SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996 Commission File No. 0-9377
KINNARD INVESTMENTS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-0972952
(State of incorporation) (I.R.S Employer identification number)
920 Second Avenue South, Minneapolis, Minnesota 55402 612) 370-2700
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(Address of principal executive offices) Telephone Number
Not applicable
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days. Yes X No
Shares of $0.02 par value common stock outstanding at May 10, 1996: 5,994,171
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
CONTENTS
PART I Page
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated statements of financial condition.............................3
Consolidated statements of operations......................................4
Consolidated statements of shareholders' equity............................5
Consolidated statements of cash flows......................................6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.................................8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS......................................10
PART II
OTHER INFORMATION..........................................................13
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
March 31, December 31,
1996 1995
- --------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $3,276 $5,766
Receivable from clearing firm and other
broker-dealers 7,097 4,324
Receivable from customers 13,651 9,734
Miscellaneous receivables 1,746 1,549
Trading securities, at market 10,248 10,226
Office equipment at cost, less accumulated
depreciation of $3,807 and $3,604, respectively 1,711 1,740
Investment securities, at fair value 8,383 11,827
Other assets 632 731
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Total assets $46,744 $45,897
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Notes payable $4,460 $6,307
Due to clearing firm and other broker-dealers 236 405
Payable to customers 4,353 3,184
Securities sold but not yet purchased, at market 1,566 1,659
Employee compensation and related taxes payable 3,558 3,649
Other accounts payable and accrued expenses 5,517 4,489
Income taxes payable 887 346
Deferred tax liability 481 553
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Total liabilities 21,058 20,592
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Shareholders' Equity
Preferred stock, authorized 1,000 shares; none
issued or outstanding 0 0
Undesignated stock, authorized 16,500 shares;
none issued or outstanding 0 0
Common stock, $.02 par value; authorized 7,500
shares; issued and outstanding 6,025 and 6,257
shares, respectively 121 125
Additional paid-in capital 12,736 13,680
Retained earnings 12,829 11,500
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Total shareholders' equity 25,686 25,305
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Total liabilities and shareholders' equity $46,744 $45,897
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</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues
Commission income $10,106 $5,791
Principal transactions 9,151 6,790
Investment account income 792 871
Investment banking 471 260
Interest 591 406
Other 1,049 639
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Total revenues 22,160 14,757
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Operating Expenses
Compensation and benefits 10,710 7,918
Bank commissions 4,137 2,054
Floor brokerage and clearance 1,209 916
Communications 320 315
Occupancy and computer 1,495 1,435
Other 2,067 1,615
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Total operating expenses 19,938 14,253
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Income before income taxes 2,222 504
Income tax expense 893 187
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Net income $1,329 $317
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Earnings per common share:
Primary $0.22 $0.05
Fully diluted $0.21 $0.05
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Weighted average number of common and common
equivalent shares outstanding:
Primary 6,181 6,052
Fully diluted 6,199 6,269
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</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except per share data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Additional Unearned
Common Stock Issued Paid-in Compen- Retained
Shares Amount Capital sation Earnings
<S> <C> <C> <C> <C> <C>
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Balance, December 31, 1993 6,033 $121 $13,245 ($107) $11,930
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Dividends on common stock
($.10 per share) (598)
Exercise of warrants 21 0 47
Issuance of shares under
the employee
stock option plan 57 1 299
Repurchase of shares (230) (4) (730)
Amortization of unearned
compensation 81
Net loss (3,210)
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Balance, December 31, 1994 5,881 118 12,861 (26) 8,122
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Forfeiture of restricted
shares and adjustment
to common stock dividend (1) (5) 6 2
Exercise of warrants 381 7 850
Issuance of shares under the
employee stock option plan 11 0 22
Repurchase of shares (15) 0 (48)
Amortization of unearned
compensation 20
Net income 3,376
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Balance, December 31, 1995 6,257 125 13,680 0 11,500
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Issuance of shares under the
employee stock option plan 24 0 46
Repurchase of shares (256) (4) (990)
Net income 1,329
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Balance, March 31, 1996
(unaudited) 6,025 $121 $12,736 $0 $12,829
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</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Three Months Ended
March 31,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers, brokers-dealers
and clearing agencies $15,141 $13,593
Cash paid to suppliers and employees (18,998) (15,924)
Interest:
Received 591 406
Paid (71) (12)
Income taxes paid (424) (1)
- -------------------------------------------------------------------------------
Net cash used in operating activities (3,761) (1,938)
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investment securities 6,957 5,278
Purchase of:
Office equipment (170) (193)
Investment securities (2,721) (5,618)
- -------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 4,066 (533)
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CASH FLOWS FROM FINANCING ACTIVITIES
Issuance (repurchase) of common stock (948) 857
Net borrowings (payments) on notes payable and
revolving credit agreements (1,847) 2,600
Dividends paid 0 (147)
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Net cash provided by (used in) financing activities (2,795) 3,310
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Increase (decrease) in cash and cash equivalents (2,490) 839
Cash and cash equivalents at beginning of period 5,766 2,750
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Cash and cash equivalents at end of period $3,276 $3,589
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</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Three Months Ended
March 31,
1996 1995
- -------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
USED IN OPERATING ACTIVITIES:
Net income $1,329 $317
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 199 229
Unearned compensation 0 6
Net unrealized gain on investment securities (221) (1,000)
Net realized loss (gain) on sale of investment
securities (571) 129
Deferred income taxes (72) 382
(Increase) decrease in:
Receivable from clearing firm and other
brokers-dealers (2,773) (1,975)
Receivable from customers (3,917) (1,956)
Miscellaneous receivables (197) 115
Trading securities, at market (22) 2,393
Income tax receivable 0 (197)
Other assets 99 107
Increase (decrease) in:
Due to clearing firm and other broker-dealers (169) (1,510)
Payable to customers 1,169 913
Securities sold but not yet purchased (93) 739
Employee compensation and related taxes payable (91) (405)
Other accounts payable and accrued expenses 1,028 (225)
Income taxes payable 541 0
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Net cash used in operating activities ($3,761) ($1,938)
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</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
The accompanying consolidated financial statements of Kinnard
Investments, Inc., (the "Company") have been prepared in
conformity with generally accepted accounting principles and
should be read in conjunction with the Company's annual report for
the year ended December 31, 1995. The results of operations for
the three months ended March 31, 1996 are not necessarily
indicative of the results to be expected for the year ended
December 31, 1996.
The consolidated statement of financial condition as of March 31,
1996 and other financial information for the three months ended
March 31, 1996 and 1995, are unaudited, but management of the
Company believes that all adjustments (consisting only of normal
recurring adjustments) necessary for a fair statement of the
results of operations for the periods have been included.
