<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 0-22403
HORIZON Pharmacies, Inc.
(Exact name of small business issuer as specified in its charter)
DELAWARE 75-2441557
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
275 W. Princeton Drive
Princeton, Texas 75407
(Address of principal executive offices)
(972) 736-2424
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Title of Each Class Outstanding at August 14, 1998
Common stock, par value $.01 per share 5,363,118
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
PART I. FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets - December 31, 1997 and
June 30, 1998 (unaudited) . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income - Three months ended
June 30, 1997 and 1998 (unaudited) and Six months
ended June 30, 1997 and 1998 (unaudited). . . . . . . . . . . . . . 4
Consolidated Statement of Shareholders' Equity - Six months ended
June 30, 1998 (unaudited) . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows - Six months ended
June 30, 1997 and 1998 (unaudited). . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements (unaudited) . . . . . . . . . 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . 10
PART II. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Changes in Securities and Use of Proceeds . . . . . . . . . . . . . . . 17
Submission of Matters to a Vote of Security Holders. . . . . . . . . . . 17
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . 19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
HORIZON PHARMACIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
June 30,
December 31, 1998
1997 (unaudited)
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . $ 4,084,088 $ 6,516,706
Accounts receivable, net:
Third-party providers . . . . . . . . . . . . 2,763,481 3,969,386
Others. . . . . . . . . . . . . . . . . . . . 1,477,953 1,835,188
Inventories. . . . . . . . . . . . . . . . . . . 7,900,994 11,503,730
Prepaid expenses and deposits. . . . . . . . . . 120,915 260,463
Deferred income taxes. . . . . . . . . . . . . . 42,000 42,000
----------- -----------
Total current assets . . . . . . . . . . . . . . . 16,389,431 24,127,473
Property, equipment and capital lease assets:
Property and equipment:
Land and building . . . . . . . . . . . . . . 204,389 334,389
Equipment . . . . . . . . . . . . . . . . . . 1,453,112 2,460,856
----------- -----------
Total. . . . . . . . . . . . . . . . . . 1,657,501 2,795,245
Less accumulated depreciation. . . . . . . . . . 200,855 334,126
----------- -----------
Property and equipment, net. . . . . . . . . . . 1,456,646 2,461,119
Equipment under capital leases . . . . . . . . . 374,209 404,826
Less accumulated amortization . . . . . . . . 92,238 134,681
----------- -----------
Equipment under capital leases, net. . . . . . . 281,971 270,145
----------- -----------
Total property, equipment and capital lease
assets, net . . . . . . . . . . . . . . . . . . . 1,738,617 2,731,264
Intangibles:
Noncompete covenants . . . . . . . . . . . . . . 441,788 701,788
Customer lists . . . . . . . . . . . . . . . . . 531,147 722,746
Goodwill . . . . . . . . . . . . . . . . . . . . 1,879,782 4,091,109
----------- -----------
2,852,717 5,515,643
Less accumulated amortization . . . . . . . . 327,058 479,833
----------- -----------
Intangibles, net . . . . . . . . . . . . . . . . . 2,525,659 5,035,810
----------- -----------
$20,653,707 $31,894,547
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . $ 3,670,123 $ 4,006,408
Accrued liabilities. . . . . . . . . . . . . . . 394,526 459,611
Notes payable. . . . . . . . . . . . . . . . . . 161,865 233,391
Income taxes payable . . . . . . . . . . . . . . 220,000 278,338
Current portion of long-term debt. . . . . . . . 572,254 963,191
Current portion of capital leases. . . . . . . . 83,824 90,683
----------- -----------
Total current liabilities. . . . . . . . . . . . . 5,102,592 6,031,622
Long-term debt . . . . . . . . . . . . . . . . . . 3,332,682 5,171,346
Obligations under capital leases . . . . . . . . . 197,775 173,540
Deferred income taxes. . . . . . . . . . . . . . . 182,000 157,000
Shareholders' equity
Preferred stock. . . . . . . . . . . . . . . . . -- --
Common stock . . . . . . . . . . . . . . . . . . 44,365 53,631
Additional paid-in capital . . . . . . . . . . . 11,516,834 19,607,948
Retained earnings. . . . . . . . . . . . . . . . 277,459 769,659
----------- -----------
11,838,658 20,431,238
Treasury Stock, at cost; 6,081 shares in 1998. . -- (70,199)
----------- -----------
Total shareholders' equity . . . . . . . . . . . . 11,838,658 20,361,039
----------- -----------
$20,653,707 $31,894,547
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
HORIZON PHARMACIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
Three Months ended June 30 Six Months ended June 30
-------------------------- -----------------------------
1997 1998 1997 1998
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues:
Prescription drugs sales . . . . . . . . . . . $4,842,834 $12,205,482 $ 8,903,150 $22,005,163
Other sales and services . . . . . . . . . . . 1,103,978 3,661,461 2,156,909 6,684,029
---------- ----------- ----------- -----------
Total net revenues. . . . . . . . . . . . . . . . 5,946,812 15,866,943 11,060,059 28,689,192
Costs and expenses:
Cost of sales and services:
Prescription drugs. . . . . . . . . . . . . 3,408,812 8,808,716 6,218,070 15,990,117
Other . . . . . . . . . . . . . . . . . . . 715,268 1,988,515 1,364,514 3,657,507
Depreciation and amortization. . . . . . . . . 66,192 179,311 124,888 329,822
Selling, general and administrative expenses . 1,567,405 4,434,119 2,889,786 7,744,403
---------- ----------- ----------- -----------
Total costs and expenses. . . . . . . . . . . . . 5,757,677 15,410,661 10,597,258 27,721,849
---------- ----------- ----------- -----------
Income from operations. . . . . . . . . . . . . . 189,135 456,282 462,801 967,343
Other income (expense):
Interest and other income. . . . . . . . . . . (1,825) 33,266 (1,432) 84,098
Interest expense . . . . . . . . . . . . . . . (89,382) (133,480) (142,913) (237,241)
---------- ----------- ----------- -----------
Total other income (expense). . . . . . . . . . . (91,207) (100,214) (144,345) (153,143)
---------- ----------- ----------- -----------
Income before provision for income taxes. . . . . 97,928 356,068 318,456 814,200
Provision for income taxes (Note 3) . . . . . . . 34,000 139,000 111,000 322,000
---------- ----------- ----------- -----------
Net income. . . . . . . . . . . . . . . . . . . . $ 63,928 $ 217,068 $ 207,456 $ 492,200
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Basic earnings per share (Note 2) . . . . . . . . $ 0.04 $ 0.05 $ 0.12 $ 0.11
Diluted earnings per share (Note 2) . . . . . . . $ 0.04 $ 0.04 $ 0.12 $ 0.10
</TABLE>
See accompanying notes.
4
<PAGE>
HORIZON PHARMACIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
COMMON STOCK TOTAL
------------------- ADDITIONAL RETAINED TREASURY SHAREHOLDERS'
SHARES AMOUNT PAID-IN CAPITAL EARNINGS STOCK EQUITY
------ ------ --------------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 . . . . . . . . . 4,436,494 $44,365 $11,516,834 $277,459 $0 $11,838,658
Exercise of stock options. . . . . . . . . . . 116,101 1,161 463,243 -- 464,404
Tax benefit from exercise of stock options . . -- -- 50,228 -- 50,228
Issuance of stock to acquire stores. . . . . . 63,077 631 681,869 -- 682,500
Issuance of stock to acquire land. . . . . . . 6,250 63 49,937 -- 50,000
Issuance of stock to reduce debt . . . . . . . 4,361 43 44,957 45,000
Sales of common stock (net of offering costs). 736,838 7,368 6,800,880 6,808,248
Acquisition of treasury stock (6,081 shares) . -- -- (70,199) (70,199)
Net income . . . . . . . . . . . . . . . . . . -- -- -- 492,200 492,200
-------------------------------------------------------------------------------
Balance at June 30, 1998 . . . . . . . . . . . 5,363,121 $53,631 $19,607,948 $769,659 ($70,199) $20,361,039
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
</TABLE>
See accompanying notes.
5
<PAGE>
HORIZON PHARMACIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1998
---------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . $ 207,456 $ 492,200
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization of property,
equipment and capital lease assets. . . . . . . 59,880 177,047
Amortization of intangibles. . . . . . . . . . . . 65,008 152,775
Provision for uncollectible accounts receivable. . 7,193 35,444
Pro forma provision for income taxes . . . . . . . 111,000 --
Credit for deferred income taxes . . . . . . . . . -- (25,000)
Changes in operating assets and liabilities,
net of acquisitions of businesses:
Accounts receivable . . . . . . . . . . . . . . (943,771) (1,532,525)
Inventories . . . . . . . . . . . . . . . . . . (120,404) (1,469,626)
Prepaid expenses and deposits . . . . . . . . . (10,025) (139,548)
Bank overdraft. . . . . . . . . . . . . . . . . (41,487) --
Accounts payable. . . . . . . . . . . . . . . . 1,423,127 336,285
Accrued liabilities . . . . . . . . . . . . . . 97,081 65,085
Income taxes payable. . . . . . . . . . . . . . -- 108,566
-------------------------
Total adjustments. . . . . . . . . . . . . . . . . . 647,602 (2,291,497)
-------------------------
Net cash used provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . . . 855,058 (1,799,297)
INVESTING ACTIVITIES
Purchase of land . . . . . . . . . . . . . . . . . . -- (80,000)
Purchases of property and equipment. . . . . . . . . (47,344) (255,637)
Purchases of home medical equipment. . . . . . . . . -- (10,817)
998,642 5,604,718
Assets acquired for cash in acquisitions of
businesses . . . . . . . . . . . . . . . . . . . . -- (1,966,355)
-------------------------
Net cash used in investing activities. . . . . . . . (47,344) (2,312,809)
FINANCING ACTIVITIES
Borrowings on notes to supplier. . . . . . . . . . . -- 650,000
Principal payments on notes payable. . . . . . . . . (108,333) (243,551)
Principal payments on long-term debt . . . . . . . . (111,771) (366,185)
Principal payments on notes to supplier. . . . . . . -- (650,000)
Principal payments on obligations under
capital leases . . . . . . . . . . . . . . . . . . (17,300) (47,993)
Issuance of common stock, net of offering costs
of $344,518 and $191,751 in 1997 and 1998,
respectively . . . . . . . . . . . . . . . . . . . (344,518) 7,272,652
Purchase of treasury stock . . . . . . . . . . . . . -- (70,199)
Distributions to shareholders. . . . . . . . . . . . (150,000) --
-------------------------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . . . . (731,922) 6,544,724
-------------------------
Net increase in cash and cash equivalents. . . . . . 75,792 2,432,618
Cash and cash equivalents at beginning of period . . 153,260 4,084,088
-------------------------
Cash and cash equivalents at end of period . . . . . $ 229,052 $ 6,516,706
-------------------------
-------------------------
Supplemental disclosure of interest paid . . . . . . $ 152,913 $ 237,241
</TABLE>
6
<PAGE>
HORIZON PHARMACIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) CONTINUED
<TABLE>
<S> <C> <C>
NONCASH INVESTING AND FINANCING ACTIVITIES
Equipment leased under capital leases. . . . . . . . $ 94,614 $ 30,617
Issuance of common stock to reduce long-term debt. . $ -- $ 45,000
Issuance of common stock to purchase land. . . . . . $ -- $ 50,000
Reduction of income taxes payable from exercise of
stock options. . . . . . . . . . . . . . . . . . . $ -- $ 50,228
Acquisitions of businesses financed by debt and
common stock:
Accounts receivable and other . . . . . . . . . $ 66,382 $ 67,144
Inventories . . . . . . . . . . . . . . . . . . 482,260 2,133,110
Property and equipment. . . . . . . . . . . . . 60,000 294,870
Home medical equipment. . . . . . . . . . . . . -- 448,420
Intangibles . . . . . . . . . . . . . . . . . . 390,000 2,661,174
------------------------
998,642 5,604,718
Less cash paid. . . . . . . . . . . . . . . . . -- (1,966,355)
------------------------
Assets acquired . . . . . . . . . . . . . . . . $998,642 $ 3,638,363
------------------------
------------------------
Financed by:
Notes payable . . . . . . . . . . . . . . . . . $898,642 $ 315,077
Long-term debt. . . . . . . . . . . . . . . . . -- 2,640,786
Advance by shareholder. . . . . . . . . . . . . 100,000 --
Common stock. . . . . . . . . . . . . . . . . . -- 682,500
------------------------
$998,642 $ 3,638,363
------------------------
------------------------
</TABLE>
See accompanying notes.
