<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For 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 333-13413
READING ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 23-2859312
(State of incorporation) (I.R.S. Employer Identification No.)
30 SOUTH FIFTEENTH STREET, SUITE 1300
PHILADELPHIA, PENNSYLVANIA 19102-4813
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER: 215-569-3344
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ ] No [ ]
There were 7,449,364 shares of Common Stock outstanding as of May 14, 1999.
<PAGE>
INDEX
READING ENTERTAINMENT, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PART I. - FINANCIAL INFORMATION PAGE
- ------------------------------- ----
Item 1. Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets -- March 31, 1999
(Unaudited) and December 31, 1998...................................................... 3-4
Condensed Consolidated Statements of Operations -- Three Months
Ended March 31, 1999 and 1998 (Unaudited).............................................. 5
Condensed Consolidated Statements of Cash Flows -- Three Months
Ended March 31, 1999 and 1998 (Unaudited).............................................. 6
Notes to Condensed Consolidated Financial Statements (Unaudited).......................... 7-12
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 13-17
PART II. - OTHER INFORMATION
- ----------------------------
Item 6. Exhibits and Reports on Form 8-K................................................... 18
Signatures ................................................................................... 20
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
PART I - Financial Information
<S> <C> <C>
Item 1. Financial Statements
Reading Entertainment, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(Unaudited)
March 31, December 31,
1999 1998*
---- -----
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 51,526 $ 58,593
Amounts receivable 662 575
Restricted cash 931 904
Inventories 212 236
Prepayments and other current assets 897 532
-------- --------
Total current assets 54,228 60,840
-------- --------
Investments in unconsolidated affiliates 13,718 12,819
Net investment in leased equipment 2,125 2,125
Property held for development 36,448 32,949
Property and equipment - net 38,635 32,534
Note receivable from joint venture partner 3,041 2,883
Other assets 3,375 4,729
Intangible assets:
Beneficial leases - net of accumulated amortization of
$4,339 in 1999 and $4,111 in 1998 12,569 12,797
Cost in excess of assets acquired - net of accumulated
amortization of $1,586 in 1999 and $1,426 in 1998 11,239 10,611
-------- --------
121,150 111,447
-------- --------
$175,378 $172,287
-------- --------
</TABLE>
* The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements .
See Notes to Consolidated Financial Statements.
-3-
<PAGE>
Reading Entertainment, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (continued)
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1999 1998*
---- -----
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 1,760 $ 3,031
Accrued taxes 557 418
Accrued property costs and other 1,055 1,734
Film rent payable 1,313 1,347
Note payable 153 149
Short term debt 606 594
Purchase commitments 11,409 8,066
Other liabilities 808 123
-------- --------
Total current liabilities 17,661 15,462
-------- --------
Note payable 888 920
Other liabilities 6,058 4,606
-------- --------
Total long term liabilities 6,946 5,526
-------- --------
Minority interests 1,887 1,927
Reading Entertainment Convertible Redeemable Series A 7,000 7,000
Preferred Stock, par value $.001 per
share, stated value $7,000; Authorized, issued and
outstanding - 70,000 shares
Shareholders' Equity
Reading Entertainment Series B Preferred Stock, par value
$.001 per share,
stated value $55,000; Authorized, issued and outstanding
- 550,000 shares 1 1
Reading Entertainment preferred stock, par value $.001 per
share:
Authorized -9,380,000 shares: None issued
Reading Entertainment common stock, par value $.001 per
share:
Authorized -25,000,000 shares: Issued and outstanding
-7,449,364 shares 7 7
Other capital 138,637 138,637
Retained earnings 8,156 9,727
Accumulated other comprehensive income (4,917) (6,000)
-------- --------
Total shareholders' equity 141,884 142,372
-------- --------
$175,378 $172,287
-------- --------
</TABLE>
* The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See Notes to Condensed Consolidated Financial Statements.
-4-
<PAGE>
Reading Entertainment, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except shares and per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1999 1998
---- ----
<S> <C> <C>
REVENUES:
Theater:
Admissions $ 5,529 $ 6,410
Concessions 1,627 2,056
Advertising and other 313 237
Real estate 49 42
Interest and dividends 738 1,328
------- -------
8,256 10,073
------- -------
EXPENSES:
Theater costs 5,803 6,227
Theater concession costs 367 437
Depreciation and amortization 986 848
General and administrative 2,362 2,117
------- -------
9,518 9,629
------- -------
(Loss) income from operations (1,262) 444
Equity in earnings of affiliates 90 118
Other income (expense), net 2 (632)
------- -------
Loss before minority interests and
income taxes (1,170) (70)
Minority interests 65 94
------- -------
Loss before income taxes (1,235) (164)
Income taxes 222 193
------- -------
Net loss (1,457) (357)
Less: Preferred stock dividends and amortization
of asset put option (1,083) (1,079)
------- -------
Net loss applicable to common
shareholders (2,540) (1,436)
------- -------
Basic and diluted loss per share $(0.34) $(0.19)
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
-5-
<PAGE>
Reading Entertainment, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1999 1998
---- ----
OPERATING ACTIVITIES
<S> <C> <C>
Net (loss) income $(1,457) $(357)
Adjustments to reconcile net (loss) income to
net cash used in operating activities:
Depreciation 589 452
Amortization 397 386
Deferred rent expense 81 (51)
Write off of capitalized development costs 142 13
Loss on disposal of assets 0 395
Equity in earnings of affiliates (90) (118)
Minority interests 65 94
Changes in operating assets and liabilities:
(Increase) decrease in amounts receivable (84) 359
Decrease (increase) in inventories 26 (2)
(Increase) decrease in prepayments and other current (386) 945
assets
Decrease in accounts payable and accrued expenses (1,763) (2,827)
(Decrease) increase in film rent payable (38) 246
Increase (decrease) in other liabilities 550 (46)
-------- -------
Net cash used in operating activities (1,968) (511)
-------- -------
INVESTING ACTIVITIES
Purchase of property held for development (117) 0
Purchase of property and equipment (4,605) (7,311)
Acquisition of Royal George Theatre (37) 0
Decrease in restricted cash 0 3,093
Decrease in purchase committment 56 0
Investment in joint venture (94) 0
-------- -------
Net cash used in investing activities (4,797) (4,218)
-------- -------
FINANCING ACTIVITIES
Note receivable from joint venture partner (55) 0
Minority interest distributions (107) (56)
Decrease in note payable (61) (537)
Payment of preferred stock dividends (114) (1,008)
-------- -------
Net cash used in financing activities (337) (1,601)
-------- -------
Effect of exchange rate changes on cash and cash equivalents 35 98
-------- -------
(Decrease) in cash and cash equivalents (7,067) (6,232)
Cash and cash equivalents at beginning of year 58,593 92,870
-------- -------
Cash and cash equivalents at end of period $ 51,526 $86,638
======== =======
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
-6-
<PAGE>
Reading Entertainment, Inc. and Subsidiaries
Notes to Condensed Financial Statements (unaudited)
March 31, 1999
(amounts in tables in thousands)
NOTE 1 -- BASIS OF PRESENTATION
Reading Entertainment, Inc. ("REI" or "Reading Entertainment" and
collectively, with its subsidiaries and predecessors, "Reading" or the
"Company") is in the business of developing and operating multiplex cinemas in
the United States, Puerto Rico, Australia, and New Zealand and of developing,
and eventually operating cinema based entertainment centers in Australia and New
Zealand. The Company operates its cinemas through various subsidiaries under
the Angelika Film Centers and Reading Cinemas names in the mainland United
States (the "Domestic Cinemas"); through Reading Cinemas of Puerto Rico, Inc., a
wholly owned subsidiary, under the CineVista name in Puerto Rico ("CineVista" or
the "Puerto Rico Circuit"); through Reading Entertainment Australia Pty.,
Limited (collectively with its subsidiaries referred to herein as "Reading
Australia") under the Reading Cinemas name in Australia (the "Australia
Circuit") and through Reading New Zealand Limited's ("Reading New Zealand")
participation in a cinema joint venture operating under the Berkley Cinemas name
in New Zealand. The Company's entertainment center development activities in
Australia are also conducted through Reading Australia, under the Reading
Station name and in New Zealand under the Reading New Zealand Limited name. In
addition, the Company has recently expanded into the live theater business and
currently owns, or has agreements to acquire, four live theaters, consisting of
seven auditoriums, located in Manhattan and Chicago, and to license a fifth live
theater located in San Francisco. These live theaters are designed for the
presentation of "Off Broadway" type productions and typically have auditoriums
with less than 600 seats. The Company is also a participant in two real estate
joint ventures in Philadelphia, Pennsylvania and holds certain property for sale
located primarily in Philadelphia and owns certain leased equipment which it
leases to third parties.
