<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended: August 31, 1996
---------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From ___ To ___
Commission File Number: 0-14779
-------
DATA TRANSLATION, INC.
--------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2532613
- -------------------------------------------- ----------------------------
(State or other jurisdiction of organization (I.R.S. Employer
or incorporation) Identification Number)
100 Locke Drive
Marlborough, Massachusetts
-------------------------------------------------
(Address of principal executive offices)
01752
-------------------------------------------------
(Zip code)
(508) 481-3700
-------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
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) 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, par value $.01 per share 8,072,984 shares
- -------------------------------------- ---------------------------
Class Outstanding at September 30,1996
<PAGE>
Page 2 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
INDEX
-----
Page No.
--------
Part I - Financial Information:
Consolidated Balance Sheets as of
August 31, 1996 and November 30, 1995.......................3
Consolidated Statements of Operations for the
Three and Nine Months Ended August 31, 1996 and 1995........4
Consolidated Statements of Stockholders' Equity
For the Fiscal Year Ended November 30, 1995
and the Nine Months Ended August 31, 1996..................5
Consolidated Statements of Cash Flows for the Nine Months
Ended August 31, 1996 and 1995..............................6
Notes to Consolidated Financial Statements....................7-9
Management's Discussion and Analysis of
Financial Condition and Results of Operations...............10-12
Part II - Other Information.....................................13
Signatures......................................................14
<PAGE>
Page 3 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 31, November 30,
1996 1995
------------- -------------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 4,639,000 $ 28,602,000
Marketable securities 33,721,000 6,559,000
Accounts receivable, net of reserves of
$395,000 in 1996 and $204,000 in 1995 10,227,000 6,062,000
Inventories 1,710,000 1,900,000
Prepaid expenses 725,000 339,000
Prepaid income taxes 60,000 60,000
------------- -------------
Total current assets 51,082,000 43,522,000
Net assets of discontinued operations 4,796,000 6,270,000
Equipment and Leasehold Improvements, net 2,342,000 1,414,000
Other Assets - net 111,000 85,000
------------- -------------
Total Assets $ 58,331,000 $ 51,291,000
============= =============
Current Liabilities:
Accounts payable $ 823,000 $ 516,000
Accrued expenses 5,407,000 2,853,000
Deferred revenue 1,670,000 1,010,000
------------- -------------
Total current liabilities 7,900,000 4,379,000
Deferred Income Taxes 3,000 3,000
Stockholders' Equity:
Preferred Stock, $.01 par value,
Authorized - 1,000,000 shares, none issued - -
Common Stock, $.01 par value,
Authorized - 10,000,000 shares, issued -
8,070,284 in 1996 and 8,491,208 in 1995 81,000 85,000
Capital in excess of par value 39,957,000 37,062,000
Retained earnings 10,723,000 11,665,000
Cumulative translation adjustment (29,000) (5,000)
Treasury stock, at cost, 869,096
shares in 1995 - (1,843,000)
Unrealized holding loss on available for
sale securities (304,000) (55,000)
------------- -------------
Total stockholders' equity 50,428,000 46,909,000
------------- -------------
Total Liabilities and Stockholders' Equity $ 58,331,000 $ 51,291,000
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Page 4 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended August 31, Nine Months Ended August 31,
1996 1995 1996 1995
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales 13,066,000 $ 8,137,000 $ 36,677,000 $ 20,323,000
Cost of sales 4,947,000 3,376,000 14,508,000 8,687,000
-------------- ------------- -------------- --------------
Gross profit 8,119,000 4,761,000 22,169,000 11,636,000
Research and development expenses 1,787,000 1,357,000 4,455,000 3,538,000
Selling and marketing expenses 3,802,000 2,321,000 10,649,000 6,233,000
General and administrative expenses 1,401,000 635,000 3,871,000 1,402,000
-------------- ------------- -------------- --------------
Operating income 1,129,000 448,000 3,194,000 463,000
Interest income 556,000 135,000 1,579,000 493,000
Interest expense - (1,000) (1,000) (3,000)
Other income (expense) 2,000 3,000 (47,000) 2,000
-------------- ------------- ------------ -------------
Income from continuing operations
before tax provision 1,687,000 585,000 4,725,000 955,000
Tax provision 337,000 - 945,000 7,000
-------------- ------------- ----------- --------------
Income from continuing operations 1,350,000 585,000 3,780,000 948,000
Discontinued operations:
Income (loss) from discontinued operations
of Data Translation II, Inc. (includes transaction
costs of $1,500,000 related to spin-off and
estimated loss on disposal of Data Translation
Networking Limited of $1,563,000) (4,764,000) 841,000 (4,722,000) 2,216,000
-------------- ------------ ------------ --------------
Net income (loss) $ (3,414,000) $ 1,426,000 $ (942,000) $ 3,164,000
============== ============ ============ =============
Income from continuing operations per common
share 0.16 $ 0.09 $ 0.44 $ 0.14
Income (loss) from discontinued operations per
common share (0.56) $ 0.12 $ (0.55) $ 0.34
-------------- ------------ ------------ --------------
Net income (loss) per common share (0.40) $ 0.21 $ (0.11) $ 0.48
============== ============ ============ =============
Weighted average number of common
and common equivalent shares outstanding 8,483,000 6,812,000 8,520,000 6,621,000
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
Page 5 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Unrealized
$.01 Par Value Holding
------------------------------ Loss on
Capital in Cumulative Available Total
Issued Excess of Retained Translation Treasury for Sale Stockholders'
Shares Amount Par Value Earnings Adjustment Stock Securities Equity
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, November 30, 1994 6,765,472 $68,000 $8,739,000 $6,894,000 $64,000 ($4,781,000) - $10,984,000
Proceeds from stock plans 325,736 3,000 1,166,000 - - - - 1,169,000
Public sale of treasury
stock, net of issuance
costs of $375,000 - - 5,864,000 - - 2,938,000 - 8,802,000
Public sale of common
stock, net of issuance
costs of $400,000 1,400,000 14,000 21,293,000 - - - - 21,307,000
Translation adjustment - - - - (69,000) - - (69,000)
Net income - - - 4,771,000 - - - 4,771,000
Reserve for unrealized
investment losses - - - - - - (55,000) (55,000)
--------------------------------------------------------------------------------------------------------
Balance, November 30, 1995 8,491,208 $85,000 $37,062,000 $11,665,000 ($5,000) ($1,843,000) ($55,000) $46,909,000
Proceeds from stock plans 224,672 3,000 1,281,000 - - - - 1,284,000
Retirement of treasury
stock (869,096) (9,000) (1,834,000) - - 1,843,000 - -
Public sale of common stock 223,500 2,000 3,448,000 - - - - 3,450,000
Translation adjustment - - - - (24,000) - - (24,000)
Net loss - - - (942,000) - - - (942,000)
Reserve for unrealized
investment losses - - - - - - (249,000) (249,000)
---------------------------------------------------------------------------------------------------------
Balance, August 31, 1996 8,070,284 $81,000 $39,957,000 $10,723,000 ($29,000) - ($304,000) $50,428,000
=========================================================================================================
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
Page 6 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended August 31,
1996 1995
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (942,000) $ 3,164,000
Adjustments to reconcile net income (loss) to
net cash used in operating activities-
Depreciation and amortization 720,000 379,000
Deferred income taxes - 1,000
Loss on sale of marketable securities 28,000 34,000
Change in assets and liabilities-
Accounts receivable (4,165,000) (2,098,000)
Inventories 190,000 (511,000)
Prepaid expenses (386,000) (325,000)
Prepaid income taxes - 1,000
Net assets of discontinued operations 1,474,000 (1,120,000)
Accounts payable 307,000 510,000
Accrued expenses 2,554,000 (167,000)
Deferred revenue 660,000 1,262,000
------------ --------------
Net cash provided by operating activities $ 440,000 $ 1,130,000
------------ --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and leasehold improvements (1,607,000) (508,000)
Increase in other assets (66,000) (57,000)
Purchases of marketable securities (42,245,000) (9,132,000)
Proceeds from sales of marketable securities 14,806,000 4,966,000
------------ --------------
Net cash used in investing activities $ (29,112,000) $ (4,731,000)
------------ --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from bank - 38,000
Proceeds from stock plans 1,284,000 1,085,000
Net proceeds from public sale of common stock 3,450,000 8,802,000
------------ --------------
Net cash provided by financing activities $ 4,734,000 $ 9,925,000
------------ --------------
EXCHANGE RATE EFFECTS (25,000) (30,000)
------------ --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (23,963,000) $ 6,294,000
CASH AND CASH EQUIVALENTS, beginning of period 28,602,000 778,000
------------ --------------
CASH AND CASH EQUIVALENTS, end of period $ 4,639,000 $ 7,072,000
============ ==============
OTHER TRANSACTIONS NOT PROVIDING (USING) CASH
Decrease in value of marketable securities 249,000 61,000
Increase in unrealized holding loss on
available for sale securities (249,000) (61,000)
------------ --------------
$ - $ -
============ ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 694,000 $ (21,000)
============ ==============
Cash paid for interest $ 1,000 $ 3,000
============ ==============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
DATA TRANSLATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
In the opinion of management, these unaudited consolidated financial
statements and disclosures reflect all adjustments necessary for fair
presentation. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. These consolidated condensed
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's latest
audited financial statements, which are contained in the Company's 1995 Annual
Report on Form 10-K, filed with the Securities and Exchange Commission on
February 26, 1996.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. Cash Equivalents and Marketable Securities
Cash equivalents are carried at cost which approximates market value and
have maturities of less than three months. Cash equivalents include money market
accounts and U.S. Treasury bills.