7
<PAGE>
HORIZON PHARMACIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1
The unaudited consolidated financial statements include all adjustments,
consisting of normal, recurring accruals, which HORIZON Pharmacies, Inc. (the
"Company") considers necessary for a fair presentation of the financial
position and the results of operations for the indicated periods. The notes
to the financial statements should be read in conjunction with the notes to
the financial statements contained in the Company's Form 10-KSB, for the year
ended December 31, 1997. The results of operations for the six months ended
June 30, 1998, are not necessarily indicative of the results to be expected
for the full year ending December 31, 1998. The Company's revenues and
earnings are higher during peak holiday periods and from Christmas through
Easter (the first and fourth quarters of the calendar year). Estimated gross
profit rates were used to determine costs of sales for the three and six
month periods ended June 30, 1997 and 1998.
NOTE 2
Common shares used in the calculation of basic and diluted earnings for
the three months and six month periods ended June 30, 1997 totaled 1,713,636.
Weighted average common shares outstanding used in the calculation of basic
earnings per share for the three months and six months ended June 30, 1998
totaled 4,681,154 and 4,586,865, respectively. Common shares used in the
calculation of diluted earnings per share for the three months and six months
ended June 30, 1998 were 4,968,993 and 4,859,802, respectively. The
difference in the number of shares for 1998 is attributable to dilutive stock
options and warrants.
NOTE 3
Prior to completion of the Company's initial public offering (the
"Offering") on July 11, 1997, no historical provisions for income taxes were
included in the Company's financial statements as income taxes, if any, were
payable by the shareholders under provisions of subchapter S of the Internal
Revenue Code. Upon completion of the Offering, the S status of the Company
was automatically terminated and the Company became subject to income taxes.
The provisions for income taxes included in the accompanying statements
of income for the three and six month periods ended June 30, 1997 are pro
forma provisions based on an estimated effective tax rate of 35% presented as
if the Company was required to pay income taxes for the periods. The income
tax provisions for the three and six month periods ended June 30, 1998 are
based on an estimated actual tax rate of 39%.
NOTE 4
At June 30, 1998, the Company operated 33 free-standing retail
pharmacies, all of which were acquired from third parties in purchase
transactions. Such acquisitions have each been structured as asset purchases
and generally have included inventories, store fixtures and the assumption of
store operating lease arrangements. The acquisitions generally have been
financed by debt to the sellers and/or an inventory supplier. A summary of
acquisitions for the six months ended June 30, 1997 and 1998 follows:
8
<PAGE>
HORIZON PHARMACIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) CONTINUED
Note 4 (Continued)
<TABLE>
ASSETS ACQUIRED
-------------------------------------
ACCOUNTS
SIX MONTHS RECEIVABLE
ENDED STORES PURCHASE AND DEBT COMMON
JUNE 30 ACQUIRED PRICE INVENTORIES INTANGIBLES EQUIPMENT INCURRED STOCK ISSUED
- --------- -------- -------- ----------- ----------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 3 $ 998,642 $ 482,260 $ 390,000 $ 126,382 $ 998,642 $ --
1998 9 5,604,718 2,133,110 2,661,174 810,434 2,955,863 $682,500
</TABLE>
The following unaudited pro forma results of operations data give effect to the
acquisitions completed during the six month periods ended June 30, 1997 and 1998
as if the transactions had been consummated as of January 1, 1997. The
unaudited pro forma results of operations data is presented for illustrative
purposes and is not necessarily indicative of the actual results that would have
occurred had the acquisitions been consummated as of January 1, 1997, or of
future results of operations. The data reflects adjustments for amortization of
intangibles resulting from the purchases, incremental interest expense resulting
from borrowings to fund the acquisitions, reductions in employee benefits and
rent expense and income taxes.
<TABLE>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1998
---- ----
<S> <C> <C>
Unaudited pro forma information:
Net revenues $ 27,147,681 $ 33,724,791
Net income 636,101 640,871
Basic earnings per share $ .23 $ 0.14
Diluted earnings per share $ .23 $ 0.13
</TABLE>
In July and August 1998, the Company acquired from third parties in purchase
transactions six retail pharmacies, two home medical equipment operations,
one intravenous operation and one closed door institutional pharmacy. The
total purchase price of $5,563,922 has been preliminarily allocated to
inventories ($2,484,672), property and equipment ($224,440), intangibles
($2,642,450) and accounts receivable ($212,360). The purchases were financed
by the issuance of shares of common stock (valued at $2,137,448), notes
payable ($1,022,659) and cash ($2,403,815).
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
The following discussion and analysis reviews the operating results of
the Company for the three and six months ended June 30, 1998 and compares
those results to the comparable periods of 1997. Certain statements
contained in this discussion are not based on historical facts, but are
forward-looking statements that are based upon numerous assumptions about
future conditions which may ultimately prove to be inaccurate and actual
events and results may materially differ from anticipated results described
in such statements. The Company's ability to achieve such results is subject
to certain risks and uncertainties, such as those inherent generally in the
retail pharmacy industry and the impact of competition, pricing and changing
market conditions. The Company disclaims, however, any intent or obligation
to update these forward-looking statements. As a result, the reader is
cautioned not to place reliance on these forward-looking statements.
The Company's principal business strategy since commencing operations in
1994 has been to establish a chain of retail pharmacies through the
acquisition of free standing full-line retail pharmacies and related
businesses. In evaluating a retail pharmacy for potential acquisition, the
Company (i) evaluates the target store's profits and losses for preceding
years; (ii) reviews the store's income tax returns for preceding years; (iii)
reviews computer-generated prescription reports showing historical
information including prescriptions sold, average price of each prescription,
gross margins and trends in prescription sales; (iv) analyzes the store's
location and competition in the immediate area; (v) reviews the store's lease
agreement, if any; and (vi) assesses targeted areas for growth patterns and
trends. Based on the Company's analysis of the foregoing items, the Company
prepares an offer to purchase the particular store. To assess the
reasonableness of the seller's purchase price, the Company considers the
anticipated rate of return, payback period and the availability and terms of
seller financing, it being generally desired that 50% of the purchase price
be seller-financed with the balance split between cash and other
consideration such as shares of the Company's common stock, par value $.01
per share (the "Common Stock").
During the six months ended June 30, 1997 and 1998, the Company acquired
three and nine retail pharmacies, respectively. The primary measurement of
the effect of acquisitions on the Company's operating performance is the
number of store operating months, which is the number of months all stores
were owned by the Company during the relevant measuring period. Acquisitions
are expected to continue as the most significant factor in the Company's
growth strategy. Since June 30, 1998, the Company has acquired a retail
pharmacy in Kansas City, Missouri; three retail pharmacies in Houston, Texas;
a retail pharmacy, closed door pharmacy, IV pharmacy operation and home
medical equipment operation in Blair, Nebraska; and a retail pharmacy and
home medical equipment operation in Borger, Texas. Each of these
acquisitions was considered significant as such term is defined in Form 8-K
and has been or will be reported in a Current Report on Form 8-K. The audited
financial statements for these operations are not included in the financial
statements presented in this Quarterly Report on Form 10-QSB.
Currently, the Company's primary source of revenue is the sale of
prescription drugs. During the three months ended June 30, 1997 and June 30,
1998, sales of prescription drugs generated 81.4% and 76.9% respectively of
the Company's net revenues; during the six months ended June 30, 1997 and
1998, prescription drugs generated 80.5% and 76.7% respectively of net
revenues. Management expects the Company's prescription drug business to
increase on an annual basis as a result of the demographic trends towards an
aging population and the continued development of new pharmaceutical
products. However, the Company anticipates that such sales will decrease as a
percentage of the Company's total revenues and gross margins as the Company
expands its home healthcare and other non-pharmaceutical sales and services
which have historically generated higher margins.
10
<PAGE>
The Company's revenues and profits are higher during peak holiday
periods and from Christmas through Easter. Sales of health-related products
peak during seasonal outbreaks of cough and cold/flu viruses, which typically
occur during the winter and spring. Accordingly, revenues and profits are
typically highest in the fourth quarter and the first quarter of the ensuing
year.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain
income statement data for the periods indicated:
<TABLE>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
NET REVENUES:
Prescription drugs sales 81.4% 76.9% 80.5% 76.7%
Other sales and services 18.6% 23.1% 19.5% 23.3%
------ ------ ------ ------
Total net revenues 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
------ ------ ------ ------
COSTS AND EXPENSES:
Cost of sales -- prescription drugs(1) 70.4% 72.2% 69.8% 72.7%
Cost of sales -- other(2) 64.8% 54.3% 63.3% 54.7%
Selling, general and administrative
expenses(3) 26.4% 27.9% 26.1% 27.0%
Depreciation and amortization(3) 1.1% 1.1% 1.1% 1.1%
Interest expense net(3) 1.5% .6% 1.3% .5%
Income before provision for income
taxes(3) 1.6% 2.2% 2.9% 2.8%
Net income (3) 1.1% 1.4% 1.9% 1.7%
</TABLE>
- --------------------
(1) As a percentage of prescription drugs sales.
(2) As a percentage of other sales and services.
(3) As a percentage of total net revenues.
Intangible assets, including but not limited to goodwill, pharmacy files
and non-compete covenants, have historically represented a substantial
portion of the Company's acquisition costs. Such assets are generally
amortized over a period of not more than 40 years. Accordingly, the
amortization of intangible assets is not expected to have a significant
effect on the Company's future results of operations.
NET REVENUES
The Company's total net revenues increased $9,920,131 or 167% to
$15,866,943 for the three months ended June 30, 1998 compared to $5,946,812
for the three months ended June 30, 1997. The increase was attributable
primarily to the increase in store operating months from 42 in the second
quarter of 1997 to 92 in the second quarter of 1998. For the six months
ended June 30, 1998, the Company's total net revenue increased $17,629,133 or
159% to $28,689,192 compared to $11,060,059 for the six months ended June 30,
1997. Operating store months increased to 170 in the six months ended June
30, 1998 as compared to 78 in the six months ended June 30, 1997.
11
<PAGE>
The following tables show the Company's prescription drug gross margins
and total revenues margins for the three and six months ended June 30, 1997
and 1998:
<TABLE>
GROSS MARGINS ON GROSS MARGINS ON
PRESCRIPTION DRUG SALES TOTAL REVENUES
----------------------- ---------------------
THREE MONTHS ENDED JUNE 30, AMOUNT PERCENTAGE AMOUNT PERCENTAGE
- --------------------------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C>
1998 $ 3,396,766 27.8% $ 5,069,712 32.0%
1997 $ 1,434,022 29.6% $ 1,822,732 30.7%
SIX MONTHS ENDED JUNE 30,
1998 $ 6,015,046 27.3% $ 9,041,568 31.5%
1997 $ 2,685,080 30.2% $ 3,477,475 31.4%
</TABLE>
The decrease in the gross margin on prescription drug sales from 1997 to 1998
was primarily the result of an increase in third-party sales, which have
lower margins and the acquisition of new stores which historically have had
lower margins than those of the Company.
