<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
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 000-23855
U.S. PLASTIC LUMBER CORPORATION
(Name of small business issuer in its charter)
--------------------
NEVADA 87-0404343
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
---------------------
2300 W. GLADES ROAD, SUITE 440 W, BOCA RATON, FLORIDA 33431
(561) 394-3511
(Address and telephone number of principal executive offices and
place of business)
Check here whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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
---- ----
The number of shares outstanding of the registrant's common stock as of
April 16, 1999 is 22,917,854.
<PAGE> 2
U.S. PLASTIC LUMBER CORPORATION AND SUBSIDIARIES
FORM 10-QSB
INDEX
PART I. UNAUDITED FINANCIAL INFORMATION
Item 1. Financial Statements: PAGE
- ------- --------------------- ----
Condensed Consolidated Balance Sheets as of March 31, 1999
and December 31, 1998.................................................. 3
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 1999 and 1998............................. 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 1998............................ 5
Notes to Condensed Consolidated Financial Statements..................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................... 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 17
Item 2. Changes in Securities and Use of Proceeds.......................... 18
Item 5. Other Information.................................................. 19
Item 6. Exhibits and Reports on Form 8-K................................... 19
SIGNATURES.................................................................. 19
FORWARD LOOKING STATEMENTS
When used in this Form 10-QSB, the words or phrases "will likely result", "are
expected to", "will continue", "is anticipated", "estimate", "projected",
"intends to" or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements are subject to certain risks and uncertainties,
including but not limited to economic conditions, changes in laws or
regulations, the Company's history of operating losses, limited access to
capital, demand for products and services of the Company, dilution from issuance
of additional shares, newly developing technologies, loss of permits, conflicts
of interest in related party transactions, regulatory matters, environmental
liability, the occurrence of events not covered by insurance, a substantial
increase in interest rates, protection of technology, lack of industry
standards, raw material commodity pricing, the ability to receive bid awards,
the inability to implement our growth strategy, the inability to maintain key
employees, the effects of competition, the risks and costs associated with the
change in the year 2000 and the ability of the Company to obtain additional
financing. Such factors, which are discussed in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the notes to
condensed consolidated financial statements, could affect the Company's
financial performance and could cause the Company's actual results for future
periods to differ materially from any opinions or statements expressed with
undue reliance on any such forward-looking statements, which speak only as of
the date made. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
2
<PAGE> 3
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---- ----
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,149,518 $ 901,970
Accounts receivable, net 18,551,020 12,334,903
Inventories 3,440,725 4,869,006
Prepaid expenses and other assets 1,453,391 1,278,402
------------- -------------
Total current assets 24,594,654 19,384,281
Property, plant and equipment, net 55,452,695 17,890,636
Acquired intangibles, net 16,294,284 9,553,642
Other assets 5,603,704 5,376,403
------------- -------------
Total assets $ 101,945,337 $ 52,204,962
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,677,090 $ 4,229,972
Notes and capital leases payable, current portion 3,945,670 3,635,300
Accrued expenses 3,516,599 1,564,944
Other liabilities 4,387,897 1,097,762
------------- -------------
Total current liabilities 20,527,256 10,527,978
Notes and capital leases payable, net of current portion 27,823,238 14,669,104
Notes Payable - Affiliates 6,500,000 --
Deferred income taxes and other liabilities 613,287 130,281
Minority interest 250,164 250,164
Convertible subordinated debentures, net of discount 10,500,000 3,555,556
------------- -------------
Total liabilities 66,213,945 29,133,083
Stockholders' equity:
10% Convertible preferred stock, par value $.001; authorized 5,000,000
shares; issued and outstanding 351,462 shares and 382,709 shares,
respectively (aggregate liquidation preference of $7,144,194 and
$7,808,877, respectively) 351 383
Common stock par value $.0001, authorized 50,000,000 shares; issued and
outstanding 22,356,449 shares and 18,230,528 shares, respectively 2,236 1,823
Additional paid-in capital 43,068,045 24,669,247
Accumulated deficit (7,339,240) (1,599,574)
------------- -------------
Total stockholders' equity 35,731,392 23,071,879
------------- -------------
Total liabilities and stockholders' equity $ 101,945,337 $ 52,204,962
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
3
<PAGE> 4
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Sales, net $ 19,812,231 $ 7,659,261
Cost of goods sold 14,175,235 6,058,821
Restructuring charge and asset impairment 2,025,000 --
------------ ------------
Gross profit 3,611,996 1,600,440
Selling, general and administrative expenses 3,702,499 1,584,796
Restructuring charge and asset impairment 3,720,000 --
------------ ------------
Operating income (loss) (3,810,503) 15,644
------------ ------------
Interest and other income 47,395 105,588
Interest expense (1,611,677) (145,332)
------------ ------------
Loss before income taxes (5,374,785) (24,100)
Provision for income taxes (benefit) -- (9,640)
------------ ------------
Net loss (5,374,785) (14,460)
Preferred stock dividend earned (169,612) (108,155)
------------ ------------
Net loss attributable to common stockholders $ (5,544,397) $ (122,615)
============ ============
Net loss per share - basic and diluted $(.26) $(.01)
============ ============
Weighted average common shares outstanding- basic and diluted 21,619,613 15,737,443
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
4
<PAGE> 5
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (5,374,785) $ (14,460)
------------ ------------
Adjustments to reconcile net loss to net cash (used in) operating activities:
Depreciation 706,644 252,168
Amortization 202,882 103,589
Amortization of deferred financing and debenture discount costs 914,124 44,444
Restructuring and asset impairment charge 5,251,623 --
Gain on sale of assets -- 105,588
Expense related to common shares issued to non-employees -- 36,225
Compensation expense on earn-out shares -- 3,718
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable (4,245,570) 763,317
Inventories 415,456 (141,377)
Prepaid expenses and other current assets (9,517) (180,910)
Other assets (10,088) --
Accounts payable 3,284,640 (728,944)
Other liabilities 573,424 (65,144)
Accrued expenses (824,924) (609,069)
------------ ------------
Total adjustments 6,258,694 (416,395)
------------ ------------
Net cash provided by (used in) operating activities 883,909 (430,855)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,215,107) (1,775,970)
Cash paid for acquisitions, net of cash received (8,892,314) (515,500)
Advances to Joint Venture -- (707,812)
------------ ------------
Net cash used in investing activities (10,107,421) (2,999,282)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of warrants and options 100,000 172,870
Advances (repayment of) due to affiliates 6,500,000 (1,150,000)
Proceeds from notes payable 6,875,392 5,067,508
Proceeds from issuance of convertible debentures 2,500,000 --
Payment of deferred financing costs (413,363) --
Payments of notes payable (6,090,969) (733,450)
------------ ------------
Net cash provided by financing activities 9,471,060 3,356,928
------------ ------------
Net change in cash and cash equivalents 247,548 $ (73,209)
Cash and cash equivalents, beginning of period 901,970 1,170,120
------------ ------------
Cash and cash equivalents, end of period $ 1,149,518 $ 1,096,911
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
5
<PAGE> 6
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
U.S. Plastic Lumber Corp. and its subsidiaries (the "Company") are engaged in
the manufacturing of plastic lumber from recycled plastic waste and
environmental services including the recycling of soils which have been exposed
to hydrocarbons. The Company's plastic lumber customers are located throughout
the United States. The Company's environmental services customers are located
primarily in the Northeastern United States.
The Company's unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and the regulations of the Securities and Exchange
Commission for quarterly reporting. Accordingly, they do not include all
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of the Company's management
the statements include all adjustments, consisting only of normal recurring
adjustments, which are necessary for a fair presentation of the financial
position, results of operations and cash flows for the interim periods.
Operating results for the three month period ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999.
PRINCIPLES OF CONSOLIDATION
The accompanying condensed consolidated financial statements include the
accounts of U.S. Plastic Lumber Corp., its wholly-owned subsidiaries and a
majority owned joint venture. All significant inter-company balances and
transactions have been eliminated in consolidation.
RECLASSIFICATIONS
In order to maintain consistency and comparability between periods presented,
certain amounts have been reclassified from the previously reported financial
statements in order to conform with the financial statement presentation of the
current period.
LOSS PER SHARE
Basic loss per share is computed by dividing net loss less preferred stock
dividends earned by the weighted average number of shares actually outstanding.
Diluted loss per share further considers the impact of common stock equivalents
to the extent that they are dilutive. The Company's basic and diluted loss per
share are equivalent for the three months ended March 31, 1999 and 1998 because
the common stock equivalents are anti-dilutive for both of these periods.
SUPPLEMENTAL CASH FLOW INFORMATION AND NONCASH INVESTING AND FINANCING
ACTIVITIES
Interest paid totaled $740,390 and $98,931 in the three months ended March 31,
1999 and 1998, respectively. State income taxes paid totaled $38,650 in the
first three months of 1999 (none in 1998). See Notes 3 and 7 for information
regarding common shares, warrants and debt issued for acquisitions and warrants
issued to secure additional financing.
6
<PAGE> 7
2. ACQUISITIONS
1998 ACQUISITIONS
In January 1998, the Company acquired 100% of the stock of Green Horizon
Environmental, Inc.("GHE"), an environmental services company located in
Norristown, Pennsylvania.
In February 1998, the Company acquired 55% of the stock of Consolidated
Technologies, Inc. ("CTI"), an environmental recycling services company located
in Norristown, Pennsylvania.
On February 28, 1998 the Company acquired substantially all of the assets of
Chesapeake Plastic Lumber, Inc. ("CPL"), a manufacturer of plastic lumber in
Denton, Maryland.
Effective April 30, 1998 the Company acquired 100% of the stock of
Cycle-Masters, Inc. ("CMI"), a manufacturer of plastic lumber in Sweetser,
Indiana.
Effective June 30, 1998 the Company acquired 100% of the stock of Geocore, Inc.
("GCI") a small environmental services company in northern New Jersey.
Effective June 30, 1998 the Company acquired the remaining 45% of CTI.
Effective June 30, 1998 the Company purchased substantially all of the assets of
Trimax of Long Island, Inc. and Polymerix, Inc. ("Trimax") through the U.S.
Bankruptcy Court. The Trimax purchase includes two patents for the manufacture
of structural plastic lumber.
On December 30, 1998 the Company acquired 100% of S&W Waste, Inc. ("S&W"), a
RCRA facility that recycles and beneficially re-uses industrial wastes and
disposes of contaminated materials, located in northern New Jersey.
The $8,517,273 total purchase price for all of the 1998 acquisitions consisted
of 952,875 shares of USPL common stock valued at an aggregate of $3,535,660,
cash payments of $3,705,000 and issuance of debt totaling $954,952, costs
totaling $303,868 and $17,793 assigned to options granted to a former owner.
Several of the acquisitions include non compete agreements, stock options and
earnout provisions based on achieving specified profitability levels for key
employees and former owners.
A summary of the allocation of the $8,517,273 aggregate purchase price of the
1998 acquisitions to the net assets acquired follows:
Working capital (deficit) $ (846,926)
Long-term assets 7,101,976
Long-term debt (1,535,609)
Net deferred tax assets 333,303
Acquired intangibles 3,464,529
-----------
Aggregate purchase price $ 8,517,273
===========
1999 ACQUISITIONS
On January 28, 1999, the Company acquired 100% of the stock of Eaglebrook
Plastics, Inc. and Eaglebrook Products, Inc.(collectively "Eaglebrook", a
plastic recycling and plastic lumber manufacturing company located in Chicago,
IL. The Company is leasing the 300,000 square foot Chicago facility from the
sellers for ten years at a monthly rental of $39,181 with an option to purchase
the facility for $3,000,000. The company intends to purchase the Chicago
facility and has recorded the appraised value of the land and building in
property and equipment and the applicable lease payments and the option price in
notes and capital leases payable.
