FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1999
---------------------------------
Commission file number #0-10786
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Insituform Technologies, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 13-3032158
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
702 Spirit 40 Park Drive, Chesterfield, Missouri 63005
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(Address of Principal Executive Offices)
(636) 530-8000
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(Registrant's telephone number including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at August 1, 1999
- -------------------------- ---------------------------------
Class A Common Stock, 25,400,506 Shares
$0.01 par value
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INDEX
-----
Part I Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations
Item 3. Quantitative and Qualitative Disclosure
About Market Risk
Part II Other Information and Signatures:
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of
Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
Index to Exhibits
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<TABLE>
PART I. - FINANCIAL INFORMATION
-------------------------------
ITEM 1. - FINANCIAL STATEMENTS
INSITUFORM TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTIONS>
Unaudited
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
--------------
Cash and cash equivalents $65,258 $76,904
Trade receivables, less allowance
for doubtful accounts of $2,899
and $2,909, respectively 46,634 52,280
Retainage under construction contracts 11,018 12,368
Costs and estimated earnings in excess
of billings 16,954 9,792
Inventories 9,714 11,282
Prepaid expenses and other 7,468 7,479
-------- --------
TOTAL CURRENT ASSETS 157,046 170,105
-------- --------
PROPERTY AND EQUIPMENT, less accumulated
depreciation 53,797 56,421
-------- --------
OTHER ASSETS
- ------------
Goodwill, less accumulated amortization of
$16,657 and $15,078, respectively 65,807 56,504
Patents and patent applications, less
accumulated amortization of $6,360 and
$5,663, respectively 10,581 11,172
Investments in licensees and affiliated
companies 5,126 5,234
Other 4,864 5,172
-------- --------
TOTAL OTHER ASSETS 86,378 78,082
-------- --------
TOTAL ASSETS $297,221 $304,608
======== ========
See accompanying summary of accounting policies and notes to consolidated
financial statements.
</TABLE>
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<TABLE>
INSITUFORM TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
Unaudited
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
-------------------
Accounts payable and accrued expenses $45,477 $45,231
Current maturities of long-term debt
and notes payable 1,914 2,918
-------- --------
TOTAL CURRENT LIABILITIES 47,391 48,149
LONG-TERM DEBT, less current maturities 111,597 112,131
OTHER LIABILITIES 1,052 1,115
-------- --------
TOTAL LIABILITIES 160,040 161,395
-------- --------
MINORITY INTERESTS 3,756 3,708
-------- --------
STOCKHOLDERS' EQUITY
--------------------
Preferred stock, undesignated, $.10 par -
shares authorized 2,000,000; none
outstanding - -
Common stock, $.01 par - shares authorized
40,000,000; shares outstanding 25,394,551
and 27,302,304 275 273
Additional paid-in capital 71,663 68,931
Retained earnings 97,000 86,355
-------- --------
168,938 155,559
Treasury stock - 2,151,601 and 991,701
shares (31,384) (13,097)
Cumulative foreign currency translation
adjustments (4,129) (2,957)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 133,425 139,505
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $297,221 $304,608
======== ========
See accompanying summary of accounting policies and notes to consolidated
financial statements.
</TABLE>
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<TABLE>
INSITUFORM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except share amounts)
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Rehabilitation revenue $85,640 $75,501 $156,802 $139,261
Cost of rehabilitation 56,046 51,067 103,058 92,933
-------- -------- -------- --------
Gross profit 29,594 24,434 53,744 46,328
Selling, administrative and
general expenses 16,761 15,180 31,983 30,057
-------- -------- -------- --------
Operating income 12,833 9,254 21,761 16,271
Other expense:
- --------------
Interest expense (2,230) (2,243) (4,444) (4,556)
Other income 618 769 1,545 1,310
-------- -------- -------- --------
Total other expense (1,612) (1,474) (2,899) (3,246)
Income before taxes on income 11,221 7,780 18,862 13,025
Taxes on income 4,607 3,088 7,699 5,169
-------- -------- -------- --------
Income before minority
interests and equity in earnings 6,614 4,692 11,163 7,856
Minority interests in net income (237) (173) (436) (250)
Equity in earnings of affiliated
companies 16 (110) (84) (151)
-------- -------- -------- --------
Net income $6,393 $4,409 $10,643 $7,455
======== ======== ======== ========
Basic earnings per share $0.25 $0.16 $0.41 $0.28
======== ======== ======== ========
Diluted earnings per share $0.25 $0.16 $0.41 $0.27
======== ======== ======== ========
See accompanying summary of accounting policies and notes to consolidated
financial statements.
</TABLE>
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<TABLE>
INSITUFORM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<CAPTION>
For the Six Months
Ended June 30,
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
- -------------------------------------
Net income $10,643 $7,455
Adjustments to reconcile net income to cash used by
operating activities:
Depreciation and amortization 9,443 9,299
Miscellaneous (254) 345
Equity in earnings of affiliated companies 84 151
Minority interests 436 250
Translation adjustments (1,170) (758)
Deferred income taxes (166) (142)
Changes in operating assets and liabilities,
net of assets acquired:
Receivables 6,813 16,292
Costs in excess of billings under construction (7,140) (4,540)
Inventories 1,899 286
Prepaid expenses and other (1,217) 426
Other assets (167) 832
Accounts payable and accruals 838 (444)
Income taxes payable 564 (3,352)
------- ------
Net cash provided by operating activities 20,606 26,100
------- ------
Cash flows from investing activities:
- -------------------------------------
Capital expenditures (4,682) (7,767)
Proceeds on disposal of property and equipment 1,607 569
Purchase of business net of cash acquired (11,771) -
Investments in licensees/affiliated companies - 16
Patents and patent applications (66) (688)
------- ------
Net cash used by investing activities (14,912) (7,870)
------- ------
(continued)
See accompanying summary of accounting policies and notes to consolidated
financial statements.
</TABLE>
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<TABLE>
INSITUFORM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<CAPTION>
For the Six Months
Ended June 30,
1999 1998
---- ----
<S> <C> <C>
Cash flows from financing activities:
- -------------------------------------
Proceeds from issuance of common stock 2,734 537
Purchases of treasury stock (18,287) -
Increase (decrease) in short-term borrowings (662) 237
Repayments of long-term debt (824) (1,286)
------- -------
Net cash used by financing activities (17,039) (512)
------- -------
Effect of exchange rates changes on cash (301) (33)
------- -------
Net increase (decrease) in cash and cash
equivalents for the period (11,646) 17,685
------- -------
Cash and cash equivalents, beginning of period 76,904 45,734
------- -------
Cash and cash equivalents, end of period $65,258 $63,419
======= =======
Supplemental disclosures of cash flows information:
- ---------------------------------------------------
1999 1998
---- ----
Cash paid during six months ended June 30, for:
--------------------------------------------------
Interest $4,381 $4,525
Income taxes $7,129 $5,295
Non-cash investing and financing activities:
--------------------------------------------
Deferred consideration for business acquired - $1,105
See accompanying summary of accounting policies and notes to consolidated
financial statements.
</TABLE>
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INSITUFORM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1999
1. GENERAL
In the opinion of the Company, the accompanying consolidated
financial statements contain all adjustments (consisting of
only normal recurring adjustments) necessary to present
fairly the financial position as of June 30, 1999
(unaudited) and the unaudited results of operations and cash
flows for the six months ended June 30, 1999 and 1998. The
financial statements have been prepared in accordance with
the requirements of Form 10-Q and consequently do not
include all the disclosures normally made in an Annual
Report on Form 10-K. Accordingly, the consolidated
financial statements included herein should be reviewed in
conjunction with the financial statements and the footnotes
thereto included in the Company's 1998 Annual Report on Form
10-K.
The results of operations for the six months ended June 30,
1999 and 1998 are not necessarily indicative of the results
to be expected for the full year.
2. COMPREHENSIVE INCOME
For the quarters ended June 30, 1999 and 1998, comprehensive
income was $5.1 million and $4.3 million, respectively. For
the six months ended June 30, 1999 and 1998, comprehensive
income was $9.5 million and $6.7 million, respectively. The
Company's adjustment to comprehensive income consists solely
of cumulative foreign currency translation adjustments.