Sales of prescription drugs decreased from 81.4% of total revenues for
the three months ended June 30, 1997 to 76.9% of total revenues for three
months ended June 30, 1998. For the six months ended June 30, 1998, sales of
prescription drugs decreased to 76.7% of total revenues as compared to 80.5%
for the six months ended June 30, 1997. The Company expects that
prescription drug sales will continue to decrease as a percentage of total
revenues as the Company expands its home healthcare and other
non-pharmaceutical sales and services whose gross margins exceed those of
pharmaceutical sales.
Same store sales increased from $5,946,811 in the second quarter of 1997
to $6,718,709 in the second quarter of 1998, an increase of 13.0%. Same
store sales for the six month period increased from $10,746,011 in 1997 to
$12,173,702, in 1998, an increase of 13.3%. Management believes that the
increases are primarily the result of increased advertising and promotions as
well as an enhanced product mix.
COSTS AND EXPENSES
Cost of sales increased $6,673,151 or 162%, from $4,124,080 in the three
months ended June 30, 1997 as compared to $10,797,231 in the three months
ended June 30, 1998. For the six month period cost of sales increased
$12,065,040 or 159% from $7,582,584 in 1997 to $19,647,624 in 1998. These
increases are primarily the result of increased sales volume resulting from
the increased number of store operating months.
Cost of sales as a percentage of total net revenues decreased 1.3% from
69.3% in the three months ended June 30, 1997 to 68.0% in the three months
ended June 30, 1998. For the six month period cost of sales as a percentage
of net revenues decreased 0.1% from 68.6% in 1997 to 68.5% in 1998. These
decreases are primarily the result of increases in third party prescriptions,
offset by the effects of management's continual monitoring and adjustment of
prices to the consumer and the addition of non-pharmaceutical sales and
services with lower cost of sales.
Selling, general and administrative expenses increased from $1,567,405
in the three months ended June 30, 1997 to $4,434,119 in the three months
ended June 30, 1998. Such expenses, expressed as a percentage of net
revenues, were 26.4% and 27.9% for the three months ended June 30, 1997 and
1998, respectively. For the six month period selling, general and
administrative expenses increased from $2,889,786 in 1997 to $7,744,403 in
1998. Such expenses expressed as a percentage of net revenues, were
12
<PAGE>
26.1% and 27.0% for the six months ended June 30, 1997 and 1998,
respectively. The amount of selling, general and administrative expenses in
both the three and six month periods increased primarily from the increase in
the number of stores and store operating months. The percentage increases of
1.5% and 0.9% in the three and six month periods ended June 30, 1998 as
compared to the same periods in 1997 are primarily the result of costs
incurred in connection with the Company's change of domicile from Texas to
Delaware; an increase in personnel costs to handle additional acquisitions;
and a change in the Company's primary supplier from Bergen Brunswig to
McKesson Corporation ("McKesson").
Interest expense was $89,382 in the second quarter of 1997 compared to
$133,480 during the second quarter of 1998. For the six month period
interest expense increased from $142,913 in 1997 to $237,241 in 1998. The
increase in interest expense resulted primarily from the increase in the
Company's indebtedness associated with the Company's acquisitions.
Interest and other income was a negative $1,825 in the second quarter of
1997 compared to $33,266 in the second quarter of 1998. For the six month
period interest and other income (expense) increased from a negative $1,432 in
1997 to $84,098 in 1998.
EARNINGS
Net income for the three months ended June 30, increased $153,140 or 240%
from $63,928 in 1997 to $217,068 in 1998. For the six months ended June 30,
net income increased $284,744 or 137% from $207,456 in 1997 to $492,200 in
1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the six months ended June 30,
1998 was $1,799,297 as compared to net cash provided of $855,058 for the six
months ended June 30, 1997. Increases in accounts receivable and
inventories, which were partially offset by an increase in accounts payable
and net income, were the primary reasons for the increased usage of cash.
Net cash used in investing activities was $47,344 and $2,312,809 for the
six months ended June 30, 1997 and 1998, respectively. The principal cause
of this difference was the increase in the number of stores acquired by the
Company during the six months ended June 30, 1998.
Net cash increased $2,432,618 during the six months ended June 30, 1998
from $4,084,088 at December 31, 1997 to $6,516,706 at June 30, 1998.
On June 16, 1998, the Company closed a private placement (the "1998
Private Placement") of 736,838 shares (the "Shares") of Common Stock and
warrants (the "Warrants") to purchase 41,000 shares of Common Stock. In
connection with the 1998 Private Placement, the Company paid a finder's fee
of $150,000 and other expenses of approximately $42,000. The Company also
agreed to register the Shares and the Common Stock issuable upon exercise of
the Warrants and will incur approximately $75,000 of expenses in connection
with such registration.
On July 2, 1998, the Company, entered into a Credit Agreement with
McKesson pursuant to which McKesson will provide the Company with a revolving
loan facility up to $15,000,000 and a term loan of $3,000,000 for general
corporate purposes and acquisitions (collectively, the "Credit Facilities").
Availability of the revolving loan facility is subject to borrowing base
requirements and compliance with loan covenants.
Management expects that seller-financing of acquisitions, the 1998
Private Placement and the Credit Facilities will be sufficient to support the
Company's current expansion schedule and ongoing acquisition
13
<PAGE>
activities for the next 12 months, although there can be no assurance that
such proceeds will be adequate to support the Company's acquisitions during
such period.
In addition, management expects to convert, during the next 12 to 18
months, between two and three of its existing stores to "healthcare
centers,'' although there can be no assurance that all or any part of such
conversions will be effected. In the event such conversions are undertaken,
management expects to incur a minimum of $20,000 to $40,000 in conversion
costs per store converted. The costs of such conversion are expected to be
funded from operations.
Additionally, management has evaluated and selected a point-of-sale
("POS") system which will be installed in all the Company's retail locations
during the next six to nine months. The POS system will enable the Company
to more closely monitor pricing, inventory turns and promotions of
nonpharmaceutical merchandise in the stores. It is estimated that the POS
system will cost between $25,000 and $30,000 per location depending on the
number of terminals installed. The Company expects to finance the POS system
with capital leases.
YEAR 2000
The Company is in the process of conducting a Year 2000 compliance
assessment of its information technology systems. The Year 2000 issue
relates to the ability of date-sensitive software to properly recognize the
year 2000 in calculating and processing computer system data. The Company
has determined that some existing software will need to be modified.
Modifications to existing software are expected to be completed well in
advance of 2000. The Company anticipates that timely completion of these
modifications will mitigate the Year 2000 issue internally.
The Company has not determined the potential impact of the year 2000
issue on its significant vendors or, suppliers at this time. Because third
party failures could have a material impact on the Company's ability to
conduct business, plans are being developed to address the Year 2000 issue
with these third parties. The Company anticipates completing this assessment
process during 1998. Based upon current expenditures and estimates, the
costs of addressing the Year 2000 issue are not expected to have a material
impact on future operating results or financial position.
IMPACT OF INFLATION AND CHANGING PRICES
Though not significant, inflation continues to cause increases in
product, occupancy and operating expenses, as well as the cost of acquiring
capital assets. The effect of higher costs is minimized by achieving
operating efficiencies and passing vendor price increases along to the
consumers.
FACTORS AFFECTING OPERATIONS
DEPENDENCE ON ACQUISITIONS FOR GROWTH. The Company has grown rapidly in
recent periods and intends to continue to pursue an aggressive growth
strategy. The Company's growth strategy depends upon its ability to continue
to acquire, consolidate and operate existing free-standing pharmacies and
related businesses on a profitable basis. The Company continually reviews
acquisition proposals and is currently engaged in discussions with third
parties with respect to possible acquisitions. The Company will compete for
acquisition candidates with buyers who have greater financial and other
resources, and may be able to pay higher acquisition prices, than the
Company. To the extent the Company is unable to acquire suitable retail
pharmacies, or to integrate such acquisitions successfully, its ability to
expand its business would be reduced significantly.
SALES TO THIRD-PARTY PAYORS. A growing percentage of the Company's
prescription drug sales has been accounted for by sales to customers who are
covered by third-party payment programs. Although
14
<PAGE>
contracts with third-party payors may increase the volume of prescription
sales and gross profits, third-party payors typically negotiate lower
prescription prices than those of non third-party payors. Accordingly, there
has been downward pressure on gross profit margins on sales of prescription
drugs which is expected to continue in future periods.
RELIANCE ON MEDICARE AND MEDICAID REIMBURSEMENTS. Substantially all of
the Company's home healthcare revenues are attributable to third-party
payors, including Medicare and Medicaid, private insurers, managed care plans
and HMOs. The amounts received from government programs and private
third-party payors are dependent upon the specific benefits included under
the program or the patient's insurance policies. Any substantial delays in
reimbursement or significant reductions in the coverage or payment rates of
third-party payors, or from patients enrolled in the Medicare or Medicaid
programs, would have a material adverse effect on the Company's revenues and
profitability.
EXPANSION. The Company's expansion will require the implementation and
integration of enhanced operational and financial systems and additional
management, operational and financial resources. Failure to implement and
integrate these systems and add these resources could have a material adverse
effect on the Company's results of operations and financial condition. There
can be no assurance that the Company will be able to manage its expanding
operations effectively or that it will be able to maintain or accelerate its
growth. While the Company experienced growth in net revenues and net income
in 1996 and 1997, there can be no assurance that the Company will continue to
experience growth in, or maintain the present level of, net sales or net
earnings.
GOVERNMENT REGULATION AND HEALTHCARE REFORM. The Company's pharmacists
and pharmacies are subject to a variety of state and Federal regulations, and
may be adversely affected by certain changes in such regulations. In
addition, the Company relies on prescription drug sales for a significant
portion of its revenues and profits, and prescription drug sales represent a
significant segment of the Company's business. These revenues are affected by
regulatory changes within the healthcare industry, including changes in
programs providing for reimbursement of the cost of prescription drugs by
third-party payment plans, such as government and private plans, and
regulatory changes relating to the approval process for prescription drugs.
REGULATION OF HOME HEALTHCARE SERVICES. The Company's home healthcare
business is subject to extensive Federal and state regulation. In addition,
the requirements that the Company must satisfy to conduct its businesses vary
from state to state. Changes in the law or new interpretations of existing
laws could have a material effect on permissible activities of the Company,
the relative costs associated with doing business and the amount of
reimbursement for the Company's products and services paid by government and
other third-party payors.
MALPRACTICE LIABILITY. The provision of home healthcare services
entails an inherent risk of claims of medical and professional malpractice
liability. The Company may be named as a defendant in such malpractice
lawsuits, and is subject to the attendant risk of substantial damage awards.
While the Company believes it has adequate professional and medical
malpractice liability insurance coverage, there can be no assurance that a
future claim or claims will not be successful or if successful will not
exceed the limits of available insurance coverage or that such coverage will
continue to be available at acceptable costs and on favorable terms.
COMPETITION. The retail pharmacy and home healthcare businesses are
highly competitive. In each of its markets, the Company competes with one or
more national, regional and local retail pharmacy chains, independent retail
pharmacies, deep discount retail pharmacies, supermarkets, discount
department stores, mass merchandisers and other retail stores and mail order
operations. Similarly, the Company's stores offering home healthcare services
will compete with other larger providers of home healthcare services
15
<PAGE>
including chain operations and independent single unit stores which are more
established in that market and which offer more extensive home healthcare
services than the Company. Most of the Company's competitors in the retail
pharmacy and home healthcare markets have financial resources that are
substantially greater than those of the Company. There can be no assurance
the Company will be able to successfully compete with its competitors in the
retail pharmacy and/or home healthcare industry.
GEOGRAPHIC CONCENTRATION. Currently, 18 of the Company's 39 retail
pharmacies are located in Texas, and other retail pharmacies located in Texas
may be acquired by the Company. Consequently, the Company's results of
operations and financial condition are dependent upon general trends in the
Texas economy and any significant healthcare legislative proposals enacted in
the state of Texas.