7
<PAGE> 8
On January 7, 1999, the Company executed a contract to acquire the all of the
stock of Brass Investment Co. ("Brass"), which owns all the stock of Soil
Remediation of Philadelphia ("SRP") and Allied Waste, Inc. ("AWI"). SRP operates
a soil remediation facility in Philadelphia, PA similar to the Company's soil
remediation facility in New Castle, DE. AWI provides environmental services. The
Company signed a Management Contract on January 7, 1999 taking over all
responsibility for day to day management and financial control of SRP and AWI as
of that date. The Company finalized the transaction with Brass on March 23,
1999.
A summary of the allocation of the $36,709,523 aggregate purchase price of the
1999 acquisitions to the net assets acquired follows:
Working capital (deficit) $ (8,159,141)
Long-term assets 38,328,106
Acquired intangibles 6,540,558
------------
Aggregate purchase price $ 36,709,523
============
All of the acquisitions in 1998 and 1999 have been accounted for as purchases.
Accordingly, the results of operations of the acquired companies are included in
the Condensed Consolidated Financial Statements for periods subsequent to the
date of acquisition. The excess of the aggregate purchase price over the
estimated fair value of the net assets acquired in all of the acquisitions has
been recorded as acquired intangibles. The acquired intangibles are being
amortized on a straight-line basis over a period of twenty to forty years.
The unaudited pro forma combined results of operations of the Company, and all
of its subsidiaries for the three months ended March 31, 1999 and year ended
December 31,1998, as if the aforementioned acquisitions were made on January 1,
1998, are as follows:
<TABLE>
<CAPTION>
YEAR
1998
----
<S> <C>
Net sales $86,895,285
===========
Net income $ 1,556,282
===========
Net loss attributable to common shareholders $ 879,204
===========
Diluted income (loss) per share $ .04
===========
Weighted average shares used in computation 21,073,511
===========
</TABLE>
The foregoing unaudited pro forma results of operations reflect adjustments for
amortization of goodwill and depreciation on revalued property and equipment.
Per share amounts are calculated after preferred dividends are subtracted from
net income. They do not purport to be indicative of the results of operations
which actually would have resulted had the acquisitions occurred at the
beginning of the period presented, or of future results of operations of the
consolidated entities.
3. CAPITAL STOCK
SERIES A CONVERTIBLE PREFERRED STOCK
Late in 1996, the Company initiated an offering of up to 250,000 shares of the
Company's Series A Preferred Stock. The shares are nonvoting and have a 10%
cumulative stock dividend payable semiannually The dividend is payable only in
Series A Preferred Stock. No cash dividends will be paid. Each share is
convertible into seven shares of the Company's common stock at the option of the
stockholder or mandatorily on the date a registration statement, which would
yield the Company $10 million in proceeds, is declared effective by the
Securities and Exchange Commission ("SEC"). In the event of any liquidation,
8
<PAGE> 9
after payment of debts and other liabilities, the holders of Series A Preferred
Stock will be entitled to receive, before the holder of any of the Common stock,
the stated value of $20.00 per share plus any unpaid dividends. The Series A
Preferred Stock can be redeemed at any time at the sole option of the Company
for $25.00 per share.
In the first quarter of 1999, 1,050 Series A shares were converted into 7,350
common shares. A 5% stock dividend of 11,351 Series A shares was declared as of
March 31, 1999 to shareholders of record on March 1, 1999. At March 31, 1999
approximately 238,311 Series A shares are outstanding. On or about April 12,
1999, the Company sent notice to all Series A Preferred Stock holders of its
intention to mandatorily redeem the Series A Preferred if not converted into
common stock by the preferred shareholder. The purpose of this redemption would
eliminate any future dividend payments to Series A holders. All Series A
Preferred shareholders elected to convert to common stock as opposed to being
redeemed. The Company paid a dividend on the Series A Preferred through May 5,
1999 in the amount of 15,996 shares of common stock.
SERIES B CONVERTIBLE PREFERRED STOCK
In the summer of 1998, the Company issued 211,020 shares of the Company's Series
B Preferred Stock to accredited investors. The Series B shares have
substantially the same rights and features as the Series A Preferred shares
except that the stated and liquidation value of the Series B shares is $21.00
per share.
In the first quarter of 1999, 48,113 Series B shares were converted into 336,790
common shares. A 5% stock dividend of 6,565 Series B shares was declared
effective March 31, 1999 to shareholders of record on March 1, 1999.
Approximately 113,151 Series B shares are outstanding as of March 31, 1999.
EMPLOYEE STOCK OPTIONS
The Company has granted stock options to key employees and directors. The option
price at the date of grant is determined by the Board of Directors and is
generally tied to the market price of the Company's freely trading shares. The
term for exercising the stock options is generally ten years. Stock options
granted under the Company's stock option incentive plan generally vest ratably
over a period of three years. Employee stock option activity in 1999 is as
follows:
<TABLE>
<CAPTION>
Number of
Weighted Average Options
Exercise Price Outstanding
-------------- -----------
<S> <C> <C>
Outstanding at December 31, 1998 $ 3.46 1,671,000
Granted 5.35 1,452,500
Exercised 4.75 (10,000)
Canceled 3.94 (45,000)
------ ---------
Outstanding at March 31, 1999 $ 4.36 3,068,500
====== =========
Options exercisable at March 31, 1999 $ 3.46 1,279,000
====== =========
</TABLE>
NONEMPLOYEE STOCK OPTIONS AND WARRANTS
Magellan Finance Corporation ("Magellan"), a stockholder, holds an option to
purchase up to 117,894 shares of the Company's common stock at $1.77 per share
(expires June 30, 1999). If Magellan does not exercise its option to purchase
the shares, then the Company is obligated to issue the shares to certain USPL
stockholders at no cost. Warrants to purchase 62,500 common shares at $7.22 per
share were issued to the purchasers of $2,500,000 of convertible subordinated
debentures January 1999. Another 85,000 and 42,500 warrants to purchase common
stock at $5.00 and $7.50, respectively, were also issued in conjunction with the
sale of the $2,500,000 convertible subordinated debentures in 1999. The Company
issued 500,000 warrants at $6.00 to the shareholders of Brass Investment
Co. as part of the acquisition consideration.
9
<PAGE> 10
Nonemployee stock option and warrant activity in 1999 is summarized as follows:
<TABLE>
<CAPTION>
Weighted Average Number
Exercise Price Outstanding
---------------- -----------
<S> <C> <C>
Outstanding at December 31, 1998 $ 3.15 620,394
Issued 6.00 890,000
Exercised 3.50 (15,000)
-------- ----------
Outstanding at March 31, 1999 $ 4.84 1,495,394
======== =========
Stock options exercisable at March 31, 1999 $ 5.71 1,232,500
======== =========
</TABLE>
STOCK RESERVED
At March 31, 1999, common stock was reserved for the following:
<TABLE>
<CAPTION>
<S> <C>
Shares contingently issuable to USPL and CEI shareholders (see Note 5) 4,573,686
Conversion of Series A & B Preferred Stock 2,460,829
Non employee stock options 650,394
Employee stock options 3,068,500
Shares contingently issuable under other earnout provisions 175,500
Warrants 845,000
Convertible Debentures 1,816,826
----------
13,590,735
==========
</TABLE>
4. NON RECURRING RESTRUCTURING CHARGE AND FLOW MOLD
INVENTORY WRITE-DOWN IN 1999
In conjunction with the significant acquisitions in each division during the
first quarter of 1999, the Company restructured and consolidated its two
operating divisions and facilities. A restructuring and asset impairment charge
totaling $5,745,000 was recorded in the first quarter of 1999 including
$4,365,000 by Plastic Lumber Division and $1,380,000 by the Environmental
Recycling Division.
In addition to consolidating several plants, the Plastic Lumber Division
discontinued the labor intensive flow molding process and converted entirely to
more efficient continuous extrusion method of manufacturing flow mold
equipment has been written down to its estimated resale value and the inventory
of flow mold plastic lumber has been written down to its raw material value
totaling $2,785,000. The restructuring charge also included severance, lease
termination, idle plant costs during the changeover and equipment relocation
costs totaling $ 1,580,000 for the Plastic Lumber and $765,000 for Environmental
Recycling. The Environmental Recycling Division also wrote-off $615,000 of
obsolete equipment and site development costs.
The $1,852,000 remaining reserve for costs to be paid in future periods consists
of the following items:
<TABLE>
<S> <C>
Estimated lease payments required before facilities are sublet $ 304,000
Severance agreements and termination benefits 1,075,000
Costs to be incurred to move inefficient operations 473,000
----------
Total reserve $1,852,000
==========
</TABLE>
5. COMMITMENT AND CONTINGENCIES
EARNOUT AGREEMENT
The Company has reserved for issuance pursuant to earnout agreements,
4,573,686 shares which were related to an earnout provision contained in the
Agreement and Plan of Reorganization entered into by the Company on December 15,
1995. In connection with this transaction, the parties to the Agreement and Plan
of Reorganization agreed that the earnout shares would be paid to certain
shareholders who held the common stock as of the date of the Agreement and Plan
of Reorganization in the event net sales or production of Earth Care Global
Holdings, on a consolidated basis, meet or exceed 2.0 million pounds of plastic
lumber per month for three consecutive months are achieved, subject to certain
limitations contained in the Agreement. Certain questions have arisen with
respect to the meaning of the production quotas set forth in these agreements
and the Company has appointed a committee of independent directors who have
selected independent counsel to review this matter. In the event these sales or
production levels are reached, the shareholders of Earth Care Global Holdings as
of March 29, 1996 and Clean Earth, Inc., which
10
<PAGE> 11
shareholders are referred to as the "Historical Shareholders" would receive
approximately 4.6 million earnout shares. No additional assets or cash would be
received by the Company in the event such sales or production goals were
achieved which would result in dilution from the issuance of additional shares
and, which would directly impact all shareholders who purchased the Company's
common stock subsequent to March 29, 1996 and who still owned the Company's
common stock on the date the earnout shares are issued, assuming the sales or
production goal is met. As of March 31, 1999, net tangible book value was $19.4
million, or .87 per share of common stock. Net tangible book value per share
represents total assets less total liabilities, divided by the number of shares
of common stock outstanding. After making the accounting adjustments necessary
to give effect to the issuance of the 4,573,686 earnout shares, the adjusted net
book value as of March 31, 1999 would have been $.72 per share which represents
an immediate dilution of $0.15 per share to shareholders who are not Historical
Shareholders.
LEGAL PROCEEDINGS
The Company is subject to claims and legal actions that arise in the ordinary
course of its business. The Company believes that the ultimate liability, if
any, with respect to these claims and legal actions, will not have a material
effect on the financial position or results of operations of the Company.
6. LINE OF CREDIT AND NEW CREDIT FACILITY
In October 1998 the Company negotiated a five year line of credit for
$30,000,000 with a division of Southern Pacific Bank. The draws on the line are
collateralized by specific equipment and/or inventory and eligible accounts
receivable. The line bears interest at 1% over prime on inventory and receivable
loans and 1.25% over prime on equipment loans. Loans secured by specific
equipment are payable in terms of 4 to 7 years in equal monthly installments
with the unpaid balance due in October 2003. The total costs of obtaining the
line aggregating approximately $1,223,000 are being amortized over the five year
term of the agreement as interest expense.
7. CONVERTIBLE SUBORDINATED DEBENTURES
On December 22, 1998 the Company issued $4,000,000 of subordinated debentures
convertible into common stock at the lower of $5.29 or 90% of the lowest trading
price in the four days preceding the conversion date. The conversion price is
adjustable downward if, in the one year period ending December 22, 1999, the
Company issues convertible securities or common stock at a more favorable price
than the debenture conversion price. The 5% per annum debenture interest is
payable 1.25% per quarter starting April 1, 1999. The Company issued the
debenture holders warrants to purchase 100,000 shares of common stock for $7.215
per share at any time before December 22, 2003. The proceeds were used for
acquisitions.