3. EARNINGS PER SHARE
Earnings per share has been calculated using the following
share information:
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<CAPTION>
Three Months Ended June 30,
1999 1998
---- ----
<S> <C> <C>
Weighted average number of
common shares used for basic
EPS 25,435,941 26,978,379
Effect of dilutive stock
options and warrants 551,949 277,636
---------- ----------
Weighted average number of
common shares and dilutive
potential common stock 25,987,890 27,256,015
========== ==========
Six Months Ended June 30,
1999 1998
---- ----
Weighted average number of
common shares used for basic
EPS 25,700,211 26,968,862
Effect of dilutive stock
options and warrants 470,778 201,482
---------- ----------
Weighted average number of
common shares and dilutive
potential common stock 26,170,989 27,170,344
========== ==========
</TABLE>
4. SEGMENT REPORTING
The Company has principally three operating segments:
rehabilitation, tunneling and corrosion and abrasion ("Tite
Liner(R)"). These operating units represent strategic
business units that offer distinct products and services and
serve different markets.
The following disaggregated financial results have been
prepared using a management approach, which is consistent
with the basis and manner with which management internally
disaggregates financial information for purposes of
assisting in making internal operating decisions.
Financial information by segment is as follows (in
thousands):
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<TABLE>
<CAPTION>
Three Months Ended June 30,
1999 1998
---- ----
<S> <C> <C>
Revenues
Rehabilitation $67,279 $56,415
Tunneling 11,005 8,809
Tite Liner 7,356 10,277
------- -------
Total Revenues $85,640 $75,501
======= =======
Operating Income
Rehabilitation $11,929 $7,942
Tunneling 1,647 880
Tite Liner (743) 432
------- -------
Total Operating Income $12,833 $9,254
======= =======
Six Months Ended June 30,
1999 1998
---- ----
Revenues
Rehabilitation $122,710 $105,572
Tunneling 20,578 15,598
Tite Liner 13,514 18,091
------- -------
Total Revenues $156,802 $139,261
======== ========
Operating Income
Rehabilitation $20,130 $14,170
Tunneling 2,661 1,538
Tite Liner (1,030) 563
------- -------
Total Operating Income $21,761 $16,271
</TABLE> ======= =======
5. ACQUISITION
On June 1, 1999, the Company completed its acquisition of
all of the shares of Riooltechnieken Nederland B.V., its
exclusive licensee of the Insituform(R) Process in the
Netherlands, from BFI Holdings B.V. The purchase price was
NGL 25 million (approximately US$11.8 million), which was
paid in cash at closing.
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6. CURRENT EVENTS
On July 20, 1999, the Company entered into a settlement
agreement with Insituform East, Inc. ("East") and its
affiliates, providing for dismissal of the pending actions
before the Delaware Chancery Court and the American
Arbitration Association involving the parties and their
joint venture doing business under the name Midsouth
Partners ("Midsouth"). The Company has accounted for losses
in Midsouth, which was 57.5% owned by the Company and its
subsidiary, on the equity method, as a consequence of
Midsouth's management by a seven-member management committee
controlled by East.
Under the settlement, the Company and its subsidiary
withdrew as partners in Midsouth, and the licenses from the
Company to Midsouth with respect to the Insituform(R)
process and the NuPipe(R) process were terminated. Pursuant
to the settlement, East will pay to the Company an amount
equal to the book value of the interests of the Company and
its subsidiary in Midsouth, and will repay to the Company
outstanding loans to Midsouth in the amount of $400,000.
Under the settlement, the Company and its affiliates and
licensees may operate in Midsouth's former exclusive
territory (consisting of Tennessee and portions of
Mississippi and Kentucky) without any obligation to East or
its affiliates.
7. LITIGATION
The Company is involved in certain litigation incidental to
the conduct of its business. In the Company's opinion, none
of these proceedings will have a material adverse effect on
the Company's financial position, results of operations and
liquidity. The financial statements include the estimated
amounts of liabilities that are likely to be incurred from
these and various other pending litigation and claims.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial
condition and results of operations during the periods included
in the accompanying consolidated financial statements.
GENERAL
- -------
The Company's revenues derive primarily from rehabilitation,
tunneling and corrosion and abrasion operations, generated by
the Company's subsidiaries conducting business in the United
States, Canada, France, the United Kingdom, Chile, Argentina and
Mexico, and include product sales to, and royalties and license
fees paid by, the Company's unaffiliated Insituform(R)licensees
and sub-licensees and its unaffiliated NuPipe(R) licensees.
During the three years ended December 31, 1998, 1997 and 1996,
approximately 63.8%, 62.5% and 69.7%, respectively, of the
Company's consolidated revenues related to the Insituform(R)
Process.
Statements contained in and preceding management's discussion
and analysis include various forward-looking information that is
based on data currently available to management and management's
beliefs and assumptions. When used in this document, the words
"anticipate," "estimate," "believes," "plans," and similar
expressions are intended to identify forward-looking statements,
but are not the exclusive means of identifying such statements.
Such statements are subject to risks and uncertainties, and the
Company's actual results may vary materially from those
anticipated, estimated or projected due to a number of factors,
including, without limitation, the competitive environment for
the Company's products and services, the geographical
distribution and mix of the Company's work, and other factors
set forth in reports and other documents filed by the Company
with the Securities and Exchange Commission from time to time.
RESULTS OF OPERATIONS
- ---------------------
Three and Six Months Ended June 30, 1999 and 1998
Total revenues for the second quarter increased 13.3% to $85.6
million from $75.5 million in 1998, which contributed to an
increase in revenues for the first half of 1999 of 12.6% to
$156.8 million from $139.3 million in the first half of 1998.
The majority of the increased volume for the second quarter
continued to come from the Company's installation operations
within North America and Europe in addition to tunneling
operations. The Company's Titeliner revenues for second quarter
1999 decreased 28.4% compared to the same quarter in the prior
year, and decreased 25.3% for the first half of 1999 compared to
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the same period in the prior year. This decline continued
principally due to lower volume in Canada and Chile.
The Company's gross profit during the second quarter increased
21.3% to $29.6 million from $24.4 million in the second quarter
of 1998, and during the first half of 1999 increased 16.0% to
$53.7 million from $46.3 million during the first half of 1998,
primarily due to increased revenues as well as increased
profitability from the Company's North American and European
rehabilitation operations as well as the tunneling operations.
The improvement in rehabilitation operations was offset somewhat
by a decrease in gross profit from the Company's corrosion and
abrasion operations due to the revenue volume decrease and
continued project difficulties in Chile. The overall gross
profit margin for second quarter 1999 was 34.6% compared to
32.4% in the second quarter of 1998 and for the first half of
1999 was 34.3% compared to 33.3% in the prior year.
In second quarter 1999, selling, administrative and general
expenses increased 10.5% to $16.8 million from $15.2 million in
the same quarter in the prior year, and for the first half of
1999 increased 6.3% to $32.0 million from $30.1 million in the
same period in the prior year. This increase was primarily due
to increased costs related to North American rehabilitation
administration. In addition, at the corporate level there were
increased costs in compensation, legal and consulting fees, and
ongoing costs related to the Company's management information
system's improvements. Also, amortization of goodwill
increased, which was a result of acquiring the installation
operation in the Netherlands. As a percentage of revenues,
selling, administrative and general expenses decreased in the
second quarter of 1999 to 19.6% from 20.1% in the comparable
quarter of the prior year and for the first half of 1999
decreased to 20.4% from 21.6% in first half of 1998. This
decrease is primarily attributable to revenue volume increasing
at a faster rate than selling, administrative and general
expenses.
Interest expense in second quarter 1999 remained relatively flat
with second quarter 1998 due to virtually no change in
outstanding debt. For the first half of 1999, interest expense
decreased 2.5% to $4.4 million from $4.6 million in the prior
year, due primarily to lower revolving credit borrowings in the
Company's subsidiaries.
Other income decreased in second quarter 1999 to $0.6 million
from $0.8 million in second quarter 1998, due principally to
lower investment income resulting from lower interest rates.
Despite a decrease in second quarter 1999, other income for the
first half of 1999 increased to $1.5 million from $1.3 million
in the first half of 1998 due primarily to increased invested
cash and cash equivalents.
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In the second quarter of 1999, taxes on income increased to $4.6
million from $3.1 million in 1998 due principally to the
increase in income before taxes on income of $3.5 million from
the second quarter of 1998. In the first half of 1999, taxes on
income increased 49% to $7.7 million from $5.8 million due
principally to the increase in income before taxes on income of
$2.5 million from the first half of 1998.
