FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 000-23175
Beringer Wine Estates Holdings, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 68-0370340
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Pratt Avenue
St. Helena, CA 94574
(Address of principal executive offices) (Zip code)
(707) 963-7115
(Registrant's telephone number including area code)
Not applicable (Former name, former address, and former fiscal year, if
changed since last report)
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 ____
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Title Outstanding
Class A Common Stock 1,416,962 shares at February 7, 1998.
Class B Common Stock 17,338,946 shares at February 7, 1998.
INDEX
PART 1: FINANCIAL INFORMATION Page
Item 1 Financial Statements - Unaudited 2
Consolidated Balance Sheets - December 31, 1997 and 2
June 30, 1997
Consolidated Statements of Operations - three and six 3
month periods ended December 31, 1997
Consolidated Statements of Cash flows - three and six 4
month periods ended December 31, 1997
Notes to Financial Statements 5
Item 2 Management's discussion and analysis of financial condition 7
And results of operations
PART II: OTHER INFORMATION
Item 5 Other Information 20
Item 6 Exhibits and Reports on Form 8-K 20
Signatures 21
Part I. Financial Information
Item 1. Financial Statements
Item 1. Financial Statements
<TABLE>
<CAPTION>
Consolidated Balance Sheets
(in thousands, except share and per share data)
December 31, 1997 June 30, 1997
(unaudited)
Assets
Current Assets:
<S> <C> <C>
Cash 19 115
Accounts receivable-trade, net of allowance of $266 and $251 37,046 28,226
Inventories 258,561 214,097
Prepaids and other current assets 3,403 5,024
---------------------------------
Total current assets 299,029 247,462
Property, plant and equipment, net of accumulated depreciation
of $18,702 and $13,197 223,710 212,378
Investments 238 267
Other assets, net 7,404 7,077
----------------------------------
Total Assets 530,381 467,184
==================================
Liabilities, Redeemable Preferred Stock, Preferred and
Common Stock and Other Stockholders Equity
Current Liablities
Accounts payable-trade 32,881 10,114
Book overdraft liability 2,386 2,001
Accrued trade discounts 6,029 2,461
Accrued payroll, bonuses and benefits 4,905 3,661
Accrued interest 4,718 5,998
Other accrued expenses 4,937 5,698
Income taxes payable 1,335
-
Deferred tax liabilities 849 4,104
Current portion of long-term debt 7,076 3,714
---------------------------------
Total current liabilities 65,116 37,751
Line of credit 85,500 104,000
Long-term debt, less current portion 169,980 211,398
Deferred tax liabilities 31,069 29,368
Other liabilities 5,333 6,333
---------------------------------
Total liabilities 356,998 388,850
Redeemable preferred stock:
Redeemable Series A Preferred Stock, $0.01 par value;
stated at redemption value at June 30, 1997, less non-accreted
discount of $2,623,000 including cumulative dividends in arrears;
2,000,000 shares authorized; 369,640 shares issued and
outstanding at June 30, 1997 - 34,341
-----------------------------------
Preferred and Common stock and other stockholders' equity:
Preferred Stock, 5,000,000 shares authorized at December 31, 1997
- -
Class A Common Stock, $0.01 par value; 2,000,000 shares
authorized; 1,416,962 and 1,019,980 shares issued and outstanding 4 10
Class B Common Stock, $0.01 par value; 38,000,000 shares
authorized; 17,338,946 and 11,716,212 shares issued and outstanding 173 117
Notes receivable from stockholders
(477) (636)
Warrants 1,848
-
Additional paid-in capital 187,755 57,470
Accumulated deficit
(14,082) (14,816)
--------------------------------
--------------------------------
Total preferred and common stock and other stockholders' equity
173,373 43,993
---------------------------------
Total redeemable preferred stock, preferred and comon stock and
other stockholders' equity 173,373 78,334
--------------------------------
Total liabilities, redeemable preferred stock, preferred and common
stock and other stockholders' equity 530,371 467,184
================================
</TABLE>
see notes to consolidated financial statements
<TABLE>
<CAPTION>
Consolidated Statements of Operations
(Unaudited, in thousands, except per share data) Three months ended Six months ended
December 31, December 31,
<S> <C> <C> <C> <C>
1997 1996 1997 1996
--------------------------------------------------------
Gross revenues $98,929 81,194 $167,850 $139,980
Less excise taxes 4,552 4,069 7,663 6,894
--------------------------------------------------------
Net revenues 94,377 77,125 160,187 133,086
Cost of goods sold 55,738 48,041 94,904 91,277
--------------------------------------------------------
Gross profit 38,639 29,084 65,283 41,809
Selling, general and administrative expenses 26,603 24,250 47,798 39,155
--------------------------------------------------------
Operating income 12,036 4,834 17,485 2,654
Other income (expense):
Interest expense (5,933) (6,469) (12,955) (12,736)
Other, net 533 853 1,161 (394)
--------------------------------------------------------
Income (loss) before income taxes 6,636 (782) 5,691 (10,476)
Provision for (benefit of) income taxes 1,912 (384) 1,640 (5,260)
--------------------------------------------------------
Net income (loss) before extraordinary item 4,724 (398) 4,051 (5,216)
Less preferred stock dividends and accretion of
Discount 2,998 1,202 4,365 2,395
--------------------------------------------------------
Income (loss) available to common stockholders
before extraordinary item 1,726 (1,600) (314) (7,611)
Extraordinary loss, net of tax 3,317 - 3,317 -
--------------------------------------------------------
========================================================
Net loss available to stockholders
(1,591) (1,600) (3,631) (7,611)
Income (loss) per share:
Basic EPS before extraordinary item
0.10 (0.13) (0.02) (0.64)
Less extraordinary loss per share
(0.19) - (0.22) -
---------------------------------------------------------
=========================================================
Basic EPS before extraordinary item (0.09) (0.13) (0.24) (0.64)
Diluted EPS before extraordinary item (0.10) (0.13) (0.02) (0.64)
Less extraordinary loss per share (0.09) - (0.22) -
==========================================================
Diluted EPS after extraordinary item (0.09 (0.13) (0.24) (0.64)
==========================================================
Weighted average number of common shares
and equivalents outstanding:
Basic 16,885 11,899 15,134 11,812
==========================================================
==========================================================
Diluted 17,963 11,899 15,134 11,812
==========================================================
</TABLE>
See notes to consolidated financial statements
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
(Unaudited, in thousands) Three months ended Six months ended
December 31, December 31,
<S> <C> <C> <C> <C>
1997 1996 1997 1996
Cash flows from operating activities:
Net income (loss) 1,407 (398) 734 (5,216)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Deferred Taxes (1,030) 2,258 (1,554) (11,484)
Depreciation and amortization 2,745 1,524 5,835 3,049
Provision for doubtful accounts - 52 - 52
Extraordinary loss on extinguishment of debt 1,509 1,509 - 1,509
Other 3 12 85 4
Changes in assets and liabilities
Accounts receivable-trade (7,835) (390) (8,820) (325)
Inventories 2,403 (3,287) (44,484) (15,098)
Prepaids and other assets (541) (778) 732 761
Accounts payable-trade (17,734) (5,896) 22,787 16,884
Book overdraft liability (5,833) - 385 -
Accrued trade discounts 3,261 3,213 3,568 2,256
Accrued payroll, bonuses and benefits 1,184 1,130 1,244 898
Accrued interest (858) (4,140) (1,260) (4,490)
Other accrued expenses (364) 1,857 (761) 2,827
Income taxes payable 1,335 (1,123) 1,335 2,493
Other liabilities (501) 6,500 (1,000) 7,333
-----------------------------------------------
Net cash provided by (used in) operating activities (20,847) 534 (19,885) (56)
Cash flows from investing activities:
Acquisitions of property, plant and equipment (7,154) (3,598) (16,343) (6,723)
Dispositions of property, plant and equipment - 47 - 47
Distribution from instruments - - 29 -
-----------------------------------------------
Net cash provided by (used in) investing activities (7,154) (3,549) (16,314) (6,676)
-----------------------------------------------
Cash flows from financing activities:
Net proceeds from (repayments of) long-term debt and line of credit (66,022) 6,442 (58,127) 9,000
Repayment of debt due to Nestle - (1,649) - (4,024)
Proceeds from initial public offering 132,476 - 132,476 -
Issuance of common stock - 1 - 827
Issuance (redemption) of preferred stock (38,705) - (38,705) -
Proceeds from notes receivable from stockholders 159 108 159 108
Exercise of stock options - - 300 -
------------------------------------------------------------
Net cash provied by (used in) financing activities 27,908 4,900 36,103 5,909
Net increase (decrease) in cash (93) 1,885 (96) (505)
Cash at beginning of the period 112 11,833 115 14,223
===========================================================
Cash at end of the period 19 13,718 19 13,718
==========================================================
</TABLE>
Notes to Consolidated Financial Statements
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (which include only normal
recurring adjustments) necessary to present fairly the Companys financial
position at December 31, 1997 and its results of operations and its cash flows
for the three month and six month periods ended December 31, 1997 and 1996.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted from the accompanying consolidated financial
statements. For further information, reference should be made to the
consolidated financial statements and notes thereto included in the Companys
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission (File No. 333-34443).
