<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-Q
(Mark One)
/ / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended ___________________________________________
OR
/X/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from January 1, 2000 to March 31, 2000
--------------- --------------
Commission file number 1-9348
------
MINOLTA - QMS, INC.
-------------------
(Exact name of registrant as specified in its charter)
DELAWARE 63-0737870
______________________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
ONE MAGNUM PASS, MOBILE, AL 36618
________________________________________________________________________________
(Address of principal executive offices) (Zip Code)
(334) 633-4300
________________________________________________________________________________
(Registrant's telephone number, including area code)
QMS, INC.
________________________________________________________________________________
(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
---------- ------------
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of the issuer's common stock, as of the latest practicable date
13,266,131 at April 28, 2000.
- -----------------------------
1
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MINOLTA - QMS, INC. AND SUBSIDIARIES
====================================
INDEX
-----
PART I - FINANCIAL INFORMATION PAGE NUMBER
--------------------- -----------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (unaudited)
as of March 31, 2000, and December 31, 1999 3-4
Condensed Consolidated Statements of Operations
(unaudited) for the three months ended
March 31, 2000, and April 2, 1999 5
Condensed Consolidated Statements of Comprehensive
Loss (unaudited) for the three months ended
March 31, 2000, and April 2, 1999 6
Condensed Consolidated Statements of Cash Flows
(unaudited) for the three months ended
March 31, 2000, and April 2, 1999 7
Notes to Condensed Consolidated Financial Statements
(unaudited) 8-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-15
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 16
PART II - OTHER INFORMATION 17
-----------------
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. (a) Exhibits
(b) Reports on Form 8 - K
SIGNATURES 18
2
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MINOLTA - QMS, INC. AND SUBSIDIARIES
====================================
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
as of March 31, 2000, and December 31, 1999
(Unaudited)
March 31, December 31,
in thousands 2000 1999
- -------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 3,922 $ 3,505
Trade Receivables (less allowance for doubtful
accounts of $1,292 at March 31, 2000, and $666
at December 31, 1999) 52,254 39,926
Note Receivable, Net 239 239
Inventories, Net (Note 5) 45,861 56,987
Deferred income taxes 3,975 3,202
Other Current Assets 4,431 5,946
-------- --------
Total Current Assets 110,682 109,805
-------- --------
PROPERTY, PLANT, AND EQUIPMENT 41,245 40,211
Less Accumulated Depreciation 33,318 33,743
-------- --------
Total Property, Plant, and Equipment, Net 7,927 6,468
CAPITALIZED AND DEFERRED SOFTWARE, NET 9,484 9,481
GOODWILL, NET 20,926 21,773
OTHER ASSETS, NET 4,486 3,679
-------- --------
TOTAL ASSETS $153,505 $151,206
======== ========
See Notes to Condensed Consolidated Financial Statements
3
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MINOLTA - QMS, INC. AND SUBSIDIARIES
====================================
CONDENSED CONSOLIDATED BALANCE SHEETS
as of March 31, 2000, and December 31, 1999
(Unaudited)
March 31, December 31,
in thousands 2000 1999
- ----------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 30,692 $ 37,678
Revolving Credit Loans (Note 8) 33,745 26,840
Current Maturities of Long-Term Debt 8,203 5,616
Current Maturities of Capital Lease Obligations 698 568
Employment Costs 4,732 5,003
Deferred Service Revenue 3,193 5,156
Other Current Liabilities (Note 6) 11,930 14,523
-------- --------
Total Current Liabilities 93,193 95,384
LONG-TERM DEBT 43,674 37,148
LONG-TERM CAPITAL LEASE OBLIGATIONS 1,337 1,385
OTHER LIABILITIES 3,938 4,159
COMMITMENTS AND CONTINGENCIES (Note 11) -- --
-------- --------
STOCKHOLDERS' EQUITY (Notes 7 and 8) 11,363 13,130
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $153,505 $151,206
======== ========
See Notes to Condensed Consolidated Financial Statements
4
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MINOLTA - QMS, INC. AND SUBSIDIARIES
====================================
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2000, and April 2, 1999
(Unaudited)
Three Months Ended
------------------
March 31, April 2,
in thousands, except per share amounts 2000 1999
- ------------------------------------------------------------------------------
NET SALES $78,991 $43,366
COST OF SALES 58,664 33,325
------- -------
GROSS PROFIT 20,327 10,041
OPERATING EXPENSES 18,712 10,640
------- -------
OPERATING INCOME (LOSS) 1,615 (599)
OTHER INCOME (EXPENSE)
Interest Income 0 26
Interest Expense (1,703) (247)
Miscellaneous Expense (605) (37)
------- -------
Total Other Expense, net (2,308) (258)
------- -------
LOSS BEFORE INCOME TAXES (693) (857)
INCOME TAX PROVISION 246 34
------- -------
NET LOSS $ (939) $ (891)
======= =======
NET LOSS PER COMMON SHARE (Note 3)
Basic and Diluted $ (0.07) $ (0.08)
======= =======
SHARES USED IN PER SHARE COMPUTATION (Note 3)
Basic and Diluted 13,260 10,700
See Notes to Condensed Consolidated Financial Statements
5
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MINOLTA - QMS, INC. AND SUBSIDIARIES
====================================
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the Three Months Ended March 31, 2000, and April 2, 1999
(Unaudited)
Three Months Ended
---------------------
March 31, April 2,
in thousands 2000 1999
- -------------------------------------------------------------------------
Net Loss $ (939) $ (891)
