<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For transition period from ________ to ________
Commission File Number: 0-29598
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MIDWEST BANC HOLDINGS, INC.
------------------------------------------------------------
(Exact name of Registrant as specified in its charter.)
Delaware 36-3252484
------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
501 W. North Ave., Melrose Park, IL 60160
---------------------------------------- --------
(Address of principal executive offices) (ZIP code)
(708) 865-1053
--------------
(Registrant's telephone number, including area code)
Indicate by checkmark 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 close of the period covered by this report.
Class Outstanding June 30, 1998
---------------------- --------------------------
Common, par value $.01 11,279,392
1
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MIDWEST BANC HOLDINGS, INC.
FORM 10-Quarterly Report
Table of Contents
<TABLE>
<CAPTION>
PART I
Page Number
-----------
<S> <C>
Item 1. Financial Statements ............................................... 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ..................... 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk ......... 20
PART II
Item 1. Legal Proceedings .................................................. 22
Item 2. Changes in Securities and Use of Proceeds .......................... 22
Item 3. Defaults Upon Senior Securities .................................... 22
Item 4. Submission of Matters to a Vote of Security Holders ................ 22
Item 5. Other Information .................................................. 24
Item 6. Exhibits and Reports on Form 8-K ................................... 24
Form 10-Q Signature Page .................................................... 24
</TABLE>
2
<PAGE> 3
PART I - Financial Information
MIDWEST BANC HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (unaudited)
(In Thousands, except share and per share data)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 31,101 $ 34,471
Securities available-for-sale 419,644 343,115
Trading account securities -- 5,008
Securities held-to-maturity 19,571 16,233
Loans 517,684 488,099
Allowance for loan losses (6,473) (6,143)
----------- -----------
Net loans 511,211 481,956
Premises and equipment, net 16,260 14,863
Other real estate owned 741 789
Goodwill, net 2,308 2,424
Accrued interest and other assets 12,200 9,783
----------- -----------
Total assets $ 1,013,036 $ 908,642
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 97,859 $ 102,080
Interest-bearing 739,270 692,282
----------- -----------
Total deposits 837,129 794,362
Federal funds purchased and securities
sold under agreements to repurchase 7,223 12,992
Notes payable 89,225 42,575
Accrued interest and other liabilities 5,766 5,753
----------- -----------
Total liabilities 939,343 855,682
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; authorized 1,000,000 shares
none issued
Common stock $.01 par value; authorized 17,000,000 shares
11,279,392 and 10,114,392 issued and outstanding as of
June 30, 1998 and December 31, 1997 114 101
Surplus 29,704 12,620
Retained earnings 44,518 40,026
Accumulated other comprehensive income (loss) (181) 675
Treasury stock at cost, 100,000 shares as of June 30, 1998
and December 31, 1997 (462) (462)
----------- -----------
Total stockholders' equity 73,693 52,960
----------- -----------
Total liabilities and stockholders' equity $ 1,013,036 $ 908,642
=========== ===========
</TABLE>
3
<PAGE> 4
MIDWEST BANC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Three Months Ended June 30, 1998 and 1997
(In Thousands, except share and per share data)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
INTEREST INCOME
Loans, including fees $12,178 $10,880
Securities
Taxable 6,008 5,392
Tax-exempt 310 338
Trading account securities 72 37
Federal funds sold 124 44
------- -------
Total interest income 18,692 16,691
INTEREST EXPENSE
Deposits 9,012 7,991
Other borrowings 1,173 725
------- -------
Total interest expense 10,185 8,716
------- -------
Net interest income 8,507 7,975
Provision for loan losses 438 697
------- -------
Net interest income after provision for loan losses 8,069 7,278
OTHER INCOME
Service charges on deposits 770 689
Gains on securities transactions 431 31
Net trading account profits 22 23
Mortgage loan origination fees 275 132
Trust income 148 141
Other income 204 171
------- -------
Total other income 1,850 1,187
OTHER EXPENSE
Salaries and employee benefits 3,354 3,102
Occupancy expense, net 980 757
Other expenses 1,470 1,352
------- -------
Total other expenses 5,804 5,211
------- -------
Income before income taxes 4,115 3,254
Provision for income taxes 1,502 1,273
------- -------
NET INCOME $ 2,613 $ 1,981
======= =======
Basic earnings per share $ 0.23 $ 0.20
======= =======
Diluted earnings per share $ 0.23 $ 0.20
======= =======
</TABLE>
4
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MIDWEST BANC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Six Months Ended June 30, 1998 and 1997
(In Thousands, except share and per share data)
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $23,813 $20,833
Securities
Taxable 11,488 10,835
Tax-exempt 602 504
Trading account securities 169 37
Federal funds sold and other 291 112
------- -------
Total interest income 36,363 32,321
INTEREST EXPENSE
Deposits 17,642 15,439
Other borrowings 2,171 1,287
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Total interest expense 19,813 16,726
------- -------
Net interest income 16,550 15,595
Provision for loan losses 825 1,198
------- -------
Net interest income after provision for loan losses 15,725 14,397
OTHER INCOME
Service charges on deposits 1,494 1,304
Gains on securities transactions 725 18
Net trading account profits 18 40
Mortgage loan origination fees 487 222
Trust income 299 279
Other income 320 317
------- -------
Total other income 3,343 2,180
OTHER EXPENSE
Salaries and employee benefits 6,626 6,097
Occupancy expense, net 1,790 l,536
Other expenses 2,864 2580
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Total other expenses 11,280 10,213
------- -------
Income before income taxes 7,788 6,364
Provision for income taxes 2,844 2,492
------- -------
NET INCOME $ 4,944 $ 3,872
======= =======
Basic earnings per share $ 0.45 $ 0.39
======= =======
Diluted earnings per share $ 0.45 $ 0.39
======= =======
</TABLE>
5
<PAGE> 6
MIDWEST BANC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Retained Comprehensive Treasury Stockholders'
Stock Surplus Earnings Loss Stock Equity
----- ------- -------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 $ 3,437 $ 10,489 $ 34,932 $ (1,377) $ (4,519) $ 42,962
Net income -- -- 3,872 -- -- 3,872
Unrealized gains on Securities APS -- -- -- 685 -- 685
-------
Comprehensive net income -- -- -- -- -- 4,557
Net purchase of treasury stock shares -- 18 -- -- 55 73
Cash dividends -- -- (229) -- -- (229)
-------- -------- -------- -------- -------- --------
Balance, June 30, 1997 $ 3,437 $ 10,507 $ 38,575 $ (692) $ (4,464) $ 47,363
======== ======== ======== ======== ======== ========
Balance, January 1, 1998 $ 101 $ 12,620 $ 40,026 $ 675 $ (462) $ 52,960
Net income -- -- 4,944 -- -- 4,944
Unrealized losses on Securities APS -- -- -- (856) -- (856)
--------
Comprehensive net income -- -- -- -- -- 4,088
Common stock issuance 13 17,084 -- -- -- 17,097
Cash dividends -- -- (452) -- -- (452)
-------- -------- -------- -------- -------- --------
Balance, June 30, 1998 $ 114 $ 29,704 $ 44,518 $ (181) $ (462) $ 73,693
======== ======== ======== ======== ======== ========
</TABLE>
6
<PAGE> 7
MIDWEST BANC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
--------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,944 $ 3,872
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 888 821
Provision for loan losses 825 1,198
Net proceeds from sale of trading account securities 5,026 40
Net loss on sale of securities (725) (18)
Net loss on sale of trading account securities (18) (40)
Net proceeds from sales of real estate loans originated for sale 2,284 (1,409)
Increase in other assets (2,254) (341)
Increase in other liabilities 14 2,519
--------- ---------
Net cash provided by operating activities 10,984 6,642
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales and maturities of securities
available-for-sale 193 527 47,738
Principal payments on securities available-for-sale 53,557 14,272
Purchase of securities available-for-sale (323,744) (78,539)
Purchase of securities held-to-maturity (3,923) (2,236)
Maturities of securities held-to-maturity 585 515
Net increase in loans (32,364) (52,026)
Property and equipment expenditures (2,285) (851)
--------- ---------
Net cash used in investing activities (114,647) (71,127)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 42,767 52,311
Issuance of common stock 17,097 --
Net bank borrowings 46,650 3,725
Dividends paid (452) (229)
Securities sold under agreements to repurchase
and federal funds purchased (5,769) 8,468
Treasury stock sales -- 73
--------- ---------
Net cash provided by financing activities 100,293 64,348
--------- ---------
Decrease in cash and cash equivalents (3,370) (137)
Cash and cash equivalents at beginning of year 341,471 35,297
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 31,101 $ 35,160
========= =========
</TABLE>
7
<PAGE> 8
NOTE 1 - BASIS OF PRESENTATION
The financial information of Midwest Banc Holdings, Inc. (the "Company")
included herein is unaudited; however, such information reflects all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation for the interim
periods. The financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulations S-X.