The Company accounts for marketable securities in accordance with
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities. SFAS No. 115 requires
enterprises to classify debt and equity securities as either held-to-maturity,
available-for-sale or trading. Under SFAS No. 115, the accounting for the
effects of unrealized gains and losses reported on investment holdings differs
according to the nature of an investment classification.
Marketable securities held as of August 31, 1996, consist of the
following:
<TABLE>
<CAPTION>
Maturity Market Value
----------------------------------
<S> <C> <C>
Investments available for sale:
U.S. Treasury Bills Less than 1 year $ 4,483,000
U.S. Treasury Bills 1 - 5 years 6,893,000
-----------
Total U.S. Treasury Bills 11,376,000
U.S. Agency Bonds 1 - 5 years 548,000
U.S. Agency Bonds 6 - 10 years 285,000
-----------
Total U.S. Agency Bonds 833,000
Utility Bonds 1 - 5 years 98,000
Utility Bonds 6 - 10 years 204,000
-----------
Total Utility Bonds 302,000
Municipal Bonds 1 - 5 years 1,981,000
Municipal Bonds 6 - 10 years 1,300,000
Municipal Bonds 10+ years 2,500,000
-----------
Total Municipal Bonds 5,781,000
Corporate Obligations 1 - 5 years 7,511,000
Corporate Obligations 6 - 10 years 5,444,000
Corporate Obligations 10+ years 2,474,000
-----------
Total Corporate Obligations 15,429,000
-----------
Total investments available for sale $33,721,000
===========
</TABLE>
Marketable securities had a cost of $34,025,000 and $6,614,000 at August
31, 1996 and November 30, 1995, respectively, and a market value of $33,721,000
and $6,559,000, respectively. To reduce the carrying amount of the portfolio to
market value, a valuation allowance has been reflected as a separate component
of stockholders' equity.
<PAGE>
Page 8 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Inventories
Inventories are stated at the lower of first-in, first-out (FIFO) cost
or market and consist of the following:
<TABLE>
<CAPTION>
August 31, November 30,
1996 1995
---- ----
<S> <C> <C>
Raw material $ 522,000 $ 1,060,000
Work-in-process 504,000 418,000
Finished goods 684,000 422,000
---------- ----------
$ 1,710,000 $ 1,900,000
========== ==========
</TABLE>
Work-in-process and finished goods inventories include material, labor and
manufacturing overhead. Management performs periodic reviews of inventory and
disposes of items not required by their manufacturing and marketing plan.
4. Net Income Per Common Share
Net income per common share is determined by dividing net income by the
weighted average number of common and common equivalent shares outstanding
during each period. Common equivalent shares have been calculated in accordance
with the treasury stock method and are included for all periods where their
effect is dilutive. Fully diluted net income per share has not been separately
presented, as the amounts would not be materially different from net income per
share.
5. Contingencies
On June 7, 1995, a lawsuit was filed against the Company by Avid
Technology, Inc. ("Avid"), in the United States District Court for the District
of Massachusetts. The complaint generally alleges patent infringement by the
Company arising from the manufacture, sale, and use of the Company's Media
100/(R)/ product. The complaint includes requests for injunctive relief, treble
damages, interest, costs and fees. In July, 1995 the Company filed an Answer and
Counterclaim denying any infringement and asserting that the Avid patent in
question is invalid. The Company intends to vigorously defend the lawsuit. In
addition, Avid is seeking reissue of the patent, including claims that it
asserts are broader than in the existing patent, and these reissue proceedings
remain pending before the U.S. Patent and Trademark Office. On July 31, 1996,
the court ordered a stay of all proceedings in the lawsuit pending conclusion of
the reissue proceedings referred to above.
Also, on April 5, 1996, the Company asserted, by motion for leave to
file a supplemental counterclaim, its own claims against Avid for infringement
of a newly-issued Company patent relating to the Company's Media 100 digital
video system. The court denied the Company's motion for a leave to proceed by
supplemental counterclaim, following which the Company on April 23, 1996 filed
its own, separate complaint against Avid, in the United States District Court
for the District of Massachusetts, asserting these infringement claims. The
Company contends that the products infringing this newly-issued Company patent
include certain versions of Avid's Media Composer product. In May, 1996, Avid
filed a responsive Answer and Counterclaim denying infringement and asserting
that the Company patent in question is invalid.
There can be no assurance that the Company will prevail on the lawsuit
asserted by Avid or that the expense or other effects of the lawsuits, whether
or not the Company prevails, will not be material.
From time to time the Company is involved in other disputes and/or
litigation encountered in its normal course of business. The Company does not
believe that the ultimate impact of the resolution of such other outstanding
matters will have a material effect on the Company's financial condition or
results of operations.
<PAGE>
Page 9 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Capitalized Software Development Costs
The Company capitalizes certain computer software development costs.
Such costs, net of accumulated amortization, were approximately $104,000 and
$84,000 as of August 31, 1996 and November 30, 1995, respectively and are
included in other assets. These costs are amortized on a straight-line basis
over two years which approximates the life of the product. Amortization expense,
included in cost of goods sold, was approximately $40,000 and $63,000 for the
nine months ended August 31, 1996 and 1995, respectively.
7. Income Taxes
Based on the projected taxable income from continuing operations for
fiscal 1996, the Company has provided for income taxes using an effective tax
rate of approximately 20% taking into consideration full utilization of its
remaining net operating loss carryforwards, research and development tax credit
carryforwards, and other general business tax credits. A corresponding tax
benefit, has been provided for within discontinued operations. During fiscal
1995, substantially all of the potential tax provision resulting from profitable
operations in the Company's domestic operations were offset by net operating
loss carryforwards.
8. Discontinued Operations
On July 30, 1996, the Company announced its intention to separate its
Media 100(R) digital media business from its data acquisition and imaging,
commercial products and networking distribution businesses. The Company intends
to transfer the assets and liabilities associated with the data acquisition and
imaging, commercial products and networking distribution businesses to a wholly
owned subsidiary, Data Translation II, Inc. ("DTI II"), in connection with the
proposed spin off of those businesses to the Company's stockholders. The Company
also announced its intention to dispose of the networking distribution business
within twelve months. In the event that the disposal of that business is not
completed prior to the effective date of the proposed spin off transaction, that
business will be transferred to DTI II as described above.