Other Comprehensive Loss (no income
tax effect):
Foreign Currency Translation Adjustments (859) (242)
Unrealized Gain on Securities 31 0
------- -------
Total Other Comprehensive Loss (828) (242)
------- -------
Comprehensive Loss $(1,767) $(1,133)
======= =======
See Notes to Condensed Consolidated Financial Statements
6
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MINOLTA - QMS, INC. AND SUBSIDIARIES
====================================
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2000, and April 2, 1999
(Unaudited)
Three Months Ended
--------------------
March 31, April 2,
in thousands 2000 1999
- --------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net Loss $ (939) $ (891)
Adjustments to Reconcile Net Loss to Net Cash
Used in Operating Activities:
Depreciation of Property, Plant and Equipment 798 596
Amortization of Goodwill 847 0
Amortization of Capitalized and Deferred Software 2,319 2,288
Provision for Losses on Accounts and Notes Receivable 522 50
Provision (Recovery) for Losses on Inventory (2,752) 717
Other 144 (12)
Net Change in Assets and Liabilities that Provided
(Used) Cash:
Trade Receivables (12,954) (5,050)
Inventories, Net 13,878 (4,930)
Accounts Payable (6,986) 7,794
Other (5,789) (1,705)
-------- -------
Net Cash Used in Operating Activities (10,912) (1,143)
-------- -------
Cash Flows from Investing Activities:
Collections of Notes Receivable 104 172
Purchase of Property, Plant and Equipment (2,257) (601)
Proceeds from Disposal of Property, Plant and Equipment 0 29
Additions to Capitalized and Deferred Software Costs (2,322) (2,610)
-------- -------
Net Cash Used in Investing Activities (4,475) (3,010)
-------- -------
Cash Flows from Financing Activities:
Net Proceeds from Revolving Credit Loans 6,905 3,531
Proceeds from Long-Term Debt 10,000 0
Payments of Long-Term Debt and Capital Lease Obligations (1,036) (78)
Other (65) (2)
-------- -------
Net Cash Provided by Financing Activities 15,804 3,451
-------- -------
Net Change in Cash and Cash Equivalents 417 (702)
Cash and Cash Equivalents at Beginning of Period 3,505 1,707
-------- -------
Cash and Cash Equivalents at End of Period $ 3,922 $ 1,005
======== =======
See Notes to Condensed Consolidated Financial Statements
7
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MINOLTA - QMS, INC. AND SUBSIDIARIES
====================================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. MANAGEMENT OPINION
In the opinion of management, the condensed consolidated financial statements
reflect all adjustments necessary to present fairly the financial position of
the Company as of March 31, 2000, the results of operations and changes in
cash flows for the three months ended March 31, 2000, and April 2, 1999. The
results of operations for the three months ended March 31, 2000, are not
necessarily indicative of the results to be expected for the fiscal year
ending March 30, 2001. Certain reclassifications have been made to fiscal
1999 amounts to conform to the transitional period ending March 31, 2000,
presentation.
2. FISCAL YEAR AND NAME CHANGE AND TRANSITION PERIOD
On October 8, 1999, the Company's Board of Directors modified its accounting
periods effective in fiscal 2000, from a fiscal year ending on the Friday
closest to December 31 to a fiscal year ending on the Friday closest to March
31. Accordingly, this Form 10-Q is for the three-month transition period
ended on March 31, 2000. In connection with this fiscal year change, the
Company will include audited financial statements for this three-month
transition period ended March 31, 2000, in its annual report on Form 10-K for
its new fiscal year ending March 30, 2001.
On April 24, 2000 the Company's Shareholders approved changing the Company's
name to Minolta-QMS, Inc.
3. NET LOSS PER SHARE
Basic and diluted loss per share computations are based on the weighted
average number of common shares outstanding during the period. The diluted
loss per share does not included the effect of the assumed exercise of stock
options, as they are antidilutive.
4. COMPREHENSIVE LOSS
Comprehensive loss consists of net loss and foreign currency translation
adjustments and is reflected in the Condensed Consolidated Statements of
Comprehensive Loss. Due to the Company's available operating loss
carryforwards, there was no income tax effect related to the components of
other comprehensive loss for any of the periods presented.
8
<PAGE>
5. INVENTORIES
Inventories at March 31, 2000, and December 31, 1999, are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ----------
<S> <C> <C>
Raw materials $ 9,088 $ 13,705
Work in process 1,227 16,191
Finished goods 41,421 35,718
Inventory reserve (5,875) (8,627)
----------- ----------
TOTAL $45,861 $ 56,987
=========== ==========
</TABLE>
6. OTHER CURRENT LIABILITIES
Other current liabilities at March 31, 2000, and December 31, 1999, are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- ----------
<S> <C> <C>
Warranty accrual $ 3,280 $ 2,979
Management transition expense 1,864 1,809
Reserves for restructuring charges 1,698 3,980
Other 5,088 5,755
---------- ----------
TOTAL $ 11,930 $14,523
========== ==========
</TABLE>
The decrease in the reserves for restructuring charges at March 31, 2000
resulted from payments made during the period.
7. LEASE AGREEMENT
An operating lease agreement contains various covenants and a provision
which requires the lessor's approval of the Company's payment of cash
dividends. At October 3, 1997, and October 2, 1998, the Company was not in
compliance with the minimum Net Worth covenant contained in the lease
agreement. On December 8, 1997, the Company obtained a one-year waiver of
non-compliance from the lessor through October 5, 1998, in exchange for $1.3
million in prepaid rent and an amendment to a related warrant agreement to
purchase 100,000 shares of the Company's common stock at $4 per share.