SUBSTANTIAL INDEBTEDNESS. In connection with the Company's acquisition
of retail pharmacies and other related businesses, the Company has incurred
substantial debt and may incur additional indebtedness in the future in
connection with its planned acquisition of additional stores. The Company's
ability to make cash payments to satisfy its substantial indebtedness will
depend upon its future operating performance, which is subject to a number of
factors including prevailing economic conditions and financial, business and
other factors beyond the Company's control. If the Company is unable to
generate sufficient earnings and cash flow to meet its obligations with
respect to its outstanding indebtedness, refinancing of certain of these debt
obligations or disposition of certain assets may be required. In the event
debt refinancing is required, there can be no assurance that the Company can
effect such refinancing on satisfactory terms.
POSSIBLE NEED FOR ADDITIONAL CAPITAL. Although the Company believes
that the proceeds from the 1998 Private Placement combined with operating
revenues and the Credit Facilities will be adequate to satisfy its capital
requirements for the next 12 months, circumstances, including the acquisition
of additional stores, may require the Company to obtain long or short-term
financing to realize certain business opportunities. No assurance can be
made that such financing will be obtained.
RELIANCE ON SINGLE SUPPLIER. On April 30, 1998, the Company entered
into a Supply Agreement with McKesson pursuant to which the Company agreed to
purchase a substantial portion of its pharmaceutical and non-pharmaceutical
inventory from McKesson. McKesson also provides the Company with order entry
machines, shelf labels and other supplies used in connection with the
Company's purchase and sale of such inventory. The Company believes that the
wholesale pharmaceutical and non-pharmaceutical distribution industry is
highly competitive because of the consolidation of the retail pharmacy
industry and the practice of certain large retail pharmacy chains to purchase
directly from product manufacturers. Although the Company believes that it
could obtain its inventory through another similar distributor at competitive
prices and upon competitive payment terms in the event its relationship with
McKesson was terminated, there can be no assurance that the termination of
such relationship would not adversely affect the Company's business.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS; SEASONALITY. The Company's
results of operations depend significantly upon the net sales generated
during the first and fourth quarters, and any decrease in net sales for such
periods could have a material adverse effect upon the Company's
profitability. As a result, the Company believes that period-to-period
comparisons of its results of operations are not and will not necessarily be
meaningful, and should not be relied upon as an indication of future
performance.
16
<PAGE>
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
RECENT SALES OF UNREGISTERED SECURITIES.
ACQUISITIONS. On April 13, 1998 the Company issued to an
individual 5,266 unregistered shares of Common Stock in partial consideration
of its acquisition of a home health care agency located in Texas. On May 1,
1998 the Company issued to a corporation 9,910 unregistered shares of Common
Stock in partial consideration of its acquisition of an intravenous operation
and closed door pharmacy located in Missouri. On May 28, 1998 the Company
issued to a corporation 8,237 unregistered shares of Common Stock in partial
consideration of its acquisition of a pharmacy located in New Mexico. On May
29, 1998, the Company issued to a corporation 6,250 unregistered shares of
common stock in partial consideration of its acquisition of land located in
Texas. On May 30, 1998 the Company issued to a corporation 8,382
unregistered shares of Common Stock in partial consideration of its
acquisition of a pharmacy located in New Mexico. The Company claimed
exemption from registration of such shares under Section 4(2) of the
Securities Act of 1933 on the basis that such issuances did not involve any
public offering.
DEBT CONVERSION. On June 6, 1998 the Company issued to a
corporation 2,139 unregistered shares of Common Stock in connection with the
conversion of $25,000 of long-term debt owed by the Company in connection
with the acquisition substantially all of the assets of Sun Country Drug,
Inc., a New Mexico corporation. The Company claimed exemption from
registration of such shares under Section 4(2) of the Securities Act of 1933
on the basis that such issuance did not involve any public offering.
PRIVATE PLACEMENT. On June 16, 1998, the Company, closed the
1998 Private Placement of 736,838 shares of Common Stock and Warrants to
purchase 41,000 shares of Common Stock. In connection with the 1998 Private
Placement, the Company paid a finder's fee of $150,000 and other expenses of
approximately $42,000. The Warrants may be exercised any time prior to June
15, 2003 at a price per share of $9.50. The Company claimed exemption from
registration of such shares under Section 4(2) of the Securities Act of 1933
on the basis that such issuance did not involve any public offering.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
a) The Company held its Annual Meeting of Shareholders on June 4, 1998.
b) The following matters were voted upon at the annual meeting:
1) Following are the directors elected at the annual meeting and
the tabulation of votes related to each nominee.
<TABLE>
Director Affirmative Votes Withheld
-------- ----------- --------------
<S> <C> <C>
Michael F. Loy 3,587,567 15,336
Carson A. McDonald 3,574,364 28,539
Philip H. Yeilding 3,587,567 15,336
</TABLE>
In addition to the foregoing, Charlie K. Herr, Ricky D. McCord, Robert D.
Mueller and Sy S. Shahid are directors whose terms of office continued after
the meeting.
17
<PAGE>
2) The shareholders approved the HORIZON Pharmacies, Inc.1998 Stock
Option Plan. Affirmative votes were 2,309,943; negative votes were 40,219;
and abstentions were 3,600.
3) The shareholders ratified the appointment of Ernst & Young LLP as
independent public accountants for 1998. Affirmative votes were 3,590,228;
negative votes were 11,649; and abstentions were 1,026.
4) At an adjourned session of the annual meeting held June 30, 1998,
the shareholders approved an Agreement and Plan of Merger pursuant to which
the Company changed its state of incorporation from Texas to Delaware.
Affirmative votes were 3,160,701; negative votes were 213,168; and
abstentions were 8,481.
ITEM 5. OTHER INFORMATION.
CHANGE IN PRIMARY SUPPLIER. On April 30, 1998, the Company and McKesson
entered into a Supply Agreement pursuant to which McKesson the Company
agreed to purchase a substantial portion of its prescription drugs, health
and beauty care products and durable medical products from McKesson for a
term of five years beginning June 1, 1998.
ACQUISITIONS. During the period from March 31, 1998 to the date of
filing of this Report, the Company acquired six retail pharmacies, two home
medical equipment operations, a closed door pharmacy and an intravenous
operation as described below:
<TABLE>
DATE OF
ACQUISITION PHARMACY NAME STATE
- ----------- ------------- -----
<S> <C> <C>
5/30/98 Graham's Pharmacy and Home Health, Inc. Las Vegas, New Mexico
7/24/98 Martin Drug Corp. d/b/a Interurban Pharmacy Houston, Texas
7/25/98 Carlen, Inc. d/b/a Briargrove Pharmacy Houston, Texas
7/26/98 Stirnimann, Inc d/b/a Kirkwood Pharmacy Houston, Texas
7/31/98 CCB Consulting, Inc. d/b/a Barr Pharmacy, Blair, Nebraska
Blair Medical Supply, Barr Long Term Care
Pharmacy
8/6/98 Borger Pharmacy, Inc. d/b/a Moore's Borger, Texas
Pharmacy and Moore's Home Health Care, Inc.
</TABLE>
18
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit No. Name of Exhibit
----------- ---------------
2.1 Certificate of Merger of HORIZON Pharmacies, Inc., a
Delaware corporation and HORIZON Pharmacies, Inc., a Texas
corporation, filed in the State of Delaware.
2.2 Articles of Merger of HORIZON Pharmacies, Inc., a Delaware
corporation and HORIZON Pharmacies, Inc., a Texas
corporation, filed in the State of Texas.
3.1 Certificate of Incorporation of HORIZON Pharmacies, Inc.
3.2 Bylaws of HORIZON Pharmacies, Inc.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
During the three months ended June 30, 1998, the Company filed the
following Current Reports on Form 8-K:
<TABLE>
FINANCIAL STATEMENTS
REPORT DATE DATE FILED ITEM REPORTED FILED
----------- ---------- ------------- --------------------
<S> <C> <C> <C>
5/30/98 6/15/98 Item 2 - Acquisition of Assets Graham No(1)
Pharmacy and Home Health Center, Inc.
6/16/98 6/25/98 Item 2 - Private Placement of 736,838 Yes
shares of the Company's common stock.
</TABLE>
- ---------------
(1) Filed by amendment on August 14, 1998.
19
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Company
caused the report to be signed on its behalf by the undersigned, thereunto
duly authorized.
HORIZON PHARMACIES, INC.,
a Texas corporation
Date: August 14, 1998 /s/ Ricky D. McCord
----------------------------------
Ricky D. McCord
President, Chief Executive Officer
Date: August 14, 1998 /s/ John N. Stogner
----------------------------------
John N. Stogner
Chief Financial Officer
20
<PAGE>
CERTIFICATE OF MERGER
OF
HORIZON PHARMACIES, INC., A TEXAS CORPORATION
AND
HORIZON PHARMACIES, INC., A DELAWARE CORPORATION
-----------------------------------------
Under Section 252 of the
Delaware General Corporation Law
-----------------------------------------
Pursuant to the provisions of Section 252 of the Delaware General
Corporation Law, the undersigned hereby certifies:
1. CONSTITUENT CORPORATIONS. The names of the constituent corporations
to the merger (the "Merger") are HORIZON Pharmacies, Inc., a Texas corporation
("HORIZON-TX"), and HORIZON Pharmacies, Inc., a Delaware corporation
("HORIZON-DE"), and HORIZON-TX and HORIZON-DE are collectively referred to
herein as the "Constituent Corporations".
2. AGREEMENT AND PLAN OF MERGER. An Agreement and Plan of Merger, dated
as of April 27, 1998 (the "Merger Agreement"), by and between HORIZON-TX and
HORIZON-DE setting forth the terms and conditions of the Merger has been
approved, adopted, certified, executed and acknowledged by each of the
Constituent Corporations in accordance with Section 252 of the Delaware General
Corporation Law.
3. SURVIVING CORPORATION. The surviving corporation in the Merger shall
be HORIZON-DE (the "Surviving Corporation") and its name as the Surviving
Corporation shall be "HORIZON Pharmacies, Inc."
4. CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION. The
Certificate of Incorporation of HORIZON-DE, as in effect immediately prior to
the effectiveness of the Merger, shall continue to be in full force and effect
as the Certificate of Incorporation of the Surviving Corporation until amended
in accordance with the terms thereof and the laws of the State of Delaware.
5. MERGER AGREEMENT. The executed Merger Agreement is on file at the
principal place of business of the Surviving Corporation presently located at
275 W. Princeton Drive, Princeton, TX 75407. A copy of the Merger Agreement
will be furnished by the Surviving Corporation, on request and without cost, to
any stockholder of either Constituent Corporation.
6. AUTHORIZED CAPITAL STOCK OF HORIZON-TX. The authorized capital stock
of HORIZON-TX consisted of 14,000,000 shares of common stock, $.01 par value per
share, and 1,000,000 shares of preferred stock.
<PAGE>
7. EFFECTIVENESS. The Merger will be effective upon the filing of (a)
this Certificate of Merger in accordance with Section 252 of the Delaware
General Corporation Law and (b) Articles of Merger with the Secretary of State
of the State of Texas.
IN WITNESS WHEREOF, the Surviving Corporation has caused this Certificate
of Merger to be signed by its Chairman and Chief Operating Officer and attested
to by its Secretary, this 30th day of June, 1998.