The financial statements have been prepared in accordance with generally
accepted accounting principles for interim information. Accordingly, they do
not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments of a recurring nature considered necessary for a
fair presentation of the results for the interim periods presented have been
included. Operating results for the three months ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1998.
Certain amounts in previously issued financial statements have been
reclassified to conform with the current period presentation.
NOTE 2 -- ACQUISITION ACTIVITIES
On March 18, 1999 the Company acquired a four auditorium live theater
complex in Chicago, which operates under the name "The Royal George Theatre" for
approximately $2,800,000 of which $1,200,000 of the purchase price was financed
with a purchase money mortgage due in May 2000. Also, in March 1999, the
Company entered into an agreement to license the use of the Marines Theater in
San Francisco through May 2001.
In December 1998, the Company entered into an Agreement in Principle (the
"Agreement in Principle") to lease and operate four cinemas all of which are
located in Manhattan (herein as referred as the "Circuit") and to acquire three
live "Off Broadway" theaters also located in Manhattan. Pursuant to the
Agreement in Principle, the Company will also acquire the 16.7% interest in the
Angelika Film Center in Manhattan not already owned by it and certain management
rights with respect to three other cinemas located in Manhattan (the lease
transaction, the management rights and the minority interest in the Angelika are
collectively referred to as the "Cinema Transactions").
-7-
<PAGE>
Reading Entertainment, Inc. and Subsidiaries
Notes to Condensed Financial Statements (unaudited)
March 31, 1999
(amounts in tables in thousands)
The Company will lease the Circuit for an initial term of ten years and the
Company will acquire, in consideration of an option payment of $5 million ($4
million of which is payable eighteen months from closing), the right to
purchase, at the end of the initial term of the lease, the Circuit for a
purchase price of $48 million (including option fee). The Circuit includes the
fee interests underlying two of the cinemas. The Company will acquire the 16.7%
interest in the Angelika for $4.5 million, which purchase price will be paid in
a ten-year installment sale note. The Company has agreed to provide to the
sellers, at the election of the sellers, standby credit facilities of up to
$32,500,000 maturing in 10 years. Borrowings under the credit facilities cannot
be made prior to eighteen months following the closing of the transaction.
It is anticipated that the Company will acquire the three live theaters in
exchange for approximately 1.1 million shares of Common Stock valued at $9.00
per share. The closing price of the Common Stock on December 2, 1998 was $9.00,
the date the Agreement in Principle was approved by the Company. If any of the
conditions to REI's obligation to issue Common Stock are not satisfied, the
acquisition will close on a cash basis, for a purchase price of approximately
$9.9 million.
In connection with the Cinemas Transactions, the Company has made a deposit
of $1,000,000. Such deposit is included as a component of "Other Assets" in the
Condensed Consolidated Balance Sheets.
Closing of the transactions are subject to certain conditions, including
approval by the Conflicts Committee of the Board of Director's of the definitive
documentation memorializing the transaction, and the issuance of fairness
opinions.
NOTE 3 -- INVESTMENTS IN UNCONSOLIDATED AFFILIATES
The Company owned 2,113,673 shares of common stock of Citadel Holding
Corporation (together with its wholly owned subsidiaries "Citadel") representing
an ownership interest of approximately 31.7% at March 31, 1999. The Company
accounts for its investment in the Citadel common stock by the equity method.
Citadel's net earnings for the three months ended March 31, 1999 were $470,000
and the Company's share of such earnings was $88,000, which amount is included
in the Condensed Consolidated Statement of Operations for the three months ended
March 31, 1999 as "Equity in earnings of affiliate." Citadel's assets and
liabilities totaled $35,179,000 and $10,968,000, respectively, at March 31,
1999. The carrying value of the Company's investment at March 31, 1999
approximates the Company's underlying equity in the net assets of Citadel. The
closing price of Citadel's common stock on the American Stock Exchange at March
31, 1999 was $3.25 per share.
The Company owns 2,226,173 shares of common stock of Big 4 Ranch, Inc.
("BRI") representing an ownership interest of approximately 33.4%. BRI owns a
40% interest in three agricultural partnerships which own agricultural land
located in California. A company controlled and owned by the Chairman of the
Board of the Company and certain members of his family owns a 20% interest in
the partnerships and Citadel owns the remaining 40% interest in the
partnerships. The Company accounts for its investment in the BRI common stock
by the equity method. BRI's net loss for the three months ended March 31, 1999
totaled $118,000; the Company did not record its share of such loss as the
carrying value of its investment in BRI had previously been reduced to $0. The
Company has no obligation to fund BRI's operating losses. BRI's deficit equity
approximated $20,000 at March 31, 1999.
Reading Australia owns a 50% interest in the Whitehorse Property Group Unit
Trust ("WPG"). WPG owns a shopping center located near Melbourne, Australia.
WPG's net income for the quarter ended March 31, 1999 totaled $4,000 and the
Company's $2,000 share of the net income has been included in the Condensed
Consolidated Statement of Operations for the three months ended March 31, 1999
as "Equity in earnings of affiliate." WPG's assets and
-8-
<PAGE>
Reading Entertainment, Inc. and Subsidiaries
Notes to Condensed Financial Statements (unaudited)
March 31, 1999
(amounts in tables in thousands)
liabilities totaled $10,870,000 and $7,911,000, respectively, at March 31, 1999.
The carrying amount of the Company's 50% interest approximates half of the
appraised value of WPG.
Reading New Zealand owns a 50% interest in two joint ventures, (the "NZ
JVs"), one with a cinema operator and one with a property developer in New
Zealand. The results of the operation of the NZ JV's for the three months
ended March 31, 1999 were immaterial.
At March 31, 1999, the assets of the NZ JVs consisted of two multiplex
cinemas (a five screen cinema on owned land and a four screen leased cinema), a
1.764 acre property located in Wellington, which was acquired as a possible
entertainment center site and a parcel on which a 4 screen cinema is being
constructed and is expected to open during the third quarter of 1999. The
Wellington property is subject to a $1,126,000 loan. The Company is responsible
for 50% of such indebtedness.
The Company has entered into contracts to acquire a .215 acre site and a
1,086 stall parking garage each located adjacent to the Wellington property.
The aggregate commitment of the Company under these agreements is $8,230,000.
The Company has conveyed to its joint venture partner in the Wellington property
the option to acquire a 50% interest in the adjacent land and parking garage at
an exercise price equal to 50% of the Company's costs of acquiring and holding
these properties. This option expires on November 30, 1999.
The carrying value of each of the Company's equity investments was as
follows:
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1999 1998
---------------------------
<S> <C> <C>
Citadel $ 8,247 $ 8,159
BRI 0 0
WPG/1/ 1,530 1,483
NZ JVs/2/ 3,941 3,177
---------------------------
Total $13,718 $12,819
</TABLE>
The carrying value of the Company's foreign currency denominated assets
will fluctuate due to changes in the exchange rates between the Australian, New
Zealand and U.S. dollars.
- -----------------
/1/ Does not include a loan to the joint venture partner of approximately
$1,849,000 and $1,769,000 at March 31, 1999 and December 31, 1998, respectively.
/2/ Does not include a loan to the joint venture partner of approximately
$1,192,000 and $1,114,000 at March 31, 1999 and December 31, 1998, respectively.
-9-
<PAGE>
Reading Entertainment, Inc. and Subsidiaries
Notes to Condensed Financial Statements (unaudited)
March 31, 1999
(amounts in tables in thousands)
NOTE 4 -- PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1999 1998
---------------------------
<S> <C> <C>
Land/1/ $ 1,089 $ 378
Buildings 3,181 1,858
Leasehold improvements 20,585 20,522
Equipment 8,969 8,792
Construction-in-progress and property development costs 10,160 5,714
---------------------------
43,984 37,264
Less: Accumulated depreciation (5,349) (4,730)
---------------------------
$38,635 $32,534
===========================
</TABLE>
The carrying value of Reading Australia's and Reading New Zealand's assets
will fluctuate due to changes in the exchange rate between the Australian, New
Zealand and U.S. dollar.
NOTE 5 -- INCOME TAXES
The Company recorded $15,000 and $14,000 in state and local income tax
expense for the three months ended March 31, 1999 and 1998, respectively,
related to earnings from the Domestic Cinemas. The Company recorded tax
provisions of $207,000 and $179,000 for the three months ended March 31, 1999
and 1998, respectively, related to foreign withholding taxes which will be paid
if certain intercompany loans are repaid.