NOTE 2 INVENTORIES
<TABLE>
Inventories consist of the following (in thousands):
<CAPTION>
December 31, 1997 June 30, 1997
<S> <C> <C>
Wine in production $147,881 $ 89,890
Cased goods and retail 103,662 104,485
Costs and supplies 7,018 19,722
Total $ 258,561 $ 214,097
</TABLE>
Included in inventories at December 31, 1997 and June 30, 1997 were
$31,396,000 and $47,468,000 respectively, of step-up remaining from applying
purchase accounting relative to the acquisitions of Beringer Wine Estates
Company, Chateau St. Jean, and Stags Leap Winery.
Note 3 - Earnings per share computation
During the quarter ended December 31, 1997, the Company adopted Financial
Accounting Standard No. 128 - Earnings per Share. Under this standard previously
reported primary and fully diluted EPS calculations are replaced with basic and
diluted EPS calculations. Basic EPS represents the income available to common
stockholders divided by the weighted average number common shares outstanding
during the measurement period. Diluted EPS represents the income available to
common stockholders divided by the weighted average number of common shares
outstanding during the measurement period giving effect to all dilutive
potential common shares that were outstanding during the period.
Basic EPS is computed using the weighted average number of Class A and
Class B common shares. Diluted EPS is computed using the weighted average number
of Class A and Class B common shares giving effect to all dilutive potential
common shares that were outstanding during the period. Potential common shares
consist primarily of stock options (dilutive impact calculated applying the
"treasury stock method).
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
($ in Thousands) December 31, December 31,
<S> <C> <C> <C> <C>
1998 1997 1998 1997
Numerator - Income (loss)
Net Income before extraordinary item $ 4,724 $(398) $4,051 $(5,216)
Less: Preferred stock dividends
& discount accretion 2,998 1,202 4,365 2,395
Extraordinary items 3,317 - 3,317 -
--------------------------------------------------
Net loss available to common
Stockholders $(1,591) $(1,600) $(3,631) $(7,611)
Denominator - Basic shares
Average common shares outstanding 16,885 11,899 15,134 11,812
---------------------------------------------------
Basic EPS $ (0.09) $ (0,13) $ (0.24) $ (0.64)
---------------------------------------------------
Denominator - Diluted shares
Average common shares outstanding 16,885 11,899 15,134 11,812
Dilutive effect of stock options 1,078 - - -
Total Diluted Shares 17,963 11,899 15,134 11,812
Diluted EPS $ (0.09) $ (0.13) $ (0.24) $ (0.64)
</TABLE>
Note 4 - Changes in Redeemable Preferred Stock and Equity
During the three month period ended December 31, 1997 the Company executed
several significant transactions impacting the redeemable preferred stock and
equity of the Company. On November 3, 1997, the Company sold, in an initial
public offering ("IPO"), 5.5 million Class B common shares and received net
proceeds of $132.5 million. The Company used $38.7 million of the net proceeds
from the IPO to redeem the Series A Preferred Stock, The company issued 431,631
Class B common shares pursuant to the exercise of warrants and 396,982 Class A
common shares pursuant to the conversion of Class B common shares. The table
below presents a summary of the significant changes in redeemable preferred
stock and equity during the quarter ended December 31, 1997. ($ in millions)
<TABLE>
<S> <C>
September 30, 1997 $ 78.0
Net Income 1.4
Initial Public Offering 132.5
Series A Preferred Stock Redemption (36.2)
Other (2.3)
December 31, 1997 $173.4
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Beringer Vineyards was founded in 1876. The business remained family owned
until 1971, when it was acquired by a subsidiary of NestIe. On January 1,1996,
an investment group led by Texas Pacific Group acquired the Company from Nestle
Holdings (the "Acquisition"). Thereafter, the Company's operations were expanded
with the acquisitions of Chateau St. Jean in April 1996 and Stags' Leap Winery
in February 1997.
The Acquisition and the related accounting treatment have impacted the
Company's financial results in two significant ways. Financial results have been
most significantly impacted by an increase in the cost of goods sold resulting
from the increase of inventory balances to their fair market values less costs
of completion and disposal (the "inventory step-up") in accordance with purchase
accounting rules applied to record the Acquisition. In addition, the Company's
earnings have been negatively affected by significant increases in interest
expense related to the debt incurred to finance the Acquisition.
Effect of Inventory Step-Up
The Acquisition was recorded using the purchase accounting method. Under
this method, the purchase price is allocated to the assets and liabilities of
the acquired company in the order of their liquidity and based on their
estimated fair market values at the time of the transaction. When the Company
was acquired in January 1996, $101.9 million of the purchase price in excess of
book value was allocated to the Company's inventory on hand at the transaction
date. Subsequent acquisitions have resulted in additional inventory step-ups.
The 1996 purchase of Chateau St. Jean generated $6.4 million in inventory
step-up, while the 1997 acquisition of Stags' Leap Winery generated $14.6
million in inventory step-up. The Company uses the "first-in, first-out"
("FIFO") method of inventory accounting. As the inventory on hand at the
transaction dates is sold in the normal course of business under the FIFO method
of accounting, costs of the wine sold are charged to cost of goods sold,
including the amount of the inventory step-up allocated to the wine sold. As
this inventory step-up is charged to cost of goods sold, it reduces the
Company's gross profit and its overall operating results. The charges to cost of
goods sold resulting from the inventory step-up are non-cash items and are
expected to affect the Company's reported performance at decreasing levels
through fiscal year 2000. As the inventory step-up will affect the Company's
reported financial results only in the near term, the Company's historical
results for 1996 and 1997 are not indicative of the Company's future
performance.
Use of Proceeds of Initial Public Offering
On November 3, 1997, Beringer Wine Estates Holdings, Inc. sold 4,920,000
shares of Class B Common Stock to the public utilizing a group of underwriters
led by Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette, Hambrecht & Quist,
and Smith Barney, Inc., (the IPO) and 600,000 shares of Class B Common Stock
directly to holders of the Series A Preferred Stock. The public offering netted
the Company $132.5 million which was used to retire all of its outstanding
subordinated notes, redeem all outstanding shares of the Series A Preferred
Stock, and retire $49.9 million and $6.0 million of the Companys line of credit
and long-term senior debt, respectively. The early retirement of the
subordinated notes resulted in a pre-tax extraordinary loss of $4,658,000 that
included a $3.15 prepayment penalty and the remaining unamortized discount. The
early redemption of the Series A Preferred Stock resulted in a $2.5 million
reduction of net income allocable to common stockholders, which represented the
accelerated accretion of the original issue discount remaining on the redemption
date.