For comparability, certain 1995 amounts have been reclassified to
conform with the presentation for 1996. The reclassifications had
no effect on net income or shareholders' equity as previously
reported.
Note 2. Net Capital Requirements
Pursuant to the net capital provisions of the Securities Exchange
Act of 1934, the Company's subsidiaries, John G. Kinnard and
Company, Inc. (JGK), and PRIMEVEST Financial Services, Inc. (PFS),
are required to maintain a minimum net capital as defined under
such provisions. Also under this rule, JGK's ratio of aggregate
indebtedness to net capital may not exceed 15 to 1, and PFS's
percentage of net capital to aggregate debit items, both as
defined, must be greater than 2%. In addition, broker-dealers may
be prohibited from expanding their business or declaring cash
dividends if certain requirements are not met. For JGK, the
restrictions would apply if its ratio of aggregate indebtedness to
net capital is greater than 10 to 1, and for PFS, if its net
capital is less than 5% of aggregate debit balances.
At March 31, 1996, JGK had net capital of $6.8 million, a net
capital requirement of $691,000 and a ratio of aggregate
indebtedness to net capital of 1.08 to 1. PFS had net capital of
$2.6 million, a net capital requirement of $250,000 and a ratio of
net capital to aggregate debit items of 22%.
Note 3. Shareholders' Equity
During the first quarter of 1996, the Company repurchased
approximately 256,000 shares of its common stock at a total cost
of $994,000. The Board of Directors has authorized the repurchase
of up to 600,000 shares of the Company's common stock, of which a
total of 514,000 shares have been repurchased as of March 31,
1996.
In the first quarter of 1996, 23,700 options with an exercise
price of $1.98 per shares were exercised, generating proceeds of
$46,000.
In 1995, 381,056 warrants with an exercise price of $2.25 per
share and an expiration date of February 1995 were exercised,
generating proceeds of $857,000. An additional 38,917 warrants
that were not exercised expired.
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Commitments and Contingent Liabilities
In October 1994, a purported class action lawsuit was commenced in
U.S. District Court for the District of Minnesota against Palace
Casinos, Inc. ("Palace Casinos") and a number of other defendants,
including JGK, alleging violation of state and federal securities
laws and common law claims. The lawsuit sought an unspecified
amount of damages. The plaintiffs sought to represent a class of
persons who purchased Palace Casinos preferred stock in a private
placement, in which JGK acted as a selling agent. In February
1996, the parties reached a settlement, which remains subject to
certain conditions and to receipt of final judicial approval.
Under the settlement agreement, all claims against JGK by settling
class members who accept the class-action settlement are to be
released, in exchange for a payment by JGK of $500,000 to
plaintiffs for the benefit of the settling class.
JGK is a defendant in various other actions relating to its
business, some of which involve claims for unspecified amounts.
Although the ultimate outcome of these other matters cannot be
predicted with certainty, the Company's management believes that
while the outcome of these matters may have a material effect on
the earnings in a particular period, the outcome will not have a
material adverse effect on the financial condition of the Company.
In the normal course of business, the Company enters into
underwriting and other commitments. The ultimate settlement of
such transactions open at quarter-end is not expected to have a
material effect on the financial statements.
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion should be read in conjunction with Management's Discussion and
Analysis contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
Results of Operations
The following table sets forth a summary of changes in the major
categories of revenues and expenses:
<TABLE>
<CAPTION>
Three Months Ended
Unaudited March 31, 1996 versus 1995
Increase (decrease)
<S> <C> <C>
Revenues
Commission income $4,315 75%
Principal transactions 2,361 35
Investment account income (79) (9)
Investment banking 211 81
Interest 185 46
Other 410 64
Total revenues 7,403 50
Operating Expenses
Compensation and benefits 2,792 35
Bank commissions 2,083 101
Floor brokerage and clearance 293 32
Communications 5 2
Occupancy and computer 60 4
Other 452 28
Total 5,685 40
Income before income taxes 1,718 341
Income taxes 706 378
Net income $1,012 319%
</TABLE>
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three months ended March 31, 1996 and 1995
The equity markets set new record highs during the first quarter of 1996, while
fixed income markets were adversely affected by rising interest rates. The
Company's revenues of $22.2 million compare to $14.8 million a year ago, a 50%
increase. Primary earnings per share were $0.22 per share versus $0.05 per share
last year. The improved profitability was due to higher transaction levels,
increased productivity and expense management. For the fifth consecutive
quarter, the Company increased earnings per share and net income relative to the
prior year's comparable period.
Sales of all commission products were up significantly from the prior year, but
the largest increase was in mutual funds, which increased 130%. It was a record
quarter for the mutual fund industry as a whole, with individuals investing
record amounts of new money into mutual funds.
Revenue from principal transactions increased by $2.4 million from the same
period last year due to strong increases in revenues from equity products. The
Company's expertise in the Capital Markets Group is trading, researching and
selling emerging growth stocks. This segment of the market was quite strong in
the current period. Revenues from fixed income trading declined modestly as the
value of inventories were negatively impacted by rising interest rates. The
yield on the 30 year Treasury bond increased from 5.9% at December 31, 1995 to
6.7% at March 31, 1996.
The investment account generated income of $792,000 in the first quarter of
1996, down 9% from the prior year. The investment account has historically been
a volatile source of revenues for the Company.
Investment banking revenues increased by $211,000 or 81%. The Company completed
two private placements in the first quarter of 1996 versus no financings for the
comparable quarter last year.
Employee compensation and benefits rose by 35% as revenue based compensation,
such as commissions paid to investment executives, increased in line with
revenues. Incentive compensation rose due to increases in profitability and
revenues. Salaries increased modestly as the Company continues to closely manage
the number of employees and related compensation.
Bank commissions increased by 101% due in part to higher payouts resulting from
improved productivity, but primarily to increased transaction levels. Floor
brokerage and clearance also increased in conjunction with the increased level
of transactions. Other operating expense rose by $452,000 due to a charge for an
arbitration award, which was partially offset by lower legal expenses as a
result of settling several litigations.
Liquidity and Capital Resources
Operating Activities
A large portion of the Company's assets are cash and assets readily convertible
to cash. The liquid portion of trading inventory and investment securities are
stated at quoted market value and are readily marketable. The less liquid
portions of trading inventory and investment securities are stated at fair
value, which is determined by management's best estimate.
During the three months ended March 31, 1996, the value of trading securities
increased $22,000 and securities sold but not yet purchased decreased by
$93,000. Both long and short inventories are generally maintained to facilitate
customer transactions rather than for market speculation.
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Operating Activities
As securities broker-dealers, John G. Kinnard and PRIMEVEST are required by SEC
regulations to meet certain liquidity and capital standards. Both companies have
been in compliance with these regulations at all times.
Based on the Company's current liquidity positions, available bank lines and
operating plans, it is anticipated that the Company has sufficient resources to
meet the cash requirements of its operations in the foreseeable future.