As a result of the foregoing, net income for second quarter 1999
increased 45.0% to $6.4 million, representing a 7.5% return on
revenue, compared to $4.4 million for second quarter 1998, when
a 5.8% return on revenue was achieved. For the first half of
1999, net income was $10.6 million, or a 6.8% return on revenue,
compared to $7.5 million in the first half of 1998, when a 5.4%
return on revenue was achieved.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At June 30, 1999, the balance of cash, U.S. Treasury bills, and
short-term investments was $65.3 million, compared to $76.9
million at December 31, 1998. The decrease in cash and cash
equivalents in 1999 resulted from operation of the Company's
previously reported stock repurchase program, which used cash in
the amount of $18.3 million in the first half of 1999. Also,
there were cash outlays for capital spending of $4.7 million,
and $11.8 million for the acquisition of the Netherlands
operations, offset somewhat by the Company's continued strong
positive generation of cash from operating activities of $20.6
million. Working capital was $109.7 million at June 30, 1999,
compared to $122.0 million at December 31, 1998.
While operating activities generated cash of $20.6 million
during the first half of 1999, $26.1 million was generated in
the first half of 1998. The principal reason for the decrease
was a smaller favorable change in operating assets and
liabilities of $1.6 million during the first half of 1999, as
compared to a favorable change of $9.5 million during the first
half of 1998.
Trade receivables, together with costs and estimated earnings in
excess of billings and retainage under construction contracts,
increased only slightly to $74.6 million from $74.4 million at
December 1998, primarily attributable to stronger management
control over collections. The collection of installation
receivables involves contractual provisions for retainage by the
project owner, often 5% to 15% of the contract amount, which
extends the collection process. Collections are also sometimes
further prolonged by the slow internal review processes often
employed by the Company's municipal customers. In the United
States, retainage receivables are generally received within 60
to 90 days after the completion of a contract.
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Capital expenditures were $4.7 million in the first half of
1999, compared to $7.8 million in the first half of 1998.
Capital expenditures generally reflect replacement equipment
required by the Company's installation operations. During the
first half of 1998, capital expenditures also reflected
approximately $0.5 million related to the completion of the
Company's new research and development center.
While the Company expects that routine capital spending will
continue at the current level in the foreseeable future, the
Company has several information system improvement initiatives
underway that will require increased expenditures during the
next several years. These initiatives, which began principally
in 1997, include expenditures of approximately $1.6 million in
connection with the installation of an electronic data
collection system in each of the Company's North American
rehabilitation operations during the course of 1999, of which
$1.0 million was spent during the first half of 1999. See "Year
2000" below for information concerning the impact of year 2000
issues on the Company's operations. In addition, during the
second half of 1999, the Company plans to increase expenditures
related to field crew capacity expansion to meet rising volume
demands.
On June 1, 1999, the Company completed its acquisition of all of
the shares of Riooltechnieken Nederland B.V., its exclusive
licensee of the Insituform process in the Netherlands, from BFI
Holdings, B.V. The purchase price was NGL 25 million
(approximately $11.8 million), which was paid in cash at
closing. Included in the acquisition was a 10% stockholding
owned by the licensee in Insituform Linings PLC, a joint venture
between the Company and certain European licensees, which
manufactures the Insituform tubes used by the Company's
operations and licensees in Europe and Asia.
Financing activities used $17.0 million in the first half of
1999, as compared to cash used of $0.5 million in the first half
of 1998. In July 1998, the Company announced that its Board of
Directors had authorized the repurchase of up to 2,700,000
shares of the Company's class A common stock, $.01 par value, to
be made from time to time over five years in open market
transactions. The amount and timing of purchases will be
dependent upon a number of factors, including the price and
availability of the Company's shares, general market conditions
and competing alternative uses of funds, and may be discontinued
at any time. During the first half of 1999, the Company used
cash in the amount of $18.3 million for the repurchase of
1,159,900 shares. The Company has used cash in the cumulative
amount of $28.1 million for the repurchase of 1,895,800 shares
through June 30, 1999 since inception of the stock repurchase
program. The repurchased shares will be held as treasury stock.
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In the first half of 1999, the Company made principal payments
totaling $0.8 million relating to the Company's existing debt,
as compared to $1.3 million in the first half of 1998. The
Company generated $2.7 million from the issuance of common stock
from stock options granted to employees, as compared to $0.5
million in the first half of 1998.
The Company's $110 million principal amount of Senior Notes,
Series A, due February 14, 2007 (the "Senior Notes") bear
interest, payable semi-annually in August and February of each
year, at the rate per annum of 7.88%. Each year, from February
2001 to February 2006, inclusive, the Company will be required
to make principal payments of $15.7 million, together with an
equivalent payment at maturity. The Senior Notes may be prepaid
at the Company's option, in whole or in part, at any time,
together with a make whole premium, and upon specified change in
control events each holder has the right to require the Company
to purchase its Senior Note without any premium thereon.
The Company has a credit agreement (the "Credit Agreement")
whereby the lender will make available to the Company, until
September 1, 2001 (the "Maturity Date"), a revolving credit line
of up to $20,000,000 aggregate principal amount for working
capital and permitted acquisitions, including $10,000,000
available for standby and commercial letters of credit.
Interest on outstanding advances accrues, at the election of the
Company, at either the lender's prime rate, payable monthly, or
its LIBOR rate, plus a margin ranging from .5% to 1.5% depending
on the maintenance of certain financial ratios, payable at the
end of selected interest periods (from one to six months).
Outstanding principal is subject to repayment on the Maturity
Date, except that advances for permitted acquisitions must be
repaid within six months after disbursement.
The note purchase agreements pursuant to which the Senior Notes
were acquired, and the Credit Agreement, obligate the Company to
comply with certain financial ratios and restrictive covenants
that, among other things, place limitations on operations and
sales of assets by the Company or its subsidiaries, and limit
the ability of the Company to incur further secured indebtedness
and liens and of subsidiaries to incur indebtedness, and, in the
event of default, limit the ability of the Company to pay cash
dividends or make other distributions to the holders of its
capital stock or to redeem such stock. The Credit Agreement
also obligates certain of the Company's domestic subsidiaries to
guaranty the Company's obligations, as a result of which the
same subsidiaries have also delivered their guaranty with
respect to the Senior Notes.
In July 1999, the Company borrowed EUR 5,672,000 in order to
refinance a portion of the purchase price for its Netherlands
licensee. Such amount is repayable in seven equal installments
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annually on each July 31, and accrues interest, payable
quarterly, at the rate of 5.5% per annum.
On July 20, 1999, the Company entered into a settlement
agreement with Insituform East, Inc. ("East") and its
affiliates, providing for dismissal of the pending actions
before the Delaware Chancery Court and the American Arbitration
Association involving the parties and their joint venture doing
business under the name Midsouth Partners ("Midsouth"). Under
the Agreement, the Company and its subsidiary withdrew as
partners in Midsouth, and the licenses from the Company to
Midsouth with respect to the Insituform process and the NuPipe
process were terminated. Pursuant to the Agreement, East will
pay to the Company an amount equal to the book value of the
interests of the Company and its subsidiary in Midsouth, and
will repay to the Company outstanding loans to Midsouth in the
amount of $400,000.
The Agreement expressly provides that the Company and its
affiliates and licensees may operate in Midsouth's former
exclusive territory (consisting of Tennessee and portions of
Mississippi and Kentucky) without any obligation to East or its
affiliates. Under the Agreement, a subsidiary of East retains a
non-exclusive right in Midsouth's former territory to utilize
the cured-in-place process and technology in the condition and
state as commercially practiced under license on the date of
settlement. The Agreement further provides that such subsidiary:
(i) retains no rights to use the trademark "Insituform"; (ii) is
not entitled to receive from the Company any further
improvements or modifications to the cured-in-place process or
technology, nor any technical or marketing support; and (iii)
may not use any of the rights granted outside of such territory
unless such use is inadvertent and de minimis. Any breach of
the foregoing limitations results in immediate abrogation of the
rights granted.
In March 1998, the Company completed the acquisition of the
entire minority interest in its Chilean subsidiary for an
aggregate purchase price of approximately $2.1 million, $1.0
million of which was paid in connection with closing, $0.6
million of which is paid in March 1999, the first anniversary of
closing, and the remainder of which is due on the second
anniversary of closing. In September 1998, the Company
completed its acquisition of 80% of the shares of Video
Injection S.A. The purchase price for the these shares was $5.0
million, $2.4 million of which was paid at closing, $1.3 million
of which is due on the first anniversary of closing, and $1.3
million of which is due on the second anniversary of closing,
such additional installments secured by the Company's letter of
credit arrangements. On the fifth anniversary of closing (or
earlier, in specified events), the Company will purchase the
remaining 20% of the shares of Video Injection pursuant to a
formula based on Video Injection's results of operations.
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Management believes its current working capital will be adequate
to meet its requirements for the foreseeable future.
