<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
20549
-------------------------------
FORM 10-Q
QUARTERLY REPORTS UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended February 28, 1998
Commission File No. 0-6936-3
WD-40 COMPANY
(Exact Name of Registrant as specified in its charter)
California 95-1797918
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1061 Cudahy Place, San Diego, California 92110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619) 275-1400
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 issuer's classes of
common stock, as of the latest practicable date:
Common Stock as of April 7, 1998 15,630,408
<PAGE>
Part I Financial Information
Item 1. Financial Statements
WD-40 COMPANY
CONSOLIDATED CONDENSED BALANCE SHEET
ASSETS
------
<TABLE>
<CAPTION>
(Unaudited)
February 28, 1998 August 31, 1997
----------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 13,229,000 $ 10,868,000
Trade accounts receivable, less allowance for
cash discounts and doubtful accounts
of $769,000 and $495,000 30,423,000 22,608,000
Product held at contract packagers 2,541,000 2,132,000
Inventories 1,866,000 3,341,000
Other current assets 2,518,000 2,694,000
------------ -------------
Total current assets 50,577,000 41,643,000
Property, plant, and equipment, net 3,614,000 4,160,000
Long-term investments 3,544,000 3,711,000
Goodwill, net 12,949,000 13,435,000
Other assets 1,535,000 2,469,000
------------ -------------
$ 72,219,000 $ 65,418,000
------------ -------------
------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 8,309,000 $ 6,683,000
Accrued payroll and related expenses 2,573,000 2,383,000
Income taxes payable 4,126,000 1,546,000
Current portion of long-term debt 885,000 756,000
------------ -------------
Total current liabilities 15,893,000 11,368,000
Long-term debt 861,000 1,671,000
Deferred employee benefits 1,059,000 1,039,000
------------ -------------
17,813,000 14,078,000
Shareholders' equity:
Common stock, no par value, 18,000,000 shares
authorized -- shares issued and outstanding
of 15,622,932 and 15,561,942 9,505,000 8,459,000
Paid-in capital 321,000 321,000
Retained earnings 43,994,000 42,403,000
Cumulative translation adjustment 586,000 157,000
------------ -------------
Total shareholders' equity 54,406,000 51,340,000
------------ -------------
$ 72,219,000 $ 65,418,000
------------ -------------
------------ -------------
</TABLE>
(See accompanying notes to consolidated condensed financial statements.)
2
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WD-40 COMPANY
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ -------------------------------
February 28 February 28 % February 28 February 28 %
----------- ----------- ----------- -----------
1998 1997 Change 1998 1997 Change
----------- --------------------- ----------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 39,174,000 $ 39,806,000 (1.6%) $ 72,771,000 $ 68,071,000 6.9%
Cost of product sold 16,754,000 17,472,000 (4.1%) 31,072,000 28,891,000 7.5%
------------ ------------ ------------ ------------
Gross profit 22,420,000 22,334,000 0.4% 41,699,000 39,180,000 6.4%
------------ ------------ ------------ ------------
Operating expenses:
Selling, general & administrative,
and amortization expense 8,497,000 7,868,000 8.0% 16,407,000 15,482,000 6.0%
Advertising & sales promotions 4,021,000 3,741,000 7.5% 7,092,000 5,986,000 18.5%
------------ ------------ ------------ ------------
Income from operations 9,902,000 10,725,000 (7.7%) 18,200,000 17,712,000 2.8%
------------ ------------ ------------ ------------
Other income (expense) (9,000) (460,000) (98.0%) (143,000) (818,000) (82.5%)
------------ ------------ ------------ ------------
Income before income taxes 9,893,000 10,265,000 (3.6%) 18,057,000 16,894,000 6.9%
Provision for income taxes 3,559,000 3,700,000 (3.8%) 6,498,000 6,089,000 6.7%
------------ ------------ ------------ ------------
Net Income $ 6,334,000 $ 6,565,000 (3.5%) $ 11,559,000 $ 10,805,000 7.0%
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Basic earnings per share $ 0.41 $ 0.42 $ 0.74 $ 0.70
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted earnings per share $ 0.40 $ 0.42 $ 0.74 $ 0.69
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Basic common equivalent shares 15,590,237 15,499,334 15,576,963 15,480,544
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted common equivalent shares 15,664,618 15,586,114 15,654,407 15,561,511
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
(See accompanying notes to consolidated condensed financial statements.)
3
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WD-40 COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------------------------
February 28, 1998 February 28, 1997
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 11,559,000 $ 10,805,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization expense 1,074,000 1,066,000
Loss on sale of equipment 225,000 61,000
Changes in assets and liabilities:
Accounts receivable (7,806,000) (9,473,000)
Product held at contract packagers (409,000) (235,000)
Inventories 1,499,000 29,000
Other assets 1,347,000 352,000
Accounts payable and accrued expenses 2,041,000 2,392,000
Income taxes payable 2,576,000 1,706,000
Long-term deferred employee benefits 21,000 38,000
------------- --------------
Net cash provided by operating activities 12,127,000 6,741,000
------------- --------------
Cash flows from investing activities:
Decrease in short-term investments 0 104,000
Proceeds from sale of equipment 520,000 197,000
Capital expenditures (835,000) (657,000)
------------- --------------
Net cash used in investing activities (315,000) (356,000)
------------- --------------
Cash flows from financing activities:
Proceeds from issuance of common stock 1,046,000 1,408,000
Repayment of long-term debt (680,000) 0
Dividends paid (9,968,000) (9,592,000)
------------- --------------
Net cash used in financing activities (9,602,000) (8,184,000)
------------- --------------
Effect of exchange rate changes on cash
and cash equivalents 151,000 12,000
------------- --------------
Increase in cash and cash equivalents 2,361,000 (1,787,000)
Cash and cash equivalents at beginning of period 10,868,000 6,748,000
------------- --------------
Cash and cash equivalents at end of period $ 13,229,000 $ 4,961,000
------------- --------------
------------- --------------
</TABLE>
(See accompanying notes to consolidated condensed financial statements.)
4
<PAGE>
WD-40 COMPANY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FEBRUARY 28, 1998
-----------------
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, WD-40 Company Ltd. (U.K.), WD-40 Products
(Canada) Ltd. and WD-40 Company (Australia) Pty. Ltd. All significant
intercompany transactions and balances have been eliminated.
The financial statements included herein have been prepared by the Company,
without audit, according to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations.
In the opinion of management, the unaudited financial information for the
interim periods shown reflects all adjustments (which include only normal,
recurring adjustments) necessary for a fair presentation thereof. These
financial statements and notes thereto should be read in conjunction with the
financial statements and notes thereto included in the Company's 1997 Annual
Report to Shareholders, which statements and notes are incorporated by reference
in the Company's Annual Report on Form 10-K for the year ended August 31, 1997.
USE OF ESTIMATES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share", which
establishes new standards for computing earnings per share and which became
effective for financial statements for periods ending after December 15, 1997,
including interim periods. Under the new requirements, historically reported
"primary" and "fully diluted" earnings per share have been replaced with "basic"
and "diluted" earnings per share.
Basic earnings per share is based upon the weighted average number of common
shares outstanding during the period. Diluted earnings per share is based
upon the weighted average number of common shares outstanding and dilutive
common stock equivalents outstanding during the period. The Company's common
stock equivalents consist of options granted under the Company's stock option
plans, which are included in the diluted earnings per share calculations
using the treasury stock method.
Common stock equivalents of 74,381 and 86,780 shares for the three months ended
February 28, 1998 and 1997 were used to calculate diluted earnings per share.