The annualized results of operations for the three months and six months ended
June 30, 1998 are not necessarily indicative of the results expected for the
full year ending December 31, 1998.
For purposes of per share calculations, the Company had 11,279,392 shares of
common stock outstanding at June 30, 1998, 10,014,392 shares outstanding at
December 31, 1997 and 10,023,614 shares outstanding at June 30, 1997.
Quarterly weighted average shares of common stock outstanding were 11,279,392
and 10,015,547 for the three months ended June 30, 1998 and 1997, respectively.
Year to date, average shares were 10,901,978 and 10,014,155 for the six month
periods ended June 30, 1998 and 1997 respectively.
NOTE 2 - NEW ACCOUNTING STANDARDS
Effective for fiscal years beginning after December 15, 1997, under a new
accounting standard (SFAS 130), comprehensive income is now reported for all
periods. Comprehensive income includes both net income and other comprehensive
income. Other comprehensive income includes the change in unrealized gains and
losses on securities available-for-sale. Comprehensive income has been
disclosed in the statement of stockholders' equity.
Effective for fiscal years beginning after December 15, 1997, a new accounting
standard (SFAS 131) establishes standards for the way that public enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. This standard
will have no impact on the Company.
8
<PAGE> 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS- THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Consolidated net income for the second quarter of 1998 was $2.6 million or $
0.23 cents per share, a 31.9% increase compared to $2.0 million or $ 0.20 cents
per share earned in the second quarter of 1997. Consolidated net income for
the six months ended June 30, 1998 was $4.9 million or $.45 a share compared to
$3.9 million or $.39 a share for the similar period in 1997. Net interest
income increased 6.7% to $8.5 million in the second quarter of 1998 compared to
$8.0 million in the second quarter of 1997. Year to date, net interest income
increased 6.1% to $16.6 million compared to the six months ended June 30, 1997.
Noninterest income increased 55.9% to $1.9 million and noninterest expenses
increased 11.4% to $5.8 million in the second quarter of 1998 compared to the
similar period in 1997. Year to date, non interest income increased 53.3% to
$3.3 million and noninterest expenses increased 10.4% to $11.3 million compared
to the similar six month period in 1997.
Net Interest Income
Net interest income was $8.5 million and $8.0 million during the three months
ended June 30, 1998 and 1997 respectively, an increase of 6.7%. Year to date,
net interest income increased $955,000 or 6.1% to $16.6 million compared to
$15.6 million for the similar period in 1997. The Company's net interest
margin (tax equivalent net interest income as a percentage of earning assets)
was 3.67% for the three months ended June 30, 1998 and 4.15% a year earlier.
Year to date, the net interest margin was 3.69% in 1998 compared to 4.15% in
1997. Net interest income increased due to the growth in average earning
assets from $783.2 million during the second quarter of 1997 to $943.4 million
during the second quarter of 1998. Year to date, average earning assets
increased 19.8% from $762.5 million in 1997 to $913.3 million in 1998. In
addition, a greater proportion of earning assets was invested in loans during
the first six months of 1998 than a year earlier. The average year to date
loan to deposit ratio increased from 61.2% as of June 30, 1997 to 62.2% at June
30, 1998.
Despite the growth of earning assets and the percentage increase in loans, the
decrease in net interest margin was primarily due to a flattening of interest
rate yield curves and the accelerated prepayments under existing mortgage-backed
securities investments. The impact of these circumstances reduced taxable
investment yields from 7.08% for the second quarter in 1997 to 6.18% for the
second quarter in 1998. The year to date taxable investment yields decreased
from 7.32% in 1997 to 6.29% in 1998. A portion of this decrease in yield was
offset by a $725,000 gain year to date on securities sales as part of
management's continuing program to reposition the investment portfolio. These
gains are recorded as part of other income and are not reflected in the net
interest margin calculations.
9
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Provision for Loan Losses
The Company's provision for loan losses was $438,000 for the second quarter of
1998 compared to $697,000 for the similar period in 1997. Year to date, the
provision for losses decreased from $1.2 million in 1997 to $825,000 in 1998.
Net charge-offs for the three months ended June 30 were $318,000 and $479,000
in 1998 and 1997, respectively. Net chargeoffs for the six months ended June
30 were $495,000 and $533,000 in 1998 and 1997, respectively.
The allowance for loan losses as a percentage of total loans was 1.25% as of
June 30, 1998 and 1.26% as of December 31, 1997. In management's judgment, an
adequate allowance for loan losses has been established.
Other Income
Noninterest income, excluding securities gains, was $1.4 million for the three
months ended June 30, 1998 and $1.1 million for the same period in 1997, an
increase of $264,000 or 23.3%. Trust income increased 5.0% or approximately
$7,000 to $148,000 during the second quarter. Year to date, trust income was
$299,000 or 7.2% higher than the comparable period in 1997. Mortgage banking
fee income increased $143,000 or 108% to $275,000 during the second quarter of
1998 compared to the second quarter of 1997. Year to date, mortgage fees
increased $265,000 to $487,000 or 119.4% higher than the comparable period in
1997. Mortgage banking income is seasonal, with residential activity tending
to decline in the winter months, and is also sensitive to interest rate levels
and expectations. The reduction in long term interest rates has created a
significant demand for refinancing existing mortgages, as well as financing new
home sales, during the past six months. Most fixed rate mortgages which the
Company originates are sold.
Service charges and fees increased 11.8% or $81,000 from $689,000 in the
second quarter of 1997 to $770,000 in the second quarter of 1998. Year to
date, service charges and fees increased 14.6% from $1.3 million in 1997 to
$1.5 million in 1998. Service charges and fees include service charges on
deposit accounts which may be expected to increase as deposits grow in the
future.
Sales of securities available-for-sale resulted in net gains of $431,000 in the
second quarter of 1998 compared to a net gain of $31,000 for the comparable
period in 1997. Gains on securities held-for-sale were $725,000 and $18,000
for the six months ended June 30, 1998 and 1997 respectively. Securities
available-for-sale are held for indefinite periods of time and include
securities that will be used as a part of the Company's asset/liability
management strategy. Such securities may be sold in response to changes in
interest rates, liquidity needs, or significant prepayment risk.
10
<PAGE> 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Other Expense
Salary and benefit expenses increased 8.1% or $252,000 from $3.1 million during
the three months ended June 30, 1997 to approximately $3.4 million for the
second quarter of 1998. Year to date, salary and benefit expenses increased
$529,000 or 8.7% to $6.6 million. The full-time equivalent number of employees
was 306 as of June 30, 1997 and 308 as of June 30, 1998. The increase in
salaries and benefits was primarily the result of annual merit increases in
salaries in December 1997, a shift in the mix of officer/staff levels,
increased employee benefit expenses, and higher commissions related to mortgage
origination volumes.
Occupancy expenses increased $223,000 or 29.5% to $980,000 during the second
quarter of 1998 compared to the second quarter of 1997. Year to date,
occupancy expenses increased $254,000 or 16.5% to $1.8 million compared to the
six months ended June 30, 1997. Specific costs and increased depreciation,
related to the renovation of the largest banking center, was a primary factor
in the higher occupancy expense levels in 1998.
