UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
For the period ended March 31, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
For the transition period from to
Commission File Number: 1-6417
GTE CALIFORNIA INCORPORATED
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-
0510200
(State or other jurisdiction of
(I.R.S. Employer
Incorporation or organization)
Identification No.)
One GTE Place, Thousand Oaks, California
91362-3811
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code 805-372-
6000
(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
The Company had 69,438,190 shares of $20 par value common stock
outstanding at April 30, 1995. The Company's common stock is
100% owned by GTE Corporation.
<TABLE>
PART I. FINANCIAL INFORMATION
GTE CALIFORNIA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three
Months Ended
March
31,
1995
1994
(Thousands of
Dollars)
<S> <C>
<C>
OPERATING REVENUES:
Local network services $ 312,783 $
239,688
Network access services 189,348
161,772
Long distance services 106,004
234,026
Equipment sales and services 38,186
36,677
Other 21,006
23,202
667,327
695,365
OPERATING EXPENSES:
Cost of sales and services 151,083
150,663
Depreciation and amortization 147,694
144,549
Marketing, selling, general and
administrative 195,540
200,738
494,317
495,950
Net operating income 173,010
199,415
OTHER (INCOME) DEDUCTIONS:
Interest expense 27,136
20,307
Other - net (1,325)
(1,074)
INCOME BEFORE INCOME TAXES 147,199
180,182
INCOME TAXES 59,296
73,226
NET INCOME $ 87,903 $
106,956
</TABLE>
Per share data is omitted since the Company's common stock is
100% owned by GTE Corporation (GTE).
See Notes to Condensed Consolidated Financial Statements.
1
GTE CALIFORNIA INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
RESULTS OF OPERATIONS
Net income was $87.9 and $107.0 for the three months ended March
31, 1995 and 1994, respectively, reflecting a decrease of 18% or
$19.1. The decrease is the result of lower operating income
primarily due to a decrease in operating revenues associated with
the Implementation Rate Design (IRD), as discussed below.
On January 1, 1995, pursuant to an order issued by the California
Public Utilities Commission (CPUC) toll competition (without pre-
subscription) became effective in California. The order also
provided for rate rebalancing with significant rate reductions
for toll service and access charges while increasing basic local
exchange rates closer to the actual cost of providing such
service. Although the rate rebalancing is intended to be revenue
neutral, its ultimate effect on revenue will depend, in part, on
the extent to which rate reductions result in increased calling
volumes. The decision does not permit rate increases to
compensate for competitive losses of market share. In the first
quarter of 1995, revenues decreased by approximately $50 as a
result of the implementation of this order. This revenue
decrease was partially offset by nonrecurring favorable carrier
settlements, growth in access lines and growth in network usage.
OPERATING REVENUES
Operating revenues were $667.3 and $695.4 for the three months
ended March 31, 1995 and 1994, respectively, reflecting a
decrease of 4% or $28.1.
Local network services revenues were $312.8 and $239.7 for the
three months ended March 31, 1995 and 1994, respectively,
reflecting an increase of 30% or $73.1. The increase is
primarily the result of $65.8 in rate increases associated with
the IRD and continued customer growth as reflected by a 2%
increase in access lines, which generated $3.0 of additional
revenues.
Network access services revenues were $189.3 and $161.8 for the
three months ended March 31, 1995 and 1994, respectively,
reflecting an increase of 17% or $27.5. The increase is
primarily the result of $22.1 in nonrecurring favorable carrier
settlement activities and a 6% increase in minutes of use, which
generated $7.2 of additional revenues, partially offset by a $4.7
reduction in interstate access revenues associated with price
reductions.
Long distance services revenues were $106.0 and $234.0 for the
three months ended March 31, 1995 and 1994, respectively,
reflecting a decrease of 55% or $128.0. The decrease is
primarily the result of $120.3 in rate reductions associated with
the previously mentioned IRD.
Equipment sales and services revenues were $38.2 and $36.7 for
the three months ended March 31, 1995 and 1994, respectively,
reflecting an increase of 4% or $1.5.
2
GTE CALIFORNIA INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Other operating revenues were $21.0 and $23.2 for the three
months ended March 31, 1995 and 1994, respectively, reflecting a
decrease of 9% or $2.2. The decrease is primarily the result of
an $8.9 reduction in directory publication revenues resulting
from the delay of certain directory publications until the second
quarter of 1995. The decrease is partially offset by increases
in late payment charges and operator services revenues of $2.8
and $2.2, respectively.
OPERATING EXPENSES
Operating expenses were $494.3 and $496.0 for the three months
ended March 31, 1995 and 1994, respectively, reflecting a
decrease of less than 1% or $1.7. The decrease primarily relates
to $6.1 of lower labor and benefits costs reflecting reductions
in workforce associated with the Company's re-engineering plan
initiated in 1994 and $5.0 of costs incurred during 1994 related
to earthquake damage. The decrease is offset by a $12.0 increase
in labor charges related to flood damage incurred during the
first quarter of 1995.
OTHER DEDUCTIONS
Interest expense was $27.1 and $20.3 for the three months ended
March 31, 1995 and 1994, respectively, reflecting an increase of
33% or $6.8. The increase is primarily due to higher average
long-term debt levels for the first three months of 1995 compared
to the same period in 1994.
Income tax expense was $59.3 and $73.2 for the three months ended
March 31, 1995 and 1994, respectively, reflecting a decrease of
19% or $13.9. The decrease is primarily due to a corresponding
decrease in pretax income.
CAPITAL RESOURCES AND LIQUIDITY
Management believes that the Company has adequate internal and
external resources available to meet ongoing operating
requirements for construction of new plant, modernization of
facilities and payment of dividends. The Company generally funds
its construction program from operations, although external
financing is available. Short-term borrowings can be obtained
through commercial paper borrowings or borrowings from GTE. In
addition, at March 31, 1995, a $3,500 line of credit was
available to the Company through shared lines of credit with GTE
and other affiliates to support short-term financing needs.
The Company's primary source of funds during the first three
months of 1995 was cash from operations of $266.2 compared to
$219.1 for the same period in 1994. The increase is primarily
due to the favorable timing of tax payments and the collection of
accounts receivable, partially offset by unfavorable timing in
the payment of accounts payable and lower results from
operations.
3
GTE CALIFORNIA INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
The Company's capital expenditures during the first three months
of 1995 were $81.6 compared to $84.9 during the same period in
1994. The 1995 expenditures reflect the Company's continued
growth in access lines, modernization of current facilities and
the introduction of new products and services. The Company
anticipates construction costs for 1995 to approximate capital
expenditures of $467.9 incurred during 1994, reflecting the
Company's expanding network and replacement of outdated
technologies with digital switches and fiber optic networks.
Cash used in financing activities was $209.3 during the first
three months of 1995 compared to $135.3 for the same period in
1994. The Company retired $35.1 in long-term debt during the
first three months of 1995 compared to $25.2 for the same period
in 1994. Cash used in financing activities also included
dividend payments of $133.8 during the first three months of 1995
compared to $111.5 for the same period in 1994. External
financing included long-term borrowings of $542.6 in the first
quarter of 1994. Proceeds from these borrowings were used
primarily to reduce short-term debt.
OTHER MATTERS
As previously reported, results for 1993 included a one-time
pretax restructuring charge of $445.2, which reduced net income
by $274.2, primarily for incremental costs related to
implementation of the Company's three-year re-engineering plan.