HORIZON PHARMACIES, INC.,
A DELAWARE CORPORATION
By:
-------------------------------------
Ricky D. McCord, Chairman and Chief
Operating Officer
ATTEST:
- -----------------------------
Sy S. Shahid, Secretary
-2-
<PAGE>
ARTICLES OF MERGER
OF
HORIZON PHARMACIES, INC., A TEXAS CORPORATION
AND
HORIZON PHARMACIES, INC., A DELAWARE CORPORATION
-----------------------------------------
Under Article 5.04 of the
Texas Business Corporation Act
-----------------------------------------
Pursuant to the provisions of Article 5.04 of the Texas Business
Corporation Act, the undersigned corporations adopt the following Articles of
Merger.
An Agreement and Plan of Merger (the "Merger Agreement") have been adopted
in accordance with the provisions of Article 5.03 of the Texas Business
Corporation Act providing for the merger (the "Merger") of HORIZON Pharmacies,
Inc., a Texas corporation ("HORIZON-TX"), and HORIZON Pharmacies, Inc., a
Delaware corporation ("HORIZON-DE"), and, resulting in HORIZON-DE being the
surviving corporation. A copy of the Merger Agreement is attached hereto as
Exhibit "A".
1. The names of the corporations participating in the Merger and the
states under the laws of which they are organized are as follows:
<TABLE>
NAME OF CORPORATION STATE
------------------- -----
<S> <C>
HORIZON Pharmacies, Inc. Texas
HORIZON Pharmacies, Inc. Delaware
</TABLE>
2. The Merger Agreement was duly approved by the shareholders of each
corporation as forth below.
3. As to each of the undersigned corporations, the number of shares of
common stock outstanding are as follows:
<TABLE>
Number of Shares of
Name of Corporation Common Stock Outstanding
------------------- ------------------------
<S> <C>
HORIZON-TX 4,515,165
HORIZON-DE 100
</TABLE>
4. As to each of the undersigned corporations the total number of shares
of common stock voted for and against the Merger Agreement, respectively, are as
follows:
<TABLE>
NAME OF CORPORATION SHARES VOTED FOR SHARES VOTED AGAINST
------------------- ---------------- --------------------
<S> <C> <C>
HORIZON-TX 3,158,730 211,468
HORIZON-DE 100 -0-
</TABLE>
<PAGE>
5. As to each corporation that is a party to the Merger Agreement, the
approval of the Merger Agreement and performance of its terms were duly
authorized by all action required by the laws under which it was incorporated or
organized and by its constituent documents.
6. The surviving corporation will be responsible for the payment of all
fees and franchise taxes of the merged corporations and will be obligated to pay
such fees and franchise taxes if the same are not timely paid.
7. The Merger will be effective upon the filing of (a) these Articles of
Merger with the Secretary of State of the State of Texas; and (b) a Certificate
of Merger in accordance with Section 252 of the Delaware General Corporation
Law.
Dated June 30, 1998.
HORIZON PHARMACIES, INC.,
A TEXAS CORPORATION
By:
--------------------------------------
Ricky D. McCord, Chairman, President
and Chief Operating Officer
HORIZON PHARMACIES, INC.,
A DELAWARE CORPORATION
By:
--------------------------------------
Ricky D. McCord, Chairman, President
and Chief Operating Officer
<PAGE>
PAGE 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "HORIZON PHARMACIES, INC.", FILED IN THIS OFFICE ON THE
TWENTY-SEVENTH DAY OF APRIL, A.D. 1998, AT 10 O'CLOCK A.M.
[SEAL] EDWARD J. FREEL
------------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
AUTHENTICATION:
2888669 8100 9047224
DATE:
981158499 04-27-98
<PAGE>
CERTIFICATE OF INCORPORATION
OF
HORIZON PHARMACIES, INC.
ARTICLE I
NAME
The name of this Corporation is: HORIZON Pharmacies, Inc.
ARTICLE II
REGISTERED AGENT
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle and the
name of the registered agent of the Corporation at such address is The
Corporation Trust Company.
ARTICLE III
DURATION
The duration of the Corporation is perpetual.
ARTICLE IV
PURPOSES
The objectives and purposes for which the Corporation is organized is (i)
to acquire and operate a chain of retail pharmacies and related businesses; and
(ii) to engage in any lawful act or activity for which a corporation may be
organized under the General Corporation Law of the State of Delaware, now or
hereafter in effect.
ARTICLE V
INCORPORATOR
The name and address of the Incorporator is Douglas A. Branch, 211 North
Robinson, 12th Floor, Oklahoma City, Oklahoma 73102.
ARTICLE VI
AUTHORIZED CAPITAL
The total number of shares of all classes of stock which the Corporation
shall have the authority to issue is fifteen million (15,000,000) shares,
divided into classes designated as follows: (i) fourteen million (14,000,000)
shares of common stock, par value $.01 per share (the "Common Stock"); and (ii)
one million (1,000,000) shares of preferred stock, par value $.01 per share (the
"Preferred Stock").
ARTICLE VII
ATTRIBUTES OF STOCK
The designations, powers, preferences and rights, and the qualifications,
limitations or restrictions thereof, for each class of stock of the Corporation
shall be as follows:
<PAGE>
COMMON STOCK: Each share of Common Stock shall be equal to each other
share of Common Stock and, when issued, shall be fully paid and non-assessable,
and the personal property of stockholders shall not be liable for corporate
debts. Subject to any preferential rights of the holders of Preferred Stock,
the holders of Common Stock of the Corporation shall each be entitled to share
in any dividends of the Corporation ratably, if, as and when declared by the
Board of Directors.
Each holder of record of Common Stock shall have one vote for each share of
Common Stock outstanding in his name on the books of the Corporation and shall
be entitled to vote said stock.
PREFERRED STOCK: Shares of Preferred Stock may be issued from time to time
in one or more series as determined by the Board of Directors. All shares of
Preferred Stock shall be of equal rank and shall be identical, except in respect
of the particulars fixed by the Board of Directors for each series as provided
herein. All shares of any one series shall be identical in all respects with
all the other shares of such series, except that shares of any one series issued
at different times may differ as to the dates from which dividends thereon shall
be cumulative.
The Board of Directors is hereby authorized, by resolution or resolutions
to provide, out of the unissued shares of Preferred Stock not then allocated to
any series of Preferred Stock, for one or more series of Preferred Stock.
Before any shares of any such series are issued, the Board of Directors shall
fix and determine, and is hereby expressly authorized and empowered to fix and
determine, by resolution or resolutions, the powers, designations, preferences
and relative, participating, optional or other rights, if any, and the
qualifications, limitations or restrictions thereof, if any, and in connection
therewith, the Board of Directors is expressly authorized and empowered to fix
and determine any or all of the following provisions of the shares of such
series:
(i) the designation of such series and the number of shares
which shall constitute such series;
(ii) the annual dividend rate payable on shares of such series,
expressed in a dollar amount per share, and the date or dates from
which such dividends shall commence to accrue and shall be cumulative;
(iii) the price or prices at which and the terms and conditions,
if any, on which shares of such series may be redeemed;
(iv) the amounts payable upon shares of such series, in the
event of the voluntary or involuntary liquidation, distribution of
assets (other than payment of dividends), dissolution, or winding up
of the affairs of the Corporation;
(v) the sinking funds or mandatory redemption provisions, if
any, for the redemption or purchase of shares of such series;
(vi) the extent of the voting powers, if any, of the shares of
such series;
(vii) the terms and conditions, if any, on which shares of such
series may be converted into shares of stock of the Corporation or any
class or classes thereof; and
(viii) any other preferences and relative, participating,
optional or other special rights, and any qualifications, limitations
or restrictions of such preferences or rights, of shares of such
series.
2
<PAGE>
ARTICLE VIII
BOARD OF DIRECTORS
The number of directors of this Corporation shall be as specified pursuant
to the Bylaws of the Corporation and may be altered from time to time as may be
provided therein. In case of vacancies in the Board of Directors, including
vacancies occurring by reason of an increase in the number of directors, a
majority of the remaining members of the Board, even though less than a quorum,
may elect directors to fill such vacancies to hold office until the next annual
meeting of the stockholders.
ARTICLE IX
EXCULPATORY PROVISIONS
No director of the Corporation shall be liable to the Corporation or any of
its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that this provision does not eliminate the liability of the
director (i) for any breach of the director's duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. For purposes of
the prior sentence, the term "damages" shall, to the extent permitted by law,
include without limitation, any judgment, fine, amount paid in settlement,
penalty, punitive damages, excise or other tax assessed with respect to an
employee benefit plan, or expense of any nature (including, without limitation,
counsel fees and disbursements). Each person who serves as a director of the
Corporation while this Article IX is in effect shall be deemed to be doing so in
reliance on the provisions of this Article IX, and neither the amendment or
repeal of this Article IX, nor the adoption of any provision of this Certificate
of Incorporation inconsistent with this Article IX, shall apply to or have any
effect on the liability or alleged liability of any director or the Corporation
for, arising out of, based upon, or in connection with any acts or omissions of
such director occurring prior to such amendment, repeal, or adoption of an
inconsistent provision. The provisions of this Article IX are cumulative and
shall be in addition to and independent of any and all other limitations on or
eliminations of the liabilities of directors of the Corporation, as such,
whether such limitations or eliminations arise under or are created by any law,
rule, regulation, bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise.
If the Delaware General Corporation Law is amended to further limit or
eliminate liability of the Corporation's directors for breach of fiduciary duty,
then a director of this Corporation shall not be liable for any such breach to
the fullest extent permitted by the Delaware General Corporation Law as so
amended. If the Delaware General Corporation Law is amended to increase or
expand liability of the Corporation's directors for breach of fiduciary duty, no
such amendment shall apply to or have any effect on the liability or alleged
liability of any director of this Corporation for or with respect to any acts or
omissions of such director occurring prior to the time of such amendment or
otherwise adversely affect any right or protection of a director of this
Corporation existing at the time of such amendment.
ARTICLE X
COMPROMISE OR ARRANGEMENT BY
CORPORATION WITH CREDITORS OR STOCKHOLDERS
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware, on the application in a summary way of this Corporation
or of any creditor or stockholder thereof or on the application of any receiver
or receivers appointed for this Corporation under the provisions of Section 291
of Title 8 of the Delaware Code or on the application of trustees in dissolution
or of any receiver or receivers appointed for this Corporation under the
provisions of Section 279 of the Delaware Code, may order a meeting of the
creditors or class of creditors, and/or of the
3
<PAGE>
stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority
in number representing three-fourths (3/4) in value of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and
to any reorganization of this Corporation as a consequence of such compromise
or arrangement, the compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been
made, be binding on all the creditors or class of creditors, and/or on all
the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
ARTICLE XI
RESERVATION OF RIGHT TO AMEND
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ARTICLE XII
AMENDMENT OF BYLAWS
In furtherance of and not in limitation of the rights, powers, privileges
and discretionary authority granted or conferred by Delaware law, the Board of
Directors of the Corporation is hereby authorized to make, amend, alter or
repeal the Bylaws of the Corporation.
The undersigned, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, does make this certificate, hereby declaring and certifying that this
is his act and deed and the facts herein stated are true and accordingly
hereunto set his hand this 27 day of April, 1998.
/s/ Douglas A. Branch
-----------------------------------
Douglas A. Branch, Incorporator
4
<PAGE>
EXHIBIT B
BYLAWS
OF
HORIZON PHARMACIES, INC.