Expenses, other than salary and employee benefits and occupancy, increased
$118,000 or 8.7% from $1.4 million in the second quarter of 1997 to $1.5
million in the second quarter of 1998. Other expenses increased $284,000 or
11.0% to $2.9 million for the six months ended June 30, 1998 compared to the
similar period in 1997. Factors contributing to the increase in other expenses
were legal fees related to corporate activities and to loan workout situations,
and increases in general operating costs.
Income Taxes
The Company recorded income tax expense of $1.5 million and $1.3 million for
the quarters ended June 30, 1998 and 1997, respectively. Year to date, the
provision for income taxes increased $352,000 or 14.1% compared to the similar
period in 1997. The increase in income taxes was due to the growth in income
before taxes of $861,000 during the second quarter and $1.4 million year to
date in 1998 compared to the similar periods in 1997.
11
<PAGE> 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Loans
Total loans increased $29.6 million or 6.1% from $488.1 million at December 31,
1997 to $517.7 million as of June 30, 1998. Commercial loans increased $5.4
million or 3.8% from $140.8 million as of December 31, 1997 to $146.2 million
as of June 30, 1998. Commercial real estate loans increased 8.0% or $17.0
million to $229.2 million as of June 30, 1998 from $212.2 million as of
December 31, 1997. Agricultural loans increased 33.3% or $8.0 million from
$24.1 million at December 31, 1997 to $32.1 million as of June 30, 1998.
Residential real estate loans increased $1.1 million or 1.1% to $94.4 million
from $93.3 million as of December 31, 1997. Consumer loans decreased 11.2% to
$16.7 million as of June 30, 1998 reflecting the continued amortization of the
indirect car loan portfolio.
Most of the residential mortgage loans originated by the Company's mortgage
banking subsidiary, Midwest One Mortgage Services, Inc., are sold in the
secondary market. At any point in time, loans will be at various stages of the
mortgage banking process. Included as part of residential real estate loans,
loans held for sale were $6.6 million as of December 31, 1997. There were no
loans held for sale as of June 30, 1998. The carrying value of these loans
approximated the market value at that time.
Allowance for Loan Losses
The adequacy of the allowance for loan losses is determined by management based
on factors that include the overall composition of the loan portfolio, types of
loans, past loss experience, loan delinquencies, potential substandard and
doubtful credits, and other factors that, in management's judgment, deserve
evaluation in estimating loan losses. The adequacy of the allowance for loan
losses is monitored by the loan review staff and reported to management and the
Board of Directors.
Following is a summary of changes in the allowance for loan losses for the six
months ended June 30:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Balance, January 1 $6,143 $5,342
Provision charged to operations 825 1,198
Loans charged-off (645) (640)
Recoveries 150 107
------ ------
Balance, June 30 $6,473 $6,007
====== ======
</TABLE>
12
<PAGE> 13
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Allowance for Loan Losses
The allowance for loan losses as a percentage of total loans was 1.25% as of
June 30, 1998 and 1.26% as of December 31, 1997. In management's judgment, an
adequate allowance for loan losses has been established.
Nonaccrual and Nonperforming Loans
Nonaccrual loans increased to $2.1 million as of June 30, 1998 from $1.9
million as of December 31, 1997. Most of the difference in nonaccrual loans is
related to three commercial loans which are being addressed by specific workout
plans at this time. Management does not believe that the increase in
nonaccrual loans represents a decline in the overall quality of the loan
portfolio at this time.
Nonperforming loans include nonaccrual loans and accruing loans which are
ninety days or more delinquent. Typically, these loans have adequate collateral
protection or personal guaranties to provide a source of repayment to the bank.
Nonperforming loans were $4.4 million as of June 30, 1998 compared to $3.2
million at December 31, 1997 and $4.3 million at June 30, 1997. Nonperforming
loans were .86%, .66% and .90% of total loans as of June 30, 1998, December 31,
1997 and June 30, 1997 respectively. Nonperforming loans were .43% and .50% of
total assets as of June 30, 1998 and June 30, 1997 respectively.
The increase in nonperforming loans was primarily due to several specific
credits which continue to make partial payments or are in process of loan
workout and collection litigation. Seasonal factors also contribute to an
increase in nonperforming loans during the first six months each year. As
such, management believes there has been no deterioration in portfolio quality
despite the modest increase in total nonperforming loans since December 31,
1997.
Securities
Securities are classified as available-for-sale if they may be sold as part of
the Company's asset/liability management strategy in response to changes in
interest rates, liquidity needs, or significant prepayment risk. Securities
available-for-sale are carried at fair value, with related unrealized net gains
or losses, net of deferred income taxes, recorded as an adjustment to equity
capital. As of June 30, 1998, net unrealized losses resulted in a $181,000
decrease in equity. This was a decrease of $856,000 from a net unrealized gain
in equity of $675,000 at December 31, 1997.
13
<PAGE> 14
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Securities
Securities available-for-sale increased 22.3% to $419.6 million as of June 30,
1998, from $343.1 million as of December 31, 1997. U.S. Treasury and agency
securities declined 70.8% from $6.3 million as of December 31, 1997 to $1.8
million as of June 30, 1998. U.S. government agency mortgage-backed securities
increased 25.3% or $79.5 million from $314.6 million as of December 31, 1997 to
$394.1 million as of June 30, 1998. Equity securities increased $2.0 million
from $7.3 million at December 31, 1997 to $9.3 million as of June 30, 1998. The
increase in equity securities was due to additional stock requirements of the
Federal Home Loan Bank related to borrowings and an increase in investments in
community bank stocks. Management does not consider any of these changes to
represent a change in the management philosophy of the investment portfolio.
Deposits and Borrowed Funds
Total deposits of $837.1 million as of June 30, 1998 represented an increase of
$42.7 million or 5.4% from $794.4 million as of December 31, 1997.
Non-interest-bearing deposits were $97.9 million as of June 30, 1998,
approximately $4.2 million lower than the $102.1 million as of December 31,
1997. At the same time, interest-bearing deposits increased 6.8% or $47.0
million. The higher level of interest-bearing deposits included an increase of
$32.3 million in certificates of deposit under $100,000 and $8.9 million in
certificates of deposit above $100,000. There were no significant changes in
deposit structure or management's strategies in acquiring deposits in the first
quarter of 1998.
The Company's membership in the Federal Home Loan Bank System gives it the
ability to borrow funds from the Federal Home Loan Bank of Chicago for short-
or long-term purposes under a variety of programs. The loans were used to fund
growth and permit the bank subsidiaries to extend term maturities, reduce
funding costs and manage interest rate risk exposures more effectively.
Federal Home Loan Bank advances were $83 million at June 30, 1998--an increase
of $57.0 million since December 31, 1997. The weighted average rate for Federal
Home Loan Bank Advances was 5.30% year to date with a range of maturities
between one and ten years. This rate compares favorably to the average 1998
year to date rate of 5.81% for certificates of deposit under $100,000.
14
<PAGE> 15
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Deposits and Borrowed Funds
Consolidated notes payable at June 30, 1998 and December 31, 1997 are listed
below:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Federal Home Loan Bank (FHLB)
advances to bank subsidiaries $83,000 $26,000
Revolving line of credit
to Midwest Banc Holdings, Inc. 2,000 12,350
($20,000,000 available)
Revolving warehouse line of credit
to Midwest One Mortgage Services 4,000 4,000
($5,000,000 available)
Mortgage payable 225 225
---------- ---------
Total notes payable $89,225 $42,575
========== ========
</TABLE>
The Company also utilizes securities sold under repurchase agreements as a
source of funds. Most local municipalities, and some other organizations, must
have funds insured or collateralized as a matter of their own policies.
Repurchase agreements provide a source of funds and do not increase the
Company's reserve requirement. Although the balance of repurchase agreements
is subject to variation, particularly seasonal variation, the account
relationships represented by these balances are principally local and have been
maintained for relatively long periods of time.
15
<PAGE> 16
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources
The Company completed an initial public offering of 1,265,000 shares of common
stock on February 23, 1998. The gross proceeds of the stock offering were
$18,975,000 with net proceeds of $17,096,750 after underwriting discounts and
related issuance expenses. The proceeds were used to provide $6 million in
capital contributions to the bank subsidiaries and the remaining amount reduced
outstanding loans under the Company's existing line of credit.