Common stock equivalents of 77,444 and 80,967 shares for the six months ended
February 28, 1998 and 1997 were used to calculate diluted earnings per share.
There were no reconciling items in calculating the numerator for basic and
diluted earnings per share for any of the periods presented.
RECLASSIFICATIONS
Certain fiscal 1997 amounts have been reclassified to conform to the current
year presentation.
5
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(CONTINUED)NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 2 - COMMITMENTS AND CONTINGENCIES
The Company is party to various claims, legal actions and complaints, including
product liability litigation, arising in the ordinary course of business. In
the opinion of management, all such matters are adequately covered by insurance
or will not have a material adverse effect on the Company's financial position
or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SECOND QUARTER OF FISCAL YEAR 1998 COMPARED TO SECOND QUARTER OF
FISCAL YEAR 1997
Consolidated net sales for the quarter were $39,174,000 a decrease
of 1.6% or $632,000 from the comparable prior year period. The
sales shortfall is attributable to the slowdown in the Asian markets
and in the Middle East.
Cost of product sold decreased to 42.8% of net sales this quarter
versus 43.9% in the comparable prior year period. Management
believes that costs have stabilized and that there will be minimal
inflationary impact for the remainder of fiscal year 1998.
Selling, general, administrative, and amortization expenses
increased $629,000 or 8.0% in the second quarter of fiscal year 1998
as compared to the same period in 1997. Such expenses as a
percentage of net sales increased this quarter to 21.7% versus
19.8% in the comparable prior year period. The increase is due
primarily to freight costs and approximately $325,000 of "one time"
expenses in both Europe and the Americas related to employee
relocation and operational restructuring.
Advertising and sales promotion expenses increased $280,000 or 7.5%,
in the second quarter of fiscal year 1998 as compared to the same
period in 1997. Such expense as a percentage of net sales increased
to 10.3% versus 9.4% in the comparable prior year period. The
increase is due to the timing of overall promotional activities and
the increased investment in the development of the new brand T.A.L. 5.
These expenses are expected to be within the historical level of
10% of sales at fiscal year end.
Other income, net, increased by $451,000, resulting primarily from
increased interest income, net, and a reduction of currency
translation losses. Currency translation losses were reduced to
$114,000 for the quarter, versus currency translation losses of
$459,000 in the comparable prior year period.
Net income decreased $231,000 or 3.5%. Net income as a percentage
of net sales this quarter was 16.2% versus 16.5% in the comparable
prior year period.
WD-40 COMPANY (U.S.)
Net sales decreased $232,000 or .8% from the comparable prior year
period. The primary reason for the sales decrease was the slowdown
in the Asian markets.
6
<PAGE>
ITEM 2. (CONTINUED) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cost of product sold decreased to 43.5% of net sales this quarter as
compared to 45.8% in the same period in fiscal year 1997, primarily
due to the mix of sales generated by promotional packaging, export
sales and 3-IN-ONE Oil.
Selling, general, and administrative expenses increased $828,000 or
17.3% to 20.2% of sales versus 17.1% in the same period in 1997,
reflecting increased freight costs, employee relocation and
operational restructuring.
Advertising and sales promotion expenses increased 1.9% or $52,000
to 10.2% of sales compared to 9.9% for the same period in the prior
year, primarily due to the timing of promotional activities.
As a result, net income decreased by $454,000 or 8.2%.
WD-40 COMPANY LTD. (U.K.)
Net sales for the quarter decreased $312,000 or 3.2% compared to the
same quarter in fiscal 1997. Sales to the Middle East were down 40%
because of large buying during the second quarter of the prior year.
Cost of product sold decreased slightly to 41.9% of net sales versus
42.0% in the comparable prior year period.
As a percentage of net sales, selling, general, and administrative
expenses were 22.8% of sales versus 24.3% in the comparable prior
year period, resulting from reduced commissions to the Middle East,
lower warehousing costs due to supply chain improvements and lower
expatriate staffing costs. Advertising and sales promotion expenses
increased to 10.7% versus 7.7% in 1997, primarily due to the timing
of promotional activities.
Foreign currency translations resulted in a loss of $115,000
compared to losses of $459,000 in the second quarter of 1997.
As a result of the factors described above, net income increased
$223,000 or 31.3%.
OTHER FOREIGN SUBSIDIARIES
Net sales decreased $328,000 or 12.0% from the comparable prior year
period, due primarily to decreased sales in the Canadian Market.
Cost of product sold as a percentage of net sales was 49.0% versus
46.1% for the same period in 1997, due to the impact of foreign
currency fluctuations and the mix of sales in the Canadian market.
Selling, general, and administrative expenses increased by $18,000
or 16.1% of sales versus 13.5% in the comparable prior year period.
Advertising and sales promotion expenses decreased slightly to 7.9%
of sales from 8.0% in the second quarter of 1997.
Net income decreased by $127,000, or 27.1% due primarily to
decreased sales in the Canadian market and the lower gross profit
percentage.
7
<PAGE>
ITEM 2. (CONTINUED) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SIX MONTHS FISCAL YEAR 1998 VERSUS SIX MONTHS FISCAL YEAR 1997
Consolidated net sales were $72,771,000 an increase of $4,700,000 or
6.9% over the same fiscal year period in 1997.
Cost of product sold as a percentage of net sales remained
consistent at 42.7% versus 42.4% in the same six month period in the
prior year.
Selling, general, administrative, and amortization expenses
increased $925,000 or 6.0% but remained consistent at 22.5% sales,
in comparison to 22.7% in the comparable prior year period.
Advertising and sales promotion expenses increased $1,106,000 or
18.5% and, as a percentage of sales increased to 9.7% of sales, in
comparison to 8.8% in the same period in fiscal year 1997. The
increase is due to the timing of overall promotional activities and
to the increased investment in the T.A.L. 5 brand.
Other income, net, increased by $675,000 primarily due to a decrease
in foreign currency translation losses. Foreign currency
translations resulted in losses of $194,000 in the current year
period compared to losses of $891,000 in the same six month period
in 1997.
Net income increased $754,000 or 7.0% due to the items described above.
WD-40 COMPANY (U.S.)
Net sales increased $3,652,000 or 7.9%. The primary reason for the
sales increase was an improvement in the U.S. domestic market.
Cost of product sold as a percent of net sales decreased to 43.5%
versus 43.8% in the prior year period.
Selling, general, and administrative expenses as a percentage of net
sales increased to 21.2% versus 20.5% in the prior year period.
Advertising and promotion expenses as a percentage of net sales
increased to 9.8% versus 9.3% in the prior year period, primarily due
to the timing of promotional activities.
Net income increased $384,000 or 4.4%, due largely to the increased
sales as described above.
WD-40 COMPANY LTD. (U.K.)
Net sales increased $1,031,000 or 5.7% compared to the prior year
period, with double digit growth in the German and Spanish sectors.
Cost of product sold as a percent of net sales increased slightly to
41.9% versus 41.7% in the prior year period.
Selling, general, and administrative expenses as a percentage of net
sales decreased to 23.0% versus 25.4% in the prior year period,
primarily due to improved volume and lower warehousing and
distribution costs following supply chain changes implemented in
the prior year.
8
<PAGE>
ITEM 2. (CONTINUED) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Advertising and promotional expenses as a percentage of net sales
increased to 9.5% versus 6.9% in the prior year period, primarily due
to the timing of promotional activities.
Foreign currency fluctuations resulted in translation losses of
$195,000 in the first six months of fiscal 1998 compared to losses
of $891,000 in the prior year period.
Net income increased $641,000 or 48.4%, due to the items described
above.