The components of net assets of discontinued operations included in the
accompanying consolidated balance sheets at August 31, 1996 and November 30,
1995 follow:
<TABLE>
<CAPTION>
August 31, November 30,
1996 1995
---- ----
<S> <C> <C>
Current assets $ 4,692,000 $ 4,722,000
Net assets (liabilities) of discontinued
operations (474,000) 2,232,000
Equipment and leasehold improvements, net 2,420,000 2,250,000
Other assets - net 290,000 133,000
Current liabilities (2,132,000) (3,067,000)
----------- -----------
Net assets of discontinued operations $ 4,796,000 $ 6,270,000
=========== ===========
</TABLE>
The above net assets (liabilities) of discontinued operations reflects the
activity of Networking.
The components of discontinued operations included in the accompanying
consolidated statements of operations for the three month and nine month periods
ended August 31, 1996 and 1995, respectively, follows:
<TABLE>
<CAPTION>
Three Months Ended August 31, Nine Months Ended August 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 5,100,000 $5,583,000 $15,858,000 $16,359,000
Income (loss) from continuing operations (1,260,000) 828,000 (846,000) 2,111,000
Income (loss) from discontinued operations (2,270,000) 10,000 (2,605,000) 120,000
Net income (loss) (3,264,000) 841,000 (3,222,000) 2,216,000
</TABLE>
The above income (loss) from discontinued operations reflects the activity of
Networking and includes an estimated loss on disposal of approximately
$1,563,000. Spin-off transaction costs of $1,500,000 are also included within
the discontinued operations of the Company.
<PAGE>
Page 10 of 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
On July 30, 1996, the Company announced its intention to separate its Media
100 digital media business from its data acquisition and imaging, commercial
products and networking distribution businesses. The Company intends to
transfer the assets and liabilities associated with the data acquisition and
imaging, commercial products and networking distribution businesses to a wholly
owned subsidiary, Data Translation II, Inc. ("DTI II"), in connection with the
proposed spin off of those businesses to the Company's stockholders. The
Company also announced its intention to dispose of the networking distribution
business within twelve months. In the event that the disposal of that business
is not completed prior to the effective date of the proposed spin off
transaction, that business will be transferred to DTI II as described above.
Results of Continuing Operations
The following table shows certain consolidated statements of operations
data as a percentage of net sales from continuing operations. Continuing
operations consist of the Company's Media 100 digital media business:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Aug 31, Aug 31, Aug 31, Aug 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales from continuing operations.. 100.0% 100.0% 100.0% 100.0%
Gross margin.......................... 62.1 58.5 60.4 57.3
Research and development expenses..... 13.7 16.7 12.1 17.4
Selling and marketing expenses........ 29.1 28.5 29.0 30.7
General and administrative expenses... 10.7 7.8 10.6 6.9
----- ----- ----- -----
Operating income...................... 8.6 5.5 8.7 2.3
Interest income and other, net........ 4.3 1.7 4.2 2.4
Provision for income taxes............ 2.6 0.0 2.6 0.0
----- ----- ----- -----
Income from continuing operations..... 10.3% 7.2% 10.3% 4.7%
===== ===== ===== =====
</TABLE>
Comparison of Third Fiscal Quarter of 1996 to Third Fiscal Quarter of 1995:
Net sales from continuing operations for the fiscal quarter ended August 31,
1996 were $13,066,000, an increase of 60.6% or $4,929,000 from the same period a
year ago. The increase in sales was due to higher unit sales of Media 100 and
shipments of the Company's newest product, Media 100 qx, which began shipping in
April 1996.
Gross margin for the fiscal quarter ended August 31, 1996 was 62.1%, compared
to 58.5% in the comparable quarter of the prior year. The increase in gross
margin was primarily a result of lower raw material costs, as well as higher
software sales.
Operating income for the third fiscal quarter of 1996 was $1,129,000
representing 8.6% of net sales, compared to $448,000 representing 5.5% of net
sales in the comparable quarter of the prior year. The operating income reflects
the higher net sales, partially offset by an increase in operating expenses of
$2,677,000 from the comparable quarter in the prior fiscal year. Selling and
marketing expenses in the third fiscal quarter of 1996 increased by $1,481,000
representing 29.1% of net sales compared to 28.5% in the comparable quarter in
1995. The increase in selling and marketing expenses were largely due to the
additional costs associated with the increased sales and promotion of Media 100
and Media 100 qx products, as well as an increased focus on international
channel development. General and administrative expenses increased to
$1,401,000, or 10.7% of net sales up from $635,000, or 7.8% of net sales in the
comparable quarter. The increase was due primarily to additional operational
costs relating to higher sales volumes and higher legal fees associated with the
pending patent lawsuits, as discussed in Note 5 to the Consolidated Financial
Statements. These higher legal expenses are expected to continue in the
foreseeable future. Research and development expenses were $1,787,000, or 13.7%
of net sales compared to $1,357,000, or 16.7% of net sales in the third quarter
of fiscal 1995. The dollar increase in research and development expenses was a
result of the Company's continued investment in product development primarily in
digital media technology.
<PAGE>
Page 11 of 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Comparison of Third Fiscal Quarter of 1996 to Third Fiscal Quarter of 1995
(continued):
Interest income for the fiscal quarter ended August 31, 1996 was $556,000, or
4.3% of net sales, compared to $135,000, or 1.7% of net sales, in the comparable
quarter a year ago reflecting an increase in cash balances including cash
equivalents and marketable securities on hand during the quarter.
A tax provision of $337,000 was provided for in the third fiscal quarter of
1996 compared to no tax provision in the comparable period of fiscal 1995. The
tax provision for the third quarter of fiscal 1996 reflects a year to date
effective tax rate to approximately 20% on continuing domestic operations. This
effective tax rate takes into consideration remaining net operating loss
carryforwards, research and development tax credit carryforwards and other
business tax credits available to be used against taxable income. Any potential
tax provision resulting from operating income by the Company's domestic
operations during the third quarter of 1995 was entirely offset by net operating
loss carryforwards.
Income from continuing operations for the fiscal quarter ended August 31, 1996
was $1,350,000 or $0.16 per share, compared to $585,000 or $0.09 per share for
the comparable period in fiscal 1995. For the third fiscal quarter in 1996,
weighted average number of common and common equivalent shares outstanding were
8,483,000 compared to 6,812,000 in the comparable fiscal quarter in 1995.
Comparison of First Nine Months of Fiscal 1996 to the First Nine Months of
Fiscal 1995:
Net sales from continuing operations for the nine months ended August 31, 1996
were $36,677,000, an increase of 80.5% or $16,354,000 from the same period a
year ago. The increase in sales was due to higher unit sales of Media 100 and
shipments of the Company's newest product, Media 100 qx, which began shipping in
April 1996.
Gross margin for the nine months ended August 31, 1996 was 60.4%, compared to
57.3% in the comparable period of the prior year. The increase in gross margin
was primarily a result of lower raw material costs, as well as higher software
sales.
Operating income for the first nine months of fiscal 1996 was $3,194,000
representing 8.7% of net sales, compared to $463,000 representing 2.3% of net
sales in the comparable period of the prior year. The operating income reflects
the higher net sales, partially offset by an increase in operating expenses of
$7,802,000. Selling and marketing expenses increased by $4,416,000 largely due
to the additional costs associated with the increased sales and promotion of
Media 100 and Media 100 qx products, as well as an increased focus on
international channel development. General and administrative expenses increased
to $3,871,000, or 10.6% of net sales up from $1,402,000, or 6.9% of net sales in
the comparable period. The increase has been primarily due to additional
operational costs relating to higher sales volumes and higher legal fees
associated with the pending patent lawsuits. Research and development expenses
were $4,455,000, or 12.1% of net sales compared to $3,538,000, or 17.4% of net
sales in the first nine months of fiscal 1995. The dollar increase in research
and development expenses was a result of the Company's continued investment in
product development primarily in digital media technology.
Interest income for the nine months ended August 31, 1996 was $1,579,000, or
4.2% of net sales, compared to $493,000, or 2.4% of net sales, in the comparable
nine month period reflecting an increase in cash balances including cash
equivalents and marketable securities on hand during the period. Interest income
has been partially offset by $47,000 of other expenses which was primarily a
result of foreign transaction losses.
