FORM 10-Q Page 1 of 9
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1997
OR
/___/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-11929
DOVER DOWNS ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0357525
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1131 North DuPont Highway, Dover, Delaware 19901
(Address of principal executive offices) (Zip Code)
(302) 674-4600
(Registrant's telephone number, including area code)
(Former name of registrant)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
As of April 30, 1997, the number of shares of each class of
the registrant's common stock outstanding is as follows:
Common stock - 2,889,000 shares
Class A common stock - 12,336,830 shares
<PAGE>
FORM 10-Q Page 2 of 9
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
A. Basis of Preparation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the instructions to
Form 10-Q and do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the
quarter and nine months ended April 30, 1997 are not necessarily
indicative of the results that may be expected for the year ending July
31, 1997.
B. Business Operations
For the video lottery operations, the difference between the
amount wagered by bettors and the amount paid out to bettors is
referred to as the win. The win is included in the amount recorded in
the Company's financial statements as gaming revenue. The Delaware
State Lottery Office sweeps the winnings from the video lottery
operations, collects the State's share of the winnings and the amount
due to the vendors under contract with the State who provide the video
lottery machines and associated computer systems, collects the amount
allocable to purses for harness horse racing and remits the remainder
to the Company as its commission for acting as a Licensed Agent.
Operating expenses include the amounts collected by the State (i) for
the State's share of the winnings, (ii) for remittance to the providers
of the video lottery machines and associated computer systems, and
(iii) for harness horse racing purses.
<PAGE>
FORM 10-Q Page 3 of 9
DOVER DOWNS ENTERTAINMENT, INC.
CONSOLIDATED STATEMENT OF EARNINGS
Dollars in Thousands, Except Per Share Amounts
Quarter Ended Nine Months Ended
April 30, April 30,
1997 1996 1997 1996
Revenues:
Motorsports $ 14 $ - $ 9,453 $ 8,497
Gaming (including win) (1) 23,718 16,263 58,693 21,002
23,732 16,263 68,146 29,499
Expenses:
Operating 18,106 11,914 48,383 18,963
Depreciation 556 408 1,545 1,050
General and administrative 783 558 2,189 1,483
19,445 12,880 52,117 21,496
Operating earnings 4,287 3,383 16,029 8,003
Interest (income) expense, net (118) 91 (165) 178
Earnings before income taxes 4,405 3,292 16,194 7,825
Income taxes 1,860 1,530 6,739 3,438
Net earnings $ 2,545 $ 1,762 $ 9,455 $ 4,387
Earnings per common share $ .16 $ .12 $ .62 $ .30
Weighted average common shares
and common share equivalents
outstanding (000) 15,300 14,511
Dividends paid per common share $ .08 None $ .08 None
(1) Gaming revenues from the Company's video lottery (slot) machine
gaming operations include the total win from such operations.
The Delaware State Lottery Office collects the win and remits
a portion thereof to the Company as its commission for acting
as a Licensed Agent. The difference between total win and the
amount remitted to the Company is reflected in Operating
Expenses.
<PAGE>
FORM 10-Q Page 4 of 9
DOVER DOWNS ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEET
Dollars in Thousands
April 30, July 31,
1997 1996
ASSETS
Current assets:
Cash and cash equivalents $13,731 $ 3,461
Accounts receivable 3,019 1,023
Due from State of Delaware 109 1,573
Inventories 435 380
Prepaid expenses 1,201 647
Prepaid income taxes 330 -
Deferred income taxes 86 59
Total current assets 18,911 7,143
Property, plant and equipment, net 49,187 36,466
Total assets $68,098 $43,609
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to bank $ - $ 3,500
Accounts payable 2,030 823
Purses due horsemen - 2,254
Accrued liabilities 2,241 2,119
Income taxes payable - 2,445
Current portion of long-term debt 22 22
Deferred revenue 13,278 6,738
Dividend payable 1,218 -
Total current liabilities 18,789 17,901
Long-term debt 757 774
Deferred income taxes 576 487
Commitments and contingent liabilities
See Part II Legal Proceedings
Shareholders' equity:
Preferred stock, $.10 par value;
1,000,000 shares authorized; issued
and outstanding: none
Common stock, $.10 par value;
35,000,000 shares authorized; issued
and outstanding: April - 2,889,000;
July - none 289 -
Class A common stock, $.10 par value;
30,000,000 shares authorized; issued
and outstanding: April - 12,336,830;
July - 14,015,830 1,234 1,402
Additional paid-in capital 21,083 4,701
Retained earnings 25,370 18,344
Total shareholders' equity 47,976 24,447
Total liabilities and shareholders' equity $68,098 $43,609
<PAGE>
FORM 10-Q Page 5 of 9
DOVER DOWNS ENTERTAINMENT, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Dollars in Thousands
Nine Months Ended
April 30,
1997 1996
Cash flows provided by operating activities:
Net earnings $ 9,455 $ 4,387
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation 1,545 1,050
(Increase) decrease in assets:
Accounts receivable (1,996) (442)
Due from State of Delaware 1,464 (126)
Inventories (55) (223)
Prepaid expenses (554) (878)
Increase (decrease) in liabilities:
Accounts payable 1,207 2,740
Purses due horsemen (2,254) (878)
Accrued liabilities 122 (346)
Current and deferred income taxes (2,713) (919)
Deferred revenue 6,540 5,150
Net cash provided by operating activities 12,761 9,515
Cash flows from investing activities:
Sale of short-term investments - 2,900
Capital expenditures (14,266) (9,141)
Net cash used in investing activities (14,266) (6,241)
Cash flows from financing activities:
Short-term borrowings - 7,375
Repayment of short-term borrowings (3,500) (7,375)
Repayment of long-term debt (17) (52)
Repayment to shareholder - (193)
Dividends paid (1,211) -
Net proceeds from initial public offering 16,362 -
Proceeds of stock options exercised 141 -
Net cash provided by (used in)
financing activities 11,775 (245)
Net increase in cash and cash equivalents 10,270 3,029
Cash and cash equivalents, beginning of period 3,461 98
Cash and cash equivalents, end of period $13,731 $ 3,127
Supplemental information:
Interest paid $ 141 $ 218
Income taxes paid $ 9,452 $ 4,357
<PAGE>
FORM 10-Q Page 6 of 9
Item 2.Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations: Nine Months Ended April 30, 1997 vs. Nine
Months Ended April 30, 1996
Revenues increased by $38,647,000 to $68,146,000 primarily as a
result of the introduction of video lottery (slot) machines which were
in operation for the entire first nine months of fiscal 1997 compared
with 124 days of operations during the first nine months of fiscal
1996. Harness horse racing revenues (included in gaming revenues)
increased by $1,125,000 as a result of 271 days of simulcast operations
during the first nine months of fiscal 1997 compared with 148 days
during the first nine months of 1996 and from revenues associated with
exporting live harness horse races on 97 days during fiscal 1997
compared with none during fiscal 1996. Motorsports revenues increased
$956,000 or 11.3%. Approximately $441,000 of the total motorsports
revenue increase resulted from increased attendance and $291,000 from
increased ticket prices. The remainder of the motorsports revenue
increase of $224,000 related to sponsorship, concession, broadcast and
other ancillary revenues.