NOTE 6 -- COMMON STOCK TRANSFER RESTRICTIONS
REI common stock (par value $.001) ("Common Stock") is traded on the Nasdaq
National Market under the symbol RDGE and the Philadelphia Stock Exchange under
the symbol RDG. The Company's Articles of Incorporation include restrictions on
the transfer of Common Stock which are intended to reduce the risk that an
"ownership change" within the meaning of Section 382(g) of the Internal Revenue
Code of 1986, as amended, will occur, which change could reduce the amount of
federal tax net loss carry forwards available to offset taxable income. The
restrictions provide that any attempted sale, transfer, assignment or other
disposition of any shares of Common Stock to any person
- ------------------
/1/ Does not include land held for development, which is included in
"Property held for development" in the Condensed Consolidated Balance Sheets.
-10-
<PAGE>
Reading Entertainment, Inc. and Subsidiaries
Notes to Condensed Financial Statements (unaudited)
March 31, 1999
(amounts in tables in thousands)
or group who, prior to the transfer owns (within the meaning of the Code and
such regulations) shares of Common Stock or any other securities of REI which
are considered "stock" for purposes of Section 382, having a fair market value
equal to or greater than 4.75% of the value of all outstanding shares of REI
"stock" shall be void ab initio, unless the Board of Directors of the Company
shall have given its prior written approval. The transfer restrictions will
continue until January 1, 2003 (unless earlier terminated by the Company's Board
of Directors).
NOTE 7 -- LOSS PER SHARE
Net loss available to common shareholders reflects the reduction for
dividends declared on the Company's Series A Voting Cumulative Convertible
Redeemable Preferred Stock (the "Series A Preferred Stock"), and for dividends
that have accumulated but have not been declared on the Series B Voting
Cumulative Convertible Preferred Stock (the "Series B Preferred Stock")
(collectively, the "Convertible Preferred Stock") and for amortization of the
value of an estimate of an asset put option (the "Asset Put Option").
The weighted average number of shares used in the computation of basic loss
per share were 7,449,364 in 1999 and 1998. Diluted loss per share is calculated
by dividing net loss income by the weighted average common shares outstanding
for the period plus the dilutive effect of stock options, convertible securities
and the Asset Put Option. During the first quarter of 1999 and 1998 the Company
recorded a net loss available to shareholders of $1,457,000 and $357,000,
respectively, therefore, the stock options, the Convertible Preferred Stock and
the Asset Put Option, were anti-dilutive.
NOTE 8 -- PURCHASE COMMITMENTS
At March 31, 1999 the Company had commitments for major capital
expenditures, property purchase commitments, and purchase money debt commitments
for 1999 and thereafter which totaled approximately $68,600,000 inclusive of
approximately $57,400,000 related to Australia and New Zealand projects.
Included in this amount are projected construction and equipment expenditures of
approximately $46,300,000 for 1999, consisting of $25,300,000 to construct seven
cinemas with a total of 64 screens on leased land, which are anticipated to be
completed in 1999, $11,400,000 to close certain property purchase commitments,
$9,600,000 to construct an entertainment center with a 10 screen cinema on land
owned by the Company which is expected to be completed in 1999. With respect to
periods subsequent to 1999, the Company has a development commitment of
approximately $21,100,000 relating to an entertainment center in Australia and a
$1,200,000 purchase commitment due in May 2000 (See Note 2).
The U.S. dollar cost of such Australia and New Zealand projects was based
on a conversion rate of .6315 U.S. dollars to each Australian dollar and a
conversion rate of .5389 U.S. dollars to each New Zealand dollar. At March 31,
1999 the Company has not utilized forward contracts to hedge or offset exposure
to market risks arising from changes to foreign exchange rates. Accordingly,
amounts reflect as commitments may fluctuate based upon foreign exchange rates
at the time of payments.
Pursuant to the provisions of the Agreement in Principle (See Note 2), if
the Company completes the Cinemas Transaction, the Company will be required to
provide the existing owners, with a ten-year line of credit of up to $32,500,000
commencing 18 months from the conclusion of the transaction and will be required
to pay $4,000,000 pursuant to a deferred option fee 18 months from closing.
While no assurances can be given that the transaction will be concluded,
management presently anticipates closing to occur in the second quarter of 1999,
in which case such amounts would be funded in late 2000 or early 2001.
-11-
<PAGE>
Reading Entertainment, Inc. and Subsidiaries
Notes to Condensed Financial Statements (unaudited)
March 31, 1999
(amounts in tables in thousands)
The Agreement in Principle contemplates the acquisition of certain live
theater assets, in exchange for stock. However, under certain circumstances, the
Company could be required to fund the Theater Acquisition with a cash payment of
approximately $9,900,000. While no assurances can be given that the Theater
Acquisition will be completed, management presently anticipates closing of the
transaction in the second quarter of 1999 and that the transaction will be
structured as a stock transaction and not as a cash transaction.
Under the terms of the joint venture agreement with WPG (see Note 3), the
Company has guaranteed approximately $3,600,000 of WPG debt.
NOTE 9 -- COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130").
SFAS 130 establishes rules for the reporting and presentation of comprehensive
income and its components. SFAS 130 requires foreign currency translation
adjustments which, prior to adoption, were reported separately in shareholders'
equity to be included in other comprehensive income.
The following sets forth the Company's comprehensive income or loss for the
periods shown:
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1999 1998
------------------
<S> <C> <C>
Net loss ($1,457) ($357)
Other comprehensive income 1,083 494
--------- -------
Comprehensive (loss) income ($374) $ 137
========= =======
</TABLE>
NOTE 10 -- SEGMENT INFORMATION
The following sets forth certain information concerning the Company's two
segments, real estate development and cinema operations, for the three months
ended March 31:
<TABLE>
<CAPTION>
Real Estate Cinema Corporate and
1999 Development Operations Eliminations Consolidated
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 0 $7,469 $ 787 $ 8,256
Operating (Loss) (748) (197) (317) (1,262)
1998
- -------------------------
Revenues $ 0 $8,703 $1,370 $10,073
Operating (Loss) income (571) 575 440 444
</TABLE>
-12-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company has elected to focus its theater development and related real
estate development activities in two principal areas, the development and
operation of state of the art multiplex cinemas in Puerto Rico, the United
States, Australia, and New Zealand, and the development and operation in
Australia and New Zealand of entertainment centers typically consisting of a
multiplex cinema, complementary restaurant and retail uses, and self contained
parking.
RESULTS OF OPERATIONS
Due to the nature of the Company's development and acquisition activities
and the timing associated with the results of such activities and the results of
operations of five new cinemas opened since January 1, 1998, historical revenues
and earnings have varied significantly. The Company's entertainment center
developments are in the early stage of development and generally will not
produce income or cash flow for at least eighteen to twenty-four months from the
time that all development approvals have been secured. Management believes that
historical financial results may not be indicative of future operating results.
Theater Revenues are comprised of Admissions, Concessions and Advertising
and other revenues. "Theater costs," "Theater concession costs" collectively
"Theater Operating Expense" reflect the direct theater costs of CineVista, the
Domestic Cinemas and Reading Australia's cinema operations. "General and
Administrative" expenses are presented without consideration of intercompany
management fees.
Theater Revenues, Theater Operating Expenses, and General and
Administrative expenses for each of the three month periods ended March 31, were
as follows:
<TABLE>
<CAPTION>
DOMESTIC
1999 CINE VISTA CINEMAS AUSTRALIA CORPORATE/1/ TOTAL
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Theater Revenue $2,721,000 $2,906,000 $ 1,794,000 $ 48,000 $ 7,469,000
Theater Operating Expense 2,518,000 2,233,000 1,419,000 6,170,000
Depreciation and Amortization 520,000 271,000 182,000 13,000 986,000
General & Administrative 185,000 133,000 824,000/2/ 1,220,000/3/ 2,362,000
----------------------------------------------------------------------
($502,000) $ 269,000 ($631,000) ($1,185,000) ($2,049,000)
======================================================================
DOMESTIC
1998 CINE VISTA CINEMAS AUSTRALIA CORPORATE/1/ TOTAL
----------------------------------------------------------------------
Theater Revenue $4,372,000 $2,658,000 $ 1,667,000 $ 6,000 $ 8,703,000
Theater Operating Expense 3,259,000 2,181,000 1,224,000 0 6,664,000
Depreciation and Amortization 420,000 251,000 170,000 7,000 848,000
General & Administrative 392,000 133,000 663,000/2/ 929,000 2,117,000
----------------------------------------------------------------------
$ 301,000 $ 93,000 ($390,000) ($930,000) ($926,000)
======================================================================
</TABLE>
/1/ Corporate operations reflect net revenue from the operation of the Royal
George Theatre (1999 only) and corporate overhead.