A DELAWARE CORPORATION
(ADOPTED AS OF APRIL 27, 1998)
<PAGE>
INDEX
<TABLE>
<S> <C> <C>
ARTICLE I -- OFFICES
Section 1.1. Registered Office. . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Other Offices. . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II -- STOCKHOLDERS
Section 2.1. Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.2. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.3. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.4. List of Stockholders . . . . . . . . . . . . . . . . . . . . . 2
Section 2.5. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.6. Organization . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.7. Order of Business and Procedure. . . . . . . . . . . . . . . . 2
Section 2.8. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.9. Inspectors . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.10. Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.11. No Action by Consent . . . . . . . . . . . . . . . . . . . . . 4
Section 2.12. Advance Notice of Stockholders' Proposals. . . . . . . . . . . 4
Section 2.13. Presence at Meetings by Means of Communications Equipment. . . 5
Section 2.14. Inspectors . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III -- DIRECTORS
Section 3.1. General Powers of Board. . . . . . . . . . . . . . . . . . . . 5
Section 3.2. Number of Directors and Term of Office . . . . . . . . . . . . 5
Section 3.3. Election of Directors. . . . . . . . . . . . . . . . . . . . . 6
Section 3.4. Nominations of Directors . . . . . . . . . . . . . . . . . . . 6
Section 3.5. Chairman of the Board . . . . . . . . . . . . . . . . . . . . 6
Section 3.6. Resignations . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.7. Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.8. Classes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.9. Removal. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.10. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.11. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.12. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.13. Quorum and Organization of Meetings. . . . . . . . . . . . . . 8
Section 3.14. Action by Unanimous Consent. . . . . . . . . . . . . . . . . . 8
Section 3.15. Telephonic Participation . . . . . . . . . . . . . . . . . . . 8
Section 3.16. Committees of Directors. . . . . . . . . . . . . . . . . . . . 8
Section 3.17. Minutes of Committee Meeting . . . . . . . . . . . . . . . . . 9
Section 3.18. Compensation of Directors. . . . . . . . . . . . . . . . . . . 9
Section 3.19. Books and Records. . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.20. Report of Financial Condition. . . . . . . . . . . . . . . . . 9
Section 3.21. Closing of Stock Transfer Books. . . . . . . . . . . . . . . . 9
B-i
<PAGE>
ARTICLE IV -- NOTICES
Section 4.1. Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.2. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V -- OFFICERS
Section 5.1. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.2. Election . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.3. Absence. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.4. Chairman of the Board. . . . . . . . . . . . . . . . . . . . . 10
Section 5.5. President. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.6. Vice Presidents. . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.7. Assistant Vice Presidents. . . . . . . . . . . . . . . . . . . 11
Section 5.8. Treasurer. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.9. Secretary. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.10. Assistant Secretaries. . . . . . . . . . . . . . . . . . . . . 11
Section 5.11. Chief Financial Officer. . . . . . . . . . . . . . . . . . . . 11
Section 5.12. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VI -- CAPITAL STOCK
Section 6.1. Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.2. Facsimile Signatures . . . . . . . . . . . . . . . . . . . . . 12
Section 6.3. Transfer Agents and Registrars . . . . . . . . . . . . . . . . 12
Section 6.4. Lost Certificates. . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.5. Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.6. Fixing Record Date . . . . . . . . . . . . . . . . . . . . . . 13
Section 6.7. Registered Stockholders. . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI -- INDEMNIFICATION
Section 7.1. Actions Other Than By or In the Right of the Corporation . . . 13
Section 7.2. Actions By or In the Right of the Corporation. . . . . . . . . 13
Section 7.3. Determination of Right of Indemnification. . . . . . . . . . . 14
Section 7.4. Indemnification Against Expenses of Successful Party . . . . . 14
Section 7.5. Advance of Expenses. . . . . . . . . . . . . . . . . . . . . . 14
Section 7.6. Other Rights and Remedies. . . . . . . . . . . . . . . . . . . 14
Section 7.7. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.8. Constituent Corporations . . . . . . . . . . . . . . . . . . . 15
Section 7.9. Other Insurance. . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VIII -- GENERAL PROVISIONS
Section 8.1. Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8.2. Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8.3. Checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8.4. Execution of Proxies . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IX -- AMENDMENTS
</TABLE>
B-ii
<PAGE>
BYLAWS
OF
HORIZON PHARMACIES, INC.
(ADOPTED AS OF APRIL 27, 1998)
ARTICLE I
OFFICES
SECTION 1.1. REGISTERED OFFICE. The registered office of HORIZON
Pharmacies, Inc. (the "Corporation") in the State of Delaware, shall be located
at Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801.
SECTION 1.2. OTHER OFFICES. The Corporation may also have offices at such
other places both within and outside the State of Delaware as the Board of
Directors may from time to time determine as the business of the Corporation may
require.
ARTICLE II
STOCKHOLDERS
SECTION 2.1. 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 2.2. SPECIAL MEETINGS. Unless otherwise proscribed by law,
special meetings of stockholders for any purpose or purposes may be held at such
time and place either within or outside the State of Delaware as may be stated
in the notice (as described herein at Section 2.3) and may be called only by a
majority of the Board of Directors. The Board, from time to time, by resolution
duly adopted by a majority of its members, may amend these Bylaws to authorize
other persons to call such special meetings of Stockholders.
SECTION 2.3. NOTICE OF MEETINGS. (a) Unless waived, a notice of each
annual or special meeting, stating the date, hour and place and the purpose or
purposes for which the meeting is called, shall be given to each stockholder of
record entitled to vote or entitled to notice, not more than sixty (60) days nor
less than ten (10) days before the date of any such meeting, unless a different
period is proscribed by law. Such notice may be delivered either personally or
by mail, courier, facsimile or telegram. If mailed, such notice shall be
directed to a stockholder at his or her address as the same appears on the
records of the Corporation. If a meeting is adjourned to another time or place
and such adjournment is for thirty (30) days or less and no new record date is
fixed for the adjourned meeting, no further notice as to such adjourned meeting
need be given if the time and place to which it is adjourned are fixed and
announced at such meeting. In the event of a transfer of shares after notice
has been given and prior to the holding of the meeting, it shall not be
necessary to serve notice on the transferee. If the adjournment is for more
than thirty (30) days, or 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.
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(b) A written waiver of any such notice signed by the person entitled
thereto, 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 the 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. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
SECTION 2.4. LIST OF STOCKHOLDERS. The officer who has charge of the
stock ledger of the Corporation shall prepare and make available, at least ten
(10) 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 (10) 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.
SECTION 2.5. QUORUM. Except as otherwise provided by law or in the
Certificate of Incorporation or these Bylaws, at any meeting of stockholders,
the holders of a majority of shares issued and outstanding of each class
entitled to vote, shall be present or represented by proxy in order to
constitute a quorum for the transaction of business. If, however, such quorum
shall not be present or represented at any meeting of the stockholders, a
majority in voting interest of the stockholders present in person or represented
by proxy, or, in the absence of a decision by the majority, any officer entitled
to preside at such meeting, shall have power to adjourn the meeting from time to
time, without notice other than an announcement at the meeting of the time and
place of the adjourned meeting, until a quorum shall be present or represented.
At any such adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty (30) 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 2.6. ORGANIZATION. The Chairman of the Board, if any, or, in his
absence, the Vice Chairman, if any, or, in their absence, the 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 Vice Chairman or the President. The Secretary of the Corporation, or, if
the Secretary of the Corporation not be present, the Assistant Secretary, or if
the Secretary and the Assistant Secretary not be present, any person whom the
Chairman of the meeting shall appoint, shall act as Secretary of the meeting.
SECTION 2.7. ORDER OF BUSINESS AND PROCEDURE. The order of business at
all meetings of the stockholders and all matters relating to the manner of
conducting the meeting shall be determined by the Chairman of the meeting.
Meetings shall be conducted in a manner designed to accomplish the business of
the meeting in a prompt and orderly fashion and to be fair and equitable to all
stockholders, but it shall not be necessary to follow any manual of
parliamentary procedure.
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SECTION 2.8. VOTING. Except for the election of directors, at any meeting
duly called and held at which a quorum is present, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any questions brought before such meeting, unless the
question is one upon which by express provision of law or of the Certificate of
Incorporation or these Bylaws, a greater vote is required in which case such
express provision shall govern and control the decision of 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 2.9. INSPECTORS. The Board of Directors in advance of any
stockholders' meeting may appoint one or more inspectors to act at the meeting
or any adjournment thereof. If inspectors are not so appointed, the person
presiding at a stockholders' meeting may, and on the request of any stockholder
entitled to vote thereat shall, appoint one or more inspectors. In case any
person appointed as inspector fails to appear or act, the vacancy may be filled
by the Board of Directors in advance of the meeting or at the meeting by the
person present thereat. Each inspector, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to discharge the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability.
SECTION 2.10. PROXIES. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after eleven (11) months from its date, unless the proxy provides for a longer
period. Each proxy shall be in writing and be executed by the Stockholder. A
telegram, telex, cablegram or similar transmission by the Stockholder, or a
photographic, photostatic, facsimile or similar reproduction of a writing
executed by the Stockholder, shall be treated as an execution in writing for the
purposes of this Section.
Shares standing in the name of a corporation may be voted by an officer,
agent or proxy as the bylaws of such corporation may prescribe or, in the
absence of such provision, as the board of directors of such corporation may
determine.
Shares held by an administrator, executor, guardian or conservator may be
voted by him or her, either in person or by proxy, without a transfer of such
shares into his or her name. Shares standing in the name of a trustee may be
voted by him or her, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him or her without a transfer of such shares
into his or her name as trustee.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without being transferred into his or her name, if such authority is
contained in an appropriate order of the court appointing the receiver.
A Stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee.
Thereafter, the pledgee shall be entitled to vote the shares so transferred.
Treasury shares, shares of this Corporation's stock owned by another
corporation the majority of the voting stock of which is owned or controlled by
this Corporation, and shares of this Corporation's own stock held by this
Corporation in a fiduciary capacity shall not be voted, directly or indirectly,
at any meeting, and shall not be counted in determining the total number of
outstanding shares at any given time.
B-3
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SECTION 2.11. NO ACTION BY CONSENT. No action that is required or
permitted to be taken by stockholders of the Corporation at any annual or
special meeting of stockholders may be effected by written consent of
stockholders in lieu of a meeting of stockholders.
SECTION 2.12. ADVANCE NOTICE OF STOCKHOLDERS' PROPOSALS. (a) At an
annual or special meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before a meeting, business must be: (i) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors; (ii) brought before the meeting by or at the direction of the
Board of Directors; (iii) properly brought before an annual meeting by a
stockholder; or (iv) if, and only if, the notice of a special meeting provides
for business to be brought before the meeting by stockholders; properly brought
before the meeting by a stockholder. For business to be properly brought before
the meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed by first class United States
mail, postage prepaid, and received at the principal executive offices of the
Corporation not less than forty (40) days prior to the meeting; provided,
however, that in the event less than forty-five (45) days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received no later than the
tenth day following the day on which such notice of the date of the meeting was
mailed or such disclosure was made, but not less than five (5) days prior to the
meeting.
(b) A stockholder's notice to submit business to a meeting of
stockholders shall set forth: (i) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business; (ii) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder; (iii) a representation that the stockholder intends to appear at
the meeting in person or by proxy to submit the business specified in such
notice; (iv) any material interest of the stockholder in such business; and (v)
a brief description of the business desired to be brought before the meeting
and the reasons for conducting such business at the meeting, including the
complete text of any resolutions to be presented at the annual meeting, and the
reasons for conducting such business at the meeting. In addition, the
stockholder making such proposal shall promptly provide any other information
reasonably requested by the Corporation. Notwithstanding anything in the Bylaws
to the contrary, no business shall be conducted at a meeting except in
accordance with the procedures set forth in this Section 2.12. The Chairman of
a meeting shall, if the facts warrant, determine that business was not properly
brought before the meeting and in accordance with the provisions of this Section
2.12, and, if he should so determine, he shall so declare to the meeting and any
such business not properly brought before the meeting shall not be transacted.