The Debentures mature on December 22, 2003, however, beginning on June 22, 1999
the debenture holders have the right to force the Company to redeem up to
$1,000,000 of Debentures at a 10% premium (i.e. $1,100,000 for $1,000,000 of
debentures). In addition the debenture holders can require the Company to redeem
100% of the debentures at a 30% premium if the Company fails to register the
underlying shares with the Securities and Exchange Commission before August 19,
1999. The Company has registered the shares underlying the Debentures on May 14,
1999 and must keep the registration statement effective until December 22, 2001
as required by the Debenture agreement.
The debenture holders can force the Company to issue up to $1,500,000 of
debentures on the same terms at any time until December 22, 2001. This "Call"
right is in addition to the $2,500,000 of Debentures issued in January 1999. The
Company can compel the debenture holders to purchase an additional $500,000 of
Debentures between June 22, 1999 and December 22, 1999. However, the maximum
total debentures that can be issued is $8,000,000. The Company must issue
additional warrants in the same proportion (2.5%) as any additional debentures
are issued.
On January 27, 1999 the Company issued an additional $2,500,000 of Convertible
Subordinated debentures to the same debenture holders with the same terms as the
$4,000,000 issued on December 22, 1998. The proceeds were used for acquisitions.
The Company incurred costs totaling $1,184,235 related to the $6,500,000
debentures including $348,055 assigned to the 162,500 warrants. These costs are
being amortized as additional interest expense over the five year term of the
debentures. The unamortized balance is included in other assets. If the
debentures are converted into common stock the unamortized balance will be
charged to additional paid-in-capital.
11
<PAGE> 12
8. SEGMENT REPORTING
The Company's operations are conducted through its Plastic Lumber Division and
its Environmental Recycling Division. A $4,365,000 restructuring charge was
recorded by the Plastic Lumber Division in the first quarter of 1999 and a
$1,380,000 restructuring charge was recorded by the Environmental Recycling
Division. The operating results of the two segments excluding the aforementioned
restructuring charges are as follows: (in thousands)
THREE MONTHS
ENDED MARCH 31,
-------------------------
1999 1998
---- ----
Sales:
Environmental recycling $ 11,463 $ 4,854
Plastic lumber 8,349 2,805
-------- --------
Total Sales $ 19,812 $ 7,659
======== ========
Operating Income by Segment:
Environmental recycling $ 1,490 $ 776
Plastic lumber 910 (458)
Corporate (465) (302)
-------- --------
Total $ 1,935 $ 16
======== ========
Depreciation and amortization:
Environmental recycling $ 369 $ 134
Plastic lumber 492 175
Corporate 47 47
-------- --------
$ 908 $ 356
======== ========
The identifiable assets of the respective segments is set forth below (in
thousands):
MARCH 31, DEC. 31,
1999 1998
---- ----
Identifiable assets:
Environmental recycling $ 46,465 $ 26,761
Plastic lumber 52,621 22,915
Corporate 2,859 2,529
-------- --------
$101,945 $ 52,205
======== ========
The capital expenditures of the respective segments is set forth below (in
thousands):
THREE MONTHS
ENDED MARCH 31,
------------------------
1999 1998
---- ----
Capital Expenditures:
Environmental recycling $ 517 $1,025
Plastic lumber 698 751
Corporate -- --
------ ------
$1,215 $1,776
====== ======
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion is intended to assist in the understanding of the
Company's financial position and results of operations for each of the three
month periods ended March 31, 1999 and 1998. This discussion should be read in
conjunction with the condensed consolidated financial statements and notes
thereto which are included elsewhere herein.
BUSINESS
The Company has two distinct business lines-manufacturing plastic lumber and
environmental recycling. The Plastic Lumber Division manufactures structural and
non-structural plastic lumber and a variety of accessory products such as park
and site amenities, made from 100% recycled high density polyethylene. The
structural plastic lumber is manufactured under processes that are protected by
patents.
The Environmental Recycling Division provides environmental recycling services
including environmental construction services, upland disposal of dredge
materials, beneficial re-use of industrial wastes, and on-site recycling
services. The Division also operates two plants providing thermal desorption and
bioremediation of soil brought to the plants by third parties as well as its
sister environmental service companies.
BUSINESS COMBINATIONS
The Company makes its decisions to acquire or invest in businesses based on
financial and strategic considerations.
ACQUISITIONS COMPLETED DURING THE THREE MONTHS ENDED MARCH 31, 1999
On January 7, 1999, the Company executed a contract to acquire all of the stock
of Brass Investment Co. ("Brass"), which owns all the stock of Soil Remediation
of Philadelphia ("SRP") and Allied Waste, Inc. ("AWI"). SRP operates a soil
remediation facility in Philadelphia, PA similar to the Company's soil
remediation facility in New Castle, DE. AWI provides environmental services
similar to the Company's environmental services division. The Company signed a
Management Contract on January 7, 1999 taking over all responsibility for day to
day management and financial control of SRP and AWI as of that date. The Company
finalized its transaction with Brass in March 1999.
On January 28, 1999, the Company acquired 100% of the stock of Eaglebrook
Plastics, Inc. and Eaglebrook Products, Inc. ("Eaglebrook"), located in Chicago,
IL. Eaglebrook processes HDPE for use as a raw material and produces plastic
lumber similar to the Company's. Eaglebrook also produces composite lumber
through a continuous extrusion process.
NON RECURRING RESTRUCTURING CHARGE AND EQUIPMENT AND INVENTORY REVALUATION IN
1999
In conjunction with the aforementioned significant acquisitions in each
division, the Company restructured and consolidated its two operating divisions
and facilities. A restructuring charge totaling $5,745,000 was recorded in the
first quarter of 1999 including $4,365,000 by Plastic Lumber and $1,380,000 by
the Environmental Recycling Division.
In addition to consolidating several plants, the Company has discontinued
utilizing the labor intensive flow molding process and converted entirely to a
continuous extrusion method of manufacturing plastic lumber. The flow mold
equipment has been written down by $760,000 to estimated its resale value and
the inventory of flow mold plastic lumber, a discontinued product line, has been
written down by $2,025,000 to its raw material value. The restructuring charge
also included severance, lease termination, idle plant costs during the
changeover and equipment relocation costs totaling $1,580,000 for the Plastic
Lumber and $765,000 for Environmental Recycling. The Environmental Recycling
Division also wrote-off $615,000 of obsolete equipment and site development
costs.
13
<PAGE> 14
COMPARISON OF THE FIRST QUARTERS ENDED MARCH 31, 1999 AND 1998
The following table sets forth revenue with percentages of total revenue, and
sets forth costs of operations, selling, general and administrative expenses and
operating income with percentages of the applicable segment revenue, for each of
the Company's business segments for the periods indicated. The following amounts
do not include the aforementioned non recurring restructuring and inventory
charges:
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31
------------------------------------------------------------
1999 % 1998 %
-------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Sales:
Plastic Lumber $ 8,349 42.1 $ 2,805 36.6
Environmental Recycling 11,463 57.9 4,854 63.4
-------- ------- -------- -------
Total sales 19,812 100.0 7,659 100.0
Cost of Sales:
Plastic Lumber 5,259 63.0 2,428 86.6
Environmental Recycling 8,266 72.1 3,378 69.6
Depreciation:
Plastic Lumber 386 4.6 140 5.0
Environmental Recycling 312 2.7 108 2.2
Corporate 8 0.0 4 0.1
Selling, General and Administrative:
Plastic Lumber 1,688 20.2 660 23.5
Environmental Recycling 1,338 11.7 566 11.7
Corporate 418 2.1 255 3.3
Amortization:
Plastic Lumber 106 1.3 35 1.2
Environmental Recycling 57 .5 26 0.5
Corporate 39 .2 43 0.6
-------- ------- -------- -------
Total Operating Expenses 17,877 90.2 7,643 99.8
-------- ------- -------- -------
Total Operating Income 1,935 9.8 16 0.2
Operating Income by Segment:
Plastic Lumber 910 10.9 (458) (16.3)
Environmental Recycling 1,490 13.0 776 16.0
Corporate (465) (2.3) (302) (3.9)
-------- ------- -------- -------
Total Operating Income $ 1,935 9.8 $ 16 0.2
</TABLE>
CONSOLIDATED SALES AND OPERATING INCOME
The Company recognized significant increases in both sales and operating income
for 1999 compared to 1998. Sales increased 158% to $19,812,000 for 1999 from
$7,659,000 in 1998. Most of the increase, $11,437,000 was attributable to
acquisitions completed after March 31, 1998. An increase of $1,595,000 was
achieved through internal growth offset by decreases in the discontinued flow
molding operations. Consolidated operating income increased by $1,918,000 to
$1,934,000 for 1999 compared to $16,000 in 1998. The increase in operating
income was primarily due to businesses acquired in 1998 and 1999. The Company
expects to obtain significant efficiencies from the plant consolidations and
restructuring as we enter the building season in the northern states.
14
<PAGE> 15
SALES BY SEGMENT
Plastic Lumber Division sales increased 198% to $8,349,000 in 1999 compared to
$2,805,000 in 1998. Substantially all of the $5,544,000 increase was
attributable to companies acquired after March 31, 1998.
Environmental Recycling Division sales for 1999 were $11,463,000, an increase of
$6,609,000 or 136% over the $4,854,000 for the first quarter of 1998. The
acquisitions of S&W Waste, Inc. (S&W) on December 30, 1999 and Brass effective
January 1, 1999 contributed substantially all of the increase in sales during
the first quarter of 1999.
GROSS PROFIT
Consolidated gross profit, excluding the restructuring charge, increased
$4,037,000 or 252% to $5,637,000 for 1999 compared to $1,600,000 in 1998. The
gross profit as a percent of revenue improved by 7 percentage points from 21% in
1998 to 28% in 1998. The increase in gross profit was attributed primarily to
acquisitions in both business segments subsequent to March 31, 1998. Business
units in both Divisions continued to eliminate and consolidate duplicative
operating expenses during 1999.
Plastic Lumber acquisitions after March 31, 1998 accounted for $2,485,000 or
101% of the $2,467,000 increase in Plastic Lumber Division gross profit in 1999.
The changeover to the more efficient continuous extrusion method and the
consolidation of the plastic lumber plants significantly reduced plastic lumber
production at existing plants in the first quarter of 1999. The changes are
expected to be complete and production fully on stream by mid second quarter.
Environmental Recycling Division acquisitions of S&W and Brass accounted for
$1,595,000 or 103% of the $1,546,000 increase in gross profit in 1999 over 1998.
The opening of the CBC facility in late June 1998 contributed $384,000 of gross
profit. The New Castle Delaware soil remediation facility and the existing
environmental construction service companies' gross profit was $409,000 lower in
1999 due to a higher mix of government contracts and the shutdown during
renovation of the New Castle facility
Cost of sales (including depreciation) as a percent of Plastic Lumber sales
improved significantly from 91% in 1998 to 67% in 1999. The improvement was
primarily from acquisitions, however, tripling the the Wisconsin plants capacity
has allowed its costs as a percent of sales to improve significantly from 73% to
62% of sales.