Warrants granted under this agreement are exercisable through December 31,
2001. On November 17, 1998, the Company obtained a continuation of the waiver
of non-compliance from the lessor through December 31, 1999, in exchange for
continuing the $1.3 million in prepaid rent. On June 7, 1999, the Company
obtained a waiver agreement and lease amendment for the transactions related
to the Minolta convergence and reacquisition of the European and Australian
subsidiaries.
At March 31, 2000, the Company was in violation of several financial
covenants contained in the operating lease agreement. Among the remedies
available to the landlord is the acceleration of all remaining base rent on a
discounted basis for the initial lease term (approximately $13.0 million),
cancellation of the lease, or all other remedies available by law. The
violations of the financial covenants in the lease agreement will also
constitute an event of default under the Harris revolving credit agreement
(see note 8).
9
<PAGE>
On March 10, 2000 the Company received a letter of intent from its landlord
indicating its willingness to sell the leased property for the greater of
$14.0 million or an appraised value, based upon a mutually agreed to process,
provided such sale is consummated no later than May 31, 2000. Management
believes it is probable that negotiations to complete the purchase of the
property and cancel the operating lease agreement will be successful, and
the Company's parent (Minolta Investments Company) has agreed to provide the
funding necessary to consummate such purchase. In addition, on March 20,
2000, the Company obtained a waiver of the cross covenant contained in the
Harris revolving credit agreement.
8. FINANCING AGREEMENTS
Amounts borrowed at March 31, 2000 and December 31, 1999, consist of $33.7
million and $26.8 million, respectively, under secured revolving credit
agreements.
On August 19, 1999, the Company entered into an agreement with Harris Trust
and Savings Bank ("Harris"). This credit facility provides for a revolving
line of credit through August 2002 with maximum availability of $20.0
million, secured by the Company's domestic and Canadian accounts receivable
and inventory. At March 31, 2000, total availability was $19.8 million and
$10.0 million was outstanding. The stated rate of interest for any borrowings
under the agreement is one-quarter of one percent (0.25) over prime or London
Interbank Offered Rate ("LIBOR") plus three percent. The effective rate at
March 31, 2000, was 9.25%.
In compliance with Financial Accounting Standards Board ("FASB") Emerging
Issues Task Force Issue No. 95-22, "Balance Sheet Classification of
Borrowings Outstanding Under Revolving Credit Arrangements That Include a
Subjective Acceleration Clause and a Lock-Box Arrangement," the Harris credit
facility is classified as short-term debt in the financial statements.
The Company was not in compliance with certain of the Harris financial
covenants at December 31, 1999. A waiver of non-compliance was received from
the lender on March 2, 2000 and is extended until an agreement is reached on
revised covenants. An event of default under the Harris agreement also
occurred at March 31, 2000, as a result of the Company's conditions of
continued non-compliance with an operating lease agreement. Under the terms
of the letter of intent from the landlord, the Company is presently
negotiating the purchase of the leased property and cancellation of the
operating lease agreement (see Note 7). Accordingly, on March 20, 2000, the
Company obtained a waiver of this cross covenant from Harris.
At March 31, 2000, the Company's wholly owned subsidiary, QMS B.V., had
borrowings of $23.7 million under the revolving credit facilities with ING
Bank N.V., Ing. Mezzanine Fonds B.V. and NMB Heller N.V. (collectively
"Heller") through February 2001. Total borrowing capacity under this
agreement is based on a percentage of eligible accounts receivable and
inventory and is secured by these assets. At March 31, 2000, total
availability was $27.1 million and $23.7 million was outstanding. The
stated rate of interest for any borrowings under this agreement is Amsterdam
Interbank Offered Rate ("AIBOR") plus 1.25% with a minimum of 4% per annum
(5.75% at March 31, 2000). The Company was not in compliance with the Heller
required minimum stockholders' equity covenant at March 31, 2000. A waiver of
non-compliance was received from the lender. The Heller credit facility
requires lender approval for payment of dividends from QMS B.V., to
Minolta-QMS, Inc.
On February 4, 2000, the Company received a $10 million loan from Minolta.
This loan is payable in thirty-six principal installments. The stated
interest rate is LIBOR plus 2.5% payable monthly in arrears. Proceeds of this
loan will be used for corporate working capital purposes.
9. SEGMENT REPORTING
10
<PAGE>
The Company has three geographic reportable segments: United
States/Canada/Latin America; Japan; and Europe/Australia. Each segment's
operations consist of the manufacture and sale of network printing solutions
and related servicing activities, albeit at varying levels by segment. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies in the Company's 1999 Annual
Report on Form 10-K. The Company evaluates segment performance based on
operating profit (loss). Sales for each segment are based on the locations
of the third-party customer. All intercompany transactions between segments
have been eliminated. Segment results for the three months ended March 31,
2000, and April 2, 1999, are as follows (in thousands):
<TABLE>
<CAPTION>
March 31, April 2,
2000 1999
-------- -------
<S> <C> <C>
NET SALES
U.S./Canada/Latin America $ 28,773 $33,920
Japan 5,164 9,446
Europe/Australia 45,054 0
-------- -------
Total Net Sales $ 78,991 $43,366
======== =======
Operating Income (loss)
U.S./Canada/Latin America $ 1,504 $ (386)
Japan (1,025) (213)
Europe/Australia 1,136 0
-------- -------
Segment Operating Income (loss) 1,615 (599)
Other expense (2,308) (258)
-------- -------
Total Loss Before Income Taxes $ (693) $ (857)
======== =======
</TABLE>
There was no material change in segment identifiable assets during the period.
10. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," which will be effective
(as amended) for the Company in fiscal 2002. This Statement requires that
all derivatives be recognized in the statement of financial position as
either assets or liabilities and measured at fair value. In addition, all
hedging relationships must be designated, reassessed and documented pursuant
to the provisions of SFAS No. 133. The Company's management has not yet
determined the effect SFAS No. 133 will have on its consolidated financial
statements.
11. COMMITMENTS AND CONTINGENCIES
11
<PAGE>
As of March 31, 2000, the Company had commitments of approximately $57.7
million under contracts to purchase print engines and consumables and
approximately $16.7 million under contracts to purchase spares and related
components.
The Company is a defendant in various litigation and claims in the normal
course of business. Based on consultation with various counsel in these
matters, management is of the opinion that the ultimate resolution of such
litigation and claims will not materially affect the Company's financial
position, results of operations, or cash flows.
12
<PAGE>
MINOLTA - QMS, INC. AND SUBSIDIARIES
====================================
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
On April 24, 2000, the Company's shareholders approved changing the Company's
name to Minolta-QMS, Inc.
Results of Operations
- ---------------------
Net loss for the three months ended March 31, 2000 was $.9 million ($.07 per
share) on net sales of $79.0 million compared to a net loss of $.9 million ($.08
per share) for the three months ended April 2, 1999, on net sales of $43.4
million.
Net Sales Comparisons for Key Geographic Locations
<TABLE>
<CAPTION>
Three months ended
----------------------------------
March 31, April 2,
(000's) 2000 1999 Difference
------- --------- --------- ----------
<S> <C> <C> <C>
U.S./Canada $ 26,863 $ 24,224 $ 2,639
Europe/Australia 45,054 9,065 35,989
Japan 5,164 9,446 (4,282)
Latin America 792 566 226
All Other 1,118 65 1,053
----------------------------------
Total $ 78,991 $ 43,366 $ 35,625
==================================
</TABLE>
Net sales for the three months ended March 31, 2000, increased 82.2% from net
sales for the three months ended April 2, 1999. The sales increase relates
primarily to the reacquisition of the Company's former European and Australian
subsidiaries, in June 1999.
During the three months ended March 31, 2000, total U.S. and Canadian sales
increased by 10.9% as compared to net sales for the three months ended
April 2, 1999. This was due mainly to the increased sales of color laser
printers and consumables in the U.S.
Japanese sales for the three months ended March 31, 2000, as compared to the
three months ended April 2, 1999, decrease by $4.3 million or 45.3%. This was
due primarily to the restructuring in Japan and a reduction in sales to certain
Asian markets.
The Company's gross profit for the three-month comparisons increased $10.3
million (from $10.0 million to $20.3 million), primarily as a result of higher
sales. Gross profit as a percentage of sales increased from 23.2% to 25.7%. This
was the result of improved margins on color laser printers.
The operating expenses including goodwill amortization increased by $8.1 million
for the three month comparisons. As a percentage of net sales, operating
expenses including goodwill amortization decreased from 24.5% to 23.7% for the
comparison. The increase in operating expenses including goodwill amortization
reflects additions of the European and Australian subsidiaries. The decrease in
operating expenses as a percentage of sales reflects the Company's continuing
strategy to align operating expenses with revenues.
Total other income and expense for the three months ended March 31, 2000, was a
net expense of $2.3 million. This was an increase of $2.0 million from the
three months ended April 2, 1999. The increase was primarily due to the
increase in interest expense and reflects the new short-term debt and long-term
debt incurred in connection with the Minolta convergence and the reacquisition
of the Company's former European subsidiary.
13
<PAGE>
Income taxes reflect estimated foreign income taxes of Minolta - QMS, Inc.'s
foreign subsidiaries and U.S. tax liabilities for foreign commissions earned.
Financial Condition
- -------------------
Accounts receivable grew by $12.3 million during the three month period ended
March 31, 2000, due to the addition of the Company's reacquired European
subsidiary. Inventories and accounts payable decreased by $11.1 million and $7.0
million, respectively. The decrease in inventory was primarily due to increased
emphasis by the Company on global supply management as it relates to purchasing
and manufacturing. The decrease in accounts payable followed the reduction of
the Company's inventory.
The Company expects its assets and liabilities to remain at higher levels due to
higher sales and production volumes from acquisitions.
Liquidity and Capital Resources
- -------------------------------
The Company's net working capital as of March 31, 2000, was $17.5 million as
compared to $14.4 million at December 31, 1999 and $12.5 million at April 2,
1999.
At March 31, 2000, the Company had cash on hand of $3.9 million and borrowings
of $10.0 million and $23.7 million under the revolving credit facilities with
Harris Trust and Savings Bank ("Harris") and Heller National Bank ("HNB"),
respectively. Total borrowing capacity under the facilities is a function of
eligible accounts receivable and inventory. At March 31, 2000, total
availability was $46.9 million, consisting of $19.8 million with Harris and
$27.1 million with HNB. The Company believes its current working capital
availability, including the effect of the acquisition, is adequate for its
operating needs.
The Company was not in compliance with certain of the Harris financial covenants
at December 31, 1999. A waiver of non-compliance was received from the lender
on March 2, 2000 and is extended until an agreement is reached on revised
covenants. An event of default under the Harris agreement also occurred at March
31, 2000, as a result of the Company's conditions of continued non-compliance
with an operating lease agreement. Under the terms of the letter of intent from
the landlord, the Company is presently negotiating the purchase of the leased
property and cancellation of the operating lease agreement (see Note 7).