OTHER FOREIGN SUBSIDIARIES
Net sales decreased $407,000 or 8.5%, due primarily to decreased
sales in the Canadian market.
Cost of product sold as a percentage of sales increased to 47.6%
from 46.5% in the prior year period.
Advertising and sales promotion expenses decreased $79,000 or 17.9%,
primarily due to the timing of promotional activities.
Net income decreased by $110,000 or 15.1%, largely due to the
decreased sales as described above.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents increased $2,361,000 during the six months
ended February 28, 1998 versus a decrease of $1,787,000 for the same
period last year. The increase in the current year period was
primarily due to an increase in cash flows provided by operating
activities.
LIQUIDITY AND CAPITAL RESOURCES
The current ratio of 3.2-to-one on February 28, 1998 represents a
decrease from the current ratio of 3.7-to-one at August 31, 1997. An
increase in trade accounts payable related to timing of sales and
promotional activities was largely responsible for the ratio
decrease.
The Company's primary source of liquidity is funds provided by
operations. The Company's cash flows from operations are expected
to provide sufficient funds to meet both short and long-term
operating needs, as well as future dividends. Capital expenditures
for fiscal year 1998 are expected to total approximately $1,000,000,
principally for improving management information systems and
facilities upgrades in Europe and the United States.
YEAR 2000 ISSUE
Many existing computer programs were designed and developed using
only two digits to identify a year in the date field. If not
corrected, many computer applications could fail or create erroneous
results by or at the Year 2000 (the "Year 2000 Issue"). The Company
has developed comprehensive global plans to assess and address, in a
timely manner, its business processes involving information
technology, supply chain management and other key service providers.
The majority of the Company's order processing, production,
distribution, sales, human resource and financial systems are Year
2000 compliant, with plans for the remaining systems to be Year 2000
compliant by December 1998. The cost impact of completing the
required changes is not expected to be material.
9
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PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit No. Description
----------- -----------
Articles of Incorporation and By-Laws
3 (a) The Restated Articles of Incorporation are incorporated
by reference from the Registrant's Form 10-K Annual
Report filed November 13, 1995, Exhibit 3 (a) thereto.
3 (b) The Certificate of Amendment of Restated Articles of
Incorporation is incorporated by reference from the
Registrant's Form 10-K/A filed December 5, 1997,
Exhibit 3 (b) thereto.
3 (c) Restated By-Laws
27 Financial Data Schedule (electronic filing only)
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter
ended February 28, 1998.
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.
WD-40 COMPANY
Registrant
Date: April 14, 1998 /s/ Garry O. Ridge
-----------------------------
Garry O. Ridge
President and Chief Financial Officer
(Principal Financial Officer)
10
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RESTATED BY-LAWS
FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR
ITS ARTICLES OF INCORPORATION
OF
WD-40 COMPANY
A CALIFORNIA CORPORATION
ARTICLE I
OFFICES
Section 1. PRINCIPAL EXECUTIVE OFFICE The principal executive
office of the corporation is hereby fixed and located at 1061 Cudahy Place, San
Diego, California 92110. The Board of Directors (herein called the "Board") is
hereby granted full power and authority to change said principal executive
office from one location to another. Any such change shall be noted on the
By-Laws opposite this Section, or this Section may be amended to state the new
location.
Section 2. OTHER OFFICES. Branch or subordinate offices may at any
time be established by the Board at any place or places.
ARTICLE II
SHAREHOLDERS
Section 1. PLACE OF MEETING Meetings of shareholders shall be held
either at the principal executive office of the corporation or at any other
place within or without the State of California which may be designated either
by the Board or by the written consent of all persons entitled to vote thereat,
given either before or after the meeting and filed with the Secretary.
Section 2. ANNUAL MEETINGS. The annual meeting of shareholders shall
be held on that Tuesday falling the closest to December 15 of each year at 2
o'clock P.M., local time, or such other date or such other time as may be fixed
by the Board; provided however, that should said day fall upon a legal holiday
observed by the corporation at its principal executive office, then any such
annual meeting of shareholders shall be held at the same time and place on the
next day ensuing which is a full business day. At such meetings directors shall
be elected and any other proper business may be transacted.
Section 3. SPECIAL MEETINGS. Special meetings of the shareholders
may be called at any time by the Board, the Chairman of the Board, the
President, or by the holders of shares entitled to cast not less than 10 percent
of the votes at such meeting. Upon request in writing to the Chairman of the
Board, the President, any Vice President or the Secretary by any person (other
than the Board) entitled to call a special meeting of shareholders, the officer
-1-
<PAGE>
forthwith shall cause notice to be given to the shareholders entitled to vote
that a meeting will be held at a time requested by the person or persons calling
the meeting, not less than 35 nor more than 60 days after the receipt of the
request. If the notice is not given within 20 days after receipt of the
request, the persons entitled to call the meeting may give the notice.
Section 4. NOTICE OF ANNUAL OR SPECIAL MEETING. Written notice of
eachannual or special meeting of shareholders shall be given not less than 10
nor more than 60 days before the date of the meeting to each shareholder
entitled to vote thereat. Such notice shall state the place, date, and hour of
the meeting and (i) in the case of a special meeting the general nature of the
business to be transacted, and no other business may be transacted, or (ii) in
the case of the annual meeting, those matters which the Board, at the time of
the mailing of the notice, intends to present for action by the shareholders,
but, subject to the provisions of applicable law, any proper matter may be
presented at the meeting for such action. The notice of any meeting at which
directors are to be elected shall include the names of nominees intended at the
time of the notice to be presented by the Board for election.
Notice of a shareholders meeting shall be given either personally or
by first class mail or by other means of written communication, addressed to the
shareholder at the address of such shareholder appearing on the books of the
corporation or given by the shareholder to the corporation for the purpose of
notice; or, if no such address appears or is given, at the place where the
principal executive office of the corporation is located or by publication at
least once in a newspaper of general circulation in the county in which the
principal executive office is located. The notice shall be deemed to have been
given at the time when delivered personally or deposited in the mail or sent by
other means of written communication.
Section 5. QUORUM. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders. The shareholders present at a duly called or held meeting at
which a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum, if any action taken (other than adjournment) is approved by at least a
majority of the shares required to constitute a quorum.
Section 6. ADJOURNED MEETING AND NOTICE THEREOF. Any shareholders'
meeting, whether or not a quorum is present, may be adjourned from time to time
by the vote of a majority of the shares, the holders of which are either present
in person or represented by proxy thereat, but in the absence of a quorum
(except as provided in Section 5 of this Article) no other business may be
transacted at such meeting.
It shall not be necessary to give any notice of the time and place of
the adjourned meeting or of the business to be transacted thereat, other than by
announcement at the meeting at which such adjournment is taken; provided,
however, when any shareholders' meeting is adjourned for more than 45 days or,
if after adjournment a new record date is fixed for the adjourned meeting,
notice of the adjourned meeting shall be given as in the case of an original
meeting.
Section 7. VOTING. The shareholders entitled to notice of any
meeting or to vote at any such meeting shall be only persons in whose name
shares stand on the stock records of the corporation on the record date
determined in accordance with Section 8 of this Article.
Voting shall in all cases be subject to the provisions of Chapter 7 of
the California General Corporation Law and to the following provisions:
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<PAGE>
(a) Subject to clause (g), shares held by an administrator,
executor, guardian, conservator, or custodian may be voted by such holder
either in person or by proxy, without a transfer of such shares into the
holder's name; and shares standing in the name of a trustee may be voted by
the trustee, either in person or by proxy, but no trustee shall be entitled
to vote shares held by such trustee without a transfer of such shares into
the trustee's name.