Environmental Recycling Division cost of sales (including depreciation)
increased as a percent of sales from 72% in 1998 to 75% in 1999. The higher
gross margins from the SRP and S&W acquisitions were more than offset by the
lower gross profit margins on environmental construction contracts with
governmental units and AWI'S 80% ratio.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("S,G&A")
Consolidated SG&A expenses increased $1,963,000 to $3,444,000 for 1999 from
$1,481,000 in 1998. However, as a percentage of consolidated sales, SG&A
expenses improved from 19.3% for 1998 to 17.4% in 1999 entirely due to the
Plastic Lumber Division. The Environmental Recycling Division S,G& A expenses
remained at 11.7% of revenues in both periods whereas the Plastic Lumber S,G&A
expenses as a percent of sales improved from 23.6% to 20.2%. Corporate
administrative expenses improved to 2.1% of sales in 1999 from 3.3% in 1998
despite making two major acquisitions in 1999 involving 5
15
<PAGE> 16
separate companies. The improvement in Plastic Lumber S,G&A ratio is due
primarily to better cost utilization by increased revenues
INTEREST EXPENSE
Interest expense increased $1,467,000 to $1,612,000 in 1999 over $145,000 in
1998. $722,000 of the increase is the write-off the entire discount assigned
from the $6,500,000 convertible subordinated debentures proceeds in December
1998 and January 1999. Pursuant to SEC rules $722,000 was assigned to the more
favorable conversion feature of the debentures (see note 7 to the condensed
consolidated financial statements) and the $722,000 is included in interest
expense in the first quarter of 1999. There was no similar charge in 1998.
Interest expense also includes $157,000 of amortization of deferred financing
costs to increase the line of credit at PNC Bank in February 1998, to obtain the
new credit agreement form Southern Pacific Bank (SPB) in October 1998, and to
sell the convertible debentures. Only $46,246 of similar costs were included in
interest expense in the first quarter of 1998.
Interest expense also increased as a result of: increased borrowings under the
$30 million SPB credit facility; the issuance of $6,500,000 of convertible
debentures; and the issuance of $4,00,000 of debt issued to purchase Eaglebrook.
The increased borrowings from SPB were used for working capital and to finance
portions of the S&W, Eaglebrook and Brass acquisitions, the start up of dredging
operations and additional Plastic Lumber plant capacity. Interest expense also
increased as a result of debt service assumed from businesses acquired during
1998 and 1999.
DEPRECIATION AND AMORTIZATION
Depreciation expense increased $454,000 or 180% in 1999 compared to 1998
reflecting the significant increase in plant and equipment from both
acquisitions and continued capital investments. Amortization expense increased
$98,000 in 1999 over 1998 due to goodwill from the numerous acquisitions
completed after March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $1,150,000 at March 31, 1999, an increase of
$248,000 from the $902,000 at December 31, 1998. Cash provided in operating
activities was $471,000. The significant increase in revenues during the first
quarter of 1999 resulted in increases in accounts receivable. The Company used
its revolving credit agreements to finance the increase in accounts receivable
and inventories and to pay down accounts payable and accrued expenses of
acquired companies.
Cash used in investing activities was primarily for acquisitions. The
Environmental Recycling Division made capital expenditures in 1999 for property,
plant and equipment totaling $517,000. The Plastic Lumber Division made
machinery and equipment purchases totaling $697,650 primarily to expand capacity
at several of the manufacturing facilities. The Company also used a total of
$8,892,314 to acquire companies with plant & equipment valued at $38,300,000.
Cash provided by financing activities totaled $9,471,000 including $6,211,000 of
net additional bank and equipment financings, $2,500,000 of net proceeds from
the issuance of additional 5% convertible subordinated debentures (see Note 6 to
Consolidated Financial Statements) including $6,500,000 net proceeds from loans
from affiliates. In addition, the Company assumed $7,665,000 of debt owed by
acquired companies and incurred $9,250,000 of additional debt to make the
acquisitions. The credit facility was used to replace $4,200,000 of debt assumed
on acquisitions and to make $1,890,000 of scheduled payments on term loans and
capital leases.
The Company will require additional working capital for the environmental
recycling operations, especially for the dredging opportunities being pursued by
the Company. Although, there are no material commitments in place currently for
capital expenditures, the Company also anticipates requiring additional working
capital to expand and upgrade its plastic lumber manufacturing facilities as
sales
16
<PAGE> 17
levels increase. The Company also anticipates using working capital to fund
research and development costs with respect to its new products.
SEASONALITY
The Company experiences a seasonal slow down during the winter months because
its environmental operations are located in the Northeast United States where
adverse weather and normal ground freezing can impact the Company's performance.
Additionally, sales of certain plastic lumber products slow significantly in the
winter months.
YEAR 2000 ISSUE
Many existing computer programs use only two digits to identify a year in the
date field. These programs were designed and developed without considering the
impact of the upcoming change in the century. If not corrected, many computer
applications could fail or create erroneous results by or at the Year 2000 (the
"Year 2000 Issue"). The Company's accounting software is year 2000 compliant at
all subsidiaries except one. The Company plans to upgrade that subsidiary's
systems to a Year 2000 compliant system in 1999. The Company is in the process
of conducting an internal audit of its non-information technology systems (e.g.
manufacturing equipment imbedded computer systems) and its major customers and
vendors to determine what issues, if any, exist. Upon completion of its internal
audit, the Company will evaluate the full scope of issues, related costs, and
available remedies to insure the Company's non-information technology systems
and those of its major customers and vendors continue to meet its internal
needs. Anticipated costs for system and software modifications, if any, will be
expensed as incurred.
Based on its preliminary review, the Company does not anticipate a material
financial impact as a result of the Year 2000 Issue nor does it anticipate any
material financial expenditures to remedy the Year 2000 date change within its
own software. The Company anticipates spending approximately $250,000 to remedy
Year 2000 issues during 1999. However, the Company has no control over Year 2000
compliance by the customers and vendors of the Company. If the Company's
customers and vendors are not in Year 2000 compliance, this could provide a
material adverse financial impact to the Company, however the Company believes
it is unlikely based on the nature of its business, customers and vendors.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is involved as plaintiff or defendant in various
legal proceedings arising in the normal course of its business. While the
ultimate outcome of these various legal proceedings cannot be predicted with
certainty, it is the opinion of management that the resolution of these legal
actions should not have a material effect on the Company's financial position,
results of operations or liquidity.
6
<PAGE> 18
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Issuances of unregistered shares during the three months ended March 31, 1999
are as follows:
On January 8, 1999, the Company issued to an independent consultant for
financial consulting services 10,000 shares of Common Stock.
On January 8, 1999, the Company issued to a consultant 30,000 shares of Common
Stock for services related to raising private placement equity.
On January 27, 1999, 333,340 shares of Common Stock were issued due to a
conversion of Series B Preferred Stock in the amount of 47,620 shares.
On January 29, 1999, 1,668,025 shares of Common Stock were issued as a result of
the acquisition of Eaglebrook Plastics, Inc. and Eaglebrook Products, Inc.
On February 6, 1999, 3,450 shares of Common Stock were issued as dividends due
on Series B Preferred Stock.
On February 17, 1999, 7,350 shares of Common Stock were issued due to a
conversion of Series A Preferred Stock in the amount of 1,050 shares.
On February 18, 1999, the Company issued to a consultant 22,500 shares of Common
Stock for services related to raising private placement equity.
On February 24, 1999, 333 shares of Common Stock were issued to an employee as
an employee bonus.
On February 24, 1999, 833 shares of Common Stock were issued to an employee as
an employee bonus.
On March 9, 1999, 15,000 shares of Common Stock were issued as a result of two
exercises of stock options.
On March 10, 1999, 22,000 shares of Common Stock were issued in connection with
a fee for placing senior debt instruments for the Company.
On March 23, 1999, 2,000,000 shares of Common Stock were issued due to the
purchase of Brass Investment Co.
On March 24, 1999, 10,000 shares of Common Stock were issued as a result of the
exercise of stock options.
On March 25, 1999, 4,642 shares of Common Stock were issued to an employee as an
employment bonus.
The Common Stock underlying the stock options, Series A Preferred Stock and
Series B Preferred Stock have previously been registered with the SEC.
All of the other transactions were not registered under the Securities Act of
1933 in reliance on the exemption from registration in Section 4(2) of the Act,
as transactions not involving any public offering. These offerings were
completed without any general or public solicitation. In each case the offering
was done to a very limited number of officers, directors and shareholders of the
companies being acquired or to independent consultants or employees of the
Company. The independent consultants, officers, directors and few shareholders
had strong knowledge and experience in business matters as well as pre-existing
business relationships with the Company. The knowledge and experience of these
individuals enabled them to evaluate the risks and merits of the investment. The
securities issued in all of the foregoing transactions were issued as restricted
securities and the certificates were stamped with
7
<PAGE> 19
restrictive legends to prevent any resale without registration under the Act or
in compliance with an exemption from registration.
All cash proceeds from the exercise of stock options has been used for general
corporate purposes.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.7 Amended and Restated Bylaws
27.1 Financial Data Schedule for the three months ended March 31,
1999
(b) Reports on Form 8-K
On February 10, 1999, the Company filed an 8K filed for the
Eaglebrook acquisition and an amended 8K-A on April 13, 1999.
On April 7, 1999, the Company filed an 8K for the Brass Investment
Company acquisition and an amended 8K-A on May 12, 1999.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
/s/ Mark S. Alsentzer
---------------------------
Mark S. Alsentzer,
CEO and President
/s/ John W. Poling
---------------------------
John W. Poling, Chief
Financial Officer
Date May 17, 1999
8
<PAGE> 1
EXHIBIT 3.7
AMENDED AND RESTATED
BYLAWS
OF
U.S. PLASTIC LUMBER CORP.
A NEVADA CORPORATION
<PAGE> 2
AMENDED AND RESTATED
BYLAWS
OF
U.S. PLASTIC LUMBER CORP.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I: OFFICES...........................................................................................1
ARTICLE II: SHAREHOLDERS.....................................................................................1
Section 1. Annual Meeting............................................................................1
Section 2. Special Meetings..........................................................................2
Section 3. Place Of Meeting..........................................................................2
Section 4. Notice Of Meeting.........................................................................2
Section 5. Fixing Of Record Date.....................................................................3
Section 6. Voting Lists..............................................................................4
Section 7. Recognition Procedure For Beneficial Owners...............................................5
Section 8. Quorum And Manner Of Acting...............................................................5
Section 9. Proxies...................................................................................5
Section 10. Voting Of Shares.........................................................................6
Section 11. Corporation's Acceptance Of Votes........................................................7
Section 12. Informal Action By Shareholders..........................................................8
Section 13. Meetings By Telecommunication............................................................9
ARTICLE III: BOARD OF DIRECTORS..............................................................................9
Section 1. General Powers............................................................................9
Section 2. Nomination For Directors And Submission Of Proposals......................................9
Section 3. Number, Qualifications And Tenure.........................................................10
Section 4. Removal Of Directors......................................................................11
Section 5. Vacancies.................................................................................11
Section 6. Regular Meetings..........................................................................11
Section 7. Special Meetings..........................................................................11
Section 8. Notice....................................................................................11
Section 9. Quorum....................................................................................12
Section 10. Manner Of Acting.........................................................................12
Section 11. Compensation.............................................................................13
Section 12. Presumption Of Assent....................................................................13
Section 13. Committees...............................................................................13
Section 14. Informal Action By Directors.............................................................14
Section 15. Telephonic Meetings......................................................................14
ARTICLE IV: OFFICERS AND AGENTS..............................................................................14
Section 1. General...................................................................................14
Section 2. Appointment And Term Of Office............................................................15
Section 3. Resignation And Removal...................................................................15
Section 4. Vacancies.................................................................................15
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 5. President.................................................................................15
Section 6. Vice Presidents...........................................................................16
Section 7. Secretary.................................................................................16
Section 8. Treasurer.................................................................................17
ARTICLE V: STOCK.............................................................................................17
Section 1. Certificates..............................................................................17
Section 2. Consideration For Shares..................................................................18
Section 3. Lost Certificates.........................................................................18
Section 4. Transfer Of Shares........................................................................19
Section 5. Transfer Agent, Registrars And Paying Agents..............................................19
ARTICLE VI: INDEMNIFICATION..................................................................................19
Section 1. General...................................................................................19
Section 2. Advancing Expenses........................................................................20
Section 3. Benefit To Survive........................................................................20
Section 4. General Provisions........................................................................20
Section 5. Optional Indemnification..................................................................21
Section 6. Witness Expenses..........................................................................21
ARTICLE VII: INSURANCE.......................................................................................21
Section 1. Provision Of Insurance....................................................................21
ARTICLE VIII: ACQUISITION OF CONTROLLING INTEREST............................................................21
ARTICLE IX: MISCELLANEOUS....................................................................................22
Section 1. Seal......................................................................................22
Section 2. Fiscal Year...............................................................................22
Section 3. Amendments................................................................................22
Section 4. Receipt Of Notices By The Corporation.....................................................22
Section 5. Gender....................................................................................22
Section 6. Conflicts.................................................................................22
Section 7. Definitions...............................................................................22
</TABLE>
<PAGE> 4
AMENDED AND RESTATED
BYLAWS
OF
U.S. PLASTIC LUMBER CORP.
