<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER: 1-7665
------------------------
LYDALL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 06-0865505
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of
Incorporation or Organization)
ONE COLONIAL ROAD, P.O.B. 151, 06045-0151
MANCHESTER, CONNECTICUT (zip code)
(Address of principal
executive offices)
</TABLE>
(860) 646-1233
(Registrant's telephone number, including area code)
NONE
(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. ______
Common stock $.10 par value per share.
Total Shares outstanding November 11, 1999 15,681,328
- --------------------------------------------------------------------------------
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<PAGE>
LYDALL, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets................. 3
Consolidated Condensed Statements of Net Income and
Comprehensive Income.................................. 4-5
Consolidated Condensed Statements of Cash Flows....... 6
Notes to Consolidated Condensed Financial
Statements............................................ 7-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 11-13
Item 3. Quantitative and Qualitative Disclosures about
Market Risk............................................... 13
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.................. 14
Signature................................................... 15
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LYDALL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 3,268 $ 2,254
Accounts receivable, net.................................. 53,027 48,609
Inventories:
Finished goods.......................................... 9,933 10,303
Work in process......................................... 10,865 8,859
Raw materials........................................... 12,141 11,003
LIFO reserve............................................ (1,361) (1,216)
-------- --------
Total inventories......................................... 31,578 28,949
Taxes receivable.......................................... -- 2,256
Prepaid expenses.......................................... 1,663 1,966
Deferred tax assets....................................... 7,159 6,785
-------- --------
Total current assets................................ 96,695 90,819
Property, plant and equipment, at cost...................... 181,006 172,485
Less accumulated depreciation............................... (71,290) (64,649)
-------- --------
109,716 107,836
Other assets, at cost, less amortization.................... 28,607 28,193
-------- --------
Total assets........................................ $235,018 $226,848
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft............................................ $ 2,689 $ --
Current portion of long-term debt......................... 7,140 2,340
Short-term borrowings..................................... -- 52,324
Accounts payable.......................................... 23,848 22,530
Accrued taxes............................................. 1,824 1,411
Accrued payroll and other compensation.................... 6,611 5,810
Other accrued liabilities................................. 16,478 15,494
-------- --------
Total current liabilities........................... 58,590 99,909
Deferred tax liabilities.................................... 9,964 10,726
Other long-term liabilities................................. 6,998 6,988
Long-term debt.............................................. 43,729 --
Contingencies
Stockholders' equity:
Preferred stock........................................... -- --
Common stock.............................................. 2,178 2,171
Capital in excess of par value............................ 39,092 38,697
Retained earnings......................................... 140,245 129,310
Accumulated other comprehensive income.................... (4,261) (71)
-------- --------
177,254 170,107
Less: treasury stock, at cost............................. (61,517) (60,882)
-------- --------
Total stockholders' equity.......................... 115,737 109,225
-------- --------
Total liabilities and stockholders' equity................ $235,018 $226,848
======== ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
3
<PAGE>
LYDALL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF NET INCOME
AND COMPREHENSIVE INCOME
(IN THOUSANDS EXCEPT PER-SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
Net sales................................................... $76,834 $56,495
Cost of sales............................................... 57,694 40,166
------- -------
Gross margin................................................ 19,140 16,329
Selling, product development and administrative expenses.... 13,511 11,353
------- -------
Operating income............................................ 5,629 4,976
Other (income) expense:
Investment income......................................... (18) (130)
Interest expense.......................................... 701 262
Foreign currency transaction gain......................... (72) (127)
Other..................................................... 26 175
------- -------
637 180
======= =======
Income before income taxes.................................. 4,992 4,796
Income tax expense.......................................... 1,743 1,642
------- -------
Net income.................................................. $ 3,249 $ 3,154
======= =======
Basic earnings per common share............................. $ .21 $ .20
------- -------
Weighted average common stock outstanding................... 15,733 15,688
Diluted earnings per common share........................... $ .21 $ .20
------- -------
Weighted average common stock and equivalents outstanding... 15,848 15,941
Net income.................................................. $ 3,249 $ 3,154
------- -------
Other comprehensive income, before tax:
Foreign currency translation adjustments.................. 292 1,085
Unrealized loss on securities............................. -- (735)
------- -------
Other comprehensive income, before tax...................... 292 350
Income tax expense related to items of other comprehensive
income.................................................... -- (122)
------- -------
Other comprehensive income, net of tax...................... 292 228
------- -------
Comprehensive income........................................ $ 3,541 $ 3,382
======= =======
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
4
<PAGE>
LYDALL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF NET INCOME
AND COMPREHENSIVE INCOME
(IN THOUSANDS EXCEPT PER-SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
Net sales................................................... $244,434 $172,281
Cost of sales............................................... 185,950 122,388
-------- --------
Gross margin................................................ 58,484 49,893
Selling, product development and administrative expenses.... 41,178 34,003
-------- --------
Operating income............................................ 17,306 15,890
Other (income) expense:
Investment income......................................... (33) (530)
Interest expense.......................................... 2,010 547
Foreign currency transaction gain......................... (1,082) (91)
Other..................................................... (86) 7
-------- --------
809 (67)
-------- --------
Income before income taxes.................................. 16,497 15,957
Income tax expense.......................................... 5,561 5,403
-------- --------
Net income.................................................. $ 10,936 $ 10,554
======== ========
Basic earnings per common share............................. $ .70 $ .66
-------- --------
Weighted average common stock outstanding................... 15,726 15,908
Diluted earnings per common share........................... $ .69 $ .65
-------- --------
Weighted average common stock and equivalents outstanding... 15,819 16,266
Net income.................................................. $ 10,936 $ 10,554
-------- --------
Other comprehensive loss, before tax:
Foreign currency translation adjustments.................. (4,190) 977
Unrealized loss on securities............................. -- (1,397)
-------- --------
Other comprehensive loss, before tax........................ (4,190) (420)
Income tax benefit related to items of other comprehensive
loss...................................................... -- 147
Other comprehensive loss, net of tax........................ (4,190) (273)
-------- --------
Comprehensive income........................................ $ 6,746 $ 10,281
======== ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
5
<PAGE>
LYDALL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1999 1998
--------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................. $ 10,936 $ 10,554
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation............................................ 9,006 6,846
Amortization............................................ 1,336 1,491
Loss on disposition of property, plant and equipment.... 192 383
Foreign currency transaction gain....................... (1,082) (91)
Changes in operating assets and liabilities excluding
effects from acquisitions:
Accounts receivable................................... (5,678) 634
Taxes receivable...................................... 2,256 2,032
Inventories........................................... (877) (2,627)
Other assets.......................................... (1,487) (120)
Accounts payable...................................... 1,503 1,894
Accrued taxes......................................... 471 (85)
Accrued payroll and other compensation................ 1,063 (2,377)
Deferred income taxes................................. (968) (663)
Other long-term liabilities........................... 40 (296)
Other accrued liabilities............................. (1,178) (1,042)
--------- --------
Total adjustments....................................... 4,597 5,979
--------- --------
Net cash provided by operating activities................... 15,533 16,533
--------- --------
Cash flows from investing activities:
Acquisitions.............................................. (291) (16,889)
Additions of property, plant, and equipment............... (14,086) (13,336)
Purchase of investments, net.............................. -- (394)
--------- --------
Net cash used for investing activities...................... (14,377) (30,619)
Cash flows from financing activities:
Cash overdraft............................................ 2,689 --
Long-term debt payments................................... (45,102) (3,244)
Long-term debt proceeds................................... 82,380 --
Proceeds from short-term borrowings....................... 62,992 56,113
Payments of short-term borrowings......................... (102,712) (37,300)
Issuance of common stock.................................. 402 929
Acquisition of common stock............................... (635) (9,899)
--------- --------
Net cash provided by financing activities................... 14 6,599
--------- --------
Effect of exchange rate changes on cash..................... (156) 86
--------- --------
Increase (decrease) in cash and cash equivalents............ 1,014 (7,401)
Cash and cash equivalents at beginning of period............ 2,254 8,891
--------- --------
Cash and cash equivalents at end of period.................. $ 3,268 $ 1,490
========= ========
Supplemental Schedule of Cash Flow Information:
Cash paid during the period for:
Interest.................................................. $ 1,759 $ 476
Income taxes.............................................. 3,902 4,371
Non-cash transactions:
Unrealized gains/losses on available-for-sale
securities.............................................. -- 908
Reclassification between short and long term assets....... -- 904
Reclassification of deferred tooling revenue from
inventory to other accrued liabilities.................. 2,949 --
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
6
<PAGE>
LYDALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The accompanying consolidated condensed financial statements include the
accounts of Lydall, Inc. and its wholly owned subsidiaries. All financial
information is unaudited for interim periods reported. All significant
intercompany transactions have been eliminated in the consolidated condensed
financial statements. Management believes that all adjustments, which
include only normal recurring accruals, necessary to present a fair
statement of the financial position and results of the periods have been
included. The year-end condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles. This Form 10-Q should be read in
conjunction with Lydall's Annual Report on Form 10-K for the year ended
December 31, 1998.
2. Basic earnings per common share are based on net income divided by the
weighted average number of common shares outstanding during the period.
Diluted earnings per common share are based on net income divided by the
weighted average number of common shares outstanding during the period,
including the effect of stock options and stock awards where such effect is
dilutive.