The Company and its four subsidiary banks (the "Banks") are subject to
regulatory capital requirements administered by federal banking agencies.
Capital adequacy guidelines and prompt corrective action regulations involve
quantitative measures of assets, liabilities, and certain off-balance-sheet
items calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgments by regulators about
components, risk weightings, and other factors, and the regulators can lower
classifications in certain areas. Failure to meet various capital requirements
can initiate regulatory action that could have a direct material effect on the
financial statements.
The prompt corrective action regulations provide five classifications,
including well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized, although these
terms are not used to represent overall financial condition. If adequately
capitalized, regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and plans for capital restoration are required.
The Company and the Banks were categorized as well capitalized as of June 30,
1998. Management is not aware of any conditions or events since the most
recent regulatory notification that would change the Company's or the Banks'
categories.
16
<PAGE> 17
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources
Capital levels and minimum required levels (dollars in thousands):
<TABLE>
<CAPTION>
Minimum Required Minimum Required
for Capital to Be
Actual Adequacy Purposes Well Capitalized
---------------------- ---------------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
June 30, 1998
Total capital to risk-
weighted assets $78,028 13.9% $45,066 8.0% $56,333 10.0%
Tier I capital to risk-
weighted assets 71,555 12.7% 22,533 4.0% 33,800 6.0%
Tier I capital to
average assets 71,555 7.7% 22,533 4.0% 28,166 5.0%
Minimum Required Minimum Required
for Capital to Be
Actual Adequacy Purposes Well Capitalized
---------------------- ---------------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997
Total capital to risk-
weighted assets $55,980 10.8% $41,562 8.0% $51,953 10.0%
Tier I capital to risk-
weighted assets 49,842 9.6% 20,781 4.0% 31,172 6.0%
Tier I capital to
average assets 49,842 6.2% 32,418 4.0% 40,522 5.0%
</TABLE>
17
<PAGE> 18
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity
Liquidity measures the ability of the Company to meet maturing obligations and
its existing commitments, to withstand fluctuations in deposit levels, to fund
its operations, and to provide for customers' credit needs. The liquidity of
the Company principally depends on cash flows from operating activities,
investment in and maturity of assets, changes in balances of deposits and
borrowings, and its ability to borrow funds in the money or capital markets.
Net cash inflows provided by operations were $11.0 million in the first six
months of 1998 compared to $6.6 million a year earlier. In the first six
months of 1998, net proceeds from sales of real estate loans originated for
sale and net proceeds from the sale of trading account securities were $7.2
million compared to a net outflow of $1.4 million in 1997. In the first six
months of 1997, an increase in other liabilities more than offset the net
outflow generated by real estate loans originated for sale.
Net cash outflows from investing activities were $114.6 million in the first
six months of 1998 compared to $71.1 million a year earlier. In the first six
months of 1998, net principal disbursed on loans accounted for net outflows of
$32.4 million, and securities transactions aggregated a net outflow of $80.0
million. In the first six months of 1997, net principal disbursed on loans
accounted for a net outflow of $52.0 million, and securities transactions
resulted in net outflows of $18.3 million.
Cash inflows from financing activities in the first six months of 1998 included
a $42.8 million increase in deposits. This compares with a net inflow of $52.3
million for the same period in 1997. Net bank borrowings resulted in net cash
inflows of $46.7 million in the first six months of 1998 and inflows of $3.7
million in the first six months of 1997. Cash inflows from financing in 1998
included the $17.1 million net proceeds from the common stock offering
completed in February 1998.
During the first six months of 1998, the Company repaid $11.4 million in
borrowings under its existing bank line of credit with the proceeds of the
common stock offering in late February. A new borrowing of $1.0 million under
the existing line of credit in the second quarter was used to provide a capital
contribution to one bank subsidiary. In addition, the bank subsidiaries
borrowed $57,000,000 in advances due at various dates through 2008 with the
Federal Home Loan Bank of Chicago.
In the event of short-term liquidity needs, the Banks may purchase federal
funds from correspondent banks. The Company's membership in the Federal Home
Loan Bank System gives it the ability to borrow funds from the Federal Home
Loan Bank of Chicago for short- or long-term purposes under a variety of
programs.
18
<PAGE> 19
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity
Mortgage lending activity resulted in operating net cash inflows of
approximately $2.3 million during the first six months of 1998 compared to a
net outflow of $1.4 million in 1997. Total cash inflows from operating
activities exceeded operating outflows by $11.0 million for the six months
ended June 30, 1998. During the first six months of 1997, net cash inflows
from operating activities were $6.6 million. Interest received net of interest
paid was a principal source of operating cash inflows in both periods reported.
Management of investing and financing activities and market conditions
determine the level and the stability of net interest cash flows. Management's
policy is to mitigate the impact of changes in market interest rates to the
extent possible so that balance sheet growth is the principal determinant of
growth in net interest cash flows.
RECENT REGULATORY DEVELOPMENTS
Various bills have been introduced in Congress that would allow bank holding
companies to engage in a wider range of nonbanking activities, including
greater authority to engage in securities and insurance activities. Similarly,
some of these bills would allow insurance companies and securities firms to
become bank holding companies. While the scope of permissible nonbanking
activities and the conditions under which the new powers could be exercised
varies among the bills, the expanded power generally would be available to a
bank holding company only if the bank holding company and its bank subsidiaries
remain well capitalized and well managed. The bills also impose various
restrictions on transactions between the depository institution subsidiaries of
bank holding companies and their nonbank affiliates. These restrictions are
intended to protect the depository institutions from the risks of the new
nonbanking activities permitted to such affiliates.
Additionally, legislation has been introduced in Illinois that would generally
allow state chartered banks to engage in any activities which are permissible
for any other financial institution the deposits of which are insured by the
FDIC or any other agency of the federal government. If passed, such a law would
allow the state bank subsidiaries of the Company to engage in new activities,
such as real estate development, but only to the extent a savings and loan was
then authorized to engage in such activity.
At this time, the Company is unable to predict whether any of the pending bills
will be enacted and, therefore, is unable to predict the impact such legislation
may have on the operations of the Company and its bank subsidiaries.
19
<PAGE> 20
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YEAR 2000 COMPLIANCE
The Company has conducted a review of its computer systems for those that could
be affected by the "year 2000" issue. The Company has developed a preliminary
implementation plan to resolve potential problems in compliance with Federal
Reserve Bank guidelines.
Based upon responses from vendors to date and independent appraisals conducted
on behalf of the Company and selected equipment and software suppliers, the
Company believes its systems are, or will be, fully compliant before the end of
1999. At the present time, one computer system will require a systems
software upgrade and related equipment estimated to cost less than $250,000 and
the cost will be depreciated over the estimated useful life. No other
situations have been identified at this time which would require material
capital expenditures in order to become fully compliant. The Company maintains
continuing contact with its equipment and software vendors on year 2000 issues
and does not anticipate significant problems at this time.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Interest Rate Sensitivity Analysis
The Company's overall interest rate sensitivity is demonstrated by net interest
income analysis. Net interest income analysis measures the change in net
interest income in the event of hypothetical changes in interest rates. This
analysis assesses the risk of change in net interest income in the event of
sudden and sustained 1.0% to 2.0% increases and decreases in market interest
rates. The table below presents the Company's projected changes in net interest
income for the various rate shock levels at June 30, 1998.
<TABLE>
<CAPTION>
Net Interest Income
(Dollars in thousands) Amount Change Change
------ ------ ------
<S> <C> <C> <C>
-200 bp $31,617 $(3,122) (8.99)%
-100 bp 32,832 (1,907) (5.49)
Base 34,739 --- ---
+100 bp 35,305 566 1.63
+200 bp 35,118 379 1.09
</TABLE>
20
<PAGE> 21
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Interest Rate Sensitivity Analysis
As shown above, at June 30, 1998, the effect of an immediate 200 basis point
increase in interest rates would increase the Company's net interest income by
1.09% or approximately $379,000. The effect of an immediate 200 basis point
decrease in rates would reduce the Company's net interest income by 8.99% or
approximately $3.1 million.