THREE MONTHS ENDED DECEMBER 31, 1997
Net Revenue
Net revenues for the second quarter of fiscal 1998 were $94.4 million, an
increase of 22% over net revenues of $77.1 million from the second quarter of
fiscal 1997. Shipments of nine liter case equivalents increased 12% in the
second quarter of fiscal 1998 to 1.835 million cases from 1.640 million cases in
the second quarter of fiscal 1997. Unit revenues averaged $51.42 for the second
quarter of fiscal 1998, a 9% increase over unit revenues of $47.03 for the
second quarter of fiscal 1997.
Cost of Goods Sold
Cost of goods sold for the second quarter of fiscal 1998 was $55.7 million
and included $8.2 million of non-cash charges resulting from the inventory
step-up. Cost of goods sold for the second quarter of fiscal 1997 was $48.0
million, which included $8.5 million of non-cash charges resulting from the
inventory step-up.
Cost of goods sold, excluding non-cash charges resulting from the inventory
step-up, for the second quarter of fiscal 1998 was $47.5 million, compared with
$39.5 million for the second quarter of fiscal 1997. Cost of goods sold,
excluding non-cash charges resulting from the inventory step-up, was 50.3% of
net revenues for the second quarter of fiscal 1993, compared with 51.2% for the
second quarter of fiscal 1997. Cost of goods sold, excluding non-cash charges
resulting from the inventory step-up, was $25.90 per case for the second quarter
of fiscal 1998, compared with $24.08 for the second quarter of fiscal 1997; an
8% increase in average cost of goods sold per case.
Gross Profit
Gross profit for the second quarter of fiscal 1998 was $38.6 million,
compared with $29.1 million for the second quarter of fiscal 1997. Gross profit
was 40.9% of net revenues for the second quarter of fiscal 1998, compared with
37.7% for the second quarter of fiscal 1997.
Gross profit, excluding non-cash charges resulting from the inventory
step-up, was $46.9 million for the second quarter of fiscal 1998, compared with
$37.6 million for the second quarter of fiscal 1997. Gross profit, excluding
non-cash charges resulting from the inventory step-up, was 49.6% of net revenues
for the second quarter of fiscal 1998, compared with 48.8% for the second
quarter of fiscal 1997. Gross profit averaged $25.54 per case for the second
quarter of fiscal 1998, compared with $22.94 for the second quarter of fiscal
1997; an 11% increase in average gross profit per case.
The following table illustrates the effect of the inventory step-up on cost
of goods sold and gross profit:
<TABLE>
<CAPTION>
Gross Profit With and Without Inventory Step-Up
($ Millions)
Quarter Ended December 31,
as Reported Pro forma
With Inventory Without Inventory
Step-up Step-up
<S> <C> <C> <C> <C>
1997 1996 1997 1996
-----------------------------------------------
Net Revenues $94.4 $77.1 $94.4 $77.1
Cost of Goods Sold 47.5 39.5 47.5 39.5
Step-Up 8.2 8.5 0.0 0.0
Gross Profit $38.6 $29.1 $46.9 $37.6
As a percent of net revenues 40.9% 37.7% 49.6% 48.8%
</TABLE>
Operating Expenses
Operating expenses for the second quarter of fiscal 1998 were $26.6
million, a 10% increase from the second quarter of fiscal 1997. Operating
expenses were 28.2% of net revenues for the second quarter of fiscal 1998,
compared with 31.4% for the second quarter of fiscal 1997. The timing of media
advertising expenditures and other marketing and sales promotional activities
accounted for the majority of the increase.
Operating Income
Operating income for the second quarter of fiscal 1998 was $12.0 million,
compared with $4.8 million for the second quarter of fiscal 1997. Operating
income was 12.8% of net revenues for the second quarter of fiscal 1998, compared
with 6.3% for the second quarter of fiscal 1997.
Operating income, excluding non-cash charges resulting from the inventory
step-up, was $20.3 million for the second quarter of fiscal 1998, compared with
$13.4 million for the second quarter of fiscal 1997. Operating income was 21.5%
of net revenues for the second quarter of fiscal 1998, compared with 17.3% for
the second quarter of fiscal 1997.
The following table illustrates the effect of the inventory step-up on
operating income:
<TABLE>
<CAPTION>
Operating Income With and Without Inventory Step-Up
($ Millions)
Quarter Ended December 31,
As Reported Pro forma
With Inventory without Inventory
Step-up Step-up
<S> <C> <C> <C> <C>
1997 1996 1997 1996
Operating Income $12.0 $4.8 $20.3 $13.4
As a percent of net revenues 12.8% 6.3% 21.5% 17.3%
</TABLE>
Interest and Other Income/Expense
Interest and other income/expense were $5.4 million for the second quarter
of fiscal 1998. This represents a 4% reduction from the second quarter of fiscal
1997. The decrease in interest expense was the result of the retirement of
subordinated debt and reduction of senior debt, using, in part, the proceeds
from the IPO. Interest and other income/expense was 5.7% of net revenues for the
second quarter of fiscal 1998, compared with 7.3% in the second quarter of
fiscal 1997.
Income (Loss) Before Taxes
The Company reported income of $6.6 million before income taxes for the
second quarter of fiscal 1998. This compares with a pre-tax loss of $0.8 million
for the second quarter of fiscal 1997. Pre-tax income, excluding the non-cash
charges resulting from the inventory step-up, was $14.9 million for the second
quarter of fiscal 1998, compared with $7.8 million for the second quarter of
fiscal 1997. Pre-tax income for the second quarter of fiscal 1998 increased by
91% over the second quarter of fiscal 1997. Pre-tax income, excluding non-cash
charges resulting from the inventory step-up, was 15.7% of net revenue for the
second quarter of fiscal 1998, compared with 10.1 % for the second quarter of
fiscal 1997.
The following table Illustrates the effect of the inventory step-up on
income (loss) before taxes:
<TABLE>
<CAPTION>
Income (Loss) Before Taxes With and Without Inventory Step-Up
($ Millions)
Quarter Ended December 31,
As Reported Pro forma
With Inventory Without Inventory
Step-up Step-up
<S> <C> <C> <C> <C>
1997 1996 1997 1996
------------------------------------------------
Income (Loss) Before Taxes $6.6 $(0.8) $14.9 $7.8
As a percent of net revenues 7.0% (1.0)% 15.7% 10.1%
</TABLE>
Income Tax Provision (Benefit)
A tax provision of $1.9 million was recorded for the second quarter of
fiscal 1998, reflecting a tax rate of 28.8%. A tax benefit of $0.4 million was
recorded for the second quarter of fiscal 1997.
The second quarter of fiscal 1998 pro forma tax provision of $5.4 million
was recorded, reflecting a pro forma effective tax rate of 36.5%. A pro forma
tax provision of $2.7 million was recorded for the second quarter of fiscal
1997, reflecting a pro forma effective tax rate of 35.0%.
Net Income (Loss) Before Extraordinary Items
The Company reported net income before extraordinary items of $4.7 million
for the second quarter of fiscal 1998, compared with a $0.4 million net loss for
the second quarter of fiscal 1997. Net income before extraordinary items,
excluding non-cash charges resulting from the inventory step-up, increased 87%
to $9.4 million for the second quarter of fiscal 1998, from $5.0 million for the
second quarter of fiscal 1997. Net income before extraordinary items, excluding
non-cash charges resulting from the inventory step-up, was 10.0% of net revenue
for the second quarter of fiscal 1998, compared with 6.5% for the second quarter
of fiscal 1997.
The following table Illustrates the effect of the inventory step-up on net
income (loss) before extraordinary items:
<TABLE>
<CAPTION>
Net Income (Loss) Before Extraordinary Items
With and Without Inventory Step-Up
($ Millions)
Quarter Ended December 31,
As Reported Pro forma
With Inventory Without Inventory
Step-up Step-up
<S> <C> <C> <C> <C>
1997 1996 1997 1996
Net Income (loss)
Before Extraordinary Items $4.7 $(0.4) $9.4 $5.0
As a percent of net revenues 5.0% (0.5)% 10.0% 6.5%
</TABLE>
Preferred Stock Dividends and Accretion
During the second quarter of fiscal 1998, the Company redeemed all of its
Series A Preferred Stock. As a result of this redemption, the company recorded
accelerated accretion of original issue discount related to the Series A
Preferred Stock of $2.5 million.
