SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended APRIL 1, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number: 0-24179
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KASPER A.S.L., LTD.
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(Exact name of registrant as specified in its charter)
DELAWARE 22-3497645
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(State of Incorporation) (IRS Employer Identification No)
77 METRO WAY, SECAUCUS, NEW JERSEY 07094
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(Address and zip code of principal executive office)
(201) 864-0328
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS.
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of May 11, 2000 was 6,800,000.
55745.0005
<PAGE>
KASPER A.S.L., LTD. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
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PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at April 1, 2000 and January 1, 2000 . . . . . . . . . . 3
Condensed Consolidated Statements of Operations for the Thirteen weeks ended
April 1, 2000 and Thirteen weeks ended April 3, 1999. . . . . . . . . . . . . . . . .4
Condensed Consolidated Statements of Cash Flows for the Thirteen weeks ended
April 1, 2000 and Thirteen weeks ended April 3, 1999. . . . . . . . . . . . . . . . .5
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . 8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
2
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KASPER A.S.L., LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
------------------ ---- ----------------
ASSETS APRIL 1, JANUARY 1, 2000
2000
------------------ ---- ----------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents.............................................. $ 3,015 $ 5,086
Accounts receivable, net............................................... 62,653 26,207
Inventories............................................................ 86,289 95,068
Prepaid expenses and other current assets.............................. 3,211 3,207
Income taxes receivable................................................ 2,668 2,668
Deferred taxes......................................................... 5,077 5,077
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Total Current Assets................................................... 162,913 137,313
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Property, Plant and Equipment, at cost less accumulated
depreciation and amortization of $9,968 and $9,004,
respectively........................................................... 21,368 19,803
Reorganization value in excess of identifiable assets, net of
accumulated amortization of $9,234 and $8,418, respectively............ 55,947 56,763
Trademarks, net of accumulated amortization of $5,484 and $4,668,
respectively........................................................... 108,749 109,565
Other Assets, at cost less accumulated amortization of $1,038 and $717,
respectively........................................................... 5,993 6,321
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Total Assets........................................................... $354,970 $329,765
================== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable....................................................... $27,799 $28,753
Accrued expenses and other current liabilities......................... 8,784 8,219
Interest payable....................................................... 440 4,032
Deferred income........................................................ 907 1,000
Income taxes payable................................................... 2,130 594
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Total Current Liabilities.............................................. 40,060 42,598
Long-Term Liabilities:
Deferred Taxes......................................................... 3,064 3,064
Deferred income........................................................ 750 1,000
Long-Term Debt......................................................... 110,000 110,000
Bank Revolver.......................................................... 79,786 53,444
Minority Interest...................................................... 638 519
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Total Liabilities...................................................... 234,298 210,625
Commitments and Contingencies
Shareholders' Equity:
Common Stock, $0.01 par value; 20,000,000 shares
authorized; 6,800,000 shares issued and outstanding............... 68 68
Preferred Stock, $0.01 par value; 1,000,000 shares
authorized; none issued and outstanding........................... -- --
Capital in excess of par value............................................... 119,932 119,932
Retained Earnings (Accumulated Deficit)...................................... 1,018 (632)
Cumulative Other Comprehensive Income (Loss)................................. (346) (228)
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Total Shareholders' Equity................................................... 120,672 119,140
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Total Liabilities and Shareholders' Equity................................... $354,970 $329,765
================== ================
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these balance sheets.
3
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KASPER A.S.L., LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
THIRTEEN WEEKS THIRTEEN WEEKS
ENDED ENDED
APRIL 1, APRIL 3,
2000 1999
---------------------- ----------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net Sales.............................................. $107,589 $98,286
Royalty Income......................................... 3,579 231
Cost of Sales.......................................... 73,640 66,288
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Gross Profit........................................... 37,528 32,229
Operating Expenses:
Selling, general and administrative expenses........... 26,163 16,857
Depreciation and Amortization.......................... 2,682 1,995
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Total operating expenses............................... 28,845 18,852
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Operating income....................................... 8,683 13,377
Interest and Financing Costs........................... 5,838 4,504
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Income before provision for income taxes............... 2,845 8,873
Provision for Income Taxes............................. 1,195 3,726
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Net Income............................................. $1,650 $ 5,147
====================== ======================
Basic earnings per common share........................ .24 .76
====================== ======================
Diluted earnings per common share...................... .24 .76
====================== ======================
Weighted average number of shares used in computing
Basic earnings per common share.................... 6,800,000 6,800,000
Weighted average number of shares used in computing
Diluted earnings per common share.................. 6,800,000 6,800,000
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these financial statements.
4
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KASPER A.S.L., LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
THIRTEEN WEEKS THIRTEEN WEEKS
ENDED ENDED
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APRIL 1, 2000 APRIL 3, 1999
---------------------- ----------------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................................... $1,650 $ 5,147
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization............................................. 2,101 1,369
Amortization of reorganization value in excess of identifiable
assets............................................................... 816 815
Income applicable to minority interest.................................... 119 109
(Increase) decrease in:
Accounts receivable, net.................................................. (36,446) (31,089)
Inventories............................................................... 8,779 20,144
Prepaid expenses and other current assets................................. (4) (1,516)
Other assets.............................................................. 7 --
(Decrease) increase in:
Accounts payable, accrued expenses and other current liabilities.......... (389) (2,609)
Interest payable.......................................................... (3,592) (3,672)
Deferred income........................................................... (343) --
Income taxes payable...................................................... 1,536 3,557
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Total adjustments............................................................ (27,416) (12,892)
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Net cash used in operating activities........................................ (25,766) (7,745)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures net of proceeds from the sale of fixed assets........ (2,529) (467)
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Net cash used in investing activities........................................ (2,529) (467)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Bank Revolver............................................................. 26,342 9,069
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Net cash provided by financing activities.................................... 26,342 9,069
Effect of exchange rate changes on cash and cash equivalents................. (118) (54)
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Net (decrease) increase in cash and cash equivalents......................... (2,071) 803
Cash and cash equivalents, at beginning of period............................ 5,086 2,437
---------------------- ----------------------
Cash and cash equivalents, at end of period.................................. $3,015 $3,240
====================== ======================
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these financial statements.
5
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KASPER A.S.L., LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. GENERAL
The Condensed Consolidated Financial Statements included herein have
been prepared by Kasper A.S.L., Ltd. and subsidiaries (Kasper A.S.L., Ltd. being
sometimes referred to, and together with its subsidiaries collectively referred
to, as the "Company" or "Kasper" as the context may require) without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "Commission"). Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principals have been condensed or omitted from this report; as is
permitted by such rules and regulations; however the Company believes that the
disclosures are adequate to make the information presented not misleading. These
Condensed Consolidated Financial Statements included herein should be read in
conjunction with the Consolidated/Combined Financial Statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the Fiscal Year
ended January 1, 2000.
In the opinion of management, the accompanying interim Condensed
Consolidated Financial Statements contain all material adjustments necessary to
present fairly the Condensed Consolidated financial condition, results of
operations, and changes in financial position of Kasper and its subsidiaries for
the interim periods presented.
NOTE 2. INVENTORIES
Inventories are valued at lower of cost (first-in, first-out, "FIFO")
or market.
Inventories consist of the following:
APRIL 1, 2000 JANUARY 1, 2000
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(in thousands)
Raw materials $45,989 $45,849
Finished goods 40,300 49,219
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Total inventories $86,289 $ 95,068
======= ========
NOTE 3. INCOME PER SHARE
The computation of income per common share is based upon the weighted
average number of common shares outstanding during the period.