The re-engineering plan will redesign and streamline processes to
improve customer-responsiveness and product quality, reduce the
time necessary to introduce new products and services and further
reduce costs.
Implementation of the re-engineering plan began during 1994 and
is expected to be completed by the end of 1996. Expenditures of
$131.3 have been made since inception of the re-engineering plan,
including $17.9 during the first three months of 1995. These
expenditures were primarily associated with the consolidation of
customer contact, network operations and operator service
centers, separation benefits from employee reductions and
incremental expenditures to redesign and streamline processes.
The level of re-engineering activities and related expenditures
are expected to accelerate during the remainder of 1995. There
have been no significant changes made to the overall re-
engineering plan as originally reported. As of March 31, 1995,
$313.9 remains in the restructuring reserve, of which $121.5 is
classified as a current liability. Management believes the
reserve is adequate to cover future expenditures.
4
GTE CALIFORNIA INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Effective January 1, 1990 the CPUC adopted the new regulatory
framework (NRF) for the Company. The new framework replaced the
traditional "rate case" process with a framework that was
centered around a Price Cap Index (PCI) mechanism with "sharing"
of intrastate earnings (those earnings subject to the CPUC
regulation) above a benchmark rate of return. This plan is
designed to stimulate productivity and efficiencies with a
portion of these gains flowing directly to the customer.
Effective January 1, 1994, the CPUC eliminated earnings sharing
and the Company agreed to reduce its rates by $53.0. In
addition, the CPUC adjusted the Company's overall earnings cap to
a 15.50% rate of return and the earnings floor to 7.75%. Under
NRF, rates are adjusted annually by the PCI, which is based on an
inflation factor (measured by GDPPI) minus a total factor
productivity (TFP) adjustment plus or minus adjustments for
events beyond management's control (exogenous events). Rate
ceilings for partially competitive services (i.e., Centrex and
custom calling features) are changed annually by the PCI and
their respective cost floors are increased annually by the
inflation factor. The Company has the option to adjust rates at
its discretion, however, rates must remain within the bounds of
their rate cap and cost floor. Fully competitive services (e.g.,
directory advertising) are not subject to pricing limits set by
the CPUC. The 1995 PCI adjustment resulted in a rate decrease of
$12.0, which the CPUC approved in an order issued December 21,
1994.
In March 1995, the Federal Communications Commission (FCC)
increased the local-exchange carrier (LEC) productivity factors
associated with its interstate price cap plan to provide three
different options, on an interim basis, regarding the
determination and use of productivity factors. These changes
will be reflected in the LECs' annual tariff filing, effective
August 1, 1995. The FCC is expected to continue to consider
permanent changes to its price cap plan in a future rulemaking
proceeding. GTE believes the impact of the interim rules will be
minimized in the near-term because GTE has reduced its access
fees in previous years to amounts below the FCC's maximum price.
In April 1995, GTE filed a motion with the U.S. District Court
for the District of Columbia to remove the 1984 Consent Decree,
which restricts the Company from providing interLATA services.
GTE believes that the Consent Decree is no longer required since
GTE has since divested its interests in the entities whose
purchase gave rise to the Consent Decree.
In May 1995, the FCC approved GTE's applications to construct a
new fiber-optic and coaxial-cable video network in four markets,
including Ventura County, California. GTE expects to submit
tariffs that set the rates for use of its video network to the
FCC for approval and to commence the initial deployment of the
network in late 1995 and early 1996.
5
GTE CALIFORNIA INCORPORATED AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
In December 1994, the CPUC issued a decision which adopts an
initial procedural plan to facilitate opening local exchange
telecommunications markets to competition by January 1, 1997. On
April 26, 1995, the CPUC issued a formal rulemaking proceeding
and investigation as a procedural vehicle to develop and adopt
rules for local competition. The rulemaking document contained
proposed interim rules that would authorize competitive LEC's to
seek authority to offer local exchange services beginning in June
1995. The parties must file comments on the proposed rules by
May 24, 1995 identifying any additions, deletions, clarifications
or modifications they believe are appropriate. Parties must also
clearly identify the scope of any issues to be addressed through
this rulemaking proceeding which they believe need further input
from parties prior to resolution and also whether they believe
evidentiary hearings will be required. Parties recommending
evidentiary hearings must set forth a proposed schedule to allow
sufficient lead time for a CPUC decision on interim rules before
January 1, 1996.
6
<TABLE>
GTE CALIFORNIA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
March 31,
December 31,
1995
1994
(Thousands of
Dollars)
<S> <C>
<C>
CURRENT ASSETS:
Cash $ 18,469 $
43,118
Accounts and notes receivable, less allowances
of $41,404 and $38,537, respectively 492,761
572,310
Materials and supplies 36,311
40,303
Deferred income tax benefits 75,332
78,924
Prepayments and other 19,176
18,152
Total current assets 642,049
752,807
PROPERTY, PLANT AND EQUIPMENT:
Original cost 8,509,425
8,420,252
Accumulated depreciation (3,734,805)
(3,582,965)
Net property, plant and equipment 4,774,620
4,837,287
PREPAID PENSION COSTS 342,301
323,979
OTHER ASSETS 143,422
153,571
TOTAL ASSETS $ 5,902,392 $
6,067,644
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
7
<TABLE>
GTE CALIFORNIA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
March 31,
December 31,
1995
1994
(Thousands of
Dollars)
<C> <S>
<S>
CURRENT LIABILITIES:
Short-term debt, including current maturities $ 196,734 $
272,199
Accounts payable 176,975
278,211
Accrued taxes 145,638
90,676
Accrued interest 22,843
24,478
Accrued payroll and vacations 107,127
89,918
Accrued dividends 60,139
133,402
Accrued restructuring costs and other 229,781
240,913
Total current liabilities 939,237
1,129,797
LONG-TERM DEBT 1,280,306
1,280,157
DEFERRED CREDITS AND RESERVES, primarily
deferred income taxes, investment tax
credits and restructuring costs 1,331,680
1,333,867
SHAREHOLDERS' EQUITY:
Preferred stock 81,866
81,866
Common stock 1,388,764
1,388,764
Other capital 2,040
2,040
Reinvested earnings 878,499
851,153
Total shareholders' equity 2,351,169
2,323,823
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,902,392 $
6,067,644
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
8
<TABLE>
GTE CALIFORNIA INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Three
Months Ended
March
31,
1995
1994
(Thousands of
Dollars)
<C> <S>
<S>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 87,903 $
106,956
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 147,694
144,549
Deferred income taxes and investment
tax credits 6,956
8,712
Provision for uncollectible accounts 17,125
18,856
Changes in current assets and current
liabilities (6,094)
(51,955)
Other - net 12,664
(7,950)
Net cash from operating activities 266,248
219,168
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (81,564)
(84,882)
Cash used in investing activities (81,564)
(84,882)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt issued --
542,594
Long-term debt retired (35,106)
(25,194)
Dividends paid to shareholders (133,822)
(111,465)
Net change in affiliate notes 8,075
(41,108)
Decrease in short-term debt (48,480)
(500,100)
Net cash used in financing activities (209,333)
(135,273)
Decrease in cash (24,649)
(987)
Cash at beginning of period 43,118
6,620
Cash at end of period $ 18,469 $
5,633
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
9
GTE CALIFORNIA INCORPORATED AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) The unaudited condensed consolidated financial statements
included herein have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. However, in the opinion
of management of the Company, the condensed consolidated
financial statements include all adjustments, which consist only
of normal recurring accruals, necessary to present fairly the
financial information for such periods. These condensed
consolidated financial statements should be read in conjunction
with the financial statements and the notes thereto included in
the Company's 1994 Annual Report on Form 10-K.