In addition, prior to the preferred stock redemption the Company recorded
preferred stock dividends and normal accretion of $0.5 million. Preferred stock
dividends and normal accretion were $1.2 million for the second quarter of
fiscal 1997.
Extraordinary Item
The Company retired all of its outstanding subordinated debt during the
second quarter of fiscal 1998. The prepayment penalty and write-off of the
remaining original issue discount resulted in an extraordinary charge, net of
tax, of $3.3 million.
Net Income (loss) available to Common Stockholders
The Company reported a net loss of $1.6 million for the second quarter of
fiscal 1998, after payment of preferred dividends and accretion, and
extraordinary items. Calculated on a basis of 18.0 million outstanding shares,
the Company reported a net loss of $0.09 per share. For the second quarter of
fiscal 1997, after preferred dividends and accretion, the Company reported a net
loss of $1.6 million. This resulted in a loss of $0.13 per share, calculated on
a basis of 11.9 million outstanding shares.
Pro forma income available to common stockholders, excluding non-cash
charges resulting from the inventory step-up, accelerated accretion of preferred
stock original issue discount, and extraordinary items, was $8.9 million or
$0.50 per share for the second quarter of fiscal 1998. This represents a 132%
increase over the second quarter of fiscal 1997, when net income available to
common stockholders, excluding non-cash charges resulting from the inventory
step-up, was $3.8 million or $0.29 per share. Per share calculations were based
upon 18 million weighted average shares outstanding for the second quarter of
fiscal 1998 and 13.3 million weighted average shares outstanding for the second
quarter of fiscal 1997.
SIX MONTHS ENDED DECEMBER 31, 1997
Net Revenues
Net revenues for the first six months of fiscal 1998 were $160.2 million,
compared with $133 million in the first two quarters of fiscal 1997. This
represents an increase of 20.4%. Shipments of nine liter case equivalents for
the first six months of fiscal 1998 increased 10.5% to 3.046 million cases, from
2.757 million cases for the first six months of fiscal 1997. Net unit revenues
averaged $52.59 for the first six months of fiscal 1998, an 9% increase over net
unit revenues of $48.27 for the first six months of fiscal 1997.
Cost of Goods Sold
Cost of goods sold for the first six months of fiscal 1998 was $94.9
million and included $16.1 million of non-cash charges resulting from the
inventory step-up. Cost of goods sold for the first six months of fiscal 1997
was $91.3 million, which included non-cash charges resulting from the inventory
step-up of $23.7 million.
Cost of goods sold, excluding non-cash charges resulting from the inventory
step-up, for the first six months of fiscal 1998 was $78.8 million, compared
with $67.6 million for the first six months of fiscal 1997. Cost of goods sold,
excluding non-cash charges resulting from the inventory step-up, was 49.2% of
net revenues for the first six months of fiscal 1998, compared with 50.8% for
the first six months of fiscal 1997. Cost of goods sold, excluding non-cash
charges resulting from the inventory step-up, was $25.88 per case for the first
six months of fiscal 1998, compared with $24.50 per case for the first six
months of fiscal 1997, a 6% increase in average cost of goods sold per case.
Gross Profit
Gross profit for the first six months of fiscal 1998 was $65.3 million,
compared with $41.8 million for the first six months of fiscal 1997. Gross
profit was 40.8% of net revenues in the first six months of fiscal 1998,
compared with 31.4% for the first six months of fiscal 1997.
Gross profit, excluding non-cash charges resulting from the Inventory
step-up, was $81.4 million for the first six months of fiscal 1998, compared
with $65.5 million for the first six months of fiscal 1997. Gross profit,
excluding non-cash charges resulting from the inventory step-up, was 50.8% of
net revenue for the first six months of fiscal 1998, compared with 49.2% for the
first six months of fiscal 1997. Gross margin averaged $26.11 per case during
the first six months of fiscal 1998, compared with $23.77 for the first six
months of fiscal 1997, a 12% increase in average gross profit per case. The
following table illustrates the effect of the inventory step-up on cost of goods
sold and gross profit:
<TABLE>
<CAPTION>
Gross Profit With and Without Inventory Step-Up
($ Millions)
Six Months Ended December 31,
As Reported Pro forma
th Inventory Without Inventory
Step-up Step-up
<S> <C> <C> <C> <C>
1997 1996 1997 1996
----------------------------------------------
Net Revenues 160.2 $133.1 $160.2 $133.1
Cost of Goods Sold 78.8 67.6 78.8 67.6
Step-Up 16.1 23.7 0.0 0.0
Gross Profit $65.3 $41.8 $81.4 $65.5
As a percent of net revenues 40.8% 31.4% 50.8% 49.2%
</TABLE>
Operating Expenses
Operating expenses for the first six months of fiscal 1998 were $47.8
million, a 22% increase from the six months of fiscal 1997. Operating expenses
were 29.8% of net revenues for the first six months of fiscal 1998, compared
with 29.4% for the first six months of fiscal 1997. The timing of media
advertising expenditures and other marketing and sales promotional activities
accounted for the majority of the increase.
Operating Income
Operating income for the first six months of fiscal 1998 was $17.5 million,
compared with $2.1 million for the first six months of fiscal 1997. Operating
income was 10.9% of net revenues for the first six months of fiscal 1998,
compared with 2.0% for the first six months of fiscal 1997.
Operating income, excluding non-cash charges resulting from the inventory
step-up, was $33.6 million for the first six months of fiscal 1998, compared
with $26.4 million for the first six months of fiscal 1997. Operating income was
20.9% of net revenue for the first six months of fiscal 1998, compared with
19.8% for the first six months of fiscal 1997.
The following table illustrates the effect of the inventory step-up on
operating Income:
<TABLE>
<CAPTION>
Operating Income With and Without Inventory Step-Up
($ Millions)
Six Months Ended December 31,
As Reported Pro forma
With Inventory Without Inventory
Step-up Step-up
<S> <C> <C> <C> <C>
1997 1996 1997 1996
----------------------------------------------
Operating Income $17.5 $2.7 $33.6 $26.4
As a percent of net revenues 10.9% 2.0% 20.9% 19.8%
</TABLE>
Interest and Other Income/Expense
Interest and other income/expense were $11.8 million for the first six
months of fiscal 1998. This represents a 10% reduction from the first six months
of fiscal 1997. The decrease in interest expense resulted from the retirement of
subordinated debt and reduction of senior debt following the IPO. Interest and
other income/expense was 7.4% of net revenues for the first six months of fiscal
1998, compared with 9.9% for the first six months of fiscal 1997.
Income (Loss) Before Taxes
The Company reported income of $5.7 million before income taxes for the
first six months of fiscal 1998. This compares with a pre-tax loss of $10.5
million for the first six months of fiscal 1997. Pretax income, excluding the
non-cash charges resulting from the inventory step-up, was $21.8 million for the
first six months of fiscal 1998, compared with $13.2 million for the first six
months of fiscal 1997. This represents a 64.3% increase in pre-tax income for
the first six months of fiscal 1998. The pre-tax profit margin, excluding
non-cash charges resulting from the inventory step-up, was 13.6% of net revenue
for the first six months of fiscal 1998, compared with 9.9% for the first six
months of fiscal 1997.
The following table illustrates the effect of the inventory step-up on
income (loss) before taxes:
<TABLE>
<CAPTION>
Income (Loss) Before Taxes With and Without Inventory Step-Up
($ Millions)
Six Months Ended December 31,
As Reported Pro forma
With Inventory Without Inventory
Step-up Step-up
<S> <C> <C> <C> <C>
1997 1996 1997 1996
------------------------------------------------
Income (Loss) Before Taxes $5.7 $(10.5) $21.8 $13.2
As a percent of net revenues 3.6% (7.9)% 13.6% 9.9%
</TABLE>
A tax provision of $1.6 million was recorded for the first six months of
fiscal 1998, reflecting a 28.8% tax rate. This compares with a tax benefit of
$5.3 million for the first six months of fiscal 1997.