(b) Shares standing in the name of a receiver may be voted by
such receiver; and shares held by or under the control of a receiver may be
voted by such receiver without the transfer thereof into the receiver's name if
authority to do so is contained in the order of the court by which such
receiver was appointed.
(c) Subject to the provisions of Section 705 of the California
General Corporation Law, and except where otherwise agreed in writing between
the parties, a shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
(d) Shares standing in the name of a minor may be voted and
the corporation may treat all rights incident thereto as exercisable by the
minor, in person or by proxy, whether or not the corporation has notice, actual
or constructive, of the nonage, unless a guardian of the minor's property has
been appointed and written notice of such appointment given to the corporation.
(e) Shares standing in the name of another corporation,
domestic or foreign, may be voted by such officer, agent or proxyholder as the
by-laws of such other corporation may prescribe or, in the absence of such
provision, as the Board of Directors of such other corporation may determine or,
in the absence of such determination, by the chairman of the Board, president or
any vice president of such other corporation, or by any other person authorized
to do so by the Board, president or any vice president of such other
corporation. Shares which are purported to be voted or any proxy purported to
be executed in the name of a corporation (whether or not any title of the person
signing is indicated) shall be presumed to be voted or the proxy executed in
accordance with the provisions of this subdivision, unless the contrary is
shown.
(f) Shares of the corporation owned by any subsidiary shall
not be entitled to vote on any matter.
(g) Shares held by the corporation in a fiduciary capacity,
and shares of the corporation held in a fiduciary capacity by any subsidiary,
shall not be entitled to vote on any matter, except to the extent that the
settlor or beneficial owner possesses and exercises a right to vote or to give
the corporation binding instructions as to how to vote such shares.
(h) If shares stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, husband and wife as community property, tenants by the entirety,
voting trustees, persons entitled to vote under a shareholder voting agreement
or otherwise, or if two or more persons (including proxyholders) have the same
fiduciary relationship respecting the same shares, unless the secretary of the
corporation is given written notice to the contrary and is furnished with a copy
of the instrument or order appointing them or creating the relationship wherein
it is so provided, their acts with respect to voting shall have the following
effect:
(i) If only one votes, such act binds all;
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(ii) If more than one vote, the act of the majority
so voting binds all;
(iii) If more than one vote, but the vote is evenly
split on any particular matter, each faction may vote the securities in
question proportionately.
If the instrument so filed or the registration of the shares shows that any such
tenancy is held in unequal interests, a majority or even split for the purpose
of this section shall be a majority or even split in interest.
Subject to the following sentence and to the provisions of Section 708
of the California General Corporation Law, every shareholder entitled to vote at
any election of directors may cumulate such shareholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the shareholder's shares are
entitled, or distribute the shareholder's votes on the same principle among as
many candidates as the shareholder thinks fit. No shareholder shall be entitled
to cumulate votes for any candidate or candidates pursuant to the preceding
sentence unless such candidate or candidates' names have been placed in
nomination prior to the voting and the shareholder has given notice, at the
meeting prior to the voting of the shareholder's intention to cumulate the
shareholder's votes. If any one shareholder has given such notice, all
shareholders may cumulate their votes for candidates in nomination.
Elections need not be by ballot; provided however, that all elections
for directors must be by ballot upon demand made by a shareholder at the meeting
and before the voting begins.
In any election of directors, the candidates receiving the highest
number of votes of the shares entitled to be voted for them up to the number of
directors to be elected by such shares are elected.
Section 8. RECORD DATE. The Board may fix, in advance, a record
date for the determination of the shareholders entitled to notice of any
meeting or to vote or entitled to receive payment of any dividend or other
distribution, or any allotment of rights, or to exercise rights in respect to
any other lawful action. The record date so fixed shall be not more than 60
nor less than 10 days prior to the date of the meeting nor more than 60 days
prior to any other action. When a record date is so fixed, only shareholders
of record on that date are entitled to notice of and to vote at the meeting
or to receive the dividend, distribution, or allotment of rights, or to
exercise of the rights, as the case may be, notwithstanding any transfer of
shares on the books of the corporation after the record date. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting unless
the Board fixes a new record date for the adjourned meeting. The Board shall
fix a new record date if the meeting is adjourned for more than 45 days.
If no record date is fixed by the Board, the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held. The record date for determining shareholders for any purpose other than
set forth in this Section 8 or Section 10 of this Article shall be at the close
of business on the day on which the Board adopts the resolution relating
thereto, or the sixtieth day prior to the date of such other action, whichever
is later.
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Section 9. CONSENT OF ABSENTEES. The transactions of any meeting of
shareholders, however called and noticed, and wherever held, are as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person or by
proxy, signs a written waiver of notice, or a consent to the holding of the
meeting or an approval of the minutes thereof. All such waivers, consents, or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Neither the business to be transacted at nor the purpose
of any regular or special meeting of shareholders need be specified in any
written waiver of notice, except as provided in Section 601(f) of the California
General Corporation Law.
Section 10. ACTION WITHOUT MEETING. Subject to Section 603 of the
California General Corporation Law, any action which, under any provision of the
California General Corporation Law, may be taken at any annual or special
meeting of shareholders, may be taken without a meeting and without prior notice
if a consent in writing, setting forth the action so taken, shall be signed by
the holders of outstanding shares 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. Unless a
record date for voting purposes be fixed as provided in Section 8 of this
Article, the record date for determining shareholders entitled to give consent
pursuant to this Section 10, when no prior action by the Board has been taken,
shall be the day on which the first written consent is given.
Section 11. PROXIES. Every person entitled to vote shares has the
right to do so either in person or by one or more persons authorized by a
written proxy executed by such shareholder and filed with the Secretary. Any
proxy duly executed is not revoked and continues in full force and effect until
revoked by the person executing it prior to the vote pursuant thereto by a
writing delivered to the corporation stating that the proxy is revoked or by a
subsequent proxy executed by, or by attendance at the meeting and voting in
person by, the person executing the proxy; provided, however, that no proxy
shall be valid after the expiration of 11 months from the date of its execution
unless otherwise provided in the proxy.
Section 12. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the Board may appoint any persons other than nominees for office
as inspectors of election to act at such meeting and any adjournment thereof.
If inspectors of election be not so appointed, or if any persons so appointed
fail to appear or refuse to act, the chairman of any such meeting may, and on
the request of any shareholder or shareholder's proxy shall, make such
appointment at the meeting. The number of inspectors shall be either one or
three. If appointed at a meeting on the request of one or more shareholders or
proxies, the majority of shares present shall determine whether one or three
inspectors are to be appointed.
The duties of such inspectors shall be as prescribed by Section 707(b)
of the California General Corporation Law and shall include: determining the
number of shares outstanding and the voting power of each; the shares
represented at the meeting, the existence of a quorum; the authenticity,
validity, and effect of proxies; receiving votes, ballots, or consents; hearing
and determining all challenges and questions in any way arising in connection
with the right to vote; counting and tabulating all votes or consents,
determining when the polls shall close; determining the result; and doing such
acts as may be proper to conduct the election or vote with fairness to all
shareholders. If there are three inspectors of election, the decision, act, or
certificate of a majority is effective in all respects as the decision, act, or
certificate of all.
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ARTICLE III
DIRECTORS
Section 1. POWERS. Subject to limitations of the Articles of
Incorporation and of the California General Corporation Law relating to action
required to be approved by the shareholders or by the outstanding shares, the
business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the Board. The Board may
delegate the management of the day-to-day operation of the business of the
corporation to a management company or other person provided that the business
and affairs of the corporation shall be managed and all corporate powers shall
be exercised under the ultimate direction of the Board. Without prejudice to
such general powers, but subject to the same limitations, it is hereby expressly
declared that the Board shall have the following powers in addition to the other
powers enumerated in these By-Laws:
(a) To select and remove all the officers, agents, and
employees of the corporation, prescribe the powers and duties for them as may
not be inconsistent with law, or with the Articles or these By-Laws, fix their
compensation, and require from them security for faithful service.