(c) In addition to the information required above to be given by a
stockholder who intends to submit business to a meeting of stockholders, if the
business to be submitted is the nomination of a person or persons for election
to the Board of Directors then such stockholder's notice must also set forth, as
to each person whom the stockholder proposes to nominate for election as a
director: (i) the name, age, business address and, if known, residence address
of such person; (ii) the principal occupation or employment of such person;
(iii) the class and number of shares of stock of the Corporation which are
beneficially owned by such person; (iv) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors or is otherwise required by the rules and regulations of the
Securities and Exchange Commission promulgated under the Securities Exchange Act
of 1934, as amended; (v) the written consent of such person to be named in the
proxy statement as a nominee and to serve as a director if elected; and (vi) a
description of all arrangements or understandings between such stockholder and
each nominee and
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any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by such stockholder. Nominations
other than those made by the Board of Directors or its designated committee
must comply with the procedures set forth in this Section 2.12, and no person
nominated by a stockholder shall be eligible for election as a director
unless nominated in accordance with the terms of this Section 2.12. The
Chairman of a meeting shall, if the facts warrant, determine that a
nomination was not properly made in accordance with the foregoing procedures
of this Section 2.12, and, if he should so determine, he shall so declare to
the meeting and the defective nomination disregarded.
(d) Notwithstanding the foregoing provisions of this Section 2.12, a
stockholder who seeks to have any proposal included in the Corporation's proxy
statement shall comply with the requirements of Regulation 14A under the
Securities Exchange Act of 1934, as amended.
SECTION 2.13. PRESENCE AT MEETINGS BY MEANS OF COMMUNICATIONS EQUIPMENT.
Stockholders may not participate in and hold a meeting of the Stockholders by
means of conference telephone or similar communications equipment.
SECTION 2.14 INSPECTORS. The Board of Directors in advance of any
Stockholders' meeting may appoint one or more inspectors to act at the meeting
or any adjournment thereof. If inspectors are not so appointed, the person
presiding at a Stockholders' meeting may, and on the request of any Stockholder
entitled to vote thereat shall, appoint one or more inspectors. In case any
person appointed as inspector fails to appear or act, the vacancy may be filled
by the Board in advance of the meeting or at the meeting by the person present
thereat. Each inspector, before entering upon the discharge of his duties, shall
take and sign an oath faithfully to execute the duties of inspector at such
meeting with strict impartiality and according to the best of his ability.
ARTICLE III
DIRECTORS
SECTION 3.1. GENERAL POWERS OF BOARD. The business of the Corporation
shall be managed by or under the direction of its Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
Bylaws directed or required to be exercised or done by the stockholders.
SECTION 3.2. NUMBER OF DIRECTORS AND TERM OF OFFICE. The Board of
Directors shall consist of at least seven (7) directors; provided, however, that
the Board of Directors, by resolution adopted by vote of a majority of the then
authorized number of directors, may increase or decrease the number of directors
within such minimum and maximum limitations. The Board of Directors shall be
divided into three classes, as nearly equal in number as reasonably possible,
with the terms of office of the first class to expire at the 1998 annual meeting
of stockholders, the term of office of the second class to expire at the 1999
annual meeting of stockholders and the term of office of the third class to
expire at the 2000 annual meeting of stockholders. At each annual meeting of
stockholders following such initial classification and election, directors
elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
after their election. Directors need not be stockholders nor residents of the
United States or the State of Delaware.
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SECTION 3.3. ELECTION 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 as provided herein and until his respective
successor has be elected and qualified. At each meeting of the stockholders for
the election of directors, the persons receiving the greatest number of votes
shall be the directors.
SECTION 3.4. NOMINATIONS OF DIRECTORS. Nomination of persons for election
to the Board of Directors may be made by the Board of Directors or any committee
designated by the Board of Directors or by any stockholder entitled to vote for
the election of directors at the applicable meeting of stockholders. Such
nominations, if not made by the Board of Directors, shall be made by timely
notice in writing to the Secretary of the Corporation and comply with the
provisions of Section 2.12.
SECTION 3.5. CHAIRMAN OF THE BOARD. The Board of Directors may elect one
of their members to be Chairman of the Board. The Chairman of the Board shall
be subject to the control of and may be removed by the Board of Directors. If
he is present, the Chairman of the Board shall preside at all meetings of the
Board of Directors and of the stockholders, and he shall have and perform such
other duties as from time to time may be assigned to him by the Board of
Directors.
SECTION 3.6. RESIGNATIONS. Any director of the Corporation may resign at
any time by giving written notice to the Chairman of the Board, if any, or the
Secretary of the Corporation. Such resignation shall take effect at the time
specified therein, and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 3.7. VACANCIES. In the event that any vacancy shall occur in the
Board of Directors, whether because of death, resignation, removal, newly
created directorships resulting from any increase in the authorized number of
directors, the failure of the stockholders to elect the whole authorized number
of directors, or any other reason, such vacancy may be filled by the vote of a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office for the
remainder of the full term of the class in which the vacancy occurred or until
their successors are duly elected and shall qualify, unless sooner displaced. If
there are no directors in office, then an election of directors may be held in
the manner provided by statute.
SECTION 3.8. CLASSES. Directors shall be at least eighteen (18) years of
age and need not be residents of the State of Delaware nor Stockholders of the
Corporation. The Directors shall be divided into three classes, as nearly equal
in number as reasonably possible, with the terms of office of the first class to
expire at the 1998 annual meeting of Stockholders, the term of office of the
second class to expire at the 1999 annual meeting of Stockholders and the term
of office of the third class to expire at the 2000 annual meeting of
Stockholders. At each annual meeting of Stockholders following such initial
classification and election, directors elected to succeed those directors whose
terms expire shall be elected for a term of office to expire at the third
succeeding annual meeting of Stockholders after their election.
SECTION 3.9. REMOVAL. Any director, or the entire Board of Directors, may
be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least a majority of the voting power of
all of the then outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors, voting together as a single
class. The Board may remove a director for cause upon the vote of a majority of
the members of the Board (excluding the director whose removal is sought). Such
removal for cause shall be effective immediately upon such Stockholder or Board
action even if successors are not elected simultaneously. The vacancies on the
Board caused by such action shall be
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filled only by election by the Stockholders; provided that the Board may not
fill more than two (2) such directorships during the period between any two
successive Annual Stockholders' Meetings. Stockholders holding a majority of
shares then entitled to vote at an election of directors may, at any time
terminate the term of office of all or any of the directors for cause only by
a vote at any Annual Stockholders' Meeting or any Special Stockholders'
Meeting called for that purpose. The Board may remove a director for cause
upon the vote of a majority of the members of the Board (excluding the
director whose removal is sought). Such removal for cause shall be effective
immediately upon such Stockholder or Board of Director action even if
successors are not elected simultaneously. The vacancies on the Board caused
by such action shall be filled only by election by the Stockholders.
Notwithstanding the foregoing, whenever the holders of any class or series
of shares are entitled to elect one or more directors by the provisions of the
Articles of Incorporation, only the holders of shares of that class or series
shall be entitled to vote for or against the removal of any director elected by
the holders of shares of that class or series; and any vacancies in such
directorships and any newly created directorships of such class or series to be
filled by reason of an increase in the number of such directors may be filled by
the affirmative vote of a majority of the directors elected by such class or
series then in office or by a sole remaining director so elected, or by the vote
of the holders of the outstanding shares of such class or series, and such
directorships shall not in any case be filled by the vote of the remaining
directors or the holders of the outstanding shares as a whole unless otherwise
provided in the Articles of Incorporation.
SECTION 3.10. REGULAR MEETINGS. The Board of Directors of the Corporation
may hold meetings, both regular and special, either within or without the State
of Delaware. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board of Directors. After such determination and notice thereof has been
once given to each person then a member of the Board of Directors, regular
meetings may be held at such intervals and time and place without further notice
being given.
SECTION 3.11. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board or the President or by any
two (2) or more directors then in office and shall be held at such time and
place as shall be designated in the notice of the meeting.
SECTION 3.12. NOTICE. Notice of each special meeting or, where required,
each regular meeting, of the Board of Directors shall be given to each director
either by being mailed on at least the third day prior to the date of the
meeting or by being telegraphed, faxed or given personally or by telephone on at
least 24 hours notice prior to the date of meeting. Such notice shall specify
the place, date and hour of the meeting and, if it is for a special meeting, the
purpose or purposes for which the meeting is called. At any meeting of the
Board of Directors at which every director shall be present, even though without
such notice, any business may be transacted. Any acts or proceedings taken at a
meeting of the Board of Directors not validly called or constituted may be made
valid and fully effective by ratification at a subsequent meeting which shall be
legally and validly called or constituted. Notice of any regular meeting of the
Board of Directors need not state the purpose of the meeting and, at any regular
meeting duly held, any business may be transacted. If the notice of a special
meeting shall state as a purpose of the meeting the transaction of any business
that may come before the meeting, then at the meeting any business may be
transacted, whether or not referred to in the notice thereof. A written waiver
of notice of a special or regular meeting, signed by the person or persons
entitled to such notice, whether before or after the time stated therein shall
be deemed the equivalent of such notice, and attendance of a director at a
meeting shall constitute a waiver of notice of such
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meeting except when the director attends the meeting and prior to or at the
commencement of such meeting protests the lack of proper notice.
SECTION 3.13. QUORUM AND ORGANIZATION OF MEETINGS. At all meetings of the
Board of Directors, a majority shall constitute a quorum for the transaction of
business, and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specially provided by statute or by the Certificate of
Incorporation. If a quorum shall not be present at the meeting of the Board of
Directors, a majority of the directors present may adjourn the meeting to
another time and place, and the meeting may be held as adjourned without further
notice or waiver other than an announcement at the meeting, until a quorum shall
be present. Meetings shall be presided over by the Chairman of the Board, if
any, or, in his absence, by the Vice Chairman, if any, or, in the absence of
both, the President. The Secretary of the Corporation shall act as secretary of
the meeting, but, in his absence, the, the Chairman of the meeting may appoint
any person to act as secretary of the meeting.
SECTION 3.14. ACTION BY UNANIMOUS CONSENT. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, 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
of Directors or committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or committee.
SECTION 3.15. TELEPHONIC PARTICIPATION. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, members of the Board of
Directors may participate in a meeting of the Board of Directors, or any
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 such participation in a meeting shall constitute presence in person at the
meeting.
SECTION 3.16. COMMITTEES OF DIRECTORS. 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 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 the 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 power or authority of the Board of Directors
in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders a dissolution of the Corporation
or a revocation of a dissolution, or amending the Bylaws of the Corporation;
and, unless the resolution or the Certificate of Incorporation expressly so
provides, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors.
SECTION 3.17. MINUTES OF COMMITTEE MEETINGS. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
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SECTION 3.18. COMPENSATION OF DIRECTORS. No stated salary shall be paid
directors as such for their services, but by resolution of the Board of
Directors, a fixed sum may be allowed for attendance at regular or special
meetings of the Board of Directors; provided, however, that nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. The
Corporation may reimburse directors for out-of-pocket expenses for attendance at
regular or special meetings of the Board of Directors.
SECTION 3.19. BOOKS AND RECORDS. The directors may keep the books of the
Corporation, except such as are required by law to be kept within the State,
outside the State of Delaware, at such place or places as they may from time to
time determine.
SECTION 3.20. REPORT OF FINANCIAL CONDITION. At least once in each year,
the directors shall make a complete and detailed report of the financial
condition of the Corporation to its Stockholders, which report shall be filed
with the Chief Financial Officer and shall be subject to inspection by the
Stockholders.
SECTION 3.21. CLOSING OF STOCK TRANSFER BOOKS. The directors may close
the stock transfer books for a period not exceeding twenty (20) days prior to
Stockholders' meetings or payment of dividends or for such other reasons as they
may see fit.
ARTICLE IV
NOTICES
SECTION 4.1. METHOD. Whenever, unless the provisions of any statutes or
of the Certificate of Incorporation or of these Bylaws provide otherwise, notice
is required to be given to any director or stockholder, it shall be construed to
mean personal notice, but such notice may be given in writing, by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the Corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail or delivered to the custody of a commercial courier service. Notice
to directors may also be given by telephone or facsimile. Any notice required
or permitted to given by facsimile, telegram or other means of immediate
communication shall be deemed to be given at the time of actual delivery. Any
notice required or permitted to be given by mail shall be deemed to be given at
the time when the same is deposited, postage prepaid, in the United States mail
as aforesaid.