Investing Activities
The majority of investment activity during the current period resulted from the
sale and repurchase of investment grade fixed income securities held in the
investment account. A portion of the proceeds from the sale of securities held
in the investment account were used to reduce short-term borrowings.
Financing Activities
The Company's subsidiaries maintain various credit facilities in order to meet
short-term operating needs. At March 31, 1996 and December 31, 1995 there were
outstanding balances of $4.5 million and $6.3 million, respectively, under these
facilities. The outstanding debt was used primarily to finance customer margin
balances.
Cautionary Statements
As provided under the Private Securities Reform Act of 1995, the Company wishes
to caution investors of the following factors which could affect the Company's
results of operations and cause such results to differ materially from those
anticipated in forward-looking statements made in this document or elsewhere by
or on behalf of the Company: volatility in the securities markets, risks in the
ownership and underwriting of securities, consolidation in the financial
services industries, volatility in earnings and losses of investment accounts,
competition, government regulation, customer litigation and arbitration, and
off-balance-sheet credit and market risks. For a more complete discussion of
these and other factors, see the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.
<PAGE>
KINNARD INVESTMENTS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
See Note 4 in Notes to Consolidated Financial Statements.
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 - Restated Articles of Incorporation
3.2 - Restated Bylaws
27 - Financial Data Schedule (filed in electronic format only)
(b) Reports on Form 8-K
None
<PAGE>
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.
KINNARD INVESTMENTS, INC.
/s/ Stephen H. Fischer
Stephen H. Fischer
Treasurer (principal financial officer)
Date 05/10/96
<PAGE>
EXHIBIT INDEX
KINNARD INVESTMENTS, INC.
FORM 10-Q
For Fiscal Quarter Ended March 31, 1996
Exhibit No. Description
3.1 Restated Articles of Incorporation
3.2 Restated Bylaws
27 Financial Data Schedule
(filed in electronic format only)
Exhibit 3.1
RESTATED
ARTICLES OF INCORPORATION
OF
KINNARD INVESTMENTS, INC.
ARTICLE 1.
NAME
1.1. Name. The name of the corporation shall be Kinnard Investments, Inc.
ARTICLE 2.
REGISTERED OFFICE
2.1. Registered Office. The location and post office address of the
registered office of the corporation in this state shall be 920 Second Avenue
South, Minneapolis, Hennepin County, Minnesota 55402.
ARTICLE 3.
CAPITAL STOCK
3.1. Authorized Shares. The aggregate number of shares the corporation has
authority to issue shall be 25,000,000 shares, consisting of 7,500,000 shares of
Common Stock, par value $.02, 1,000,000 shares of Preferred Stock and 16,500,000
undesignated shares. The Board of Directors of the corporation is authorized, by
resolution adopted and filed in the manner provided by law, (i) to establish
such series of Preferred Stock with such designation, rights and preferences as
the Board shall determine and (ii) to establish from the undesignated shares one
or more classes or series of shares, to designate each such class or series
(which may include but is not limited to designation as additional Common or
Preferred Stock), and to fix the relative rights and preferences of each such
class or series.
ARTICLE 4.
SHAREHOLDERS
4.1. Preemptive Rights. No holder of any stock of the corporation shall
have any preemptive right to subscribe for or purchase his proportionate share
of any stock of the corporation now or hereafter authorized or issued.
4.2. Voting Rights. At each meeting of the shareholders and with respect to any
matter upon which the shareholders shall have a right to vote, each holder of
record of shares of Common Stock shall be entitled to one (1) vote for each
share of Common Stock so held (except that if a class of non-voting or
restricted-voting common stock is issued, holders of such shares shall not be
entitled to vote except as allowed by law or by the corporation's designation of
the rights of holders of such shares). No shareholder shall have the right to
cumulate his votes for the election of directors and there shall be no
cumulative voting for any purpose whatsoever.
ARTICLE 5.
DIRECTORS
5.1. Number.The management of the corporation shall be vested in a Board of
Directors. The number of directors shall be fixed by the Bylaws and may be
altered by amending the Bylaws but shall never be less than required by law.
<PAGE>
5.2. Limitation of Director Liability. To the fullest extent permitted by the
Minnesota Business Corporation Act as the same exists or may hereafter be
amended, a director of this corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director. Any repeal or modification of this Article by the
shareholders of the corporation shall be prospective only and shall not
adversely affect any limitation on the personal liability of a director of the
corporation existing at the time of such repeal or modification.
ARTICLE 6.
BYLAWS
6.1. Bylaws. The Board of Directors is expressly authorized to make and alter
Bylaws of this corporation, in the manner provided in the Bylaws, subject to the
power of the shareholders to change or repeal such Bylaws and subject to any
other limitations on such authority provided by the Minnesota Business
Corporation Act.
ARTICLE 7.
MISCELLANEOUS
7.1. Ratification by Shareholders. Any contract, act or transaction of the
corporation or of the directors may be ratified by a vote of a majority of the
voting power of the shares present and entitled to vote or other minimum
required by law, and such ratification shall, so far as permitted by law, be as
valid and as binding as though ratified by every shareholder of the corporation.
7.2. Indemnification of Directors, Officers, Employees and Agents. Except as
otherwise provided in the Bylaws, directors, officers, employees and agents of
the corporation shall be indemnified to the maximum extent permitted by the
Minnesota Business Corporation Act, as from time to time amended, for expenses
and liabilities arising by reason of their position with, or by acts in such
capacities on behalf of, the corporation or another corporation which they may
serve at the request of the corporation.
7.3. Inapplicability of Minnesota Control Share Acquisition Statute.
Section 302A.671 of the Minnesota Statues Annotated (entitled "Control Share
Acquisitions") shall not apply to this corporation.
Exhibit 3.2
RESTATED BYLAWS
OF
KINNARD INVESTMENTS, INC.