ARTICLE I
OFFICES
The principal office of the corporation shall be designated from time
to time by the corporation and may be within or outside of Nevada.
The corporation may have such other offices, either within or outside
Nevada, as the board of directors may designate or as the business of the
corporation may require from time to time.
The registered office of the corporation required by the Nevada General
Corporation Law to be maintained in Nevada may be, but need not be, identical
with the principal office, and the address of the registered office may be
changed from time to time by the board of directors.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders shall
be held on a date and at a time fixed by the board of directors of the
corporation (or by the president in the absence of action by the board of
directors) for the purpose of electing directors and for the transaction of such
other business as may come before the meeting. If the election of directors is
not held on the day fixed as provided herein for any annual meeting of the
shareholders, or any adjournment thereof, the board of directors shall cause the
election to be held at a special meeting of the shareholders as soon thereafter
as it may conveniently be held.
A shareholder may apply to the district court in the county in Nevada
where the corporation's principal office is located or, if the corporation has
no principal office in Nevada, to the district court of the county in which the
corporation's registered office is located to seek an order that a shareholder
meeting be held (i) if an annual meeting was not held within six months after
the close of the corporation's most recently ended fiscal year or fifteen months
after its last annual meeting, whichever is earlier, or (ii) if the shareholder
participated in a proper call of or proper demand for a special meeting and
notice of the special meeting was not given within thirty days after the date of
the call or the date the last of the demands necessary to require calling of the
meeting was received by the corporation pursuant to Nevada corporate law, or the
special meeting was not held in accordance with the notice.
SECTION 2. SPECIAL MEETINGS. Unless otherwise prescribed by statute,
special meetings of the shareholders may be called for any purpose by the
president or by the board of directors.
1
<PAGE> 5
SECTION 3. PLACE OF MEETING. The board of directors may designate any
place, either within or outside Nevada, as the place for any annual meeting or
any special meeting called by the board of directors. If no designation is made,
or if a special meeting is called other than by the board, the place of meeting
shall be the principal office of the corporation.
SECTION 4. NOTICE OF MEETING. Written notice stating the place, date,
and hour of the meeting shall be given not less than ten nor more than sixty
days before the date of the meeting, except if any other longer period is
required by the Nevada General Corporation Law. The secretary shall be required
to give such notice only to shareholders entitled to vote at the meeting except
as otherwise required by the Nevada General Corporation Law.
Notice of a special meeting shall include a description of the purpose
or purposes of the meeting. Notice of an annual meeting need not include a
description of the purpose or purposes of the meeting except the purpose or
purposes shall be stated with respect to (i) an amendment to the articles of
incorporation of the corporation, (ii) a merger or share exchange in which the
corporation is a party and, with respect to a share exchange, in which the
corporation's shares will be acquired, (iii) a sale, lease, exchange or other
disposition, other than in the usual and regular course of business, of all or
substantially all of the property of the corporation or of another entity which
this corporation controls, in each case with or without the goodwill, (iv) a
dissolution of the corporation, (v) restatement of the articles of
incorporation, or (vi) any other purpose for which a statement of purpose is
required by the Nevada General Corporation Law. Notice shall be given personally
or by mail, private carrier, telegraph, teletype, electronically transmitted
facsimile or other form of wire or wireless communication by or at the direction
of the president, the secretary, or the officer or persons calling the meeting,
to each shareholder of record entitled to vote at such meeting. If mailed and if
in a comprehensible form, such notice shall be deemed to be given and effective
when deposited in the United States mail, properly addressed to the shareholder
at his address as it appears in the corporation's current record of
shareholders, with first class postage prepaid. If notice is given other than by
mail, and provided that such notice is in a comprehensible form, the notice is
given and effective on the date actually received by the shareholder.
If requested by the person or persons lawfully calling such meeting,
the secretary shall give notice thereof at corporate expense. No notice need be
sent to any shareholder if three successive notices mailed to the last known
address of such shareholder have been returned as undeliverable until such time
as another address for such shareholder is made known to the corporation by such
shareholder. In order to be entitled to receive notice of any meeting, a
shareholder shall advise the corporation in writing of any change in such
shareholder's mailing address as shown on the corporation's books and records.
When a meeting is adjourned to another date, time or place, notice need
not be given of the new date, time or place if the new date, time or place of
such meeting is announced before adjournment at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact any
business which may have been transacted at the original meeting. If
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the adjournment is for more than 120 days, or if a new record date is fixed for
the adjourned meeting, a new notice of the adjourned meeting shall be given to
each shareholder of record entitled to vote at the meeting as of the new record
date.
A shareholder may waive notice of a meeting before or after the time
and date of the meeting by a writing signed by such shareholder. Such waiver
shall be delivered to the corporation for filing with the corporate records, but
this delivery and filing shall not be conditions to the effectiveness of the
waiver. Further, by attending a meeting either in person or by proxy, a
shareholder waives objection to lack of notice or defective notice of the
meeting unless the shareholder objects at the beginning of the meeting to the
holding of the meeting or the transaction of business at the meeting because of
lack of notice or defective notice. By attending the meeting, the shareholder
also waives any objection to consideration at the meeting of a particular matter
not within the purpose or purposes described in the meeting notice unless the
shareholder objects to considering the matter when it is presented.
SECTION 5. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to (i) notice of or vote at any meeting of shareholders or
any adjournment thereof, (ii) receive distributions or share dividends, (iii)
demand a special meeting, or (iv) make a determination of shareholders for any
other proper purpose, the board of directors may fix a future date as the record
date for any such determination of shareholders, such date in any case to be not
more than seventy days, and, in case of a meeting of shareholders, not less than
ten days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed by the
directors, the record date shall be the day before the notice of the meeting is
given to shareholders, or the date on which the resolution of the board of
directors providing for a distribution is adopted, as the case may be. When a
determination of shareholders entitled to vote at any meeting of shareholders is
made as provided in this section, such determination shall apply to any
adjournment thereof unless the board of directors fixes a new record date, which
it must do if the meeting is adjourned to a date more than 120 days after the
date fixed for the original meeting. Unless otherwise specified when the record
date is fixed, the time of day for such determination shall be as of the
corporation's close of business on the record date.
Notwithstanding the above, the record date for determining the
shareholders entitled to take action without a meeting or entitled to be given
notice of action so taken shall be the date a writing upon which the action is
taken is first received by the corporation. The record date for determining
shareholders entitled to demand a special meeting shall be the date of the
earliest of any of the demands pursuant to which the meeting is called.
SECTION 6. VOTING LISTS. After a record date is fixed for a
shareholders' meeting, the secretary shall make, at the earlier of ten days
before such meeting or two business days after notice of the meeting has been
given, a complete list of the shareholders entitled to be given notice of such
meeting or any adjournment thereof. The list shall be arranged by voting groups
and within each voting group by class or series of shares, shall be in
alphabetical order within each class or series, and shall show the address of
and the number of shares of each class or series held by each
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shareholder. For the period beginning the earlier of ten days prior to the
meeting or two business days after notice of the meeting is given and continuing
through the meeting and any adjournment thereof, this list shall be kept on file
at the principal office of the corporation, or at a place (which shall be
identified in the notice) in the city where the meeting will be held. Such list
shall be available for inspection on written demand by any shareholder
(including for the purpose of this Section 6 any holder of voting trust
certificates) or his agent or attorney during regular business hours and during
the period available for inspection. The original stock transfer books shall be
prima facie evidence as to who are the shareholders entitled to examine such
list or transfer books or to vote at any meeting of shareholders.
Any shareholder, his agent or attorney may copy the list during regular
business hours and during the period it is available for inspection, provided
(i) the shareholder has been a shareholder for at least three months immediately
preceding the demand or holds at least five percent of all outstanding shares of
any class of shares as of the date of the demand, (ii) the demand is made in
good faith and for a purpose reasonably related to the demanding shareholder's
interest as a shareholder, (iii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iv) the records are directly connected with the described purpose, and (v) the
shareholder pays a reasonable charge covering the costs of labor and material
for such copies, not to exceed the estimated cost of production and
reproduction.
SECTION 7. RECOGNITION PROCEDURE FOR BENEFICIAL OWNERS. The board of
directors may adopt by resolution a procedure whereby a shareholder of the
corporation may certify in writing to the corporation that all or a portion of
the shares registered in the name of such shareholder are held for the account
of a specified person or persons. The resolution may set forth (i) the types of
nominees to which it applies, (ii) the rights or privileges that the corporation
will recognize in a beneficial owner, which may include rights and privileges
other than voting, (iii) the form of certification and the information to be
contained therein, (iv) if the certification is with respect to a record date,
the time within which the certification must be received by the corporation, (v)
the period for which the nominee's use of the procedure is effective, and (vi)
such other provisions with respect to the procedure as the board deems necessary
or desirable. Upon receipt by the corporation of a certificate complying with
the procedure established by the board of directors, the persons specified in
the certification shall be deemed, for the purpose or purposes set forth in the
certification, to be the registered holders of the number of shares specified in
place of the shareholder making the certification.
SECTION 8. QUORUM AND MANNER OF ACTING. A majority of the votes
entitled to be cast on a matter by a voting group represented in person or by
proxy, shall constitute a quorum of that voting group for action on the matter.
If less than a majority of such votes are represented at a meeting, a majority
of the votes so represented may adjourn the meeting from time to time without
further notice, for a period not to exceed 120 days for any one adjournment. If
a quorum is present at such adjourned meeting, any business may be transacted
which might have been transacted at the meeting as originally noticed. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of
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enough shareholders to leave less than a quorum, unless the meeting is adjourned
and a new record date is set for the adjourned meeting.
If a quorum exists, action on a matter, other than the election of
directors, by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast within the voting group opposing
the action, unless the vote of a greater number or voting by classes is required
by law or the articles of incorporation.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy by signing an appointment form or similar writing, either
personally or by his duly authorized attorney-in-fact. A shareholder may also
appoint a proxy by transmitting or authorizing the transmission of a telegram,
teletype, or other electronic transmission providing a written statement of the
appointment to the proxy, a proxy solicitor, proxy support service organization,
or other person duly authorized by the proxy to receive appointments as agent
for the proxy, or to the corporation. The transmitted appointment shall set
forth or be transmitted with written evidence from which it can be determined
that the shareholder transmitted or authorized the transmission of the
appointment. The proxy appointment form or similar writing shall be filed with
the secretary of the corporation before or at the time of the meeting. The
appointment of a proxy is effective when received by the corporation and is
valid for six months unless a different period is expressly provided in the
appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile,
of an appointment of a proxy may be substituted for or used in lieu of the
original appointment for any purpose for which the original appointment could be
used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate votes
before the proxy exercises his authority under the appointment. Other notice of
revocation may, in the discretion of the corporation, be deemed to include the
appearance at a shareholders' meeting of the shareholder who granted the proxy
and his voting in person on any matter subject to a vote at such meeting.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment.
The corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by the
shareholder (including a shareholder who is a successor to the shareholder who
granted the proxy) either personally or by his attorney-
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in-fact, notwithstanding that the revocation may be a breach of an obligation of
the shareholder to another person not to revoke the appointment.
Subject to Section 11 and any express limitation on the proxy's
authority appearing on the appointment form, the corporation is entitled to
accept the proxy's vote or other action as that of the shareholder making the
appointment.
SECTION 10. VOTING OF SHARES. Each outstanding share, regardless of
class, shall be entitled to one vote and each fractional share shall be entitled
to a corresponding fractional vote on each matter submitted to a vote at a
meeting of shareholders, except to the extent that the voting rights of the
shares of any class or classes are limited or denied by the articles of
incorporation as permitted by the Nevada Business Corporation Code. Cumulative
voting shall not be permitted in the election of directors or for any other
purpose.
At each election of directors, that number of candidates equaling the
number of directors to be elected, having the highest number of votes cast in
favor of their election, shall be elected to the board of directors.
Except as otherwise ordered by a court of competent jurisdiction upon a
finding that the purpose of this Section would not be violated in the
circumstances presented to the court, the shares of the corporation are not
entitled to be voted if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and the first corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation except to the extent the second corporation holds the shares
in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of
redemption is mailed to the holders and a sum sufficient to redeem the shares
has been deposited with a bank, trust company or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares.
SECTION 11. CORPORATION'S ACCEPTANCE OF VOTES. If the name signed on a
vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment or
proxy appointment revocation and give it effect as the act of the shareholder.
If the name signed on a vote, consent, waiver, proxy appointment or proxy
appointment revocation does not correspond to the name of a shareholder, the
corporation, if acting in good faith, is nevertheless entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and to
give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports to be
that of an officer or agent of the entity;
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(ii) the name signed purports to be that of an administrator, executor,
guardian or conservator representing the shareholder and, if the
corporation requests, evidence of fiduciary status acceptable to the
corporation has been presented with respect to the vote, consent,
waiver, proxy appointment or proxy appointment revocation;
(iii) the name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests,
evidence of this status acceptable to the corporation has been
presented with respect to the vote, consent, waiver, proxy appointment
or proxy appointment revocation;
(iv) the name signed purports to be that of a pledgee, beneficial owner
or attorney-in-fact of the shareholder and, if the corporation
requests, evidence acceptable to the corporation of the signatory's
authority to sign for the shareholder has been presented with respect
to the vote, consent, waiver, proxy appointment or proxy appointment
revocation;
(v) two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one
of the co-tenants or fiduciaries, and the person signing appears to be
acting on behalf of all the co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy appointment or
proxy appointment revocation is otherwise proper under rules
established by the corporation that are not inconsistent with this
Section 11.
The corporation is entitled to reject a vote, consent, waiver, proxy
appointment or proxy appointment revocation if the secretary or other officer or
agent authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the signatory's
authority to sign for the shareholder.
Neither the corporation nor its officers nor any agent who accepts or
rejects a vote, consent, waiver, proxy appointment or proxy appointment
revocation in good faith and in accordance with the standards of this Section is
liable in damages for the consequences of the acceptance or rejection.
SECTION 12. INFORMAL ACTION BY SHAREHOLDERS. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a written consent (or counterparts thereof) that sets forth the
action so taken is signed by all of the shareholders entitled to vote with
respect to the subject matter thereof and received by the corporation. Such
consent shall have the same force and effect as a unanimous vote of the
shareholders and may be stated as such in any document. Action taken under this
Section 12 is effective as of the date the last writing necessary to effect the
action is received by the corporation, unless all of the writings specify a
different effective date, in which case such specified date shall be the
effective date for such action. If any shareholder revokes his consent as
provided for herein prior to what would otherwise be the effective date, the
action proposed in the consent shall be
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invalid. The record date for determining shareholders entitled to take action
without a meeting is the date the corporation first receives a writing upon
which the action is taken.
Any shareholder who has signed a writing describing and consenting to
action taken pursuant to this Section 12 may revoke such consent by a writing
signed by the shareholder describing the action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the corporation before the effectiveness of the action.
SECTION 13. MEETINGS BY TELECOMMUNICATION. Any or all of the
shareholders may participate in an annual or special shareholders' meeting by,
or the meeting may be conducted through the use of, any means of communication
by which all persons participating in the meeting may hear each other during the
meeting. A shareholder participating in a meeting by this means is deemed to be
present in person at the meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the corporation shall
be managed under the direction of, its board of directors, except as otherwise
provided in the Nevada General Corporation Law or the articles of incorporation.
SECTION 2. NOMINATION FOR DIRECTORS AND SUBMISSION OF PROPOSALS.
(a) Nominations for directors to be elected may be made at a
meeting of shareholders only by (i) the board of directors (or any committee
thereof), or (ii) a shareholder of the corporation entitled to vote for the
election of directors at the meeting who complies with the procedure set forth
in Section 2(b) of this Article III of these bylaws. Business may be conducted
at a meeting of the shareholders of the corporation only if such business (i)
was specified in the notice of meeting (or any supplement thereto) given by the
board of directors, (ii) is otherwise properly brought before the meeting by the
board of directors, or (iii) is otherwise properly brought before the meeting by
a shareholder of the corporation in accordance with the procedure set forth in
Section 2(b) of this Article III of these bylaws. Notwithstanding the foregoing,
at any time prior to the election of directors at a meeting of shareholders, the
board of directors may designate a substitute nominee to replace any bona fide
nominee who was nominated as set forth above and who, for any reason, becomes
unavailable for election as a director.
(b) Beginning with the annual meeting of the shareholders to
be held in 2000 and without limitation of the applicable provisions of the
federal securities laws, nominations by shareholders for directors to be
elected, or proposals by shareholders to be considered, at a meeting of
shareholders and which have not been previously approved by the board of
directors must be submitted to the secretary of the corporation in writing,
either by personal delivery, nationally-recognized express mail or United States
mail, postage prepaid, not later than (i) with
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respect to an election to be held, or a proposal to be considered, at an annual
meeting of shareholders, the latest date upon which shareholder proposals must
be submitted to the corporation for inclusion in the corporation's proxy
statement relating to such meeting pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended, or other applicable rules or regulations under
the federal securities laws or, if no suc rules apply, at least ninety (90)
days prior to the date one year from the date of the immediately preceding
annual meeting of shareholders, and (ii) with respect to an election to be held,
or a proposal to be considered, at a special meeting of shareholders, the close
of business on the tenth day following the date on which notice of such meeting
is first given to shareholders. Each such nomination or proposal shall set
forth: (i) the name and address of the shareholder making the nomination or
proposal and the person or persons nominated, or the subject matter of the
proposal submitted; (ii) a representation that the shareholder is a holder of
record of capital stock of the corporation entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to vote for the person or
persons nominated, or the proposal submitted; (iii) a description of all
arrangements and understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination was made, or the proposal was submitted, by the shareholder; (iv)
such other information regarding each nominee proposed by such shareholder as
would be required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission had the nominee been
nominated by the board of directors; and (v) the consent of each nominee to
serve as a director of the corporation if so elected. All late nominations and
proposals shall be rejected.
SECTION 3. NUMBER, QUALIFICATIONS AND TENURE. The number of directors
of the Corporation shall be at least one (1), with the exact number of directors
and their respective classifications to be determined from time to time by
resolution adopted by the board of directors of the corporation. The directors
shall be divided into four classes, designated Class I, Class II, Class III and
Class IV. Each class shall consist as nearly as may be possible, of one-fourth
(1/4) of the total number of directors constituting the board of directors (the
"Full Board"). The term of the initial Class I directors terminated on the date
of the 1997 Annual Meeting of Stockholders and shall terminate thereafter for
four-year terms; the term of the initial Class II directors terminated on the
date of the 1998 Annual Meeting of Stockholders and shall terminate thereafter
for four-year terms; the term of the initial Class III directors shall terminate
on the date of the 1999 Annual Meeting of Stockholders and thereafter for
four-year terms; the term of the initial Class IV directors shall terminate on
the date of the 2000 Annual Meeting of Stockholders and thereafter for four-year
terms. If the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in each
class as nearly equal as possible, and any additional directors of any class
elected to fill a vacancy resulting from and increase in such class shall hold
office for a term that shall coincide with the remaining term of that class, but
in no case will a decrease in the number of directors shorten the term of any
incumbent director. A director shall hold office until the annual meeting for
the year in which his/her term expires and until his/her successor shall be
elected and shall qualify, subject however, to prior death, resignation,
retirement, disqualification or removal from office.
A director shall be a natural person who is eighteen years of age or
older. A director need not be a resident of Nevada or a shareholder of the
corporation.
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SECTION 4. REMOVAL OF DIRECTORS. Directors shall be removed in the
manner provided by the Nevada General Corporation Law (Nevada Revised Statutes
Section 78.335, as may be amended from time to time). Any director may be
removed by the shareholders of the voting group that elected the director, with
or without cause, at a meeting called for that purpose. The notice of the
meeting shall state that the purpose or one of the purposes of the meeting is
removal of the director.
SECTION 5. VACANCIES. Any director may resign at any time by giving
written notice to the secretary. Such resignation shall take effect at the time
the notice is received by the secretary unless the notice specifies a later
effective date. Unless otherwise specified in the notice of resignation, the
corporation's acceptance of such resignation shall not be necessary to make it
effective.
Any vacancy on the board of directors, howsoever resulting (including
vacancies created as a result of a resolution of the board of directors
increasing the authorized number of directors), may be filled by a majority of
the directors then in office, even if less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy shall hold office for a term
that shall coincide with the term of the class to which such director shall have
elected.
SECTION 6. REGULAR MEETINGS. A regular meeting of the board of
directors shall be held without notice immediately after and at the same place
as the annual meeting of shareholders. The board of directors may provide by
resolution the time and place, either within or outside Nevada, for the holding
of additional regular meetings without other notice.
SECTION 7. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the president or any one (1) of the
directors. The person or persons authorized to call special meetings of the
board of directors may fix any place, either within or outside Nevada, as the
place for holding any special meeting of the board of directors called by them.
SECTION 8. NOTICE. Notice of the date, time and place of any special
meeting shall be given to each director at least two days prior to the meeting
by written notice either personally delivered or mailed to each director at his
business address, or by notice transmitted by private courier, telegraph, telex,
electronically transmitted facsimile or other form of wire or wireless
communication. If mailed, such notice shall be deemed to be given and to be
effective on the earlier of (i) five days after such notice is deposited in the
United States mail, properly addressed, with first class postage prepaid, or
(ii) the date shown on the return receipt, if mailed by registered or certified
mail return receipt requested, provided that the return receipt is signed by the
director to whom the notice is addressed. If notice is given by telex,
electronically transmitted facsimile or other similar form of wire or wireless
communication, such notice shall be deemed to be given and to be effective when
sent, and with respect to a telegram, such notice shall be deemed to be given
and to be effective when the telegram is delivered to the telegraph company. If
a director has designated in writing one or more reasonable addresses or
facsimile numbers for delivery of notice to him, notice sent by mail, telegraph,
telex, electronically transmitted facsimile or other form of wire or wireless
communication shall not be deemed to have been given or to be effective unless
sent to such addresses or facsimile numbers, as the case may be.