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED FOR THE QUARTER ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
(UNAUDITED) (UNAUDITED)
------------------------------- -------------------------------
NET NET
INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE
($000'S) (000'S) AMOUNT ($000'S) (000'S) AMOUNT
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share....................... $ 3,249 15,733 $0.21 $ 3,154 15,688 $0.20
Effect of dilutive securities stock options.... -- 115 0.00 -- 253 0.00
------- ------ ----- ------- ------ -----
Diluted earnings per share..................... $ 3,249 15,848 $0.21 $ 3,154 15,941 $0.20
======= ====== ===== ======= ====== =====
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
(UNAUDITED) (UNAUDITED)
------------------------------- -------------------------------
NET NET
INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE
($000'S) (000'S) AMOUNT ($000'S) (000'S) AMOUNT
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share....................... $10,936 15,726 $0.70 $10,554 15,908 $0.66
Effect of dilutive securities stock options.... -- 93 (.01) -- 358 (.01)
------- ------ ----- ------- ------ -----
Diluted earnings per share..................... $10,936 15,819 $0.69 $10,554 16,266 $0.65
======= ====== ===== ======= ====== =====
</TABLE>
3. Options to purchase 704,331 shares and 630,716 shares of Lydall Common Stock
for the year-to-date through September 30, 1999 and the comparable period in
1998, respectively, as well as 560,081 shares and 648,716 shares for the
quarters ended September 30, 1999 and 1998, respectively, were not included
in the computation of diluted earnings per share. These options were
excluded because the exercise price was greater than the average market
price of the Common Stock for each respective period, and therefore were
antidilutive.
4. On July 14, 1999, Lydall, Inc. and certain subsidiaries entered into a
$69 million credit facility with a group of five banking institutions. A
Euro-denominated term loan of approximately $19 million, which is held in
the name of Lydall's German subsidiary, bears an interest rate based on Euro
LIBOR plus a percentage based on the negotiated ratios maintained by the
parties to the agreement. The remaining $50 million is a revolving credit
facility which is renewed every three years, on which $21 million is
currently outstanding. Interest on the revolving credit facility is
primarily based on US Dollar LIBOR plus a percentage based on negotiated
ratios maintained by the parties to the agreement.
7
<PAGE>
LYDALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
As a result of entering into the new credit facility, the Company is bound
by certain financial and non-financial covenants. As of September 30, 1999
the Company was in compliance with all covenants of the facility.
5. On December 30, 1998, a subsidiary of the Company acquired for cash all of
the outstanding shares of Gerhardi and Cie GmbH and Co. KG ("Gerhardi"), a
privately held German manufacturer of automotive components. Under the terms
of the agreement and in consideration for Gerhardi's outstanding shares, the
Company's subsidiary paid to Gerhardi a negotiated purchase price of
$30.7 million and assumed Gerhardi's existing liabilities, net of cash, of
approximately $26.5 million. The purchase price is subject to a post-closing
net equity adjustment as defined in the agreement and has been allocated to
the acquired assets on a preliminary basis. Lydall, Inc. funded the
subsidiary's acquisition through interim borrowing on lines of credit. On
July 14, 1999, Lydall converted the majority of the borrowings used to
purchase Gerhardi to a Euro-denominated 5 year term loan in the name of
Lydall Deutschland Holding GmbH. This acquisition was accounted for under
the purchase method of accounting. The fair value of assets acquired
exceeded the cost of the acquisition, and as a result, the Company reduced
the appraised value of long-term assets by $9.1 million. The operating
results of Gerhardi have been included in the Company's consolidated
financial statements from the date of acquisition.
The following table summarizes the unaudited consolidated pro forma
information of Lydall, Inc., assuming that the acquisitions of Charter
Medical, Ltd., Engineered Thermal Systems, Inc. ("ETSI"), and Gerhardi and
Cie. GmbH and Co. KG ("Gerhardi") completed during 1998 had occurred on
January 1, 1998.
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS
ENDED:
IN THOUSANDS EXCEPT PER-SHARE DATA SEPTEMBER 30, 1998
---------------------------------- ------------------
<S> <C>
Sales....................................................... $76,607
Net income.................................................. $ 3,088
Basic earnings per common share............................. $ .20
Diluted earnings per common share........................... $ .19
-------
</TABLE>
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS
ENDED:
IN THOUSANDS EXCEPT PER-SHARE DATA SEPTEMBER 30, 1998
---------------------------------- ------------------
<S> <C>
Sales....................................................... $231,006
Net income.................................................. $ 10,269
Basic earnings per common share............................. $ .65
Diluted earnings per common share........................... $ .63
--------
</TABLE>
6. In the mid-1980's, the United States Environmental Protection Agency ("EPA")
notified a former subsidiary of the Company that it and other entities may
be potentially responsible in connection with the release of hazardous
substances at a landfill and property located adjacent to a landfill located
in Michigan City, Indiana. The preliminary indication, based on the Site
Steering Committee's volumetric analysis, is that the alleged contribution
to the waste volume at the site of the plant once owned by a former
subsidiary is approximately 0.434 percent of the total volume. The portion
of the 0.434 percent specifically attributable to the former subsidiary by
the current operator of the plant is approximately 0.286 percent. The EPA
has completed its Record of Decision for the site and has estimated
8
<PAGE>
LYDALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
the total cost of remediation to be between $17 million and $22 million.
Based on the alleged volumetric contribution of its former subsidiary to the
site, and on the EPA's estimated remediation costs, Lydall's alleged total
exposure would be less than $100 thousand, which has been accrued.
There are over 800 potentially responsible parties ("prp") that have been
identified by the Site Steering Committee. Of these, 38, not including the
Company's former subsidiary, are estimated to have contributed over
80 percent of the total waste volume at the site. These prp's include
Fortune 500 companies, public utilities, and the State of Indiana. The
Company believes that, in general, these parties are financially solvent and
should be able to meet their obligations at the site. The Company has
reviewed Dun & Bradstreet reports on several of these prp's and, based on
these financial reports, does not believe Lydall will have any material
additional volume attributed to it for reparation of this site due to
insolvency of other prp's.
In June 1995, the Company and its former subsidiary were sued in the
Northern District of Indiana by the insurer of the current operator of the
former subsidiary's plant seeking contribution. In October 1997, the insurer
made a settlement demand of $150,591 to the Company in exchange for a
release of the Company's liability at the site and indemnification from the
current operator against site-related claims. The Company executed a
settlement agreement with the insurer and current operator for a full site
release; however, the current operator subsequently backed out of the
agreement. In June 1998, a stipulation for dismissal signed by all parties
was filed to end current litigation until the total liability at the site is
defined. Management believes the ultimate disposition of this matter will
not have a material adverse effect upon the Company's consolidated financial
position, results of operations, or cash flows.
By letter dated July 13, 1998, Lydall Eastern, Inc., a subsidiary of
Lydall, Inc. ("Lydall Eastern"), was identified as a "potentially
responsible party" by the EPA in connection with the claimed release or
threat of release of hazardous substances at a site known as the Rogers
Fibre Mill in Buxton, Maine (the "site"). Lydall Eastern merged with the
owner and operator of a fiberboard mill at the site whose ownership dated
back to approximately 1912. Lydall Eastern ceased operation at the site in
1980. In 1982, Lydall Eastern conveyed its interest in the site.
The EPA is spending public funds to investigate and take action with respect
to the site. The EPA likely will seek to recover the funds it has spent, and
will spend, at the site from potentially responsible parties, including
Lydall Eastern. At this time, it is not possible to predict what future
liability or costs might be incurred by Lydall Eastern in connection with
the site.
7. Lydall's subsidiaries manufacture and fabricate products with various
distinct applications and provide logistics services. Lydall is organized
and reports results of operations in four segments: Heat-Management,
Filtration, Paperboard, Wovens and Other. For a full description of each
segment, refer to the "Notes to Consolidated Financial Statements" reported
in the Company's 1998 Annual
9
<PAGE>
LYDALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
Report on Form 10-K. The tables below present revenues and operating income
by segment for the three months and nine months ended September 30, 1999 and
1998.
<TABLE>
<CAPTION>
IN THOUSANDS HEAT RECONCILING CONSOLIDATED
FOR THE THREE MONTHS ENDED MANAGEMENT FILTRATION PAPERBOARD WOVENS OTHER ITEMS TOTALS
- -------------------------- ---------- ---------- ---------- -------- -------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
September 30, 1999
Sales................ $ 39,531 $14,566 $10,943 $ 1,048 $11,755 $(1,009) $ 76,834
Operating income
(loss)............. $ 3,478 $ 1,301 $ 150 $ (264) $ 1,620 $ (656) $ 5,629
-------- ------- ------- ------- ------- ------- --------
September 30, 1998
Sales................ $ 19,111 $14,681 $10,094 $ 1,326 $11,618 $ (335) $ 56,495
Operating income
(loss)............. $ 1,539 $ 1,839 $ 851 $ (668) $ 1,328 $ 87 $ 4,976
-------- ------- ------- ------- ------- ------- --------
</TABLE>
<TABLE>
<CAPTION>
IN THOUSANDS HEAT RECONCILING CONSOLIDATED
FOR THE NINE MONTHS ENDED MANAGEMENT FILTRATION PAPERBOARD WOVENS OTHER ITEMS TOTALS
- ------------------------- ---------- ---------- ---------- -------- -------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
September 30, 1999
Sales................ $129,769 $43,984 $32,630 $ 2,660 $38,269 $(2,878) $244,434
Operating income
(loss)............. $ 8,157 $ 4,716 $ 1,709 $ (798) $ 4,593 $(1,071) $ 17,306
-------- ------- ------- ------- ------- ------- --------
September 30, 1998
Sales................ $ 59,303 $43,060 $30,285 $ 4,818 $36,356 $(1,541) $172,281
Operating income
(loss)............. $ 7,486 $ 4,668 $ 1,933 $(1,926) $ 3,016 $ 713 $ 15,890
-------- ------- ------- ------- ------- ------- --------
</TABLE>
8. In June of 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes accounting and reporting standards for derivative instruments,
including certain derivatives embedded in other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at
fair value. This statement is effective for fiscal years beginning after
June 15, 2000. As of September 30, 1999, the Company had one interest rate
swap and one forward currency contract outstanding. Lydall is currently
evaluating the effect on the Company's consolidated financial position,
results of operations, comprehensive income, and cash flows as a result of
implementing this pronouncement.