<PAGE>
Page 12 of 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Comparison of First Nine Months of Fiscal 1996 to the First Nine Months of
Fiscal 1995 (continued):
A tax provision of $945,000 was provided for in the first nine months of
fiscal 1996 compared to a tax provision of $7,000 in the comparable period of
fiscal 1995. The tax provision for the first nine months in fiscal 1996 includes
an effective tax rate of approximately 20% on profitable continuing domestic
operations due to net operating loss carryforwards, research and development tax
credit carryforwards, and business tax credits available to be used against
taxable income. Any potential tax provision resulting from operating income by
the Company's domestic operations during fiscal 1995 were offset by net
operating loss carryforwards.
Income from continuing operations for the nine month period ended August 31,
1996 was $3,780,000 or $0.44 per share, compared to $948,000 or $0.14 per share
for the same period in 1995. For the first nine months in fiscal 1996, weighted
average number of common and common equivalent shares outstanding were 8,520,000
compared to 6,621,000 in the comparable period in fiscal 1995.
Discontinued Operations
Losses from discontinued operations for the three and nine months ended August
31, 1996 were $4,764,000 and $4,722,000, respectively. Included in these losses
were estimated transaction costs related to the spin-off of $1,500,000 and
estimated loss on disposal of the networking distribution business of
$1,563,000. The remaining loss of $1,701,000 for the three months ended August
31, 1996 can be compared to net income of $841,000 in the comparable period in
the prior fiscal year, reflecting declining gross margins in the Networking
business, as well as, continued investment in the promotion and channel
development of Broadway. For the nine months ended August 31, 1996 and 1995,
results from discontinued operations were $1,659,000 loss and income of
$2,216,000, respectively, reflecting declining gross margins in the Networking
business, as well as, continued investment in the promotion and channel
development of Broadway. Net sales were $8,917,000 and $10,936,000 for the three
months ended August 31, 1996 and 1995, respectively, which includes net sales
for Networking of $3,817,000 and $5,353,000 for the three months ended August
31, 1996 and 1995, respectively. For the nine months ended August 31, 1996 and
1995, net sales were $32,380,000 and $30,963,000, respectively, which includes
net sales for Networking of $16,522,000 and $14,604,000 for the nine months
ended August 31, 1996 and 1995, respectively. See Note 8 to the Consolidated
Financial Statements.
Liquidity and Capital Resources
As of August 31, 1996, the Company had $43,182,000 of working capital.
Included in working capital was $4,639,000 of cash and cash equivalents as well
as $33,721,000 of marketable securities as described in Note 2 to these
Consolidated Financial Statements. As part of the spin-off transaction described
above under "General," the Company intends to contribute to DTI II an amount in
cash and cash equivalents equal to $10,000,000, subject to adjustment based upon
(1) changes in working capital of the transferred businesses between September
1, 1996 and the consummation of the spin-off and (2) any net proceeds or loss
from the disposition of the networking distribution business, if completed prior
to the effective date of the proposed spin off transaction. Although management
believes the Company's capital needs for 1996 will be met through its credit
facilities and cash flow from operations, the Company may need to raise
additional capital from equity and/or debt sources in order to finance its
anticipated growth and capital requirements beyond 1996.
For a description of certain pending patent lawsuits, see Note 5 to the
Consolidated Financial Statements.
<PAGE>
Page 13 of 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
On June 7, 1995, a lawsuit was filed against the Company by Avid
Technology, Inc. ("Avid"), in the United States District Court for the District
of Massachusetts. The complaint generally alleges patent infringement by the
Company arising from the manufacture, sale, and use of the Company's Media 100
product. The complaint includes requests for injunctive relief, treble damages,
interest, costs and fees. In July, 1995 the Company filed an Answer and
Counterclaim denying any infringement and asserting that the Avid patent in
question is invalid. The Company intends to vigorously defend the lawsuit. In
addition, Avid is seeking reissue of the patent, including claims that it
asserts are broader than in the existing patent, and these reissue proceedings
remain pending before the U.S. Patent and Trademark Office. On July 31, 1996,
the court ordered a stay of all proceedings in the lawsuit pending conclusion of
the reissue proceedings referred to above.
Also, on April 5, 1996, the Company asserted, by motion for leave to
file a supplemental counterclaim, its own claims against Avid for infringement
of a newly-issued Company patent relating to the Company's Media 100 digital
video system. The court denied the Company's motion for a leave to proceed by
supplemental counterclaim, following which the Company on April 23, 1996 filed
its own, separate complaint against Avid, in the United States District Court
for the District of Massachusetts, asserting these infringement claims. The
Company contends that the products infringing this newly-issued Company patent
include certain versions of Avid's Media Composer product. In May, 1996, Avid
filed a responsive Answer and Counterclaim denying infringement and asserting
that the Company patent in question is invalid.
There can be no assurance that the Company will prevail on the lawsuit
asserted by Avid, or that the expense or other effects of the lawsuits, whether
or not the Company prevails, will not be material.
The foregoing supplement is made to the Company's disclosure in its
Quarterly Report on Form 10-Q for the fiscal quarters ended February 29 and
May 31, 1996.
Item 5. Other Information
-----------------
On September 12, 1996, the Company merged with and into its wholly owned
subsidiary, Data Translation, Inc., a Delaware corporation, effecting the
reincorporation of the Company from Massachusetts to Delaware. The effects of
the reincorporation of the Company in Delaware are described in the Company's
proxy statement dated March 8, 1996 for the Annual Meeting of Shareholders which
was held on April 10, 1996 and at which the reincorporation was approved by the
Company's stockholders.
The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, par value $.01 per share (the "Common Stock") and
1,000,000 shares of Preferred Stock, par value $.01 per share (the "Preferred
Stock").
The holders of shares of Common Stock are entitled to one vote for each
share held of record on all matters submitted to a vote of stockholders. Holders
of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities. Holders of Common Stock have no preemptive rights and have no
rights to convert their Common Stock into any other securities. All of the
outstanding shares of Common Stock are fully paid and nonassessable.
The Board of Directors is authorized, subject to any limitations
prescribed by law, from time to time to issue up to an aggregate of 1,000,000
shares of Preferred Stock with such powers, designations, preferences and
relative, participating, optional and other special rights and such
qualifications, limitations or restrictions thereof, as shall be determined by
the Board of Directors in a resolution or resolutions providing for the issue of
such Preferred Stock. Thus, any series may, if so determined by the Board of
Directors, have full voting rights with Common Stock or superior or limited
voting rights, be convertible into Common Stock or another security of the
Company, and have such other preferences, relative rights, and limitations as
the Board of Directors shall determine. As a result, any series of Preferred
Stock could have rights which would adversely affect the voting power of the
Common Stock. The shares of any class or series of Preferred Stock need not be
identical. The issuance of Preferred Stock could have the effect of delaying or
preventing a change in control of the Company without any further action by
stockholders.
The Company's Certificate of Incorporation provides, among other things,
that, subject to certain exceptions, the affirmative vote of the holders of 75%
of the Common Stock and any other voting securities outstanding shall be
required to approve (i) any merger or consolidation of the Company with a
Related Person (as defined below), (ii) any sale, lease, exchange, transfer or
other disposition of more than 10% of the assets of the Company to a Related
Person or more than 10% of the assets of a Related Person to the Company, (iii)
the issuance of any securities of the Company to a Related Person, (iv) the
acquisition by the Company of any securities of a Related Person or (v) certain
redemptions or recapitalizations involving Common Stock which take place within
two years after a Related Person becomes a Related Person; provided, that such
stockholder approval shall not be required if the proposed transaction is
approved by the Board of Directors prior to the time the Related Person became a
Related Person or is otherwise approved by the Board of Directors where a
majority of the members of the Board of Directors voting for approval of such
transaction were members of the Board of Directors before each Related Person
involved in the transaction became a Related Person.