Computations of the prospective effects of hypothetical interest rate changes
are based on numerous assumptions, including relative levels of market interest
rates, loan prepayments and deposit decay rates, and should not be relied upon
as indicative of actual results. Actual values may differ from those
projections set forth above, should market conditions vary from assumptions
used in preparing the analyses. Further, the computations do not contemplate
any actions the Company may undertake in response to changes in interest rates.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995, and is including this statement for purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain assumptions
and describe future plans, strategies, and expectations of the Company, are
generally identifiable by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar expressions. The Company's
ability to predict results or the actual effect of future plans or strategies
is inherently uncertain. Factors which could have a material adverse affect on
the operations and future prospects of the Company and its subsidiaries
include, but are not limited to, changes in interest rates; general economic
conditions; legislative/regulatory changes; monetary and fiscal policies of the
U.S. government, including policies of the U.S. Treasury and the Federal
Reserve Board; the quality or composition of the loan or investment portfolios;
demand for loan products; deposit flows; competition; demand for financial
services in the Company's market area; and accounting principles, policies, and
guidelines. These risks and uncertainties should be considered in evaluating
forward-looking statements and undue reliance should not be placed on such
statements. Further information concerning the Company and its business,
including additional factors that could materially affect the Company's
financial results, is included in the Company's filings with the Securities and
Exchange Commission.
21
<PAGE> 22
PART II
MIDWEST BANC HOLDINGS, INC.
Item 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company
or its subsidiaries are a party other than ordinary routine litigation
incidental to their respective businesses.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders was held on May 20, 1998. Four proposals
were submitted to stockholders as described in the Company's proxy statement
dated April 15, 1998. The following is a brief description of the matters
voted upon, as well as the outcome of the vote:
1. To elect eight members to serve on the Company's Board of Directors. The
nominees were E. V. Silveri, Robert L. Woods, Angelo DiPaolo, Daniel
Nagle, Joseph Rizza, LeRoy Rosasco, Robert D. Small and Leon Wolin.
Each nominee received at least a minimum of 85.8% of the total shares
outstanding and 99.8% of the votes cast.
2. To amend the Company's By-laws to provide for staggered terms for the
Company's Board of Directors.
<TABLE>
<S> <C> <C>
Votes For: 8,211,570 97.0% of 9,727,501 shares voted
Votes Against: 253,024 3.0%
Abstain: 4,816 0.0%
</TABLE>
22
<PAGE> 23
3. To approve an amendment to the Company's By-laws to increase to 66-2/3%
of the outstanding voting stock the required percentage of voting stock
needed to amend or repeal or adopt any provision inconsistent with the
following By-law provisions:
<TABLE>
<CAPTION>
<S> <C> <C>
Provision: Section 2.2 - Special Meetings
Votes For: 8,292,620 97.0%
Votes Against: 216,454 2.5%
Abstain: 41,366 0.5%
Provision: Section 2.11 - Action by Stockholders
Votes For: 8,238,284 96.9%
Votes Against: 212,096 2.5%
Abstain: 55,030 0.6%
Provision: Section 2.12 - Notice of Shareholder Business
Votes For: 8,262,754 96.6%
Votes Against: 215,504 2.6%
Abstain: 72,152 0.8%
Provision: Section 3.2 - Number, Tenure and Qualifications
Votes For: 8,278,794 96.8%
Votes Against: 227,636 2.7%
Abstain: 43,980 0.5%
Provision: Section 3.10 - Vacancies and Newly-Created Directorships
Votes For: 8,285,988 96.9%
Votes Against: 212,136 2.5%
Abstain: 52,286 0.6%
Provision: Section 13.2 - Amendment of By-laws by Stockholders
Votes For: 8,270,620 97.0%
Votes Against: 235,202 2.8%
Abstain: 44,636 0.5%
</TABLE>
4. To ratify the appointment of Crowe, Chizek and Company LLP as independent
auditors for the fiscal year ending December 31, 1998.
<TABLE>
<CAPTION>
<S> <C>
Votes For: 9,680,674
Votes Against: 3,050
Abstain: 45,777
</TABLE>
23
<PAGE> 24
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 3.2 Amended By-laws dated as of May 20, 1998
Exhibit 27 Financial Data Schedule
(b) Filings on Form 8-K
None
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.
MIDWEST BANC HOLDINGS, INC.
(Registrant)
By: /s/ Robert L. Woods
----------------------------------
Robert L. Woods,
President and
Chief Executive Officer
By: /s/ Edward H. Sibbald
----------------------------------
Edward H. Sibbald,
Executive Vice President and
Chief Financial Officer
Date: July 28, 1998
24
<PAGE> 1
EXHIBIT 3.2
AS AMENDED THROUGH MAY 20, 1998
MIDWEST BANC HOLDINGS, INC.
RESTATED BY-LAWS
ARTICLE I
OFFICES AND REGISTERED AGENT
Section 1.1 Registered Office and Agent. Midwest Banc Holdings, Inc.
(the "Corporation") shall have and continuously maintain a registered office in
the City of Wilmington, County of New Castle, State of Delaware, and a
registered agent having a business office identical with such registered
office.
Section 1.2 Corporation's Principal Office in Illinois. The Corporation's
principal office in Illinois is located at Midwest Centre, 501 West North
Avenue, Melrose Park, IL 60160.
Section 1.3 Other Offices. The Corporation may also have such other
office or offices both in and outside of Delaware as the Board of Directors may
determine or as the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
Section 2.1 Annual Meeting. An annual meeting of the stockholders shall
be held on the first Wednesday in May of each year, at the hour of 2:00 p.m.,
or in the event the annual meeting is not so held on such date or at such time,
then on the day and at the time designated by the Board of Directors and stated
in the notice of the meeting, for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the annual meeting shall be a legal holiday, such meeting shall be
held on the next
<PAGE> 2
succeeding business day. If the directors shall not be elected at the annual
meeting, or at any adjournment thereof, the Board of Directors shall cause the
election to be held as soon thereafter as may be convenient.
Section 2.2 Special Meetings. Special meetings of the stockholders may
be called at any time by the Chairman or the President, and shall be called by
the President or Secretary at the request, in writing, of a majority of the
Board of Directors. Such request shall state the purpose or purposes of the
proposed meeting.
Section 2.3 Place of Meetings. Meetings of stockholders, whether annual
or special, shall be held at such time and place as may be determined by the
Board of Directors and designated in the notice or waiver of notice of such
meeting; provided, that a waiver of notice signed by all stockholders may
designate any time or any place as the time and place for the holding of such
meeting. If no designation is made, the place of meeting shall be the
principal office of the Corporation in Illinois.
Section 2.4 Notice of Meetings. Written or printed notice stating the
place, date and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not
less than ten nor more than sixty days before the date of the meeting, or in
the case of a merger or consolidation, share exchange, dissolution or sale,
lease or exchange of all or substantially all of the assets of the Corporation,
other than in the usual and regular course of business, at least twenty days
before the date of the meeting, either personally or by mail, by or at the
direction of the Chairman, the President, the Secretary or the persons calling
the meeting, to each stockholder of record entitled to vote at such meeting.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail,
<PAGE> 3
with postage thereon prepaid, addressed to the stockholder at his address as it
appears on the records of the Corporation.
Section 2.5 Fixing of Record Date or Otherwise Determining Stockholders.
For the purpose of determining stockholders entitled to notice of or to vote
at any meeting of stockholders, or stockholders entitled to receive payment of
any dividend, or in order to make a determination of stockholders for any other
proper purpose, the Board of Directors may fix in advance a date as the record
date for any such determination of stockholders, such date in any case to be
not more than sixty days and, for a meeting of stockholders, not less than ten
days, or in the case of a merger, consolidation, share exchange, dissolution or
sale, lease or exchange of all or substantially all of the assets of the
Corporation other than in the usual and regular course of business, not less
than twenty days, immediately preceding such meeting. If no record date is
fixed for the determination of stockholders entitled to notice of or to vote at
a meeting of stockholders, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the date on which notice is given
or if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. If no record date is fixed for the
determination of stockholders entitled to receive payment of a dividend, the
date on which the resolution of the Board of Directors declaring such dividend
is adopted shall be the record date for such determination of stockholders.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this Section, such determination
shall apply to any adjournment thereof, provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
<PAGE> 4
Section 2.6 List of Stockholders Entitled to Vote. The officer who has
charge of the stock ledger of the Corporation shall prepare and make, at least
ten 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, for a period of at
least ten days prior to the meeting, either 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. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of the stockholders,
the corporate books, or to vote at any meeting of the stockholders.