TABLE OF CONTENTS
ARTICLE 1. OFFICES...........................................................20
1.1. Offices........................................................20
ARTICLE 2. MEETINGS OF SHAREHOLDERS..........................................20
2.1. Regular Meetings...............................................20
2.2. Special Meetings...............................................20
2.3. Record Date....................................................20
2.4. Notice of Meetings.............................................20
2.4.1. To Whom Given.......................................20
2.4.2. When Given..........................................21
2.4.3. Contents of Notice..................................21
2.4.4. How Given...........................................21
2.4.5. Waiver Of Notice....................................21
2.5. Quorum.........................................................21
2.6. Adjournment of Meetings........................................21
2.7. Shareholder Voting.............................................21
2.7.1. Vote Required to Pass a Matter......................21
2.7.2. Voting by Ballot....................................22
2.7.3. Jointly Owned Shares................................22
2.7.4. Voting Multiple Shares..............................22
2.7.5. Voting Shares Held by Organizations or
Legal Representatives...............................22
2.7.6. Proxies.............................................22
2.8. Order of Business..............................................22
ARTICLE 3. DIRECTORS.........................................................22
3.1. General Powers.................................................22
3.2. Number of Directors............................................22
3.3. Election of Directors and Term of Office.......................23
3.4. Resignation....................................................23
3.5. Removal of Directors...........................................23
3.5.1. Minnesota Business Corporations Act.................23
3.5.2. Automatic Removal If Not Re-Elected.................23
3.6. Vacancies......................................................23
3.7. Quorum.........................................................23
3.8. Act of the Board...............................................23
3.9. Advance Written Consent........................................23
3.10. Board Meetings................................................24
3.10.1. Annual Meeting.....................................24
3.10.2. Regular Meetings...................................24
3.10.3. Special Meetings...................................24
3.10.4. Waiver of Notice...................................24
3.10.5. Order of Business..................................24
3.11. Action without a Meeting......................................24
3.12. Compensation..................................................24
3.13. Executive Committee...........................................25
3.14. Other Committees..............................................25
ARTICLE 4. OFFICERS..........................................................25
4.1. Chief Executive Officer........................................25
4.2. Chief Financial Officer........................................25
4.3. Chairman of the Board..........................................25
4.4. President......................................................25
4.5. Vice Presidents................................................25
4.6. Secretary......................................................26
4.7. Treasurer......................................................26
4.8. Other Officers.................................................26
4.9. Election or Appointment of Officers............................26
4.10. Term of Office................................................26
4.11. Employment Rights not Affected................................26
4.12. Removal from Office...........................................26
4.13. Resignations..................................................26
4.14. Vacancies in Office...........................................26
4.15. Delegation....................................................26
ARTICLE 5. INDEMNIFICATION...................................................27
5.1. Indemnification of Directors and Executive Officers............27
5.2. Indemnification of Other Employees and Agents..................27
5.3. Non-exclusivity................................................27
5.4. Insurance......................................................27
ARTICLE 6. SHARES AND THEIR TRANSFER.........................................27
6.1. Certificates of Stock..........................................27
6.2. Stock Record...................................................27
6.3. Identification of Shareholders.................................28
6.4. Lost Stock Certificates........................................28
ARTICLE 7. GENERAL PROVISIONS................................................28
7.1. Dividends or Distributions.....................................28
7.2. Fiscal Year....................................................28
7.3. Audit of Books and Accounts....................................28
7.4. Seal...........................................................28
7.5. Securities of Other Companies..................................28
7.5.1. Voting Securities Held by the Corporation...........28
7.5.2. Purchase and Sale of Securities.....................28
ARTICLE 8. AMENDMENTS OF BYLAWS..............................................29
8.1. Amendments.....................................................29
<PAGE>
RESTATED BYLAWS
OF
KINNARD INVESTMENTS, INC. (1)
ARTICLE 1.
OFFICES.
1.1. Offices. The principal executive office of the corporation shall be 920
Second Avenue South, Minneapolis, Minnesota 55402.(2) The corporation may have
offices at such other places within or without the State of Minnesota as the
board of directors shall from time to time determine or the business of the
corporation requires. (3)
ARTICLE 2.
MEETINGS OF SHAREHOLDERS.
2.1. Regular Meetings. A regular meeting of the shareholders of the corporation
entitled to vote shall be held at the principal executive office of the
corporation or at such other place, within or without the State of Minnesota, as
is designated by the board of directors, or by written consent of all the
shareholders entitled to vote thereat, on an annual basis, at a specified time
on a regular business day, during the month of May or such other month as shall
be determined by the board of directors. At the meeting, the shareholders,
voting as provided in the Articles of Incorporation and these Bylaws, shall
elect directors and shall transact such other business as shall properly come
before the meeting. (4)
2.2. Special Meetings. Special meetings of the shareholders entitled to vote may
be called by the chairman of the board, chief executive officer, the chief
financial officer, or two or more directors for the purposes and under the
circumstances specified in the Minnesota Business Corporations Act, as amended,
and in accordance with the procedures thereof. Special meetings of the
shareholders entitled to vote also may be demanded by a shareholder or
shareholders meeting the requirements of the Minnesota Business Corporations
Act, as amended, for the purposes and under the circumstances specified therein,
in accordance with the procedures thereof. (5)
2.3. Record Date. The board of directors may fix a date not more than 60 days
before the date of a meeting of shareholders, as a record date for the
determination of the shareholders entitled to notice of and entitled to vote at
such meeting, notwithstanding any transfer of any shares on the books of the
corporation after any record date so fixed. When a date is so fixed, only
shareholders on that date are entitled to notice of and entitled to vote at that
meeting of shareholders. In the absence of action by the board, only
shareholders of record 20 days before the date of a meeting are entitled to
notice of and entitled to vote at such meeting. (6)
2.4. Notice of Meetings. Notice of meetings of shareholders shall be given as
follows:
2.4.1. To Whom Given. Notice of all meetings of shareholders shall be given
to every holder of shares entitled to vote at the meeting (1) unless the
meeting is an adjourned meeting to be held not more than 120 days after the
date fixed for the original meeting and the date, time, and place of the
meeting were announced at the time of the original meeting or any
adjournment of the original meeting. or (2) unless the Minnesota Business
Corporations Act does not require notice. When the law requires notice to
be given to all shareholders, whether or not entitled to vote at the
meeting, notice shall be so given. (7)
2.4.2. When Given. In all instances where a specific minimum notice period
has not otherwise been fixed by law, the notice shall be given at least
seven days before the date of the meeting, and not more than 60 days before
the date of the meeting. (8)
2.4.3. Contents of Notice. The notice shall contain the date, time, and
place of the meeting. In the case of a special meeting, the notice shall
contain a statement of the purposes of the meeting. This notice shall
contain any other information required by the Minnesota Business
Corporations Act, such as information on dissenters' rights where
applicable. The notice may also contain any other information deemed
necessary or desirable by the board or by any other person or persons
calling the meeting. (9)
2.4.4. How Given. Notice of a meeting shall be given to each shareholder
entitled thereto by mailing a copy to an address designated by the
shareholder or to the last known address of the shareholder. Alternatively,
notice may be given by communicating to a shareholder orally, or by handing
a copy to the shareholder, or by leaving a copy at the office of the
shareholder with a clerk or other person in charge of the office, or if
there is no one in charge, by leaving a copy in a conspicuous place in the
office, or if the office is closed or the shareholder to be notified has no
office, by leaving a copy at the dwelling house or usual place of abode of
the shareholder with some person of suitable age and discretion then
residing therein, or in any other manner allowed by the Minnesota Business
Corporations Act. Notice by mail is given when deposited in the United
States mail with sufficient postage affixed. Notice is deemed received when
it is given. (10)
2.4.5. Waiver Of Notice. A shareholder may waive notice of a meeting of
shareholders. A waiver of notice by a shareholder entitled to notice is
effective whether given before, at, or after the meeting, and whether given
in writing, orally, or by attendance. Attendance by a shareholder at a
meeting is a waiver of notice of that meeting, except where the shareholder
objects at the beginning of the meeting to the transaction of business
because the meeting is not lawfully called or convened, or objects before a
vote on an item of business because the item may not lawfully be considered
at that meeting and does not participate in the consideration of the item
at that meeting. (11)
2.5. Quorum. The holders of twenty-five percent (25%) of the voting power of the
shares entitled to vote at a meeting, represented either in person or by proxy,
shall constitute a quorum for the transaction of business at any regular or
special meeting of the shareholders. If a quorum is present when a duly called
or held meeting is convened, the shareholders present may continue to transact
business until conclusion of the meeting, even though the withdrawal of any
shareholders originally present leaves less than the proportion or number
otherwise required for a quorum. (12)
2.6. Adjournment of Meetings. In case a quorum is not present at any meeting,
those present shall have the power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until the required number
of voting shares shall be represented. At such adjourned meetings at which the
required number of voting shares shall be represented, any business may be
transacted which might have been transacted at the original meeting. If any
meeting becomes deadlocked in that neither a motion to conclude the meeting nor
a motion to adjourn the meeting to another date or time passes, the presiding
chairman has the power to declare the meeting either be concluded or be
adjourned to another date or time.