For purposes of the foregoing, a "Related Person" includes any person
or entity that, together with its affiliates and associates, beneficially owns
5% of more of the outstanding shares of the capital stock of the Company;
provided, that the term "Related Person" does not include any person or entity
that together with its affiliates or associates beneficially owned on December
31, 1995 in the aggregate more than 15% of the outstanding shares of any class
of stock of the Company's Massachusetts predecessor corporation.
The Certificate of Incorporation provides that no director of the
Company shall be liable to the Company for monetary damages for any breach of
fiduciary duty, except to the extent such exculpation from liability is not
permitted under the General Corporation Law of the State of Delaware. This
provision does not prevent stockholders from obtaining injunctive or other
equitable relief against directors nor does it shield directors from liability
under federal or state securities laws. The Certificate of Incorporation
provides that the Company shall indemnify its directors and officers to the
maximum extent permitted by Delaware law.
The Certificate of Incorporation provides that, so long as the
Company has a class of stock registered pursuant to the provisions of the
Securities Exchange Act of 1934, as amended, any action by the stockholders
of such class must be taken at an annual or special meeting of stockholders and
may not be taken by written consent.
The Certificate of Incorporation provides that the provisions of
Section 203 of the General Corporation Law of the State of Delaware shall not
apply to the Company.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits
Exhibit
Number Description
------- ---------------------
3.1 Certificate of Incorporation of Data Translation, Inc.
3.2 By-laws of Data Translation, Inc.
27 Financial Data Schedule
b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
<PAGE>
Page 14 of 14
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.
Data Translation, Inc.
Date: October 15, 1996 By: /s/ Peter J. Rice
------------------------
Peter J. Rice
Vice President & Treasurer
Date: October 15, 1996 By: /s/ Gary B. Godin
------------------------
Gary B. Godin
Chief Accounting Officer and
Corporate Controller
<PAGE>
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
DATA TRANSLATION, INC.
----------------------
1. The name of this corporation is Data Translation, Inc.
2. The registered office of this corporation in the State of Delaware is
located at 1013 Centre Road, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is Corporation Service Company.
3. The purpose of this corporation is to engage in any, lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
4. The corporation shall have two classes of stock, Common Stock, $.01
par value per share, and Preferred Stock, $.01 par value per share. The total
number of shares that the corporation shall have authority to issue is
25,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock.
Subject to the limitations prescribed by law and the provisions of this
certificate of incorporation, the board of directors of the corporation is
authorized to issue the Preferred Stock from time to time in one or more series,
each of such series to have such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative, participating, optional
or other special rights, and such qualifications, limitations or restrictions
thereof, as shall be determined by the board of directors in a resolution or
resolutions providing for the issue of such Preferred Stock. Subject to the
powers, preferences and rights of any Preferred Stock, including any series
thereof, having any preference or priority over, or rights superior to, the
Common Stock and except as otherwise provided by law, the holders of the Common
Stock shall have and possess all powers and voting and other rights pertaining
to the stock of this corporation and each share of Common Stock shall be
entitled to one vote.
5. The name and mailing address of the incorporator is: Sarah A.
Manchester, Ropes & Gray, One International Place, Boston, MA 02110.
<PAGE>
6. Except as otherwise provided in the provisions establishing a class of
stock, the number of authorized shares of any class of stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the voting power of the
corporation entitled to vote irrespective of the provisions of Section 242(b)(2)
of the General Corporation Law of the State of Delaware.
7. In furtherance and not in limitation of the power conferred upon the
board of directors by law, the board of directors shall have power to make,
adopt, alter, amend and repeal from time to time by-laws of this corporation,
subject to the right of the stockholders entitled to vote with respect thereto
to alter and repeal by-laws made by the board of directors.
8. A director of this corporation shall not be liable to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent that exculpation from liability is not permitted
under the General Corporation Law of the State of Delaware as in effect at the
time such liability is determined. No amendment or repeal of this paragraph 8
shall apply to or have any effect on the liability or alleged liability of any
director of the corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
9. This corporation shall, to the maximum extent permitted from time to
time under the law of the State of Delaware, indemnify and upon request advance
expenses to any person who is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit, proceeding or claim,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was or has agreed to be a director or officer of this
corporation or while a director or officer is or was serving at the request of
this corporation as a director, officer, partner, trustee, employee or agent of
any corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, against expenses
(including attorney's fees and expenses), judgments, fines, penalties and
amounts paid in settlement incurred (and not otherwise recovered) in connection
with the investigation, preparation to defend or defense of such action, suit,
proceeding or claim; provided, however, that the foregoing shall not require
this corporation to indemnify or advance expenses to any person in connection
with any action, suit, proceeding, claim or counterclaim initiated by or on
behalf of such person. Such indemnification shall not be exclusive of other
indemnification rights arising under any by-law, agreement, vote of directors or
stockholders or otherwise and shall inure to the benefit of the heirs and legal
representatives of such person. Any person seeking indemnification under this
paragraph 9 shall be deemed to have met the standard of conduct required for
such indemnification unless the contrary shall be established. Any repeal or
modification of the foregoing provisions of this paragraph 9 shall not adversely
affect any right or protection of a director or officer of this corporation with
respect to any acts or omissions of such director or officer occurring prior to
such repeal or modification.
-2-
<PAGE>
The books of this corporation may (subject to any statutory requirements) be
kept outside the State of Delaware as may be designated by the board of
directors or in the by-laws of this corporation.
10. (A) Except as set forth in Section (D) of this paragraph 10, the
affirmative vote of the holders of not less than 75% of the outstanding shares
of capital stock of the corporation entitled to vote generally in the election
of directors shall be required for the approval or authorization of any Business
Combination of the corporation with any Related Person.
(B) For purposes of this paragraph 10:
(1) The term "Business Combination" shall mean (i) any merger or
consolidation of the corporation with or into a Related Person, (ii) any
sale, lease, exchange, transfer or other disposition, including without
limitation the creation of a mortgage or any other security device of all
or any substantial part of the assets of the corporation (including without
limitation any voting securities of a subsidiary) or of a subsidiary, to a
Related Person, (iii) any merger or consolidation of a Related Person with
or into the corporation or a subsidiary of the corporation (iv) any sale,
lease exchange, transfer or other disposition of all or any substantial
part of the assets of a Related Person to the corporation or a subsidiary
of the corporation, (v) the issuance of any securities of the corporation
to a Related Person, (vi) the acquisition by the corporation or a
subsidiary of the corporation of any securities of a Related Person, (vii)
any reclassification of Common Stock of the corporation, or any
recapitalization involving Common Stock of the corporation, consummated at
a time that a Related Person exists and within two years after such Related
Person becomes a Related Person, and (viii) any agreement, contract or
other arrangement providing for any of the transactions described in this
definition of Business Combination.
(2) The term "Related Person" shall include any individual,
corporation, partnership or other person or entity (collectively, a
"Person") that together with its affiliates and associates beneficially
owns in the aggregate 5% or more of the outstanding shares of the capital
stock of any class of the corporation, and any affiliate or associate of
any such Person; provided, however, that the term "Related Person" shall
not include a Person that together with its affiliates and associates
beneficially owned on December 31, 1995 in the aggregate more than 15% of
the outstanding shares of any class of stock of the corporation's
predecessor, Data Translation, Inc., a Massachusetts corporation, or any
affiliate or associate of such Person.
(3) The term "substantial part" shall mean more than 10% of the total
assets of the corporation in question, as of the end of its most recent
fiscal year ending prior to the time the determination is being made.
-3-
<PAGE>
(4) With respect to any proposed Business Combination, the term
"continuing director" shall mean (i) directors who were members of the
board of directors at December 31, 1995 of the corporation's predecessor
corporation, Data Translation, Inc., a Massachusetts corporation and (ii)
any other director who was a member of the Board of Directors of the
corporation immediately prior to the time that any Related Person involved
in the proposed Business Combination became a Related Person (or, if the
transaction involves more than one Related Person, immediately prior to the
time the first of such Persons to become a Related Person became a Related
Person).