/2/ Includes $666,000 and $571,000 of General and Administrative expenses
associated with Reading Australia's real estate development segment for the
three months ended March 31, 1999 and March 31, 1998, respectively.
/3/ Includes $82,000 of expenses associated with New Zealand operations.
-13-
<PAGE>
CineVista
- ---------
CineVista's Theater Revenues decreased approximately 37.8% or
$1,651,000 to $2,721,000 in the three months ended March 31, 1999 from
$4,372,000 in the corresponding prior year period. The decrease is primarily a
result of more favorable film product in the first quarter of 1998 and a
$327,000 reduction in the current year quarter as a result of the net effect of
the closing of an eight screen cinema at one location in the second quarter of
1998, the closing of four screens at two locations in the first quarter of 1998,
offset by the opening of an eight screen cinema in the second quarter of 1998.
CineVista is constructing a twelve screen cinema on a leased property in the San
Juan metropolitan area which is expected to open in the fourth quarter of 1999.
CineVista is also currently in negotiation to build an additional ten screen
cinema at an existing location. At March 31, 1999 and 1998, CineVista operated
46 screens at seven locations and 44 screens at seven locations, respectively.
CineVista's Theater Operating Expenses decreased approximately 22.8%
or $741,000 to $2,518,000 for the three months ended March 31, 1999 from
$3,259,000 in the corresponding prior year period. The decrease from the prior
year period is attributable to expense items which vary directly with the
Theater Revenue of CineVista.
CineVista's General and administrative expenses decreased
approximately 52.8% or $207,000 to $185,000 for the three months ended March 31,
1999 from $392,000 in the corresponding prior year period. The total for the
quarter ended March 31, 1998 included a $165,000 charge relating to the closing
of four screens during the period. The charge was comprised of a $395,000 loss
on leasehold improvements net of a reversal of a $230,000 provision for deferred
rent.
Domestic Cinemas
- ----------------
Domestic Cinemas' Theater Revenues increased approximately 9.3% or
$248,000 to $2,906,000 for the three months ended March 31, 1999 from $2,658,000
in the corresponding prior year period in part due to the inclusion in the
current year period of the Tower Theater in Sacramento, California which
commenced operations in November 1998. The Company is currently negotiating a
transaction to lease sixteen screens at four locations in Manhattan (See note
2). Closing of the transaction is expected to occur in the second quarter of
1999. In May 1999, the Company commenced operation of a twelve screen cinema in
Manville, New Jersey. The Company has leased an additional eight screen cinema
in Buffalo, New York with operations expected to commence in the second quarter
of 1999. At March 31, 1999 and March 31, 1998, the Domestic Cinemas operated 22
screens at four locations and 19 screens at three locations respectively.
Theater Operating Expenses increased approximately 2.4% or $52,000 to
$2,233,000 for the three months ended March 31, 1999 from $2,181,000 in the
corresponding prior year period, primarily as a result of the inclusion of the
Tower Theater in the current period.
The Domestic Cinemas' General and Administrative expenses remained
consistent with the corresponding prior year period.
Australia
- ---------
Theater Revenues for Australian operations increased approximately
7.6% or $127,000 to $1,794,000 for the three months ended March 31, 1999 from
$1,667,000 in the corresponding prior year period. A four screen cinema
commenced operations in November 1998 and is included in the results for the
three months ended March 31, 1999. Reading Australia is currently constructing
an entertainment center on land owned by the Company. The complex will include
a 10 screen cinema and entertainment related retail space with operations
expected to commence in the fourth quarter of 1999. Reading Australia is also
constructing 40 screens at five leased locations with five screens at one
location to commence operations in the second quarter of 1999, 5 screens at
another location expected to commence operations in the third quarter 1999, and
thirty screens at three locations expected to commence operation in the fourth
quarter 1999. At March 31, 1999 and 1998, Reading Australia operated 21 screens
at four locations and 16 screens at three locations, respectively.
-14-
<PAGE>
Theater Operating Expenses for Australian operations increased
approximately 15.9% or $195,000 to $1,419,000 for the three months ended March
31, 1999 from $1,224,000 in the corresponding prior year period. The increase
reflects results of the recently opened cinema, including increased advertising
costs associated with promoting the new location.
General and Administrative costs increased approximately 24.3% or
$161,000 to $824,000 for the three months ended from $663,000 in the
corresponding prior year period. The increase primarily related to increased
payroll costs, office expenses and carrying costs of land held for development
associated with continued expansion of operations and development activities in
Australia.
Corporate
- ---------
General and Administrative costs (net of amounts associated with the
New Zealand operations) increased approximately 22.5% or $209,000 to $1,138,000
for the three months ended March 31, 1999 from $929,000 in the corresponding
prior year period primarily as a result of increased payroll costs, travel and
entertainment costs and office expenses associated with the Company's expansion
of operations and development activities.
Real estate revenues include rental income and the net proceeds of
sales of the Company's real estate in the United States which the Company is
liquidating. Future real estate revenues may increase as larger properties are
sold.
"Interest and dividend" revenues were as follows in each of the three
month periods ended March 31.
1999 1998
---------- ----------
$738,000 $1,328,000
The decrease in "Interest and dividend" revenues is primarily a result
of a reduction in average investable fund balances for the three months ended
March 31, 1999 as compared to the corresponding prior year period due to
increasing investment in the Company's development projects.
Equity in Earnings of Affiliates
- --------------------------------
"Equity in earnings of affiliates" include earnings from the
Company's investment in Citadel, BRI, WPG and the NZ JVs. "Equity in earnings
of affiliate" decreased $28,000 to $90,000 from $118,000 in the three months
ended March 31, 1999 verses the corresponding prior year period. In the first
quarter of 1999 "Equity in earnings of affiliate" included equity earnings of
$88,000 from the Company's investment in Citadel and $2,000 from WPG. In the
first quarter of 1998 "Equity in earnings of affiliate" included equity earnings
of $60,000 from the Company's investment in Citadel, $85,000 from WPG and a loss
of $27,000 from BRI.
Other (expense) Income
- ----------------------
"Other income" totaled $2,000 in the three months ended March 31, 1999
verses "Other expense" of $632,000 in the corresponding prior year period.
Other expense in the prior year was comprised primarily of losses on foreign
currency derivative contracts. The Company does not presently have any foreign
currency derivative positions.
Minority Interests
- ------------------
"Minority interests" for the three months ended March 31, 1999 and
1998 includes $61,000 and $59,000, respectively from minority shares in a
Domestic Cinema, and $4,000 and $35,000, respectively from minority interests
in Reading Australia cinemas net income.
Income Tax Provision
- --------------------
Income tax expense in the current three month period includes an
accrual for foreign withholding taxes of $207,000 which will be paid if certain
intercompany loans are repaid and state and local taxes of $15,000. Income tax
expense in the prior year's first quarter includes a $179,000 provision for
foreign withholding taxes and $14,000 for state and local taxes.
Net loss
- --------
As a result of the above described factors the Company recorded a "Net
loss" of $1,457,000 and $357,000 for the three months ending March 31, 1999 and
1998, respectively, an increase in the loss of approximately $1,100,000.
-15-
<PAGE>
The increase is comprised primarily of a decrease in Theater Operating Income of
$914,000 (Theater Revenues less Theater Operating Expenses and Depreciation and
Amortization), and a $590,000 reduction in "Interest and dividend" revenue, a
$245,000 increase in "General and Administrative" expenses and an increase of
$634,000 in "Other income."