(2) Reclassifications of prior year data have been made in the
financial statements where appropriate to conform to the 1995
presentation.
10
GTE CALIFORNIA INCORPORATED AND SUBSIDIARY
PART II. OTHER INFORMATION
Item 6. Exhibits And Reports On Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K.
(3-1) Amended By-Laws (Exhibit 3-1 of the March 31,
1995
Form 10-Q, File No. 1-6417).
(27) Financial Data Schedule.
(b) The Company filed no reports on Form 8-K during the
first
quarter of 1995.
11
SIGNATURE
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 hereunto duly authorized.
GTE CALIFORNIA
INCORPORATED
(Registrant)
Date: May 12, 1995 WILLIAM M. EDWARDS,
III
WILLIAM M. EDWARDS,
III
Controller
(Chief Accounting
Officer)
12
Exhibit 3-1
BYLAWS
OF
GTE CALIFORNIA INCORPORATED
(A California Corporation)
AS IN EFFECT
APRIL 1, 1995
<TABLE>
INDEX
<CAPTION>
Page
<C>
<S>
ARTICLE I. OFFICES
Section 1. Principal Executive Office . . . . . . . . .
. . 1
Section 2. Other Offices . . . . . . . . . . . . . . . .
. . 1
ARTICLE II. SHAREHOLDERS
Section 1. Place of Meetings . . . . . . . . . . . . . .
. . 1
Section 2. Annual Meetings . . . . . . . . . . . . . . .
. . 1
Section 3. Special Meetings . . . . . . . . . . . . . .
. . 1
Section 4. Notice of Annual or Special Meetings . . . .
. . 2
Section 5. Quorum . . . . . . . . . . . . . . . . . . .
. . 2
Section 6. Adjourned Meetings and Notice Thereof . . . .
. . 2
Section 7. Voting . . . . . . . . . . . . . . . . . . .
. . 2
Section 8. Record Date . . . . . . . . . . . . . . . . .
. . 5
Section 9. Consent of Absentees . . . . . . . . . . . .
. . 5
Section 10. Action Without Meeting . . . . . . . . . . .
. . 5
Section 11. Proxies . . . . . . . . . . . . . . . . . . .
. . 6
Section 12. Inspectors of Election . . . . . . . . . . .
. . 6
Section 13. Conduct of Meeting . . . . . . . . . . . . .
. . 6
ARTICLE III. DIRECTORS
Section 1. Powers . . . . . . . . . . . . . . . . . . .
. . 7
Section 2. Number of Directors . . . . . . . . . . . . .
. . 7
Section 3. Election and Term of Office . . . . . . . . .
. . 8
Section 4. Vacancies . . . . . . . . . . . . . . . . . .
. . 8
Section 5. Place of Meeting . . . . . . . . . . . . . .
. . 8
Section 6. Regular Meetings . . . . . . . . . . . . . .
. . 8
Section 7. Special Meetings . . . . . . . . . . . . . .
. . 9
Section 8. Quorum . . . . . . . . . . . . . . . . . . .
. . 9
Section 9. Participation in Meetings by Conference
Telephone . . . . . . . . . . . . . . . . .
. . 9
Section 10. Waiver of Notice . . . . . . . . . . . . . .
. . 9
Section 11. Adjournment . . . . . . . . . . . . . . . . .
. . 10
Section 12. Fees and Compensation . . . . . . . . . . . .
. . 10
Section 13. Action Without Meeting . . . . . . . . . . .
. . 10
Section 14. Rights of Inspection . . . . . . . . . . . .
. . 10
Section 15. Committees . . . . . . . . . . . . . . . . .
. . 10
ARTICLE IV. OFFICERS
Section 1. Officers . . . . . . . . . . . . . . . . . .
. . 11
Section 2. Election . . . . . . . . . . . . . . . . . .
. . 11
Section 3. Subordinate Officers . . . . . . . . . . . .
. . 11
Section 4. Removal and Resignation . . . . . . . . . .
. . 11
Section 5. Vacancies . . . . . . . . . . . . . . . . . .
. . 12
Section 6. President . . . . . . . . . . . . . . . . . .
. . 12
Section 7. Vice Presidents . . . . . . . . . . . . . . .
. . 12
Section 8. Secretary . . . . . . . . . . . . . . . . .
. . 12
Section 9. Treasurer . . . . . . . . . . . . . . . . . .
. . 12
Section 10. Controller . . . . . . . . . . . . . . . . .
. . 13
- -i-
ARTICLE V. OTHER PROVISIONS
Section 1. Inspection of Corporate Records . . . . . . .
. 13
Section 2. Inspection of Bylaws . . . . . . . . . . . . .
. 14
Section 3. Endorsement of Documents; Contracts . . . . .
. 14
Section 4. Certificates of Stock and Lost
Certificates . . . . . . . . . . . . . . . .
. 14
Section 5. Representation of Shares of Other
Corporations . . . . . . . . . . . . . . . .
. 15
Section 6. Annual Report to Shareholders . . . . . . . .
. 15
Section 7. Construction and Definitions . . . . . . . . .
. 15
ARTICLE VI. INDEMNIFICATION
Section 1. Definitions . . . . . . . . . . . . . . . . .
. 15
Section 2. Indemnification in Actions by Third
Parties . . . . . . . . . . . . . . . . . .
. 16
Section 3. Indemnification in Actions by or in the
Right of the Corporation . . . . . . . . . .
. 16
Section 4. Indemnification Against Expenses . . . . . . .
. 16
Section 5. Required Determinations . . . . . . . . . . .
. 17
Section 6. Advance of Expenses . . . . . . . . . . . . .
. 17
Section 7. Other Indemnification . . . . . . . . . . . .
. 17
Section 8. Forms of Indemnification not Permitted . . . .
. 17
Section 9. Insurance . . . . . . . . . . . . . . . . . .
. 17
Section 10. Nonapplicability to Fiduciaries of
Employee Benefit Plans . . . . . . . . . . .
. 18
ARTICLE VII. AMENDMENTS
</TABLE>
-ii-
Bylaws
(Bylaws for the regulation, except
as otherwise provided by statute or
its Articles of Incorporation)
OF
GTE CALIFORNIA INCORPORATED
(a California corporation)
ARTICLE I
OFFICES
Section 1. Principal Executive Office. The principal
executive office of the corporation is fixed and located at One
GTE Place, Thousand Oaks, California 91362-3811. The Board of
Directors (herein called the "Board") is granted full power and
authority to change said principal executive office from one
location to another. Any such change shall be noted on the
Bylaws opposite this Section, or this Section may be amended to
state the new location.
Section 2. Other Offices. Branch or subordinate offices
may be established at any time by the Board at any place or
places.
ARTICLE II
SHAREHOLDERS
Section 1. Place of Meetings. Meetings of Shareholders
shall be held either at the principal executive office of the
corporation or at any other place within or without the State of
California which may be designated either by the Board or by the
written consent of all persons entitled to vote thereat, given
either before or after the meeting and filed with the Secretary.