The pro forma tax provision for the first six months of fiscal 1998 was
$7.8 million, reflecting a tax rate of 36.0%. The pro forma tax provision for
the first six months of 1997 was $4.6 million, reflecting a tax rate of 35.0%.
Net Income (Loss) Before Extraordinary Items
The Company reported net income before extraordinary items of $4.1 million
for the first six months of fiscal 1998, compared with a $5.2 million net loss
for the first six months of fiscal 1997.
Net income before extraordinary items, excluding non-cash charges resulting
from the inventory step-up, increased 61.8% to $13.9 million for the first six
months of fiscal 1998, from $8.5 million for the first six months of fiscal
1997. Net income before extraordinary items, excluding non-cash charges
resulting from the inventory step-up, was 8.7% of net revenues for the first six
months of fiscal 1998, compared with 6.5% for the first six months of fiscal
1997.
The following table illustrates the effect of the inventory step-up on net
income (loss) before extraordinary items:
<TABLE>
<CAPTION>
Net Income (Loss) Before Extraordinary Items
With and Without Inventory Step-Up
($ Millions)
Six Months Ended December 31,
As Reported Pro forma
With Inventory Without Inventory
Step-up Step-up
<S> <C> <C> <C> <C>
1997 1996 1997 1996
------------------------------------------------
Net Income (Loss)
Before Extraordinary Items $4.1 $(5.2) $13.9 $8.6
As a percent of net revenues 2.5% (3.9)% 8.7% 6.5%
</TABLE>
Preferred Stock Dividends and Accretion
During the second quarter of fiscal 1998, the Company redeemed all of its
Series A Preferred Stock. As a result of this redemption, the company recorded
accelerated accretion of original issue discount related to the Series A
Preferred Stock of $2.5 million.
In addition, prior to the preferred stock redemption the Company recorded
preferred stock dividends and normal accretion of $1.9 million. Preferred stock
dividends and normal accretion were $2.4 million for the second quarter of
fiscal 1997.
Extraordinary Item
The Company retired all of its outstanding subordinated debt during the
second quarter of fiscal 1998. The prepayment penalty and write-off of the
remaining original issue discount resulted in an extraordinary charge, net of
tax, of $3.3 million.
Net Income (loss) to Common Shareholders
The Company reported a net loss, after preferred dividends and accretion
and extraordinary items, of $3.6 million for the first six months of fiscal
1998. This represents a net loss of $0.24 per share for the first six months of
fiscal 1998, calculated on the basis of 15.1 million outstanding shares. The
Company reported a net loss, after preferred dividends and accretion, of $7.6
million for the first six months of fiscal 1997. This represents a loss of $0.64
per share, calculated on the basis of 11.8 million outstanding shares.
Net income to common stockholders, excluding non-cash charges resulting
from the inventory step-up, accelerated accretion of preferred stock original
issue discount, and extraordinary items, was $12.0 million or $0.75 per share
for the first six months of fiscal 1998. This represents a 93.7% increase over
the first two six months of fiscal 1997, when net income to common stockholders,
excluding non-cash charges resulting from the inventory step-up, was $6.2
million or $0.47 per share. Per share calculations are based upon weighted
average shares outstanding of 16.1 million shares for the first six months of
fiscal 1998 and 13.2 million shares for the first six months of fiscal 1997.
Liquidity and Capital Resources
Working capital at December 31,1997 was $233.9 million, compared with
$209.7 million at June 30,1997. The majority of the increase in working capital
can be attributed to higher inventory levels from the 1997 harvest which are
required for future sales volume increases.
Existing credit arrangements were restructured on October 24, 1997 in
anticipation of the de-leveraging of the Company resulting from its IPO. Long
term debt outstanding at December 31, 1997 was $177.1 million and the line of
credit balance was $85.5 million. This left $61.0 million available under the
terms of this line, after taking into consideration an outstanding letter of
credit of $3.5 million. Interest expense (excluding interest payments
capitalized to ongoing development activities) for the second quarter of fiscal
1998 was $5.9 million. The Company used the net proceeds of its IPO received on
November 3, 1997 to retire all the outstanding subordinated notes, including
prepayment penalties and interest, in the amount of $39.1 millions. The proceeds
were also used to redeem all of the Series A Preferred Stock, at the redemption
value of $38.7 million. The balance of the proceeds was used to repay $49.9
million of the line of credit and $8.0 million of its long-term senior debt.
The Company expects that this reduction in debt, partially offset by
increased financing as a result of the large 1997 harvest, will result in a
reduction of interest expense for fiscal 1998, as compared with fiscal 1997.
The Company anticipates that current capital, combined with cash from
operations and the availability of cash from additional borrowings, will be
sufficient to meet its liquidity and capital expenditures requirements through
the six months ending December 31, 1998.
Forward-Looking Statements
This Form 10-Q and other information provided from time to time by the
Company contains historical information as well as forward-looking statements
about the Company, the premium wine industry and general economic conditions.
These forward-looking statements include, for example, projections about the
health of the economy, the future consumer demand for premium wine, and other
projections particular to the Company. These projections include, without
limitation, estimates of sales and earnings growth and costs of labor and
grapes.
Actual results may differ materially from the Company's current
projections. A shift in consumer preferences and demand for premium wine,
competition from other premium wine companies, and agricultural risks, among
other conditions, may affect the Company's operating results.
For additional cautionary statements and risks which could cause results to
differ materially from the Company's forward-looking statements, please refer to
the "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's Prospectus, dated October
28, 1997. These forward-looking statements speak only as of the date of this
Form 10-Q. The Company expressly disclaims any obligation to publicly release
any updates or revisions of any such forward-looking statements to reflect any
changes in the Companys expectations or any change in events, conditions or
circumstances on which any such statement is based.
Part II. Other Information
Item 5. Other Information
The Board of Directors, at a regularly scheduled meeting held on December
5, 1997, approved an amendment to the bylaws. This amendment increased the
number of directors from eleven to twelve. The Board of Directors appointed
Emily Woods, Chief Executive Officer and Chairman of J. Crew, Inc., as Director
to fill the newly-created position.
Item 6. Exhibits and Reports on Form 8-K
1. Exhibit 11 Statement re Computation of Per Share Earnings..
2. Exhibit XX Bylaws (Amended as of December 5, 1997).
No reports on Form 8K were filed during the quarter ended December 31,
1997.
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.
Beringer Wine Estates Holdings, Inc.
February 12, 1998 By://Peter F. Scott
Peter F. Scott, Senior Vice
President, Finance and Operations and CFO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This shedule contains summary financial information extracted from the
Consolidated Balance Sheet and Consolidated Statement of Operations and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001041891
<NAME> Beringer Wine Estates Holdings,Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Jun-30-1998
<PERIOD-START> Oct-01-1998
<PERIOD-END> Dec-31-1998
<EXCHANGE-RATE> 1
<CASH> 19
<SECURITIES> 0
<RECEIVABLES> 37,312
<ALLOWANCES> (266)
<INVENTORY> 258,561
<CURRENT-ASSETS> 299,029
<PP&E> 242,412
<DEPRECIATION> (18,702)
<TOTAL-ASSETS> 530,381
<CURRENT-LIABILITIES> 65,116
<BONDS> 0
0
0
<COMMON> 187
<OTHER-SE> 173,196
<TOTAL-LIABILITY-AND-EQUITY> 530,381
<SALES> 94,377
<TOTAL-REVENUES> 94,377
<CGS> 55,738
<TOTAL-COSTS> 55,738
<OTHER-EXPENSES> 26,603
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,933
<INCOME-PRETAX> 6,636
<INCOME-TAX> 1,912
<INCOME-CONTINUING> 4,724
<DISCONTINUED> 0
<EXTRAORDINARY> 3,317
<CHANGES> 0
<NET-INCOME> 1,407
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
Exhibit 11
See Note 3, Notes to Financial Statements)
EXHIBIT 3(ii)
BERINGER WINE ESTATES HOLDINGS, INC.