Accordingly, on March 20, 2000, the Company obtained a waiver of this cross
covenant from Harris.
On February 4, 2000, the Company received a $10 million loan from Minolta. This
loan is payable in thirty-six principal installments. The stated interest rate
is LIBOR plus 2.5% payable monthly in arrears. Proceeds of this loan will be
used for corporate working capital purposes.
Lease Agreement
- ---------------
An operating lease agreement contains various covenants and a provision which
requires the lessor's approval of the Company's payment of cash dividends. At
October 3, 1997, and October 2, 1998, the Company was not in compliance with the
minimum Net Worth covenant contained in the lease agreement. On December 8,
1997, the Company obtained a one-year waiver of non-compliance from the lessor
through October 5, 1998, in exchange for $1.3 million in prepaid rent and an
amendment to a related warrant agreement to purchase 100,000 shares of the
Company's common stock at $4 per share. Warrants granted under this agreement
are exercisable through December 31, 2001. On
14
<PAGE>
November 17, 1998, the Company obtained a continuation of the waiver of non-
compliance from the lessor through December 31, 1999, in exchange for continuing
the $1.3 million in prepaid rent. On June 7, 1999, the Company obtained a waiver
agreement and lease amendment for the transactions related to the Minolta
convergence and reacquisition of the European and Australian subsidiaries.
At March 31, 2000, the Company was in violation of several financial covenants
contained in the operating lease agreement. Among the remedies available to the
landlord is the acceleration of all remaining base rent on a discounted basis
for the initial lease term (approximately $13.0 million), cancellation of the
lease, or all other remedies available by law. The violations of the financial
covenants in the lease agreement will also constitute an event of default under
the Harris revolving credit agreement (see note 8).
On March 10, 2000 the Company received a letter of intent from its landlord
indicating its willingness to sell the leased property for the greater of $14.0
million or appraised value, based upon a mutually agreed to process, provided
such sale is consummated no later than May 31, 2000. Management believes it is
probable that negotiations to complete the purchase of the property and cancel
the operating lease agreement will be successful, and the Company's parent
(Minolta Investments Company) has agreed to provide the funding necessary to
consummate such purchase. In addition, on March 20, 2000, the Company obtained a
waiver of the cross covenant contained in the Harris revolving credit agreement.
Foreign Currency Exchange Rates
- -------------------------------
The Company purchases print engine mechanisms and memory components from several
Japanese suppliers. Fluctuations in Japanese yen currency exchange rates will
affect the prices of these products. The Company is attempting to mitigate
negative impacts through yen-sharing arrangements with suppliers; however,
material price increases resulting from unfavorable exchange rate fluctuations
could adversely affect operating results.
The effect of yen fluctuations on material prices are also offset in part by
yen-based Japanese sales. Roughly 6.5% of all Company sales are in Japanese
yen, which causes sales and profit margins to increase when yen values increase.
Recently Issued Accounting Standards
- ------------------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which will be effective (as amended) for
the Company in fiscal 2002. This Statement requires that all derivatives be
recognized in the statement of financial position as either assets or
liabilities and measured at fair value. In addition, all hedging relationships
must be designated, reassessed and documented pursuant to the provisions of SFAS
No. 133. The Company's management has not yet determined the effect SFAS No.
133 will have on its consolidated financial statements.
15
<PAGE>
MINOLTA - QMS, INC. AND SUBSIDIARIES
====================================
PART I - FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
________________________________________________________________________________
The Company is exposed to market risk primarily from changes in foreign currency
exchange rates and to a lesser extent interest rates. The following describes
the nature of these risks.
Foreign Currency Exchange Risk
At March 31, 2000, the Company had sales in over 90 countries worldwide.
These sales outside the United States accounted for approximately 60 percent of
worldwide sales. Virtually all of these sales were denominated in currencies of
the local country. As such, the Company's reported profits and cash flows are
exposed to changing exchange rates.
To date, management has not deemed it cost-effective to engage in a formula-
based program of hedging the profits and cash flows of foreign operations using
derivative financial instruments. The Company's U.S. operations purchase
significant quantities of inventory from Japanese suppliers. Payments are made
to these suppliers in U.S. dollars linked to the yen. In the OEM agreements
with these suppliers, a currency payment model is negotiated that describes how
fluctuations in exchange rates will be shared over the term of the agreement.
In June 1999, the Company reacquired its former European subsidiary which also
purchases significant quantities of inventory from Japanese suppliers in yen.
The Company is currently negotiating with its European subsidiary's suppliers to
adjust for fluctuations in exchange rates.
In addition, at any point in time the Company's foreign subsidiaries hold
financial assets and liabilities that are denominated in currencies other than
U.S. dollars. These financial assets and liabilities consist primarily of
short-term, third-party receivables and payables. Changes in exchange rates
affect these financial assets and liabilities.
Prior to 2000, the Company on occasion has used derivatives to hedge specific
risk situations involving foreign currency exposures. No such derivatives were
held at March 31, 2000.
Interest Rate Risk
The financial liabilities of the Company that are exposed to changes in interest
rates include short-term borrowings and long-term debt. The stated rate of
interest for borrowings under the Harris revolving credit agreement is one-
quarter of one percent (0.25) over prime or LIBOR plus three percent, and the
stated rate of interest for borrowings under the Heller revolving credit
agreement is one and one-quarter percent (1.25) over AIBOR. Long-term
borrowings with Minolta and Alto Imaging Group N.V. have stated interest rates
of LIBOR plus 2.5% payable monthly in arrears and LIBOR plus 0.5% (but not to be
less than 6.50%), respectively. Long-term borrowings of the Company's European
subsidiary bear interest at 6% and 10%. A one percent annual increase in the
stated interest rates would have resulted in approximately $195,000 of
additional interest expense for the three months ended March 31, 2000.