Operating expenses increased by $29,420,000 of which $26,236,000
was due to the introduction of video lottery (slot) machine operations.
Amounts retained by the State of Delaware, fees to the manager who
operates the video lottery (slot) machine operation, and the amount
collected by the State of Delaware for payment to the vendors under
contract with the State who provide the video lottery machines and
associated computer systems were $23,322,000 during the first nine
months of fiscal 1997 and $7,749,000 during the first nine months of
fiscal 1996. Amounts allocated from the video lottery operation for
harness horse racing purses were $6,589,000 during the first nine
months of 1997 and $2,295,000 during the first nine months of 1996.
Wages and benefits of recently hired employees for the video lottery
(slot) machine operation increased $2,348,000 from the same period in
the prior year. Advertising, promotional and customer complimentary
costs of $3,061,000 and costs associated with casino food and beverage
sales of $606,000 were the other significant operating costs of the
video lottery (slot) machine operation for the nine-month period ended
April 30, 1997.
For the harness horse racing and simulcasting operations, wages and
benefits of newly hired people increased by $471,000, simulcast costs
increased by $630,000 and advertising expenses increased by $168,000.
All of the increases were related to the additional live and simulcast
days during the first nine months of fiscal 1997.
Motorsports operating expenses were higher in 1997 primarily due to
a $245,000 increase in purse obligation expenses and related sanction
fees and a $72,000 increase in advertising expenses.
Depreciation increased by $495,000 or 47.1% due to capital
expenditures related to the Company's video lottery casino and
motorsports facilities expansion.
FORM 10-Q Page 7 of 9
General and administrative costs increased by $706,000 or 47.6% to
$2,189,000 from $1,483,000 primarily as a result of increased wages and
benefits related to the video lottery operations.
The Company's effective income tax rates for the first nine months
of fiscal 1997 and fiscal 1996 were 41.6% and 43.9%, respectively.
Net earnings increased by $5,068,000 due to the video lottery
(slot) machine operations that were in operation for the entire first
nine months of fiscal 1997 compared with 124 days during the first nine
months of fiscal 1996, and also due to higher attendance and event-
related revenues at the Company's NASCAR sanctioned events in September
1996 compared with September 1995.
Results of Operations: Quarter Ended April 30, 1997 vs. Quarter Ended
April 30, 1996
Revenues increased by $7,469,000 to $23,732,000 primarily due to
the growth in the video lottery (slot) machine operation resulting from
increased marketing programs and the expansion from 500 video lottery
machines in the third quarter of 1996 to 1,000 machines in the third
quarter of 1997. Harness horse racing revenues increased by $217,000
as a result of exporting live harness horse races on 54 days during the
third quarter of fiscal 1997 as compared with none during fiscal 1996.
Operating expenses increased by $6,192,000 of which $5,433,000 of
the increase was due to the growth of video lottery (slot) machine
operation. Amounts retained by the State of Delaware, fees to the
manager who operates the video lottery (slot) machine operation, and
the amount collected by the State of Delaware for payment to the
vendors under contract with the State who provide the video lottery
machines and associated computer systems were $9,479,000 during the
third quarter of fiscal 1997 and $6,254,000 during the third quarter of
1996. Amounts allocated from the video lottery operation for harness
horse racing purses were $2,586,000 during the third quarter of 1997
and $1,810,000 during the third quarter of 1996. Wages and benefits
related to the video lottery (slot) machine operation were $1,199,000
during the third quarter of 1997. Advertising, promotional and customer
complimentary costs of $1,386,000 and costs associated with casino food
and beverage sales of $234,000 were the other significant operating
costs of the video lottery (slot) machine operation.
For the harness horse racing and simulcasting operations, wages and
benefits of $378,000 and simulcast costs of $287,000 were the
significant operating costs.
Depreciation increased by $148,000 or 36.3% due to capital
expenditures related to the Company's video lottery casino and
motorsports facilities expansion.
FORM 10-Q Page 8 of 9
General and administrative costs increased by $225,000 or 40.3% to
$783,000 from $558,000 during the second quarter of 1996 primarily as a
result of increased wages and benefits related to the video lottery
operations.
The Company's effective income tax rates for the third quarter of
fiscal 1997 and fiscal 1996 were 42.2% and 46.5%, respectively.
Net earnings increased by $783,000 due primarily to the growth of
the video lottery (slot) machine operation during the third quarter of
fiscal 1997 compared with the third quarter of fiscal 1996.
Liquidity and Capital Resources
Cash flows from operations for the nine months ended April 30, 1997
and 1996 were $12,761,000 and $9,515,000, respectively. The reason for
the increase in cash flows was primarily the increased net earnings and
depreciation, and increased receipts related to advance ticket sales to
the Company's auto racing events.
Capital expenditures for the first nine months of fiscal 1997 were
$14,266,000 and related primarily to the expansion of the video lottery
(slot) facility and the addition of motorsports grandstand seating and
luxury suites.
On April 23, 1997, the Board of Directors of the Company declared
a quarterly cash dividend on both classes of common stock of $.08 per
share. The dividend will be payable on June 10, 1997 to shareholders
of record at the close of business on May 10, 1997.
The Company has a $20,000,000 committed revolving line of credit
from PNC Bank to provide seasonal funding needs and to finance capital
improvements. There were no amounts outstanding under the credit
facility at April 30, 1997.
On October 3, 1996, the Company issued 1,075,000 shares of common
stock at $17.00 per share. The Company used $3,500,000 of the proceeds
to pay down the Company's revolving credit facility and has financed
capital expenditures through April 30, 1997 with the proceeds.