YEAR 2000
- ---------
The "year 2000" problem relates to computer systems that have
time and date-sensitive programs that were designed to read
years beginning with "19," but may not properly recognize the
year 2000. If a computer system or software application used by
the Company or a third party dealing with the Company fails
because of the inability of the system or application to
properly read the year "2000," the results may adversely affect
the Company.
Accordingly, the Company is reviewing its internal computer
programs and systems to ensure year 2000 compliance. In 1998,
the Company established a project team to address year 2000
risks facing the Company, and its customers and suppliers, and
engaged an internationally-recognized consulting firm to assist
the team with implementing programs addressing preparedness of
the Company. The project team continues to coordinate the
identification and implementation of changes to computer
hardware and software applications that will attempt to ensure
the availability and integrity of the Company's information
systems. The project team is also reviewing and analyzing voice
and data communications systems, building systems, manufacturing
and operations equipment with embedded components (including
HVAC, security and fire protection), and field operations
equipment to ensure the reliability of operational systems and
manufacturing processes, both in North America and in Europe.
The project team has identified the Company sites and entities
that may harbor assets at risk, collecting pertinent
information, establishing year 2000 disposition strategies and
assessing and reporting risks. The Company's manufacturing
system has been modified so as to achieve year 2000 compliance
in all material respects, and the Company has identified
additional systems that will be replaced by year end. The
Company's project team provides consulting services where needed
in the areas of project planning and estimating, testing and
technical issues, and runs remedial projects as appropriate.
The Company also faces risk to the extent that suppliers of
products, services and systems purchased by the Company and
others with whom the Company transacts business on a worldwide
basis do not comply with year 2000 requirements. Principal
areas of the Company's review are banking systems (and the
effects on receivables, payables and payroll),
telecommunications, suppliers to the Company's manufacturing and
operating units (such as felt and resin), transportation systems
(both inbound and outbound), and customer information systems
for order placement and release and payment of invoices. The
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Company's project team has had formal communications with
representatives from significant outside parties that transact
with the Company to determine the extent to which the Company is
vulnerable to failure by them to remediate their own year 2000
issues. In the case of suppliers to the Company's manufacturing
and operating units, verification includes site visits. The
Company's strategy entails proactive compliance assessment in
the case of these parties when appropriate, as well as
maintaining paper records of transactions when advisable and
inventory stocks of key materials.
The Company expects to complete its year 2000 compliance program
during 1999 and, based on information collected, presently
believes that any significant issues within its own operations
and facilities will be addressed in a timely manner. However,
while the Company has not identified material difficulties
presented by its suppliers or in its financial or communications
support that are not being addressed, and while the estimated
cost of the Company's efforts is not expected to be material to
the Company's financial position or any year's results of
operations, there can be no assurance to this effect.
Based on management's current assessment that no material
exposure to significant business interruption exists, the
Company has not adopted any formal contingency plan in the event
its year 2000 project is not completed in a timely manner, or in
the event unforeseen difficulties arise. The Company will
appropriately modify its strategy as additional circumstances
come to its attention, but there can be no assurance that the
Company will timely identify and remediate all significant year
2000 problems, and that remedial efforts will not involve
significant time and expense, or that such problems will not
have a material adverse effect on the Company's business,
results of operations or financial position.
MARKET RISK
- -----------
The Company conducts its rehabilitation activities on a
worldwide basis, giving rise to exposures related to changes in
foreign currency exchange rates. For example, foreign currency
exchange rate movements may create a degree of risk to the
Company's operations by affecting: (i) the U.S. dollar value of
sales made in foreign currencies, and (ii) the U.S. dollar value
of costs incurred in foreign currencies. In addition, the
Company is exposed to market risks related to changes in
interest rates. The Company's objective is to minimize the
volatility in earnings and cash flow from these risks.
The Company has selectively used, and will continue to use,
forward exchange contracts in order to manage its currency
exposure. Forward exchange contracts are executed by the
Company only with large, reputable banks and financial
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institutions and are denominated in currencies of major
industrial countries. Given its assessment of such risk, the
Company has not deemed it necessary to offset any interest rate
exposure. Furthermore, the Company does not enter into
transactions involving derivative financial instruments for
speculative trading purposes.
Based on the Company's overall currency exchange rate and
interest rate exposure at June 30, 1999, a ten percent weakening
in the U.S. dollar across all currencies or ten percent increase
in interest rates would not have a material impact on the
financial position, results of operations or cash flows of the
Company. These effects of hypothetical changes in currency
exchange rates and in interest rates, however, ignore other
effects the same movement may have arising from other variables,
and actual results could differ from the sensitivity
calculations of the Company. The Company regularly assesses
these variables, establishes policies and business practices to
protect against the adverse effects of foreign currency and
interest rate fluctuations and does not anticipate any material
losses generated by these risks.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK
For information concerning this item, see "Item 2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Market Risk," which information is incorporated
herein by reference.
<PAGE>
<PAGE>
PART II. - OTHER INFORMATION
----------------------------
ITEM 1. LEGAL PROCEEDINGS
AM-Liner Proceeding. In previously reported patent
infringement proceedings brought by the Company in the United
States District Court for the Northern District of California
against AM-Liner USA, Inc., American Pipe & Plastics Inc.
("APP") and J.F. Pacific Liners, Inc. (Civil Action No.
C-95-01511 CAL), the court in May 1999 entered an amended
judgment against the defendants in a total amount of $3,491,000,
including pre-judgment interest and costs. The defendants filed
an amended appeal bond in an amount of the amended judgment plus
ten per cent. The Company has filed a cross-appeal from the
portion of the amended judgment that calculates the amount of
damages. The Company is not able to predict the likelihood of
any recovery from the defendants of amounts awarded or its
cross-appeal. The Company has commenced a further patent
infringement proceeding against APP and its licensee, Sancon
Engineering, Inc., in the Central District of California (Civil
Action No. SACV 99-909 DOC (EEx)) alleging that APP's processes
infringe one aspect of an additional patent held by the Company.
Ultraliner Proceedings. In May 1999, the Company
commenced an action against Ultraliner, Inc. ("Ultraliner") and
its licensee, HydroTech, Inc. ("HydroTech"), in the United
States District Court for the Northern District of California
(Civil Action No. C-99-2429 CAL), alleging infringement by the
defendants of six of the Company's NuPipe(R) patents in
connection with Ultraliner's manufacture and sale of its fold
and formed pipe liner and its installation by HydroTech.
Ultraliner has subsequently served its summons and complaint on
the Company with respect to an action in the Central District of
Tennessee for a declaration of invalidity of the Company's U.S.
patent no. 4,867,921 covering the NuPipe(R) installation
process. Pursuant to the Company's motion, in July 1999 the
court ruled that the action should be transferred to the
Northern District of California.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On May 26, 1999, the Company convened its Annual
Meeting of Stockholders (the "Annual Meeting").
(b) Not applicable because (i) proxies for the Annual
Meeting were solicited pursuant to Regulation 14A under the
Securities Exchange Act of 1934 together with the Company's
Proxy Statement dated April 19, 1999 (the "Proxy Statement");
(ii) there was no solicitation in opposition to management's
nominees as listed in the Proxy Statement and (iii) all of such
nominees were elected.
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(c) At the Annual Meeting, the stockholders voted in
favor of a proposal to approve an amendment to the By-Laws of
the Company providing procedures for nominations for election of
directors and the filling of vacancies on the Board of
Directors. The holders of 20,064,738 shares voted in favor of,
the holders of 93,349 shares voted against, the holders of
108,702 shares abstained and there were 2,452,024 broker
non-votes with respect to approval of such proposal.
At the Annual Meeting, the stockholders voted in favor
of a proposal to approve an amendment of the Certificate of
Incorporation of the Company in order to conform the filling of
vacancies on the Board of Directors to the procedures set forth
in the By-Laws of the Company. The holders of 20,063,245 shares
voted in favor of, the holders of 93,662 shares voted against,
the holders of 109,902 shares abstained and there were 2,452,004
broker non-votes with respect to approval of such proposal.
At the Annual Meeting, the stockholders voted in favor
of management's nominees for election as directors of the
Company. The holders of 22,483,261 shares voted in favor of,
and holders of 235,552 shares withheld their vote for, the
election of Robert W. Affholder; the holders of 22,484,001
shares voted in favor of, and holders of 234,812 shares withheld
their vote for, the election of Paul A. Biddelman; the holders
of 22,483,514 shares voted in favor of, and holders of 235,299
shares withheld their vote for, the election of Stephen P.