Section 2. Annual Meetings. The annual meetings of
Shareholders shall be held on the second Wednesday in April at
10 a.m., local time, or such other date or such other time as may
be fixed by the Board; provided, however, that should said date
fall upon a Saturday, Sunday or legal holiday observed by the
corporation at its principal executive office, then any such
annual meeting of Shareholders shall be held at the same time and
place on the next day thereafter ensuing which is a full business
day. At such meetings, Directors shall be elected and any other
proper business may be transacted.
Section 3. Special Meetings. Special meetings of the
Shareholders may be called at any time by the Board, the
President, or by the holders of shares entitled to cast not less
than ten percent of the votes at such meeting. Upon request in
writing to the President, any Vice President or the Secretary or
by any person (other than the Board) entitled to call a special
meeting of Shareholders, the officer forthwith shall cause notice
to be given to the Shareholders entitled to vote that a meeting
will be held at a time requested by the person or persons calling
the meeting, not less than 35 nor more than 60 days after the
receipt of the request. If the notice is not given within 20
days after receipt of the request, the persons entitled to call
the meeting may give the notice.
Section 4. Notice of Annual or Special Meetings. Written
notice of each annual or special meeting of Shareholders shall be
given not less than ten nor more than 60 days before the date of
the meeting to each Shareholder entitled to vote thereat. Such
notice shall state the place, date and hour of the meeting and
(i) in the case of a special meeting, the general nature of the
business to be transacted, and no other business may be
transacted, or (ii) in the case of the annual meeting, those
matters which the Board, at the time of the mailing of the
notice, intends to present for action by the Shareholders, but,
subject to the provisions of applicable law, any proper matter
may be presented at the meeting for such action. The notice of
any meeting at which Directors are to be elected shall include
the names of nominees intended at the time of the notice to be
presented by management for election.
Notice of a Shareholders' meeting shall be given either
personally or by mail or by other means of written communication,
addressed to the Shareholder at the address of such Shareholder
appearing on the books of the corporation or given by the
Shareholder to the corporation for the purpose of notice; or, if
no such address appears or is given, at the place where the
principal executive office of the corporation is located or by
publication at least once in a newspaper of general circulation
in the county in which the principal executive office is located.
Notice by mail shall be deemed to have been given at the time a
written notice is deposited in the United States mails, postage
prepaid. Any other written notice shall be deemed to have been
given at the time it is personally delivered to the recipient or
is delivered to a common carrier for transmission, or actually
transmitted by the person giving the notice by electronic means,
to the recipient.
Section 5. Quorum. A majority of the shares entitled to
vote, represented in person or by proxy, shall constitute a
quorum at any meeting of Shareholders. The Shareholders present
at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the
withdrawal of enough Shareholders to have less than a quorum, if
any action taken (other than adjournment) is approved by at least
a majority of the shares required to constitute a quorum.
Section 6. Adjourned Meetings and Notice Thereof. Any
Shareholders' meeting, whether or not a quorum is present, may be
adjourned from time-to-time by the vote of a majority of the
shares, the holders of which are either present in person or
represented by proxy thereat, but in the absence of a quorum
(except as provided in Section 5 of this ARTICLE) no other
business may be transacted at such meeting.
It shall not be necessary to give any notice of the time
and place of the adjourned meeting or of the business to be
transacted thereat, other than by announcement at the meeting at
which such adjournment is taken; provided, however, when any
shareholders' meeting is adjourned for more than 45 days or, if
after adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given as in the
case of an original meeting.
Section 7. Voting. The Shareholders entitled to notice of
any meeting or to vote at any such meeting shall be only persons
in whose name shares stand on the stock records of the
corporation on the record date determined in accordance with
Section 8 of this ARTICLE.
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Voting shall in all cases be subject to the provisions of
Chapter 7 of the California General Corporation Law, and to the
following provisions:
(a) Subject to clause (g), shares held by an
administrator, executor, guardian, conservator or custodian may
be voted by such holder either in person or by proxy, without a
transfer of such shares into the holder's name; and shares
standing in the name of a trustee may be voted by the trustee,
either in person or by proxy, but no trustee shall be entitled to
vote shares held by such trustee without a transfer of such
shares into the trustee's name.
(b) Shares standing in the name of a receiver may be voted
by such receiver; and shares held by or under the control of a
receiver may be voted by such receiver without the transfer
thereof into the receiver's name if authority to do so is
contained in the order of the court by which such receiver was
appointed.
(c) Subject to the provisions of Section 705 of the
California General Corporation Law and except where otherwise
agreed in writing between the parties, a Shareholder whose shares
are pledged shall be entitled to vote such shares until the
shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so
transferred.
(d) Shares standing in the name of a minor may be voted
and the corporation may treat all rights incident thereto as
exercisable by the minor, in person or by proxy, whether or not
the corporation has notice, actual or constructive, of the
nonage, unless a guardian of the minor's property has been
appointed and written notice of such appointment given to the
corporation.
(e) Shares standing in the name of another corporation,
domestic or foreign, may be voted by such officer, agent or proxy
holder as the Bylaws of such other corporation may prescribe or,
in the absence of such provision, as the Board of Directors of
such other corporation may determine or, in the absence of such
determination, by the Chairman of the Board, President or any
Vice President of such other corporation, or by any other person
authorized to do so by the Chairman of the Board, President or
any Vice President of such other corporation. Shares which are
purported to be voted or any proxy purported to be executed in
the name of a corporation (whether or not any title of the person
signing is indicated) shall be presumed to be voted or the proxy
executed in accordance with the provisions of this subdivision,
unless the contrary is shown.
(f) Shares of the corporation owned by any subsidiary
shall not be entitled to vote on any matter.
(g) Shares held by the corporation in a fiduciary
capacity, and shares of the issuing corporation held in a
fiduciary capacity by any subsidiary, shall not be entitled to
vote on any matter, except to the extent that the settlor or
beneficial owner possesses and exercises a right to vote or to
give the corporation binding instructions as to how to vote such
shares.
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(h) If shares stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership,
joint-tenants, tenants-in-common, husband and wife as community
property, tenants-by-the-entirety, voting trustees, persons
entitled to vote under a Shareholder voting agreement or
otherwise, or if two or more persons (including proxy holders)
have the same fiduciary relationship respecting the same shares,
unless the Secretary of the corporation is given written notice
to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is
so provided, their acts with respect to voting shall have the
following effect:
(i) If only one votes, such act binds all;
(ii) If more than one vote, the act of the majority
so voting binds all;
(iii) If more than one vote, but the vote is evenly
split on any particular matter, each faction may vote the
securities in question proportionately.
If the instrument so filed or the registration of the
shares shows that any such tenancy is held in unequal interests,
a majority or even split for the purpose of this Section shall be
a majority or even split in interest.
Subject to the following sentence and to the provisions of
Section 708 of the California General Corporation Law, every
Shareholder entitled to vote at any election of Directors may
cumulate such Shareholder's votes and give one candidate a number
of votes equal to the number of Directors to be elected
multiplied by the number of votes to which the Shareholder's
shares are entitled, or distribute the Shareholder's votes on the
same principle among as many candidates as the Shareholder thinks
fit. No Shareholder shall be entitled to cumulate votes for any
candidate or candidates pursuant to the preceding sentence unless
such candidate or candidates' names have been placed in
nomination prior to the voting and the Shareholder has given
notice at a meeting prior to the voting of the Shareholder's
intention to cumulate the Shareholder's votes. If any one
Shareholder has given such notice, all Shareholders may cumulate
their votes for candidates in nomination.