(b) To conduct, manage, and control the affairs and business
of the corporation and to make such rules and regulations therefor not
inconsistent with law, or with the Articles or these By-Laws, as they may deem
best.
(c) To adopt, make, and use a corporate seal, and to prescribe
the forms of certificates of stock, and to alter the form of such seal and of
such certificates from time to time as in their judgment they may deem best.
(d) To authorize the issuance of shares of stock of the
corporation from time to time, upon such terms and for such consideration as may
be lawful.
(e) To borrow money and incur indebtedness for the purpose of
the corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations, or other evidences of debt and securities therefor.
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS The authorized
number of directors shall be not less than 9 nor more than 12 until changed by
amendment of the Articles or by a By-Law duly adopted by the shareholders. The
exact number of directors shall be fixed, within the limits specified, by the
Board or the shareholders in the same manner provided in these By-Laws for the
amendment hereof. The exact number of directors shall be 10 until changed as
provided in this Section 2.
Section 3. ELECTION AND TERM OF OFFICE. The directors shall be
elected at each annual meeting of shareholders but if any such annual meeting is
not held or the directors are not elected thereat, the directors may be elected
at any special meeting of shareholders held for that purpose. Each director
shall hold office until the next annual meeting and until a successor has been
elected and qualified.
Section 4. VACANCIES. Any director may resign effective upon giving
written notice to the Chairman of the Board, the President, Secretary, or the
Board, unless the notice specifies a later time for the effectiveness of such
resignation. If the resignation is
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effective at a future time, a successor may be elected to take office when the
resignation becomes effective.
Vacancies in the Board, including those existing as a result of a
removal of a director, may be filled by approval of the Board or, if the number
of directors then in office is less than a quorum, by (1) the unanimous written
consent of the directors then in office, (2) the affirmative vote of a majority
of the directors then in office at a meeting held pursuant to notice or waivers
of notice as required for special meetings, or (3) by a sole remaining
director. Except as provided herein, each director so elected shall hold office
until the next annual meeting and until such director's successor has been
elected and qualified.
If, after the filling of any vacancy by the directors, the directors
then in office who have been elected by the shareholders shall constitute less
than a majority of the directors then in office, the provisions of Section
305(c) of the California General Corporation Law relating to the rights of
shareholders with respect to the election of directors shall apply.
A vacancy or vacancies in the Board shall be deemed to exist in case
of the death, resignation, or removal of any director, or if the authorized
number of directors be increased, or if the shareholders fail, at any annual or
special meeting of shareholders at which any director or directors are elected,
to elect the full authorized number of directors to be voted for at that
meeting.
The Board may declare vacant the office of a director who has been
declared of unsound mind by an order of court or convicted of a felony.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors. Any such election by
written consent requires the consent of a majority of the outstanding shares
entitled to vote. If the Board accepts the resignation of a director tendered
to take effect at a future time, the Board or the shareholders shall have power
to elect a successor to take office when the resignation is to become effective.
Section 5. PLACE OF MEETING. Regular or special meetings of the
Board shall be held at any place within or without the State of California which
has been designated from time to time by the Board. In the absence of such
designation regular meetings shall be held at the principal executive office of
the corporation.
Section 6. REGULAR MEETINGS. Immediately following each annual
meeting of shareholders, the Board shall hold a regular meeting for the purpose
of organization, election of officers, and the transaction of other business.
Other regular meetings of the Board shall be held without notice at
such date, time and place as may be fixed by the Board in advance thereof
following the end of each of the second, third and fourth quarters of the
corporation's fiscal year. If the Board fails to fix the date, time and place
of any such regular meeting, the Chairman of the Board, the President or the
Secretary shall do so and the meeting shall be called and noticed as for special
meetings.
Section 7. SPECIAL MEETINGS. Special meetings of the Board for any
purpose or purposes may be called at any time by the Chairman of the Board, the
President, or the Secretary or by any two directors.
Special meetings of the Board shall be held upon four days' written
notice or 48 hours' notice given personally or by telephone, including a voice
messaging system or other system or technology designed to record and
communicate messages, telegraph, facsimile,
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electronic mail, or other electronic means. Any such notice shall be addressed
or delivered to each director at such director's address or by such means as it
is shown upon the records of the corporation or as may have been given to the
corporation by the director for purposes of notice or, if such address is not
shown on such records or is not readily ascertainable, at the place in which the
meetings of the directors are regularly held.
Section 8. QUORUM. A majority of the authorized number of directors
constitutes a quorum of the Board for the transaction of business, except to
adjourn as hereinafter provided. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board, unless a greater number be
required by law or by the Articles. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
directors, if any action taken is approved by at least a majority of the
required quorum for such meeting.
Section 9. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board may participate in a meeting through use of conference
telephone or similar communications equipment, so long as all members in such
meeting can hear one another.
Section 10. WAIVER OF NOTICE. The transactions of any meeting of the
Board, however called and noticed or wherever held, are as valid as though had
at a meeting duly held after regular call and notice if a quorum be present and
if, either before or after the meeting, each of the directors not present signs
a written waiver of notice, a consent to holding such meeting or an approval of
the minutes thereof. All such waivers, consents, or approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.
Section 11. ADJOURNMENT. A majority of the directors present,
whether or not a quorum is present, may adjourn any directors' meeting to
another time and place. Notice of the time and place of holding an adjourned
meeting need not be given to absent directors if the time and place be fixed at
the meeting adjourned. If the meeting is adjourned for more than 24 hours,
notice of any adjournment to another time or place shall be given prior to the
time of the adjourned meeting to the directors who were not present at the time
of the adjournment.
Section 12. FEES AND COMPENSATION. Directors and members of
committees may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by the Board.
Section 13. ACTION WITHOUT MEETING. Any action required or permitted
to be taken by the Board may be taken without a meeting if all members of the
Board shall individually or collectively consent in writing to such action.
Such consent or consents shall have the same effect as a unanimous vote of the
Board and shall be filed with the minutes of the proceedings of the Board.
Section 14. RIGHTS OF INSPECTION. Every director shall have the
absolute right at any reasonable time to inspect and copy all books, records,
and documents of every kind and to inspect the physical properties of the
corporation and also of its subsidiary corporations, domestic or foreign. Such
inspection by a director may be made in person or by agent or attorney and
includes the right to copy and obtain extracts.
Section 15. COMMITTEES. The Board may appoint one or more
committees, each consisting of two or more directors, and delegate to such
committees any of the authority of the Board except with respect to:
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(a) The approval of any action for which the General
Corporation Law also requires shareholders' approval or approval of the
outstanding shares;
(b) The filling of vacancies on the Board or on any committee;
(c) The fixing of compensation of the directors for serving on
the Board or on any committee;
(d) The amendment or repeal of By-Laws or the adoption of new
By-Laws;
(e) The amendment or repeal of any resolution of the Board
which by its express terms is not so amendable or repealable;
(f) A distribution to the shareholders of the corporation
except at a rate or in a periodic amount or within a price range determined by
the Board;
(g) The appointment of other committees of the Board or the
members thereof.