NOTE 4. DEBT
At April 1, 2000, there were direct borrowings of $79,786,000
outstanding under the Chase Facility (the "Facility") and approximately
$22,723,000 outstanding in letters of credit under the Facility. The Company has
approximately $20,200,000 available for future borrowings as of April 1, 2000.
On December 22, 1999, the Facility was amended to modify certain financial
ratios, covenants and limits on capital expenditures. The Company is in
compliance with these covenants.
6
<PAGE>
NOTE 5. SEGMENT INFORMATION
The Company's primary segment is the design, distribution and wholesale
sale of women's career suits, dresses and sportswear principally to major
department stores and specialty shops. In addition, the Company operates 64
Kasper retail outlet stores and 24 Anne Klein retail outlet stores throughout
the United States as another distribution channel for its products. The
Company's licensing operations is also considered a segment for reporting
purposes. For the purposes of decision-making and assessing performance,
Management includes the operations of Asia Expert Limited in its wholesale
segment. International operations are immaterial for segment reporting and have
been included in the wholesale segment.
The Company measures segment profit as earnings before interest, taxes,
depreciation and amortization ("EBITDA"). All intercompany revenues and expenses
are eliminated in computing revenues and EBITDA. Information on segments and a
reconciliation to the consolidated financial statements is as follows:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED APRIL 1, 2000
WHOLESALE RETAIL LICENSING CONSOLIDATED
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(in thousands)
<S> <C> <C> <C> <C>
Revenues $ 92,110 $ 15,479 $3,579 $ 111,168
EBITDA 8,080 86 3,199 11,365
Depreciation and amortization 2,682
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Operating income 8,683
Interest and financing costs 5,838
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Income before provision for income taxes 2,845
Income taxes 1,195
-----------------
Net income $1,650
=================
THIRTEEN WEEKS ENDED APRIL 3, 1999
WHOLESALE RETAIL LICENSING CONSOLIDATED
------------------ ----------------- ----------------- -----------------
(in thousands)
Revenues $87,178 $11,108 $ 231 $98,517
EBITDA 14,535 606 231 15,372
Depreciation and amortization 1,995
-----------------
Operating income 13,377
Interest and financing costs 4,504
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Income before provision for income taxes 8,873
Income taxes 3,726
-----------------
Net income $ 5,147
=================
</TABLE>
7
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the foregoing consolidated financial statements and notes thereto. This
discussion contains forward-looking statements based on current expectations
that involve risks and uncertainties. Actual results and the timing of certain
events may differ significantly from those projected in such forward-looking
statements due to a number of factors, including those set forth at the end of
this Item.
OVERVIEW
On July 9, 1999, the Company completed the purchase of the Anne Klein
trademarks including ANNE KLEIN, ANNE KLEIN II (also referred to herein as ANNE
KLEIN2), and A LINE ANNE KLEIN (the "Trademark Purchase"). The aggregate
purchase price for these assets was $67,900,000. The Company has begun to incur
product development costs relating to the ANNE KLEIN suits and ANNE KLEIN2
sportswear lines, which are scheduled to commence deliveries for the Fall 2000
season. Accordingly, the results of operations for the first quarter 2000
reflect the product development costs associated with these lines, without the
benefit of corresponding sales.
Concurrent with the Trademark Purchase, the Company entered into an
Amended and Restated Credit Facility led by The Chase Manhattan Bank ("Chase")
in order to fund the Company's working capital requirements and to finance the
Trademark Purchase (the "Chase Facility"). The Chase Facility provides the
Company with a revolving credit line of $160 million. The Company paid
$2,364,000 in commitment and related fees in connection with the Chase Facility
in July 1999. These fees will be amortized as interest and financing costs over
the remaining life of the financing agreement at the time of the amendment (four
and one half years).
On June 16, 1999, the Company received consents from a majority of
the aggregate principal amount of its outstanding Senior Notes due 2004 (the
"Senior Notes") as of May 21, 1999, to certain amendments to the Indenture,
dated as of June 1, 1997 and effective June 4, 1997 (as amended by the
Supplemental Indenture, dated as of June 30, 1997, the "Indenture"), between the
Company and IBJ Whitehall Bank & Trust Company (f/k/a IBJ Schroder Bank & Trust
Company), as Trustee, governing the Senior Notes, and had executed a Second
Supplemental Indenture (the "Second Supplemental Indenture") with respect
thereto. The primary purpose of the amendments was to enable the Company to
consummate the Trademark Purchase. On July 9, 1999, as a result of the closing
of the Chase Facility, the Second Supplemental Indenture, dated as of June 16,
1999, became effective. As a result, the Company was required to pay to each
registered holder of Senior Notes as of May 21, 1999, $0.02 in cash for each
$1.00 in principal amount of Senior Notes held by such registered holder as of
that date, totaling $2.2 million. In addition, the interest rate on the Senior
Notes increased to 13.00%, beginning January 1, 2000.
On November 24, 1999, the Company completed the purchase of
substantially all the assets and the assumption of certain liabilities of 25
Anne Klein retail outlets stores from Fashions of Seventh Avenue, Inc. and
Affiliates (the "FSA Acquisition"). The aggregate purchase price was $3,963,000,
which included a cash payment of $300,000 and assumed liabilities of $3,663,000.
8
<PAGE>
RESULTS OF OPERATIONS
REVENUES BY SEGMENT
(000'S EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
FIRST QUARTER % FIRST QUARTER %
2000 OF TOTAL 1999 OF TOTAL
-------------------- --------------------
<S> <C> <C> <C> <C>
Wholesale $ 92,110 82.9% $87,178 88.5%
Retail 15,479 13.9% 11,108 11.3%
-------------------- --------- -------------------- ---------
Net Sales 107,589 96.8% 98,286 99.8%
Licensing 3,579 3.2% 231 0.2%
-------------------- --------- -------------------- ---------
Total revenue $ 111,168 100.0% $98,517 100.0%
EBITDA BY SEGMENT
(000'S EXCEPT PERCENTAGES)
FIRST QUARTER % FIRST QUARTER %
2000 OF TOTAL 1999 OF TOTAL
-------------------- --------------------
Wholesale $8,080 71.1% $ 14,535 94.6%
Retail 86 0.8% 606 3.9%
Licensing 3,199 28.1% 231 1.5%
-------------------- --------- -------------------- ---------
Total $ 11,365 100.0% $ 15,372 100.0%
</TABLE>
THIRTEEN WEEKS ENDED APRIL 1, 2000 AS COMPARED TO THIRTEEN WEEKS ENDED
APRIL 3, 1999
TOTAL REVENUE
Net Sales for the thirteen weeks ended April 1, 2000 (the "first
quarter 2000") were $107.6 million as compared to $98.3 for the thirteen weeks
ended April 3, 1999 (the "first quarter 1999"). Wholesale sales increased
primarily as a result of the sales contributed by the newly acquired Anne Klein
lines. Exclusive of the Anne Klein apparel lines, wholesale sales decreased
$10.4 million over the first quarter 1999. The Company's comprehensive quality
control procedures, in place to ensure the Company's exacting standards of
production, delayed shipments of product from the contractors in the first
quarter 2000. A significant portion of the delayed first quarter shipments were
shipped in the month of April.
Retail sales increased to $15.5 million in the first quarter 2000
from $11.1 million in the first quarter 1999, an increase of $4.4 million due to
the net addition of 8 Kasper retail outlet stores over the last 12 months, along
with the 24 remaining Anne Klein retail outlet stores acquired in November 1999.
The 64 Kasper retail outlet stores accounted for $1.2 million of the increase,
while the new Anne Klein retail stores contributed $3.2 million in sales.
Comparable Kasper store sales were equal in first quarter 2000 sales to the
first quarter 1999.