Cortinovis; the holders of 22,483,461 shares voted in favor of,
and holders of 235,352 shares withheld their vote for, the
election of Anthony W. Hooper; the holders of 22,483,294 shares
voted in favor of, and holders of 235,519 shares withheld their
vote for, the election of Thomas N. Kalishman; the holders of
22,483,423 shares voted in favor of, and holders of 235,390
shares withheld their vote for, the election of Silas Spengler;
the holders of 22,483,332 shares voted in favor of, and holders
of 235,481 shares withheld their vote for, the election of
Sheldon Weinig; the holders of 22,484,011 shares voted in favor
of, and holders of 234,802 shares withheld their vote for, the
election of Russell B. Wight, Jr.; and the holders of 22,483,514
shares voted in favor of, and holders of 235,299 shares withheld
their vote for, the election of Alfred L. Woods.
(d) Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits filed as part of this Quarterly
Report on Form 10-Q are listed on the annexed Index to Exhibits.
(b) During the quarter ended June 30, 1999, the
Company filed a Current Report on Form 8-K dated May 28, 1999
which, under "Item 5. Other Events" thereunder, reported (x)
modifications to the license from Ashimori Industry Co. Ltd.,
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and (y) completion of the acquisition of the exclusive licensee
of the Insituform process in the Netherlands. In addition, the
Company has filed a Current Report on Form 8-K dated July 20,
1999 which, under "Item 5. Other Events" thereunder, reported
the settlement agreement between the Company and Insituform
East, Inc. and its affiliates. No financial statements were
filed as part of any such report.
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SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
INSITUFORM TECHNOLOGIES, INC.
August 9, 1999 By: s/William A. Martin
---------------------------------
William A. Martin
Senior Vice President and
Principal Financial and
Accounting Officer
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INDEX TO EXHIBITS
------------------
3.1 - Restated Certificate of Incorporation of the Company
3.2 - By-laws of the Company
27 - Financial Data Schedule, which is submitted
electronically to the Securities and Exchange Commission
for information only and is not filed
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
INSITUFORM TECHNOLOGIES, INC.
INSITUFORM TECHNOLOGIES, INC., a corporation organized and
existing by virtue of the General Corporation Law of Delaware (the
"Corporation"), pursuant to the General Corporation Law of Delaware
does hereby certify as follows:
FIRST: (a) The present name of the Corporation is INSITUFORM
TECHNOLOGIES, INC.
(b) The name under which the Corporation was
originally incorporated is INSITUFORM OF NORTH AMERICA, INC.; and
the date of filing the original certificate of incorporation with
the Secretary of State of the State of Delaware is March 27, 1980.
SECOND: The provisions of the certificate of incorporation of
the Corporation, as heretofore amended and/or supplemented, are
hereby restated and integrated into the single instrument which is
hereinafter set forth, and which is entitled Restated Certificate
of Incorporation of Insituform Technologies, Inc., without further
amendment and without any discrepancy between the provisions of the
certificate of incorporation, as heretofore amended and
supplemented, and the provisions of the said single instrument
hereinafter set forth.
THIRD: The Board of Directors of the Corporation has duly
adopted this Restated Certificate of Incorporation pursuant to the
provisions of Section 245 of the General Corporation Law of
Delaware in the form set forth as follows:
"RESTATED CERTIFICATE OF INCORPORATION
OF
INSITUFORM TECHNOLOGIES, INC.
FIRST: The name of the corporation is INSITUFORM
TECHNOLOGIES, INC.
SECOND: The registered office of the corporation is to be
located at Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle, State of Delaware. The
name of its registered agent at that address is The Corporation
Trust Company.
THIRD: The purpose of the corporation is to engage in any
lawful act or activity for which a corporation may be organized
under the General Corporation Law of Delaware.
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FOURTH: The corporation shall be authorized to issue forty-
two million (42,000,000) shares, consisting of forty million
(40,000,000) Class A Common shares, par value one cent ($0.01) per
share; and two million (2,000,000) Preferred shares, par value ten
cents ($0.10) per share ("Preferred Stock").
The shares of Preferred Stock shall be issued in one or more
series designated by the Board of Directors without further
shareholder action and shall bear such terms and designation as the
Board of Directors may fix, including dividend rates, redemption
rights, conversion rights, liquidation preferences, voting rights
(provided that the Board of Directors may designate that the
holders of one or more series of Preferred Stock shall be entitled
as a series to elect one director and the Board of Directors may at
its discretion grant the holders of one or more series of the
corporation's shares of Preferred Stock the right to elect
additional directors in the event that dividends on such series
shall be in arrears) and such other terms as the Board of Directors
shall determine. Any shares of Preferred Stock reacquired by the
corporation may be reissued without further shareholder approval.
FIFTH: The name and address of the incorporator are as
follows:
Name Address
---- -------
Ray A. Barr 9 East 40th Street
New York, New York 10016
SIXTH: The following provisions are inserted for the
management of the business and for the conduct of the affairs of
the corporation, and for further definition, limitation and
regulation of the powers of the corporation and of its directors
and shareholders:
(1) The number of directors of the corporation shall
be such as from time to time shall be fixed by, or in the
manner provided in, the by-laws; provided, however, that
the number of directors of the corporation shall not be
less than six (6) nor shall the number of directors of
the corporation exceed fifteen (15). Election of
directors need not be by ballot unless the by-laws so
provide.
(2) Vacancies in the Board of Directors shall be
filled by a majority of the directors then in office
subject to the procedures set forth in the by-laws of the
corporation. A director shall hold office until the
annual meeting for the year in which his term expires and
until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation,
retirement, disqualification or removal from office. Any
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director elected to fill a vacancy not resulting from an
increase in the number of directors shall have the same
remaining term as that of his predecessor.
Notwithstanding any provision of this Article SIXTH,
whenever the holders of any one or more series of
Preferred Stock issued by the corporation shall have the
right, voting separately by class or series, to elect
directors at an annual or special meeting of shareholders
or any class or series, the election, term of office,
filling of vacancies and other features of such
directorships shall be governed by the terms of this
Certificate of Incorporation or the resolution or
resolutions adopted by the Board of Directors pursuant to
Article FOURTH hereof applicable thereto.
(3) The Board of Directors shall have power without
the assent or vote of the shareholders:
(a) To make, alter, amend, change, add to or
repeal the by-laws of the corporation; to fix and
vary the amount to be reserved for any proper
purpose; to authorize and cause to be executed
mortgages and liens upon all or any part of the
property of the corporation; to determine the use
and disposition of any surplus or net profits; and
to fix the times for the declaration and payment of
dividends.
(b) To determine from time to time whether,
and to what extent, and at what times and places,
and under what conditions the accounts and books of
the corporation (other than the stock ledger) or
any of them, shall be open to the inspection of the
shareholders.
(4) The directors at their discretion may submit any
contract or act for approval or ratification at any
annual meeting of shareholders or at any meeting of the
shareholders called for the purpose of considering any
such act or contract, and any contract or act that shall
be approved or be ratified by the vote of the holders of
a majority of the stock of the corporation which is
represented in person or by proxy at such meeting and
entitled to vote thereat (provided that a lawful quorum
of shareholders be there represented in person or by
proxy) shall be as valid and as binding upon the
corporation and upon all the shareholders as though it
had been approved or ratified by every shareholder of the
corporation, whether or not the contract or act would
otherwise be open to legal attack because of directors'
interest, or for any other reason.
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(5) In addition to the powers and authorities
hereinbefore or by statute expressly conferred upon them,
the directors are hereby empowered to exercise all such
powers and do all such acts and things as may be
exercised or done by the corporation; subject,
nevertheless, to the provisions of the statutes of
Delaware, of this certificate, and to any by-laws from
time to time made by the shareholders; provided, however,
that no by-laws so made shall invalidate any prior act of
the directors which would have been valid if such by-law
had not been made.
SEVENTH: The corporation shall, to the full extent permitted
by Section 145 of the Delaware General Corporation Law, as amended,
from time to time, indemnify all persons whom it may indemnify
pursuant thereto.
EIGHTH: Whenever a compromise or arrangement is proposed
between this corporation and its creditors or any class of them
and/or between this corporation and its stockholders or any class
of them, any court of equitable jurisdiction within the State of
Delaware, may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this
corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for this corporation under
the provisions of Section 279 Title 8 of the Delaware Code order a
meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the
case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths (3/4)
in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the
case may be, agree to any compromise or arrangement and to any
reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and
the said reorganization shall, if sanctioned by the court to which
the said application has been made, be binding on all the creditors
or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on
this corporation.
NINTH: The corporation reserves the right to amend, alter,
change or repeal any provision contained in this certificate of
incorporation in the manner now or hereafter prescribed by law, and
all rights and powers conferred herein on stockholders, directors
and officers are subject to this reserved power.