2.7. Shareholder Voting. Shareholders entitled to vote at a meeting may do so in
accordance with the following provisions and in accordance with any additional
applicable provisions of the Minnesota Business Corporations Act:
2.7.1. Vote Required to Pass a Matter. Elections of directors and other
items of business placed to the shareholders for vote shall be enacted if
voted for by the holders of the greater of (1) a majority of the voting
power of the shares present and entitled to vote on that matter or (2) a
majority of the voting power of the minimum number of the shares entitled
to vote that would constitute a quorum for the transaction of business at
the meeting, except whether the Minnesota Business Corporations Act or the
Articles of Incorporation require a greater proportion or number. (13)
2.7.2. Voting by Ballot. Upon the demand of any shareholder or in the
discretion of the presiding chairman of the meeting, the vote upon any
matter before the meeting shall be by ballot.
2.7.3. Jointly Owned Shares. Shares owned by two or more shareholders may
be voted by any one of them unless the corporation receives written notice
from one of them denying the authority of that person to vote those
shares. (14)
2.7.4. Voting Multiple Shares. Except as provided in Section 2.7.3 above, a
shareholder is entitled to vote any portion of the shares in any way the
shareholder chooses. If a shareholder votes without designating the
proportion or number of shares voted in a particular way, the shareholder
is deemed to have voted all the shares in that way. (15)
2.7.5. Voting Shares Held by Organizations or Legal Representatives The
voting of shares held by other corporations, shares under the control of a
personal representative, administrator, executor, guardian, conservator, or
attorney-in-fact, trustee, bankruptcy trustee, receiver or other
organization, and pledged shares shall be governed by the provisions of the
Minnesota Business Corporations Act. (16)
2.7.6. Proxies. Proxies shall be dealt with in accordance with the
provisions set forth in the Minnesota Business Corporations Act, as
amended, and in accordance with any state or federal laws or regulations
governing proxies and their solicitation. (17)
2.8. Order of Business. The suggested order of business at the regular meeting
and, to the extent appropriate, at all other meetings of the shareholders shall,
unless modified by the presiding chairman, be:
(a) Call of roll
(b) Proof of due notice of meeting or waiver of notice
(c) Determination of existence of quorum
(d) Reading and disposal of any unapproved minutes
(e) Annual reports of officers and committees
(f) Election of directors
(g) Unfinished business
(h) New business
(i) Conclusion of meeting or adjournment to another date and time.
ARTICLE 3.
DIRECTORS
3.1. General Powers. The property, affairs and business of the
corporation shall be managed by a board of directors. (18)
3.2. Number of Directors. At each regular meeting of shareholders, the
shareholders shall determine the number of directors, which shall not be less
than the minimum required by law. Between regular meetings of shareholders, the
authorized number of directors may be increased by the shareholders or by the
board of directors or decreased by the shareholders. No decrease in the number
of directors pursuant to this section shall cause any director then in office to
be removed until the expiration of his or her term. (19)
3.3. Election of Directors and Term of Office. At each regular meeting of
shareholders, elections shall be held for directors. Each director shall serve
for a term that expires at the next regular meeting of the shareholders. A
director shall hold office until the term expires and until a successor is
elected and has qualified, or until the earlier death, resignation, removal or
disqualification of the director. (20)
3.4. Resignation. A director may resign at any time by giving written notice to
the corporation. The resignation is effective without acceptance when the notice
is given to the corporation, unless a later effective time is specified in the
notice. (21)
3.5. Removal of Directors. Directors may be removed as follows:
3.5.1. Minnesota Business Corporations Act. Directors may be removed by the
procedures specified in the Minnesota Business Corporations Act, as
amended. (22)
3.5.2. Automatic Removal If Not Re-Elected. If, in an election by
shareholders, a current director does not receive sufficient votes in favor
of his or her re-election and no other person receives sufficient votes in
the elections to fill the position, the current director shall
automatically be removed as a director at the conclusion of the meeting in
which the election occurred and the position shall be vacant until
otherwise filled. However, if elections result in no one receiving
sufficient votes to be elected or re-elected as director, the current board
shall continue to serve until a successor for at least one directorship
position is elected and qualified.