Royalty income increased to $3.6 million in the first quarter 2000
from $230,000 in the first quarter 1999 primarily as a result of the Trademark
Purchase completed on July 9, 1999.
9
<PAGE>
GROSS PROFIT
Gross Profit as a percentage of total revenue increased to 33.8% for
the first quarter 2000, compared to 32.7% for the first quarter 1999. The
improvement over the first quarter 1999 can be attributed to the increase in
licensing revenue from the Trademark Purchase, along with a greater contribution
from and the improved performance of retail operations. Wholesale gross profit
as a percentage of sales decreased to 30.0% in the first quarter 2000 from 31.7%
in the first quarter 1999 in part as a result of the product development costs
relating to the ANNE KLEIN2 line which will not begin shipment until the third
quarter 2000, and promotional activity in selected seasonal merchandise
offerings.
Retail gross profit as a percentage of sales increased to 40.6% in
the first quarter 2000 from 39.4% in the first quarter 1999 due to a broader
range of product offerings with a higher initial mark-up.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $26.2
million in the first quarter 2000 as compared to $16.9 million in the first
quarter 1999, an increase of $9.3 million. Approximately $6.6 million of this
increase can be attributed to the new Anne Klein wholesale operations, which
began incurring expenses in the third quarter 1999. Included in Anne Klein
wholesale expenses for the first quarter 2000 are costs relating to product
development of the ANNE KLEIN suits and ANNE KLEIN2 sportswear lines, which are
scheduled to commence deliveries for the Fall 2000 season. Accordingly, no
corresponding revenue has been realized relating to these expenses. Kasper
wholesale operation expenses were consistent with the first quarter 1999. Retail
store expansion, including the net addition of 8 Kasper retail outlet stores and
the 24 Anne Klein retail outlet stores, contributed the remaining $2.3 million
in increased selling, administrative and occupancy costs. Licensing division
operations accounted for approximately $400,000 in administrative expenses
during the first quarter 2000 as a result of the Trademark Purchase.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
Earnings before Interest, Taxes, Depreciation and Amortization,
("EBITDA") decreased to $11.4 million in the first quarter 2000 from $15.4
million in the first quarter 1999. Wholesale EBITDA decreased $6.5 million over
the first quarter 1999 primarily as a result of product development costs
relating to the new Anne Klein lines prior to the realization of sales. Retail
experienced a slight decrease in EBITDA of $500,000 reflecting the impact of the
FSA Acquisition. Licensing contributed an additional $3.0 million in EBITDA over
the first quarter 1999 as a result of the Trademark Purchase.
AMORTIZATION OF REORGANIZATION ASSET
As a result of the reorganization of Leslie Fay, the portion of the
Company's reorganization value not attributable to specific identifiable assets
has been reported as "reorganization value in excess of identifiable assets".
This asset is being amortized over a 20-year period beginning June 4, 1997.
Accordingly, the Company incurred amortization charges for both the first
quarter 2000 and 1999 totaling approximately $800,000.
10
<PAGE>
DEPRECIATION AND AMORTIZATION
Depreciation and amortization totaled $2.7 million in the first
quarter 2000 and $2.0 million in the first quarter 1999, and consist of the
amortization charges associated with the trademarks, as well as fixed asset
depreciation. As a result of the Trademark Purchase, the Company incurred an
additional $475,000 in trademark amortization in the first quarter 2000. The
trademarks are being amortized over 35 years. The remaining increase relates to
depreciation and amortization associated with capital expenditures, along with
approximately $150,000 of goodwill amortization and fixed asset depreciation as
a result of the FSA Acquisition.
INTEREST AND FINANCING COSTS
Interest and financing costs increased to $5.8 million in the first
quarter 2000 from $4.5 million in the first quarter 1999. Interest is
attributable to the expense on the Senior Notes and the amortization of the
related bondholder consent fee paid on July 9, 1999, along with interest on the
financing agreement and the amortization of the associated bank fees. Beginning
January 1, 2000, interest on the Senior Notes increased to 13.0% per annum from
12.75%. Interest is payable semi-annually on March 31 and September 30. Interest
relating to the Senior Notes for the first quarter 2000 totaled $3.6 million and
$3.5 million for the first quarter 1999. There are no principal payments due
until maturity. To the extent that the Company elects to undertake a secondary
stock offering or elects to prepay certain amounts, a premium will be required
to be paid. Amortization of the bondholder consent fee, which is being amortized
over the remaining life of the Senior Notes beginning July 9, 1999, totaled
approximately $115,000 in the first quarter 2000 versus no such expense in the
first quarter 1999.
Interest under the financing agreement totaled approximately $1.8
million in the first quarter 2000, an increase of $1.0 million over the first
quarter 1999 due primarily to the increased borrowings needed to finance the
Trademark Purchase.
The associated bank fees are being amortized over the remaining life
of the financing agreement, four and one-half years, beginning July 9, 1999 and
resulted in approximately $130,000 of amortization charges in the first quarter
2000 and approximately $200,000 in the first quarter 1999.
INCOME TAXES
Provision for income taxes was $1.2 million for the first quarter
2000. This amount differs from the amount computed by applying the federal
income tax statutory rate of 34% to income before taxes because of state and
foreign taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's main sources of liquidity have been cash flows from
operations, vendor credit terms and credit facilities. The Company's capital
requirements primarily result from working capital needs, retail expansion and
renovation of department store boutiques and other corporate activities.
Net cash used in operating activities increased to $25.8 million
during the first quarter 2000 as compared to $7.7 million for the first quarter
1999, primarily as a result of the leaner inventory levels at the beginning of
the year compared to the levels at the beginning of 1999. Contributing to the
increased cash usage was an increase in accounts receivable as a result of
increased net sales along with the decrease in net income. The increase in cash
flows for investing activities resulted from capital expenditures relating to
the warehouse expansion for the increased space needed for the Anne Klein
11
<PAGE>
product lines and for Anne Klein showroom improvements. The increase in cash
flows from financing activities is the direct result of the increased financing
needed for Trademark Purchase.
Effective June 4, 1997, the Company entered into a $100 million
working capital facility with BankBoston as the agent bank for a consortium of
lending institutions ("the Original Facility"). The Original Facility, as
amended, provided for a sub-limit for letters of credit of $50 million. The
Original Facility was secured by substantially all the assets of the Company.
The Original Facility was to expire in fiscal year 2000 and provided for various
borrowing rate options, including rates based upon a fixed spread over LIBOR.
The Original Facility provided for the maintenance of certain financial ratios
and covenants and set limits on the amount of capital expenditures and dividends
to shareholders. Availability under the Original Facility was limited to a
borrowing base calculated upon eligible accounts receivable, inventory and
letters of credit. The Original Facility had been amended to update certain
financial ratios, covenants and limits on capital expenditures.
On July 9, 1999, the Original Facility was amended by the Chase
Facility in order to fund the Company's working capital requirements and to
finance the Trademark Purchase. The Chase Facility provides the Company with a
revolving credit line of $160 million. The Chase Facility provides for the
maintenance of certain financial ratios and covenants, sets limits on the amount
of capital expenditures and dividends to shareholders and expires on December
31, 2003. The Company paid $2,364,000 in commitment and related fees in
connection with the Chase Facility in July 1999. These fees will be amortized as
interest and financing costs over the remaining life of the financing agreement
at the time of the amendment (four and one half years). In addition, the Company
wrote off approximately $750,000 in unamortized bank fees remaining under the
Original Facility. The Chase Facility was amended on December 22, 1999 to modify
certain financial ratios and covenants. As of April 1, 2000, there were direct
borrowings of $79.8 million outstanding, $22.7 million in letters of credit
outstanding and $20.2 million available for future borrowings.