Management expects to use the remaining proceeds from the initial
public offering for additional capital expenditures and general
corporate purposes.
Management believes that the net proceeds of the public offering
together with cash flows from operations and funds available under its
bank credit facility will satisfy the Company's cash requirements for
fiscal 1997.
FORM 10-Q Page 9 of 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are various claims and legal actions pending against the
Company. The Company is of the opinion, based on the advice of counsel,
it is only remotely likely that the ultimate resolution of these claims
and actions will be material.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 3(ii) - By-Laws.
By-Laws of Dover Downs Entertainment, Inc. as last amended on
January 29, 1997
Exhibit 27 - Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DATE: May 27, 1997 Dover Downs Entertainment, Inc.
(Registrant)
/s/ Denis McGlynn
Denis McGlynn
President and Chief Executive Officer
/s/ Timothy R. Horne
Timothy R. Horne
Vice President-Finance
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> APR-30-1997
<CASH> 13,731
<SECURITIES> 0
<RECEIVABLES> 3,128
<ALLOWANCES> 0
<INVENTORY> 435
<CURRENT-ASSETS> 18,911
<PP&E> 64,624
<DEPRECIATION> 15,437
<TOTAL-ASSETS> 68,098
<CURRENT-LIABILITIES> 18,789
<BONDS> 757
0
0
<COMMON> 1,523
<OTHER-SE> 46,453
<TOTAL-LIABILITY-AND-EQUITY> 68,098
<SALES> 68,146
<TOTAL-REVENUES> 68,146
<CGS> 0
<TOTAL-COSTS> 49,928
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (165)
<INCOME-PRETAX> 16,194
<INCOME-TAX> 6,739
<INCOME-CONTINUING> 9,455
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,455
<EPS-PRIMARY> .62
<EPS-DILUTED> .62
</TABLE>
BY-LAWS
OF
DOVER DOWNS ENTERTAINMENT, INC.
------------------------------------------------------------------
ARTICLE I
The Corporation
Section 1.1 Name. The title of this Corporation is Dover Downs
Entertainment, Inc.
Section 1.2 Office. The registered office of this Corporation
shall be located at P. O. Box 843, Dover, Delaware, or at such other
place as the Board of Directors may designate in accordance with
Section 133 of the Delaware Corporation Law.
Section 1.3 Seal. The corporate seal of the Corporation shall
have inscribed thereon the name of the Corporation and the year of its
creation (1994) and the words "Incorporated Delaware".
ARTICLE II
Stockholders
Section 2.1 Annual Meeting. The annual meeting of stockholders
shall be held at such place within or without the State of Delaware as
the Board of Directors from time to time determine.
A majority of the amount of the stock issued and outstanding and
entitled to vote shall constitute a quorum for the transaction of all
business, except as otherwise provided by law, the charter of the
corporation or these by-laws. Each stockholder of Common Stock shall
be entitled to one vote and each stockholder of Class A Common Stock
shall be entitled to ten votes, either in person or by proxy, for each
share of stock standing registered in his or her name on the books of
the Corporation on the record date selected by the Board of Directors
in accordance with these by-laws, unless different voting is, by law or
by the terms of the instrument creating special or preferred shares,
conferred upon the holders thereof.
Notice of the annual meeting shall be mailed by the Secretary to
each stockholder at his or her last known post office address no less
than ten days and no more than sixty days prior thereto.
Section 2.2 Special Meetings. Special meetings of stockholders
for any purpose or purposes may be called at any time by the Chairman
of the Board of Directors, the Vice Chairman of the Board of Directors,
the Chairman of the Executive Committee or the President and not by any
other person.
Section 2.3 Notice of Meetings. Whenever stockholders are
required or permitted to take any action at a meeting, a written notice
of the meeting shall be given which shall state the place, date and
hour of the meeting, and, in the case of a special meeting, the purpose
or purposes for which the meeting is called. Unless otherwise provided
by law, the written notice of any meeting shall be given not less than
ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, such notice
shall be deemed to be given when deposited in the mail, postage
prepaid, directed to the stockholder at his address as it appears on
the records of the Corporation.
Section 2.4 Adjournments. Any meeting of the stockholders,
annual or special, may adjourn from time to time to reconvene at the
same or some other place, and notice need not be given of any such
adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting
the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more
than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given to each stockholder of record entitled to vote at the
meeting.
Section 2.5 Quorum. At each meeting of stockholders, except
where otherwise provided by law or the certificate of incorporation or
these by-laws, the holders of a majority of the outstanding shares of
stock entitled to vote at the meeting, present in person or by proxy,
shall constitute a quorum. In the absence of a quorum, the
stockholders so present may, by majority vote, adjourn the meeting from
time to time in the manner provided in Section 2.4 of these by-laws
until a quorum shall attend.
Section 2.6 Organization. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in his absence
by the Vice Chairman of the Board, if any, or in his absence by the
President, or in his absence by the Chairman of the Executive
Committee, if any, or in his absence by a Vice President, or in the
absence of the foregoing persons by a chairman designated by the Board
of Directors, or in the absence of such designation by a chairman
chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may appoint any
person to act as secretary of the meeting.
Section 2.7 Voting; Proxies. Unless otherwise provided in the
certificate of incorporation, each stockholder entitled to vote at any
meeting of stockholders shall be entitled to one vote for each share of
stock of Common Stock and ten votes for each share of Class A Common
Stock held by such shareholder which has voting power upon the matter
in question. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable
and if, and only as long as, it is coupled with an interest sufficient
in law to support an irrevocable power. A stockholder may revoke any
proxy which is not irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy or
another duly executed proxy bearing a later date with the Secretary of
the Corporation. Voting at meetings of stockholders need not be by
written ballot and need not be conducted by inspectors unless the
holders of a majority of the outstanding shares of all classes of stock
entitled to vote thereon present in person or by proxy at such meeting
shall so determine. At all meetings of stockholders for the election
of directors a plurality of the votes cast shall be sufficient to
elect. All other elections and questions shall, unless otherwise
provided by law or by the certificate of incorporation or these
by-laws, be decided by the vote of the holders of a majority of the
outstanding shares of stock entitled to vote thereon present in person
or by proxy at the meeting, provided that (except as otherwise required
by law or by the certificate of incorporation or these by-laws) the
Board of Directors may require a larger vote upon any election or
question.