(5) Any Person shall be deemed to be the beneficial owner of any
shares of stock of the corporation
(i) that it owns directly, whether or not of record; or
(ii) that it has the right to acquire pursuant to any agreement
or understanding or upon exercise of conversion rights, warrants or
options or otherwise; or
(iii) that are beneficially owned, directly or indirectly
(including shares deemed to be owned through application of clause
(ii) above), by an affiliate or associate; or
(iv) that are beneficially owned, directly or indirectly, by any
other Person or (including any shares which such other Person has the
right to acquire pursuant to any agreement or understanding or upon
exercise of conversion rights, warrants or options or otherwise) with
which it or its affiliates or associates has any agreement or
arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of stock of the corporation.
(6) The outstanding shares of stock of the corporation shall include
shares deemed owned through the application of clauses (5)(ii), (iii) and
(iv) above, but shall not include any other shares that may be issuable
pursuant to any agreement or upon exercise of conversion rights, warrants,
options or otherwise.
(7) The term "affiliate" shall mean any individual, corporation,
partnership or other person or entity that directly, or indirectly through
one or more intermediaries, controls, or is controlled by or is under
common control with, such Person. The term "control" (including the terms
"controlling," "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
-4-
<PAGE>
(8) The term "associate" shall mean (i) any corporation or
organization (other than this corporation or a majority-owned subsidiary of
this corporation) of which such Person is an officer, director, trustee,
partner or employee or is, directly ore indirectly, the beneficial owner of
10% or more of any class of equity securities; (ii) any trust or other
estate in which such Person serves as a trustee or in a similar fiduciary
capacity, and (iii) any relative or spouse of such Person or any relative
of such spouse, who has the same home as such Person or who is a director
or officer of this corporation or of any of its subsidiaries.
(C) The Board of Directors of the corporation shall have the power to
determine for the purposes of this paragraph 10, on the basis of information
known to the Board of Directors, whether (1) a Person is a Related Person, and
(2) a Person is an affiliate or associate of another. Any such determination
shall be conclusive and binding for all purposes of this paragraph 10.
(D) The provisions of this paragraph 10 shall not apply to any Business
Combination with any Person if (1) the Board of Directors of the corporation has
approved a memorandum of understanding with such other Person with respect to
such transaction prior to the time such Person became a Related Person; (2) such
transaction is otherwise approved by the Board of Directors of the corporation,
provided that a majority of the members of the Board of Directors voting for the
approval of such transaction were continuing directors; or (3) the Business
Combination involves solely the corporation and a subsidiary greater than 50% of
whose stock is owned by the corporation and none of whose stock is beneficially
owned by a Related Person (other than beneficial ownership arising solely
because of control of the corporation), provided that if the corporation is not
the surviving company, each stockholder of the corporation receives the same
type of consideration in such transaction in proportion to his stock holdings,
the provisions of paragraphs 10 through 11 of this Certificate of Incorporation
are continued in effect or adopted by such surviving company as part of its
articles of association and such articles have no provisions inconsistent with
such provisions, and the provisions of the corporation's by-laws are continued
in effect or adopted by said surviving company.
(E) This paragraph 10 may not be amended or rescinded except by the
affirmative vote of the holders of not less than 75% of the outstanding shares
of capital stock of the corporation entitled to vote generally in the election
of directors, at any regular or special meeting of the stockholders, but only if
notice of the proposed alteration or amendment was contained in the notice of
such meeting.
11. The Board of Directors of the corporation, when evaluating any offer
of another party (a) to make a tender or exchange offer for any equity security
of the corporation or (b) to effect a Business Combination (as defined in
paragraph 10), shall, in connection with the exercise of its judgment in
determining what is in the best interest of the corporation as a
-5-
<PAGE>
whole, be authorized to give due consideration to such factors as the Board of
Directors determines to be relevant, including, without limitation:
(i) the interest of the corporation's stockholders;
(ii) whether the proposed transaction might violate federal or
state laws;
(iii) not only the consideration being offered in the proposed
transaction, in relation to the then current market price for the
outstanding capital stock of the corporation, but also to the market
price for the capital stock of the corporation over a period of years,
the estimated price that might be achieved in a negotiated sale of the
corporation as a whole or in part or through orderly liquidation, the
premiums over market price for the securities of other corporations in
similar transactions, current political, economic and other factors
bearing on securities prices and the corporation's financial condition
and future prospects; and
(iv) the social, legal and economic effects upon employees,
suppliers, customers and others having similar relationships with the
corporation, and the communities in which the corporation conducts its
business.
In connection with any such evaluation, the Board of Directors is authorized to
conduct such investigations and to engage in such legal proceedings as the Board
of Directors may determine.
12. If at any time this corporation shall have a class of stock registered
pursuant to the provisions of the Securities Exchange Act of 1934, for so long
as such class is so registered, any action by the stockholders of such class
must be taken at an annual or special meeting of stockholders and may not be
taken by written consent.
14. The provisions of Section 203 of the Delaware General Corporation law
shall not apply to the corporation.
THE UNDERSIGNED, the sole incorporator named above, hereby certifies that
the facts stated above are true as of this 11th day of September, 1996.
/s/ Sarah G. Manchester
-----------------------------------------
Sarah G. Manchester
-6-
<PAGE>
BY-LAWS
OF
DATA TRANSLATION, INC.
Section 1. LAW, CERTIFICATE OF INCORPORATION AND BY-LAWS
1.1. These by-laws are subject to the certificate of incorporation of the
corporation. In these by-laws, references to law, the certificate of
incorporation and by-laws mean the law, the provisions of the certificate of
incorporation and the by-laws as from time to time in effect.
Section 2. STOCKHOLDERS
2.1. Annual Meeting. The annual meeting of stockholders shall be held at
10:00 a.m. on the second Wednesday in April in each year, unless that day be a
legal holiday at the place where the meeting is to be held, in which case the
meeting shall be held at the same hour on the next succeeding day not a legal
holiday, or at such other date and time as shall be designated from time to time
by the board of directors and stated in the notice of the meeting, at which they
shall elect a board of directors and transact such other business as may be
required by law or these by-laws or as may properly come before the meeting. At
an annual meeting of the stockholders, only such business shall be conducted as
shall have been properly brought before the meeting as (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the board of directors, (b) otherwise properly brought before the meeting by or
at the direction of the board of directors, or (c) otherwise properly brought
before the meeting by a stockholder by the stockholder's giving timely notice
thereof in writing to the secretary of the corporation. To be timely, a
stockholder's notice must be received at the principal executive offices of the
corporation: (1) not less than 60 days in advance of such meeting if such
meeting is to be held on a day which is within 30 days preceding the anniversary
of the previous year's annual meeting or 90 days in advance of such meeting if
such meeting is to be held on or after the anniversary of the previous year's
annual meeting; and (2) with respect to any other annual meeting of
stockholders, on or before the close of business on the 15th day following the
earliest date of public disclosure of the date of such meeting. For purposes of
this section, the date of public disclosure of a meeting shall include, but not
be limited to, the date on which disclosure of the date of the meeting is made
in a press release reported by the Dow Jones News Services, Associated Press or
a comparable national news service, or in a document publicly filed by the
corporation with the Securities
<PAGE>
and Exchange Commission pursuant to Sections 13, 14 or 15(d) (or the rules and
regulations thereunder) of the Securities Exchange Act of 1934, as amended. A
stockholder's notice to the secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (b) the name, age and
business and residential address, as they appear on the corporation's records,
of the stockholder proposing such business, (c) the class and number of shares
of the corporation which are beneficially owned by the stockholder, and (d) any
material interest of the stockholder in such business. Notwithstanding anything
in the by-laws to the contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth herein. The chairman
of the annual meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting and in
accordance with the provisions hereof and if the chairman should so determine,
the chairman shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
2.2. Special Meetings. A special meeting of the stockholders may be
called at any time by the president or the board of directors. A special
meeting of the stockholders shall be called by the secretary, or, in the case of
the death, absence, incapacity or refusal of the secretary, by an assistant
secretary or some other officer, upon application of a majority of the
directors. Any such application shall state the purpose or purposes of the
proposed meeting. Any such call shall state the place, date, hour, and purposes
of the meeting.