Pursuant to the Leslie Fay reorganization plan, the Company issued
$110 million in Senior Notes. The Senior Notes initially bore interest at 12.75%
per annum and mature on March 31, 2004. Beginning January 1, 2000, the interest
rate increased to 13.0%. Interest is payable semi-annually on March 31 and
September 30. Interest relating the Senior Notes for the first quarter 2000
totaled $3.6 million. There are no principal payments due until maturity. To the
extent that the Company elects to undertake a secondary stock offering or elects
to prepay certain amounts, a premium will be required to be paid.
On June 16, 1999, the Company received consents from a majority of
the aggregate principal amount of its Senior Notes as of May 21, 1999, to
certain amendments to the Indenture and had executed the Second Supplemental
Indenture. The primary purpose of the amendments was to enable the Company to
consummate the Trademark Purchase. On July 9, 1999, as a result of the closing
of the Chase Facility, the Second Supplemental Indenture became effective. As a
result, the Company was required to pay to each registered holder of Senior
Notes as of May 21, 1999, $0.02 in cash for each $1.00 in principal amount of
Senior Notes held by such registered holder as of that date, totaling $2.2
million (the "Consent Fee"). The Consent Fee is being amortized over the
remaining life of the Senior Notes and is included in interest and financing
costs.
The Company had a factoring/financing agreement with Heller
Financial, Inc. ("Heller"). It provided for Heller to act as the credit and
collection arm of the Company. The Company received funds from Heller as the
receivables were collected. Any amounts unpaid after 120 days were guaranteed
and paid to the Company by Heller. The agreement was amended in January 1998 to
add an additional 18 months to the term of the arrangement and lower the rate to
.35% for the first $250 million in sales and .3% on the excess over that amount.
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On October 4, 1999, the Company terminated the factoring agreement
with Heller and entered into a new agreement with the CIT Group/Commercial
Services, Inc. ("CIT"). Under the new agreement CIT purchases the receivables
from the Company and remits the funds to the Company when collected. Any amounts
unpaid after 120 days are guaranteed to be paid to the Company by CIT. The
agreement has no expiry date but may be terminated upon 60 days written notice
by either party. For its services CIT charges the Company $75,000 per month. If
during a twelve-month period the number of invoices exceeds 425,000, CIT is
entitled to an additional fee of $1.75 per additional invoice.
Capital expenditures were $2.5 million and $500,000 for the first
quarter 2000 and first quarter 1999, respectively. Capital expenditures
represent funds spent for warehouse expansion, showroom improvements, new retail
stores, information systems, overseas facilities development and general
improvements.
The Company anticipates that it will be able to satisfy its ongoing
cash requirements for the foreseeable future, primarily with cash flow from
operations, supplemented by borrowings under the Chase Facility and, from time
to time, amounts received in connection with strategic transactions, including
licensing arrangements. Events that may impact this include, but are not limited
to, future events that may have the effect of reducing available cash balances
(such as unexpected operating losses, or increased capital or other
expenditures), as well as future circumstances that might reduce or eliminate
the availability of external financing.
DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION
The statements contained in this Quarterly Report on Form 10-Q that
are not historical facts are "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and section 21E of the
Securities Act of 1934, as amended. Those statements appear in a number of
places in this report, including in "Management's Discussion and Analysis of
Financial Conditions and Results of Operations," and include all discussions of
trends affecting the Company's financial conditions and results of operations
and the Company's business and growth strategies as well as statements that
contain such forward-looking statements as "believes," "anticipates," "could,"
"estimates," "expects," "intends," "may," "plans," "predicts," "projects,"
"will," and similar terms and phrases, including the negative thereof. In
addition, from time to time, the Company or its representatives have made or may
make forward-looking statements, orally or in writing. Furthermore,
forward-looking statements may be included in our other filings with the
Securities and Exchange Commission as well as in press releases or oral
statements made by or with the approval of the Company's authorized executive
officers.
We caution you to bear in mind that forward-looking statements, by
their very nature, involve assumptions and expectations and are subject to risks
and uncertainties. Although we believe that the assumptions and expectations
reflected in the forward-looking statements contained in this report are
reasonable, no assurance can be given that those assumptions or expectations
will prove to have been correct. Important factors that could cause actual
results to differ materially from our expectations include but are not limited
to, the following cautionary statements ("Cautionary Statements"):
o general economic conditions;
o the ability of the Company to adapt to changing consumer preferences
and tastes;
o the Company's limited operating history;
o potential fluctuations in the Company's operating costs and results;
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o potential exchange rate fluctuations;
o the Company's concentration of revenues;
o the Company's dependence on a limited number of suppliers; and
o the ability of the Company to successfully integrate the Trademark
Purchase, the FSA Acquisition and any future acquisitions into the
Company's existing businesses
All subsequent written or oral forward-looking statements attributable to
the Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The re-adjournment of the 1999 annual meeting of shareholders of the
Company was held on March 14, 2000 for the purpose of: (1) electing seven
directors; and (2) approving the Company's 1999 Share Incentive Plan. Proxies
for the meeting were solicited pursuant to Regulation 14A of the Exchange Act
and there were no solicitation in opposition.
First, the following directors were elected by the following vote:
Votes
-----
For Withheld
--- --------
Arthur S. Levine 5,871,884 262,988
William J. Nightingale 5,871,884 262,988
Salvatore M. Salibello 5,871,884 262,988
Lester E. Schreiber 5,871,893 262,979
Denis J. Taura 5,871,893 262,979
Olivier Trouveroy 5,871,884 262,988
H. Sean Mathis 5,871,893 262,979
Second, the proposal to approve the Company's 1999 Share Incentive Plan
was approved by the following vote: (a) 3,661,368 votes were cast "for" the
matter; (b) 296,550 votes were cast "against" the matter; and (c) 3,695 votes
"abstained" from voting on the matter. There were 2,173,259 broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 By-laws, as amended.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
KASPER A.S.L., LTD.
(Registrant)
Dated: May 12, 2000
/s/ Arthur S. Levine
-------------------------------------
Arthur S. Levine
Chairman and Chief Executive Officer
/s/ Mary Ann Domuracki
-------------------------------------
Mary Ann Domuracki
Executive Vice President -
Finance & Administration
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EXHIBIT INDEX
-------------
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
3.1 By-laws, as amended
27 EDGAR Data Schedule
17
Exhibit 3.1
AMENDED AND RESTATED BY-LAWS
OF
KASPER A.S.L., LTD.
(F/K/A SASSCO FASHIONS, LTD.)
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1. DELAWARE OFFICE. The principal office of Kasper A.S.L.,
Ltd. (the "Corporation") in the State of Delaware shall be located in the City
of Wilmington, County of New Castle, and the name and address of its registered
agent is The Corporation Trust Company, 1209 Orange Street, Wilmington,
Delaware.
SECTION 1.2. OTHER OFFICES. The Corporation may have such other
offices, either within or without the State of Delaware, as the Board of
Directors may from time to time designate or as the business of the Corporation
may from time to time require.
SECTION 1.3. BOOKS AND RECORDS. The books and records of the
Corporation may be kept inside or outside the State of Delaware at such place or
places as may from time to time be designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 2.1. ANNUAL MEETING. The annual meeting of stockholders of the
Corporation shall be held at such place, either within or without the State of
Delaware, and at such time and date as the Board of Directors, by resolution,
shall determine for the purpose of electing directors and for the transaction of
such other business as may be properly brought before the meeting. If the Board
of Directors fails so to determine the time, date and place of meeting, the
annual meeting of stockholders shall be held at 10:00 a.m., local time, at the
principal office of the Corporation on the first Thursday in May. If the date of
the annual meeting shall fall upon a legal holiday, the meeting shall be held on
the next succeeding business day.