Section 2.7 Quorum and Manner of Acting. Unless otherwise provided by the
Certificate of Incorporation or these By-laws, a majority of the outstanding
shares of the Corporation, entitled to vote on a matter, represented in person
or by proxy, shall constitute a quorum for consideration of such matter at any
meeting of stockholders; provided, that if less than a majority of the
outstanding shares entitled to vote on a matter are represented at said meeting,
a majority of the shares so represented may adjourn the meeting from time to
time without further notice other than announcement at the meeting at which the
adjournment is taken of the time and place of the adjourned meeting. At the
adjourned meeting the Corporation may transact any business which might have
been transacted at the original meeting. If the
<PAGE> 5
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting. If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting and entitled to vote shall be the act of the
stockholders, unless the vote of a greater number or voting by classes is
required by the Delaware General Corporation Law, the Certificate of
Incorporation or these By-laws. Withdrawal of stockholders from any meeting
shall not cause failure of a duly constituted quorum at that meeting.
Section 2.8 Voting Shares and Proxies. Each stockholder shall be
entitled to one vote for each share of capital stock held by such stockholder,
except as otherwise provided in the Certificate of Incorporation. Each
stockholder entitled to vote shall be entitled to vote in person, or may
authorize another person or persons to act for him by proxy executed in writing
by such stockholder or by his duly authorized attorney-in-fact, but no such
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period.
Section 2.9 Inspectors. At any meeting of stockholders, the chairman of
the meeting may, or upon the request of any stockholder shall, appoint one or
more persons as inspectors for such meeting. Such inspectors shall ascertain
and report the number of shares represented at the meeting, based upon the list
of stockholders produced at the meeting in accordance with Section 2.6 hereof
and upon their determination of the validity and effect of proxies, and they
shall count all votes, report the results and do such other acts as are proper
to conduct the election and voting with impartiality and fairness to all the
stockholders. Each such report shall be in writing and signed by at least a
majority of the inspectors, the report of a majority being
<PAGE> 6
the report of the inspectors, and such reports shall be prima facie evidence of
the number of shares represented at the meeting and the result of a vote of the
stockholders.
Section 2.10 Voting of Shares by Certain Holders. Shares of its own
stock belonging to the Corporation, unless held by it in a fiduciary capacity,
shall not be counted in determining the total number of outstanding shares at
any given time. Shares standing in the name of another corporation, domestic
or foreign, may be voted by such officer, agent or proxy as the by-laws of such
corporation may prescribe, or, in the absence of such provision, as the board
of directors of such corporation may determine. Persons holding stock in a
fiduciary capacity shall be entitled to vote the shares so held. Persons whose
stock is pledged shall be entitled to vote, unless in the transfer by the
pledgor on the books of the Corporation he expressly empowered the pledgee to
vote thereon, in which case only the pledgee, or his proxy, may represent such
stock and vote thereon.
Section 2.11 Action by Stockholders. Any action required to be taken or
which may be taken at a meeting of stockholders must be effected at a duly
called annual or special meeting of the stockholders of the Corporation, and
the power of stockholders to consent in writing, without a meeting, to the
taking of any action is specifically denied.
Section 2.12 Notice of Stockholder Business. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before the annual meeting
of stockholders, business must be (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board, (b)
otherwise properly brought before the meeting by or at the direction of the
Board, or (c) otherwise properly brought before the meeting by a stockholder.
For business to be properly
<PAGE> 7
brought before an annual meeting of the stockholders, the stockholder must have
the legal right and authority to make the proposal for consideration at the
meeting and the stockholder must have given timely notice thereof in writing to
the President of the Corporation. To be timely, a stockholder's written notice
of intent to make a proposal or proposals must be personally delivered to or
mailed by United States mail, postage prepaid and received by the President of
the Corporation at the principal executive offices of the Corporation not less
than 120 days prior to the meeting; provided however, that in the event that
less than 130 days notice or prior public disclosure of the date of the meeting
is given or made to stockholders (which notice or public disclosure shall
include the date of the annual meeting specified in these By-laws, if such
By-laws have been filed with the Securities and Exchange Commission and if the
Annual Meeting is held on such date), notice by the stockholder to be timely
must be so received not later than the close of business on the 10th day
following the day on which notice of the day of the annual meeting was mailed or
such public disclosure was made. A stockholder's notice to the President shall
set forth as to each item of business the stockholder proposes to bring before
the annual meeting (a) a brief description of the business desired to be brought
before the meeting, and in the case of a nomination for election of director,
such nominee's name and qualifications, and the reasons for conducting business
at the meeting, (b) the name and the record address of the stockholder or
stockholders proposing such business, (c) the number of shares of stock of the
Corporation which are beneficially owned by such stockholder or stockholders,
and (d) any material interest of the stockholder in such business. The chairman
of the meeting may refuse to acknowledge the proposal of any stockholder not
made in compliance with this Section 2.12. Notwithstanding anything in these
By-laws to the contrary, no business shall be brought before
<PAGE> 8
or conducted at an annual meeting except in accordance with the procedures set
forth in this Section 2.12.
ARTICLE III
DIRECTORS
Section 3.1 General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors except as may be otherwise provided
by statute, these By-laws or the Certificate of Incorporation.
Section 3.2 Number, Tenure and Qualifications. The number of directors
shall be eight (8). The number may be increased or decreased from time to time
by amendment of this Section except as may otherwise be provided in the
Certificate of Incorporation. Commencing with the annual meeting of
stockholders held in 1998, the directors shall be divided into three (3)
classes, as nearly equal in number as possible, with the term of office of the
first class to expire at the 1999 annual meeting of stockholders, the term of
office of the second class to expire at the 2000 annual meeting of stockholders
and the third class expiring at the 2001 annual meeting of stockholders. At
each annual meeting of stockholders following such initial classification,
directors elected by the stockholders to succeed those directors whose term
expires shall be elected for a term of office to expire at the third succeeding
annual meeting of stockholders after their election. Each director shall hold
office until his successor is elected and qualified or until his earlier
resignation or removal. In addition, each director of the Corporation shall
own, of record or beneficially, at least 120,000 shares of the Corporation.
Section 3.3 Regular Meetings. A regular meeting of the Board of
Directors shall be held, without other notice than this Section, immediately
after and at the same place as the
<PAGE> 9
annual meeting of stockholders. The Board of Directors may provide, by
resolution, the time and place, either within or without Delaware, for the
holding of additional regular meetings without other notice than such
resolution.
Section 3.4 Special Meetings. Special meetings of the Board of Directors
may be called at any time by the Chairman, the President or at the written
request of any two directors. The person or persons who call a special meeting
of the Board of Directors may designate any place, either within or without
Delaware, as the place for holding such special meeting. In the absence of
such a designation, the place of meeting shall be the Corporation's principal
place of business.
Section 3.5 Notice of Special Meetings. Notice stating the place, date
and hour of a special meeting shall be mailed not less than five days before
the date of meeting, or shall be sent by telegram or be delivered personally or
by telephone not less than two days before the date of the meeting, to each
director by or at the direction of the person or persons calling the meeting.
Attendance of a director at any meeting shall constitute a waiver of notice of
such meeting except where a director attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meting is not lawfully called or convened. Neither the
business to be transacted at nor the purpose of any meeting of the Board of
Directors need be specified in the notice or waiver of notice of such meeting.
Section 3.6 Quorum and Manner of Acting. A majority of the number of
directors as fixed in Section 3.2 hereof shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors; provided,
that if less than a majority of such number of directors are present at said
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice. The act of the majority of the directors
present at a
<PAGE> 10
meeting at which a quorum is present shall be the act of the Board of Directors,
unless otherwise provided in the Delaware General Corporation Law, the
Certificate of Incorporation or these By-laws.