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A director may waive notice of a meeting before or after the time and date of
the meeting by a writing signed by such director. Such waiver shall be delivered
to the secretary for filing with the corporate records, but such delivery and
filing shall not be conditions to the effectiveness of the waiver. Further, a
director's attendance at or participation in a meeting waives any required
notice to him of the meeting unless at the beginning of the meeting, or promptly
upon his later arrival, the director objects to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice and does not thereafter vote for or assent to action taken at the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
SECTION 9. QUORUM. A majority of the number of directors fixed by the
board of directors pursuant to Article III, Section 2 or, if no number is fixed,
a majority of the number in office immediately before the meeting begins, shall
constitute a quorum for the transaction of business at any meeting of the board
of directors.
SECTION 10. MANNER OF ACTING. Except as otherwise specified below, the
affirmative vote of a majority of the votes entitled to be cast by the members
of the board of directors shall be necessary for the board of directors to
effectuate or authorize corporate action by the corporation. The following
actions of the corporation shall require the affirmative vote of at least
two-thirds (2/3) of the votes entitled to be cast by the directors: (i) the
amendment of any provision of the bylaws; (ii) the merger of the corporation or
any subsidiary thereof into each other or into any other entity; (iii) the sale
of more than twenty-five percent (25%) of the assets of the corporation or of
any subsidiary, either alone or in the aggregate; (iv) the purchase of assets
with a value of more than twenty-five percent (25%) of the corporation's assets
at the time of such purchase; or (v) any other similar action that would have a
material impact on the corporation or any of its subsidiaries.
SECTION 11. COMPENSATION. By resolution of the board of directors, any
director may be paid any one or more of the following: his expenses, if any, of
attendance at meetings, a fixed sum for attendance at each meeting, a stated
salary as director, or such other compensation as the corporation and the
director may reasonably agree upon. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
SECTION 12. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the board of directors or committee of the board at
which action on any corporate matter is taken shall be presumed to have assented
to all action taken at the meeting unless (i) the director objects at the
beginning of the meeting, or promptly upon his arrival, to the holding of the
meeting or the transaction of business at the meeting and does not thereafter
vote for or assent to any action taken at the meeting, (ii) the director
contemporaneously requests that his dissent or abstention as to any specific
action taken be entered in the minutes of the meeting, or (iii) the director
causes written notice of his dissent or abstention as to any specific action to
be received by the presiding officer of the meeting before its adjournment or by
the secretary promptly after the adjournment of the meeting. A director may
dissent to a specific action at a meeting, while assenting to others. The right
to dissent to a specific action taken at a meeting of the
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board of directors or a committee of the board shall not be available to a
director who voted in favor of such action.
SECTION 13. COMMITTEES. By resolution adopted by a majority of all the
directors in office when the action is taken, the board of directors may
designate from among its members an executive committee and one or more other
committees, and appoint one or more members of the board of directors to serve
on them. To the extent provided in the resolution, each committee shall have all
the authority of the board of directors, except that no such committee shall
have the authority to (i) authorize distributions, (ii) approve or propose to
shareholders actions or proposals required by the Nevada General Corporation Law
to be approved by shareholders, (iii) fill vacancies on the board of directors
or any committee thereof, (iv) amend articles of incorporation, (v) adopt, amend
or repeal the bylaws, (vi) authorize or approve the reacquisition of shares
unless pursuant to a formula or method prescribed by the board of directors, or
(vii) authorize or approve the issuance or sale of shares, or contract for the
sale of shares or determine the designations and relative rights, preferences
and limitations of a class or series of shares, except that the board of
directors may authorize a committee or officer to do so within limits
specifically prescribed by the board of directors. The committee shall then have
full power within the limits set by the board of directors to adopt any final
resolution setting forth all preferences, limitations and relative rights of
such class or series and to authorize an amendment of the articles of
incorporation stating the preferences, limitations and relative rights of a
class or series for filing with the Secretary of State under the Nevada General
Corporation Law.
Sections 5, 6, 7, 8, 9 or 13 of Article III, which govern meetings,
notice, waiver of notice, quorum, voting requirements and action without a
meeting of the board of directors, shall apply to committees and their members
appointed under this Section 12.
Neither the designation of any such committee, the delegation of
authority to such committee, nor any action by such committee pursuant to its
authority shall alone constitute compliance by any member of the board of
directors or a member of the committee in question with his responsibility to
conform to the standard of care set forth in Article III, Section 15 of these
bylaws.
The Board, by resolution, may designate an executive committee,
nominating committee and any other committee, each consisting of two or more
members, at least one of which shall also be a member of the Board of Directors.
Except as otherwise expressly provided, each such committee shall serve at the
pleasure of the Board.
SECTION 14. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at a meeting of the directors or any committee designated
by the board of directors may be taken without a meeting if a written consent
(or counterparts thereof) that sets forth the action so taken is signed by all
of the directors entitled to vote with respect to the action taken. Such consent
shall have the same force and effect as a unanimous vote of the directors or
committee members and may be stated as such in any document. Unless the consent
specifies a different effective time or date, action taken under this Section 13
is effective at the time or date the last director signs a writing describing
the action taken, unless, before such time, any director has
12
<PAGE> 16
revoked his consent by a writing signed by the director and received by the
president or the secretary of the corporation.
SECTION 15. TELEPHONIC MEETINGS. The board of directors may permit any
director (or any member of a committee designated by the board) to participate
in a regular or special meeting of the board of directors or a committee thereof
through the use of any means of communication by which all directors
participating in the meeting can hear each other during the meeting. A director
participating in a meeting in this manner is deemed to be present in person at
the meeting.
ARTICLE IV
OFFICERS AND AGENTS
SECTION 1. GENERAL. The officers of the corporation shall be a
president, a secretary and a treasurer, and may also include one or more vice
presidents, each of which officer shall be appointed by the board of directors
and shall be a natural person eighteen years of age or older. One person may
hold more than one office. The board of directors or an officer or officers so
authorized by the board may appoint such other officers, assistant officers,
committees and agents, including a chairman of the board, a vice chairman of the
board, assistant secretaries and assistant treasurers, as they may consider
necessary. Except as expressly prescribed by these bylaws, the board of
directors or the officer or officers authorized by the board shall from time to
time determine the procedure for the appointment of officers, their authority
and duties and their compensation, provided that the board of directors may
change the authority, duties and compensation of any officer who is not
appointed by the board.
SECTION 2. APPOINTMENT AND TERM OF OFFICE. The officers of the
corporation to be appointed by the board of directors shall be appointed at each
annual meeting of the board held after each annual meeting of the shareholders.
If the appointment of officers is not made at such meeting or if an officer or
officers are to be appointed by another officer or officers of the corporation,
such appointments shall be made as determined by the board of directors or the
appointing person or persons. Each officer shall hold office until the first of
the following occurs: his successor shall have been duly appointed and
qualified, his death, his resignation, or his removal in the manner provided in
Section 3.
SECTION 3. RESIGNATION AND REMOVAL. An officer may resign at any time
by giving written notice of resignation to the president, secretary or other
person who appoints such officer. The resignation is effective when the notice
is received by the corporation unless the notice specifies a later effective
date.
Any officer or agent may be removed at any time with or without cause
by the board of directors or an officer or officers authorized by the board.
Such removal does not affect the contract rights, if any, of the corporation or
of the person so removed. The appointment of an officer or agent shall not in
itself create contract rights.
SECTION 4. VACANCIES. A vacancy in any office, however occurring, may
be filled by the board of directors, or by the officer or officers authorized by
the board, for the unexpired
13
<PAGE> 17
portion of the officer's term. If an officer resigns and his resignation is made
effective at a later date, the board of directors, or officer or officers
authorized by the board, may permit the officer to remain in office until the
effective date and may fill the pending vacancy before the effective date if the
board of directors or officer or officers authorized by the board provide that
the successor shall not take office until the effective date. In the
alternative, the board of directors, or officer or officers authorized by the
board of directors, may remove the officer at any time before the effective date
and may fill the resulting vacancy.
SECTION 5. PRESIDENT. The president shall preside at all meetings of
shareholders and all meetings of the board of directors unless the board of
directors has appointed a chairman, vice chairman, or other officer of the board
and has authorized such person to preside at meetings of the board of directors.
Subject to the direction and supervision of the board of directors, the
president shall be the chief executive officer of the corporation, and shall
have general and active control of its affairs and business and general
supervision of its officers, agents and employees. Unless otherwise directed by
the board of directors, the president shall attend in person or by substitute
appointed by him, or shall execute on behalf of the corporation written
instruments appointing a proxy or proxies to represent the corporation, at all
meetings of the stockholders of any other corporation in which the corporation
holds any stock. On behalf of the corporation, the president may in person or by
substitute or by proxy execute written waivers of notice and consents with
respect to any such meetings. At all such meetings and otherwise, the president,
in person or by substitute or proxy, may vote the stock held by the corporation,
execute written consents and other instruments with respect to such stock, and
exercise any and all rights and powers incident to the ownership of said stock,
subject to the instructions, if any, of the board of directors. The president
shall have custody of the treasurer's bond, if any. The president shall have
such additional authority and duties as are appropriate and customary for the
office of president and chief executive officer, except as the same may be
expanded or limited by the board of directors from time to time.
SECTION 6. VICE PRESIDENTS. The vice presidents shall assist the
president and shall perform such duties as may be assigned to them by the
president or by the board of directors. In the absence of the president, the
vice president, if any (or, if more than one, the vice presidents in the order
designated by the board of directors, or if the board makes no such designation,
then the vice president designated by the president, or if neither the board nor
the president makes any such designation, the senior vice president as
determined by first election to that office), shall have the powers and perform
the duties of the president.
SECTION 7. SECRETARY. The secretary shall (i) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders and the
board of directors, a record of all actions taken by the shareholders or board
of directors without a meeting, a record of all actions taken by a committee of
the board of directors in place of the board of directors on behalf of the
corporation, and a record of all waivers of notice of meetings of shareholders
and of the board of directors or any committee thereof, (ii) see that all
notices are duly given in accordance with the provisions of these bylaws and as
required by law, (iii) serve as custodian of the corporate records and of the
seal of the corporation and affix the seal to all documents when authorized by
the board of directors, (iv) keep at the corporation's registered office or
principal place of business a record containing the names and addresses of all
shareholders in a form that permits preparation of a list of shareholders
arranged by voting group and by class or series of shares within each voting
group,
14
<PAGE> 18
that is alphabetical within each class or series and that shows the address of,
and the number of shares of each class or series held by, each shareholder,
unless such a record shall be kept at the office of the corporation's transfer
agent or registrar, (v) maintain at the corporation's principal office the
originals or copies of the corporation's articles of incorporation, bylaws,
minutes of all shareholders' meetings and records of all action taken by
shareholders without a meeting for the past three years, all written
communications within the past three years to shareholders as a group or to the
holders of any class or series of shares as a group, a list of the names and
business addresses of the current directors and officers, a copy of the
corporation's most recent corporate report filed with the Secretary of State,
and financial statements showing in reasonable detail the corporation's assets
and liabilities and results of operations for the last three years, (vi) have
general charge of the stock transfer books of the corporation, unless the
corporation has a transfer agent, (vii) authenticate records of the corporation,
and (viii) in general, perform all duties incident to the office of secretary
and such other duties as from time to time may be assigned to him by the
president or by the board of directors. Assistant secretaries, if any, shall
have the same duties and powers, subject to supervision by the secretary. The
directors and/or shareholders may however respectively designate a person other
than the secretary or assistant secretary to keep the minutes of their
respective meetings.
Any books, records, or minutes of the corporation may be in written
form or in any form capable of being converted into written form within a
reasonable time.