SECTION 2.2. SPECIAL MEETING. Subject to the rights of the holders of
any series of stock having a preference over the Common Stock of the Corporation
as to dividends or upon liquidation (the "Preferred Stock") to elect additional
directors under specific circumstances, special meetings of the stockholders may
be called only by the Chairman of the Board or by the Board of Directors
pursuant to a resolution adopted by a majority of the total number of directors
which the Corporation would have if there were no vacancies (the "Whole Board").
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SECTION 2.3. PLACE OF MEETING. The Board of Directors may designate the
place of meeting for any meeting of the stockholders. If no designation is made
by the Board of Directors, the place of meeting shall be the principal office of
the Corporation.
SECTION 2.4. NOTICE OF MEETING. Written or printed notice, stating the
place, day and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be prepared and delivered by the Corporation not less
than ten days nor more than sixty days before the date of the meeting, either
personally or by mail, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail with postage thereon prepaid, addressed to the
stockholder at such stockholder's address as it appears on the stock transfer
books of the Corporation. Such further notice shall be given as may be required
by law. Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. Meetings may be held without notice if all
stockholders entitled to vote are present, or if notice is waived by those not
present in accordance with Section 6.4 of these Bylaws. Any previously scheduled
meeting of the stockholders may be postponed, and (unless the Certificate of
Incorporation otherwise provides) any special meeting of the stockholders may be
canceled, by resolution of the Board of Directors upon public notice given prior
to the time previously scheduled for such meeting of stockholders.
SECTION 2.5. QUORUM AND ADJOURNMENT. Except as otherwise provided by
law or by the Certificate of Incorporation, the holders of a majority of the
voting power of the outstanding shares of the Corporation entitled to vote
generally in the election of directors (the "Voting Stock"), represented in
person or by proxy, shall constitute a quorum at a meeting of stockholders,
except that when specified business is to be voted on by a class or series
voting as a class, the holders of a majority of the voting power of the shares
of such class or series shall constitute a quorum for the transaction of such
business. The chairman of the meeting or a majority of the shares of Voting
Stock so represented may adjourn the meeting from time to time, whether or not
there is such a quorum (or, in the case of specified business to be voted on by
a class or series, the chairman or a majority of the shares of such class or
series so represented may adjourn the meeting with respect to such specified
business). No notice of the time and place of adjourned meetings need be given
except as required by law. The stockholders present at a duly organized meeting
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
SECTION 2.6. PROXIES. At all meetings of stockholders, a stockholder
may vote by proxy executed in writing by the stockholder or as may be permitted
by law, or by such stockholder's duly authorized attorney-in-fact. Such proxy
must be filed with the Secretary of the Corporation or such stockholder's
representative at or before the time of the meeting.
SECTION 2..7 NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
(A) Annual Meetings of Stockholders. (1) Nominations of persons for
election to the Board of Directors of the Corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders (a) pursuant to the Corporation's notice of meeting delivered
pursuant to Section 2.4 of these Bylaws, (b) by or at the direction of the
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Chairman of the Board or the Board of Directors or (c) by any stockholder of the
Corporation who is entitled to vote at the meeting, who complied with the notice
procedures set forth in clauses (2) and (3) of this paragraph (A) of this By-law
and who was a stockholder of record at the time such notice is delivered to the
Secretary of the Corporation.
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph
(A)(l) of this By-law, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation and such other
business must otherwise be a proper matter for stockholder action. To
be timely, a stockholder's notice shall be delivered to the Secretary
at the principal office of the Corporation not less than seventy days
nor more than ninety days prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event
that the date of an annual meeting is advanced by more than thirty
days, or delayed by more than seventy days, from the first
anniversary date of the previous year's annual meeting, notice by the
stockholder to be timely must be so delivered not earlier than the
ninetieth day prior to such annual meeting and not later than the
close of business on the later of the seventieth day prior to such
annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made by the
Corporation. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the
giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to
be disclosed in solicitations of proxies for election of director in
an election contest, or is otherwise required, in each case pursuant
to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the regulations promulgated
thereunder, including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if
elected; (b) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any, on
whose behalf the proposal is made; and (c) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of such
beneficial owner and (ii) the class and number of shares of the
Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (A)(2)
of this By-law to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation
is increased and there is no public announcement by the Corporation
naming all of the nominees for director or specifying the size of the
increased Board of Directors made by the Corporation at least eighty
days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this By-law shall also be
considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the
Secretary at the principal office of the Corporation not later than
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the close of business on the tenth day following the day on which
such public announcement is first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting pursuant to Section
2.4 of these By-laws. Nominations of persons for election to the Board of
Directors may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the Corporation's notice of meeting (a) by or at
the direction of the Board of Directors or (b) by any stockholder of the
Corporation who is entitled to vote at the meeting, who complies with the notice
procedures set forth in this By-law and who is a stockholder of record at the
time such notice is delivered to the Secretary of the Corporation. Nominations
by stockholders of persons for election to the Board of Directors may be made at
such a special meeting of stockholders if the stockholder's notice as required
by paragraph (A)(2) of this By-law shall be delivered to the Secretary at the
principal office of the Corporation not earlier than the ninetieth day prior to
such special meeting and not later than the close of business on the later of
the seventieth day prior to such special meeting or the tenth day following the
day on which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Board of Directors to be elected at
such meeting. In no event shall the public announcement of an adjournment of a
special meeting commence a new time period for the giving of a stockholder's
notice as described above.
(C) General. (1) Only persons who are nominated in accordance with the
procedures set forth in this By-law shall be eligible to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this By-law. Except as otherwise provided by law, the Certificate of
Incorporation or these By-laws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed in accordance with the
procedures set forth in this By-law and, if any proposed nomination or business
is not in compliance with this By-law, to declare that such defective proposal
or nomination shall be disregarded.
(2) For purposes of this By-law, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this By-law, a
stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this By-law. Nothing in this By-law shall be
deemed to affect any rights of stockholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8
under the Exchange Act.
SECTION 2.8. PROCEDURE FOR ELECTION OF DIRECTORS. Election of directors
at all meetings of the stockholders at which directors are to be elected shall
be by written ballot, and, except as otherwise set forth in the Certificate of
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Incorporation with respect to the rights of the holders of any series of
Preferred Stock to elect additional directors under specific circumstances, a
plurality of the votes cast thereat shall elect. Except as otherwise provided by
law, the Certificate of Incorporation or these By-laws, all matters other than
the election of directors submitted to the stockholders at any meeting shall be
decided by the affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting and entitled to vote thereon.
SECTION 2.9. INSPECTORS OF ELECTIONS; OPENING AND CLOSING THE POLLS. 1.
The Board of Directors by resolution shall appoint one or more inspectors, which
inspector or inspectors may include individuals who serve the Corporation in
other capacities, including, without limitation, as officers, employees, agents
or representatives of the Corporation, to act at a meeting of stockholders and
make a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate has been appointed to act, or if all inspectors or alternates who
have been appointed are unable to act at a meeting of stockholders, the chairman
of the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before discharging his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspectors shall have the
duties prescribed by the General Corporation Law of the State of Delaware.
(B) The secretary of the meeting shall fix and announce at the meeting
the date and time of the opening and the closing of the polls for each matter
upon which the stockholders will vote at a meeting.