(a Delaware corporation)
BYLAWS
(Amended as of December 5, 1997)
ARTICLE I
Offices
SECTION 1.01 Registered Office. The registered office of Beringer Wine
Estates Holdings, Inc. (hereinafter called the Corporation) in the State of
Delaware shall be at 1209 Orange Street, Wilmington, New Castle County, Delaware
19801,and the name of the registered agent in charge thereof shall be The
Corporation Trust Company.
SECTION 1.02 Other Offices. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors (hereinafter called the Board) may from time
to time determine or as the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 2.01 Annual Meetings. Annual meetings of the stockholders of the
Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
SECTION 2.02 Special Meetings. A special meeting of the stockholders for
the transaction of any proper business may be called at any time only: (i) by a
majority of the authorized number of directors (ii) by the Chairman of the
Board, (iii) by a committee of the Board that has been duly designated by the
Board and whose power and authority, as provided in a resolution by the Board or
in these Bylaws, includes the power to call such meetings or (iv) one or more
stockholders holding, in the aggregate, no less than ten percent (10%) of the
voting power of the Corporation.
SECTION 2.03 Place of Meetings. All meetings of the stockholders shall be
held at such places, within or without the State of Delaware, as may from time
to time be designated by the person or persons calling the respective meeting
and specified in the respective notices or waivers of notice thereof.
SECTION 2.04 Notice of Meetings. Except as otherwise required by law,
notice of each meeting of the stockholders, whether annual or special, shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder of record entitled to vote at such meeting by
delivering a typewritten or printed notice thereof to him personally, or by
depositing such notice in the United States mail, in a postage prepaid envelope,
directed to him at his post office address furnished by him to the Secretary of
the Corporation for such purpose or, if he shall not have furnished to the
Secretary his address for such purpose, then at his post office address last
known to the Secretary, or by transmitting a notice thereof to him at such
address by telegraph, cable, or wireless. Except as otherwise expressly required
by law, no publication of any notice of a meeting of the stockholders shall be
required. Every notice of a meeting of the stockholders shall state the place,
date and hour of the meeting, and, in the case of a special meeting, shall also
state the purpose or purposes for which the meeting is called. Notice of any
meeting of stockholders shall not be required to be given to any stockholder who
shall have waived such notice and such notice shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, except a
stockholder who shall attend such meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Except as otherwise expressly
required by law, notice of any adjourned meeting of the stockholders need not be
given if the time and place thereof are announced at the meeting at which the
adjournment is taken.
SECTION 2.05 Quorum. Except in the case of any meeting for the election of
directors summarily ordered as provided by law, the holders of record of a
majority in voting interest of the shares of stock of the Corporation entitled
to be voted thereat, present in person or by proxy, shall constitute a quorum
for the transaction of business at any meeting of the stockholders of the
Corporation or any adjournment thereof. In the absence of a quorum at any
meeting or any adjournment thereof, a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat or, in
the absence therefrom of all the stockholders, any officer entitled to preside
at, or to act as secretary of, such meeting may adjourn such meeting from time
to time. At any such adjourned meeting at which a quorum is present any business
may be transacted which might have been transacted at the meeting as originally
called.
SECTION 2.06 Voting.
(a) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the Corporation
he shall have expressly empowered the pledgee to vote thereon, in which case
only the pledgee, or his proxy, may represent such stock and vote thereon. Stock
having voting power standing of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants in common, tenants
by entirety or otherwise, or with respect to which two or more persons have the
same fiduciary relationship, shall be voted in accordance with the provisions of
the General Corporation Law of the State of Delaware.
(b) Any such voting rights may be exercised by the stockholder entitled
thereto in person or by his proxy appointed by an instrument in writing,
subscribed by such stockholder or by his attorney thereunto authorized and
delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders all
matters, except as otherwise provided in the Certificate of Incorporation, in
these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall state
the number of shares voted. Except as otherwise provided by law or as otherwise
provided in the Certificate of Incorporation, each outstanding share of Class A
Common Stock shall be entitled to fifty (50) votes and each outstanding share of
Class B Common Stock shall be entitled to one (1) vote on each matter submitted
to a vote of the stockholders.
SECTION 2.07 List of stockholders. The Secretary of the Corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 2.08 Voting Procedures and Inspectors of Elections. The Corporation
shall, in advance of any meeting of the stockholders, appoint one or more
inspectors to act at the meeting and make a written report thereof. The
Corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate inspectors is able
to act at a meeting of stockholders, the person presiding at the meeting shall
appoint one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his ability.
SECTION 2.09 Action Without Meeting. Any action required to be taken at any
annual or special meeting of stockholders of the Corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
or consents in writing, setting forth the action so taken, shall be signed by
the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted and shall be
delivered to the Corporation by delivery to its registered office in Delaware,
its principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty days of the
earliest dated consent signed by a sufficient number of holder to take action
are delivered to the Corporation. Delivery made to the Corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
Board of Directors
SECTION 3.01 General Powers. The property, business and affairs of the
Corporation shall be managed by the Board.
SECTION 3.02 Number and Term of Office, The number of directors shall be
twelve (12). Directors need not be stockholders. Each of the directors of the
Corporation shall hold office until his successor shall have been duly elected
and shall qualify or until he shall resign or shall have been removed in the
manner hereinafter provided.
SECTION 3.03 Election of Directors. The directors shall be elected annually
by the stockholders of the Corporation and the persons receiving the greatest
number of votes, up to the number of directors to be elected, shall be the
directors.
SECTION 3.04 Resignations. Any director of the Corporation may resign at
any time by giving written notice to the Board or to the secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.05 Vacancies. Except as otherwise provided in the Certificate of
Incorporation, any vacancy in the Board, whether because of death, resignation,
disqualification, an increase in the number of directors, or any other cause,
may be filled by vote of the majority of the remaining directors, although less
than a quorum, or by the sole remaining director. Each director so chosen to
fill a vacancy shall hold office until his successor shall have been elected and
shall qualify or until he shall resign or shall have been removed in the manner
hereinafter provided.
SECTION 3.06 Place of Meeting, Etc. The Board may hold any of its meetings
at such place or places within or without the State of Delaware as the Board may
from time to time by resolution designate or as shall be designated by the
person or persons calling the meeting or in the notice or a waiver of notice of
any such meeting. Directors may participate in any regular or special meeting of
the Board by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board can hear
each other, and such participation shall constitute presence in person at such
meeting.
SECTION 3.07 First Meeting. The Board shall meet as soon as practicable
after each annual election of directors and notice of such first meeting shall
not be required.
SECTION 3.08 Regular Meetings. Regular meetings of the Board may be held at
such times as the Board shall from time to time by resolution determine. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and place
on the next succeeding business day not a legal holiday. Except as provided by
law, further notice of regular meetings need not be given.
SECTION 3.09 Special Meetings. Special meetings of the Board shall be held
whenever called by the Chairman of the Board or a majority of the authorized
number of directors. Except as otherwise provided by law or by these Bylaws,
notice of the time and place of each such special meeting shall be mailed to
each director, addressed to him at his residence or usual place of business, at
least five (5)days before the day on which the meeting is to be held, or shall
be sent to him at such place by telegraph, telecopy or cable or be delivered
personally not less than forty-eight (48) hours before the time at which the
meeting is to be held. Except where otherwise required by law or by these
Bylaws, notice of the purpose of a special meeting need not be given. Notice of
any meeting of the Board shall be deemed to be waived as to any director who is
present at such meeting, except a director who shall attend such meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 3.10 Ouorum and Manner of Acting. Except as otherwise provided in
these Bylaws or by law, the presence of a majority of the authorized number of
directors shall be required to constitute a quorum for the transaction of
business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. Notice of any adjourned meeting need not be given. The
directors shall act only as a Board, and the individual directors shall have no
power as such.