9. Net income for the quarter ended September 30, 1999 includes an adjustment
related to conforming certain accounting policies of Gerhardi to those of
Lydall. The adjustment, amounting to approximately $200 thousand, relates to
the capitalization of certain items expensed by Gerhardi during the
six-month period ended June 30, 1999, which, according to Lydall's
accounting policy, should have been capitalized. This adjustment, which is
reflected in the third quarter results of operations, does not have a
significant impact on Lydall's results of operations for the nine-month
period ended September 30, 1999, does not change the trend in reported
earnings for 1999 and is not expected to have a significant effect on
Lydall's earnings for 1999. Additionally, sales and cost of sales for the
quarter ended September 30, 1999 have been reduced by $1.9 million for
intercompany transactions which occurred in the first half of 1999 and were
not eliminated in the results of operations for the period ended June 30,
1999. This adjustment had no impact on reported earnings for the third
quarter of 1999.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED SEPTEMBER 30, (IN THOUSANDS) 1999 1998
- -------------------------------------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Net sales........................................... $ 76,834 100.0% $ 56,495 100.0%
Cost of sales..................................... 57,694 75.1 40,166 71.1
-------- ----- -------- -----
Gross margin........................................ 19,140 24.9 16,329 28.9
Selling, product development and administrative
expenses........................................ 13,511 17.6 11,353 20.1
-------- ----- -------- -----
Operating income.................................... 5,629 7.3 4,976 8.8
Other expense..................................... 637 0.8 180 0.3
-------- ----- -------- -----
Income before income taxes.......................... 4,992 6.5 4,796 8.5
Income tax expense................................ 1,743 2.3 1,642 2.9
-------- ----- -------- -----
Net income.......................................... $ 3,249 4.2% $ 3,154 5.6%
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, (IN THOUSANDS) 1999 1998
- ------------------------------------------------------ ---------------------- ----------------------
<S> <C> <C> <C> <C>
Net sales............................................ $244,434 100.0% $172,281 100.0%
Cost of sales...................................... 185,950 76.1 122,388 71.0
-------- ----- -------- -----
Gross margin......................................... 58,484 23.9 49,893 29.0
Selling, product development and administrative
expenses......................................... 41,178 16.8 34,003 19.7
-------- ----- -------- -----
Operating income..................................... 17,306 7.1 15,890 9.3
Other (income) expense............................. 809 0.3 (67) 0.0
-------- ----- -------- -----
Income before income taxes........................... 16,497 6.8 15,957 9.3
Income tax expense................................. 5,561 2.3 5,403 3.2
-------- ----- -------- -----
Net income........................................... $ 10,936 4.5% $ 10,554 6.1%
</TABLE>
NET SALES
Net sales for the third quarter ended September 30, 1999 were $76.8 million
compared with $56.5 million in the same quarter of 1998, representing a
$20.3 million, or 36 percent, increase. The acquisition of Gerhardi accounted
for $16.0 million of the sales increase in the third quarter of 1999 compared
with the same quarter of 1998. Sales from operations other than Gerhardi
increased in the third quarter of 1999 by $4.4 million or 8 percent from third
quarter 1998. This increase was realized primarily in the Heat-Management and
Paperboard segments offset by small declines in the Filtration and Wovens
segments.
Excluding $64.9 million in incremental 1999 sales from operations acquired
during 1998, sales for the nine months ended September 30, 1999 have increased
by $7.2 million, or 4 percent. The majority of these sales came from the
addition of Gerhardi that is included in the Heat-Management segment.
Consistent with the first six months of 1999, organic sales growth is
predominantly derived from Heat-Management sales to the automotive market with
new products such as Zero Clearance-TM- and dBLyte-TM-.
11
<PAGE>
GROSS MARGIN
Gross margin in the third quarter of 1999 was 24.9 percent compared with
28.9 percent in the third quarter of 1998. Excluding Gerhardi, gross margin for
the third quarter 1999 declined to 27.6 percent. During the third quarter there
was a deterioration in the price-to-cost ratio mainly in our Paperboard segment.
In addition, changes in sales mix in the Heat-Management segment also had a
negative impact. Cost reduction actions have been taken in the fourth quarter
within that segment to reduce fixed overhead costs which will benefit the
Company in the first quarter of 2000.
For the nine months ended September 30, 1999, gross margin was 23.9 percent
and, excluding Gerhardi, it was 28.3 percent. This compares to 29.0 percent for
the nine months ended September 30, 1998.
SELLING, PRODUCT DEVELOPMENT AND ADMINISTRATIVE EXPENSES
Selling, product development and administrative expenses in the third
quarter of 1999 increased by $2.2 million, or 19.0 percent, over the third
quarter of 1998 primarily due to the costs added with the acquisition of
Gerhardi. However, selling, product development and administrative expenses were
17.6 percent of sales in the third quarter of 1999, down from 20.1 percent in
the same period a year ago.
For the nine months ended September 30, 1999, selling, product development
and administrative expenses were $41.2 million compared to $34.0 million for the
same period in the prior year, representing an increase of $7.2 million, or
21 percent. This increase was also primarily due to costs at acquired
businesses. As a percent of sales, selling, product development, and
administrative expenses delined from 19.7 percent in the nine months ended
September 30, 1998 to 16.8 percent in the comparable period of 1999.
INTEREST EXPENSE
Interest expense in the third quarter of 1999 was $701 thousand compared
with $262 thousand in the same quarter 1998. For the nine months ended
September 30, 1999 interest expense was $2.0 million compared to $547 thousand
in the same period in the prior year. The increase in interest expense is mainly
attributable to debt incurred to finance acquisitions completed in 1998 and to
fund capital expenditures.
FOREIGN CURRENCY TRANSACTION GAIN
In the first quarter of 1999 the Company recorded a foreign currency
transaction gain of $1.4 million due to the appreciation in the dollar against
the Euro since January. The gain related to the portion of the Gerhardi purchase
price funded from domestic credit lines denominated in Euros. The loan, which
was paid in full in June of 1999, was hedged with a forward contract early in
the second quarter. Foreign currency transaction gains and losses were not
significant in the second and third quarters. It is not Lydall's policy to enter
into foreign currency denominated transactions for speculative purposes. As a
result, transaction gains such as this are not expected to recur.
LIQUIDITY AND CAPITAL RESOURCES
Operating cash flow increased 20 percent to $9.4 million in the third
quarter of 1999. For the nine months ended September 30, 1999 operating cash
flow totaled $28 million, an increase of 15 percent from the same period in
1998.
During the third quarter of 1999 the Company borrowed an additional
$7.0 million on foreign lines of credit and its new credit facility. Operating
cash flow and borrowings in the third quarter were used primarily to fund
capital expenditures and working capital requirements.
12
<PAGE>
Lydall, Inc. and certain subsidiaries entered into a $69 million credit
facility with a group of five banking institutions in the third quarter. The
facility is comprised of a Euro-denominated term loan of approximately
$19 million and a $50 million revolving credit facility which is renewed every
three years.
ACCOUNTING STANDARDS
In June of 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes accounting and reporting standards for derivative instruments,
including certain derivatives embedded in other contracts, and for hedging
activities. It requires that all derivatives be recognized as either assets or
liabilities on the balance sheet and that those instruments be measured at their
fair value. The statement is effective for fiscal years beginning after
June 15, 2000. At September 30, 1999, the Company had one interest rate swap and
one forward currency contract outstanding. Lydall is currently evaluating the
effect on the Company's consolidated financial position, results of operations,
comprehensive income, and cash flows as a result of implementing this
pronouncement.
YEAR 2000
The Company has satisfactorily completed testing of all major systems in a
simulated environment on and around sensitive Year 2000 dates. Date sensitive
components of machinery and equipment have been reviewed and remediation of any
non-compliant parts is essentially complete. The Company has examined
information from all major customers and suppliers and has not identified any
significant Year 2000 concerns. Interaction with customers and suppliers will
continue through year-end to monitor for any potential interruptions that could
result from Year 2000 issues. Despite these efforts, the Company can provide no
assurance that all customer and vendor Year 2000 compliance plans will be
successfully completed to avoid possible interruptions.
All operations of the Company have been charged with establishing
contingency plans for possible utility, logistic, supply chain and other
interruptions. This process will continue through the end of the year and will
be adapted for changes in perceived risks as they arise. While the Company could
fail to correct or identify a material Year 2000 issue which could result in an
interruption in, or failure of, certain normal business activities or operations
for an indefinite period of time, management feels that its efforts and the
diversity of its businesses help to reduce the potential impact of
non-compliance.
The Company has capitalized approximately $11.1 million under its
comprehensive program to upgrade information systems, called Lydall 2000, which
is now complete. The Company does not track internal costs incurred for the Year
2000 project. These costs are principally internal payroll costs. Costs incurred
during the fourth quarter of 1999 relating to the Year 2000 issue are estimated
to be immaterial to results of operations and cash flows.
FORWARD LOOKING INFORMATION
In the interest of more meaningful disclosure, Lydall and its management
make statements regarding the future outlook of the Company. The Company's
actual results could differ materially from those set forth in forward-looking
statements. Certain factors that might cause such a difference include risks and
uncertainties detailed in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section in the Company's 1998 Annual Report
on Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In July of 1999 Lydall entered into an interest rate swap agreement to
convert the base rate component of its variable interest rate on a Euro
denominated term-loan to a fixed rate of 3.45 percent to take advantage of
favorable long-term borrowing rates in Europe. The addition of a credit spread,
which varies as a function of Lydall's consolidated debt to EBITDA ratio,
brought the all-in rate to 4.7 percent at
13
<PAGE>
September 30, 1999. The weighted average variable interest rate for the third
quarter of 1999 was 3.94 percent.