SECTION 2.10. NO STOCKHOLDER ACTION BY WRITTEN CONSENT. Subject to the
rights of the holders of any series of Preferred Stock to elect additional
directors under specific circumstances, any action required or permitted to be
taken by the stockholders of the Corporation must be effected at an annual or
special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders, provided, however, that actions
with respect to the approval of the Kasper A.S.L., Ltd. 1997 Management Stock
Option Plan, and stock options granted with respect to such plan, may be
effected by consent in writing in lieu of a meeting of stockholders of the
Corporation.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. In addition to the powers and authorities by these By-laws expressly
conferred upon them, the Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by law or by the
Certificate of Incorporation or by these By-laws required to be exercised or
done by the stockholders.
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SECTION 3.2. NUMBER, TENURE AND QUALIFICATIONS. Subject to the rights
of the holders of any series of Preferred Stock to elect directors under
specific circumstances, the number of directors shall be fixed from time to time
exclusively pursuant to a resolution adopted by a majority of the Whole Board
but shall consist of not less than seven directors. Each director shall hold
office until the next annual meeting of stockholders and until his or her
successor shall have been duly elected and qualified. At each annual meeting of
stockholders, if authorized by a resolution of the Board of Directors, directors
may be elected to fill any vacancy on the Board of Directors, regardless of how
such vacancy shall have been created.
SECTION 3.3. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this By-law immediately after,
and at the same place as, each annual meeting of stockholders. The Board of
Directors may, by resolution, provide the time and place for the holding of
additional regular meetings without other notice than such resolution.
SECTION 3.4. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be called at the request of the Chairman of the Board, the Chief
Executive Officer or a majority of the Board of Directors. The person or persons
authorized to call special meetings of the Board of Directors may fix the place
and time of the meetings.
SECTION 3.5. NOTICE. Notice of any special meeting shall be given to
each director at such director's business or residence in writing or by telegram
or by telephone communication. If mailed, such notice shall be deemed adequately
delivered when deposited in the United States mails so addressed, with postage
thereon prepaid, at least five days before such meeting. If by telegram, such
notice shall be deemed adequately delivered when the telegram is delivered to
the telegraph company at least twenty-four hours before such meeting. If by
facsimile transmission, such notice shall be transmitted at least twenty-four
hours before such meeting. If by telephone, the notice shall be given at least
twelve hours prior to the time set for the meeting. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice of such meeting, except for
amendments to these Bylaws as provided under Section 8.1 of Article VIII hereof.
A meeting may be held at any time without notice if all the directors are
present or if those not present waive notice of the meeting in accordance with
Section 6.4 hereof, either before or after such meeting.
SECTION 3.6. CONFERENCE TELEPHONE MEETINGS. Members of the Board of
Directors, or any committee thereof, may participate in a meeting of the Board
of Directors or such 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 such meeting.
SECTION 3.7. QUORUM. A whole number of directors equal to at least a
majority of the Whole Board shall constitute a quorum for the transaction of
business, but if at any meeting of the Board of Directors there shall be less
than a quorum present, a majority of the directors present may adjourn the
meeting from time to time without further notice. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. The directors present at a duly organized meeting may
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continue to transact business until adjournment, notwithstanding the withdrawal
of enough directors to leave less than a quorum.
SECTION 3.8. VACANCIES. Subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specific
circumstances, and unless the Board of Directors otherwise determines, vacancies
resulting from death, resignation, retirement, disqualification, removal from
office or other cause, and newly created directorships resulting from any
increase in the authorized number of directors, may be filled only by the
affirmative vote of a majority of the remaining directors, though less than a
quorum of the Board of Directors, and directors so chosen shall hold office
until the next annual meeting of stockholders and until such director's
successor shall have been duly elected and qualified. No decrease in the number
of authorized directors constituting the Whole Board shall shorten the term of
any incumbent director.
SECTION 3.9. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors
may, by resolution adopted by a majority of the Whole Board, designate an
Executive Committee to exercise, subject to applicable provisions of law, all
the powers of the Board in the management of the business and affairs of the
Corporation when the Board of Directors is not in session, including without
limitation the power to declare dividends, to authorize the issuance of the
Corporation's capital stock and to adopt a certificate of ownership and merger
pursuant to Section 253 of the General Corporation Law of the State of Delaware,
and may, by resolution similarly adopted, designate one or more other
committees. The Executive Committee and each such other committee shall consist
of two or more directors of the Corporation. The Board of Directors 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. Any
such committee may to the extent permitted by law exercise such powers and shall
have such responsibilities as shall be specified in the designating resolution.
In the absence or disqualification of any member of such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not constituting 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. Each committee shall keep
written minutes of its proceedings and shall report such proceedings to the
Board of Directors when required.
A majority of any committee may determine its action and fix the time
and place of its meetings, unless the Board of Directors shall otherwise
provide. Notice of such meetings shall be given to each member of the committee
in the manner provided for in Section 3.5 of these By-laws. The Board of
Directors shall have power at any time to fill vacancies in, to change the
membership of, or to dissolve any such committee. Nothing herein shall be deemed
to prevent the Board of Directors from appointing one or more committees
consisting in whole or in part of persons who are not directors of the
Corporation; provided, however, that no such committee shall have or may
exercise any authority of the Board of Directors.
SECTION 3.10. REMOVAL. Subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specific
circumstances, 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
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the holders of at least 66-2/3 percent of the voting power of the then
outstanding Voting Stock, voting together as a single class.
SECTION 3.11. OBSERVER. During the term of employment (the "Employment
Term") of Arthur S. Levine ("Levine") as Chairman and Chief Executive Officer of
the Corporation, Levine shall have the right to designate one observer to the
Board of Directors. Any such observer so designated by Levine shall be entitled
to receive notice of, and to attend meetings of, the Board of Directors, but
shall not have the right to vote at such meetings.
ARTICLE IV
OFFICERS
SECTION 4.1. ELECTED OFFICERS. The elected officers of the Corporation
shall be a Chairman of the Board, a Chief Executive Officer, a President, one or
more Vice Presidents, a Secretary, a Treasurer and such other officers
(including, without limitation, a Chief Operating Officer and a Chief Financial
Officer) as the Board of Directors from time to time may deem proper. The
Chairman of the Board shall be chosen from the directors. All officers chosen by
the Board of Directors shall each have such powers and duties as generally
pertain to their respective offices, subject to the specific provisions of this
Article IV. Such officers shall also have powers and duties as from time to time
may be conferred by the Board of Directors or by any committee thereof.
SECTION 4.2. ELECTION AND TERM OF OFFICE. The elected officers of the
Corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Subject to Section
4.9 of these By-laws, each officer shall hold office until such officer's
successor shall have been duly elected and shall have qualified or until such
officer's death or until such officer shall resign.
SECTION 4.3. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors. The
Chairman of the Board shall make reports to the Board of Directors and the
stockholders, and shall perform all such other duties as are properly required
of him by the Board of Directors.
SECTION 4.4. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall
be responsible for the general management of the affairs of the Corporation and
shall perform all duties incidental to the Chief Executive Officer's office
which may be required by law and all such other duties as are properly required
of him by the Board of Directors. The Chief Executive Officer shall see that all
orders and resolutions of the Board of Directors and of any committee thereof
are carried into effect.
SECTION 4.5. PRESIDENT. The President shall act in a general executive
capacity and shall assist the Chairman of the Board in the administration and
operation of the Corporation's business and general supervision of its policies
and affairs. The President shall, in the absence of or because of the inability
8
<PAGE>
to act of the Chairman of the Board, perform all duties of the Chairman of the
Board and preside at all meetings of stockholders and of the Board of Directors.