SECTION 4.2. WAIVER. Whenever any notice is required to be given under
the provisions of any statute or of the Certificate of Incorporation or of these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
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ARTICLE V
OFFICERS
SECTION 5.1. GENERAL. The officers of the Corporation shall be appointed
by the Board and shall be a Chairman of the Board, a President, a Treasurer and
a Secretary. The Board of Directors may also appoint one or more Vice
Presidents, with or without such descriptive titles as the Board shall deem
appropriate, a Chief Financial Officer, one or more Assistant Vice Presidents,
one or more Assistant Secretaries, and such other officers and agents as the
Board of Directors may determine. Any two (2) or more offices may be held by
the same person, except that there shall always be two (2) persons who hold
offices which entitle them to sign instruments and stock certificates.
SECTION 5.2. ELECTION. The officers of the Corporation shall be chosen by
the Board of Directors. Each officer shall hold office for such term as may be
prescribed by the Board of Directors from time to time. It shall not be
necessary for any officer to be a director, and any number of offices may be
held by the same person.
SECTION 5.3. ABSENCE. In the event of the absence of any officer of the
Corporation, or for any other reason that the Board may deem sufficient, the
Board may at any time or from time to time delegate all or any part of the
powers or duties of any officer to any other officer or officers or to any
director or directors.
SECTION 5.4. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside, when present, at all meetings of Stockholders and the Board. To the
extent permitted by applicable law, upon resolution adopted by the Board, the
Chairman of the Board may possess the same powers as the President to execute
contracts, certificates and other instruments of the Corporation which may be
authorized by the Board. During the absence or disability of the President, the
Chairman of the Board shall exercise all the powers and discharge all the duties
of the President. The Chairman of the Board shall also perform such other
duties and may exercise such other powers as from time to time may be assigned
to him by the Board or by amendment to these Bylaws.
SECTION 5.5. PRESIDENT. The President shall be the chief executive
officer of the Corporation, shall preside at all meetings of the stockholders
and the Board of Directors (unless the Chairman of the Board shall attend such
meeting, in which event the Chairman of the Board shall preside), shall have
general and active management of the business of the Corporation and shall see
that all orders and resolutions of the Board of Directors are carried into
effect. He shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.
SECTION 5.6. VICE PRESIDENTS. In the absence of the President or in the
event of his inability or refusal to act, the Vice President, if any (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated by the Board of Directors, or in the absence of any designation, then
in the order of their election), shall perform the duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. The Vice Presidents shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
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SECTION 5.7. ASSISTANT VICE PRESIDENTS. In the absence of a Vice
President or in the event of his inability or refusal to act, the Assistant Vice
President, if any (or, if there be more than one, the Assistant Vice Presidents
in the order designated or, in the absence of any designation, then in the order
of their election), shall perform the duties and exercise the powers of that
Vice President and shall perform such other duties and have such other powers as
the Board, the Chief Executive Officer, the Chief Operating Officer or the Vice
President under whose supervision he is appointed may from time to time
prescribe.
SECTION 5.8. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all monies and other valuable effects in the same and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his transactions as
treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, he shall give the Corporation a bond (which shall be renewed
every six years) in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
SECTION 5.9. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or president, under whose supervision he shall be. He shall have
custody of the seal of the Corporation and he, or an assistant secretary, shall
have authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by his signature or by the signature of such
assistant secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the Corporation and to attest the affixing by
his signature.
SECTION 5.10. ASSISTANT SECRETARIES. The Assistant Secretary or, if there
be more than one, the Assistant Secretaries in the order determined by the Board
of Directors, shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
SECTION 5.11. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
have the custody of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Board of Directors. The Chief Financial Officer shall sign or countersign
such instruments as require his signature and shall perform such other duties as
are properly required of him. The Chief Financial Officer shall disburse the
funds of the Corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the President and
the Board of Directors at its regular meetings, or when the Board of Directors
so requires, an account of all his transactions as Chief Financial Officer and
of the financial condition of the Corporation.
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SECTION 5.12. COMPENSATION. The salaries and other compensation of all
officers and agents of the Corporation shall be fixed by the Board of Directors.
ARTICLE VI
CAPITAL STOCK
SECTION 6.1. CERTIFICATES. Every holder of stock in the Corporation 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, or the President or
a Vice President and the Treasurer, or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation, certifying the number of shares
owned by him in the Corporation. If the Corporation shall be authorized to issue
more than one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, option or other special
rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificates which the
Corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided under the General Corporation Law of
Delaware, in lieu of the foregoing requirements, there may be set forth on the
face or back of the certificate which the Corporation shall issue to represent
such class or series of stock, a statement that the Corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, option or other special rights of each
class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
SECTION 6.2. FACSIMILE SIGNATURES. The signatures of the officers upon
the certificate may be facsimiles if the certificate is countersigned by a
Transfer Agent or registered by a registrar other than the Corporation or its
employee. 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 6.3. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may
in its discretion, appoint one or more banks or trust companies in such city or
cities as the Board of Directors may deem advisable, from time to time, to act
as Transfer Agents and Registrars of the shares of stock of the Corporation;
and, upon such appointments being made, no certificate representing shares shall
be valid until countersigned by one of such Transfer Agents and registered by
one of such Registrars.
SECTION 6.4. LOST CERTIFICATES. In case any certificate representing
shares shall be lost, stolen or destroyed, the Board of Directors, or any
officer or officers authorized by the Board of Directors, may authorize the
issue of a substitute certificate in place of the certificate so lost, stolen or
destroyed, and, if the Corporation shall have a Transfer Agent and Registrar,
may cause or authorize such substitute certificate to be countersigned by the
appropriate Transfer Agent and registered by the appropriate Registrar. In each
such case, the applicant for a substitute certificate shall furnish to the
Corporation and to such of its Transfer Agents and Registrars as may require the
same, evidence to their satisfaction, in their discretion, of the loss, theft or
destruction of such certificate and of the ownership thereof, and also such
security or indemnity as may by them be required.
SECTION 6.5. TRANSFER OF SHARES. Transfers of shares shall be made on the
books of the Corporation only by the person named in the certificate or by his
attorney lawfully constituted in writing,
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<PAGE>
and upon surrender and cancellation of a certificate or certificates of a
like number of shares, with duly executed assignment and power of transfer
endorsed thereon or attached thereto, and with such proof of the authenticity
of the signatures as the Corporation or its agents may reasonably require.
Upon the surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation, or authority to transfer, it
shall issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
SECTION 6.6. 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 to receive payment of any dividend or
other distribution or allotment of any rights, or 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 shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty days prior to any other action. 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 date for the adjourned
meeting.
SECTION 6.7. REGISTERED STOCKHOLDERS. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares: (i) to receive dividends; (ii) to vote as such owner; and
(iii) to be held liable for calls and assessments. The Corporation shall not
be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the law.
ARTICLE VII
INDEMNIFICATION
Section 7.1. ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a stockholder, director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or as a member of any committee or similar
body, against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of NOLO CONTENDERE or its equivalent, shall not create, of itself, a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, that he had
reasonable cause to believe that his conduct was unlawful.
Section 7.2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a stockholder, director, officer, employee or agent of
the Corporation, or is or
B-13
<PAGE>
was serving at the request of the Corporation as a stockholder, director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or as a member of any committee or
similar body, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit 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 Corporation,
except that the Corporation shall make no indemnification in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper.
Section 7.3. DETERMINATION OF RIGHT OF INDEMNIFICATION. The Corporation
shall indemnify a person under Section 7.1 or Section 7.2 (unless ordered by a
court order) only upon a determination in the specific case that the director,
officer, employee or agent has met the applicable standard of conduct set forth
in Section 7.1 or Section 7.2. Such determination shall be made by: (i) the
Board of Directors, by a majority vote of a quorum of directors not a party to
the action, suit or proceeding; (ii) absent a quorum or at the direction of a
quorum of disinterested directors, independent legal counsel, by a written
opinion; or (iii) the stockholders of the Corporation.
Section 7.4. INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Article VII, to the extent that a
stockholder, director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 7.1 or Section 7.2 of these Bylaws, or in
defense of any claim, issue or matter therein, the Corporation shall indemnify
him against expenses (including attorneys' fees) which he actually and
reasonably has incurred in connection therewith.
Section 7.5. ADVANCE OF EXPENSES. Expenses incurred by any person who may
have a right of indemnification under this Article VII in defending an action or
proceeding may be paid in advance of the final disposition of such action or
proceeding upon specific authorization by the Board and upon his delivery to the
Board of an undertaking by or on behalf of such person to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified
under this Article VII.
Section 7.6. OTHER RIGHTS AND REMEDIES. The indemnification provided by
this Article VII shall not be deemed exclusive and is declared expressly to be
nonexclusive of any other rights to which those seeking indemnification may be
entitled under the Certificate of Incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to actions in his
official capacity and as to actions in another capacity while holding such
office. In addition, the indemnification, provided by this Article VII shall
continue as to any person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
Section 7.7. INSURANCE. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a stockholder, director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise or as a member of any committee or similar body, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Article VII.
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<PAGE>
Section 7.8. CONSTITUENT CORPORATIONS. For the purposes of this Article
VII, references to "the Corporation" include in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise or as a member of any committee or similar body, shall
stand in the same position under the provisions of this Article VII with respect
to the resulting or surviving corporation as he would have with respect to such
constituent corporation if its existence had continued.
Section 7.9. OTHER INSURANCE. The Corporation shall reduce the amount of
the indemnification of any person pursuant to the provisions of this Article VII
by the amount which such person collects as indemnification: (i) under any
policy of insurance which the Corporation purchased and maintained on his
behalf; or (ii) from another corporation, partnership, joint venture, trust or
other enterprise.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors as and when they deem expedient
at any regular or special meeting, out of funds legally available thereof
pursuant to law. Dividends may be paid in cash, in property, or in shares of the
Corporation's capital stock, subject to the provisions of the Certificate of
Incorporation.
SECTION 8.2. RESERVES. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meeting contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
SECTION 8.3. CHECKS. All checks or demands for money, notes or other
evidence of indebtedness of the Corporation shall be signed by such officer or
officers or such other person or persons as the Board of Directors may from time
to time designate by resolution.
SECTION 8.4. EXECUTION OF PROXIES. The Chairman of the Board or the
President, or in the absence or disability of the Chairman of the Board and the
President, a Vice President, may authorize from time to time the signature and
issuance of proxies to vote upon shares of stock of other corporations standing
in the name of the Corporation or authorize the execution of consents to action
taken or to be taken by such other corporation. All such proxies and consents
shall be signed in the name of the Corporation by the Chairman of the Board or
the President or a Vice President and by the Secretary or an Assistant
Secretary.
B-15
<PAGE>
ARTICLE IX
AMENDMENTS
These Bylaws may be altered, amended or repealed, and new Bylaws may be
adopted by the Board of Directors. The stockholders of the Corporation may not
adopt, amend or repeal these Bylaws other than by the affirmative vote of more
than two-thirds (2/3) of the combined voting power of all outstanding voting
securities of the Corporation entitled to vote generally in the election of
directors of the Board of Directors of the Corporation, voting together as a
single class.
IN WITNESS WHEREOF, these Bylaws, having been duly adopted by the Board of
Directors of the Corporation in accordance with the provisions of the General
Corporation Law of the State of Delaware, have been executed this 27th day of
April, 1998.
HORIZON PHARMACIES, INC.
By: /s/ RICKY D. McCORD
-----------------------------------
Ricky D. McCord, President
B-16
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