly
construed and shall include, without limitation, court costs,
attorneys' fees, witness fees, fines, amounts paid in
settlement or judgment and any other costs and expenses of
any nature or kind incurred in connection with any
proceeding, including expenses of establishing a right to
indemnification under this bylaw or any applicable law.
(3) The term the "corporation" shall include,
in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority
to indemnify its directors, officers, and employees or
agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as
a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the
provisions of this bylaw with respect to the resulting or
surviving corporation as he would have with respect to such
constituent corporation if its separate existence had
continued.
(4) References to a "director," "officer,"
"employee," or "agent" of the corporation shall include,
without limitation, situations where such person is serving
at the request of the corporation as a director, officer,
employee, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
ARTICLE XI
Loans of Officers and Others
Section 64. Certain Corporate Loans and Guaranties.
If the corporation has outstanding shares held of record by
100 or more persons on the date of approval by the Board of
Directors, the corporation may make loans of money or
property to, or guarantee the obligations of, any officer of
the corporation or its parent or any subsidiary, whether or
not a director of the corporation or its parent or any
subsidiary, or adopt an employee benefit plan or plans
authorizing such loans or guaranties, upon the approval of
the Board of Directors alone, by a vote sufficient without
counting the vote of any interested director or directors, if
the Board of Directors determines that such a loan or
guaranty or plan may reasonably be expected to benefit the
corporation.
ARTICLE XII
Right of First Refusal
Section 65. Right of First. No shareholder shall sell,
assign, pledge, or in any manner transfer any of the shares
of Common Stock of the corporation or any right or interest
therein, whether voluntarily or by operation of law, or by
gift or otherwise, except by a transfer which meets the
requirements hereinafter set forth in this bylaw:
(a) If the shareholder desires to sell or
otherwise transfer any of his shares of Common Stock, then
the shareholder shall first give written notice thereof to
the corporation. The notice shall name the proposed
transferee and state the number of shares to be transferred,
the proposed consideration, and all other terms and
conditions of the proposed transfer.
(b) For thirty (30) days following receipt of such
notice, the corporation shall have the option to purchase all
(but not less than all) of the shares specified in the notice
at the price and upon the terms set forth in such notice;
provided, however, that, with the consent of the shareholder,
the corporation shall have the option to purchase a lesser
portion of the shares specified in said notice at the price
and upon the terms set forth therein. In the event of a gift
or property settlement that is not otherwise exempted from
the provisions of this Section 64, the price shall be deemed
to be the fair market value of the Common Stock at such time
as determined in good faith by the Board of Directors. In
the event the corporation elects to purchase all of the
shares or, with consent of the shareholder, a lesser portion
of the shares, it shall give written notice to the
transferring shareholder of its election and settlement for
said shares shall be made as provided below in subsection
(d). In the event the selling shareholder does not agree
with the non-cash valuation of the shares set by the Board of
Directors, the Company shall engage an independent appraiser
to value the price of the shares. The selling shareholder
shall have the right to approve the appraiser. The cost of
the valuation shall be shared equally by the Company and the
selling shareholder.
(c) The corporation may assign its rights
hereunder.
(d) In the event the corporation and/or its
assignee(s) elect to acquire any of the shares of the
transferring shareholder as specified in said transferring
shareholder's notice, the Secretary of the corporation shall
so notify the transferring shareholder and settlement thereof
shall be made in cash within thirty (30) days after the
Secretary of the corporation receives said transferring
shareholder's notice; provided that if the terms of payment
set forth in said transferring shareholder's notice were
other than cash against delivery, the corporation and/or its
assignee(s) shall pay for said shares on the same terms and
conditions set forth in said transferring shareholder's
notice.
(e) In the event the corporation and/or its
assignees(s) do not elect to acquire all of the shares
specified in the transferring shareholder's notice, said
transferring shareholder may, within the sixty-day period
following the expiration of the option rights granted to the
corporation and/or its assignees(s) herein, transfer the
shares specified in said transferring shareholder's notice
which were not acquired by the corporation and/or its
assignees(s) as specified in said transferring shareholder's
notice. All shares so sold by said transferring shareholder
shall continue to be subject to the provisions of this bylaw
in the same manner as before said transfer.