SECTION 3.11 Action by Consent. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
SECTION 3.12 Removal of Directors. Subject to the provisions of the
Certificate of Incorporation, any director may be removed at any time, either
with or without cause, by the affirmative vote of the stockholders having a
majority of the voting power of the Corporation given at a special meeting of
the stockholders called for the purpose.
SECTION 3.13 Compensation. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of his attendance at
any meetings of the Board or Committees of the Board. Neither the payment of
such compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
SECTION 3.14 Committees. (a)Executive Committee. The Executive Committee,
to the extent permitted by law, shall have and may exercise when the Board is
not in session all powers of the Board in the management of the business and
affairs of the Corporation, including, without limitation, the power and
authority to call a special meeting of stockholders, to declare a dividend or to
authorize the issuance of stock, except such committee shall not have the power
or authority to amend the Certificate of Incorporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board as provided in subsection (a)
of Sec 151 of the Delaware General Corporation Law, fix the designations and
any
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), to adopt an agreement of
merger or consolidation, to recommend to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
to recommend to the stockholders of the Corporation a dissolution of the
Corporation or a revocation of a dissolution or to amend these Bylaws; provided,
however, that upon the effectiveness of a proposed amendment to Section 141(c)
of the General Corporation Law of the State of Delaware to permit a committee of
a board of directors to exercise powers not permitted by this section if a
corporation so elects, the corporation shall be governed by the provision or
provisions of Section 141(c) as so amended, which permit the exercise of such
additional powers and any limitations of the powers of the Executive Committee
set forth in this Section 3.14 that are not required by such provisions of
Section 141(c), as so amended, shall have no further force or effect and the
Executive Committee shall have all of the powers permitted by such provision or
provisions of Section 141 (c) as so amended. The Executive Committee shall
consist of five (5) members, all of whom shall be directors of the Corporation.
The members of the Executive Committee shall not be designated by the Board but
shall, instead, consist of: (i) the Chief Executive Officer of the Corporation;
(ii) one (1) member appointed by the Silverado Directors (as that term is
defined in the Amended and Restated Stockholders Rights Agreement and Voting
Agreement among the Corporation and the Stockholders of the Corporation, as
amended from time to time (the "Stockholders Agreement")), and (iii) three (3)
members appointed by the TPG Directors (as that term is defined in the
Stockholders Agreement).
(b) Other Committees. The Board may, by resolution passed by a majority of
the Board, from time to time appoint such other committees as may be permitted
by law. Such other committees appointed by the Board shall consist of one (1) or
more members of the Board and shall have such powers and perform such duties as
may be prescribed by the resolution or resolutions creating such committees.
(c) Term. The members of all committees of the Board shall serve a term
coexistent with that of the Board which shall have appointed such committee. The
Board, subject to the provisions of subsections (a) or (b) of this Section 3.14,
may at any time increase or decrease the number of members of a committee or
terminate the existence of a committee. The membership of a committee member
shall terminate on the date of his death or voluntary resignation from the
committee or from the Board. Subject to the provisions of Section 3.14 (a), the
Board may at any time for any reason remove any individual committee member and
the Board may fill any committee vacancy created by death, resignation, removal
or increase in the number of members of the committee. Subject to Section 3.14
(a), the Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board to act at the meeting in the
place of any such absent or disqualified member.
(d) Meetings. Unless the Board shall otherwise provide, regular meetings of
the Executive Committee or any other committee appointed pursuant to this
Section 3.14 shall be held at such times and places as are determined by the
Board, or by any such committee, and when notice thereof has been given to each
member of such committee, no further notices of such regular meetings need be
given thereafter. Special meetings of any such committee may be held at any
place which has been determined from time to time by such committee, and may be
called by any director who is a member of such committee, upon written notice to
the members of such committee of the time and place of such special meeting
given in the manner provided for the giving of written notice to members of the
Board of the time and place of special meetings of the Board. Notice of any
special meeting of any committee may be waived in writing at any time before or
after the meeting and will be waived by any director by attendance thereat,
except when the director attends such special meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. A majority of the
authorized number of members of any such committee shall constitute a quorum for
the transaction of business, and the act of a majority of those present at any
meeting at which a quorum is present shall be the act of such committee.
ARTICLE IV
Officers
SECTION 4.01 Number. The officers of the Corporation shall be the Chairman
of the Board (or Co-Chairmen of the Board), the President, one or more Vice
Presidents (the number thereof and their respective titles to be determined by
the Board), a Secretary and a Treasurer.
SECTION 4.02 Election, Term of office and Qualifications. The officers of
the Corporation, except such officers as may be appointed in accordance with
Section 4.03, shall be elected annually by the Board at the first meeting
thereof held after the election thereof. Each officer shall hold office until
his successor shall have been duly chosen and shall qualify or until his
resignation or removal in the manner hereinafter provided.
SECTION 4.03 Assistants, Agents and Employees, Etc. In addition to the
officers specified in Section 4.01, the Board may appoint other assistants,
agents and employees as it may deem necessary or advisable, including one or
more Assistant Secretaries, and one or more Assistant Treasurers, each of whom
shall hold office for such period, have such authority, and perform such duties
as the Board may from time to time determine. The Board may delegate to any
officer of the Corporation or any committee of the Board the power to appoint,
remove and prescribe the duties of any such assistants, agents or employees.
SECTION 4.04 Removal. Any officer, assistant, agent or employee of the
Corporation may be removed, with or without cause, at any time: (i) in the case
of an officer, assistant, agent or employee appointed by the Board, only by
resolution of the Board; and (ii) in the case of any other officer, assistant,
agent or employee, by any officer of the Corporation or committee of the Board
upon whom or which such power of removal may be conferred by the Board.
SECTION 4.05 Resignations. Any officer or assistant may resign at any time
by giving written notice of his resignation to the Board or the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, upon receipt thereof by the Board or
the Secretary, as the case may be; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 4.06 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or other cause, may be filled for the
unexpired portion of the term thereof in the manner prescribed in these Bylaws
for regular appointments or elections to such office.
SECTION 4.07 The Chairman of the Board. A Chairman of the Board, when
present, shall preside at all meetings of the stockholders and the Board. A
Chairman of the Board shall perform other duties commonly incident to this
office and shall also perform such other duties and have such other powers as
the Board shall designate from time to time. If there is no President, then a
Chairman of the Board shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in Section 4.08.
SECTION 4.08 The President. The President of the Corporation shall be the
chief executive officer of the Corporation and shall have, subject to the
control of the Board, general and active supervision and management over the
business of the Corporation and over its several officers, assistants, agents
and employees.
SECTION 4.09 The Vice Presidents. Each Vice President shall have such
powers and perform such duties as the Board may from time to time prescribe. In
case of the absence or inability to act of the President and the Chairman of the
Board, upon the request of the Board, a Vice President shall perform the duties
of the President and when so acting, shall have all the powers of, and be
subject to all the restrictions upon, the President.
SECTION 4.10 The Secretary. The Secretary shall, if present, record the
proceedings of all meetings of the Board, of the stockholders, and of all
committees of which a secretary shall not have been appointed in one or more
books provided for that purpose; he shall see that all notices are duly given in
accordance with these Bylaws and as required by law; he shall be custodian of
the seal of the Corporation and shall affix and attest the seal to all documents
to be executed on behalf of the Corporation under its seal; and, in general, he
shall perform all the duties incident to the office of Secretary and such other
duties as may from time to time be assigned to him by the Board.
SECTION 4.11 The Treasurer. The Treasurer shall have the general care and
custody of the funds and securities of the Corporation, and shall deposit all
such funds in the name of the Corporation in such banks, trust companies or
other depositories as shall be selected by the Board. He shall receive, and give
receipts for, moneys due and payable to the Corporation from any source
whatsoever. He shall exercise general supervision over expenditures and
disbursements made by officers, agents and employees of the Corporation and the
preparation of such records and reports in connection therewith as may be
necessary or desirable. He shall, in general, perform all other duties incident
to the office of Treasurer and such other duties as from time to time may be
assigned to him by the Board.