Elections need not be by ballot; provided, however, that
all elections for Directors must be by ballot upon demand made by
a Shareholder at the meeting and before the voting begins.
In any election of Directors, the candidates receiving the
highest number of votes of the shares entitled to be voted for
them up to the number of Directors to be elected by such shares
are elected.
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Section 8. Record Date. The Board may fix, in advance, a
record date for the determination of the Shareholders entitled to
notice of any meeting or to vote or entitled to receive payment
of any dividend or other distribution, or any allotment of
rights, or to exercise rights in respect of any other lawful
action. The record date so fixed shall be not more than 60 days
nor less than ten days prior to the date of the meeting nor more
than 60 days prior to any other action. When a record date is so
fixed, only Shareholders of record on that date are entitled to
notice of and to vote at the meeting or to receive the dividend,
distribution, or allotment of rights, or to exercise of the
rights, as the case may be, notwithstanding any transfer of
shares on the books of the corporation after the record date. A
determination of Shareholders of record entitled to notice of or
to vote at a meeting of Shareholders shall apply to any
adjournment of the meeting unless the Board fixes a new record
date for the adjourned meeting. The Board shall fix a new record
date if the meeting is adjourned for more than 45 days.
If no record date is fixed by the Board, the record date
for determining Shareholders entitled to notice of or to vote at
a meeting of Shareholders shall be at the close of business on
the business day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the next
business day next preceding the day on which the meeting is held.
The record date for determining Shareholders for any purpose
other than set forth in this Section 8 or Section 10 of this
ARTICLE shall be at the close of business on the day on which the
Board adopts the resolution relating thereto, or the 60th day
prior to the date of such other action, whichever is later.
Section 9. Consent of Absentees. The transactions of any
meeting of Shareholders, however called and noticed, and wherever
held, are as valid as though had at a meeting duly held after
regular call and notice, if a quorum is present either in person
or by proxy, and if, either before or after the meeting, each of
the persons entitled to vote, not present in person or by proxy,
signs a written waiver of notice, or a consent to the holding of
the meeting or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting. Neither
the business to be transacted at nor the purpose of, any regular
or special meeting of Shareholders need be specified in any
written waiver of notice, except as provided in Section 601(f) of
the California General Corporation Law.
Section 10. Action Without Meeting. Subject to
Section 603 of the California General Corporation Law, any action
which, under any provision of the California General Corporation
Law, may be taken at any annual or special meeting of
Shareholders, may be taken without a meeting and without prior
notice if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding shares
having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted.
Unless a record date for voting purposes be fixed as provided in
Section 8 of this ARTICLE, the record date for determining
Shareholders entitled to give consent pursuant to this
Section 10, when no prior action by the Board has been taken,
shall be the day on which the first written consent is given.
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Section 11. Proxies. Every person entitled to vote shares
has the right to do so either in person or by one or more persons
authorized by a written proxy executed by such Shareholder and
filed with the Secretary. Any proxy duly executed is not revoked
and continues in full force and effect until revoked by the
person executing it prior to the vote pursuant thereto by a
writing delivered to the corporation stating that the proxy is
revoked or by a subsequent proxy executed by the person executing
the prior proxy and presented to the meeting, or by attendance at
the meeting and voting in person by the person executing the
proxy; provided, however, that no proxy shall be valid after the
expiration of eleven months from the date of its execution unless
otherwise provided in the proxy.
Section 12. Inspectors of Election. In advance of any
meeting of Shareholders, the Board may appoint any persons other
than nominees for office Inspectors of Election to act at such
meeting and any adjournment thereof. If Inspectors of Election
be not so appointed, or if any persons so appointed fail to
appear or refuse to act, the Chairman of any such meeting may,
and on the request of any Shareholder or Shareholder's proxy
shall, make such appointment at the meeting. The number of
Inspectors shall be either one or three. If appointed at a
meeting on the request of one or more Shareholders or proxies,
the majority of shares present shall determine whether one or
three Inspectors are to be appointed.
The duties of such Inspectors shall be as prescribed by
Section 707(b) of the California General Corporation Law and
shall include: determining the number of shares outstanding and
the voting power of each; the shares represented at the meeting;
the existence of a quorum; the authenticity, validity and effect
of proxies; receiving votes, ballots or consents; hearing and
determining all challenges and questions in any way arising in
connection with the right to vote; counting and tabulating all
votes or consents; determining when the polls shall close;
determining the result; and doing such acts as may be proper to
conduct the election or vote with fairness to all shareholders.
If there are three inspectors of Election, the decision, act or
certificate of a majority is effective in all respects as the
decision, act or certificate of all.
Section 13. Conduct of Meeting. The President or any Vice
President may preside as Chairman at all meetings of the
Shareholders. The Chairman shall conduct each such meeting in a
businesslike and fair manner, but shall not be obligated to
follow any technical, formal or parliamentary rules or principles
of procedure. The Chairman's rulings on procedural matters shall
be conclusive and binding on all Shareholders, unless at the time
of a ruling a request for a vote is made to the Shareholders
holding shares entitled to vote and which are represented in
person or by proxy at the meeting, in which case the decision of
a majority if such shares shall be conclusive and binding on all
Shareholders. Without limiting the generality of the foregoing,
the Chairman shall have all of the powers usually vested in the
Chairman of a meeting of Shareholders.
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ARTICLE III
DIRECTORS
Section 1. Powers. Subject to limitations of the
Articles, of these Bylaws and of the California General
Corporation Law relating to action required to be approved by the
Shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the Board.
The Board may delegate the management of the day-to-day operation
of the business of the corporation to a management company or
other person provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be
exercised under the ultimate direction of the Board. Without
prejudice to such general powers, but subject to the same
limitations, it is hereby expressly declared that the Board shall
have the following powers in addition to the other powers
enumerated in these Bylaws:
(a) To select and remove all the other officers, agents and
employees of the corporation, prescribe the powers and
duties for them as may not be inconsistent with law,
with the Articles or these Bylaws, fix their
compensation and require from them security for faithful
service.
(b) To conduct, manage and control the affairs and business
of the corporation and to make such rules and
regulations therefor not inconsistent with law, or with
the Articles or these Bylaws, as they may deem best.
(c) To adopt, make and use a corporate seal, and to
prescribe the forms of certificates of stock, and to
alter the form of such seal and of such certificates
from time-to-time as in their judgment they may deem
best.
(d) To authorize the issuance of shares of stock of the
corporation from time-to-time, upon such terms and for
such consideration as may be lawful.
(e) To borrow money and incur indebtedness for the purposes
of the corporation, and to cause to be executed and
delivered therefor, in the corporate name, promissory
notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations or other evidences of debt and
securities therefor.
Section 2. Number of Directors. The authorized number of
Directors shall be not less than seven nor more than ten until
changed by amendment of the Articles or by a Bylaw duly adopted
by the Shareholders. The exact number of Directors shall be
fixed, within the limits specified, by the Board or the
Shareholders in the same manner provided in these Bylaws for the
amendment hereof. The exact number of Directors shall be SEVEN
(7) until changed as provided in this Section 2.