Any such committee must be appointed by resolution adopted by a
majority of the authorized number of directors and may be designated an
Executive Committee or by such other name as the Board shall specify. The Board
shall have the power to prescribe the manner in which proceedings of any such
committee shall be conducted. In the absence of any such prescription, such
committee shall have the power to prescribe the manner in which its proceedings
shall be conducted. Unless the Board or such committee shall otherwise provide,
the regular and special meetings and other actions of any such committee shall
be governed by the provisions of this Article applicable to meetings and actions
of the Board. Minutes shall be kept of each meeting of each committee.
ARTICLE IV
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a
president, secretary, and a treasurer. The corporation may also have, at the
discretion of the Board, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be elected or appointed in accordance with the provisions
of Section 3 of this Article.
Section 2. ELECTION. The officers of the corporation, except such
officers as may be elected or appointed in accordance with the provisions of
Section 3 or Section 5 of this Article, shall be chosen annually by, and shall
serve at the pleasure of the Board, and shall hold their respective offices
until their resignation, removal, or other disqualification from service, or
until their respective successors shall be elected.
Section 3. SUBORDINATE OFFICERS. The Board may elect, and may
empower the President to appoint, such other officers as the business of the
corporation may require, each of whom shall hold office for such period, have
such authority, and perform such duties as are provided in these By-Laws or as
the Board may from time to time determine.
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Section 4. REMOVAL AND RESIGNATION. Any officer may be removed,
either with or without cause, by the Board of Directors at any time, or, except
in the case of an officer chosen by the Board, by any officer upon whom such
power of removal may be conferred by the Board. Any such removal shall be
without prejudice to the rights, if any, of the officer under any contract of
employment of the officer.
Any officer may resign at any time by giving written notice to the
corporation, but without prejudice to the rights, if any, of the corporation
under any contract to which the officer is a party. Any such resignation shall
take effect at the date of the receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these By-Laws for regular election or appointment to
such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if
there shall be such an officer shall, if present, preside at all meetings of the
Board and exercise and perform such other powers and duties as may be from time
to time assigned by the Board.
Section 7. PRESIDENT. Subject to such powers, if any, as may be
given by the Board to the Chairman of the Board, if there be such an officer,
the President is the general manager and chief executive officer of the
corporation and has, subject to the control of the Board, general supervision,
direction, and control of the business and officers of the corporation. The
President shall preside at all meetings of the shareholders and, in the absence
of the Chairman of the Board, or if there be none, at all meetings of the Board.
The President has the general powers and duties of management usually vested in
the office of president and general manager of a corporation and such other
powers and duties as may be prescribed by the Board.
Section 8. VICE PRESIDENT. In the absence or disability of the
President, the Vice President in order of their rank as fixed by the Board, if
not ranked, the Vice President designated by the Board, shall perform all the
duties of the President, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the President. The Vice Presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the Board.
Section 9. SECRETARY. The Secretary shall keep or cause to be kept,
at the principal executive office and such other place as the Board may order, a
book of minutes of all meetings of shareholders, the Board, and its committees,
with the time and place of holding, whether regular or special, and, if special,
how authorized, the notice thereof given, the names of those present at Board
and committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings thereof. The Secretary shall keep,
or cause to be kept, a copy of the By-Laws of the corporation at the principal
executive office or business office in accordance with Section 213 of the
California General Corporation Law.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, if one be appointed, a share register, or a duplicate share register,
showing the names of the shareholders and their addresses, the number and
classes of shares held by each, the number and date of certificates issued for
the same, and the number and date of cancellation of every certificate
surrendered for cancellation.
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The Secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the Board and of any committees thereof
required by these By-Laws or by law to be given, shall keep the seal of the
corporation in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board.
Section 10. TREASURER. The Treasurer is the chief financial officer
of the corporation and shall keep and maintain, or cause to be kept and
maintained, adequate and correct accounts of the properties and business
transactions of the corporation, and shall send or cause to be sent to the
shareholders of the corporation such financial statements and reports as are by
law or these By-Laws required to be sent to them. The books of account shall at
all times be open to inspection by any director.
The Treasurer shall deposit all moneys and other valuables in the name
and to the credit of the corporation with such depositories as may be designated
by the Board. The Treasurer shall disburse the funds of the corporation as may
be ordered by the Board, shall render to the President and directors, whenever
they request it, an account of all transactions as Treasurer and of the
financial condition of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the Board.
ARTICLE V
OTHER PROVISIONS
Section 1. INSPECTION OF CORPORATE RECORDS
(a) A shareholder or shareholders holding at least five
percent in the aggregate of the outstanding voting shares of the corporation or
who hold at least one percent of such voting shares and have filed a Schedule
14A with the United States Securities and Exchange Commission relating to the
election of directors of the corporation shall have an absolute right to do
either or both of the following:
(i) Inspect and copy the record of shareholders' names
and addresses and shareholdings during usual business hours upon five business
days' prior written demand upon the corporation; or
(ii) Obtain from the transfer agent, if any, for the
corporation, upon five business days' prior written demand and upon the tender
of its usual charges for such a list (the amount of which charges shall be
stated to the shareholder by the transfer agent upon request), a list of the
shareholders' names and addresses who are entitled to vote for the election of
directors and their shareholdings, as of the most recent record date for which
it has been compiled or as of a date specified by the shareholder subsequent to
the date of demand.
(b) The record of shareholders shall also be open to
inspection and copying by any shareholder or holder of a voting trust
certificate at any time during usual business hours upon written demand on the
corporation, for a purpose reasonably related to such holder's interest as a
shareholder or holder of a voting trust certificate.
(c) The accounting books and records and minutes of
proceedings of the shareholders and the Board and committees of the Board shall
be open to inspection upon written demand on the corporation of any shareholder
or holder of a voting trust certificate at any reasonable time during usual
business hours, for a purpose reasonably related to such holder's interests as a
shareholder or as a holder of such voting trust certificate.
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(d) Any inspection and copying under this Article may be made
in person or by agent or attorney.
Section 2. INSPECTION OF BY-LAWS The corporation shall keep in its
principal executive office the original or a copy of these By-Laws as amended to
date which shall be open to inspection by shareholders at all reasonable times
during office hours. If the principal executive office of the corporation is
outside the State of California and the corporation has no principal business
office in such state, it shall upon the written notice of any shareholder
furnish to such shareholder a copy of these By-Laws as amended to date.
Section 3. ENDORSEMENT OF DOCUMENTS; CONTRACTS. Subject to the
provisions of applicable law, any note, mortgage, evidence of indebtedness,
contract, share certificate, conveyance, or other instrument in writing and any
assignment or endorsements thereof executed or entered into between this
corporation and any other person, when signed by the Chairman of the Board, the
President, or any Vice President, and the Secretary, any Assistant Secretary,
the Treasurer or any Assistant Treasurer of this corporation shall be valid and
binding on this corporation in the absence of actual knowledge on the part of
the other person that the signing officers had not authority to execute the
same. Any such instruments may be signed by any other person or persons and in
such manner as from time to time shall be determined by the Board, and, unless
so authorized by the Board, 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 amount.
Section 4. CERTIFICATES OF STOCK. Every holder of shares of the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the Chairman of the Board, the President or a Vice President and
by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary, certifying the number of shares and the class or series of shares
owned by the shareholder. Any or all of the signatures on the certificate may
be facsimile. If any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officers, transfer agent, or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if such
person were an officer, transfer agent, or registrar at the date of issue.
Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the Board may provide; however, that on
any certificate issued to represent any partly paid shares, the total amount of
the consideration to be paid therefor and the amount paid thereon shall be
stated.