Net Income Applicable to Common Stockholders
- --------------------------------------------
In each of the three month periods ended March 31, 1999, "Net loss
applicable to common stockholders" has been reduced by the 6.5% per annum
dividend on the $62,000,000 stated value of the Company's Convertible Preferred
Stock and amortization of an asset put option issued to Citadel. The provision
for "Preferred stock dividends and amortization of an asset put option" includes
approximately $894,000 of accumulated dividends on the Company's Series B
Cumulative Convertible Preferred Stock (the "Series B Preferred Stock"). No
dividend with respect to the Series B Preferred Stock has been declared as of
this date for the quarter ended March 31, 1999, and no decision has been made as
to when such accumulated dividends will be paid. All of the Series B Preferred
Stock is held by Craig Corporation, which corporation owns approximately 78% of
the Company's voting stock.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Company had cash and cash equivalents of
$51,526,000 all of which are anticipated to be deployed in furtherance of the
Company's cinema and entertainment center development programs. The Company's
total commitments exceed the Company's available liquid funds. However, the
Company believes that it has sufficient cash on hand to complete the projects
and acquisitions currently scheduled for completion in 1999. This includes the
anticipated addition of 50 screens in Australia (increasing the screen count in
that market from 21 to 71 screens), 36 screens in the United States (increasing
the screen count from 22 to 58 screens), 12 screens in Puerto Rico (increasing
the screen count from 46 to 58 screens) and four screens in New Zealand
(increasing the screen count from 9 to 13 screens). The Company plans to
leverage these assets as they commence operations, and to use the proceeds from
such financings to continue the development program in the year 2000. The
Company estimates that the total development cost of all of its cinema and
entertainment center projects will exceed $230,000,000. In the event that debt
financing cannot be obtained on terms acceptable to the Company, consideration
will be given to seeking joint venture partners, issuing debt or equity
securities, delaying development of certain projects and/or selling land
currently held for development, or other assets. The Company is also in
discussions with various lenders concerning the possibility of securing
construction period finance. The Company does not currently consider any of its
development assets to be held for sale.
At March 31, 1999, the Company had total commitments of $105,100,000.
Of this amount, it is currently anticipated that approximately $46,300,00 will
be funded in 1999, and approximately $58,800,00 will be funded in or after 2000.
Included among these commitments is a $32,500,000 credit facility to be made
available by the Company and a $4,000,000 option payment to be funded in
connection with the New York Acquisition (see Note 2) (both of which are
unlikely to be funded before the fourth quarter of 2000); a contractual
obligation to construct an entertainment center in Australia, at an estimated
remaining cost of $21,100,000 (currently anticipated to be completed in late
2000 or early 2001), an $8,230,000 obligation to purchase a 1,086 stall parking
structure and a 0.215 acre site located in central Wellington, and a $3,179,000
obligation to acquire additional open land in New Zealand.
The following summarizes the major sources and uses of cash funds in
the three months ended March 31:
1999:
- ----
"Unrestricted cash and cash equivalents" decreased $7,067,000 from
$58,593,000 at December 31, 1998 to $51,526,000 at March 31, 1999. Working
capital decreased $8,811,000 from $45,378,000 at December 31, 1998 to
$36,567,000 at March 31, 1999.
While not necessarily indicative of its results of operations
determined under generally accepted accounting principles, CineVista's, the
Angelika's and Reading Australia's (net of minority interest of $65,000)
operating cash flow (income or loss before depreciation and amortization and
consideration of general and administrative expenses) of $1,186,000 contributed
to the Company's liquid funds for the three months ended March 31, 1999. Other
principal sources of liquid funds in the current year quarter were $738,000 in
"Interest and Dividend" income and an increase in other liabilities of $550,000.
In addition to operating and general and administrative expenses,
other uses of liquid funds in the three months ended March 31, 1999 included
$4,605,000 in property and equipment, $117,000 of property held for development,
-16-
<PAGE>
a net decrease in "Accounts payable and accrued expenses of $1,763,000," payment
of preferred stock dividends of $114,000 and a net increase in "Prepaids and
other current assets" of $386,000.
1998:
- ----
"Unrestricted cash and cash equivalents" decreased $6,231,000 from
$92,870,000 at December 31, 1997 to $86,639,000 at March 31, 1998. Working
capital decreased $3,762,000 from $87,126,000 at December 31, 1997 to
$83,364,000 at March 31, 1998.
While not necessarily indicative of its results of operations
determined under generally accepted accounting principles, Cine Vista's, the
Angelika's and Reading Australia's (net of minority interest of $94,000)
operating cash flow (income or loss before depreciation and amortization and
consideration of general and administrative expenses) of $1,939,000 contributed
to the Company's liquid funds for the three months ended March 31, 1998. Other
principal sources of liquid funds in the three month period were $1,328,000 in
"Interest and dividend" income, a net decrease in "Amounts receivable" of
$359,000, a net decrease in "Prepayments and other current assets" of $945,000
and a net decrease in "Restricted cash" of $3,093,000.
In addition to operating and general and administrative expenses,
other uses of liquid funds in the three months ended March 31, 1998 included
$3,712,000 of property and equipment purchases, a net decrease in "Accounts
payable and accrued expenses," of $2,827,000, a net decrease in "Purchase
commitments" of $3,599,000, payment of preferred stock dividends of $1,008,000,
and a net decrease in "Notes payable" of $537,000.
YEAR 2000
As reasonably necessary and appropriate, the Company is conducting an
audit of the software and hardware components that it uses to assess whether
such components will properly recognize the dates beyond December 31, 1999
("Year 2000 Compliance"). The Company is also conducting a review of its major
suppliers of goods and services ("service providers") to understand their level
of compliance with Year 2000 issues. Both of these reviews are expected to be
completed by June 30, 1999.
Based on its review to date, the Company does not believe that
material problems exist relative to the internal hardware and software utilized,
as the Company uses current versions of software provided by major software
vendors, and hardware that is less than a year old, for the most part. The
Company has adequate financial resources to replace any hardware and/or software
that is determined not to be Year 2000 compliant. The costs of addressing Year
2000 compliance has not been, nor is expected to be, material to the Company's
financial condition or results of operations.
Based on responses received to date, the Company believes that most of
its service providers will represent that they are Year 2000 compliant or that
formal programs are in place to ensure that they will be Year 2000 compliant.
If in its survey of significant service providers, the Company becomes concerned
that one or more providers is not Year 2000 compliant or has what the Company
believes to be inadequate programs to become Year 2000 compliant, the Company
will take action to reduce or eliminate its reliance upon such service providers
or suppliers.
FORWARD-LOOKING STATEMENTS
From time to time, the Company or its representatives have made or may
make forward-looking statements, orally or in writing, including those contained
herein. Such forward-looking statements may be included in, without limitation,
reports to stockholders, press releases, oral statements made with the approval
of an authorized executive officer of the Company and filings with the
Securities and Exchange Commission. The words or phrases "anticipates,"
"expects," "will continue," "estimates," "projects," or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995.
The results contemplated by the Company's forward-looking statements
are subject to certain risks, trends, and uncertainties that could cause actual
results to vary materially from anticipated results, including without
limitation, delays in obtaining leases and permits for new multiplex locations,
construction risks and delays, the lack of strong film product, the impact of
competition, market and other risks associated with the Company's investment
activities and other factors described herein.
-17-
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(i) Certificate of Incorporation of Reading Entertainment, Inc., as
amended. (Incorporated by reference to Exhibit B to the Proxy
Statement/Prospectus included in Reading Entertainment, Inc.'s
Registration Statement on Form S-4, File No. 333-13413.)
3(ii)By-laws of Reading Entertainment, Inc., as amended.
4.1 Certificate of Designations, Preferences and Rights of Series A Voting
Cumulative Convertible Preferred Stock and Series B Voting Cumulative
Convertible Preferred Stock of Reading Entertainment, Inc.
(Incorporated by reference to Exhibit G to the Proxy
Statement/Prospectus included in Reading Entertainment, Inc.'s
Registration Statement on Form S-4, File No. 333-13413.)
10.1*Reading Company 1992 Nonqualified Stock Option Plan, as amended.
(Incorporated by reference to Exhibit 10.1 to Reading Entertainment,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30,
1998.)
10.2 Asset Put and Registration Rights Agreement dated October 15, 1996 by
and among Reading Entertainment, Inc., Citadel Holding Corporation,
and Citadel Acquisition Corp., Inc. (Incorporated by reference to
Exhibit 10.15 to Reading Entertainment, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1996.)
10.3 Limited Liability Company Agreement between Angelika Cinemas, Inc.
and Sutton Hill Associates dated August 27, 1996. (Incorporated by
reference to Exhibit 10.32 to Reading Entertainment, Inc.'s
Registration Statement on Form S-4, File No. 333-13413.)
10.4 Management Agreement dated as of August 27, 1996 between Angelika
Film Centers, LLC and City Cinemas Corporation. (Incorporated by
reference to Exhibit 10.33 to Reading Entertainment, Inc.'s
Registration Statement on Form S-4, File No. 333-13413.)
10.5 Purchase Agreement between Equipment Leasing Associates 1995-VI
Limited Partnership and FA, Inc. effective December 20, 1996.
(Incorporated by reference to Exhibit 10.27 to Reading Entertainment,
Inc.'s Annual Report on Form 10-K for the year ended December 31,
1996.)
10.6 Master Lease Agreement between FA, Inc. and Equipment Leasing
Associates 1995-VI Limited Partnership dated December 20, 1996.