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Section 3. Election and Term of Office. The Directors
shall be elected at each annual meeting of the Shareholders, but
if any such annual meeting is not held or the Directors are not
elected thereat, the Directors may be elected at any special
meeting of Shareholders held for that purpose. Each Director
shall hold office until the next annual meeting and until a
successor has been elected and qualified. A nonemployee Director
who shall have attained the age of 68 shall be ineligible for
reelection as a Director of the corporation and no person who
shall have attained the age of 68 shall be eligible for election
as a nonemployee Director of the corporation. An employee of the
corporation or any affiliate, who may be elected a Director of
the corporation, shall automatically cease to be a Director upon
his retirement or termination of his employment from the
corporation or such affiliate.
Section 4. Vacancies. Any Director may resign effective
upon giving written notice to the President, the Secretary or the
Board, unless the notice specifies a later time for the
effectiveness of such resignation. If the resignation is
effective at a future time, a successor may be elected to take
office when the resignation becomes effective.
Vacancies in the Board, except those existing as a result
of a removal of a Director, may be filled by a majority of the
remaining Directors, though less than a quorum, or by a sole
remaining Director, and each Director so elected shall hold
office until the next annual meeting and until such Director's
successor has been elected and qualified.
A vacancy or vacancies in the Board shall be deemed to
exist in case of the death, resignation or removal of any
Director, or if the authorized number of Directors be increased,
or if the Shareholders fail, at any annual or special meeting of
Shareholders at which any Director or Directors are elected, to
elect the full authorized number of Directors to be voted for at
that meeting.
The Board may declare vacant the office of a Director who
has been declared of unsound mind by an order of court or
convicted of a felony.
The Shareholders may elect a Director or Directors at any
time to fill any vacancy or vacancies not filled by the
Directors. Any such election by written consent other than to
fill a vacancy created by removal requires the consent of a
majority of the outstanding shares entitled to vote. Any such
election by written consent to fill a vacancy created by removal
requires unanimous consent.
No reduction of the authorized number of Directors shall
have the effect of removing any Director prior to the expiration
of the Director's term of office.
Section 5. Place of Meeting. Regular or special meetings
of the Board shall be held at any place within or without the
State of California which has been designated from time-to-time
by the Board. In the absence of such designation, regular
meetings shall be held at the principal executive office of the
corporation.
Section 6. Regular Meetings. Immediately following each
annual meeting of Shareholders the Board may hold a regular
meeting for the purpose of organization, election of officers and
the transaction of other business.
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Other regular meetings of the Board may be held without
call on such dates and at such times as may be fixed by the
Board. Call and notice of all regular meetings of the Board are
hereby dispensed with.
Section 7. Special Meetings. Special meetings of the
Board for any purpose or purposes may be called at any time by
the President or the Secretary or by any two Directors.
Special meetings of the Board shall be held upon four days'
written notice or 48 hours' notice given personally or by
telephone, telegraph, telex or other similar means of
communication. Any such notice shall be addressed or delivered
to each Director at such Director's address as it is shown upon
the records of the corporation or as may have been given to the
corporation by the Director for purposes of notice or, if such
address is not shown on such records or is not readily
ascertainable, at the place in which the meetings of the
Directors are regularly held.
Notice by mail shall be deemed to have been given at the
time a written notice is deposited in the United States mails,
postage prepaid. Any other written notice shall be deemed to have
been given at the time it is personally delivered to the
recipient or is delivered to a common carrier for transmission,
or actually transmitted by the person giving the notice by
electronic means, to the recipient. Oral notice shall be deemed
to have been given at the time it is communicated, in person or
by telephone or wireless, to the recipient or to a person at the
office of the recipient who the person giving the notice has
reason to believe will promptly communicate it to the recipient.
Section 8. Quorum. A majority of the authorized number of
Directors constitutes a quorum of the Board for the transaction
of business, except to adjourn as hereinafter provided. Every
act or decision done or made by a majority of the Directors
present at a meeting duly held at which a quorum is present shall
be regarded as the act of the Board, unless a greater number be
required by law or by the Articles. A meeting at which a quorum
is initially present may continue to transact business
notwithstanding the withdrawal of Directors, if any action taken
is approved by at least a majority of the required quorum for
such meeting.
Section 9. Participation in Meetings by Conference
Telephone. Members of the Board may participate in a meeting
through use of conference telephone or similar communications
equipment, so long as all members participating in such meeting
can hear one another.
Section 10. Waiver of Notice. Notice of a meeting need
not be given to any Director who signs a waiver of notice or a
consent to holding the meeting or an approval of the minutes
thereof, whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement,
the lack of notice to such Director. All such waivers, consents
and approvals shall be filed with the corporate records or made a
part of the minutes of the meeting.
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Section 11. Adjournment. A majority of the Directors
present, whether or not a quorum is present, may adjourn any
Directors' meeting to another time and place. Notice of the time
and place of holding an adjourned meeting need not be given to
absent Directors if the time and place be fixed at the meeting
adjourned. If the meeting is adjourned for more than 24 hours,
notice of any adjournment to another time or place shall be given
prior to the time of the adjourned meeting to the Directors who
were not present at the time of the adjournment.
Section 12. Fees and Compensation. Directors and members
of committees may receive such compensation, if any, for their
services, and such reimbursement for expenses, as may be fixed or
determined by the Board.
Section 13. Action Without Meeting. Any action required
or permitted to be taken by the Board may be taken without a
meeting if all members of the Board shall individually or
collectively consent in writing to such action. Such consent or
consents shall have the same effect as a unanimous vote of the
Board and shall be filed with the minutes of the proceedings of
the Board.
Section 14. Rights of Inspection. Every Director shall
have the absolute right at any reasonable time to inspect and
copy all books, records and documents of every kind and to
inspect the physical properties of the corporation and also of
its subsidiary corporations, domestic or foreign. Such
inspection by a Director may be made in person or by agent or
attorney and includes the right to copy and obtain extracts.
Section 15. Committees. The Board may appoint one or more
committees, each consisting of two or more Directors, and
delegate to such committees any of the authority of the Board
except with respect to:
(i) The approval of any action for which the
California General Corporation Law also requires
shareholders' approval or approval of the
outstanding shares;
(ii) The filling of vacancies on the Board or on any
committee;
(iii) The fixing of compensation of the Directors for
serving on the Board or on any committee;
(iv) The amendment or repeal of Bylaws or the adoption
of new Bylaws;
(v) The amendment or repeal of any resolution of the
Board which by its express terms is not so
amendable or repealable;
(vi) A distribution to the shareholders of the
corporation except at a rate or in a periodic
amount or within a price range determined by the
Board; or
(vii) The appointment of other committees of the Board
or the members thereof.
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Any such committee must be designated, and the members or
alternate members thereof appointed by resolution adopted by a
majority of the authorized number of Directors and any such
committee may be designated an Executive Committee or by such
other name as the Board shall specify. Alternate members of a
committee may replace any absent member at any meeting of the
committee. The Board shall have the power to prescribe the
manner in which proceedings of any such committee shall be
conducted. In the absence of any such prescription, such
committee shall have the power to prescribe the manner in which
its proceedings shall be conducted. Unless the Board or such
committee shall otherwise provide, the regular and special
meetings and other actions of any such committee shall be
governed by the provisions of this ARTICLE applicable to meetings
and actions of the Board. Minutes shall be kept of each meeting
of each committee.