The President may sign, alone or with the Secretary, or an Assistant Secretary,
or any other proper officer of the Corporation authorized by the Board of
Directors, certificates, contracts, and other instruments of the Corporation as
authorized by the Board of Directors.
SECTION 4.6. VICE PRESIDENTS. Each Vice President shall have such
powers and perform such duties as from time to time may be assigned to him or
her by the Board of Directors or be delegated to him or her by the President.
The Board of Directors may assign to any Vice President general supervision and
charge over any territorial or functional division of the business and affairs
of the Corporation.
SECTION 4.7. SECRETARY. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors and all other notices
required by law or by these By-laws, and in case of the Secretary's absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the Chairman of the Board, the Chief Executive Officer, or
by the Board of Directors, upon whose request the meeting is called as provided
in these By-laws. The Secretary shall record all the proceedings of the meetings
of the Board of Directors, any committees thereof and the stockholders of the
Corporation in a book to be kept for that purpose, and shall perform such other
duties as may be assigned to him by the Board of Directors, the Chairman of the
Board or the Chief Executive Officer. The Secretary shall have the custody of
the seal of the Corporation and shall affix the same to all instruments
requiring it, when authorized by the Board of Directors, the Chairman of the
Board or the Chief Executive Officer, and attest to the same.
SECTION 4.8. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. The Treasurer
shall deposit all moneys and other valuables in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, the Chairman of the Board, or the Chief
Executive Officer, taking proper vouchers for such disbursements. The Treasurer
shall render to the Chairman of the Board, the Chief Executive Officer and the
Board of Directors, whenever requested, an account of all his transactions as
Treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, the Treasurer shall give the Corporation a bond for the
faithful discharge of his duties in such amount and with such surety as the
Board of Directors shall prescribe.
SECTION 4.9. REMOVAL. Any officer elected by the Board of Directors may
be removed by a majority of the members of the Whole Board whenever, in their
judgment, the best interests of the Corporation would be served thereby. No
elected officer shall have any contractual rights against the Corporation for
compensation by virtue of such election beyond the date of the election of such
officer's successor or such officer's death, resignation or removal, whichever
event shall first occur, except as otherwise provided in an employment contract
or an employee plan.
9
<PAGE>
SECTION 4.10. VACANCIES. A newly created office and a vacancy in any
office because of death, resignation, or removal may be filled by the Board of
Directors for the unexpired portion of the term at any meeting of the Board of
Directors.
ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
SECTION 5.1. STOCK CERTIFICATES AND TRANSFERS. 1. The interest of each
stockholder of the Corporation shall be evidenced by certificates for shares of
stock in such form as the appropriate officers of the Corporation may from time
to time prescribe, provided that the Board of Directors may provide by
resolution or resolutions that some or all of any or all classes or series of
the stock of the Corporation shall be uncertificated shares. Notwithstanding the
adoption of such a resolution by the Board of Directors, every holder of stock
represented by certificates and upon request every holder of uncertificated
shares shall be entitled to have a certificate signed by, or in the name of the
Corporation by the Chairman of the Board of Directors, the Chief Executive
Officer or the President or Vice-President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation,
representing the number of shares registered in certificate form. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of uncertificated stock and the rights and obligations of the holders of
certificates representing stock of the same class and series shall be identical.
(B) The certificates of stock shall be signed, countersigned and
registered in such manner as the Board of Directors may by resolution prescribe,
which resolution may permit all or any of the signatures on such certificates to
be in facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate has 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.
(C) The shares of the stock of the Corporation represented by
certificates shall be transferred on the books of the Corporation by the holder
thereof in person or by his attorney, upon surrender for cancellation of
certificates for the same number of shares, with an assignment and power of
transfer endorsed thereon or attached thereto, duly executed, with such proof of
the authenticity of the signature as the Corporation or its agents may
reasonably require. Upon receipt of proper transfer instructions from the
registered owner of uncertificated shares such uncertificated shares shall be
cancelled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the Corporation. Within a reasonable time after the
issuance or transfer of uncertificated stock, the Corporation shall send to the
registered owner thereof a written notice containing the information required to
be set forth or stated on certificates pursuant to the Delaware General
Corporation Law or, unless otherwise provided by the Delaware General
Corporation Law, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
10
<PAGE>
relative participating, optional 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 5.2. LOST, STOLEN OR DESTROYED CERTIFICATES. No certificate for
shares or uncertificated shares of stock in the Corporation shall be issued in
place of any certificate alleged to have been lost, destroyed or stolen, except
on production of such evidence of such loss, destruction or theft and on
delivery to the Corporation of a bond of indemnity in such amount, upon such
terms and secured by such surety, as the Board of Directors or any financial
officer of the Corporation may in its or his discretion require.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. FISCAL YEAR. The fiscal year of the Corporation shall end
on the Saturday closest to December 31 of each year and shall begin on the
Sunday following immediately thereafter.
SECTION 6.2. DIVIDENDS. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and its Certificate of
Incorporation.
SECTION 6.3. SEAL. The corporate seal shall have inscribed thereon the
words "Corporate Seal," the year of incorporation of the Corporation and around
the margin thereof the words "Kasper A.S.L., Ltd. -- Delaware."
SECTION 6.4. WAIVER OF NOTICE. Whenever any notice is required to be
given to any stockholder or director of the Corporation under the provisions of
the General Corporation Law of the State of Delaware, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice. Neither the business to be transacted at, nor the purpose of, any
annual or special meeting of the stockholders or of the Board of Directors or
committee thereof need be specified in any waiver of notice of such meeting.
SECTION 6.5. AUDITS. The accounts, books and records of the Corporation
shall be audited upon the conclusion of each fiscal year by an independent
certified public accountant selected by the Board of Directors, and it shall be
the duty of the Board of Directors to cause such audit to be made annually.
SECTION 6.6. RESIGNATIONS. Any director or any officer, whether elected
or appointed, may resign at any time by serving written notice of such
resignation on the Chairman of the Board, the Chief Executive Officer, the
President, or the Secretary, and such resignation shall be deemed to be
effective as of the close of business on the date said notice is received by the
Chairman of the Board, the Chief Executive Officer, the President, or the
Secretary or at such later date as is stated therein. No formal action shall be
required of the Board of Directors or the stockholders to make any such
resignation effective.
11
<PAGE>
SECTION 6.7. INDEMNIFICATION AND INSURANCE. 1. Each person who was or
is made a party or is threatened to be made a party to or is involved in any
action, suit, or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
or a person of whom he or she is the legal representative is or was a director
or officer of the Corporation or is or was serving at the request of the
Corporation as a director or officer of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans maintained or sponsored by the Corporation, whether the
basis of such proceeding is alleged action in an official capacity as a director
or officer or in any other capacity while serving as a director or officer,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended (but, if permitted by applicable law, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that except as provided in paragraph (C) of
this By-law, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) initiated by such person
was authorized by the Board of Directors. The right to indemnification conferred
in this By-law shall be a contract right and shall include the right to be paid
by the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition, such advances to be paid by the Corporation
within 20 days after the receipt by the Corporation of a statement or statements
from the claimant requesting such advance or advances from time to time;
provided, however, that if the General Corporation Law of the State of Delaware
requires, the payment of such expenses incurred by a director or officer in his
or her capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this By-law or
otherwise.