Section 3.7 Informal Action by Directors. Any action which is required
by law or by these By-laws to be taken at a meeting of the Board of Directors,
or any other action which may be taken at a meeting of the Board of Directors
or any committee thereof, may be taken without a meeting if a consent in
writing, setting forth the action to be taken, shall be signed by all of the
directors entitled to vote with respect to the subject matter thereof, or by
all the members of such committee, as the case may be. Such consent shall have
the same force and effect as a unanimous vote of all of the directors or all of
the members of such committee, as the case may be, at a duly called meeting
thereof, and shall be filed with the minutes of proceedings of the Board or
committee.
Section 3.8 Telephonic Meetings. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, members of the Board of
Directors or of any committee designated by such Board, may participate in a
meeting of such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting.
Section 3.9 Resignations. Any director may resign at any time by giving
written notice to the Board of Directors, the Chairman, the President, or the
Secretary. Such resignation shall take effect at the time specified therein;
and, unless tendered to take effect upon acceptance thereof, the acceptance of
such resignation shall not be necessary to make it effective.
<PAGE> 11
Section 3.10 Vacancies and Newly-Created Directorships. Vacancies and
newly-created directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors then in
office, although less than a quorum, or by a sole remaining director, and the
directors so chosen shall hold office until their successors are elected and
qualified or until their earlier resignation or removal.
Section 3.11 Removal. Any director or the entire Board of Directors may
be removed, with or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors.
Section 3.12 Interested Directors.
(a) No contract or transaction between the Corporation and one or more of
its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the Board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than quorum; or
<PAGE> 12
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified, by the Board of Directors,
a committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
Section 3.13 Director Compensation. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, the Board of Directors shall
have the authority to fix the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
ARTICLE IV
COMMITTEES
Section 4.1 Appointment and Powers. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee
<PAGE> 13
to consist of one or more of the directors of the Corporation which, to the
extent provided in said resolution or in these By-laws, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that any such committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors, fix the designations and any of the
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
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), adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or a
revocation thereof, or amending the By-laws; and, unless the resolution, By-laws
or Certificate of Incorporation expressly so provides, no such committee shall
have the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the Delaware General Corporation Law.
Section 4.2 Absence or Disqualification of Committee Member. In the
absence or disqualification of any member of such committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not they constitute a quorum, may
<PAGE> 14
unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member.
Section 4.3 Record of Proceedings. The committees shall keep regular
minutes of their proceedings and when required by the Board of Directors shall
report the same to the Board of Directors.
ARTICLE V
OFFICERS
Section 5.1 Number and Titles. The officers of the Corporation shall be
a Chairman of the Board, a President, one or more Vice Presidents (the number
thereof to be determined by the Board of Directors), a Treasurer and a
Secretary. There shall be such other officers and assistant officers as the
Board of Directors may from time to time deem necessary. Any two or more
offices may be held by the same person unless the Certificate of Incorporation
or these By-laws otherwise provide.
Section 5.2 Election, Term of Office and Qualifications. The officers
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after the annual meeting of stockholders. If the
election of officers is not held at such meeting, such election shall be held
as soon thereafter as may be convenient. Vacancies may be filled or new
offices created and filled at any meeting of the Board of Directors. Each
officer shall be elected to hold office until his successor shall have been
elected and qualified, or until his earlier death, resignation or removal.
Election of an officer shall not of itself create contract rights.
<PAGE> 15
Section 5.3 Removal. Any officer may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed.
Section 5.4 Resignation. Any officer may resign at any time by giving
written notice to the Board of Directors, the Chairman, the President or the
Secretary. Such resignation shall take effect at the time specified therein;
and, unless tendered to take effect upon acceptance thereof, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5.5 Duties. In addition to and to the extent not inconsistent
with the provisions of these By-laws, the officers shall have such authority,
be subject to such restrictions, and perform such duties in the management of
the business, property and affairs of the Corporation as may be determined from
time to time by the Board of Directors.
Section 5.6 Chairman of the Board. The Chairman of the Board shall be
elected by and from the membership of the Board of Directors. Subject to the
control of the Board of Directors, the Chairman of the Board shall, in general,
supervise and manage the business and affairs of the Corporation and he shall
see that the resolutions and directions of the Board of Directors are carried
into effect. Except in those instances in which the authority to execute is
expressly delegated to another officer or agent of the Corporation or a
different mode of execution is expressly prescribed by the Board of Directors
or these By-laws, or where otherwise required by law, the Chairman of the Board
may execute for the Corporation any contracts, deeds, mortgages, bonds or other
instruments which the Board of Directors has authorized to be executed or the
execution of which is in the ordinary course or the Corporation's business, and
he may accomplish such execution either under or without the seal of the
Corporation and
<PAGE> 16
either alone or with the Secretary, or any other officer thereunto authorized
by the Board of Directors or these By-laws. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors (and
of any executive committee thereof), and shall perform such other duties as from
time to time shall be prescribed by the Board of Directors.
Section 5.7 President. The President shall be the chief executive
officer of the Corporation. Subject to the control of the Board of Directors,
he shall in general supervise the business and affairs of the Corporation and
he shall see that resolutions and directions of the Board of Directors are
carried into effect except when that responsibility is specifically assigned to
some other person by the Board of Directors. Unless there is a Chairman of the
Board who is present and who has the duty to preside, the President shall
preside at all meetings of the stockholders and, if a director, at all meetings
of the Board of Directors. Except in those instances in which the authority to
execute is expressly delegated to another officer or agent of the Corporation
or a different mode of execution is expressly prescribed by the Board of
Directors or these By-laws or where otherwise required by law, the President
may execute for the Corporation any contracts, deeds, mortgages, bonds or other
instruments which the Board of Directors has authorized to be executed or the
execution of which is in the ordinary course of the Corporation's business, and
he may accomplish such execution either under or without the seal of the
Corporation and either individually or with the Secretary, any Assistant
Secretary, or any other officer thereunto authorized by the Board of Directors
or these By-laws. In general, he shall perform all duties incident to the
office of President and such other duties as from time to time may be
prescribed by the Chairman or the Board of Directors.
<PAGE> 17
Section 5.8 Vice Presidents. In the absence of the President or in the
event of his inability or refusal to act, the Vice President (or in the event
there is more than one Vice President, the Vice President designated Executive
Vice President by the Board of Directors and thereafter, or in the absence of
such designation, the Vice Presidents in the order otherwise designated by the
Board of Directors, or in the absence of such other designation, in the order
of their election) shall perform the duties of the President, and when so
acting, shall have all the authority of and be subject to all the restrictions
upon the President. Except in those instances in which the authority to
execute is expressly delegated to another officer or agent of the Corporation
or a different mode of execution is expressly prescribed by the Board of
Directors or these By-laws or where otherwise required by law, the Vice
President (or each of them if there are more than one) may execute for the
Corporation any contracts, deeds, mortgages, bonds or other instruments which
the Board of Directors has authorized to be executed, and he may accomplish
such execution either under or without the seal of the Corporation and either
individually or with the Secretary, any Assistant Secretary, or any other
officer thereunto authorized by the Board of Directors or these By-laws. The
Vice Presidents shall perform such other duties as from time to time may be
prescribed by the Chairman, the President or the Board of Directors.
Section 5.9 Treasurer. The Treasurer shall be the principal financial
and accounting officer of the Corporation, and shall (a) have charge and
custody of, and be responsible for, all funds and securities of the
Corporation; (b) keep or cause to be kept correct and complete books and
records of account including a record of all receipts and disbursements; (c)
deposit all funds and securities of the Corporation in such banks, trust
companies or other depositaries as shall
<PAGE> 18
be selected in accordance with these By-laws; (d) from time to time prepare or
cause to be prepared and render financial statements of the Corporation at the
request of the Chairman, the President or the Board of Directors; and (e) in
general, perform all duties incident to the office of Treasurer and such other
duties as from time to time may be prescribed by the Chairman, the President or
the Board of Directors. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the Board of Directors shall determine.