ARTICLE IV
OFFICERS
Section 1. Officers. The officers of the corporation
shall be a President, a Secretary and a Treasurer. The
corporation may also have, at the discretion of the Board, one or
more Vice Presidents, one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other officers as may be
elected or appointed in accordance with the provisions of
Section 3 of this ARTICLE.
Section 2. Election. The officers of the corporation,
except such officers as may be elected or appointed in accordance
with the provisions of Section 3 or Section 5 of this ARTICLE,
shall be chosen annually by, and shall serve at the pleasure of,
the Board and shall hold their respective offices until their
resignation, removal, or other disqualification from service, or
until their respective successors shall be elected.
Section 3. Subordinate Officers. The Board may elect, and
may empower the President to appoint, such other officers as the
business of the corporation may require, each of whom shall hold
office for such period, have such authority and perform such
duties as are provided in these Bylaws or as the Board may from
time-to-time determine.
Section 4. Removal and Resignation. Any officer may be
removed, either with or without cause, by the Board of Directors
at any time or, except in the case of an officer chosen by the
Board, by any officer upon whom such power of removal may be
conferred by the Board. Any such removal shall be without
prejudice to the rights, if any, of the officer under any
contract of employment of the officer.
Any officer may resign at any time by giving written notice
to the corporation, but without prejudice to the rights, if any,
of the corporation under any contract to which the officer is a
party. Any such resignation shall take effect at the date of the
receipt of such notice or at any later time specified therein
and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
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Section 5. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause
shall be filled in the manner prescribed in these Bylaws for
regular election or appointment to such office.
Section 6. President. The President is the general
manager and chief executive officer of the corporation and has,
subject to the control of the Board, general supervision,
direction and control of the business and officers of the
corporation. The President may preside at all meetings of the
Shareholders. The President has the general powers and duties of
management usually vested in the office of president and general
manager of a corporation and such other powers and duties as may
be prescribed by the Board.
Section 7. Vice Presidents. In the absence or disability
of the President, the Vice Presidents in the order of their rank
as fixed by the Board or, if not ranked, the Vice President
designated by the Board, shall perform all the duties of the
President and, when so acting, shall have all the powers of, and
be subject to all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other
duties as from time-to-time may be prescribed for them
respectively by the Board.
Section 8. Secretary. The Secretary shall keep or cause
to be kept, at the principal executive office or such other place
as the Board may order, a book of minutes of all meetings of
Shareholders, the Board and its committees, with the time and
place of holding, whether regular or special, and if special, how
authorized, the notice thereof given, the names of those present
at Board and committee meetings, the number of shares present or,
represented at Shareholders' meetings, and the proceedings
thereof. The Secretary shall keep, or cause to be kept, a copy of
the Bylaws of the corporation at the principal executive office
or business office in accordance with Section 213 of the
California General Corporation Law.
The Secretary shall give, or cause to be given, notice of
all meetings of the Shareholders and of the Board and of any
committees thereof required by these Bylaws or by law to be
given, shall keep the seal of the corporation in safe custody,
and shall have such other powers and perform such other duties as
may be prescribed by the Board.
Section 9. Treasurer. The Treasurer shall send, or cause
to be sent, to the Shareholders of the corporation such financial
statements and reports as are by law or these Bylaws required to
be sent to them.
The Treasurer shall keep, or cause to be kept, at the
principal executive office or at the office of the corporation's
Transfer Agent or Registrar, if one be appointed, a share
register, or a duplicate share register, showing the names of the
Shareholders and their addresses, and number and classes of
shares held by each, the number and date of certificates issued
for the same, and the number and date of cancellation of every
certificate surrendered for cancellation.
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The Treasurer shall deposit all moneys and other valuables
in the name and to the credit of the corporation with such
depositories as may be designated by the Board. The Treasurer
shall disburse the funds of the corporation as may be ordered by
the Board, shall render to the President and the Directors,
whenever they request it, an account of all transactions as
Treasurer and shall have such other powers and perform such other
duties as may be prescribed by the Board.
Section 10. Controller. The Controller is the chief
accounting officer of the corporation and shall keep and
maintain, or cause to be kept and maintained, adequate and
correct accounts of the properties and business transactions of
the corporation. The books of account shall at all times be open
to inspection by any Director. All bills, vouchers and other
accounts payable shall be submitted to him, and he shall audit
and approve the same for payment if found proper and correct.
The Controller shall render to the President and Directors,
whenever they request it, an account of all transactions as
Controller, and of the financial condition of the corporation,
and shall have such other powers and perform such other duties as
may be prescribed by the Board.
ARTICLE V
OTHER PROVISIONS
Section 1. Inspection of Corporate Records.
(a) A Shareholder or Shareholders holding at least five
percent in the aggregate of the outstanding voting
shares of the corporation or who hold at least one
percent of such voting shares and have filed a
Schedule 14B with the United States Securities and
Exchange Commission relating to the election of
Directors of the corporation shall have an absolute
right to do either or both of the following:
(i) Inspect and copy the record of Shareholders'
names and addresses and shareholdings during
usual business hours upon five business days'
prior written demand upon the corporation; or
(ii) Obtain from the Transfer Agent, if any, for the
corporation, upon five business days' prior
written demand and upon the tender of its usual
charges for such a list (the amount of which
charges shall be stated to the Shareholder by
the Transfer Agent upon request), a list of the
Shareholders' names and addresses who are
entitled to vote for the election of Directors
and their shareholdings, as of the most recent
record date for which it has been compiled or as
of a date specified by the Shareholder
subsequent to the date of demand.
(b) The record of Shareholders shall also be open to
inspection and copying by any Shareholder or holder of a
voting trust certificate at any time during usual
business hours upon written demand on the corporation,
for a purpose reasonably related to such holder's
interest as a Shareholder or holder of a voting trust
certificate.
-13-
(c) The accounting books and records and minutes of
proceedings of the Shareholders and the Board and
committees of the Board shall be open to inspection upon
written demand on the corporation of any Shareholder or
holder of a voting trust certificate at any reasonable
time during usual business hours, for a purpose
reasonably related to such holder's interests as a
Shareholder or as a holder of such voting trust
certificate.
(d) Any inspection and copying under this ARTICLE may be
made in person or by agent or attorney.
Section 2. Inspection of Bylaws. The corporation shall
keep in its principal executive office the original or a copy of
these Bylaws as amended to date, which shall be open to
inspection by Shareholders at all reasonable times during office
hours. If the principal executive office of the corporation is
located outside the State of California and the corporation has
no principal business office in such state, it shall upon the
written notice of any Shareholder furnish to such Shareholder a
copy of these Bylaws as amended to date.
Section 3. Endorsement of Documents; Contracts. Subject
to the provisions of applicable law, any note, mortgage, evidence
of indebtedness, contract, share certificate, conveyance or other
instrument in writing and any assignment or endorsements thereof
executed or entered into between the corporation and any other
person, when signed by the President or any Vice President, and
the Secretary or any Assistant Secretary, the Treasurer or any
Assistant Treasurer of the corporation shall be valid and binding
on the corporation in the absence of actual knowledge on the part
of the other person that the signing officers had no authority to
execute the same. Any such instruments may be signed by any
other person or persons and in such manner as from time-to-time
shall be determined by the Board, and, unless so authorized by
the Board, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement
or to pledge its credit or to render it liable for any purpose or
amount.
Section 4. Certificates of Stock and Lost Certificates.