(f) Anything to the contrary contained herein
notwithstanding, the following transactions shall be exempt
from the provisions of this bylaw:
(1) A shareholder's transfer of any or all
shares held either during such shareholder's lifetime or on
death by will or intestacy to such shareholder's immediate
family or to any custodian or trustee for the account of such
shareholder or such shareholder's immediate family.
"Immediate family" as used herein shall mean spouse, lineal
descendant, father, mother, brother, or sister of the
shareholder making such transfer.
(2) A shareholder's bona fide pledge or
mortgage of any shares with a commercial lending institution,
provided that any subsequent transfer of said shares by said
institution shall be conducted in the manner set forth in
this bylaw.
(3) A shareholder's transfer of any or all of
such shareholder's shares to the corporation or to any other
shareholder of the corporation.
(4) A shareholder's transfer of any or all of
such shareholder's shares to a person who, at the time of
such transfer, is an officer or director of the corporation.
(5) A corporate shareholder's transfer of any
or all of its shares pursuant to and in accordance with the
terms of any merger, consolidation, reclassification of
shares or capital reorganization of the corporate
shareholder, or pursuant to a sale of all or substantially
all of the stock or assets of a corporate shareholder.
(6) A corporate shareholder's transfer of any
or all of its shares to any or all of its shareholders.
(7) A transfer by a shareholder which is a
limited or general partnership to any or all of its partners
or former partners.
In any such case, the transferee, assignee, or
other recipient shall receive and hold such Common Stock
subject to the provisions of this bylaw, and there shall be
no further transfer of such Common Stock except in accord
with this bylaw.
(g) The provisions of this bylaw may be waived
with respect to any transfer either by the corporation, upon
duly authorized action of its Board of Directors, or by the
shareholders, upon the express written consent of the owners
of a majority of the voting power of the corporation
(excluding the votes represented by those shares to be
transferred by the transferring shareholder). This bylaw may
be amended or repealed either by a duly authorized action of
the Board of Directors or by the shareholders, upon the
express written consent of the owners of a majority of the
voting power of the corporation.
(h) Any sale or transfer, or purported sale or
transfer, of securities of the corporation shall be null and
void unless the terms, conditions, and provisions of this
bylaw are strictly observed and followed.
(i) The foregoing right of first refusal shall
terminate on either of the following dates, whichever shall
first occur:
(1) On September 29, 2002; or
(2) Upon the date securities of the
corporation are first offered to the public pursuant to a
registration statement filed with, and declared effective by,
the United States Securities and Exchange Commission under
the Securities Act of 1933, as amended.
(j) The certificates representing shares of Common
Stock of the corporation shall bear on their face the
following legend so long as the foregoing right of first
refusal remains in effect:
"The shares represented by this certificate
are subject to a right of first refusal option in
favor of the corporation and/or its assignee(s),
as provided in the bylaws of the corporation."
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EPS PRIMARY REPRESENTS BASIC NET LOSS PER SHARE
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 26,552
<SECURITIES> 0
<RECEIVABLES> 115
<ALLOWANCES> 0
<INVENTORY> 366
<CURRENT-ASSETS> 27,509
<PP&E> 6,785
<DEPRECIATION> 0
<TOTAL-ASSETS> 34,599
<CURRENT-LIABILITIES> 17,662
<BONDS> 0
0
0
<COMMON> 54,967
<OTHER-SE> (79,221)
<TOTAL-LIABILITY-AND-EQUITY> 34,599
<SALES> 0
<TOTAL-REVENUES> 2,752
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,763
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (90)
<INCOME-PRETAX> (3,782)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,782)
<EPS-PRIMARY> (0.36)
<EPS-DILUTED> (0.36)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EPS PRIMARY REPRESENTS BASIC NET LOSS PER SHARE
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 24,305
<SECURITIES> 0
<RECEIVABLES> 261
<ALLOWANCES> 0
<INVENTORY> 520
<CURRENT-ASSETS> 25,495
<PP&E> 4,417
<DEPRECIATION> 0
<TOTAL-ASSETS> 30,294
<CURRENT-LIABILITIES> 9,496
<BONDS> 0
0
0
<COMMON> 54,976
<OTHER-SE> (36,317)
<TOTAL-LIABILITY-AND-EQUITY> 30,294
<SALES> 0
<TOTAL-REVENUES> 570
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,439
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (14)
<INCOME-PRETAX> (2,501)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,501)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