(Incorporated by reference to Exhibit 10.28 to Reading Entertainment,
Inc.'s Annual Report on Form 10-K for the year ended December 31,
1996.)
10.7 Nonrecourse Promissory Note between FA, Inc. and Equipment Leasing
Associates 1995-VI Limited Partnership effective December 20, 1996.
(Incorporated by reference to Exhibit 10.29 to Reading Entertainment,
Inc.'s Annual Report on Form 10-K for the year ended December 31,
1996.)
10.8 Lease Rental Purchase Agreement between FA, Inc. and Ralion Financial
Services, Inc. dated December 31, 1996. (Incorporated by reference to
Exhibit 10.30 to Reading Entertainment, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1996.)
-18-
<PAGE>
10.9*Non-Qualified Stock Option Agreement dated April 18, 1997 by and
between Reading Entertainment, Inc. and James J. Cotter.
(Incorporated by reference to Exhibit 10.1 to Reading Entertainment,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30,
1997.)
10.10*Reading Entertainment, Inc. 1997 Equity Incentive Plan.
(Incorporated by reference to Exhibit A to Reading Entertainment,
Inc.'s Definitive Proxy Statement on Schedule 14A as filed with the
Securities and Exchange Commission on August 21, 1997.)
10.11Master Management Agreement between Angelika Holding, Inc. and City
Cinemas Corporation dated November 26, 1997. (Incorporated by
reference to Exhibit 10.29 to Reading Entertainment, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1997.)
10.12Agreement by and among Pubic Transport Corporation, Reading
Properties Pty Ltd, and Mackie Group Pty Ltd for development at the
Frankston Railway Station dated May 28, 1998. (Incorporated by
reference to Exhibit 10.1 to Reading Entertainment, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998.)
10.13Agreement in Principle between Reading Entertainment, Inc. and City
Cinemas dated December 2, 1998.
27.1 Financial Data Schedule for the quarter ended March 31, 1999.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the reporting period.
-19-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
READING ENTERTAINMENT, INC. REGISTRANT
Date: May 17, 1999 By: /s/ James A. Wunderle
------------ -------------------------------
James A. Wunderle
Executive Vice President, Chief
Financial Officer and Treasurer
(Duly Authorized Officer and
Principal Financial Officer)
Date: May 17, 1999 By: /s/ David J. Brown
------------ -------------------------------
David J. Brown
Controller
(Principal Accounting Officer)
-20-
<PAGE>
BY-LAWS
of
READING ENTERTAINMENT, INC.
As amended through September 16, 1997
<PAGE>
READING ENTERTAINMENT, INC.
A Delaware Corporation
BY-LAWS
ARTICLE I
Stockholders
Section 1.1 Annual Meeting.
An annual meeting of stockholders for the purpose of electing directors and
of transacting such other business as may come before it shall be held each year
at such date, time, and place, either within or without the State of Delaware,
as may be specified by the Board of Directors.
Section 1.2 Special Meetings.
Special meetings of stockholders for any purpose or purposes may be held at
any time upon call of the Chairman or Vice Chairman of the Board, if any, the
Chief Executive Officer, the President, or any three or more members of the
Board of Directors, at such time and place either within or without the State of
Delaware as may be stated in the notice. A special meeting of stockholders
shall be called by the President or the Secretary upon the written request,
stating time, place, and the purpose or purposes of the meeting, of stockholders
who together own of record shares of stock entitling them to cast a majority of
the votes entitled to be cast by the holders of the outstanding stock of all
classes entitled to vote at such meeting.
Section 1.3 Notice of Meetings.
Written notice of stockholders meetings, stating the place, date, and hour
thereof, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be given by the Chairman or Vice Chairman of
the Board, if any, the Chief Executive Officer, the President, any Vice
President, the Secretary, or an Assistant Secretary, to each stockholder
entitled to vote thereat at least ten days but not more than sixty days before
the date of the meeting, unless a different period is prescribed by law.
Section 1.4 Quorum.
Except as otherwise provided by law or in the Certificate of Incorporation
or these By-Laws, at any meeting of stockholders, the holders of shares of stock
entitling them to cast a majority of the votes entitled to be cast at the
meeting shall be present or represented by proxy in order to constitute a quorum
for the transaction of any business. In the absence of a quorum, a majority in
interest of the stockholders present or the chairman of the meeting may adjourn
the meeting from time to time in the manner provided in Section 1.5 of these By-
Laws until a quorum shall attend.
<PAGE>
Section 1.5 Adjournment.
Any meeting of 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 1.6 Organization.
The Chairman of the Board, if any, or in his absence the Vice Chairman of
the Board, if any, or in their absence the Chief Executive Officer, or in their
absence the President, or in their absence any Vice President, shall call to
order meetings of stockholders and shall act as chairman of such meetings. The
Board of Directors or, if the Board fails to act, the stockholders may appoint
any stockholder, director, or officer of the Corporation to act as chairman of
any meeting in the absence of the Chairman of the Board, the President, and all
Vice Presidents.
The Secretary of the Corporation shall act as secretary of all meetings of
stockholders, but, in the absence of the Secretary, the chairman of the meeting
may appoint any other person to act as secretary of the meeting.
Section 1.7 Voting.
Except as otherwise provided by law or in the Certificate of Incorporation
or these By-Laws and except for the election of directors, at any meeting duly
called and held at which a quorum is present, a majority of the votes cast at
such meeting upon a given question by the holders of outstanding shares of stock
of all classes of stock of the Corporation entitled to vote thereon who are
present in person or by proxy shall decide such question. At any meeting duly
called and held for the election of directors at which a quorum is present,
directors shall be elected by a plurality of the votes cast by the holders
(acting as such) of shares of stock of the Corporation entitled to elect such
directors.
Section 1.8 Action By Consent of Stockholders.
Unless otherwise restricted by the Certificate of Incorporation, any action
required or permitted to be taken at any annual or special meeting of the
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered (by hand or by certified or registered mail, return
receipt requested) to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the Corporation having custody of the book in which proceedings of minutes of
stockholders are recorded. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
-2-
<PAGE>
ARTICLE II
Board Of Directors
Section 2.1 Number and Term of Office.
The business, property, and affairs of the Corporation shall be managed by
or under the direction of a Board of six directors; provided, however, that the
Board, by resolution adopted by vote of a majority of the then authorized number
of directors, may increase or decrease the number of directors. The directors
shall be elected by the holders of shares entitled to vote thereon at the annual
meeting of stockholders, and each shall serve (subject to the provisions of
Article IV) until the next succeeding annual meeting of stockholders and until
his respective successor has been elected and qualified.
Section 2.2 Nomination of Stockholders
No stockholder shall be permitted to nominate a candidate for election as a
director at any annual meeting unless such stockholder shall provide in writing,
not later than 120 days before the first anniversary of the preceding annual
meeting of stockholders, to the Nominating Committee of the Board of Directors
or, in the absence of such committee, to the Secretary of the Corporation,
information about such candidate which, were such candidate a nominee of the
Board of Directors for whom the Corporation solicited proxies, would be required
to be disclosed in the proxy materials pursuant to which such proxies would be
solicited as set forth in Items 7-8 of Schedule 14A promulgated by the
Securities and Exchange Commission or any successor provisions.
Section 2.3 Chairman and Vice Chairman of the Board.
The directors may elect one of their members to be Chairman of the Board of
Directors and may elect one of the members to be the Vice Chairman of the Board
of Directors. The Chairman and Vice Chairman shall be subject to the control of
and may be removed by the Board of Directors. The Chairman and Vice Chairman
shall perform such duties as may from time to time be assigned to them by the
Board.
Section 2.4 Meetings.
Regular meetings of the Board of Directors may be held without notice at
such time and place as shall from time to time be determined by the Board.
Special meetings of the Board of Directors shall be held at such time and
place as shall be designated in the notice of the meeting whenever called by the
Chairman or Vice Chairman of the Board, if any, the Chief Executive Officer, the
President, or by any three of the directors then in office.
Section 2.5 Notice of Special Meetings.
The Secretary, or in his absence any other officer of the Corporation,
shall give each director notice of the time and place of holding of special
meetings of the Board of Directors by telecopy or electronic mail at least 48
hours before the meeting, or by mail at least two days before the meeting, or
by telegram, cable, radiogram, or personal service at least two days before the
meeting. Unless otherwise stated in the notice thereof, any and all business
may be transacted at any meeting without specification of such business in the
notice.
-3-
<PAGE>
Section 2.6 Quorum and Organization of Meetings.