TENTH: No person who is or was at any time a director of the
corporation shall be personally liable to the corporation or its
stockholders for monetary damages for any breach of fiduciary duty
by such person as a director; provided, however, that, unless and
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except to the extent otherwise permitted from time to time by
applicable law, the provisions of this Paragraph Tenth shall not
eliminate or limit the liability of a director (i) for breach of
the director's duty of loyalty to the corporation or its
stockholders, (ii) for any act or omission by the director which is
not in good faith or which involves intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware, (iv) for any transaction
from which the director derived an improper personal benefit or (v)
for any act or omission occurring prior to the date this Paragraph
Tenth becomes effective. No amendment to or repeal of this
Paragraph Tenth shall apply to or have any effect on the liability
or alleged liability of any director of the corporation for or with
respect to any act or omission of such director occurring prior to
such amendment or repeal.
ELEVENTH: Subject to the rights of the holders of any class
or series of Preferred Stock expressly set forth in this
Certificate of Incorporation, the Certificate of Designation
related to such class or series of Preferred Stock or as otherwise
required by law, any action required or permitted to be taken by
the shareholders of the corporation must be effected exclusively at
a duly called annual or special meeting of such shareholders and
may not be effected by any consent in writing by such shareholders.
This Article ELEVENTH may not be repealed or amended in any
respect, and no provision inconsistent with this Article ELEVENTH
may be adopted, unless such action is approved by the affirmative
vote of the holders of not less than eighty (80) percent of the
combined voting power of the then outstanding shares of capital
stock of the corporation entitled to vote generally in the election
of directors."
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be executed on its behalf by
Anthony W. Hooper, its President, and attested by Howard Kailes,
its Secretary, as of this 8th day of June, 1999.
ATTEST:
s/Howard Kailes s/Anthony W. Hooper
- --------------------------- ---------------------------------
Howard Kailes Anthony W. Hooper
Secretary President
EXHIBIT 3.2
BY-LAWS
OF
INSITUFORM TECHNOLOGIES, INC.
(as amended through May 26, 1999)
ARTICLE I - OFFICES
The principal offices of the corporation in the State of
Delaware shall be located in the City of Dover, County of Kent. The
Corporation may have such other offices, either within or without
the State of incorporation as the board of directors may designate
or as the business of the corporation may from time to time
require.
ARTICLE II - STOCKHOLDERS
1. ANNUAL MEETING.
The annual meeting of the stockholders shall be held at
such time and upon such date during the month of June in each year
as the Board of Directors may determine, 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 succeeding business day.
2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by
either the chairman of the board, the president or by the
directors, and shall be called by the president at the request of
the holders of not less than fifty per cent of all the outstanding
shares of the Corporation entitled to vote at the meeting.
3. PLACE OF MEETING.
The directors may designate any place, either within or
without the State unless otherwise prescribed by statute, as the
place of meeting for any annual meeting or for any special meeting
called by the directors. A waiver of notice signed by all
stockholders entitled to vote at a meeting may designate any place,
either within or without the state unless otherwise prescribed by
statute, as the place for holding such meeting. If no designation
is made, or if a special meeting be otherwise called, the place of
meeting shall be the principal office of the corporation.
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4. NOTICE OF MEETING.
Written or printed notice stating the place, day and hour
of the meeting and, in the 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 fifty days before the date of the
meeting, either personally or by mail, by or at the direction of
either the chairman of the board, the president, the secretary, or
the officer or 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, addressed to the stockholder at his address as it appears on
the stock transfer books of the corporation, with postage thereon
pre-paid.
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining stockholders entitled to
notice of or to vote at any meeting of stockholders or any
adjournment thereof, or stockholders entitled to receive payment of
any dividend, or in order to make a determination of stockholders
for any other proper purpose, the 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, in case
of a meeting of stockholders, not less than ten days prior to the
date on which the particular action requiring such determination of
stockholders is to be taken. If the stock transfer books are not
closed and no record date is fixed for the determination of
stockholders entitled to notice of or to vote at a meeting of
stockholders, or stockholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the directors declaring such
dividend is adopted, as the case may be, 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.
6. VOTING LISTS.
The officer or agent having charge of the stock transfer
books for shares of the corporation shall make, at least ten days
before each meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting, or any adjournment
thereof, arranged in alphabetical order, with the address of and
the number of shares held by each, which list, for a period of ten
days prior to such meeting, shall be kept on file at the principal
office of the corporation and shall be subject to inspection by any
stockholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any stockholder
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during the whole time of the meeting. The original stock transfer
book shall be prima facie evidence as to who are the stockholders
entitled to examine such list or transfer books or to vote at the
meeting of stockholders.
7. QUORUM.
At any meeting of stockholders a majority of the
outstanding shares of the corporation entitled to vote, represented
in person or by proxy, shall constitute a quorum at a meeting of
stockholders. If less than said number of the outstanding shares
are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without
further notice. At such adjourned meeting at which a quorum shall
be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified.
The stockholders present at a duly organized meeting may continue
to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
8. PROXIES.
At all meetings of stockholders, a stockholder may vote
by proxy executed in writing by the stockholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the
secretary of the corporation before or at the time of the meeting.
9. VOTING.
Each stockholder entitled to vote in accordance with the
terms and provisions of the certificate of incorporation and these
by-laws shall be entitled to one vote, in person or by proxy, for
each share of stock entitled to vote held by such stockholders.
Upon the demand of any stockholder, the vote for directors and upon
any question before the meeting shall be by ballot. All elections
for directors shall be decided by plurality vote; all other
questions shall be decided by majority vote except as otherwise
provided by the Certificate of Incorporation or the laws of this
State.
10. ORDER OF BUSINESS.
The order of business at all meetings of the
stockholders, shall be as follows:
1. Roll call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
<PAGE>
<PAGE>
4. Reports of Officer.
5. Reports of Committees.
6. Election of Directors.
7. Unfinished Business.
8. New Business.
11. BUSINESS AT MEETINGS.
Subsequent to the 1999 annual meeting of stockholders, no
business shall be transacted at an annual meeting of stockholders
other than business that is (i) specified in the notice of meeting
(or any supplement thereto) given by or at the direction of the
Board of Directors (or any duly authorized committee thereof), (ii)
otherwise properly brought before the annual meeting by or at the
direction of the Board of Directors (or any duly authorized
committee thereof), or (iii) otherwise properly brought before the
annual meeting by a stockholder who (x) is a stockholder of record
on the record date for the determination of stockholders entitled
to vote at such annual meeting and on the date of the giving of the
notice provided for in this Section 11 and (y) complies with the
procedures set forth in this Section 11 and any other applicable
requirements. No business shall be conducted at a special meeting
of stockholders other than business that is specified in the
corporation's notice of meeting (or any supplement thereto). In
addition, subsequent to the 1999 annual meeting of stockholders
only persons who are nominated in accordance with the procedures
set forth in this Section 11 (and any other applicable
requirements) shall be eligible for election as directors of the
corporation. If business is not properly brought before any meeting
of stockholders in accordance with the procedures set forth in this
Section 11, or if a nomination at any meeting was not made in
accordance with the requirements of this Section 11, the chairman
shall declare to the meeting that the business was not properly
brought before the meeting, and such business shall not be
transacted, or the nomination was defective, and such defective
nomination shall be disregarded.
Subsequent to the 1999 annual meeting of stockholders,
nominations of persons for election to the Board of Directors may
be made at any annual meeting of stockholders, or at any special
meeting of stockholders at which directors are to be elected
pursuant to the Corporation's notice of meeting: (i) by or at the
direction of the Board of Directors (or any duly authorized
committee thereof), subject to the requirements of these By-laws,
or (ii) by any stockholder who (x) is a stockholder of record on
the record date for the determination of stockholders entitled to
vote at such annual meeting and on the date of the giving of the
<PAGE>
<PAGE>
notice provided for in this Section 11 and (y) has complied with
the procedures set forth in this Section 11.
For a stockholder to be entitled to properly bring business
before an annual meeting of stockholders subsequent to the 1999
annual meeting of stockholders, a proper Stockholder's Notice (as
defined below) must have been received by the secretary of the
corporation at the principal executive offices of the corporation,
and for any nomination of a person or persons for election to the
Board of Directors by a stockholder (a "Stockholder Nomination") to
be made at any annual meeting of stockholders subsequent to the
1999 annual meeting of stockholders, written notice thereof meeting
the requirements set forth below must have been received by the
secretary of the corporation at the principal executive offices of
the corporation, in each case not less than 90 days nor more than
120 days prior to the first anniversary of the date of the
preceding year's annual meeting of stockholders; provided, however,
that in the event that the date of the annual meeting is advanced
or delayed by more than 30 days compared to the preceding year's
annual meeting, notice by the stockholder to be timely must be so
received not later than the close of business on the later of (i)
the ninetieth (90th) day prior to such annual meeting or (ii) the
tenth (10th) day following the day on which public disclosure (as
defined below) of the date of the annual meeting is first made.