The Company also had a forward contract outstanding for the purchase of Euro
to make the first installment payment on the Euro denominated term loan on
behalf of its subsidiary, Lydall Deutschland Holding GmbH. The forward contract
settled in the fourth quarter resulting in no income statement effect.
As of the date of this report, there are no other significant changes in
market risks from those disclosed in Item 7a of Management's Discussion and
Analysis of Financial Condition and Results of Operations in the Company's 1998
Annual Report on Form 10-K.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
3 (ii)--Lydall, Inc. By-laws, adopted October 27, 1999
27.1--Financial Data Schedule, filed herewith
b. Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three months
ended September 30, 1999.
14
<PAGE>
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 thereunto duly authorized.
<TABLE>
<S> <C> <C>
LYDALL, INC.
(Registrant)
November 12, 1999 By: /s/ JOHN E. HANLEY
-----------------------------------------
John E. Hanley
VICE PRESIDENT, FINANCE AND TREASURER
(PRINCIPAL ACCOUNTING AND FINANCIAL
OFFICER)
</TABLE>
15
<PAGE>
LYDALL, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.
- ---------------------
<C> <S>
27.1 Financial Data Schedule.
</TABLE>
16
<PAGE>
Exhibit 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I: OFFICES AND FISCAL YEAR...............................................................................1
SECTION 1.01. REGISTERED OFFICE................................................................................1
SECTION 1.02. FISCAL YEAR......................................................................................1
ARTICLE II: NOTICE - WAIVERS - MEETINGS..........................................................................1
SECTION 2.01. NOTICE, WHAT CONSTITUTES.........................................................................1
SECTION 2.02. NOTICE OF MEETINGS OF BOARD OF DIRECTORS.........................................................2
SECTION 2.03. NOTICE OF MEETINGS OF STOCKHOLDERS...............................................................2
SECTION 2.04. ADVANCE NOTICE OF STOCKHOLDER NOMINATIONS AND OTHER BUSINESS.....................................2
SECTION 2.05. WAIVERS OF NOTICE................................................................................5
SECTION 2.06. EXCEPTION TO REQUIREMENTS OF NOTICE..............................................................5
ARTICLE III: MEETINGS OF STOCKHOLDERS............................................................................6
SECTION 3.01. PLACE OF MEETING.................................................................................6
SECTION 3.02. ANNUAL MEETING...................................................................................6
SECTION 3.03. SPECIAL MEETINGS.................................................................................6
SECTION 3.04. QUORUM, MANNER OF ACTING AND ADJOURNMENT.........................................................6
SECTION 3.05. ORGANIZATION AND CONDUCT OF MEETINGS.............................................................7
SECTION 3.06. VOTING...........................................................................................8
SECTION 3.07. VOTING LISTS.....................................................................................9
SECTION 3.08. INSPECTORS OF ELECTION...........................................................................9
ARTICLE IV: PROCEDURES FOR ACTION BY WRITTEN CONSENT.............................................................10
SECTION 4.01. REQUEST FOR RECORD DATE.....................................................................10
SECTION 4.02 FORM OF CONSENT.............................................................................11
SECTION 4.03 DELIVERY OF CONSENT.........................................................................11
ARTICLE V: BOARD OF DIRECTORS....................................................................................12
SECTION 5.01. POWERS..........................................................................................12
SECTION 5.02. NUMBER..........................................................................................13
SECTION 5.03. TERM OF OFFICE..................................................................................13
SECTION 5.04. VACANCIES.......................................................................................13
SECTION 5.05. RESIGNATIONS....................................................................................13
SECTION 5.06. ORGANIZATION....................................................................................13
SECTION 5.07. PLACE OF MEETING................................................................................14
SECTION 5.08. REGULAR MEETINGS................................................................................14
SECTION 5.09. SPECIAL MEETINGS................................................................................14
SECTION 5.10. QUORUM, MANNER OF ACTING AND ADJOURNMENT.......................................................14
SECTION 5.11. COMMITTEES OF THE BOARD.........................................................................14
SECTION 5.12. COMPENSATION OF DIRECTORS.......................................................................15
SECTION 5.13. QUALIFICATIONS AND ELECTION OF DIRECTORS........................................................15
SECTION 5.14. VOTING OF STOCK.................................................................................15
SECTION 5.15. ENDORSEMENT OF SECURITIES FOR TRANSFER..........................................................16
ARTICLE VI: OFFICERS............................................................................................16
SECTION 6.01. NUMBER, QUALIFICATIONS AND DESIGNATION..........................................................16
<PAGE>
SECTION 6.02. ELECTION AND TERM OF OFFICE.....................................................................16
SECTION 6.03. SUBORDINATE OFFICERS, COMMITTEES AND AGENTS.....................................................16
SECTION 6.04. THE CHAIRMAN OF THE BOARD.......................................................................17
SECTION 6.05. THE PRESIDENT...................................................................................17
SECTION 6.06. THE SECRETARY...................................................................................17
SECTION 6.07. THE TREASURER...................................................................................17
SECTION 6.08. OFFICERS' BONDS.................................................................................18
SECTION 6.09. SALARIES........................................................................................18
ARTICLE VII: CERTIFICATES OF STOCK, TRANSFER, ETC...............................................................18
SECTION 7.01. FORM AND ISSUANCE..............................................................................18
SECTION 7.02. TRANSFER........................................................................................19
SECTION 7.03. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES...............................................19
SECTION 7.04. RECORD HOLDER OF SHARES.........................................................................19
SECTION 7.05. DETERMINATION OF STOCKHOLDERS OF RECORD.........................................................19
ARTICLE VIII: GENERAL PROVISIONS................................................................................20
SECTION 8.01. DIVIDENDS.......................................................................................20
SECTION 8.02. CONTRACTS.......................................................................................20
SECTION 8.03. CORPORATE SEAL..................................................................................20
SECTION 8.04. CHECKS, NOTES, ETC..............................................................................20
SECTION 8.05. CORPORATE RECORDS...............................................................................21
SECTION 8.06. AMENDMENT OF BYLAWS.............................................................................21
</TABLE>
<PAGE>
BY-LAWS
OF
LYDALL, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES AND FISCAL YEAR
SECTION 1.01. REGISTERED OFFICE.
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware until otherwise established
by resolution of the Board of Directors, and a certificate certifying the change
is filed in the manner provided by statute.
SECTION 1.02. FISCAL YEAR.
The fiscal year of the corporation shall end on the 31st day of
December in each year.
ARTICLE II
NOTICE - WAIVERS - MEETINGS
SECTION 2.01. NOTICE, WHAT CONSTITUTES.
Whenever, under the provisions of the Delaware General Corporation Law
("DGCL") or the certificate of incorporation or these Bylaws, notice is required
to be given to any director or stockholder, it shall not be construed to require
personal notice, but such notice may be given in writing, by mail or by telegram
(with messenger service specified), telex or TWX (with answerback received) or
courier service, charges prepaid, or by telephone or facsimile transmission to
the address (or to the telex, TWX, facsimile or telephone number) of the person
appearing on the books of the corporation, or in the case of directors, supplied
to the corporation for the purpose of notice. If the notice is sent by mail,
telegram or courier service, it shall be deemed to be given when deposited in
the United States mail or with a telegraph office or courier service for
delivery to that person or, in the case of telex or TWX, when dispatched, or in
the case of facsimile transmission, when received.
<PAGE>
SECTION 2.02. NOTICE OF MEETINGS OF BOARD OF DIRECTORS.
Notice of a regular meeting of the Board of Directors need not be
given. Notice of every special meeting of the Board of Directors shall be given
to each director in person or by telephone or in writing at least 24 hours (in
the case of notice in person or by telephone, telex, TWX or facsimile
transmission) or 48 hours (in the case of notice by telegram, courier service or
express mail) or five days (in the case of notice by first class mail) before
the time at which the meeting is to be held. Every such notice shall state the
time and place of the meeting. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the board need be specified in a
notice of the meeting.
SECTION 2.03. NOTICE OF MEETINGS OF STOCKHOLDERS.
Written notice of the place, date and hour of every meeting of the
stockholders, whether annual or special, shall be given to each stockholder of
record entitled to vote at the meeting not less than ten nor more than 60 days
before the date of the meeting. Every notice of a special meeting shall state
the purpose or purposes thereof.
SECTION 2.04. ADVANCE NOTICE OF STOCKHOLDER NOMINATIONS AND OTHER
BUSINESS.
(a) ANNUAL MEETINGS OF STOCKHOLDERS
(1) Nominations of persons for election to the Board of
Directors of the Corporation and the proposal of business to be considered by
the stockholders may be made at an annual meeting of stockholders (A) pursuant
to the Corporation's notice of meeting delivered pursuant to Section 2.03 of
these Bylaws, (B) by and at the direction of the Board of Directors, or (C) by
any stockholder for the Corporation who is entitled to vote at the meeting, who
complied with the notice procedures set forth in clauses (2) and (3) of this
paragraph (a) and who was a stockholder of record at the time such notice was
delivered to the Secretary of the Corporation.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to paragraph (a)(1)(C) above,
the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation and such other business must otherwise be a proper
matter for stockholder action. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of the Corporation
not less than sixty (60) days nor more than ninety (90) days prior to the first
anniversary of the preceding year's annual meeting; PROVIDED, HOWEVER, that in
the event the date the annual meeting is called for is a date that is not within
thirty (30) days before or after such anniversary date, notice by the
<PAGE>
stockholder to be timely must be so delivered not later than the close of
business on the tenth (10th) day following the day on which such notice of the
date of the Annual Meeting was mailed or public announcement of the date of the
Annual Meeting was made, whichever first occurs. In no event shall the public
announcement of an adjournment or postponement of an Annual Meeting of
stockholders commence a new time period (or extend any time period) for the
giving of a stockholder's notice as described above.