Except as provided in this Section no new certificate for shares shall
be issued in lieu of an old one unless the latter is surrendered and canceled at
the same time. The Board may, however, in case any certificate for shares is
alleged to have been lost, stolen, or destroyed, authorize the issuance of a new
certificate in lieu thereof, and the corporation may require that the
corporation be given a bond or other adequate security sufficient to indemnify
it against any claim that may be made against it (including expense or
liability) on account of the alleged loss, theft, or destruction of such
certificate or the issuance of such new certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or any other officer or officers authorized by the Board or the
President are authorized to vote, represent and exercise on behalf of the
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of the corporation.
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The authority herein granted may be exercised either by any such officer in
person or by any other person authorized so to do by proxy or power of attorney
duly executed by said officer.
Section 6. STOCK PURCHASE PLANS. The corporation may adopt and carry
out a stock purchase plan or agreement or stock option plan or agreement
providing for the issue and sale for such consideration as may be fixed of its
unissued shares, or of issued shares acquired or to be acquired, to one or more
of the employees or directors of the corporation or of a subsidiary or to a
trustee on their behalf and for the payment of such shares in installments or at
one time, and may provide for aiding any such persons in paying for such shares
by compensation for services rendered, promissory notes, or otherwise.
Any such stock purchase plan or agreement or stock option plan or
agreement may include, among other features, the fixing of eligibility for
participation therein, the class and price of shares to be issued or sold under
the plan or agreement, the number of shares which may be subscribed for, the
method of payment therefor, the reservation of title until full payment
therefor, the effect of the termination of employment and option or obligation
on the part of the corporation to repurchase the shares upon termination of
employment, restrictions upon transfer of the shares, the time limits of and
termination of the plan, and any other matters, not in violation of applicable
law, as may be included in the plan as approved or authorized by the Board or
any committee of the Board.
Section 7. CONSTRUCTION AND DEFINITIONS. Unless the context
otherwise requires, the general provisions, rules of construction, and
definitions contained in the General Provisions of the California Corporations
Code and in the California General Corporation Law shall govern the construction
of these By-Laws.
ARTICLE VI
INDEMNIFICATION
Section 1. DEFINITIONS. For the purpose of this Article, "agent"
includes any person who is or was a director, officer, employee, or other agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise, or was a
director, officer, employee, or agent of foreign or domestic corporation which
was a predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation; "proceeding" includes any threatened,
pending, or completed action or proceeding, whether civil, criminal,
administrative or investigative; and "expenses" includes attorneys fees and any
expenses of establishing a right to indemnification under Section 4 or Section
5(d).
Section 2. INDEMNIFICATION IN ACTIONS BY THIRD
PARTIES. The corporation shall have the power to indemnify any person who was
or is a party or is threatened to be made a party to any proceeding (other than
an action by or in the right of the corporation to procure a judgment in its
favor) by reason of the fact that such person is or was an agent of the
corporation, against expenses, judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with such proceeding if such
person acted in good faith and in a manner such person reasonably believed to be
in the best interests of the corporation and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of such person was
unlawful. The termination of any 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 the
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<PAGE>
person reasonably believed to be in the best interests of the corporation or
that the person had reasonable cause to believe that the person's conduct was
unlawful.
Section 3. INDEMNIFICATION IN ACTIONS BY OR IN THE RIGHT OF THE
CORPORATION. The corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending, or
completed action by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that such person is or was an agent of the
corporation, against expenses actually and reasonably incurred by such person in
connection with the defense or settlement of such action if such person acted in
good faith, in a manner such person believed to be in the best interests of the
corporation and its shareholders. No indemnification shall be made under this
Section 3:
(a) In respect of any claim, issue, or matter as to which such
person shall have been adjudged to be liable to the corporation in the
performance of such person's duty to he corporation and its shareholders,
unless and only to the extent that the court in which such proceeding is or was
pending shall determine upon application that, in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for
expenses and then only to the extent that the court shall determine;
(b) Of amounts paid in settling or otherwise disposing of a
pending action without court approval; or
(c) Of expenses incurred in defending a pending action which
is settled or otherwise disposed of without court approval.
Section 4. INDEMNIFICATION AGAINST EXPENSES. To the extent that an
agent of the corporation has been successful on the merits in defense of any
proceeding referred to in Sections 2 or 3 or in defense of any claim, issue or
matter therein, the agent shall be indemnified against expenses actually and
reasonably incurred by the agent in connection therewith.
Section 5. REQUIRED DETERMINATIONS. Except as provided in Section 4,
any indemnification under this Article shall be made by the corporation only if
authorized in the specific case, upon a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 by any of the
following:
(a) A majority vote of a quorum consisting of directors who
are not parties to such proceeding;
(b) If such a quorum of directors is not obtainable, by
independent legal counsel in a written opinion;
(c) Approval of the shareholders, with the shares owned by the
person to be indemnified not being entitled to vote thereon; or
(d) The court in which such proceeding is or was pending upon
application made by the corporation or the agent or the attorney or other person
rendering services in connection with the defense, whether or not such
application by the agent, attorney, or other person is opposed by the
corporation.
Section 6. ADVANCE OF EXPENSES Expenses incurred in defending any
proceeding may be advanced by the corporation prior to the final disposition of
such
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<PAGE>
proceeding upon receipt of an undertaking by or on behalf of the agent to repay
such amount if it shall be determined ultimately that the agent is not entitled
to be indemnified as authorized in this Article.
Section 7. OTHER INDEMNIFICATION. The indemnification provided by
this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office, to the extent such additional rights to indemnification are authorized
in the Articles. The rights to indemnity hereunder 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, and administrators of the person.
Nothing contained in this Article shall affect any right to indemnification to
which persons other than such directors and officers may be entitled by contract
or otherwise.
Section 8. FORMS OF INDEMNIFICATION NOT PERMITTED. No
indemnification or advance shall be made under this Article, except as provided
in Section 4 or Section 5(d) in any circumstance where it appears:
(a) That it would be inconsistent with a provision of the
Articles, By-Laws, a resolution of the shareholders or an agreement in effect at
the time of the accrual of the alleged cause of action asserted in the
proceeding in which the expenses were incurred or other amounts were paid, which
prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
Section 9. INSURANCE. The corporation shall have power to purchase
and maintain insurance on behalf of any agent of the corporation against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such whether or not the corporation would have the
power to indemnify the agent against such liability under the provisions of this
Article. The fact that the corporation owns all or a portion of the shares of
the company issuing a policy of insurance shall not render this section
inapplicable if either of the following conditions are satisfied:
(a) If authorized in the Articles, any policy issued is
limited to the extent provided by Subdivision (d) of Section 204 of the
California General Corporation Law; or
(b) (i) The company issuing the insurance policy is
organized, licensed and operated in a manner that complies with the insurance
laws and regulations applicable to its jurisdiction of organization, (ii) the
company issuing the policy provides procedures for processing claims that do not
permit the company to be subject to the direct control of the corporation, and
(iii) the policy issued provides for some manner of risk sharing between the
issuer and the corporation, on the one hand, and some unaffiliated person or
persons, on the other, such as by providing for more than one unaffiliated owner
of the company issuing the policy or by providing that a portion of the coverage
furnished will be obtained from some unaffiliated insurer or reinsurer.
In the event that any insurance maintained by the corporation does not
provide full coverage, either by the requirement of a deductible or co-payment
or by the fact that the expenses actually and reasonably incurred exceed the
insurance limits or for any other reason, the corporation shall have the power
to indemnify that agent or person for the amount not
-15-
<PAGE>
covered by the insurance, provided, however, the corporation shall have the
power to indemnify the agent or person against such liability notwithstanding
any insurance and in accordance with the provisions of this Article.