(B) To obtain indemnification under this By-law, a claimant shall
submit to the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to the claimant and is
reasonably necessary to determine whether and to what extent the claimant is
entitled to indemnification. Upon written request by a claimant for
indemnification pursuant to the first sentence of this paragraph (B), a
determination, if required by applicable law, with respect to the claimant's
entitlement thereto shall be made as follows: (1) if requested by the claimant,
by Independent Counsel (as hereinafter defined), or (2) if no request is made by
the claimant for a determination by Independent Counsel, (i) by a majority vote
of the Disinterested Directors (as hereinafter defined), even though less than a
quorum, or (ii) if there are no Disinterested Directors or, if the Disinterested
Directors so direct, by Independent Counsel in a written opinion to the Board of
12
<PAGE>
Directors, a copy of which shall be delivered to the claimant, or (iii) if the
Disinterested Directors so direct, by the stockholders of the Corporation. In
the event the determination of entitlement to indemnification is to be made by
Independent Counsel at the request of the claimant, the Independent Counsel
shall be selected by the Board of Directors unless there shall have occurred
within two years prior to the date of the commencement of the action, suit or
proceeding for which indemnification is claimed a "Change of Control" as defined
in the Kasper A.S.L., Ltd. 1997 Management Stock Option Plan, in which case the
Independent Counsel shall be selected by the claimant unless the claimant shall
request that such selection be made by the Board of Directors. If it is so
determined that the claimant is entitled to indemnification, payment to the
claimant shall be made within 10 days after such determination.
(C) If a claim under paragraph (A) of this By-law is not paid in full
by the Corporation within 30 days after a written claim pursuant to paragraph
(B) of this By-law has been received by the Corporation, the claimant may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standard of
conduct which makes it permissible under the General Corporation Law of the
State of Delaware for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including without limitation, the
Disinterested Directors, Independent Counsel or stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the General Corporation Law of the
State of Delaware, nor an actual determination by the Corporation (including,
without limitation, the Disinterested Directors, Independent Counsel or
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
(D) If a determination shall have been made pursuant to paragraph (B)
of this By-law that the claimant is entitled to indemnification, the Corporation
shall be bound by such determination in any judicial proceeding commenced
pursuant to paragraph (C) of this By-law.
(E) The Corporation shall be precluded from asserting in any judicial
proceeding commenced pursuant to paragraph (C) of this By-law that the
procedures and presumptions of this By-law are not valid, binding and
enforceable and shall stipulate in such proceeding that the Corporation is bound
by all the provisions of this By-law.
(F) The right to indemnification and the payment of expenses incurred
in defending a proceeding in advance of its final disposition conferred in this
By-law shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-laws, agreement, vote of stockholders or Disinterested
Directors or otherwise. No repeal or modification of this By-law shall in any
way diminish or adversely affect the rights of any director, officer, employee
13
<PAGE>
or agent of the Corporation hereunder in respect of any occurrence or matter
arising prior to any such repeal or modification.
(G) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the General Corporation Law of the State of Delaware. To the extent that
the Corporation maintains any policy or policies providing such insurance, each
such director or officer, and each such agent or employee to which rights to
indemnification have been granted as provided in paragraph (H) of this By-law,
shall be covered by such policy or policies in accordance with its or their
terms to the maximum extent of the coverage thereunder for any such director,
officer, employee or agent.
(H) The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification, and rights to be paid
by the Corporation the expenses incurred in defending any proceeding in advance
of its final disposition, to any employee or agent of the Corporation, and to
persons serving as employees or agents of another corporation, partnership,
joint venture, trust or other enterprise, at the request of the Corporation, to
the fullest extent of the provisions of this By-law with respect to the
indemnification and advancement of expenses of directors arid officers of the
Corporation.
(I) If any provision or provisions of this By-law shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (1) the validity,
legality and enforceability of the remaining provisions of this By-law
(including, without limitation, each portion of any paragraph of this By-law
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself held to be invalid, illegal or unenforceable) shall not in any way
be affected or impaired thereby; and (2) to the fullest extent possible, the
provisions of this By-law (including, without limitation, each such portion of
any paragraph of this By-law containing any such provision held to be invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
(J) For purposes of this By-law:
(1) "Disinterested Director" means a director of the Corporation
who is not and was not a party to the proceeding or matter in
respect of which indemnification is sought by the claimant.
(2) "Independent Counsel" means a law firm, a member of a law
firm, or an independent practitioner, that is experienced in
matters of corporation law and shall include any person who,
under the applicable standards of professional conduct then
prevailing, would not have a conflict of interest in
representing either the Corporation or the claimant in an
action to determine the claimant's rights under this By-law.
(K) Any notice, request or other communication required or permitted to
be given to the Corporation under this By-law shall be in writing and either
delivered in person or sent by telecopy, telex, telegram, overnight mail or
14
<PAGE>
courier service, or certified or registered mail, postage prepaid, return
receipt requested, to the Secretary of the Corporation and shall be effective
only upon receipt by the Secretary.
SECTION 6.8. EXTRAORDINARY TRANSACTIONS. Notwithstanding any other
provision of these By-laws, and in addition to any affirmative vote required by
law, these By-laws or the Certificate of Incorporation of the Corporation,
during the Employment Term, unless otherwise agreed by the Corporation and
Levine, the following extraordinary transactions shall require the approval of
Levine:
(i) any merger or consolidation of the Corporation with any
person;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions)
to or with any person of all or substantially all of the
assets of the Corporation; or
(iii) any material amendment to these By-laws, whether made or
approved by the Board of Directors or by the Stockholders.
ARTICLE VII
CONTRACTS, PROXIES, ETC.
SECTION 7.1. CONTRACTS. Except as otherwise required by law, the
Certificate of Incorporation or these By-laws, any contracts or other
instruments may be executed and delivered in the name and on the behalf of the
Corporation by such officer or officers of the Corporation as the Board of
Directors may from time to time direct. Such authority may be general or
confined to specific instances as the Board of Directors may determine. The
Chairman of the Board, the Chief Executive Officer, the President or any Vice
President may execute bonds, contracts, deeds, leases and other instruments to
be made or executed for or on behalf of the Corporation. Subject to any
restrictions imposed by the Board of Directors or the Chairman of the Board, the
Chief Executive Officer, the President or any Vice President of the Corporation
may delegate contractual powers to others under such officer's jurisdiction, it
being understood, however, that any such delegation of power shall not relieve
such officer of responsibility with respect to the exercise of such delegated
power.
SECTION 7.2. PROXIES. Unless otherwise provided by resolution adopted
by the Board of Directors, the Chairman of the Board, the Chief Executive
Officer, the President or any Vice President may from time to time appoint an
attorney or attorneys or agent or agents of the Corporation, in the name and on
behalf of the Corporation, to cast the votes which the Corporation may be
entitled to cast as the holder of stock or other securities in any other
corporation or entity, any of whose stock or other securities may be held by the
Corporation, at meetings of the holders of the stock or other securities of such
other corporation, or to consent in writing, in the name of the Corporation as
such holder, to any action by such other corporation or entity, and may instruct
the person or persons so appointed as to the manner of casting such votes or
giving such consent, and may execute or cause to be executed in the name and on
15
<PAGE>
behalf of the Corporation and under its corporate seal or otherwise, all such
written proxies or other instruments as such officer may deem necessary or
proper.
ARTICLE VIII
AMENDMENTS
SECTION 8.1. AMENDMENTS. These By-laws may be altered, amended or
repealed at any meeting of the Board of Directors or of the stockholders,
provided notice of the proposed change was given in the notice of the meeting
and, in the case of a meeting of the Board of Directors, in a notice given no
less than twenty-four hours prior to the meeting; provided, however, that, in
the case of amendments by stockholders, notwithstanding any other provisions of
these By-laws or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the stock required by law, the Certificate of
Incorporation or these By-laws, the affirmative vote of the holders of at least
66-2/3 percent of the voting power of the then outstanding Voting Stock, voting
together as a single class, shall be required to alter, amend or repeal any
provision of these By-laws.
16
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