(b) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be
conducted at a special meeting of stockholders as shall have been described in
the Corporation's notice of meeting given pursuant to Section 2.03 of these
Bylaws. Nominations of persons for election to the Board of Directors may be
made at a special meeting of stockholders at which directors are to be elected
pursuant to the Corporation's notice of meeting (1) by or at the direction of
the Board of Directors or (2) by any stockholder of the Corporation who is
entitled to vote at the meeting, who complies with the notice procedures set
forth in this Section and who is a stockholder of record at the time such notice
is delivered to the Secretary of the Corporation. In the event the Corporation
calls a special meeting of stockholders for the purpose of electing one or more
directors to the Board of Directors, any such stockholder may nominate a person
or persons (as the case may be), for election to such position(s) as are
specified in the Corporation's Notice of Meeting, if the stockholder's notice
shall be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting. In no event shall the public announcement of an adjournment of
a special meeting commence a new time period for the giving of a stockholder's
notice as described above.
(c) GENERAL
(1) Only persons who are nominated in accordance with the procedures
set forth in this Section 2.04 shall be eligible to serve as directors and only
such business shall be conducted at a meeting of stockholders as shall have been
brought before the meeting in accordance with the procedures set forth in this
Section 2.04. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the Chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set forth
in this Section and, if any proposed nomination or business is not in accordance
with this Section (including whether the stockholder or beneficial owner, if
any, on whose behalf the nomination is made solicits (or is part of a group
which solicits), or fails to so solicit (as the case may be), proxies in support
of such stockholder's nominee in compliance with such stockholder's
representation as required by this Section), to declare that such defective
proposal or nomination shall be disregarded. Any decision by the Chairman of the
meeting shall be conclusive and binding upon all stockholders of the corporation
for any purpose.
<PAGE>
(2) For purposes of this Section 2.04, "public announcement"
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 Securities and Exchange
Act of 1934, as amended (the "Exchange Act").
(3) Notwithstanding the foregoing provisions of this Section
2.04, a stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section. Nothing in this Section shall be deemed to
affect any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
(d) CONTENTS OF STOCKHOLDER'S NOTICE FOR NOMINATIONS OF DIRECTORS. Any
stockholder's notice required by this Section shall set forth as to each person
whom the stockholder proposes to nominate for election or reelection as a
Director (i) the name, age, business address and residence address of the
person, (ii) the principal occupation and employment of the person, (iii) the
class or series and number of shares of capital stock of the Corporation which
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 filing 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 stockholder's notice
further shall set forth as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made (i)
the name and address of such stockholder and of such beneficial owner, as they
appear on the Corporation's books, (ii) the class and number of shares of the
capital stock of the Corporation which are owned beneficially and of record by
such stockholder and such beneficial owner, as to the stockholder giving the
notice, (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 Annual Meeting to nominate the person named in its
notice, (v) a representation whether the stockholder or the beneficial owner, if
any, intends or is part of a group which intends to (1) deliver a proxy
statement and/or form of proxy to holders of at least the percentage of the
Corporation's outstanding capital stock required to elect the nominee and/or (2)
otherwise solicit proxies from stockholders in support of such nomination, and
(vi) any other information relating to such stockholder that would be required
to be disclosed in a proxy statement or other filing 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 serving as a Director if
elected. The Corporation may require any proposed nominee to furnish such other
information as it may reasonably require to determine the eligibility of such
proposed nominee to serve as a Director of the Corporation.
<PAGE>
(e) CONTENTS OF STOCKHOLDER'S NOTICE FOR PROPOSED BUSINESS. Any
stockholder's notice required by this Section shall set forth for each item of
business that the stockholder proposes for consideration (i) a description of
the business desired to be brought before the stockholder meeting, (ii) the text
of the proposal or business (including the text of any resolutions proposed for
consideration and in the event that such business includes a proposal to amend
the Bylaws of the Corporation, the language of the proposed amendment), (iii)
the reasons for conducting such business at the stockholder meeting, (iv) any
material interest in such business of such stockholder and the beneficial owner,
if any, on whose behalf the proposal is made; and (v) any other information
relating to the stockholder, the beneficial owner, or proposed business that
would be required to be disclosed in a proxy statement or other filing in
connection with solicitations of proxies relating to the proposed item of
business pursuant to Section 14 of the Exchange Act, and the rules and
regulations promulgated thereunder. Such stockholder's notice further shall set
forth as to the stockholder giving the notice and the beneficial owner, if any,
on whose behalf the proposal is made (i) the name and address of such
stockholder as they appear on the Corporation's books and of such beneficial
owner, (ii) the class and number of shares of capital stock of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owners, (iii) a description of all arrangements or understandings
between such stockholder and any other person or persons (including their names)
pursuant to which the proposals are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the Annual Meeting to propose the items of business set forth in the notice, (v)
a representation whether the stockholder or the beneficial owner, if any,
intends or is part of a group which intends to (1) deliver a proxy statement
and/or form of proxy to holders of at least the percentage of the Corporation's
outstanding capital stock required to approve or adopt the proposal and/or (2)
otherwise solicit from stockholders in support of such proposal, and (vi) any
other information relating to such stockholder, beneficial owner, or proposed
business that would be required to be disclosed in a proxy statement or other
filing required to be made in connection with solicitations of proxies in
support of such proposal pursuant to Section 14 of the Exchange Act, and the
rules and regulations promulgated thereunder. The Corporation may require the
stockholder to furnish such other information as it may reasonably require to
determine whether each proposed item of business is a proper matter for
stockholder action.
SECTION 2.05 WAIVERS OF NOTICE.
(a) WRITTEN WAIVER. Whenever notice is required to be given under any
provisions of the DGCL or the certificate of incorporation or these Bylaws, a
written waiver, signed by the person or persons entitled to the notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the stockholders, directors, or members of a committee of
directors need be specified in any written waiver of notice of such meeting.
<PAGE>
(b) WAIVER BY ATTENDANCE. Attendance of a person at a meeting, either
in person or by proxy, shall constitute a waiver of notice of such meeting,
except where a person attends a meeting for the express purpose of objecting at
the beginning of the meeting to the transaction of any business because the
meeting was not lawfully called or convened.
SECTION 2.06. EXCEPTION TO REQUIREMENTS OF NOTICE.
(a) GENERAL RULE. Whenever notice is required to be given, under any
provision of the DGCL or of the certificate of incorporation or these Bylaws, to
any person with whom communication is unlawful, the giving of such notice to
such person shall not be required and there shall be no duty to apply to any
governmental authority or agency for a license or permit to give such notice to
such person. Any action or meeting which shall be taken or held without notice
to any such person with whom communication is unlawful shall have the same force
and effect as if such notice had been duly given.
(b) STOCKHOLDERS WITHOUT FORWARDING ADDRESSES. Whenever notice is
required to be given, under any provision of the DGCL or the certificate of
incorporation or these Bylaws, to any stockholder to whom (i) notice of two
consecutive annual meetings, and all notices of meetings or of the taking of
action by written consent without a meeting to such person during the period
between such two consecutive annual meetings, or (ii) all, and at least two,
payments (if sent by first class mail) of dividends or interest on securities
during a 12 month period, have been mailed addressed to such person at his
address as shown on the records of the corporation and have been returned
undeliverable, the giving of such notice to such person shall not be required.
Any action or meeting which shall be taken or held without notice to such person
shall have the same force and effect as if such notice had been duly given. If
any such person shall deliver to the corporation a written notice setting forth
the person's then current address, the requirement that notice be given to such
person shall be reinstated.
ARTICLE III
MEETINGS OF STOCKHOLDERS
SECTION 3.01. PLACE OF MEETING.
All meetings of the stockholders of the corporation shall be held at
such place within or without the State of Delaware as shall be designated by the
Board of Directors in the notice of such meeting in accordance with Section 3.02
or 3.03.
<PAGE>
SECTION 3.02. ANNUAL MEETING.
The Board of Directors may fix and designate the date and time of the
annual meeting of the stockholders. At said meeting the stockholders then
entitled to vote shall elect directors and shall transact such other business as
may properly be brought before the meeting.
SECTION 3.03. SPECIAL MEETINGS.
Special meetings of the stockholders of the corporation may be called
at any time by a majority of the Board of Directors. The Board of Directors
shall have the sole power to determine the date, time and place of any Special
Meeting of stockholders and the business to be transacted at such meeting. The
Board of Directors shall have the sole power to set a record date for the
determination of stockholders entitled to vote at any Special Meeting. Nothing
contained in this Section 3.03 shall be construed as limiting, fixing or
affecting the time when a meeting of stockholders called by action of the Board
of Directors may be held.
SECTION 3.04. QUORUM, MANNER OF ACTING AND ADJOURNMENT.
(a) QUORUM. The holders of a majority of the shares entitled to vote,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders except as otherwise provided by the DGCL, by the
certificate of incorporation or by these Bylaws.
(b) POSTPONEMENT, CANCELLATION AND ADJOURNMENT OF STOCKHOLDER MEETINGS.
Any previously scheduled Annual or Special Meeting of the stockholders may be
postponed, and any previously scheduled Annual or Special Meeting of the
stockholders called by the Board may be canceled, by resolution of the Board of
Directors upon public notice given prior to the time previously scheduled for
such meeting of stockholders.