16
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MINOLTA - QMS, INC. AND SUBSIDIARIES
====================================
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 1 - LEGAL PROCEEDINGS
- --------------------------
The Company is a defendant in various litigation and claims in the normal course
of business. Based on consultation with various counsel in these matters,
management is of the opinion that the ultimate resolution of such litigation and
claims will not materially affect the Company's financial position, results of
operations, or cash flows.
ITEM 2 - CHANGES IN SECURITIES - None.
- ------------------------------
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - None.
- ----------------------------------------
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None.
- ------------------------------------------------------------
ITEM 5 - OTHER INFORMATION - None.
- --------------------------
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits:
Exhibit
Number Description
------ -----------
3(b) Amended and Restated By-Laws of Registrant
27 Financial Data Schedule
(b) Reports: None.
17
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MINOLTA - QMS, INC. AND SUBSIDIARIES
====================================
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MINOLTA - QMS, INC.
(Registrant)
Date: May 10, 2000 /s/ Edward E. Lucente
----------------- ---------------------------------
Edward E. Lucente
President and Chief Executive Officer
Date: May 10, 2000 /s/ Albert A. Butler
----------------- ----------------------
Albert A. Butler
Chief Financial Officer
18
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EXHIBIT 3b
QMS, INC.
AMENDED AND RESTATED BY-LAWS
(in effect as of October 8, 1999)
ARTICLE I
OFFICES
Section 1. The registered office shall be in the city of Wilmington,
county of New Castle, state of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the state of Delaware as the board of directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
may be held at such place, either within or without the State of Delaware, as
may be designated by or in the manner provided by these By-Laws.
Section 2. Annual meetings of stockholders shall be held within 120 days
after the end of each fiscal year of the corporation at such date, place and
time as shall be designated from time to time by the board of directors and as
shall be specified in the notice of the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare or cause to be prepared, at least ten days before
every meeting of
<PAGE>
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, either at a place within the city where the meeting
during ordinary business hours, for a period of at least ten days prior to the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the board of directors or by such officers of
the corporation as may be so authorized by the board of directors from time to
time.
Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
shall be given not less than ten nor more than sixty days before the date of the
meeting, to each stockholder entitled to vote at such meeting.
Section 7. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute, by the certificate of
incorporation or by another provision of these by-laws. If, however, such quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting
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<PAGE>
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented any business may be transacted which
might have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, the notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 8. If a quorum is present at any meeting of the stockholders, any
question brought before such meeting shall be decided by an affirmative vote of
the majority of the shares represented at the meeting and entitled to vote on
the subject matter, except as otherwise required by the certificate of
incorporation, the laws of Delaware or another provision of these by-laws.
Neither treasury shares, nor shares held by another corporation if a majority of
the shares entitled to vote for the election of directors of such other
corporation is held by the corporation, shall be voted at any meeting or counted
in determining the total number of outstanding shares at any given time. The
president, or other officer presiding at the meeting, shall determine whether
the vote upon any question before the meeting shall be by written ballot.
Section 9. Unless otherwise provided in the certificate of incorporation,
at every meeting of the stockholders, including meetings for the election of
directors, any stockholder having the right to vote shall be entitled to vote in
person or by proxy, but no proxy shall be voted on after three years from its
date, unless the proxy provides for a longer period. Each stockholder shall have
one vote for each share of stock having voting power and registered in his name
on the books of the corporation.
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<PAGE>
Section 10. Unless otherwise provided in the certificate of incorporation,
any action required to be taken at any annual or special meeting of stockholders
of the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
Section 11. Notwithstanding any other provision of these by-laws, the act
of the stockholders required to make, alter, amend, change, add to or repeal any
provision of the certificate of incorporation or these by-laws which is or which
is proposed to be inconsistent with Articles 9 or 10 of the certificate of
incorporation shall be governed by the provisions of Article 9 and 10,
respectively.
Section 12. Notwithstanding any other provision of these by-laws, a
Business Combination (as that term is defined in Article 10 of the certificate
of incorporation) shall be governed by the provisions of Article 10 of the
certificate of incorporation).
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<PAGE>
ARTICLE III
DIRECTORS
Section 1. The business and affairs of the corporation shall be managed by
or under the direction of the board of directors except as may be otherwise
provided by law, the certificate of incorporation or these by-law; the board of
directors shall appoint all officers of the corporation and may, with or without
cause, remove any officer at any time; and the board of directors shall fix the
compensation of the president.
Section 2. The board of directors shall consist of not less than five and
not more than fifteen members, the precise number within such minimum and
maximum limits to be fixed from time to time by resolution of the board of
directors or by the affirmative vote of the holders of at least 75% of all
outstanding shares entitled to be voted in the election of directors, voting
together as a class. Directors need not be stockholders.
Section 3. Pursuant to Article 9 of the certificate of incorporation, the
board of directors shall be divided into three classes, designated as Class I,
Class II and Class III, each class to consist, as nearly as possible of one-
third of the total number of directors constituting the entire board of
directors. If the number of directors has changed pursuant to the provisions of
Section 2 of this Article, any increase or decrease shall be apportioned among
the classes so as to maintain the number of directors in each class as nearly
equal as possible, and any additional director of any Class elected to fill a
vacancy resulting from an increase in such a Class shall hold office for a term
that shall coincide with the remaining term of that Class, unless otherwise
required by law, but in no case shall a decrease in the number of directors in a
Class shorten the term of an incumbent director.