SECTION 4.12 Compensation. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of such officers
shall be prevented from receiving such compensation by reason of the fact that
he is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he is also a director of the Corporation. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving proper compensation therefor.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 5.01 Execution of Contracts. The Board, except as in these Bylaws
otherwise provided, may authorize any officer or officers, agent or agents, to
enter into any contract or execute any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined to specific
instances; and unless so authorized by the Board or by these Bylaws, no officer,
agent or employee shall have any power or authority to bind the Corporation by
any contract or engagement or to pledge its credit or to render it liable for
any purpose or in any amount.
SECTION 5.02 Checks, Drafts, Etc. All checks, drafts or other orders for
payment of money, notes or other evidence of indebtedness, issued in the name of
or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such officer, assistant, agent or attorney shall
give such bond, if any, as the Board may require.
SECTION 5.03 Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board may select, or as may
be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the President, any Vice
President or the Treasurer (or any other officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation who
shall from time to time be determined by the Board) may endorse, assign and
deliver checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation.
SECTION 5.04 General and Special Bank Accounts. The Board may from time to
time authorize the opening and keeping of general and special bank accounts with
such banks, trust companies or other depositories as the Board may select or as
may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
Shares and Their Transfer
SECTION 6.01 Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
President or a vice President, and by the Secretary or an Assistant Secretary or
by the Treasurer or an Assistant Treasurer. Any of or all of the signatures on
the certificates may be a facsimile. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed upon, any
such certificate, shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, such certificate may nevertheless
be issued by the Corporation with the same effect as though the person who
signed such certificate, or whose facsimile signature shall have been placed
thereupon, were such officer, transfer agent or registrar at the date of issue.
A record shall be kept of the respective names of the persons, firms or
corporations owning the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be canceled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so canceled, except in cases provided for in Section 6.04.
SECTION 6.02 Transfers of Stock. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.03, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
SECTION 6.03 Regulations. The Board may make such rules and regulations as
it may deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
SECTION 6.04 Lost, Stolen, Destroyed, and Mutilated Certificates. In any
case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
SECTION 6.05 Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting. If no other record is fixed by
the Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of the stockholders shall be at the close of
business on the date next preceding the date on which notice is given, or, if
notice is waived, at the close of business on the date next preceding the date
on which the meeting is held. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders, shall apply to any
adjournment of such meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.
ARTICLE VII
Indemification
SECTION 7.01 Directors and Officers. The Corporation shall indemnify to the
fullest extent permitted by the Delaware General Corporation Law any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a 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, limited liability
company, trust or other enterprise (including services with respect to an
employee benefit plan), against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, that he had
reasonable cause to believe that his conduct was unlawful. The provisions of
this section shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth by the Delaware General Corporation Law.
SECTION 7.02 Derivative Claims Against Directors and Officers. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director or officer of the Corporation, against
expenses (including attorneys, fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the Corporation unless and only to the extent that the Court of Chancery
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper. The provisions of this section shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of Conduct set forth by the Delaware
General Corporation Law.
SECTION 7.03 Employees and Agents. The Corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was an employee or agent of the
Corporation, or is or was serving at the request of the Corporation as an,
employee or agent of another corporation, partnership, joint venture, limited
liability company, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, that he had reasonable cause to believe that his
conduct was unlawful.
Section 7.04 Derivative Claims Against Agents. The Corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was an employee or agent of the Corporation, or is or was serving at the
request of the Corporation as an employee or agent of another corporation,
partnership, joint venture, limited liability company, trust or other enterprise
against expenses (including attorneys fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
SECTION 7.05 Determination of Right to Indemnification. Any indemnification
under Sections 7.01, 7.02, 7.03 or 7.04 of this Article VII (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director or officer, is proper
in the circumstances because he has met the applicable standard of conduct set
forth in Sections 7.01, 7.02, 7.03 and 7.04 of this Article. Such determination
shall be made by (i) a majority of the directors who are not parties to such
action, suit or proceeding, even though less than a quorum, or (ii) if there are
no such directors or if such directors so direct, by independent legal counsel
in a written opinion.
SECTION 7.06 Expenses. Notwithstanding the other provisions of this Article
VII, to the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 7.01, 7.02, 7.03 or 7.04 of
this Article VII, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys'. fees) actually and
reasonably incurred by him in connection therewith.
SECTION 7.07 Advancement of Expenses. Expenses incurred by an officer or
director of the Corporation in defending a civil or criminal action, suit or
proceeding described in Sections 7.01 or 7.02 shall be paid by the Corporation
in advance of the final disposition of such action, suit or proceeding upon
receipt, if required by Delaware law, of an undertaking by or on behalf of the
director or officer to repay such amount unless it shall be determined
ultimately that he is entitled to be indemnified by the Corporation as
authorized in this Article VII. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the Board deems
appropriate.
Notwithstanding the foregoing, unless otherwise determined pursuant to
Section 7.08 of this Article VII, no advance shall be made by the Corporation if
a determination is reasonably and promptly made (1) by the Board by a majority
vote of a quorum consisting of directors who were not parties to the proceeding,
or (2) if such quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, that the facts known to the decision making party at the time such
determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the Corporation.
SECTION 7.08 Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and officers
under this Article VII shall be deemed to be contractual rights and be effective
to the same extent and as if provided for in a contract between the Corporation
and the director or officer. Any right to indemnification or advances granted by
this Article VII to a director or officer shall be enforceable by or on behalf
of the person holding such right in any court ofcompetent jurisdiction if (i)
the claim for indemnification or advances is denied, in whole or in part, or
(ii) no disposition of such claim is made within ninety (90) days of request
therefor. The claimant in such enforcement action, if successful in whole or in
part, shall be entitled to be paid also the expense of prosecuting his claim.
The Corporation shall be entitled to raise as a defense to any such action that
the claimant has not met the standards of conduct that make it permissible under
the Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed. Neither the failure of the Corporation
(including its Board, independent legal counsel or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he has
met the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation (including the
Board, independent legal counsel or its stockholders) that the claimant has not
met such applicable standard of conduct, shall be a defense to the action or
create a presumption that claimant has not met the applicable standard of
conduct.
SECTION 7.09 Non-Exclusivity. The indemnification provided by this Article
VII shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors administrators of such a person.
SECTION 7.10 Insurance. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article VII.
SECTION 7.11 Successors. For the purposes of this Article VII, references
to "the Corporation" include constituent corporations absorbed in a
consolidation or merger as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another constituent corporation,
partnership, joint venture, limited liability company, trust or other enterprise
shall stand in the same position under the provisions of this Article VII with
respect to the resulting or surviving corporation as he would if he had served
the resulting or surviving corporation in the same capacity.
SECTION 7.12 Certain Definitions. For purposes of this Article VII,
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article VII.
SECTION 7.13 Saving Clause. If this Article VII or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Article VII
that shall not have been invalidated, or by any other applicable law.
ARTICLE VIII
Miscellaneous
SECTION 8.01 Seal. The Board shall provide a corporate seal, which shall be
in the form of a circle and shall bear the name of the Corporation and words and
figures showing that the Corporation was incorporated in the State of Delaware
and the year of incorporation.
SECTION 8.02 Waiver of Notices. Whenever notice is required to be given by
these Bylaws or the Certificate of Incorporation or by law, the person entitled
to said notice may waive such notice in writing, either before or after the time
stated therein, and such waiver shall be deemed to be equivalent to notice.
SECTION 8.03 Amendments. These Bylaws, or any of them except Section 3.02,
may be altered, amended or repealed,and new Bylaws may be made, (i) by the
Board, by vote of a majority of the number of directors then in office as
directors, acting at any meeting or pursuant to a written consent of the Board,
or (ii) by the stockholders, at any annual meeting or pursuant to a written
consent of stockholders, without previous notice, or at any special meeting of
stockholders, provided that notice of such proposed amendment, modification,
repeal or adoption is given in the notice of special meeting. Any Bylaws made or
altered by the stockholders may be altered or repealed by either the Board or
the stockholders.