3.6. Vacancies. Vacancies on the board of directors may be filled by the
affirmative vote of a majority of the remaining directors, even though less than
a quorum, except that vacancies on the board resulting from newly created
directorships may be filled by the affirmative vote of two-thirds of the
directors serving at the time of the increase. A director so elected shall serve
for a term that expires at the next regular or special meeting of the
shareholders. A director so elected shall hold office until the term expires and
until a successor is elected and has qualified, or until the earlier death,
resignation, removal or disqualification of the director. (23)
3.7. Quorum. A majority of the directors currently holding office is a quorum
for the transaction of business. In the absence of a quorum, a majority of the
directors present may adjourn a meeting from time to time until a quorum is
present. If a quorum is present when a duly called or held meeting is convened,
the directors present may continue to transact business until the meeting is
concluded, even though the withdrawal of a number of directors originally
present leaves less than the proportion or number otherwise required for a
quorum. (24)
3.8. Act of the Board. The board shall take action by the affirmative vote of
the greater of (1) a majority of directors present at a duly held meeting at the
time the action is taken, or (2) a majority of the minimum number of directors
that would constitute a quorum for the transaction of business at the meeting,
except where applicable law or the articles require the affirmative vote of a
larger proportion or number. (25)
3.9. Advance Written Consent. A director may give advance written consent or
objection to a proposal to be acted on at a board meeting. If the proposal acted
on at the meeting is substantially the same or has substantially the same effect
as the proposal to which the director has consented or objected, such consent or
objection shall be counted as a vote for or against the proposal, and shall be
recorded in the minutes of the meeting. Such consent or objection shall not
constitute presence for purposes of determining the existence of a quorum. (26)
3.10. Board Meetings. Meetings of the board of directors shall be governed by
the following bylaws and applicable provisions of the Minnesota Business
Corporations Act:
3.10.1. Annual Meeting. As soon as practicable after each annual election
of directors at the regular meeting of shareholders, the board of directors
shall meet for the purpose of organization, electing or appointing officers
of the corporation, and transaction of other business, at the place where
the meeting of shareholders is held or at the place where regular meetings
of the board of directors are held. No notice of such meeting need be
given. Such first meeting may be held at any other time and place specified
in a notice given as hereinafter provided for special meetings (such notice
may be waived as provided in these bylaws).
3.10.2. Regular Meetings. Regular meetings of the board of directors shall
be held at such times and places as determined by the board of directors.
If the time and place for regular meetings have been announced in a
previous meeting of the board, no additional notice is required. (27)
3.10.3. Special Meetings. Any director or the chief executive officer may
call a board meeting by giving notice to each director at least 24 hours in
advance of the meeting if the notice is given face to face or
telephonically (but not by leaving an answering machine, voice mail or
similar message) or at least three days in advance of the meeting if the
notice is given by mail, facsimile or other electronic, written
transmission. The notice shall state the time and place of the meeting, and
the purpose or purposes of the meeting. If a specific date, time and place
for a special meeting has been announced in a previous meeting of the
board, no additional notice is required. (28)
3.10.4. Waiver of Notice. A director may waive notice of a board meeting
either before, at or after the meeting, and may do so in writing, orally or
by attendance at the meeting. Attendance by a director at a meeting is a
waiver of notice of that meeting unless the director objects at the
beginning of the meeting to the transaction of business because of
insufficient notice and does not participate thereafter in the meeting.
(29)
3.10.5. Order of Business. The suggested order of business at any meeting
of the board of directors, to the extent appropriate and unless modified by
the presiding chairman, shall be:
(a) Roll call
(b) Proof of due notice of meeting or waiver of notice,
or unanimous presence and declaration of
unanimous presence
(c) Determination of existence of quorum
(d) Reading and disposal of any unapproved minutes
(e) Reports of officers and committees
(f) Election of officers
(g) Unfinished business
(h) New business
(i) Adjournment.
3.11. Action without a Meeting. An action required or permitted to be taken at a
board meeting may be taken by written action signed by all the directors. A
written action is effective at the time it is signed by all the directors,
unless a different effective time is provided in the written action. (30)
3.12. Compensation. Directors who are not salaried officers of the corporation
shall receive such fixed compensation per meeting attended or such fixed annual
compensation as shall be determined from time to time by resolution of the board
of directors. Nothing herein contained shall be construed to preclude any
director from serving this corporation in any other capacity and receiving
proper compensation therefor. (31)
3.13. Executive Committee. The board of directors may, by resolution approved by
the affirmative vote of the majority of the board, establish an Executive
Committee, which, to the extent determined by the affirmative vote of the
majority of the board, shall have and exercise the authority of the board in the
management of the business of the corporation. The committee shall consist of
two or more directors, appointed and subject to removal by the affirmative vote
of the majority of the board. Any such Executive Committee shall act only in the
interval between meetings of the board and shall be subject at all times to the
control and direction of the board. (32)
3.14. Other Committees. The board of directors may, by resolution approved by
the affirmative vote of the majority of the board, establish other committees
having the authority, to the extent provided in the resolution, of the board in
the management of the business of the corporation. Committees shall consist of
one or more natural persons, who need not be directors, appointed by affirmative
vote of a majority of the directors present. Such committees shall be governed
by the applicable provisions in the Minnesota Business Corporations Act. (33)
ARTICLE 4.
OFFICERS
4.1. Chief Executive Officer. The corporation shall have one or more natural
persons exercising the functions of the office, however designated, of chief
executive officer. The functions of this office shall be as set forth in the
Minnesota Business Corporations Act, as amended. (34)
4.2. Chief Financial Officer. The corporation shall have one or more natural
persons exercising the functions of the office, however designated, of chief
financial officer. The functions of this office shall be as set forth in the
Minnesota Business Corporations Act, as amended. (35)
4.3. Chairman of the Board. The board of directors may, in its discretion, elect
one of its members as chairman of the board. The chairman of the board shall
have the powers, rights, responsibilities and duties as may be assigned to him
or her by the board. (36)
4.4. President. The president, if one be appointed, shall have the powers,
rights, responsibilities and duties as may be assigned to him or her by the
board of directors. Unless otherwise determined by the board, the president
shall be the chief executive officer of the corporation. (37)
4.5. Vice Presidents. Each vice president, if any be appointed, shall have the
powers, rights, responsibilities and duties as may be assigned to him or her by
the board of directors. The board may designate a vice president or vice
presidents to perform the duties of the president or chief executive officer, in
the event of the absence or disability of the president or chief executive
officer. (38)
4.6. Secretary. The Secretary, if one be appointed, shall have the powers,
rights, responsibilities and duties as may be assigned to him or her by the
board of directors. Unless otherwise determined by the board, he or she shall
have the following duties: He or she shall be secretary of and shall attend all
meetings of the shareholders and board of directors. He or she shall act as
clerk thereof and shall record all the proceedings of such meetings in the
minute book of the corporation. He or she may assist the directors in giving
proper notice of meetings of shareholders and directors. (39)
4.7. Treasurer. The Treasurer, if one be appointed, shall have the powers,
rights, responsibilities and duties as may be assigned to him or her by the
board of directors. Unless otherwise determined by the board, the treasurer
shall be the chief financial officer of the corporation. (40)
4.8. Other Officers. The board may elect or appoint any other officers or agents
the board determines to be necessary for the operation and management of the
corporation. Each such officer shall have the powers, rights, responsibilities
and duties as may be assigned to him or her by the board of directors. (41)
4.9. Election or Appointment of Officers. At each annual meeting of the board of
directors, the board shall elect one or more persons to exercise the functions
of chief executive officer and chief financial officer and shall elect any other
officers it determines to be appropriate. Officers also may be elected at other
board meetings or by written action.
4.10. Term of Office. An officer shall hold office until the next annual meeting
of the board and until a successor is elected and has qualified, or until the
earlier death, resignation, removal or disqualification of the officer. If an
officer is an employee and his or her employment is terminated, the holding of
office also shall terminate at the time of termination of employment.