2.3. Place of Meeting. All meetings of the stockholders for the election
of directors or for any other purpose shall be held at such place within or
without the State of Delaware as may be determined from time to time by the
president or the board of directors. Any adjourned session of any meeting of
the stockholders shall be held at the place designated in the vote of
adjournment.
2.4. Notice of Meetings. Except as otherwise provided by law, a written
notice of each meeting of stockholders stating the place, day and hour thereof
and, in the case of a special meeting, the purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
meeting, to each stockholder entitled to vote thereat, and to each stockholder
who, by law, by the certificate of incorporation or by these by-laws, is
entitled to notice, by leaving such notice with him or at his residence or usual
place of business, or by depositing it in the United States mail, postage
prepaid, and addressed to such stockholder at his address as it appears in the
records of the corporation. Such notice shall be given by the secretary, or by
an officer or person designated by the board of directors, or in the case of a
special meeting by the officer calling the meeting. As to any adjourned session
of any meeting of stockholders, notice of the adjourned meeting need not be
given if the time and place thereof are announced at the meeting at which the
adjournment was taken except that if the adjournment is for more than thirty
days or if after the adjournment a new record date is set for the adjourned
session, notice of any such adjourned session of the meeting shall be
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<PAGE>
given in the manner heretofore described. No notice of any meeting of
stockholders or any adjourned session thereof need be given to a stockholder if
a written waiver of notice, executed before or after the meeting or such
adjourned session by such stockholder, is filed with the records of the meeting
or if the stockholder attends such meeting without objecting at the beginning of
the meeting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any meeting of the stockholders or any adjourned session thereof
need be specified in any written waiver of notice.
2.5. Quorum of Stockholders. At any meeting of the stockholders a quorum
as to any matter shall consist of a majority of the votes entitled to be cast on
the matter, except where a larger quorum is required by law, by the certificate
of incorporation or by these by-laws. Any meeting may be adjourned from time to
time by a majority of the votes properly cast upon the question, whether or not
a quorum is present. If a quorum is present at an original meeting, a quorum
need not be present at an adjourned session of that meeting. Shares of its own
stock belonging to the corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of any corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
2.6. Action by Vote. When a quorum is present at any meeting, a plurality
of the votes properly cast for election to any office shall elect to such office
and a majority of the votes properly cast upon any question other than an
election to an office shall decide the question, except when a larger vote is
required by law, by the certificate of incorporation or by these by-laws. No
ballot shall be required for any election unless requested by a stockholder
present or represented at the meeting and entitled to vote in the election.
2.7. Proxy Representation. Every stockholder may authorize another person
or persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, objecting to
or voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date unless such proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
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. The authorization of a proxy may but
need not be limited to specified action, provided, however, that, if a proxy
limits its authorization to a meeting or meetings of stockholders, unless
otherwise specifically provided such proxy shall entitle the holder thereof to
vote at any adjourned session but shall not be valid after the final adjournment
thereof.
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<PAGE>
2.8. Inspectors. The directors or the person presiding at the meeting
may, and shall if required by applicable law, appoint one or more inspectors of
election and any substitute inspectors to act at the meeting or any adjournment
thereof. Each inspector, before entering upon the discharge of his duties, shall
take and sign an oath faithfully to execute the duties of inspector at such
meeting with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, and the validity and effect of proxies, and shall
receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspectors shall make a report in
writing of any challenge, question or matter determined by them and execute a
certificate of any fact found by them.
2.9. List of Stockholders. The secretary shall prepare and make, at least
ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting, arranged in alphabetical order
and showing the address of each stockholder and the number of shares registered
in his name. The stock ledger shall be the only evidence as to who are
stockholders entitled to examine such list or to vote in person or by proxy at
such meeting.
Section 3. BOARD OF DIRECTORS
3.1. Number. The corporation shall have one or more directors, the number
of directors to be determined from time to time by vote of a majority of the
directors then in office. Except in connection with the election of directors at
the annual meeting of stockholders, the number of directors may be decreased
only to eliminate vacancies by reason of death, resignation or removal of one or
more directors. No director need be a stockholder.
3.2. Tenure. Each director shall hold office until the next annual
meeting and until his successor is elected and qualified, or until he sooner
dies, resigns, is removed or becomes disqualified.
3.3. Powers. The business and affairs of the corporation shall be managed
by or under the direction of the board of directors who shall have and may
exercise all the powers of the corporation and do all such lawful acts and
things as are not by law, the certificate of incorporation or these by-laws
directed or required to be exercised or done by the stockholders.
3.4. Vacancies. Vacancies and any newly created directorships resulting
from any increase in the number of directors may be filled by vote of the
holders of the particular class or series of stock entitled to elect such
director at a meeting called for the purpose, or by a majority of the directors
then in office, although less than a quorum, or by a sole remaining
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<PAGE>
director, in each case elected by the particular class or series of stock
entitled to elect such directors. When one or more directors shall resign from
the board, effective at a future date, a majority of the directors then in
office, including those who have resigned, who were elected by the particular
class or series of stock entitled to elect such resigning director or directors
shall have power to fill such vacancy or vacancies, the vote or action by
writing thereon to take effect when such resignation or resignations shall
become effective. The directors shall have and may exercise all their powers
notwithstanding the existence of one or more vacancies in their number, subject
to any requirements of law or of the certificate of incorporation or of these
by-laws as to the number of directors required for a quorum or for any vote or
other actions.
3.5. Committees. The board of directors may, by vote of a majority of the
whole board, (a) designate, change the membership of or terminate the existence
of any committee or committees, each committee to consist of one or more of the
directors; (b) designate one or more directors as alternate members of any such
committee who may replace any absent or disqualified member at any meeting of
the committee; and (c) determine the extent to which each such committee shall
have and may exercise the powers of the board of directors in the management of
the business and affairs of the corporation, including the power to authorize
the seal of the corporation to be affixed to all papers which require it and the
power and authority to declare dividends or to authorize the issuance of stock;
excepting, however, such powers which by law, by the certificate of
incorporation or by these by-laws they are prohibited from so delegating. In the
absence or disqualification of any member of such committee and his alternate,
if any, the member or members thereof present at any meeting and not
disqualified from voting, whether or not constituting a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in the
place of any such absent or disqualified member. Except as the board of
directors may otherwise determine, any committee may make rules for the conduct
of its business, but unless otherwise provided by the board or such rules, its
business shall be conducted as nearly as may be in the same manner as is
provided by these by-laws for the conduct of business by the board of directors.
Each committee shall keep regular minutes of its meetings and report the same to
the board of directors upon request.
3.6. Regular Meetings. Regular meetings of the board of directors may be
held without call or notice at such places within or without the State of
Delaware and at such times as the board may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent directors. A regular meeting of the
directors may be held without call or notice immediately after and at the same
place as the annual meeting of stockholders.
3.7. Special Meetings. Special meetings of the board of directors may be
held at any time and at any place within or without the State of Delaware
designated in the notice of the meeting, when called by the president, or by
one-third or more in number of the directors,
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<PAGE>
reasonable notice thereof being given to each director by the secretary the
president or any one of the directors calling the meeting.
3.8. Notice. It shall be reasonable and sufficient notice to a director
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to him at his usual or last known
business or residence address or to give notice to him in person or by telephone
at least twenty-four hours before the meeting. Notice of a meeting need not be
given to any director if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any director
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
3.9. Quorum. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, at any meeting of the
directors a majority of the directors then in office shall constitute a quorum;
a quorum shall not in any case be less than one-third of the total number of
directors constituting the whole board. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
3.10. Action by Vote. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, when a quorum is present at
any meeting the vote of a majority of the directors present shall be the act of
the board of directors.
3.11. Action Without a Meeting. Any action required or permitted to be
taken at any meeting of the board of directors or a committee thereof may be
taken without a meeting if all the members of the board or of such committee, as
the case may be, consent thereto in writing, and such writing or writings are
filed with the records of the meetings of the board or of such committee. Such
consent shall be treated for all purposes as the act of the board or of such
committee, as the case may be.