Section 2.8 Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion of exchange or stock or
for the purpose of any other lawful action, the Board of Directors may
fix, in advance, a record date, which shall not be more than sixty nor
less than ten days before the date of such meeting, nor more than sixty
days prior to any other action. If no record date is fixed: (1) the
record date for determining stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice
is waived, at the close of business on the day next preceding the day
on which the meeting is held; and (2) the record date for determining
stockholders for any other purpose shall be at the close of business on
the day on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 2.9 List of Stockholders Entitled To Vote. The
Secretary shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled
to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the
name of each stockholder. Such list shall be open to the examination
of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be held. The
list shall also be produced and kept at the time and place of the
meeting during the whole time thereof and may be inspected by any
stockholder who is present. The stock ledger shall be the only
evidence as to who are the stockholders entitled to examine the stock
ledger, the list of stockholders or the books of the Corporation, or to
vote in person or by proxy at any meeting of stockholders.
Section 2.10 Action by Consent Of Stockholders. Unless
prohibited by law or the rules and regulations of any national
securities exchange on which securities of the Corporation are listed,
action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without
a meeting, and stockholders shall have the power to consent in writing,
without a meeting, to the taking of any action.
ARTICLE III
Board of Directors
Section 3.1 Number; Qualifications. The Board of Directors
shall consist up to nine members. Directors need not be stockholders.
Section 3.2 Election; Resignation; Removal; Vacancies. At each
annual meeting of stockholders, the stockholders shall elect Directors
to replace those Directors whose terms then expire. Any Director may
resign at any time upon written notice to the Corporation.
Stockholders may remove Directors only for cause. Any vacancy
occurring in the Board of Directors for any cause may be filled only by
the Board of Directors, acting by vote of a majority of the Directors
then in office, although less than quorum. Each Director so elected
shall hold office until the expiration of the term of office of the
Director whom he has replaced.
Section 3.3 Notice Of Nomination Of Directors. Nominations for
the election of directors may be made by the Chairman acting on behalf
of the Board of Directors or by any stockholder entitled to vote for
the election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail, postage
prepaid, to the Secretary of the Corporation not less than fourteen
days nor more than sixty days prior to any meeting of the stockholders
called for the election of directors; provided, however, that if less
than twenty-one days' notice of the meeting is given to stockholders,
such written notice shall be delivered or mailed, as prescribed, to the
Secretary of the Corporation not later than the close of the seventh
day following the day on which notice of the meeting was mailed to
stockholders. Notice of nominations which are proposed by the Board of
Directors shall be given by the Chairman on behalf of the Board. Each
such notice shall set forth (i) the name, age, business address and, if
known, residence address of each nominee proposed in such notice, (ii)
the principal occupation or employment of each such nominee and (iii)
the number of shares of stock of the Corporation which are beneficially
owned by each such nominee. The Chairman of the meeting may, if the
facts warrant, determine and declare to the meeting that a nomination
was not made in accordance with the foregoing procedure, and if he
should so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded.
Section 3.4 Non-Discrimination Statement. Consistent with the
Corporation's equal employment opportunity policy, nominations for the
election of directors shall be made by the Board of Directors and
accepted from stockholders in a manner consistent with these By-Laws
and without regard to the nominee's race, color, ethnicity, religion,
sex, age, national origin, veteran status, handicap or disability.
Section 3.5 Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within or without the State of
Delaware and at such times as the Board of Directors may from time to
time determine, and if so determined notices thereof need not be given.
Section 3.6 Special Meetings. Special meetings of the Board of
Directors may be held at any time or place within or without the State
of Delaware whenever called by the Chairman of the Board of Directors,
the Vice Chairman of the Board of Directors, the Chairman of the
Executive Committee, or by the President. Reasonable notice thereof
shall be given by the person calling the meeting, not later than the
second day before the date of the special meeting.
Section 3.7 Telephonic Meetings Permitted. Members of the
Board of Directors, or any committee designated by the Board, may
participate in any meeting of such Board or committee by means of
conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this by-law shall constitute
presence in person at such meeting.
Section 3.8 Quorum; Vote Required For Action; Informal Action.
At all meetings of the Board of Directors a majority of the whole Board
shall constitute a quorum for the transaction of business. Except in
cases in which the certificate of incorporation or these by-laws
otherwise provide, the vote of a majority of the directors present at
a meeting at which a quorum is present shall be the act of the Board of
Directors. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting if all members of the Board or
such committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of the proceedings of
the Board or committee.
Section 3.9 Organization. Meetings of the Board of Directors
shall be presided over by the Chairman of the Board, if any, or in his
absence by the Vice Chairman of the Board, if any, or in his absence by
the President, or in his absence by the Chairman of the Executive
Committee, if any, or in his absence by a Vice President, or in the
absence of the foregoing persons by a chairman designated by the Board
of Directors, or in the absence of such designation by a chairman
chosen at the meeting. The Secretary shall act as a secretary of the
meeting, but in his absence the chairman of the meeting may appoint any
person to act as secretary of the meeting.
Section 3.10 Compensation Of Directors. The Directors and
members of standing committees shall receive such fees or salaries as
fixed by resolution of the Executive Committee and in addition will
receive expenses in connection with attendance or participation in each
regular or special meeting.
ARTICLE IV
Committees
Section 4.1 Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or
more committees, each committee to consist of one or more of the
directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the
absence or disqualification of a member of the committee, the member or
members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting
in place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of
the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall
have power or authority in reference to amending the certificate of
incorporation of the Corporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or
exchange or all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of dissolution, or amending these by-laws.
The Board of Directors shall, at the annual organization meeting
thereof, elect an Executive Committee which shall consist of not more
than four members, all of whom shall be members of the Board of
Directors. The Executive Committee shall have and may exercise all of
the powers and authority of the Board of Directors in the management of
the business and affairs of the Corporation to the fullest extent
permitted by law (as presently allowed under Section 141 (c) to the
Delaware General Corporation Law as revised effective July 1, 1996, and
as may be allowed in the future pursuant to amendments or revisions to
applicable law).
Section 4.2 Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board may make,
alter and repeal rules for the conduct of its business. In the absence
of such rules each committee shall conduct its business in the same
manner as the Board of Directors conducts its business pursuant to
Article III of these by-laws.