4.11. Employment Rights not Affected. The appointment of any person to any
office shall not of itself create any employment or other contractual rights,
nor does it change in any way the "at-will" nature of or other term of any
existing employment of that employee, nor shall it cause board action to be
required to terminate the employment of that employee. (42)
4.12. Removal from Office. Any officer may be removed from his or her office
with or without cause by the affirmative vote of a majority of the entire board
of directors (without prejudice, however, to any contract rights of such
officer). (43)
4.13. Resignations. An officer may resign from his or her office at any time by
giving written notice to the corporation. The resignation is effective without
acceptance when the notice is given to the corporation, unless a later effective
time is specified in the notice.
4.14. Vacancies in Office. If there be a vacancy in any office of the
corporation, by reason of death, resignation, removal or otherwise, such vacancy
may be filled for the unexpired term by the board of directors at any regular or
special meeting.
4.15. Delegation. Unless prohibited by a resolution approved by the affirmative
vote of a majority of the directors present, an officer may delegate some or all
of the duties and powers of his or her office to other persons. An officer who
does so remains subject to the standard of conduct for an officer with respect
to the discharge of all duties and powers so delegated. (44)
ARTICLE 5.
INDEMNIFICATION
5.1. Indemnification of Directors and Executive Officers. Persons who serve or
served as directors, chief executive officer, chief financial officer,
president, executive vice-presidents, secretary, treasurer or in-house counsel,
and such other persons or classes of persons as may be specifically designated
by the board of directors from time to time, shall be entitled to
indemnification by the corporation for costs and liabilities arising from, and
to advancement of expenses arising from defense against, proceedings brought or
threatened against them, to the full extent provided in the Articles of
Incorporation and the Minnesota Business Corporations Act. However, the
indemnification under this Section with respect to a person identified above who
is serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise shall apply only to the extent such person is not indemnified by such
other corporation, partnership, joint venture, trust or other enterprise. The
indemnification and advancement of expenses provided by this section shall
continue as to a person who has ceased to be a director or officer or agent of
the corporation and shall inure to the benefit of the heirs, executors and
administrators of such person. (45)
5.2. Indemnification of Other Employees and Agents. Each person who is not a
member of the class of persons eligible for indemnification pursuant to Section
5.1 above may be entitled to indemnification from costs and liabilities arising
from, and to advancement of expenses arising from defense against, proceedings
brought or threatened against them, to the full extent provided in the Articles
of Incorporation and the Minnesota Business Corporations Act. Determination of
whether such indemnification shall be provided shall be made by an officer who
is charged with responsibility for monitoring litigation and other disputes. An
employee who disagrees with the decision of such an officer may petition the
board of directors to reconsider the officer's decision. If so petitioned, the
board has total discretion in reaching its decision. Any decision regarding
indemnification under this Section shall be made taking into consideration,
among other factors that may be considered, the effect that providing
indemnification may have on supervisory responsibilities of the corporation over
the employee seeking indemnification or over other employees. Any
indemnification under this Section with respect to a person serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise shall apply
only to the extent such person is not indemnified by such other corporation,
partnership, joint venture, trust or other enterprise. The indemnification
provided under this section may continue as to a person who has ceased to be an
employee or agent and may inure to the benefit of the heirs, executors and
administrators of such person. (46)
5.3. Non-exclusivity. The foregoing right of indemnification for persons in the
class covered under Section 5.1 and permissive indemnification for persons in
the class covered under Section 5.2 shall not be exclusive of other rights to
which a current or former director, officer, employee or agent may be entitled
as a matter of law.
5.4. Insurance. To the full extent permitted by law, the corporation may
purchase and maintain insurance on behalf of any current or former director,
officer, employee or agent against any liability asserted against such person
and incurred by such person in such capacity.
ARTICLE 6.
SHARES AND THEIR TRANSFER
6.1. Certificates of Stock. All shares of the corporation shall be represented
by certificates, unless the board designates certain classes or series of shares
as uncertificated. (47)
6.2. Stock Record. A record shall be kept of the name of the person, firm or
corporation owning the stock represented by such certificates respectively, the
respective dates thereof and, in the case of cancellation, the respective dates
of cancellation. Transfer of shares on the books of the corporation may be
authorized only by the shareholder named in the certificate (or his legal
representative or duly authorized attorney-in-fact) and upon surrender for
cancellation of the certificate or certificates for such shares. Every
certificate surrendered to the corporation for exchange or transfer shall be
canceled and no new certificate or certificates shall be issued in exchange for
any existing certificate until such existing certificate shall have been so
canceled (unless provisions of the Minnesota Business Corporations Act and the
Uniform Commercial Code dealing with lost certificates have been satisfied).
(48)
6.3. Identification of Shareholders. Except as otherwise provided in this
Section, the person in whose name shares are recorded on the books of the
corporation shall be deemed by the corporation to be the owner thereof for all
purposes. However, where a shareholder holds shares for the benefit of
beneficial owners, as contemplated in state or federal laws and regulations or
rules of broker/dealer self-regulatory organizations, and in accordance with
normal practice, such shareholder may indicate in writing to the corporation
that all or a portion of the shares registered in the name of such shareholder
are held for the account of one or more beneficial owners. Upon receipt by the
corporation of the writing, the persons so specified as beneficial owners,
rather than the actual holder of record, shall be deemed the shareholders of the
corporation. (49)
6.4. Lost Stock Certificates. Lost stock certificates shall be dealt with in
accordance with the provisions of the Minnesota Business Corporations Act and
the Uniform Commercial Code as enacted in Minnesota. (50)
ARTICLE 7.
GENERAL PROVISIONS
7.1. Dividends or Distributions. The board of directors may declare, and the
corporation may pay, dividends or distributions on its outstanding shares in the
manner and upon the terms and conditions provided by law. (51)
7.2. Fiscal Year. The fiscal year of the corporation shall be established by the
board of directors.
7.3. Audit of Books and Accounts. The books and accounts of the corporation
shall be audited at least once in each fiscal year or at such times as may be
ordered by the board of directors.
7.4. Seal. The corporation shall have such corporate seal or no corporate seal
as the board of directors shall from time to time determine.