Section 5.10 Secretary. The Secretary shall (a) keep the minutes of the
proceedings of the stockholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-laws or as required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all stock certificates prior to
the issuance thereof and to all documents the execution of which on behalf of
the Corporation under its seal is necessary or appropriate; (d) keep or cause
to be kept a register of the name and address of each stockholder, which shall
be furnished to the Corporation by each such stockholder, and the number and
class of shares held by each stockholder; (e) have general charge of the stock
transfer books; and (f) in general, perform all duties incident to the office
of Secretary and such other duties as from time to time may be prescribed by
the Chairman, the President or the Board of Directors.
Section 5.11 Assistant Treasurer and Assistant Secretaries. In the
absence of the Treasurer or Secretary in the event of the inability or refusal
of the Treasurer or Secretary to act, the Assistant Treasurer and the Assistant
Secretary (or in the event there is more than one
<PAGE> 19
of either, in the order designated by the Board of Directors or in the absence
of such designation, in the order of their election) shall perform the duties of
the Treasurer and Secretary, respectively, and when so acting, shall have all
the authority of and be subject to all the restrictions upon such office. The
Assistant Treasurers and Assistant Secretaries shall also perform such duties as
from time to time may be prescribed by the Treasurer or the Secretary,
respectively, or by the Chairman, the President or the Board of Directors.
Section 5.12 Salaries. The salaries and additional compensation, if any,
of the officers shall be determined from time to time by the Board of
Directors; provided, that if such officers are also directors, such
determination shall be made by a majority of the disinterested directors then
in office.
ARTICLE VI
CERTIFICATES OF STOCK AND THEIR TRANSFER
Section 6.1 Stock Certificates. The issued shares of the Corporation
shall be represented by certificates, and no class or series of shares of the
Corporation shall be uncertificated shares. Stock certificates shall be in
such form as determined by the Board of Directors and shall be signed by, or in
the name of the Corporation by the Chairman, the President or a Vice President,
and by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation. Any of or all the signatures on the
certificates may be a facsimile. All certificates of stock shall bear the seal
of the Corporation, which seal may be a facsimile, engraved or printed.
Section 6.2 Transfer of Shares. The shares of the Corporation shall be
transferable. The Corporation shall have a duty to register any such transfer
(a) provided there is presented
<PAGE> 20
to the Corporation or its transfer agents (i) the stock certificate endorsed by
the appropriate person or persons; and (ii) reasonable assurance that such
endorsement is genuine and effective; and, (b) provided that (i) the Corporation
has no duty to inquire into adverse claims or has discharged any such duty; (ii)
any applicable law relating to the collection of taxes has been complied with;
and (iii) the transfer is in fact rightful or is to a bona fide purchaser. Upon
registration of such transfer upon the stock transfer books of the Corporation
the certificates representing the shares transferred shall be cancelled and the
new record holder, upon request, shall be entitled to a new certificate or
certificates. The terms and conditions described in the foregoing provisions of
this Section shall be construed in accordance with the provisions of the
Delaware Uniform Commercial Code, except as otherwise provided by the Delaware
General Corporation Law. No new certificate shall be issued until the former
certificate or certificates for a like number of shares shall have been
surrendered and cancelled, except that in case of a lost, destroyed, wrongfully
taken or mutilated certificate a new one may be issued therefor upon such term
and indemnity to the Corporation as the Board of Directors, the Chairman or the
President may prescribe consistent with applicable law.
Section 6.3 Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the Delaware General Corporation Law.
<PAGE> 21
ARTICLE VII
DIVIDENDS
Section 7.1 Dividends. Subject to the provisions of the Delaware General
Corporation Law and the Certificate of Incorporation, the Board of Directors
may declare and pay dividends upon the shares of its capital stock. Dividends
may be paid in cash, in property, or in shares of the Corporation's capital
stock.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification. The Corporation shall indemnify, to the
full extent that it shall have the power under the Delaware General Corporation
Law to do so and in a manner permitted by such law, any person made or
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that he 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 liabilities and expenses reasonably
incurred or paid by such person in connection with such action, suit or
proceeding. The words "liabilities" and "expenses" shall include, without
limitations: liabilities, losses, damages, judgments, fines, penalties,
amounts paid in settlement, expenses, attorneys' fees and costs. Expenses
incurred in defending a civil, criminal, administrative, investigative or other
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding in accordance with the
provisions of Section 145 of the Delaware General Corporation Law, as amended.
<PAGE> 22
The indemnification and advancement of expenses provided by this By-law
shall not be deemed exclusive of any other rights to which any person
indemnified may be entitled under any by-law, statute, 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 such director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
The Corporation may purchase and maintain insurance on behalf of any
person referred to in the preceding paragraph 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 By-law or
otherwise.
For purposes of this By-law, reference to "the Corporation" shall include,
in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation, as director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this By-law with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
<PAGE> 23
The provisions of this By-law shall be deemed to be a contract between the
Corporation and each director, officer, employee and agent who serves in any
such capacity at any time while this By-law and the relevant provisions of the
Delaware General Corporation Law, as amended, or other applicable law, if any,
are in effect, and any repeal or modification of any such law or of this By-law
shall not affect any rights or obligations then existing with respect to any
state of facts then or theretofore existing or any action, suit or proceeding
theretofore or thereafter brought or threatened based in whole or in part upon
such state of facts.
For purposes of this By-law, 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 any 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 best 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.
ARTICLE IX
FISCAL YEAR
Section 9.1 Fiscal Year. The fiscal year of the Corporation shall be
fixed by the Board of Directors.
<PAGE> 24
ARTICLE X
SEAL
Section 10.1 Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware." The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or in any manner reproduced.
ARTICLE XI
WAIVER OF NOTICE
Section 11.1 Waiver of Notice. Whenever any notice is required to be
given under these By-laws, the Certificate of Incorporation or the Delaware
General Corporation Law, a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1 Contracts. The Board of Directors may authorize any officer
or agent to enter into any contract or execute and deliver any instrument in
the name and on behalf of the Corporation, and the Chairman or President may so
authorize any officer or agent with respect to contracts or instruments in the
usual and regular course of business. Such authority may be general or
confined to specific instances.
Section 12.2 Loans. No loan shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued in its name unless
authorized by the Board of Directors. Such authority may be general or
confined to specific instances.
<PAGE> 25
Section 12.3 Checks, Drafts, Etc. All checks, drafts or other orders for
payment of money, or notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or agent as shall from
time to time be authorized by the Board of Directors.
Section 12.4 Deposits. The Board of Directors may select banks, trust
companies or other depositaries for the funds of the Corporation.
Section 12.5 Stock in Other Corporations. Shares of any other
corporation or bank which may from time to time be held by the Corporation may
be represented and voted by the Chairman or the President, or by any proxy
appointed in writing by the Chairman or the President, or by any other persons
thereunto authorized by the Board of Directors, at any meeting of stockholders
of such corporation or by executing written consents with respect to such
shares where stockholder action may be taken by written consent. Shares
represented by certificates standing in the name of the Corporation may be
endorsed for sale or transfer in the name of the Corporation by the Chairman or
the President, or by any other officer thereunto authorized by the Board of
Directors. Shares belonging to the Corporation need not stand in the name of
the Corporation, but may be held for the benefit of the Corporation in the name
of any nominee designated for such purpose by the Board of Directors.
SECTION XIII
AMENDMENT
Section 13.1 Procedure. These By-laws may be altered, amended or
repaired and new by-laws may be adopted by the Board of Directors.
<PAGE> 26
Section 13.2 Amendment by Stockholders. Notwithstanding any other
provision of the Restated Certificate of Incorporation or these By-laws of the
Corporation to the contrary and notwithstanding that a lesser percentage may be
specified by law, in the event these By-laws shall be amended by vote of
stockholders, the affirmative vote of the holders of at least two-thirds (2/3)
of the voting power of the outstanding shares of all classes of stock of the
Corporation, voting together as a single class, shall be required to amend or
repeal or adopt any provision inconsistent with Sections 2.2, 2.11, 2.12, 3.2,
3.10 or 13.2 of these By-laws.
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