Every holder of shares of the corporation shall be entitled to
have a certificate signed in the name of the corporation by the
President or any Vice President, and the Treasurer or any
Assistant Treasurer, the Secretary or any Assistant Secretary,
certifying the number of shares and the class or series of shares
owned by the Shareholder. Any or all of the signatures on the
certificate may be facsimile. If any officer, Transfer Agent or
Registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer,
Transfer Agent or Registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if such
person were an officer, Transfer Agent or Registrar at the date
of issue.
Certificates for shares may be issued prior to full payment
under such restrictions and for such purposes as the Board may
provide; provided, however, that on any certificate issued to
represent any partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon
shall be stated.
-14-
Except as provided in this Section, no new certificate for
shares shall be issued in lieu of an old one unless the latter is
surrendered and cancelled at the same time. The Board may,
however, if any certificate for shares is alleged to have been
lost, stolen or destroyed, authorize the issuance of a new
certificate in lieu thereof, and the corporation may require that
the corporation be given a bond or other adequate security
sufficient to indemnify it against any claim that may be made
against it (including expense or liability) on account of the
alleged loss, theft or destruction of such certificate or the
issuance of such new certificate.
Section 5. Representation of Shares of Other Corporations.
The President or any other officer or officers authorized by the
Board or the President are each authorized to vote, represent and
exercise on behalf of the corporation all rights incident to any
and all shares of any other corporation or corporations standing
in the name of the corporation. The authority herein granted may
be exercised either by any such officer in person or by any other
person authorized so to do by proxy or power of attorney duly
executed by said officer.
Section 6. Annual Report to Shareholders. The annual
report to Shareholders referred to in Section 1501 of the
California General Corporation Law is expressly waived, but
nothing herein shall be interpreted as prohibiting the Board from
issuing annual or other periodic reports to Shareholders.
Section 7. Construction and Definitions. Unless the
context otherwise requires, the general provisions, rules of
construction and definitions contained in the General Provisions
of the California Corporations Code and in the California General
Corporation Law shall govern the construction of these Bylaws.
ARTICLE VI
INDEMNIFICATION
Section 1. Definitions. For the purposes of this ARTICLE,
"agent" means any person who is or was a Director, officer,
employee or other agent of the corporation, or is or was serving
at the request of the corporation as a Director, officer,
employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or was a
Director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such
predecessor corporation; "proceeding" means any threatened,
pending or completed action or proceeding, whether civil,
criminal, administrative or investigative; and "expenses"
includes without limitation attorneys' fees and any expenses of
establishing a right to indemnification under Sections 4 or 5(c).
-15-
Section 2. Indemnification in Actions by Third Parties.
The corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of the
corporation to procure a judgment in its favor) by reason of the
fact that such person is or was an agent of the corporation,
against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with such
proceeding if such person acted in good faith and in a manner
such person reasonably believed to be in the best interests of
the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of such person was
unlawful. The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which the person
reasonably believed to be in the best interests of the
corporation or that the person had reasonable cause to believe
that the person's conduct was unlawful.
Section 3. Indemnification in Actions by or in the Right
of the Corporation. The corporation shall have the power to
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action by or
in the right of the corporation to procure a judgment in its
favor by reason of the fact that such person is or was an agent
of the corporation, against expenses actually and reasonably
incurred by such person in connection with the defense or
settlement of such action if such person acted in good faith, in
a manner such person believed to be in the best interests of the
corporation and with such care, including reasonable inquiry, as
an ordinarily prudent person in a like position would use under
similar circumstances.
No indemnification shall be made under this Section 3:
(a) In respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the
corporation in the performance of such person's duty to
the corporation, unless and only to the extent that the
court in which such proceeding is or was pending shall
determine upon application that, in view of all the
circumstances of the case, such person is fairly and
reasonably entitled to indemnity for the expenses which
such court shall determine;
(b) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court
approval; or
(c) Of expenses incurred in defending a threatened or
pending action which is settled or otherwise disposed of
without court approval.
Section 4. Indemnification Against Expenses. To the
extent that an agent of the corporation has been successful on
the merits in defense of any proceeding referred to in Sections 2
or 3 or in defense of any claim, issue or matter therein, the
agent shall be indemnified against expenses actually and
reasonably incurred by the agent in connection therewith.
-16-
Section 5. Required Determinations. Except as provided in
Section 4, any indemnification under this ARTICLE shall be made
by the corporation only if authorized in the specific case, upon
a determination that indemnification of the agent is proper in
the circumstances because the agent has met the applicable
standard of conduct set forth in Sections 2 or 3, by:
(a) A majority vote of a quorum consisting of Directors who
are not parties to such proceeding;
(b) Approval of the Shareholders, with the shares owned by
the person to be indemnified not being entitled to vote
thereon; or
(c) The court in which such proceeding is or was pending
upon application made by the corporation or the agent or
the attorney or other person rendering services in
connection with the defense, whether or not such
application by the agent, attorney or other person is
opposed by the corporation.
Section 6. Advance of Expenses. Expenses incurred in
defending any proceeding may be advanced by the corporation prior
to the final disposition of such proceeding upon receipt of an
undertaking by or on behalf of the agent to repay such amount
unless it shall be determined ultimately that the agent is
entitled to be indemnified as authorized in this ARTICLE.
Section 7. Other Indemnification. No provision made by
the corporation to indemnify its, or its subsidiary's, Directors
or officers for the defense of any proceeding, whether contained
in the Articles, Bylaws, a resolution of Shareholders or
Directors, an agreement or otherwise, shall be valid unless
consistent with this ARTICLE. Nothing contained in this ARTICLE
shall affect any right to indemnification to which persons other
than such Directors and officers may be entitled by contract or
otherwise.
Section 8. Forms of Indemnification not Permitted. No
indemnification or advance shall be made under this ARTICLE,
except as provided in Sections 4 or 5(c), in any circumstances
where it appears:
(a) That it would be inconsistent with a provision of the
Articles, Bylaws, a resolution of the Shareholders or an
agreement in effect at the time of the accrual of the
alleged cause of action asserted in the proceeding in
which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limits
indemnification; or
(b) That it would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
Section 9. Insurance. The corporation shall have power to
purchase and maintain insurance on behalf of any agent of the
corporation against any liability asserted against or incurred by
the agent in such capacity or arising out of the agent's status
as such whether or not the corporation would have the power to
indemnify the agent against such liability under the provisions
of this ARTICLE.
-17-
Section 10. Nonapplicability to Fiduciaries of Employee
Benefit Plans. This ARTICLE does not apply to any proceeding
against any trustee investment manager or other fiduciary of an
employee benefit plan in such person's capacity as such, even
though such person may also be an agent of the corporation as
defined in Section 1 of this ARTICLE. The corporation shall have
power to indemnify such trustee, investment manager or other
fiduciary to the extent permitted by subdivision (f) of
Section 207 of the California General Corporation Law.
ARTICLE VII
AMENDMENTS
These Bylaws may be amended or repealed either by approval
of the outstanding shares (as defined in Section 152 of the
California General Corporation Law) or by the approval of the
Board; provided, however, that after the issuance of shares, a
Bylaw specifying or changing a fixed number of Directors or the
maximum or minimum number, or changing from a fixed to a variable
number of Directors, or vice versa, may only be adopted by
approval of the outstanding shares, and a bylaw reducing the
fixed number or the minimum number of Directors to a number less
than five shall be subject to the provisions of Section 212(a) of
the California General Corporation Law.
-18-
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