Any meeting of stockholders, Annual or Special, may be adjourned solely
by the chair of the meeting from time to time to reconvene at the same or some
other time, date and place. The stockholders present at a meeting shall not have
authority to adjourn the meeting. Notice need not be given of any such adjourned
meeting if the time, date and place thereof are announced at the meeting at
which the adjournment is taken and if the adjournment is for not more than 30
days. If the time, date and place are not so announced, the Secretary of the
Corporation shall give written notice of the time, date and place of the
adjourned meeting not less than ten days prior to the date of the adjourned
meeting.
At any adjourned meeting at which a quorum is present, the stockholders
may transact any business, which might have been transacted at the original
meeting. Once
<PAGE>
a share is represented for any purpose at a meeting, it shall be present for
quorum purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for the adjourned meeting. A
new record date must be set if the meeting is adjourned in a single adjournment
to a date more than 120 days after the original date fixed for the meeting. If
after the adjournment a new record date is fixed for the adjourned meeting,
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the adjourned meeting consistent with the new record date.
(c) MANNER OF ACTING. Directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy and entitled to
vote at the meeting on the election of directors. In all matters other than the
election of directors, the affirmative vote of the majority of shares present in
person or represented by proxy at the meeting and entitled to vote and voting
thereon shall be the act of the stockholders, unless the question is one upon
which, by express provision of the applicable statute, the certificate of
incorporation or these Bylaws, a different vote is required in which case such
express provision shall govern and control the decision of the question. The
stockholders present in person or by proxy at a duly organized meeting can
continue to do business until adjournment, notwithstanding withdrawal of enough
stockholders to leave less than a quorum.
SECTION 3.05. ORGANIZATION AND CONDUCT OF MEETINGS.
At every meeting of the stockholders, the Chairman of the Board, if
there be one, or in the case of a vacancy in the office or absence of the
Chairman of the Board, the President shall act as chairman, and the secretary,
or, in the absence of the secretary, an assistant secretary or in the absence of
the secretary and the assistant secretaries, a person appointed by the chairman,
shall act as secretary. The date and time of the opening and the closing of the
polls for each matter upon which the stockholders will vote at a meeting shall
be determined by the chair of the meeting and announced at the meeting. The
Board of Directors may adopt by resolution such rules, regulations, and
procedures for the conduct of the meeting of stockholders as it shall deem
appropriate. Except to the extent inconsistent with such rules and regulations
as adopted by the Board of Directors, the chair of any meeting of stockholders
shall have the exclusive right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chair, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board or prescribed by the
chair of the meeting, may include, without limitation, the following: (i) the
establishment of an agenda or order of business for the meeting; (ii) rules and
procedures for maintaining order at the meeting and the safety of those present;
(iii) limitations on attendance at or participation in the meeting to
stockholders of record of the Corporation, their duly authorized and constituted
proxies or such other persons as the chair of the meeting shall determine; (iv)
restrictions on entry to the meeting after the time fixed for the commencement
thereof; and (v) limitations on the time allotted to questions or comments by
participants. Unless and to the extent determined by the Board of Directors or
the chair of the meeting, meetings of stockholders shall not be
<PAGE>
required to be held in accordance with the rules of parliamentary procedure.
SECTION 3.06. VOTING.
(a) GENERAL RULE. Unless otherwise provided in the certificate of
incorporation, each stockholder shall be entitled to one vote, in person or by
proxy, for each share of capital stock having voting power held by such
stockholder.
(b) VOTING AND OTHER ACTION BY PROXY.
(1) A stockholder may execute a written document authorizing
another person or persons to act for the stockholder as proxy. Such execution
may be accomplished by the stockholder or the authorized officer, director,
employee or agent of the stockholder signing such document or causing his or her
signature to be affixed to such document by any reasonable means including, but
not limited to, by facsimile signature. A stockholder may authorize another
person or persons to act for the stockholder as proxy by transmitting or
authorizing the transmission of a telegram, facsimile, telephone call,
electronic mail, or other means of electronic transmission to the person who
will be the holder of the proxy or to a proxy solicitation firm, proxy support
service organization or like agent duly authorized by the person who will be the
holder of the proxy to receive such transmission if such telegram, facsimile,
telephone call, electronic mail, or other means of electronic transmission sets
forth or is submitted with information from which it can be determined that the
telegram, facsimile, telephone call, electronic mail, or other electronic
transmission was authorized by the stockholder.
(2) No proxy shall be voted or acted upon after three years
from its date unless the proxy provides for a longer period.
(3) A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only so long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally.
SECTION 3.07. VOTING LISTS.
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting. The list
shall be arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the
<PAGE>
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 3.08. INSPECTORS OF ELECTION.
(a) APPOINTMENT. All elections of directors shall be by written ballot;
the vote upon any other matter need not be by ballot. In advance of any meeting
of stockholders' the Board of Directors may appoint one or more inspectors, who
need not be stockholders' to act at the meeting and to make a written report
thereof. The Board of Directors may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of stockholders, the person presiding at
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his or her duties, shall take
and sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the person's best ability.
(b) DUTIES. The inspectors shall ascertain the number of shares
outstanding and the voting power of each, determine the shares represented at
the meeting and the validity of proxies and ballots, count all votes and
ballots, determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, and
certify their determination of the number of shares represented at the meeting
and their count of all votes and ballots. The inspectors may appoint or retain
other persons or entities to assist the inspectors in the performance of the
duties of the inspectors.
(c) POLLS. The date and time of the opening and the closing of the
polls for each matter upon which the stockholders will vote at a meeting shall
be announced at the meeting. No ballot, proxies or votes, nor any revocations
thereof or changes thereto, shall be accepted by the inspectors after the
closing of the Polls unless the Court of Chancery upon application by a
stockholder shall determine otherwise.
(d) RECONCILIATION OF PROXIES AND BALLOTS. In determining the validity
and counting of proxies and ballots, the inspectors shall be limited to an
examination of the proxies, any envelopes submitted with those proxies, any
information transmitted in accordance with section 3.06, ballots and the regular
books and records of the corporation, except that the inspectors may consider
other reliable information for the limited purpose of reconciling proxies and
ballots submitted by or on behalf of banks, brokers, their nominees or similar
persons which represent more votes than the holder of a proxy is authorized by
the record owner to cast or more votes than the stockholder holds of record. If
the inspectors consider other reliable information for the limited purpose
permitted herein, the inspectors at the time they make their certification
pursuant to subsection (b) shall specify the precise information considered by
them including the person or persons from whom they obtained the information,
when the information was obtained, the means by which the information was
obtained and the
<PAGE>
basis for the inspectors' belief that such information is accurate and reliable.
ARTICLE IV
PROCEDURES FOR ACTION BY WRITTEN CONSENT
SECTION 4.01. REQUEST FOR RECORD DATE.
(a) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting shall be as fixed by
the Board of Directors or as otherwise established under this Section 4.01. Any
person seeking to have the stockholders authorize or take corporate action by
written consent without a meeting shall, by written notice addressed to the
Secretary and delivered to the Corporation and signed by a stockholder of
record, request that a record date be fixed for such purpose. The written notice
shall contain at a minimum the information set forth in Section 4.01 (b) below.
The Board of Directors shall have ten (10) days following the date of receipt of
the notice to determine the validity of the request. Following the determination
of the validity of the request, and (subject to Section 4.01(b) no later than
ten (10) days after the date on which such request is received by the
Corporation, the Board of Directors may fix a record date for such purpose which
shall be no more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors and shall not
precede the date such resolution is adopted. If the Board of Directors fails
within ten (10) days after the date the Corporation receives such notice to fix
a record date for such purpose, the record date shall be the day on which the
first written consent is delivered to the Corporation in the manner described in
Section 4.03 below unless prior action by the Board of Directors is required
under the General Corporation Law of the State of Delaware (the "GCL"), in which
event the record date shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action.
(b) Any stockholder's notice required by this Section 4.01 shall
describe each action that the stockholder proposes to take by consent. For each
such proposal, the notice shall set forth (i) the text of the proposal
(including the text of any resolutions to be adopted by consents and the
language of any proposed amendment to the Bylaws of the Corporation), (ii) the
reasons for soliciting consent for the proposal, (iii) any material interest in
the proposal held by the stockholder and the beneficial owner, if any, on whose
behalf the action is to be taken, and (iv) any other information relating to the
stockholder, the beneficial owner, or the proposal that would be required to be
disclosed in filings in connection with the solicitation of proxies or consents
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. To the extent the proposed action by consent involves
the election of Directors, the notice shall set forth as to each person whom the
stockholder proposes to elect as a Director (i) the name, age, business address,
residence address and nationality of the person, (ii) the principal occupation
and employment of the person, (iii) the class or
<PAGE>
series and number of shares of capital stock of the Corporation which 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 filings required to be
made in connection with solicitations of proxies or consents for the election of
Directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. In addition to the foregoing, the notice
shall set forth as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the notice is given (i) the name and address of
such stockholder as they appear on the Corporation's books, and the name and
address of such beneficial owner, (ii) the class and number of shares of capital
stock of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner, (iii) a description of all arrangements
or understandings between such stockholder and any other person or persons
relating to the proposed action by consent, (iv) a representation whether the
stockholder or the beneficial owner, if any, intends or is part of a group which
intends to (1) deliver a proxy statement and/or consent solicitation statement
to holders of at least the percentage of the Corporation's outstanding capital
stock required to effect the action by consent either to solicit consents or to
solicit proxies to execute consents, and/or (2) otherwise solicit proxies or
consents from stockholders in support of the action to be taken by consent, and
(v) any other information relating to such stockholder and beneficial owner that
would be required to be disclosed in filings required to be made in connection
with solicitation of proxies or consents relating to the proposed action by
consent pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. During the ten (10) day period following the date of the
receipt of the notice required under Section 4.01(a), the Corporation may
require the stockholder of record and/or beneficial owner requesting a record
date for proposed stockholder action by consent to furnish such other
information as it may reasonably require to determine the validity of the
request for a record date.