ARTICLE V
Officers
Section 5.1 Executive Officers; Election; Qualifications; Term
of Office; Resignation; Removal; Vacancies. The officers of the
Corporation shall consist of a Chairman, Vice Chairmen, President, Vice
Presidents, Secretary, Assistant Secretaries, Treasurer, Assistant
Treasurers, General Counsel, and such other officers as may from time
to time be elected or appointed by the Board of Directors. The
President shall be elected from the Board of Directors. Any officer
may resign at any time upon written notice to the Corporation. The
Board of Directors may remove any officer with or without cause at any
time, but such removal shall be without prejudice to the contractual
rights of such officer, if any, with the Corporation. Any number of
offices may be held by the same person, except that the offices of
President and Chairman of the Board shall be separate. Any vacancy
occurring in any office of the Corporation by death, resignation,
removal or otherwise may be filled for the unexpired portion of the
term by the Board of Directors at any regular or special meeting. In
the absence of any officer, the Board of Directors may delegate his
power and duties to any other officer or to any director for the time
being.
Section 5.2 President. The President shall be the Chief
Executive Officer of the Corporation, shall execute in the name of the
Corporation all contracts and agreements authorized by the Board or the
Executive Committee, and shall affix the seal to any instrument
requiring the same, which shall always be attested by the signature of
the President, the Vice President or the Secretary or any Assistant
Secretary or the Treasurer. He may sign certificates of stock; he
shall have general supervision and direction of all the other officers
of the Corporation; he shall submit a complete report of the operations
and condition of the Corporation for the year to the Chairman and to
the directors at their regular meetings, and from time to time shall
report to the directors all matters which the interest of the
Corporation may require to be brought to their notice. He shall have
the general powers and duties usually vested in the office of a
President of a corporation.
Section 5.3 Vice President - Finance. The Vice President -
Finance shall be the Chief Accounting and Chief Financial Officer of
the Corporation and shall be responsible to the Board of Directors, the
Executive Committee and the President for all financial control and
internal audit of the Corporation and its subsidiaries. He shall
perform such other duties as may be assigned to him by the Board of
Directors, the Executive Committee or the President.
Section 5.4 Vice Presidents. The Vice Presidents elected or
appointed by the Board of Directors shall perform such duties and
exercise such powers as may be assigned to them from time to time by
the Board of Directors, the Executive Committee or the President. In
the absence or disability of the President, the Vice President
designated by the Board of Directors, the Executive Committee, or the
President shall perform the duties and exercise the powers of the
President. A Vice President may sign and execute contracts and other
obligations pertaining to the regular course of his duties.
Section 5.5 Secretary. The Secretary shall be ex-officio
Secretary of the Board of Directors and of the standing committees. He
shall attend all sessions of the Board, act as clerk thereof, record
all votes and keep the minutes of all proceedings in a book to be kept
for that purpose. He shall perform like duties for the standing
committees when required. He shall see that the proper notices are
given of all meetings of stockholders and directors, and perform such
other duties as may be prescribed from time to time by the Board of
Directors, the Executive Committee, the Chairman or the President, and
shall be sworn to the faithful discharge of his duties. He shall keep
the accounts of stock registered and transferred in such form and
manner and under such regulations as the Board of Directors or
Executive Committee may prescribe.
Section 5.6 Treasurer. The Treasurer shall keep full and
accurate accounts of receipts and disbursements in books belonging to
the Corporation and shall deposit all monies and other valuable effects
in the name and to the credit of the Corporation, in such depositories
as may be designated by the Board of Directors or Executive Committee.
He shall disburse the funds of the Corporation as may be ordered by the
Board, the Executive Committee or the President, taking proper vouchers
therefor, and shall render to the President and the Executive Committee
and Directors, whenever they may require it, an account of all his
transactions as Treasurer, and of the financial condition of the
Corporation, and at the annual organization meeting of the Board a like
report for the preceding year.
Section 5.7 General Counsel. The General Counsel shall be the
legal adviser of the Corporation and shall perform such services as the
Chairman, President, Board of Directors or Executive Committee may
require.
ARTICLE VI
Stock
Section 6.1 Certificates. Every holder of stock shall be
entitled to have a certificate signed by or in the name of the
Corporation by the Chairman or Vice Chairman of the Board of Directors,
if any, or the President of the Corporation, certifying the number of
shares owned by him in the Corporation. Any of or all the signatures
on the certificate may be a facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate, shall have ceased to be such officer,
transfer agent, or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such
officer, transfer agent, or registrar at the date of issue.
Section 6.2 Lost, Stolen Or Destroyed Stock Certificates;
Issuance Of New Certificates. The Corporation may issue a new
certificate of stock in the place of any certificate theretofore issued
by it, alleged to have been lost, stolen or destroyed, and the
Corporation may require the owner of the lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any
such certificate or the issuance of such new certificate.
ARTICLE VII
Indemnification
Section 7.1. General. The Company shall indemnify, and advance
Expenses (as hereinafter defined) to, Indemnitee (as hereinafter
defined) to the fullest extent permitted by applicable law in effect
on the adoption of these By-Laws, and to such greater extent as
applicable law may thereafter from time to time permit. The rights of
Indemnitee provided under the preceding sentence shall include, but
shall not be limited to, the rights set forth in the other Sections of
this Article.
Section 7.2. Proceedings Other Than Proceedings By Or In The
Right Of The Company. Indemnitee shall be entitled to the
indemnification rights provided in this Section 7.2 if, by reason of
his Corporate Status (as hereinafter defined), he is, or is threatened
to be made, a party to any threatened, pending, or completed Proceeding
(as hereinafter defined), other than a Proceeding by or in the right of
the Company. Pursuant to this Section 7.2, Indemnitee shall be
indemnified against Expenses, judgments, penalties, fines and amounts
paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such Proceeding or any claim, issue or matter
therein, 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 Company,
and, with respect to any criminal Proceeding, had no reasonable cause
to believe his conduct was unlawful.
Section 7.3. Proceedings By Or In The Right Of The Company.
Indemnitee shall be entitled to the indemnification rights provided in
this Section 7.3 to the fullest extent permitted by law if, by reason
of his Corporate Status, he is, or is threatened to be made, a party to
any threatened, pending or completed Proceeding brought by or in the
right of the Company to procure a judgment in its favor. Pursuant to
this Section 7.3, Indemnitee shall be indemnified against Expenses,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such
Proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest of the Company.