Section 10. NONAPPLICABILITY TO FIDUCIARIES OF EMPLOYEE BENEFIT
PLANS. This Article does not apply to any proceeding against any trustee,
investment manager, or other fiduciary of an employee benefit plan in such
person's capacity as such, even though such person may also be an agent of the
corporation as defined in Section 1. The corporation shall have power to
indemnify such a trustee, investment manager or other fiduciary to the extent
permitted by Subdivision (f) of Section 207 of the California General
Corporation Law.
ARTICLE VII
EMERGENCY BY-LAWS
During any emergency resulting from an attack on the United States or
on a locality in which the corporation conducts its business or customarily
holds meetings of its Board or its shareholders, or during any nuclear or atomic
disaster, or during the existence of any catastrophe, or other similar emergency
condition, as a result of which a quorum of the Board or of the executive
committee, if any, cannot readily be convened for action, a meeting of the Board
or of said committee may be called by any officer or director. Such notice may
be given only to such of the directors or members of the committee, as the case
may be, as it may be feasible to reach at the time and by such means as may be
feasible at the time including, without limitation, publication or radio.
The director or directors in attendance at the meeting of the Board,
and the member or members of the executive committee, if any, in attendance at
the meeting of the committee, shall constitute a quorum. If none are in
attendance at the meeting, the officers or other persons designated on a list
approved by the Board before the emergency, all in such order of priority and
subject to such conditions and for such period of time (not longer than
reasonably necessary after termination of the emergency) as may be provided in
the resolution approving the list, shall, to the extent required to provide a
quorum at any meeting of the Board or of the executive committee, be deemed
directors or members of the committee, as the case may be, for such meeting.
The Board, either before or during any such emergency, may provide,
and from time to time modify, lines of succession in the event that during such
emergency any or all officers or agents of the corporation shall for any reason
be rendered incapable of discharging their duties. The Board, either before or
during any such emergency, may, effective in the emergency, change the principal
executive office or designate several alternative offices or authorize the
officers so to do.
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<PAGE>
ARTICLE VIII
AMENDMENTS
These By-Laws may be amended or repealed either by approval of the
outstanding shares or by the approval of the Board; provided, however, that
after the issuance of shares, a By-Laws specifying or changing a fixed number of
directors or the maximum or minimum number or changing from a fixed to a
variable Board or vice versa may only be adopted by approval of the outstanding
shares.
SECRETARY'S CERTIFICATE OF ADOPTION OF BY-LAWS
I hereby certify that I am the duly elected and acting Secretary of
WD-40 COMPANY, a California corporation and that the foregoing By-Laws,
comprising nineteen (19) pages, including this page and two Index pages attached
hereto, constitute the Restated By-Laws of said corporation as duly adopted at a
meeting of the Board of Directors thereof held on March 31, 1998.
IN WITNESS WHEREOF, I have signed my name and affixed the seal of said
corporation this 31st day of March, 1998.
/s/ Harlan F. Harmsen
-----------------------------------
HARLAN F. HARMSEN
Secretary
(CORPORATE SEAL)
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<PAGE>
INDEX
<TABLE>
<S> <C> <C>
ARTICLE I. - OFFICES
Section 1. Principal Executive Office . . . . . . . . . . . . . . 1
Section 2. Other Offices. . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. - SHAREHOLDERS
Section 1. Place of Meeting . . . . . . . . . . . . . . . . . . . 1
Section 2. Annual Meetings. . . . . . . . . . . . . . . . . . . . 1
Section 3. Special Meetings . . . . . . . . . . . . . . . . . . . 1
Section 4. Notice of Annual or Special Meeting. . . . . . . . . . 2
Section 5. Quorum . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 6. Adjourned Meeting and Notice Thereof . . . . . . . . . 2
Section 7. Voting . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 8. Record Date. . . . . . . . . . . . . . . . . . . . . . 4
Section 9. Consent of Absentees . . . . . . . . . . . . . . . . . 5
Section 10. Action Without Meeting . . . . . . . . . . . . . . . . 5
Section 11. Proxies. . . . . . . . . . . . . . . . . . . . . . . . 5
Section 12. Inspectors of Election . . . . . . . . . . . . . . . . 5
ARTICLE III. - DIRECTORS
Section 1. Powers . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2. Number and Qualification of Directors. . . . . . . . . 6
Section 3. Election and Term of Office. . . . . . . . . . . . . . 6
Section 4. Vacancies. . . . . . . . . . . . . . . . . . . . . . . 6
Section 5. Place of Meeting . . . . . . . . . . . . . . . . . . . 7
Section 6. Regular Meetings . . . . . . . . . . . . . . . . . . . 7
Section 7. Special Meetings . . . . . . . . . . . . . . . . . . . 7
Section 8. Quorum . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 9. Participation in Meetings by Conference Telephone. . . 8
Section 10. Waiver of Notice . . . . . . . . . . . . . . . . . . . 8
Section 11. Adjournment. . . . . . . . . . . . . . . . . . . . . . 8
Section 12. Fees and Compensation. . . . . . . . . . . . . . . . . 8
Section 13. Action Without Meeting . . . . . . . . . . . . . . . . 8
Section 14. Rights of Inspection . . . . . . . . . . . . . . . . . 8
Section 15. Committees . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV. - OFFICERS
Section 1. Officers . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2. Election . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. Subordinate Officers . . . . . . . . . . . . . . . . . 9
Section 4. Removal and Resignation. . . . . . . . . . . . . . . . 10
Section 5. Vacancies. . . . . . . . . . . . . . . . . . . . . . . 10
Section 6. Chairman of the Board. . . . . . . . . . . . . . . . . 10
Section 7. President. . . . . . . . . . . . . . . . . . . . . . . 10
Section 8. Vice President . . . . . . . . . . . . . . . . . . . . 10
Section 9. Secretary. . . . . . . . . . . . . . . . . . . . . . . 10
Section 10. Treasurer. . . . . . . . . . . . . . . . . . . . . . . 11
i
<PAGE>
INDEX CONTINUED
ARTICLE V. - OTHER PROVISIONS
Section 1. Inspection of Corporate Records. . . . . . . . . . . . 11
Section 2. Inspection of By-Laws. . . . . . . . . . . . . . . . . 12
Section 3. Endorsement of Documents; Contracts. . . . . . . . . . 12
Section 4. Certificate of Stock . . . . . . . . . . . . . . . . . 12
Section 5. Representation of Shares of Other Corporations . . . . 12
Section 6. Stock Purchase Plans . . . . . . . . . . . . . . . . . 13
Section 7. Construction and Definitions . . . . . . . . . . . . . 13
ARTICLE VI. - INDEMNIFICATION
Section 1. Definitions. . . . . . . . . . . . . . . . . . . . . . 13
Section 2. Indemnification in Actions By Third Parties. . . . . . 13
Section 3. Indemnification in Actions By or in the Right of the
Corporation . . . . . . . . . . . . . . . . . . . . . 14
Section 4. Indemnification Against Expenses . . . . . . . . . . . 14
Section 5. Required Determinations. . . . . . . . . . . . . . . . 14
Section 6. Advance of Expenses. . . . . . . . . . . . . . . . . . 14
Section 7. Other Indemnification. . . . . . . . . . . . . . . . . 15
Section 8. Forms of Indemnification Not Permitted . . . . . . . . 15
Section 9. Insurance. . . . . . . . . . . . . . . . . . . . . . . 15
Section 10. Nonapplicability to Fiduciaries of Employee Benefit
Plans . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VII. - EMERGENCY BY-LAWS 16
ARTICLE VIII. - AMENDMENTS 17
SECRETARY'S CERTIFICATE OF ADOPTION OF BY-LAWS 17
</TABLE>
ii
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