SECTION 4.02 FORM OF CONSENT.
Every written consent purporting to take or authorize the taking of
corporate action and/or related revocations (a "Consent") shall bear the date of
signature of each stockholder who signs the Consent, and no Consent shall be
effective to take the corporate action referred to therein unless, within 60
days of the earliest date the Consent is delivered in the manner required by
Section 2.07, Consents signed by a sufficient number of stockholders to take
such action are so delivered to the Corporation.
SECTION 4.03 DELIVERY OF CONSENT.
A Consent shall be delivered to the Corporation by delivery to its
registered office in the State of Delaware or to the Secretary of the
Corporation at the Corporation's principal place of business. Delivery to the
Corporation's registered office shall be made by hand or by certified or
registered mail, return receipt requested.
<PAGE>
In the event of the delivery to the Corporation of a Consent, the
Secretary of the Corporation shall provide for the safe-keeping of such Consent
and shall promptly conduct such ministerial review of the sufficiency of the
Consents and of the validity of the action to be taken by stockholder consent as
the Secretary deems necessary or appropriate, including, without limitation,
whether the holders of a number of shares having the requisite voting power to
authorize or take the action specified in the Consent have given consent;
PROVIDED, HOWEVER, that if the corporate action to which the Consent relates is
the removal or replacement of one or more members of the Board of Directors, the
Secretary of the Corporation shall promptly designate two persons, who shall not
be members of the Board of Directors, to serve as Inspectors with respect to
such Consent and such Inspectors shall discharge the functions of the Secretary
of the Corporation under this Section 4.03. If after such investigation the
Secretary or the Inspectors (as the case may be) shall determine that the
Consent is valid and that the action therein specified has been validly
authorized, that fact shall forthwith be certified on the records of the
Corporation kept for the purpose of recording the proceedings of meetings of
stockholders, and the Consent shall be filed in such records, at which time the
Consent shall become effective as stockholder action. In conducting the
investigation required by this Section 4.03, the Secretary or the Inspectors (as
the case may be) may, at the expense of the Corporation retain special legal
counsel and any other necessary or appropriate professional advisors, and such
other personnel as they may deem necessary or appropriate to assist them, and
shall be fully protected in relying in good faith upon the opinion of such
counsel or advisors.
No action by written consent without a meeting shall be effective until
such date as the Secretary or the Inspectors (as the case may be) certify to the
Corporation that the Consents delivered to the Corporation in accordance with
this Section 4.03 represent at least the minimum number of votes that would be
necessary to take the action. To the extent the proposed action by consent
involves the election of Directors, if such consent is less than unanimous, such
action by written consent may be in lieu of holding an Annual Meeting only if
all of the directorships to which Directors could be elected at an Annual
Meeting held at the effective time of such action are vacant and are filled by
such action.
Nothing contained in Section 4.01, 4.02 or 4.03 shall in any way be
construed to suggest or imply that the Board of Directors or any stockholder
shall not be entitled to contest the validity of any Consent or revocation
thereof, whether before or after such certification by the Secretary or the
Inspectors, or to take any other action (including, without limitation, the
commencement, prosecution, or defense of any litigation with respect thereto,
and the seeking of injunctive relief in such litigation).
<PAGE>
ARTICLE V
BOARD OF DIRECTORS
SECTION 5.01. POWERS.
All powers vested by law in the corporation shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the Board of Directors.
SECTION 5.02. NUMBER.
Subject to the provisions of the certificate of incorporation, the
Board of Directors shall consist of such number of directors as may be
determined from time to time by resolution adopted by a vote of a majority of
the entire Board of Directors.
SECTION 5.03. TERM OF OFFICE.
Directors of the corporation shall hold office until the next annual
meeting of stockholders and until their successors shall have been elected and
qualified, except in the event of death, resignation or removal.
SECTION 5.04. VACANCIES.
(a) Vacancies resulting from an increase in the number of directorships
shall be filled by a vote of the majority of the shares entitled to vote in
elections of Directors. Vacancies resulting from any other reason may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and a director so chosen shall hold office until the
next annual election of the class for which such director shall have been
elected and until a successor is duly elected and qualified. If there are no
directors in office, then an election of directors may be held in the manner
provided by statute.
SECTION 5.05. RESIGNATIONS.
Any director may resign at any time upon written notice to the
chairman, president or secretary of the corporation. The resignation shall be
effective upon receipt thereof by the corporation or at such subsequent time as
shall be specified in the notice of resignation and, unless otherwise specified
in the notice, the acceptance of the resignation shall not be necessary to make
it effective.
SECTION 5.06. ORGANIZATION.
At every meeting of the Board of Directors, the Chairman of the Board,
if there be one, or, in the case of a vacancy in the office or absence of the
Chairman of the
<PAGE>
Board, one of the following officers present in the order stated: the president,
the vice chairman, if one has been appointed, the vice presidents in their order
of rank and seniority, or a chairman chosen by a majority of the directors
present, shall preside, and the secretary, or, in the absence of the secretary,
an assistant secretary, or in the absence of the secretary and the assistant
secretaries, any person appointed by the chairman of the meeting, shall act as
secretary.
SECTION 5.07. PLACE OF MEETING.
Meetings of the Board of Directors, both regular and special, shall be
held at such place within or without the State of Delaware as the Board of
Directors may from time to time determine, or as may be designated in the notice
of the meeting.
SECTION 5.08. REGULAR MEETINGS.
Regular meetings of the Board of Directors shall be held without notice
at such time and place as shall be designated from time to time by resolution of
the Board of Directors.
SECTION 5.09. SPECIAL MEETINGS.
Special meetings of the Board of Directors shall be held whenever
called by the Chairman or by a majority of the Directors.
SECTION 5.10. QUORUM, MANNER OF ACTING AND ADJOURNMENT.
(a) GENERAL RULE. At all meetings of the board a majority of the total
number of directors in office shall constitute a quorum for the transaction of
business. The vote of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the Board of Directors, except as
may be otherwise specifically provided by the DGCL or by the certificate of
incorporation. If a quorum is not present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present.
(b) UNANIMOUS WRITTEN CONSENT. Unless otherwise restricted by the
certificate of incorporation, these by-laws or the DGCL any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting, if all members of the board consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the board.
(c) Members of the Board may participate in a meeting by means of
conference telephone or similar communications equipment by means of which all
<PAGE>
persons participating in the meeting can hear each other.
SECTION 5.11. COMMITTEES OF THE BOARD.
(a) ESTABLISHMENT. The Board of Directors may, by resolution adopted by
a majority of the entire board, establish one or more committees, each committee
to consist of one or more directors. The board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee and the alternate or alternates, if
any, designated for such member, the member or members of the committee present
at any meeting and not disqualified from voting, whether or not they constitute
a quorum, may unanimously appoint another director to act at the meeting in the
place of any such absent or disqualified member.
(b) POWERS. Any such committee, to the extent provided in the
resolution establishing such committee, shall have and may exercise all the
power and authority of the Board of Directors in the management of the business
and affairs of the corporation and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to the following matters: (i) approving or
adopting, or recommending to the stockholders, any action or matter expressly
required by the DGCL to be submitted to stockholders for approval or (ii)
adopting, amending or repealing any By-law of the corporation. Such committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors. Each committee so formed shall
keep regular minutes of its meetings and report the same to the Board of
Directors when required.
(c) COMMITTEE PROCEDURES. The term "Board of Directors" or "board,"
when used in any provision of these Bylaws relating to the organization or
procedures of or the manner of taking action by the Board of Directors, shall be
construed to include and refer to any committee of the board.
SECTION 5.12. COMPENSATION OF DIRECTORS.
Unless otherwise restricted by the certificate of incorporation, the
Board of Directors shall have the authority to fix the compensation of
directors. The directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
<PAGE>
SECTION 5.13. QUALIFICATIONS AND ELECTION OF DIRECTORS.
(a) All directors of the corporation shall be natural persons of full
age, but need not be residents of Delaware or stockholders of the corporation.
Except in the case of vacancies, directors shall be elected by the stockholders
(b) Nominations of persons for election to the Board of Directors of
the corporation may be made at a meeting of stockholders by or at the direction
of the Board of Directors.
(c) Nominations of persons for election to the Board of Directors of
the corporation may also be made by any stockholder of the corporation entitled
to vote for the election of directors at the meeting who complies with the
notice procedures set forth in Section 2.04
SECTION 5.14. VOTING OF STOCK.
Unless otherwise ordered by the Board of Directors, each of the
Chairman of the Board, the president, and the principal accounting officer (as
identified in the corporation's most recent report filed with the United States
Securities and Exchange Commission) shall have full power and authority, on
behalf of the corporation, to attend and to act and vote, in person or by proxy,
at any meeting of the stockholders of any company in which the corporation may
hold stock, and at any such meeting shall possess and may exercise any and all
of the rights and powers incident to the ownership of such stock which, as the
owner thereof, the corporation might have possessed and exercised if present.
The Board of Directors, by resolution adopted from time to time, may confer like
powers upon any other person or persons.
SECTION 5.15. ENDORSEMENT OF SECURITIES FOR TRANSFER.
Each of the Chairman of the Board, the president, and the principal
accounting officer shall have the power to endorse and deliver for sale,
assignment or transfer certificates for stock, bonds or other securities,
registered in the name of or belonging to the corporation, whether issued by the
corporation or by any other corporation, government, state or municipality or
agency thereof, and the Board of Directors from time to time may confer like
power upon any other officer, agent or person by resolution adopted from time to
time. Every such endorsement shall be countersigned by the treasurer or an
assistant treasurer.