Section 7.4. Indemnification For Expenses Of A Party Who Is
Wholly Or Partly Successful. Notwithstanding any other provision of
this Article, to the extent that Indemnitee is, by reason of his
Corporate Status, a party to and is successful, on the merits or
otherwise, in any Proceeding, he shall be indemnified against all
Expenses actually and reasonably incurred by him or on his behalf in
connection therewith. If Indemnitee is not wholly successful in such
Proceeding but is successful, on the merits or otherwise, as to one or
more but less than all claims, issues or matters in such Proceeding,
the Company shall indemnify Indemnitee against all Expenses actually
and reasonably incurred by him or on his behalf in connection with each
successfully resolved claim, issue or matter. For purposes of this
Section and without limitation, the termination of any claim, issue or
matter in such a Proceeding by dismissal, with or without prejudice,
shall be deemed to be a successful result as to such claim, issue or
matter.
Section 7.5. Indemnification For Expenses Of A Witness.
Notwithstanding any other provision of this Article, to the extent that
Indemnitee is, by reason of his Corporate Status, a witness in any
Proceeding, he shall be indemnified against all Expenses actually and
reasonably incurred by him or on his behalf in connection therewith.
Section 7.6. Advancement Of Expenses. The Company shall advance
all reasonable Expenses incurred by or on behalf of Indemnitee in
connection with any Proceeding within twenty days after the receipt by
the Company of a statement or statements from Indemnitee requesting
such advance or advances from time to time, whether prior to or after
final disposition of such proceeding. Such statement or statements
shall reasonably evidence the Expenses incurred by Indemnitee and shall
include or be preceded or accompanied by an undertaking by or on behalf
of Indemnitee to repay any Expenses advanced if it shall ultimately be
determined that Indemnitee is not entitled to be indemnified against
such Expenses.
Section 7.7. Procedure For Determination Of Entitlement To
Indemnification.
(a) To obtain indemnification under this Article, Indemnitee
shall submit to the Company a written request, including therein or
therewith such documentation and information as is reasonably available
to Indemnitee and is reasonably necessary to determine whether and to
what extent Indemnitee is entitled to indemnification. The
determination of Indemnitee's entitlement to indemnification shall be
made not later than 60 days after receipt by the Company of the written
request for indemnification. The Secretary of the Company shall,
promptly upon receipt of such a request for indemnification, advise the
Board of Directors in writing that Indemnitee has requested
indemnification.
(b) Indemnitee's entitlement to indemnification under any of
Sections 7.2, 7.3 or 7.4 of this Article shall be determined in the
specific case: (i) by the Board of Directors by a majority vote of a
quorum of the Board consisting of Disinterested Directors (as
hereinafter defined); or (ii) by Independent Counsel (as hereinafter
defined), in a written opinion, if (A) a Change of Control (as
hereinafter defined) shall have occurred and Indemnitee so requests, or
(B) if a quorum of the Board of Directors consisting of Disinterested
Directors is not obtainable or, even if obtainable, such quorum of
Disinterested Directors so directs; or (iii) by the stockholders of the
Company; or (iv) as provided in Section 7.8 of this Article.
(c) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to
Section 7.7(b) of this Article, the Independent Counsel shall be
selected as provided in this Section 7.7(c). If a Change of Control
shall not have occurred, the Independent Counsel shall be selected by
the Board of Directors, and the Company shall give written notice to
Indemnitee advising him of the identity of the Independent Counsel so
selected. If a Change of Control shall have occurred, and if so
requested by Indemnitee in his written request for indemnification, the
Independent Counsel shall be selected by Indemnitee, and Indemnitee
shall give written notice to the Company advising it of the identity of
the Independent Counsel so selected. In either event, Indemnitee or
the Company, as the case may be, may, within 7 days after such written
notice of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection.
Such objection may be asserted only on the ground that the Independent
Counsel so selected does not meet the requirements of "Independent
Counsel" as defined in Section 7.13 of this Article, and the objection
shall set forth with particularity the factual basis of such assertion.
If such written objection is made, the Independent Counsel so selected
shall be disqualified from acting as such. If, within 20 days after
submission by Indemnitee of a written request for indemnification
pursuant to Section 7.7(a) hereof, no Independent Counsel shall have
been selected, or if selected shall have been objected to, in
accordance with this Section 7.7(c), either the Company or Indemnitee
may petition the Court of Chancery of the State of Delaware for the
appointment as Independent Counsel of a person selected by the Court or
by such other person as the Court shall designate, and the person so
appointed shall act as Independent Counsel under Section 7.7(b) hereof.
The Company shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in acting
pursuant to Section 7.7(b) hereof, and the Company shall pay all
reasonable fees and expenses incident to the procedures of this Section
7.7(c), regardless of the manner in which such Independent Counsel was
selected or appointed.
Section 7.8. Presumptions And Effect Of Certain Proceedings. If
a Change of Control shall have occurred, Indemnitee shall be presumed
(except as otherwise expressly provided in this Article) to be entitled
to indemnification under this Article upon submission of a request for
indemnification in accordance with Section 7.7(a) of this Article, and
thereafter the Company shall have the burden of proof to overcome that
presumption in reaching a determination contrary to that presumption.
Whether or not a Change of Control shall have occurred, if the person
or persons empowered under Section 7.7 of this Article to determine
entitlement to indemnification shall not have made a determination
within 60 days after receipt by the Company of the request therefor,
the requisite determination of entitlement to indemnification shall be
deemed to have been made and Indemnitee shall be entitled to such
indemnification unless (i) Indemnitee misrepresented or failed to
disclose a material fact in making the request for indemnification, or
(ii) such indemnification is prohibited by law. The termination of any
Proceeding described in any of Sections 7.2, 7.3, or 7.4 of this
Article, or of any claim, issue or matter therein, by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not (except as otherwise expressly provided in this
Article) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee 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 Company or, with respect to any
criminal Proceeding, that Indemnitee had reasonable cause to believe
that his conduct was unlawful.
Section 7.9. Remedies Of Indemnitee.
(a) In the event that (i) a determination is made pursuant
to Section 7.7 of this Article that Indemnitee is not entitled to
indemnification under this Article, (ii) advancement of Expenses is not
timely made pursuant to Section 7.6 of this Article, or (iii) payment
of indemnification is not made within five (5) days after a
determination of entitlement to indemnification has been made or deemed
to have been made pursuant to Sections 7.7 or 7.8 of this Article,
Indemnitee shall be entitled to an adjudication in an appropriate court
of the State of Delaware, or in any other court of competent
jurisdiction, of his entitlement to such indemnification or advancement
of Expenses. Alternatively, Indemnitee, at his option, may seek an
award in arbitration to be conducted by a single arbitrator pursuant to
the rules of the American Arbitration Association. The Company shall
not oppose Indemnitee's right to seek any such adjudication or award in
arbitration.