Section 4. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 5 of this Article, and each director
elected shall hold office until the date of the annual meeting of stockholders
upon which his term expires and until his successor is elected and qualified,
subject, however, to his prior death, resignation, retirement, disqualification
or removal from office.
Section 5. Any vacancy occurring in the board of directors, whether
created by the death, resignation, retirement, disqualification or removal from
office of a director or by an increase in the number of directorships pursuant
to Sections 2 or 3 of this Article, may be filled by the affirmative vote of a
majority of the directors then in office or by the sole remaining director. A
director elected to fill a vacancy under this Section 5 shall have the same
remaining term as that of his predecessor.
Section 6. Notwithstanding the foregoing, whenever the holders of any one
or more classes or series of Preferred Stock issued by the corporation shall
have the right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office, filling
of vacancies and other features of such directorships shall be governed by the
terms of the certificate of in-
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<PAGE>
corporation or the resolutions of the board of directors creating such class or
series, as the case may be, applicable thereto, and such directors so elected
shall not be divided into Classes pursuant to Section 3 of this Article unless
expressly provided by such terms.
Section 7. Except as may be prohibited by law, by the certificate of
incorporation or these by-laws, the board of directors shall have the right
(which, to the extent exercised, shall be exclusive) to establish the rights,
powers, duties, rules and procedures that from time to time shall govern the
board of directors, including without limitation, the vote required for any
action and the election of officers of the corporation by the board of
directors, and that from time to time shall affect the directors' powers to
manage the business and affairs of the corporation.
MEETINGS OF THE BOARD OF DIRECTORS
Section 8. Meetings of the board of directors, regular or special, may be
held either within or without the state of Delaware.
Section 9. Regular meetings of the board of directors or any committee
designated thereby may be held with or without notice, at such places and times
as shall be determined from time to time by the board.
Special meetings of the board or any committee designated thereby may, and
on the written request of any director, shall, be called by the president or by
the secretary on reasonable notice, but on no less than at least one hour's
oral, written or telephonic notice to each director or committee member, and
shall be held at such place and at such time as shall be stated in the call of
the meeting.
Section 10. At all meetings of the board of directors, a majority of
directors then in office shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors, except as
may be otherwise specifically provided by statute, the certificate of
incorporation, these by-laws or resolution of the board of directors pursuant to
Section 7 of this Article III of these by-laws. If a quorum shall not be
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 an
announcement at the meeting, until a quorum shall be present.
Section 11. The first meeting of each newly elected board of directors
shall be held immediately following the close of the stockholders' annual
meeting, and at the place thereof or at such place and time as shall be
specified in a notice given as herein provided for special meetings of the board
of directors, or as shall be specified in a written waiver signed by all of the
directors. No notice of such meeting shall be necessary to the newly elected of
continuing directors in order legally to constitute the meeting, provided a
quorum shall be present.
Section 12. Members of the board of directors or any committee designated
thereby may participate in a meeting of the board or such committee by means of
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<PAGE>
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting.
Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of the board or committee.
COMMITTEES OF DIRECTORS
Section 14. The board of directors may, by resolution passed by a majority
of the board, designate one or more committees, each committee to consist of one
or more of the directors of the corporation. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the board of directors.
Section 15. Any such committee, to the extent provided in the resolution
of the board of directors, shall have and may exercise all the powers and
authority of the board of directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but, except as otherwise provided by
law, no such committee shall have the power or authority in reference to
amending the certificate of incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, recommending
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the by-laws of the corporation; and, unless the
resolution or the certificate of incorporation expressly so provides, no such
committee shall have the power or authority to declare a dividend, to authorize
the issuance of stock or to adopt a certificate of ownership and merger.
Section 16. At all meetings of any committee of the board of directors, a
majority of the directors then serving as members of that committee shall
constitute a quorum for the transaction of business, and the act of a majority
of the committee members present at any committee meeting at which there is a
quorum shall be the act of the committee, except as may be otherwise
specifically provided by statute, the certificate of incorporation, another
provision of these by-laws or resolution of the board of directors pursuant to
Section 7 or 14 of this Article III.
Section 17. The board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
the meeting of the committee. If the board has not designated any or a
sufficient number of alternate committee members, the committee member or
members present at any committee meeting and not disqualified from voting,
regardless whether
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<PAGE>
he or they constitute a quorum, may unanimously appoint a sufficient number of
other directors to act at the meeting in the place of each absent or
disqualified member of the committee.
Section 18. Each committee shall keep regular minutes of its meetings and
report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 19. The board of directors is authorized to fix the compensation
of directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer, agent
or otherwise, and receiving compensation therefor.
RESIGNATION AND REMOVAL OF DIRECTORS
Section 20. Any director or member of a committee designated by the board
of directors may resign at any time. Such resignation shall be made in writing
and shall take effect at the time specified therein, and if no time be so
specified, at the time of its receipt by the president or secretary. The
acceptance of a resignation shall not be necessary to make it effective.
Section 21. At a special meeting of the stockholders called expressly for
such purpose, any director or the entire board of directors may be removed only
for cause at any time by a vote of the holders of a majority of the shares of
common stock then entitled to vote at an election of directors, who may then
forthwith at such meeting proceed to elect a successor or successors for the
unexpired term of each such director removed.