7.5. Securities of Other Companies. The corporation may hold securities of other
companies. Such holdings shall be governed by applicable laws and the following
provisions:
7.5.1. Voting Securities Held by the Corporation. Unless otherwise ordered
by the board of directors, the chief executive officer shall have full
power and authority on behalf of the corporation (i) to attend and to vote
at any meeting of security holders of other companies in which the
corporation may hold securities; (ii) to execute any proxy for such meeting
on behalf of the corporation and (iii) to execute a written action in lieu
of a meeting of such other company on behalf of this corporation. At such
meeting, by such proxy or by such writing in lieu of meeting, the chief
executive officer shall possess and may exercise on behalf of the
corporation all rights and powers incident to the ownership of such
securities that the corporation might have possessed and exercised if it
had been present. The board of directors may, from time to time, confer
like powers upon any other person or persons. (52)
7.5.2. Purchase and Sale of Securities. Unless otherwise ordered by the
board of directors, the chief executive officer shall have full power and
authority on behalf of the corporation to purchase, sell, transfer or
encumber any and all securities of any other company owned by the
corporation and may execute and deliver such documents as may be necessary
to effectuate such purchase, sale, transfer or encumbrance. The board of
directors may, from time to time, confer like powers upon any other person
or persons.
ARTICLE 8.
AMENDMENTS OF BYLAWS
8.1. Amendments. These Bylaws may be altered, amended, added to or repealed by
action of the board of directors, subject to the power of the shareholders to
change or repeal such bylaws and subject to any other limitations on such
authority of the board contained in the Minnesota Business Corporations Act.
(53)
- --------
1 These footnotes are added solely for the convenience of the user. They are
not part of the bylaws as enacted. Although various references are made
to the Minnesota Business Corporations Act and other statutes, such
references are not exhaustive.
2 See Minn. Stat. ss. 302A.011 Subd. 23 and Minn. Stat. ss. 302A.011 Subd. 3.
3 See Minn. Stat. ss. 302A.161 Subd. 10.
4 See Minn. Stat. ss. 302A.431.
5 See Minn. Stat. ss. 302A.433.
6 See Bylaws Section 6.3 for procedures regarding identification of
beneficial owners as shareholders.
See also Minn. Stat. ss. 302A.445 Subd. 1.
7 See Minn. Stat. ss. 302A.435 Subd. 1.
8 See Minn. Stat. ss. 302A.435 Subd. 2.
9 See Minn. Stat. ss. 302A.435 Subd. 3.
10 See Minn. Stat. ss. 302A.011 Subd. 17.
11 See Minn. Stat. ss. 302A.435 Subd. 4.
12 See Minn. Stat. ss. 302A.443. Minn. Stat. ss. 302A.181 Subd. 2 restricts
the board from amending or repealing a bylaw fixing the quorum for a
shareholders meeting. Such a change must done by the shareholders.
13 See Minn. Stat. ss. 302A.437 Subd. 1.
14 See Minn. Stat. ss. 302A.445 Subd. 5.
15 See Minn. Stat. ss. 302A.445 Subd. 6.
16 See Minn. Stat. ss. 302A.447.
17 Minn. Stat. ss. 302A.449 governs proxies. Section 14 of the Securities
Act of 1934 and Regulation 14A thereunder also govern proxies and the
solicitation of proxies. See also Bylaws Section 6.3 regarding the
identification of beneficial owners of shares held in street name.
18 See Minn. Stat. ss. 302A.201 Subd. 1.
19 See Minn. Stat. ss. 302A.203. Minn. Stat. ss. 302A.181 states that
the board cannot amend or repeal a bylaw that fixes the quorum for
meetings of shareholders.
20 See Minn. Stat. ss. 302A.207. If a director is not reelected and no
successor is elected, the director is automatically removed under Bylaws
Section 3.5.2. Minn. Stat. ss. 302A.181 states that the board of
directors does not have power to change the term of office for directors.
21 See Minn. Stat. ss. 302A.221.
22 See Minn. Stat. ss. 302A.223.
23 See Minn. Stat. ss. 302A.225.
24 See Minn. Stat. ss. 302A.235. However, for most matters, if some of
the directors leave a meeting, the remaining directors must obtain an
affirmative vote of least a majority of the smallest number that
constitutes a quorum. See Bylaws Section 3.8 and Minn. Stat. ss. 302A.237.
25 See Minn. Stat. ss. 302A.237.
26 See Minn. Stat. ss. 302A.233.
27 See Minn. Stat. ss. 302A.231 Subd. 1.
28 See Minn. Stat. ss. 302A.231 Subd. 3.
29 See Minn. Stat. ss. 302A.231 Subd. 5.
30 See Minn. Stat. ss. 302A.239.
31 See Minn. Stat. ss. 302A.211.
32 Note that to establish a committee requires "an affirmative vote of the
majority of the board," Minn. Stat. ss. 302A.241 Subd. 1. This is a
stricter requirement than the normal requirement. (Most matters require
an affirmative vote of the directors present at a meeting and at least
a majority of the number needed for a quorum.)
33 See previous footnote.
34 See Minn. Stat. ss. 302A.301. The duties of the office of chief
executive officer, unless modified by the board, are as set out in Minn.
Stat. ss. 302A.305 Subd. 2. See also Bylaws Sections 7.5.1 and 7.5.2 for
additional powers conferred on the chief executive officer to deal with
securities of other companies held by the corporation.
35 See Minn. Stat. ss. 302A.301. The duties of the office of chief financial
officer, unless modified by the board, are as set out in Minn. Stat. ss.
302A.305 Subd. 3.
36 See Minn. Stat. ss. 302A.311.
37 See Minn. Stat. ss. 302A.311.
38 See Minn. Stat. ss. 302A.311.
39 See Minn. Stat. ss. 302A.311.
40 See Minn. Stat. ss. 302A.311.
41 See Minn. Stat. ss. 302A.311.
42 See Minn. Stat. ss. 302A.331.
43 Note that removal requires the vote of the majority of the entire board,
not just the majority of the board present at a meeting. This is a
stricter standard than the normal standard.
44 See Minn. Stat. ss. 302A.351.
45 See Minn. Stat. ss. 302A.521.
46 See Minn. Stat. ss. 302A.521.
47 See Minn. Stat. ss. 302A.417.
48 See Bylaws Section 6.4.
49 See Minn. Stat. ss. 302A.445 Subd. 2, and "General Comment" under
Reporter's Notes thereto. See also Regulation 14A under the Securities
and Exchange Act of 1934, and Rules 14b-1 and 14b-2 thereunder.
50 The Minnesota Business Corporations Act provision is at Minn. Stat. ss.
302A.419; the Minnesota Uniform Commercial Code provision is as Minn.
Stat. ss. 336.8-405.
51 The requirements that must be met to declare and issue dividends or
distributions are set forth in Minn. Stat. ss. 302A.551.
52 See Minn. Stat. ss. 302A.447 Subd. 1.
53 Under Minn. Stat. ss. 302A.181, after the adoption of the initial bylaws,
the board may not "adopt, amend, or repeal a bylaw fixing a quorum for
meetings of shareholders, prescribing procedures for removing directors or
filling vacancies in the board, or fixing the number of directors or their
classifications, qualifications, or terms of office, but may adopt
or amend a bylaw to increase the number of directors."
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