A majority of the total number of members of the Board of Directors as
constituted from time to time shall constitute a quorum for the transaction of
business, but, if at any meeting of the Board of Directors (whether or not
adjourned from a previous meeting) there shall be less than a quorum present, a
majority of those present may adjourn the meeting to another time and place, and
the meeting may be held as adjourned without further notice or waiver. Except
as otherwise provided by law or in the Certificate of Incorporation or these By-
Laws, a majority of the directors present at any meeting at which a quorum is
present may decide any question brought before such meeting. Meetings 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 their absence by the Chief Executive
Officer, or in their absence by the President, or in the absence of all of the
foregoing by such other person as the directors may select. The Secretary of
the Corporation 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 Committees.
The Board of Directors may 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 a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in 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,
property, 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 (i) approving or
adopting, or recommending to stockholders, any action or matter expressly
required by law to be submitted to stockholders for approval or (ii) adopting,
amending, or repealing these By-Laws. Each committee which may be established
by the Board of Directors pursuant to these By-Laws may fix its own rules and
procedures. Notice of meetings of committees, other than of regular meetings
provided for by the rules, shall be given to committee members. All action
taken by committees shall be recorded in minutes of the meetings.
Section 2.8 Action Without Meeting.
Nothing contained in these By-Laws shall be deemed to restrict the power of
members of the Board of Directors or any committee designated by the Board to
take any action required or permitted to be taken by them without a meeting.
Section 2.9 Telephone Meetings.
Nothing contained in these By-Laws shall be deemed to restrict the power of
members of the Board of Directors, or any committee designated by the Board, to
participate in a meeting of the 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.
-4-
<PAGE>
ARTICLE III
Officers
Section 3.1 Executive Officers.
The executive officers of the Corporation shall be a Chief Executive
Officer or a President, or both, one or more Vice Presidents, a Treasurer, and a
Secretary, each of whom shall be elected by the Board of Directors. The Board of
Directors may elect or appoint such other officers (including a Controller and
one or more Assistant Treasurers and Assistant Secretaries) as it may deem
necessary or desirable. Each officer shall hold office for such term as may be
prescribed by the Board of Directors from time to time. Any person may hold at
one time two or more offices.
Section 3.2 Powers and Duties.
The Chairman of the Board, if any, or, in his absence, the Vice Chairman of
the Board, or in their absence the Chief Executive Officer, or in their absence
the President, shall preside at all meetings of the stockholders and of the
Board of Directors. The officers and agents of the Corporation shall each have
such powers and authority and shall perform such duties in the management of the
business, property, and affairs of the Corporation as generally pertain to their
respective offices, as well as such powers and authorities and such duties as
from time to time may be prescribed by the Board of Directors.
ARTICLE IV
Resignations, Removals, And Vacancies
Section 4.1 Resignations.
Any director or officer of the Corporation, or any member of any committee,
may resign at any time by giving written notice to the Board of Directors, the
Chairman or Vice Chairman of the Board, the Chief Executive Officer, the
President, or the Secretary of the Corporation. Any such resignation shall take
effect at the time specified therein or, if the time be not specified therein,
then upon receipt thereof. The acceptance of such resignation shall not be
necessary to make it effective.
Section 4.2 Removals.
The Board of Directors, by a vote of not less than a majority of the entire
Board, at any meeting thereof, or by written consent, at any time, may, to the
extent permitted by law, remove with or without cause from office or terminate
the employment of any officer or member of any committee and may, with or
without cause, disband any committee.
Any director or the entire Board of Directors may be removed, with or
without cause, by the holders of a majority of the shares entitled at the time
to vote at an election of directors.
-5-
<PAGE>
Section 4.3 Vacancies.
Any vacancy in the office of any director or officer through death,
resignation, removal, disqualification, or other cause, and any additional
directorship resulting from increase in the number of directors, may be filled
at any time by a majority of the directors then in office (even though less
than a quorum remains) or, in the case of any vacancy in the office of any
director, by the stockholders, and, subject to the provisions of this Article
IV, the person so chosen shall hold office until his successor shall have been
elected and qualified; or, if the person so chosen is a director elected to fill
a vacancy, he shall (subject to the provisions of this Article IV) hold office
for the unexpired term of his predecessor.
ARTICLE V
Capital Stock
Section 5.1 Stock Certificates.
The certificates for shares of the capital stock of the Corporation shall
be in such form as shall be prescribed by law and approved, from time to time,
by the Board of Directors.
Section 5.2 Transfer of Shares.
Shares of the capital stock of the Corporation may be transferred on the
books of the Corporation only by the holder of such shares or by his duly
authorized attorney, upon the surrender to the Corporation or its transfer agent
of the certificate representing such stock properly endorsed.
Section 5.3 Fixing Record Date.
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 to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion, or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which, unless
otherwise provided by law, 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.
Section 5.4 Lost Certificates.
The Board of Directors or any transfer agent of the Corporation may direct
a new certificate or certificates representing stock of the Corporation to be
issued in place of any certificate or certificates theretofore issued by the
Corporation, alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen, or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors (or any transfer agent of the Corporation
authorized to do so by a resolution of the Board of Directors) may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen, or destroyed certificate or certificates, or his
legal representative, to give the Corporation a bond in such sum as the Board of
Directors (or any transfer agent so authorized) shall direct to indemnify the
Corporation against any claim that may be made against the Corporation with
respect to the certificate alleged to have been
-6-
<PAGE>
lost, stolen, or destroyed or the issuance of such new certificates, and such
requirement may be general or confined to specific instances.
Section 5.5 Regulations.
The Board of Directors shall have power and authority to make all such
rules and regulations as it may deem expedient concerning the issue, transfer,
registration, cancellation, and replacement of certificates representing stock
of the Corporation.
ARTICLE VI
Miscellaneous
Section 6.1 Corporate Seal.
The corporate seal shall have inscribed thereon the name of the Corporation
and shall be in such form as may be approved from time to time by the Board of
Directors, the year of its organization, and the words "Corporate Seal" and
"Delaware".
Section 6.2 Fiscal Year.
The fiscal year of the Corporation shall be determined by resolution of the
Board of Directors.
Section 6.3 Notices and Waivers Thereof.
Whenever any notice whatever is required by law, the Certificate of
Incorporation, or these By-Laws to be given to any stockholder, director, or
officer, such notice, except as otherwise provided by law, may be given
personally, or by mail, or, in the case of directors or officers, by telecopy,
electronic mail, telegram, cable, or radiogram, addressed to such address as
appears on the books of the Corporation. Any notice given by telecopy,
electronic mail, telegram, cable, or radiogram shall be deemed to have been
given when it shall have been delivered for transmission and any notice given by
mail shall be deemed to have been given when it shall have been deposited in
the United States mail with postage thereon prepaid.
Whenever any notice is required to be given by law, the Certificate of
Incorporation, or these By-Laws, a written waiver thereof, signed by the person
entitled to such notice, whether before or after the meeting or the time stated
therein, shall be deemed equivalent in all respects to such notice to the full
extent permitted by law. 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.
Section 6.4 Stock of Other Corporations or Other Interests.
Unless otherwise ordered by the Board of Directors, the Chief Executive
Officer, the President, the Secretary, and such attorneys or agents of the
Corporation as may be from time to time authorized by the Board of Directors or
the President, shall have full power and authority on behalf of this Corporation
to attend and to act and vote in person or by proxy at any meeting of the
holders of securities of any
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<PAGE>
corporation or other entity in which this Corporation may own or hold shares or
other securities, and at such meetings shall possess and may exercise all the
rights and powers incident to the ownership of such shares or other securities
which this Corporation, as the owner or holder thereof, might have possessed
and exercised if present. The Chief Executive Officer, the President, the
Secretary, or such attorneys or agents, may also execute and deliver on behalf
of this Corporation powers of attorney, proxies, consents, waivers, and other
instruments relating to the shares or securities owned or held by this
Corporation.
ARTICLE VII
Amendments
The holders of shares entitled at the time to vote for the election of
directors shall have power to adopt, amend, or repeal the By-Laws of the
Corporation by vote of not less than a majority in interest of such shares, and
except as otherwise provided by law, the Board of Directors shall have power
equal in all respects to that of the stockholders to adopt, amend, or repeal
the By-Laws by vote of not less than a majority of the entire Board. However,
any By-Law adopted by the Board may be amended or repealed by vote of the
holders of a majority of the shares entitled at the time to vote for the
election of directors.
ARTICLE VIII
Indemnification
Section 8.1 Indemnification Generally.