For a Stockholder Nomination to be made at any special meeting
of stockholders as aforesaid, written notice thereof meeting the
requirements set forth below must have been received by the
secretary of the corporation at the principal executive offices of
the corporation, in each case not later than the close of business
on the later of (i) the ninetieth (90th) day prior to such special
meeting or (ii) the tenth (10th) day following the day on which
public disclosure of the date of the special meeting is made.
A Stockholder's Notice shall mean a written notice to the
secretary of the corporation which sets forth as to each matter
such stockholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the
annual meeting (including the form of the proposal) and the reasons
for conducting such business at the annual meeting, (ii) the name
and record address of such stockholder, (iii) the class or series
and number of shares of capital stock of the corporation that are
owned beneficially or of record by such stockholder, indicating the
name and address of any beneficial owner of such shares, (iv) a
description of all arrangements or understandings between such
stockholder (and any person acting on behalf of the stockholder)
and any other person or persons (including their names) in
connection with the proposal of such business by such stockholder
and any material interest of such stockholder in such business, and
(v) a representation that such stockholder intends to appear in
<PAGE>
<PAGE>
person or by proxy at the annual meeting to bring such business
before the meeting.
Any notice of a Stockholder Nomination must set forth (a) as
to each person whom the stockholder proposes to nominate for
election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class or series and number of
shares of capital stock of the corporation that are owned
beneficially or of record by the person and (iv) any other
information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made
in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Securities Exchange Act of
1934, as then in effect (the "Exchange Act"), and the rules and
regulations promulgated thereunder; and (b) as to the stockholder
giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of
capital stock of the corporation that are owned beneficially or of
record by such stockholder, (iii) a description of all arrangements
or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names)
pursuant to which the nomination(s) are to be made by such
stockholder, (iv) a representation that such stockholder intends to
appear in person or by proxy at the meeting to nominate the persons
named in its notice and (v) any other information relating to such
stockholder that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a
written consent of each proposed nominee to being named as a
nominee and to serve as a director if elected.
For purposes of this Section 11, "public disclosure" shall
mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in
a document publicly filed by the corporation with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
ARTICLE III - BOARD OF DIRECTORS
1. GENERAL POWERS.
The business and affairs of the corporation shall be
managed by its board of directors. The directors shall in all cases
act as a board, and they may adopt such rules and regulations for
the conduct of their meetings and the management of the
corporation, as they may deem proper, not inconsistent with these
by-laws and the laws of this State.
<PAGE>
<PAGE>
2. NUMBER OF DIRECTORS, TENURE AND QUALIFICATIONS.
The Board of Directors shall consist of eight (8)
directors, provided that the size of the Board of Directors shall
increase automatically, without any further amendment to this
Section 2, to nine (9) directors upon the election or appointment
of the Additional Nominee (as defined in that certain Agreement,
dated July 25, 1997, among the corporation, Jerome Kalishman, Nancy
F. Kalishman, The Jerome and Nancy Kalishman Family Fund, Robert W.
Affholder, Xanadu Investments, L.P., Paul A. Biddelman, Stephen P.
Cortinovis, Anthony W. Hooper, Silas Spengler, Sheldon Weinig and
Russell B. Wight, Jr., as it may be amended from time to time (the
"Agreement")) contemplated by, and selected in accordance with, the
provisions of the Agreement. Such directors (except as hereinafter
provided for the filling of vacancies) shall be elected in
accordance with the Corporation's Certificate of Incorporation by
the stockholders by a plurality vote of the number of shares voting
at the meeting at which such election shall take place.
3. REGULAR MEETINGS.
A regular meeting of the directors, shall be held without
other notice than this by-law immediately after, and at the same
place as, the annual meeting of stockholders. The directors may
provide, by resolution, the time and place for the holding of
additional regular meetings without other notice than such
resolution.
4. SPECIAL MEETINGS.
Special meetings of the directors may be called by or at
the request of the president, the Chairman of the Board, or any two
directors. The person or persons authorized to call special
meetings of the directors may fix the place either within or
without the state or country, for holding any special meeting of
the directors called by them.
5. NOTICE.
Notice of any special meeting shall be given at least 24
hours previously thereto by written notice delivered personally, or
by telegram or telecopy or mailed to each director at his residence
or business address. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed,
with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. The attendance of a director at
a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting
is not lawfully called or convened.
<PAGE>
<PAGE>
6. QUORUM.
At any meeting of the directors a majority shall
constitute a quorum for the transaction of business, but if less
than said number is present at a meeting, a majority of the
directors present may adjourn the meeting from time to time without
further notice.
7. MANNER OF ACTING.
The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the
directors.
8. NEWLY-CREATED DIRECTORSHIPS AND VACANCIES.
Any vacancy on the board of directors and any newly-
created directorship resulting from an increase in the number of
directors may be filled by the directors in accordance with the
Corporation's Certificate of Incorporation and Section 14 of this
Article III.
9. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed only for cause
by vote of the stockholders.
10. RESIGNATION.
A director may resign at any time by giving written
notice to the board, the president or the secretary of the
corporation. Unless otherwise specified in the notice, the
resignation shall take effect upon receipt thereof by the board or
such officer, and the acceptance of the resignation shall not be
necessary to make it effective.
11. COMPENSATION.
The Board of Directors shall have the authority to fix
the compensation of directors. Nothing herein 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 compensation for attending committee
meetings.
12. PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting
of the directors at which action on any corporate matter is taken
shall be presumed to have assented to the action taken unless his
dissent shall be entered in the minutes of the meeting or unless he
<PAGE>
<PAGE>
shall file his written dissent to such action with the person
acting as the secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered mail to the
secretary of the corporation immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
13. EXECUTIVE AND OTHER COMMITTEES.
The board, by resolution, may designate from among its
members an executive committee and other committees, each
consisting of one or more directors. Each such committee shall
serve at the pleasure of the board.
14. NOMINATING COMMITTEE
Effective immediately subsequent to the 1999 annual
meeting of stockholders, the board shall designate a nominating
committee consisting of three directors who shall serve at the
pleasure of the board, the functions of which shall include
establishing criteria for the selection of the nominees for
election as directors, reviewing the qualifications of and
maintaining information concerning potential nominees, making
appropriate recommendations to the Board with respect to nominees
for election as directors at the annual meeting of stockholders,
reviewing on a long-term basis the size and composition of the
board, and, as vacancies occur on the board between annual
meetings, establishing procedures for stockholders to submit and
said Committee to review proposed nominations. The board shall not,
subsequent to the 1999 annual meeting of the stockholders, nominate
any person not then serving as a director for election as a
director, or fill any vacancy on the board with any person, unless
such person is either (i) recommended to the board by said
Committee or (ii) approved by the unanimous vote of the members of
the board of directors. The presence of all members of said
Committee shall be necessary to constitute a quorum and to transact
business, and the act of the majority of the members at a meeting
at which a quorum is present shall be the act of said Committee.
Meetings of said Committee may be called by any member thereof,
upon written or oral notice of such meeting given to each member at
least 24 hours prior thereto. The Chairman of the Board shall
preside at all meetings of said Committee.
15. NOTICE AND APPROVAL OF CERTAIN ACTIONS
Notwithstanding any other provision of these By-laws (and
except for the implementation of Sections 2(a), (b), (c) and (e)
and Section 6 of the Agreement): (a) in the event that any director
proposes to bring before any regular or special meeting of the
Board of Directors any proposal relating to any amendment of the
Corporation's Certificate of Incorporation or these By-laws or the
<PAGE>
<PAGE>
Agreement (as defined in Article III, Section 2), or any change in
the structure, composition (other than such director's resignation)
or governance of the Board of Directors (any such action being
referred to herein as a "Special Action"), such director must
provide written notice thereof (including a reasonably detailed
description of such proposal) to each member of the Board of
Directors at least seven days prior to the date of the directors'
meeting at which the Special Action is to be proposed; and (b) the
taking of any Special Action by the Board of Directors must be
approved by a majority of all directors then serving; provided,
however, that no Special Action which would have any effect prior
to the 1999 annual meeting of the stockholders may be taken if such
Special Action would conflict with, have the effect of modifying or
otherwise frustrating any provision of the Agreement, including,
without limitation, any amendment to Article SIXTH of the
Corporation's Certificate of Incorporation or Section 2 of this
Article III, as such provisions will be in effect pursuant to the
Agreement following the 1997 annual meeting of the stockholders.