<PAGE>
ARTICLE VI
OFFICERS
SECTION 6.01. NUMBER, QUALIFICATIONS AND DESIGNATION.
The officers of the corporation shall be chosen by the Board of
Directors and shall be a president, one or more vice presidents, a secretary, a
treasurer, and such other officers as may be elected in accordance with the
provisions of section 6.03 of this Article. Any number of offices may be held by
the same person. Officers may, but need not, be directors or stockholders of the
corporation. The Board of Directors may elect from among the members of the
board a Chairman of the Board and a vice Chairman of the Board.
SECTION 6.02. ELECTION AND TERM OF OFFICE.
The officers of the corporation, except as elected by delegated
authority pursuant to section 6.03 of this Article, shall be elected annually by
the Board of Directors, and each such officer shall hold office for a term of
one year and until a successor is elected and qualified, or until his or her
earlier resignation or removal. Any officer may resign at any time upon written
notice to the corporation.
SECTION 6.03. SUBORDINATE OFFICERS, COMMITTEES AND AGENTS.
The Board of Directors may from time to time elect such other officers
and appoint such committees, employees or other agents as it deems necessary,
who shall hold their offices for such terms and shall exercise such powers and
perform such duties as are provided in these Bylaws, or as the Board of
Directors may from time to time determine. The Board of Directors may delegate
to any officer or committee the power to elect subordinate officers and to
retain or appoint employees or other agents, or committees thereof, and to
prescribe the authority and duties of such subordinate officers, committees,
employees or other agents.
SECTION 6.04. THE CHAIRMAN OF THE BOARD.
The Chairman of the Board shall preside at all the meetings of the
stockholders and of the Board of Directors, and shall have general supervision
over the business and operations of the corporation, subject, however, to the
control of the Board of Directors, and shall perform all duties incidental to
his or her office which may be required by law and all such other duties as are
properly required of him or her by the Board of Directors. He or She shall make
reports to the Board of Directors and the stockholders, and shall see that all
orders and resolutions of the Board of Directors and of any committee thereof
are carried into effect. In the absence or disability of the President, the
Chairman shall perform the duties of and have the authority of the President.
<PAGE>
SECTION 6.05. THE PRESIDENT.
The president shall, subject to the chairman, be the most senior
executive, the Chief Executive Officer, of the corporation and shall assist
the Chairman of the Board in the administration and operation of the
corporation's business and general supervision of its policies and affairs.
The president shall, in the absence of or because of the inability to act of
the Chairman of the Board, perform all duties of the Chairman of the Board
and preside at all meetings of stockholders and of the Board of Directors.
The president shall perform such other duties as may from time to time be
assigned to him by the Board of Directors or by the Chairman of the Board.
SECTION 6.06. THE SECRETARY.
The secretary, or an assistant secretary, shall attend all meetings of
the stockholders and of the Board of Directors and shall record the proceedings
of the stockholders and of the directors in a book or books to be kept for that
purpose; shall see that notices are given and records and reports properly kept
and filed by the corporation as required by law; shall be the custodian of the
seal of the corporation and see that it is affixed to all documents to be
executed on behalf of the corporation under its seal; and, in general, shall
perform all duties incident to the office of secretary, and such other duties as
may from time to time be assigned by the Board of Directors or the Chairman of
the Board.
SECTION 6.07. THE TREASURER.
The treasurer, or an assistant treasurer, shall have or provide for the
custody of the funds or other property of the corporation; shall collect and
receive or provide for the collection and receipt of moneys earned by or in any
manner due to or received by the corporation shall deposit all funds in his or
her custody as treasurer in such banks or other places of deposit as the Board
of Directors may from time to time designate; whenever so required by the Board
of Directors, shall render an account showing his or her transactions as
treasurer and the financial condition of the corporation; and, in general, shall
discharge such other duties as may from time to time be assigned by the Board of
Directors or the Chairman of the Board.
SECTION 6.08. OFFICERS' BONDS.
No officer of the corporation need provide a bond to guarantee the
faithful discharge of the officer's duties unless the Board of Directors shall
by resolution so require a bond in which event such officer shall give the
corporation a bond (which shall be renewed if and as required) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of office.
<PAGE>
SECTION 6.09. SALARIES.
The salaries of the officers and agents of the corporation elected by
the Board of Directors shall be fixed from time to time by the Board of
Directors.
ARTICLE VII
CERTIFICATES OF STOCK, TRANSFER, ETC.
SECTION 7.01. FORM AND ISSUANCE.
(a) ISSUANCE. The shares of the corporation shall be represented by
certificates unless the Board of Directors shall by resolution provide that some
or all of any class or series of stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until the
certificate is surrendered to the corporation. Notwithstanding the adoption of
any resolution providing for uncertificated shares, every holder of stock
represented by certificates and upon request every holder of uncertificated
shares shall be entitled to have a certificate signed by, or in the name of the
corporation by, the chairman or vice Chairman of the Board of Directors, or the
president or vice president, and by the treasurer or an assistant treasurer, or
the secretary or an assistant secretary, representing the number of shares
registered in certificate form.
(b) FORM AND RECORDS. Stock certificates of the corporation shall be in
such form as approved by the Board of Directors. The stock record books and the
blank stock certificate books shall be kept by the secretary or by any agency
designated by the Board of Directors for that purpose. The stock certificates of
the corporation shall be numbered and registered in the stock ledger and
transfer books of the corporation as they are issued.
(c) SIGNATURES. Any of or all the signatures upon the stock
certificates of the corporation may be a facsimile. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed upon, any share certificate shall have ceased to be such officer,
transfer agent or registrar, before the certificate is issued, it may be issued
with the same effect as if the signatory were such officer, transfer agent or
registrar at the date of its issue.
SECTION 7.02. TRANSFER.
Transfers of shares shall be made on the share register or transfer
books of the corporation upon surrender of the certificate therefor, endorsed by
the person named in the certificate or by an attorney lawfully constituted in
writing.
<PAGE>
SECTION 7.03. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES.
The Board of Directors may direct a new certificate of stock or
uncertificated shares to be issued in place of any certificate theretofore
issued by the corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming the certificate
of stock to be lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the Board of Directors may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or the legal
representative of the owner, to give the corporation a bond sufficient to
indemnify against any claim that may be made against the corporation on account
of the alleged loss, theft or destruction of such certificate or the issuance of
such new certificate or uncertificated shares.
SECTION 7.04. RECORD HOLDER OF SHARES.
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends, and
to vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware.
SECTION 7.05. DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) MEETINGS OF STOCKHOLDERS. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than 60 nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting unless the Board of
Directors fixes a new record date for the adjourned meeting.
(b) DIVIDENDS AND OTHER LAWFUL ACTION. In order that the corporation
may determine the stockholders entitled to receive payment of any dividend or
other distribution or allotment of any rights of the stockholders entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action (other then stockholder action by
written consent), the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted, and which record date shall be
<PAGE>
not more than 60 days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. DIVIDENDS.
Subject to the restrictions contained in the DGCL and any restrictions
contained in the certificate of incorporation, the Board of Directors may
declare and pay dividends upon the shares of capital stock of the corporation.
SECTION 8.02. CONTRACTS.
Except as otherwise provided in these Bylaws, the Board of Directors
may authorize any officer or officers including the chairman and vice Chairman
of the Board of Directors, or any agent or agents, to enter into any contract or
to execute or deliver any instrument on behalf of the corporation and such
authority may be general or confined to specific instances. Any officer so
authorized may, unless the authorizing resolution otherwise provides, delegate
such authority to one or more subordinate officers, employees or agents, and
such delegation may provide for further delegation.
SECTION 8.03. CORPORATE SEAL.
The corporation shall have a corporate seal, which shall have inscribed
thereon the name of the corporation, the year of its organization and the word
"Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
SECTION 8.04. CHECKS, NOTES, ETC.
All checks, notes and evidences of indebtedness of the corporation
shall be signed by such person or persons as the Board of Directors may from
time to time designate.
SECTION 8.05. CORPORATE RECORDS.
(a) EXAMINATION BY STOCKHOLDERS. Every stockholder shall, upon written
demand under oath stating the purpose thereof, have a right to examine, in
person or by agent or attorney, during the usual hours for business, for any
proper purpose, the stock ledger, list of stockholders, books or records of
account, and records of the
<PAGE>
proceedings of the stockholders and directors of the corporation, and to make
copies or extracts therefrom. A proper purpose shall mean a purpose reasonably
related to such person's interest as a stockholder. In every instance where an
attorney or other agent shall be the person who seeks the right to inspection,
the demand under oath shall be accompanied by a power of attorney or such other
writing which authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the corporation at its
registered office in Delaware or at its principal place of business. Where the
stockholder seeks to inspect the books and records of the corporation, other
than its stock ledger or list of stockholders, the stockholder shall first
establish (1) that the stockholder has complied with the provisions of this
section respecting the form and manner of making demand for inspection of such
documents; and (2) that the inspection sought is for a proper purpose. Where the
stockholder seeks to inspect the stock ledger or list of stockholders of the
corporation and has complied with the provisions of this section respecting the
form and manner of making demand for inspection of such documents, the burden of
proof shall be upon the corporation to establish that the inspection sought is
for an improper purpose.
(b) EXAMINATION BY DIRECTORS. Any director shall have the right to
examine the corporation's stock ledger, a list of its stockholders and its other
books and records for a purpose reasonably related to the person's position as a
director.
SECTION 8.06. AMENDMENT OF BYLAWS.
Except as otherwise provided herein, these Bylaws may be altered,
amended or repealed or new Bylaws may be adopted, if notice thereof is contained
in the notice of the meeting, either (1) by majority vote of the stockholders at
a duly organized annual or special meeting of stockholders or (2) by vote of a
majority of the entire Board of Directors at any regular or special meeting of
directors.
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