The Corporation shall indemnify each person who was or is made a party or
is threatened to be made a party to or is involved in any threatened, pending,
or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (hereinafter a "Proceeding"), by reason of the
fact that he or she, or a person of which he or she is the legal representative,
is or was a director or officer, or had agreed to serve as a director or
officer, of the Corporation or is or was serving or has agreed to serve at the
request of the Corporation as a director, officer, employee, or agent of another
corporation or of a partnership, joint venture, trust, or other enterprise,
including service with respect to employee benefit plans, or by reason of any
act alleged to have been taken or omitted in such capacity, whether the basis of
such Proceeding is alleged action in an official capacity as a director,
officer, employee, or agent or alleged action in any other capacity while
serving as a director, officer, employee, or agent, to the maximum extent
authorized by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide prior
to such amendment), against all cost, expense, liability, and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties, and amounts
paid or to be paid in settlement) reasonably incurred by such person or on his
or her behalf in connection with such Proceeding, and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of his or her heirs, executors, and
administrators. The right to indemnification conferred in this Article Eighth
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such Proceeding in advance of
its final disposition; provided that, if the General Corporation Law so
requires, the payment of such expenses incurred by a director or officer in
advance of the final disposition of a Proceeding shall be made only
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<PAGE>
upon receipt by the Corporation of an undertaking by or on behalf of such person
to repay all amounts so advanced if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation as authorized in
this Article Eighth or otherwise and provided that the Corporation shall not be
required to advance expenses in connection with a Proceeding (or part thereof)
alleging liability under Section 16(b) of the Securities Exchange Act of 1934,
as amended (a "16(b) Claim"). The termination of any Proceeding by judgment,
order, settlement, or conviction, or upon a plea of nolo contendre or its
equivalent, shall not, of itself, create a presumption that the person did not
meet any standard of conduct for indemnification imposed by the General
Corporation Law. The Corporation shall be required to indemnify a person in
connection with a Proceeding (or part thereof) initiated by such person only if
such Proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
Section 8.2 Indemnification for Costs, Charges, and Expenses for
Successful Party.
Notwithstanding the other provisions of this Article Eighth, to the extent
that a director or officer of the Corporation has been successful on the merits
or otherwise, including, without limitation, the dismissal of an action without
prejudice, in defense of any Proceeding referred to in Section 8.1, or in the
defense of any claim, issue, or matter therein, he shall be indemnified against
all costs, charges, and expenses (including attorneys' fees) actually and
reasonably incurred by him or on his behalf in connection therewith.
Section 8.3 Determination of Right to Indemnification.
Any indemnification under Section 8.1 or 8.2 (unless ordered by a court)
shall be paid by the Corporation unless a determination is made (a) by the Board
of Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit, or proceeding, or (b) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders, that indemnification of the director or officer is not proper in
the circumstances because he has not met the applicable standards of conduct set
forth in the General Corporation Law.
Section 8.4 Advance of Costs, Charges and Expenses.
Costs, charges, and expenses (including attorneys' fees) incurred by a
person referred to in section 8.1 of this Article Eighth in defending a civil or
criminal Proceeding (including investigations by any government agency and all
costs, charges, and expenses incurred in preparing for any threatened
Proceeding) shall be paid by the Corporation in advance of the final disposition
of such Proceeding; provided, however, that the payment of such costs, charges,
and expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer) in advance of the final
disposition of such Proceeding shall be made only upon receipt of an undertaking
by or on behalf of the director or officer to repay all amounts so advanced if
it shall ultimately be determined that such director or officer is not entitled
to be indemnified by the Corporation as authorized in this Article Eighth and
provided that the Corporation shall not be required to advance expenses in
connection with a 16(b) Claim. No security shall be required for such
undertaking and such undertaking shall be accepted without reference to the
recipient's financial ability to make repayment. The Board of Directors may, in
the manner set forth above, and subject to the approval of such director or
officer, authorize the Corporation's counsel to represent such person in any
Proceeding, whether or not the Corporation is a party to such Proceeding.
-9-
<PAGE>
Section 8.5 Procedure for Indemnification.
Any indemnification under Section 8.1 or advance of costs, charges, and
expenses under Section 8.4 shall be made promptly, and in any event within 60
days, upon the written request of the director or officer directed to the
Secretary of the Corporation. The right to indemnification or advances as
granted by this Article Eighth shall be enforceable by the director or officer
in any court of competent jurisdiction if the Corporation denies such request,
in whole or in part, or if no disposition thereof is made within 60 days. Such
person's costs and expenses incurred in connection with successfully
establishing his or her right to indemnification or advances, in whole or in
part, in any such action shall also be indemnified by the Corporation. It shall
be a defense to any such action (other than an action brought to enforce a claim
for the advance of costs, charges, and expenses under Section 8.4 where the
required undertaking, if any, has been received by the Corporation) that the
claimant has not met the standard of conduct, if any, set forth in the General
Corporation Law, but, to the extent permitted by applicable law, the burden of
proving that such standard of conduct has not been met shall be on the
Corporation. To the extent permitted by applicable law, neither the failure of
the Corporation (including its Board of Directors, its independent legal
counsel, and its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct,
if any, set forth in the General Corporation Law, nor the fact that there has
been an actual determination by the Corporation (including its Board of
Directors, its independent legal counsel, and its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
Section 8.6 Other Rights; Continuation of Right of Indemnification.
The indemnification provided by this Article Eighth shall not be deemed
exclusive of any other rights to which a person seeking indemnification may be
entitled under any law (common or statutory), agreement, vote of stockholders or
disinterested directors, or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding office, and shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the estate, heirs, executors, and administrators of such
person. All rights to indemnification under this Article Eighth shall be deemed
to be a contract between the Corporation and each director and officer of the
Corporation who serves or served in such capacity at any time while this Article
Eighth is in effect. No amendment or repeal of this Article Eighth or of any
relevant provisions of the General Corporation Law or any other applicable laws
shall adversely affect or deny to any director or officer any rights to
indemnification which such person may have, or change or release any obligations
of the Corporation under this Article Eighth with respect to any costs,
charges, expenses (including attorneys' fees), judgments, fines, and amounts
paid in settlement which arise out of an Proceeding based in whole or
substantial part on any act, actual or alleged, which takes place before or
while this Article Eighth is in effect. The provisions of this Section 8.6
shall apply to any such Proceeding whenever commenced, including any such
Proceeding commenced after any amendment or repeal of this Article Eighth. The
right to indemnification and advancement of expenses conferred on any person by
this Article Eighth shall not limit the Corporation from providing any other
indemnification permitted by law.
-10-
<PAGE>
Section 8.7 Definitions.
For purposes of this Article Eighth:
"the Corporation" includes any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence continued, would have had power and authority to
indemnify its directors or officers, so that any person who is or was a director
or officer of such constituent corporation, or is or was serving at the request
of such constituent corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
shall stand in the same position under the provisions of this Article Eighth
with respect to the resulting or surviving corporation ass he would have with
respect to such constituent corporation if its separate existence had continued;
"other enterprises" includes employee benefit plans, including but not
limited to any employee benefit plans of the Corporation;
"serving at the request of the Corporation" includes, but is not limited
to, any service which imposes duties on, or involves services by, a director or
officer of the Corporation with respect to an employee benefit plan, its
participants, or beneficiaries, including acting as a fiduciary there;
"fines" shall include any penalties and any excise or similar taxes
assessed on a person with respect to an employee benefit plan;
a person who acted in good faith and in a manner he reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in Section 8.1; and
service as a partner, trustee, or member of management or similar committee
of a partnership or joint venture, or as a director, officer, employee, or agent
of a corporation which is a partner, trustee, or joint venturer, shall be
considered service as a director, officer, employee, or agent of the
partnership, joint venture, trust, or other enterprise.
Section 8.8 Saving Clause.
If this Article Eighth or any portion hereof shall be invalidated on any
ground by a court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director and officer of the Corporation as to costs,
charges, expenses (including attorneys' fees), judgments, fines, and amounts
paid in settlement with respect to any action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, including an action by or in
the right of the Corporation, to the full extent permitted by any applicable
portion of this Article Eighth that shall not have been invalidated and to the
full extent permitted by applicable law.
Section 8.9 Indemnification of Other Persons.
If authorized by the Board of Directors, the Corporation may indemnify and
advance expenses to any other person whom it has the power to indemnify under
the General Corporation Law to the fullest extent permitted by such statute.
-11-
<PAGE>
Section 8.10 Insurance.
The Corporation may purchase and maintain insurance, at its expense, to
protect itself and any director, officer, employee, or agent of the Corporation
or another corporation, partnership, joint venture, trust, or other enterprises
against any expense, liability or claim, whether or not the Corporation would
have the power to indemnify such person under the General Corporation Law.
-12-
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