ARTICLE IV - OFFICERS
1. NUMBER.
The officers of the corporation shall be a chairman of
the board, a vice chairman of the board,a president, one or more
senior vice presidents, one or more vice presidents, a secretary
and a treasurer, each of whom shall be elected by the directors.
Such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the directors. In
addition, the President may from time to time appoint such officers
of operating divisions, and such contracting and attesting
officers, of the corporation as he may deem proper, who shall have
such authority, subject to the control of the directors, as the
President may from time to time prescribe.
2. ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the
directors shall be elected annually at the first meeting of the
directors held after each annual meeting of the stockholders. Each
officer elected by the directors shall hold office until his
successor shall have been duly elected and shall have qualified or,
if earlier, until his death or until he shall resign or shall have
been removed in the manner hereinafter provided. Each officer of
the corporation appointed by the President shall hold office for
such period as the President may from time to time prescribe or, if
earlier, until his death or until he shall resign or shall have
been removed in the manner hereinafter provided.
<PAGE>
<PAGE>
3. REMOVAL.
Any officer elected or appointed by the directors, or any
officer appointed by the President, may be removed by the directors
whenever in their judgment the best interests of the corporation
would be served thereby, but such removal shall be without
prejudice to the contract, if any, of the person so removed. Any
officer appointed by the President may be removed by the President
whenever in his judgment the best interests of the corporation
would be served thereby, but such removal shall be without
prejudice to the contract, if any, of the person so removed.
4. VACANCIES.
A vacancy in any office because of death, resignation,
removal, disqualification or otherwise of an officer elected or
appointed by the directors may be filled by the directors for the
unexpired portion of the term. A vacancy in any office because of
death, resignation, removal, disqualification or otherwise of any
officer appointed by the President may be filled by the President
for the unexpired portion of the term.
4A. CHAIRMAN OF THE BOARD.
The Chairman of the Board shall preside, when present, at
all meetings of the Board of Directors and at all meetings of the
stockholders and will perform such other duties as may be
prescribed from time to time by the Board or these By-laws.
4B. VICE CHAIRMAN OF THE BOARD.
In the absence of the Chairman of the Board or in the
event of his death, inability or refusal to act, the Vice Chairman
of the Board shall perform the duties of the Chairman of the Board
and, when so acting, shall have all the powers of and be subject to
all the restrictions on the Chairman of the Board. The Vice
Chairman of the Board shall perform such other duties as may be
prescribed from time to time by the Board or these by-laws.
Notwithstanding any other provisions of these By-laws, the Vice
Chairman of the Board, acting in any capacity, shall not have the
power to call any special meeting of the Stockholders.
5. PRESIDENT.
The President shall be the chief executive officer of the
corporation and, subject to the control of the Board of Directors,
shall have general and active management of the business of the
corporation, and shall see that all orders and resolutions of the
Board and stockholders are carried into effect. He shall have the
general authority to execute bonds, deeds and contracts, in the
name of the corporation and affix the corporate seal thereto; to
<PAGE>
<PAGE>
sign stock certificates; to cause the employment or appointment of
such employees and agents of the corporation as the proper conduct
of operations may require, and to fix their compensation, subject
to the provisions of these By-laws; to remove or suspend any
employee or agent who shall have been employed or appointed under
his authority or under authority of an officer subordinate to him;
and, in general, to exercise all the powers and authority usually
appertaining to the chief executive officer of a corporation.
6. VICE-PRESIDENT.
In the absence of the president or in the event of his
death, inability or refusal to act, one of the vice-presidents
designated by the directors shall perform the duties of the
president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. The
vice-president shall perform such other duties as from time to time
may be assigned to him by the president or by the directors.
7. SECRETARY.
The secretary shall keep the minutes of the stockholders'
and of the directors' meetings in one or more books provided for
that purpose, see that all notices are duly given in accordance
with the provisions of these by-laws or, as required, be custodian
of the corporate records and of the seal of the corporation and
keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder, have
general charge of the stock transfer books of the corporation and
in general perform all duties incident to the office of secretary
and such other duties as from time to time may be assigned to him
by the president or by the directors.
8. TREASURER.
If required by the 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 directors shall determine. He shall
have charge and custody of and be responsible for all funds and
securities of the corporation; receive and give receipts for monies
due and payable to the corporation from any source, whatsoever, and
deposit all such monies in the name of corporation in such banks,
trust companies or other depositories as shall be selected in
accordance with these by-laws and in general perform all of the
duties incident to the office of treasurer and such other duties as
from time to time may be assigned to him by the president or by the
directors.
<PAGE>
<PAGE>
9. SALARIES.
The salaries of those officers elected or appointed by
the directors shall be fixed from time to time by the directors and
no officer shall be prevented from receiving such salary by reason
of the fact that he is also a director of the corporation.
ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS
1. CONTRACTS.
The directors may authorize any officer or officers,
agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances.
The President may authorize any contracting officer appointed by
him pursuant to Section 1 of Article IV to enter into any pipeline
rehabilitation contract in the ordinary course of business of the
corporation, or execute and deliver any instrument in connection
therewith, in the name and on behalf of the corporation.
2. LOANS.
No loans shall be contracted on behalf of the corporation
and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the directors. Such authority may be
general or confined to specific instances.
3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name
of the corporation, shall be signed by such officer or officers,
agent or agents of the corporation and in such manner as shall from
time to time be determined by resolution of the directors.
4. DEPOSITS.
All funds of the corporation not otherwise employed shall
be deposited from time to time to the credit of the corporation in
such banks, trust companies or other depositaries as the directors
may select.
ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER
1. CERTIFICATES FOR SHARES.
Certificates representing shares of the corporation shall
be in such form as shall be determined by the directors. Such
certificates shall be signed by any of the chairman of the board,
or the president, as authorized by the directors and the secretary,
<PAGE>
<PAGE>
or such other officers authorized by law and by the directors. All
certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the stockholders, the
number of shares and date of issue, shall be entered on the stock
transfer books of the corporation. All certificates surrendered to
the corporation for transfer shall be cancelled and no new
certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except
that in case of a lost, destroyed or mutilated certificate a new
one may be issued therefor upon such terms and indemnity to the
corporation as the directors may prescribe.
2. TRANSFERS OF SHARES.
(a) Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, and cancel
the old certificate; every such transfer shall be entered on the
transfer book of the corporation which shall be kept at its
principal office.
(b) The corporation shall be entitled to treat the holder
of record of any share as the holder in fact thereof, and,
accordingly, shall not be bound to recognized any equitable or
other claim to or interest in such share on the part of any other
person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of this state.
ARTICLE VII - FISCAL YEAR
The fiscal year of the corporation shall begin on the first
day of January in each year.
ARTICLE VIII - DIVIDENDS
The directors may from time to time declare, and the
corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law.
ARTICLE IX - SEAL
The directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the
corporation, the state of incorporation, year of incorporation and
the words, "Corporate Seal".
<PAGE>
<PAGE>
ARTICLE X - WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is
required to be given to any stockholder or director of the
corporation under the provisions of these by-laws or under the
provisions of the articles of incorporation, 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 XI - AMENDMENTS
Except as otherwise provided by law, the Board of Directors
may adopt, alter, amend or repeal the by-laws of the Corporation,
provided, however, that the stockholders, representing a majority
of all the shares issued and outstanding at any annual stock
holders' meeting or at any special stockholders' meeting, may
repeal, alter or amend by-laws adopted by the Board or Directors
and may adopt new by-laws; provided, further, however, that the
size of the Board of Directors, as set forth in Section 2 of
Article III, may only be amended by a vote of at least 80% of the
members of the Board of Directors or by a vote of the stockholders,
representing a majority of all of the shares issued and
outstanding, at any annual stockholders' meeting or at any special
stockholders' meeting provided, further, however, that the
provisions of Sections 8 and 14 of Article III may only be amended
by a unanimous vote of the members of the board of directors or by
a vote of the stockholders, representing a majority of all of the
shares issued and outstanding, at any annual stockholders' meeting
or at any special stockholders' meeting.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27 (FDS) Filed with Form 10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
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<RECEIVABLES> 46,634
<ALLOWANCES> 2,899
<INVENTORY> 9,714
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0
0
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<CGS> 5,589
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