(b) In the event that a determination shall have been made
pursuant to Section 7.7 of this Article that Indemnitee is not entitled
to indemnification, any judicial proceeding or arbitration commenced
pursuant to this Section 7.9 shall be conducted in all respects as a de
novo trial, or arbitration, on the merits and Indemnitee shall not be
prejudiced by reason of that adverse determination. If a Change of
Control shall have occurred, in any judicial proceeding or arbitration
commenced pursuant to this Section 7.9 the Company shall have the
burden of proving that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to
have been made pursuant to Sections 7.7 or 7.8 of this Article that
Indemnitee is entitled to indemnification, the Company shall be bound
by such determination in any judicial proceeding or arbitration
commenced pursuant to this Section 7.9, unless (i) Indemnitee
misrepresented or failed to disclose a material fact in making the
request for indemnification, or (ii) such indemnification is prohibited
by law.
(d) The Company shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section
7.9 that the procedures and presumptions of this Article are not valid,
binding and enforceable and shall stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of
this Article.
(e) In the event that Indemnitee, pursuant to this Section
7.9, seeks a judicial adjudication of, or an award in arbitration to
enforce his rights under, or to recover damages for breach of, this
Article, Indemnitee shall be entitled to recover from the Company, and
shall be indemnified by the Company against, any and all expenses (of
the types described in the definition of Expenses in Section 7.13 of
this Article) actually and reasonably incurred by him in such judicial
adjudication or arbitration, but only if he prevails therein. If it
shall be determined in said judicial adjudication or arbitration that
Indemnitee is entitled to receive part but not all of the
indemnification or advancement of Expenses sought, the expenses
incurred by Indemnitee in connection with such judicial adjudication or
arbitration shall be appropriately prorated.
Section 7.10. Non-Exclusivity And Survival Of Rights. The rights
of indemnification and to receive advancement of Expenses as provided
by this Article shall not be deemed exclusive of any other rights to
which Indemnitee may at any time be entitled under applicable law, the
Certificate of Incorporation, the By-Laws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise.
Notwithstanding any amendment, alteration or repeal of any provision of
this Article, Indemnitee shall, unless otherwise prohibited by law,
have the rights of indemnification and to receive advancement of
Expenses as provided by this Article in respect of any action taken or
omitted by Indemnitee in his Corporate Status and in respect of any
claim asserted in respect thereof at any time when such provision of
this Article was in effect. The provisions of this Article shall
continue as to an Indemnitee whose Corporate Status has ceased and
shall inure to the benefit of his heirs, executors and administrators.
Section 7.11. Severability. If any provision or provisions of
this Article shall be held to be invalid, illegal or unenforceable for
any reason whatsoever:
(a) the validity, legality and enforceability of the
remaining provisions of this Article (including without limitation,
each portion of any Section of this Article containing any such
provision held to be invalid, illegal or unenforceable, that is not
itself invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby; and
(b) to the fullest extent possible, the provisions of this
Article (including, without limitation, each portion of any Section of
this Article containing any such provision held to be invalid, illegal
or unenforceable, that is not itself invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
Section 7.12. Certain Persons Not Entitled To Indemnification Or
Advancement Of Expenses. Notwithstanding any other provision of this
Article, no person shall be entitled to indemnification or advancement
of Expenses under this Article with respect to any Proceeding, or any
claim therein, brought or made by him against the Company.
Section 7.13. Definitions. For purposes of this Article:
(a) "Change in Control" means a change in control of the
Company of a nature that would be required to be reported in response
to Item 5(f) of Schedule 14A of Regulation 14A (or in response to any
similar item on any similar schedule or form) promulgated under the
Securities Exchange Act of 1934 (the "Act"), whether or not the Company
is then subject to such reporting requirement; provided, however, that,
without limitation, such a Change in Control shall be deemed to have
occurred if (i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Act) is or becomes the "beneficial owner") (as defined
in Rule 13d-3 under the Act), directly or indirectly, of securities of
the Company representing 20% or more of the combined voting power of
the Company's then outstanding securities without the prior approval of
at least two-thirds of the members of the Board of Directors in office
immediately prior to such person attaining such percentage interest;
(ii) the Company is a party to a merger, consolidation, sale of assets
or other reorganization, or a proxy contest, as a consequence of which
members of the Board of Directors in office immediately prior to such
transaction or event constitute less than a majority of the Board of
Directors thereafter; or (iii) during any period of two consecutive
years, individuals who at the beginning of such period constituted the
Board of Directors (including for this purpose any new director whose
election or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still
in office who were directors at the beginning of such period) cease for
any reason to constitute at least a majority of the Board of Directors.
(b) "Corporate Status" describes the status of a person who
is or was a director, officer, employee, agent or fiduciary of the
Company or of any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise which such person is or was
serving at the request of the Company.
(c) "Disinterested Director" means a director of the Company
who is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
(d) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness
fees, travel expenses, duplicating costs, printing and binding costs,
telephone charges, postage, delivery service fees, and all other
disbursements or expenses of the types customarily incurred in
connection with prosecuting, defending, preparing to prosecute or
defend, investigating, or being or preparing to be a witness in a
Proceeding.
(e) "Indemnitee" includes any person who is, or is
threatened to be made, a witness in or a party to any Proceeding as
described in Sections 7.2, 7.3 or 7.4 of this Article by reason of his
Corporate Status.
(f) "Independent Counsel" means a law firm, or a member of
a law firm, that is experienced in matters of corporation law and
neither presently is, nor in the past five (5) years has been, retained
to represent: (i) the Company or Indemnitee in any matter material to
either such party, or (ii) any other party to the Proceeding giving
rise to a claim for indemnification hereunder. Notwithstanding the
foregoing, the term "Independent Counsel" shall not include any person
who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either
the Company or Indemnitee in an action to determine Indemnitee's rights
under this Article.
(g) "Proceeding" includes any action, suit, arbitration,
alternate dispute resolution mechanism, investigation, administrative
hearing or any other proceeding whether civil, criminal, administrative
or investigative, except one initiated by an Indemnitee pursuant to
Section 7.9 of this Article to enforce his rights under this Article.
Section 7.14. Miscellaneous. Use of the masculine pronoun shall
be deemed to include usage of the feminine pronoun where appropriate.