SECTION 8. TREASURER. The treasurer shall be the principal financial
officer of the corporation, shall have the care and custody of all funds,
securities, evidences of indebtedness and other personal property of the
corporation and shall deposit the same in accordance with the instructions of
the board of directors. Subject to the limits imposed by the board of directors,
he shall receive and give receipts and acquittances for money paid in on account
of the corporation, and shall pay out of the corporation's funds on hand all
bills, payrolls and other just debts of the corporation of whatever nature upon
maturity. He shall perform all other duties incident to the office of the
treasurer and, upon request of the board, shall make such reports to it as may
be required at any time. He shall, if required by the board, give the
corporation a bond in such sums and with such sureties as shall be satisfactory
to the board, conditioned upon the faithful performance of his duties and for
the restoration to the corporation of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation. He shall have such other powers and perform such other
duties as may from time to time be prescribed by the board of directors or the
president. The assistant treasurers, if any, shall have the same powers and
duties, subject to the supervision of the treasurer.
The treasurer shall also be the principal accounting officer of the
corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account as
required by the Nevada General Corporation Law, prepare and file all local,
state and federal tax returns, prescribe and maintain an adequate system of
internal audit and prepare and furnish to the president and the board of
directors statements of account showing the financial position of the
corporation and the results of its operations.
15
<PAGE> 19
ARTICLE V
STOCK
SECTION 1. CERTIFICATES. The board of directors shall be authorized to
issue any of its classes of shares with or without certificates. The fact that
the shares are not represented by certificates shall have no effect on the
rights and obligations of shareholders. If the shares are represented by
certificates, such shares shall be represented by consecutively numbered
certificates signed, either manually or by facsimile, in the name of the
corporation by the president. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, such certificate may
nonetheless be issued by the corporation with the same effect as if he were such
officer at the date of its issue. All certificates shall be consecutively
numbered, and the names of the owners, the number of shares, and the date of
issue shall be entered on the books of the corporation. Each certificate
representing shares shall state upon its face:
(i) at the corporation is organized under the laws of Nevada;
(ii) The name of the person to whom issued;
(iii) The number and class of the shares and the designation of the
series, if any, that the certificate represents;
(iv) The par value, if any, of each share represented by the
certificate;
(v) Any restrictions imposed by the corporation upon the transfer
of the shares represented by the certificate.
If shares are not represented by certificates, within a reasonable time
following the issue or transfer of such shares, the corporation shall send the
shareholder a complete written statement of all of the information required to
be provided to holders of uncertificated shares by the Nevada General
Corporation Law.
SECTION 2. CONSIDERATION FOR SHARES. Certificated or uncertificated
shares shall not be issued until the shares represented thereby are fully paid.
The board of directors may authorize the issuance of shares for consideration
consisting of any tangible or intangible property or benefit to the corporation,
including cash, promissory notes, services performed or other securities of the
corporation. Future services shall not constitute payment or partial payment for
shares of the corporation. The promissory note of a subscriber or an affiliate
of a subscriber shall not constitute payment or partial payment for shares of
the corporation unless the note is negotiable and is secured by collateral,
other than the shares being purchased, having a fair market value at least equal
to the principal amount of the note. For purposes of this Section 2, "promissory
note" means a negotiable instrument on which there is an obligation to pay
independent of collateral and does not include a non-recourse note.
SECTION 3. LOST CERTIFICATES. In case of the alleged loss, destruction
or mutilation of a certificate of stock, the board of directors may direct the
issuance of a new certificate in lieu
16
<PAGE> 20
thereof upon such terms and conditions in conformity with law as the board may
prescribe. The board of directors may in its discretion require an affidavit of
lost certificate and/or a bond in such form and amount and with such surety as
it may determine before issuing a new certificate.
SECTION 4. TRANSFER OF SHARES. Upon surrender to the corporation or to
a transfer agent of the corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and receipt of such documentary stamps as may be required by law and
evidence of compliance with all applicable securities laws and other
restrictions, the corporation shall issue a new certificate to the person
entitled thereto, and cancel the old certificate. Every such transfer of stock
shall be entered on the stock books of the corporation which shall be kept at
its principal office or by the person and at the place designated by the board
of directors.
Except as otherwise expressly provided in Article II, Sections 7 and
11, and except for the assertion of dissenters' rights to the extent provided in
Nevada Revised Statutes Sections 92A.300 to 92A.500, the corporation shall be
entitled to treat the registered holder of any shares of the corporation as the
owner thereof for all purposes, and the corporation shall not be bound to
recognize any equitable or other claim to, or interest in, such shares or rights
deriving from such shares on the part of any person other than the registered
holder, including without limitation any purchaser, assignee or transferee of
such shares or rights deriving from such shares, unless and until such other
person becomes the registered holder of such shares, whether or not the
corporation shall have either actual or constructive notice of the claimed
interest of such other person.
SECTION 5. TRANSFER AGENT, REGISTRARS AND PAYING AGENTS. The board may
at its discretion appoint one or more transfer agents, registrars and agents for
making payment upon any class of stock, bond, debenture or other security of the
corporation. Such agents and registrars may be located either within or outside
Nevada. They shall have such rights and duties and shall be entitled to such
compensation as may be agreed.
ARTICLE VI
INDEMNIFICATION
SECTION 1. GENERAL: Every person who was or is a director, officer,
employee or agent of the corporation or of any other corporation, partnership,
joint venture, trust or other enterprise, in which he served as such at the
request of the corporation, and in which the corporation owned or owns stocks or
other beneficial or legal interests or of which the corporation is a creditor,
may be indemnified by the corporation to the fullest extent allowed by the
Nevada General Corporation Law, as amended from time to time, against any and
all liability and reasonable expense (which terms include, but are not limited
to, counsel fees, disbursements and the amount of judgments, fines and penalties
against, and amounts paid in settlement by, such person) incurred by him in
connection with or resulting from any civil or criminal claim, action, suit or
proceeding, whether brought by or in the right of the corporation or such other
corporation, partnership, joint venture, trust or enterprise, in which he may be
involved as a party or otherwise by reason of his being or having been such
director, officer or employee if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, in a criminal action or proceeding, if he had no reasonable
cause to believe his conduct was unlawful.
17
<PAGE> 21
The termination of any action, suit or 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 or not opposed to the best
interests of the corporation or that he had reasonable cause to believe his
conduct was unlawful. Indemnification as provided by this Section shall be made
by the corporation only as authorized in the specific case, and only upon a
determination that the person claiming indemnification met the applicable
standards of conduct set forth herein. Such determination shall be made in the
manner provided by the Nevada General Corporation Law.
SECTION 2. ADVANCING EXPENSES: Expenses incurred in connection with a
claim, suit or proceeding may be paid by the corporation in advance of the final
disposition thereof if authorized by the board of directors in the specific case
upon receipt of an undertaking by or on behalf of a person who may be entitled
to indemnification to repay such expenses unless he is ultimately determined to
be entitled to indemnification.
SECTION 3. BENEFIT TO SURVIVE: The rights of indemnification provided
herein shall survive the death of the person otherwise entitled thereto and
shall extend to his legal representatives and heirs.
SECTION 4. GENERAL PROVISIONS:
(a) The term "to the fullest extent permitted by applicable
law," as used in this Article, shall mean the maximum extent permitted by public
policy, common law or statute. Any person covered by Section 1 hereof may, to
the fullest extent permitted by applicable law, elect to have the right to
indemnification or to advancement or reimbursement of expenses, interpreted, at
such person's option, (i) on the basis of the applicable law on the date this
Article was approved by stockholders, or (ii) on the basis of the applicable law
in effect at the time of the occurrence of the event or events giving rise to
the action, suit or proceeding, or (iii) on the basis of the applicable law in
effect at the time indemnification is sought.
(b) The indemnification and advancement or reimbursement of
expenses provided by, or granted pursuant to, this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement or reimbursement of expenses may be entitled under any bylaw,
agreement, vote of shareholders or directors or otherwise, both as to action in
such official capacity and as to action in another capacity while holding that
office.
(c) The provisions of this Article may, at any time (and
whether before or after there is any basis for a claim for indemnification or
for the advancement or reimbursement of expenses pursuant hereto), be amended,
supplemented, waived, or terminated, in whole or in part, with respect to any
person covered by Section 1 hereof by a written agreement signed by the
corporation and such person.
(d) The corporation shall have the right to appoint the
attorney for a person covered by Section 1 hereof, provided such appointment is
not unreasonable under the circumstances.
18
<PAGE> 22
SECTION 5. OPTIONAL INDEMNIFICATION: The corporation may, to the
fullest extent permitted by applicable law, indemnify, and advance or reimburse
expenses for, persons in all situations other than that covered by this Article.
SECTION 6. WITNESS EXPENSES. The sections of this Article VI do not
limit the corporation's authority to pay or reimburse expenses incurred by a
director in connection with an appearance as a witness in a proceeding at a time
when he has not been made or named as a defendant or respondent in the
proceeding.
ARTICLE VII
INSURANCE
SECTION 1. PROVISION OF INSURANCE. By action of the board of directors,
notwithstanding any interest of the directors in the action, the corporation may
purchase and maintain insurance, in such scope and amounts as the board of
directors deems appropriate, on behalf of any person who is or was a director,
officer, employee, fiduciary or agent of the corporation, or who, while a
director, officer, employee, fiduciary or agent of the corporation, is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee, fiduciary or agent of any other foreign or domestic profit or
nonprofit corporation or of any partnership, joint venture, trust, profit or
nonprofit unincorporated association, limited liability company, other
enterprise or employee benefit plan, against any liability asserted against, or
incurred by, him in that capacity or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against such
liability under the provisions of Article VI or applicable law. Any such
insurance may be procured from any insurance company designated by the board of
directors of the corporation, whether such insurance company is formed under the
laws of Nevada or any other jurisdiction of the United States or elsewhere,
including any insurance company in which the corporation has an equity interest
or any other interest, through stock ownership or otherwise.
ARTICLE VIII
ACQUISITION OF CONTROLLING INTEREST
Pursuant to Nevada Revised Statutes Section 78.378(1), the Corporation
elects not to be governed by the provisions of Nevada state law applicable to
the acquisition of a controlling interest in the stock of the Corporation, as
set forth in Nevada Revised Statutes Sections 78.378 to 78.3793.
ARTICLE IX
MISCELLANEOUS
SECTION 1. SEAL. The board of directors may adopt a corporate seal,
which shall contain the name of the corporation and the words, "Seal, Nevada."
SECTION 2. FISCAL YEAR. The fiscal year of the corporation shall be as
established by the board of directors.
19
<PAGE> 23
SECTION 3. AMENDMENTS. The board of directors shall have power, to the
maximum extent permitted by the Nevada General Corporation Law, to make, amend
and repeal the bylaws of the corporation at any regular or special meeting of
the board acting in accordance with the provisions of these bylaws.
SECTION 4. RECEIPT OF NOTICES BY THE CORPORATION. Notices, shareholder
writings consenting to action, and other documents or writings shall be deemed
to have been received by the corporation when they are actually received: (1) at
the registered office of the corporation in Nevada; (2) at the principal office
of the corporation (as that office is designated in the most recent document
filed by the corporation with the secretary of state for Nevada designating a
principal office) addressed to the attention of the secretary of the
corporation; (3) by the secretary of the corporation wherever the secretary may
be found; or (4) by any other person authorized from time to time by the board
of directors or the president to receive such writings, wherever such person is
found.
SECTION 5. GENDER. The masculine gender is used in these bylaws as a
matter of convenience only and shall be interpreted to include the feminine and
neuter genders as the circumstances indicate.
SECTION 6. CONFLICTS. In the event of any irreconcilable conflict
between these bylaws and either the corporation's articles of incorporation or
applicable law, the latter shall control.
SECTION 7. DEFINITIONS. Except as otherwise specifically provided in
these bylaws, all terms used in these bylaws shall have the same definition as
in the Nevada General Corporation Law.
20
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