INTERESTED DIRECTORS
Section 22. An interested director is one who is a party to a contract or
transaction with the corporation or who is an officer or director of, or has a
financial interest in, another corporation, partnership or association which is
a party to a contract or transaction with the corporation. Contracts and
transactions between the corporation and one or more interested directors or
officers shall not be void or voidable solely because the director or officer is
present at or participates in the meeting of the board or committee which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose, if
(i) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the board of directors
or the committee and the board or committee in good faith authorizes the
contract or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(ii) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or known to the stockholders entitled
to vote
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<PAGE>
thereon, and the contract or transaction is specifically approved in good faith
by the vote of the stockholders; or
(iii) the contract or transaction is fair to the corporation as of the
time it is authorized, approved or ratified, by the board of directors,
committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the board or of a committee which authorizes the
contract or transaction.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of law or of the certificate of
incorporation or of these by-laws, notice is required to be given to any
director or stockholder, such notice may be given in writing, by mail, addressed
to such director or stockholder, at his address as it appears on the records of
the corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram, telephone or other
reasonable means of communication.
Section 2. Whenever any notice is required to be given under the
provisions of law or of the certificate of incorporation or of these by-laws, a
waiver thereof in writing, signed by the person or person entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice.
Section 3. Attendance of a person at a meeting shall constitute a waiver
of notice of such meeting, except when the person attends the meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall consist of a president
and a secretary and such other officers as the board of directors may deem
proper, each of whom shall be elected from time to time by the board of
directors at such time and in such manner as the board may provide by
resolution.
Section 2. None of the officers, except the chairman of the board of
directors, if one be elected, need be directors.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed in the name of the corporation by, the chairman
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<PAGE>
or vice chairman of the board of directors, or the president or a vice president
and the treasurer or an assistant treasurer, or the secretary or an assistant
secretary of the corporation, certifying the number of shares owned by him in
the corporation.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided by law, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 2. Any of or all of the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
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 his
legal representative, to give the corporation a bond sufficient to indemnify it
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed, or with respect to
the issuance of the new certificate.
TRANSFER OF STOCK
Section 4. Transfers of stock shall be made on the books of the
corporation upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, or in the case of
a certificate alleged to have
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<PAGE>
been lost, stolen or destroyed, upon compliance with the provisions of Section 3
of this Article.
FIXING RECORD DATE
Section 5. 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, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distributing or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. 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;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conductive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. Not later than 120 days after the close of each fiscal year, or
in any event prior to the next annual meeting of stockholders, the corporation
shall make available to all stockholders its annual report on the financial
condition and operations of the corporation for the fiscal year. Upon written
request, the corporation shall promptly mail without charge a copy of the most
recent annual report to any stockholder.
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CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall end on the Friday
closest to March 31, with a stub period ending March 31, 2000, and the next
fiscal year beginning April 1, 2000 and ending March 30, 2001. In future years,
the Company's fiscal year will end on the Friday closest to March 31.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 7. The corporation shall indemnify its officers, directors,
employees and agents to the extent permitted by the General Corporation Laws of
Delaware.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered, amended, changed, added to or
repealed and new by-laws may be adopted by the stockholders or by the board of
directors, when such power is conferred upon the board of directors by the
certificate of incorporation, at any regular meeting of the stockholders or of
the board of directors or at any special meeting of the stockholders or of the
board of directors if notice of such alteration, amendment, change, addition,
repeal or adoption be contained in the notice of such special meeting. If the
power to adopt, amend, change, add to or repeal by-laws is conferred upon the
board of directors by the certificate of incorporation it shall not divest or
limit the power of the stockholders to adopt, amend, change, add to or repeal
by-laws.
ARTICLE IX
EMERGENCY POWERS AND BY-LAWS
Section 1. The board of directors may adopt emergency by-laws, subject to
repeal or change by action of the stockholders, which shall, notwithstanding any
provision of law, the certificate of incorporation or these by-laws, be
operative during any emergency resulting from an attack on the United States or
on a locality in which the corporation conducts its business or customarily
holds meetings of its
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board of directors or its stockholders, or during any nuclear or atomic
disaster, or during the existence of any catastrophe, or other similar emergency
condition, as a result of which a quorum of the board of directors or a standing
committee thereof cannot readily be convened for action. The emergency by-laws
may make any provision that may be practical and necessary for the circumstances
of the emergency.
Section 2. The board of directors, either before or during any such
emergency, may provide, and from time to time modify, lines of succession in the
event that during such emergency any or all officers or agents of the
corporation shall for any reason be rendered incapable of discharging their
duties.
Section 3. The board of directors, either before or during any such
emergency, may, effective in the emergency, change the head office or designate
several alternative head offices or regional offices, or authorize the officers
so to do.
Section 4. To the extent not inconsistent with any emergency by-laws so
adopted, the by-laws of the corporation shall remain in effect during any
emergency and upon its termination the emergency by-laws shall cease to be
operative.
Section 5. To the extent required to constitute a quorum at any meeting of
the board of directors during such an emergency, the officers of the corporation
who are present shall, unless otherwise provided in emergency by-laws, be
deemed, in order of rank and within the same rank in order of seniority,
directors for such meeting.
Section 6. No officer, director or employee acting in accordance with any
emergency by-law shall be liable except for willful misconduct. No officer,
director, agent or employee shall be liable for any action taken by him in good
faith in such an emergency in furtherance of the ordinary business affairs of
the corporation even though not authorized by the by-laws then in effect.
Section 7. Unless otherwise provided in emergency by-laws, notice of any
meeting of the board of directors during any such emergency may be given only to
such of the directors as it may be feasible to reach at the time, and by such
means as may be feasible at the time, including publication, radio or
television.
-13-
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