ARTICLE VIII
Miscellaneous
Section 8.1 Fiscal Year. The fiscal year of the Corporation
shall be determined by resolution of the Board of Directors.
Section 8.2 Waiver Of Notice Of Meetings Of Stockholders,
Directors, And Committees. Any written waiver of notice, signed by the
person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person
at a meeting shall constitute a waiver of notice of such meeting,
except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the stockholders, directors, or members
of a committee of directors need be specified in any written waiver of
notice.
Section 8.3 Interested Directors; Quorum. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of
its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason,
or solely because the director or officer is present at or participates
in the meeting of the Board or committee thereof which authorizes the
contract or transaction, or solely because his or their votes are
counted for such purpose, if: (1) the material facts as to his
relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and
the Board or the committee in good faith authorizes the contract or
transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors be less than a
quorum; or (2) the material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
(3) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors,
a committee thereof, or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes
the contract or transaction.
Section 8.4 Form Of Records. Any records maintained by the
Corporation in the regular course of its business, including its stock
ledger, books of account, and minute books, may be kept on, or be in
the form of, punch cards, magnetic tape, photographs, microphotographs,
or any other information storage device, provided that the records so
kept can be converted into clearly legible form within a reasonable
time. The Corporation shall so convert any records so kept upon the
request of any person entitled to inspect the same.
Section 8.5 Amendment Of By-Laws. The Board of Directors of
the Corporation is expressly authorized to adopt, amend or repeal the
by-laws of the Corporation by a vote of a majority of the entire Board.
The stockholders may make, alter or repeal any by-law whether or not
adopted by them, provided however, that any such additional by-laws,
alterations or repeal may be adopted only by the affirmative vote of
the holders of 75% or more of the outstanding shares of capital stock
of the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class), unless such
additional by-laws, alterations or repeal shall have been recommended
to the stockholders for adoption by a majority of the Board of
Directors, in which event such additional by-laws, alterations or
repeal may be adopted by the affirmative vote of the holders of a
majority of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for
this purpose as one class).
Section 8.6 Restrictive Gaming Legend. All certificates issued
for Shares of the $.10 par value Common Stock of the Corporation shall
bear the following legend:
"Any and all shares of Common Stock of the Corporation are
held subject to the condition that if (a) any regulatory
authority should request, determine or otherwise advise that
the holder or owner is disqualified, or unsuitable, must
qualify for or obtain a license, or must submit an
application and satisfy a review process, including
background checks, in order for the Corporation or any
subsidiary to obtain or retain a license or a relicense, or
otherwise avoid significant penalties or business
disadvantage, and (b) such holder or owner shall fail to
submit to qualification within fifteen (15) days following
such request, determination or advice, or fail to be found
qualified or suitable, then (c) such holder or owner, at the
request of the Corporation or the appropriate regulatory
authority, shall promptly dispose of such holder's or owner's
interest in the Corporation's Common Stock and shall be
subject to any order of such regulatory body limiting such
holder's or owner's rights pending such disposition. Without
limiting the foregoing, any holder or owner that intends to
acquire, directly or indirectly, ten percent (10%) or more of
the outstanding common stock of the Corporation (regardless
of class or series) shall first notify the Corporation and
obtain prior written approval from the Delaware State Lottery
Office. Since money damages are inadequate to protect the
Corporation, it shall be entitled to injunctive relief to
enforce the foregoing provision."
Section 8.7 Restrictions on Transfer of Class A Common Stock.
(a) Restriction. Shares of the Company's Class A Common Stock
(the "Shares") may be sold, transferred or disposed of only in
accordance with the following:
(i) Shares may be sold or transferred to any
other holder of Shares, provided that such holder
has not acquired Shares in contravention of these
Bylaws; or
(ii) Shares may be sold, transferred or pass
by intestacy, will or inheritance to:
(A) one or more members of the
immediate family of a holder of Shares,
provided that such holder has not
acquired Shares in contravention of
these Bylaws;
(B) a corporation all of the shares
of which are owned by holders of Shares
(or one or more members of the immediate
family of a holder of Shares), provided
that no such holder has acquired Shares
in contravention of these Bylaws;
(C) a trust all of the beneficial
interests of which are owned by holders
of Shares (or one or more members of the
immediate family of a holder of Shares),
provided that no such holder has
acquired Shares in contravention of
these Bylaws; or
(D) a general or limited
partnership all of the partnership
interests in which are owned by holders
of Shares (or one or more members of the
immediate family of a holder of Shares),
provided that no such holder has
acquired Shares in contravention of
these Bylaws.
(b) Family Member Defined. For purposes of clause (a)(ii) above,
"members of the immediate family" shall be limited to any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse,
sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, and shall include adoptive
relationships.
(c) Evidence of Compliance. Prior to any sale, transfer or
disposition of Shares, the holder may be required, at the option of the
Company, to furnish appropriate evidence of compliance with these
Bylaws, including but not limited to an opinion of counsel.
(d) Conversion. Shares may be converted to shares of the
Company's Common Stock and sold, transferred or disposed of without
regard to the limitations set forth in clause (a) above.
(e) Pledge. The bona fide pledge of Shares as collateral
security for indebtedness to the pledgee shall not be deemed to violate
clause (a) above, provided that the pledgee provides to the Company a
written undertaking not to sell, transfer or dispose of the Shares in
violation of these Bylaws.
(f) Legend. All certificates evidencing the Shares (and
replacement certificates issued in their stead) shall be inscribed with
the following legend (in addition to any other legends required
hereunder or under federal or state securities laws):
"The Shares of Class A Common Stock
represented by this certificate may be sold,
transferred or otherwise disposed of only in
accordance with the terms and conditions set forth
in the Company's Bylaws, which terms and
conditions restrict, and in some instances
prohibit, the transfer or other disposition of
such Shares and which terms and conditions may
only be amended by shareholders owning 75% or more
of the outstanding shares of Class A Common Stock.
The terms and conditions set forth in the
Company's Bylaws are incorporated herein by
reference and copies thereof are available for
inspection or will be mailed by the Company to any
holder without charge within five days after the
Company's receipt of a written request therefor."
(g) Vote Required to Amend. This Section 8.7 may only be amended
by shareholders owning 75% or more of the outstanding Shares.
(h) Injunctive Relief. Since money damages would be inadequate,
the Company or any holder of Shares shall be entitled to injunctive
relief to enforce this Section 8.7.