3.12. Participation in Meetings by Conference Telephone. Members of the
board of directors, or any committee designated by such board, may participate
in a meeting of such board or committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other or by any other means permitted by law. Such
participation shall constitute presence in person at such meeting.
3.13. Compensation. In the discretion of the board of directors, each
director may be paid such fees for his services as director and be reimbursed
for his reasonable expenses incurred in the performance of his duties as
director as the board of directors from time to time may determine. Nothing
contained in this section shall be construed to preclude any director from
serving the corporation in any other capacity and receiving reasonable
compensation therefor.
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<PAGE>
3.14. Interested Directors and Officers.
---------------------------------
(a) No contract or transaction between the corporation and one or more of
its directors or officers, or between the corporation and any other corporation,
partnership, association, or other organization in which one or more of the
corporation's directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if:
(1) 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 votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the board of directors, a
committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction.
Section 4. OFFICERS AND AGENTS
4.1. Enumeration; Qualification. The officers of the corporation shall be
a president, a treasurer, a secretary and such other officers, if any, as the
board of directors from time to time may in its discretion elect or appoint
including without limitation a chairman of the board, one or more vice
presidents and a controller. The corporation may also have such agents, if any,
as the board of directors from time to time may in its discretion choose. Any
officer may be but none need be a director or stockholder. Any two or more
offices may be held by the same person. Any officer may be required by the board
of directors to secure the faithful performance of his duties to the corporation
by giving bond in such amount and with sureties or otherwise as the board of
directors may determine.
4.2. Powers. Subject to law, to the certificate of incorporation and to
the other provisions of these by-laws, each officer shall have, in addition to
the duties and powers
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<PAGE>
herein set forth, such duties and powers as are commonly incident to his office
and such additional duties and powers as the board of directors may from time to
time designate.
4.3. Election. The officers may be elected by the board of directors at
their first meeting following the annual meeting of the stockholders or at any
other time. At any time or from time to time the directors may delegate to any
officer their power to elect or appoint any other officer or any agents.
4.4. Tenure. Each officer shall hold office until the first meeting of
the board of directors following the next annual meeting of the stockholders and
until his respective successor is chosen and qualified unless a shorter period
shall have been specified by the terms of his election or appointment, or in
each case until he sooner dies, resigns, is removed or becomes disqualified.
Each agent shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or by the officer who then holds agent
appointive power.
4.5. Chairman of the Board of Directors, President and Vice President.
The chairman of the board, if any, shall have such duties and powers as shall be
designated from time to time by the board of directors.
Unless the board of directors otherwise specifies, the president shall be
the chief executive officer and shall have direct charge of all business
operations of the corporation and, subject to the control of the directors,
shall have general charge and supervision of the business of the corporation.
Any vice presidents shall have such duties and powers as shall be set forth
in these by-laws or as shall be designated from time to time by the board of
directors or by the president.
4.6. Treasurer and Assistant Treasurers. Unless the board of directors
otherwise specifies, the treasurer shall be the chief financial officer of the
corporation and shall be in charge of its funds and valuable papers, and shall
have such other duties and powers as may be designated from time to time by the
board of directors or by the president. If no controller is elected, the
treasurer shall, unless the board of directors otherwise specifies, also have
the duties and powers of the controller.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
treasurer.
4.7. Controller and Assistant Controllers. If a controller is elected, he
shall, unless the board of directors otherwise specifies, be the chief
accounting officer of the corporation and be in charge of its books of account
and accounting records, and of its accounting procedures. He shall have such
other duties and powers as may be designated from time to time by the board of
directors, the president or the treasurer.
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<PAGE>
Any assistant controller shall have such duties and powers as shall be
designated from time to time by the board of directors, the president, the
treasurer or the controller.
4.8. Secretary and Assistant Secretaries. The secretary shall record all
proceedings of the stockholders, of the board of directors and of committees of
the board of directors in a book or series of books to be kept therefor and
shall file therein all actions by written consent of stockholders or directors.
In the absence of the secretary from any meeting, an assistant secretary, or, if
there be none or he is absent, a temporary secretary chosen at the meeting,
shall record the proceedings thereof. Unless a transfer agent has been appointed
the secretary shall keep or cause to be kept the stock and transfer records of
the corporation, which shall contain the names and record addresses of all
stockholders and the number of shares registered in the name of each
stockholder. He shall have such other duties and powers as may from time to time
be designated by the board of directors or the president.
Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
secretary.
Section 5. RESIGNATIONS AND REMOVALS
5.1. Any director or officer may resign at any time by delivering his
resignation in writing to the president, or the secretary or to a meeting of the
board of directors. Such resignation shall be effective upon receipt unless
specified to be effective at some other time, and without in either case the
necessity of its being accepted unless the resignation shall so state. A
director (including persons elected by stockholders or directors to fill
vacancies in the board) may be removed from office with or without cause by the
vote of the holders of a majority of the issued and outstanding shares of the
particular class or series entitled to vote in the election of such director.
The board of directors may at any time remove any officer either with or without
cause. The board of directors may at any time terminate or modify the authority
of any agent.
Section 6. VACANCIES
6.1. If the office of the president or the treasurer or the secretary
becomes vacant, the directors may elect a successor by vote of a majority of the
directors then in office. If the office of any other officer becomes vacant, any
person or body empowered to elect or appoint that officer may choose a
successor. Each such successor shall hold office for the unexpired term, and in
the case of the president, the treasurer and the secretary until his successor
is chosen and qualified or in each case until he sooner dies, resigns, is
removed or becomes disqualified. Any vacancy of a directorship shall be filled
as specified in Section 3.4 of these by-laws.
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<PAGE>
Section 7. CAPITAL STOCK
7.1. Stock Certificates. Each stockholder shall be entitled to a
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
the certificate of incorporation and the by-laws, be prescribed from time to
time by the board of directors. Such certificate shall be signed by the
president or a vice president and by the treasurer or an assistant treasurer or
by the secretary or an assistant secretary. Any of or all the signatures on the
certificate may be a facsimile. In case an officer, transfer agent, or registrar
who has signed or whose facsimile signature has been placed on such 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 time of its
issue.
7.2. Loss of Certificates. In the case of the alleged theft, loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms, including receipt of a bond
sufficient to indemnify the corporation against any claim on account thereof, as
the board of directors may prescribe.
Section 8. TRANSFER OF SHARES OF STOCK
8.1. Transfer on Books. Subject to the restrictions, if any, stated or
noted on the stock certificate, shares of stock may be transferred on the books
of the corporation by the surrender to the corporation or its transfer agent of
the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
board of directors or the transfer agent of the corporation may reasonably
require. Except as may be otherwise required by law, by the certificate of
incorporation or by these by-laws, the corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to receive notice
and to vote or to give any consent with respect thereto and to be held liable
for such calls and assessments, if any, as may lawfully be made thereon,
regardless of any transfer, pledge or other disposition of such stock until the
shares have been properly transferred on the books of the corporation.
It shall be the duty of each stockholder to notify the corporation of his
post office address.
8.2. Record Date. 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 sixty nor less than ten days before the date of such meeting.
If no such record date is fixed by the board of directors, the record date for
determining the
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<PAGE>
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; provided, however, that the board of
directors may fix a new record date for the adjourned meeting.
In order that the corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, 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 date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
such record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
the General Corporation Law of the State of Delaware, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation by delivery to its registered office in
Delaware by hand or certified or registered mail, return receipt requested, to
its principal place of business or to an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. If no record date has been fixed by the board of directors and prior
action by the board of directors is required by the General Corporation Law of
the State of Delaware, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the board of directors adopts the resolution
taking such prior 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
or 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 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 not
more than sixty days prior to such payment, exercise or other action. If no such
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.
Section 9. CORPORATE SEAL
9.1. Subject to alteration by the directors, the seal of the corporation
shall consist of a flat-faced circular die with the word "Delaware" and the name
of the corporation cut or engraved thereon, together with such other words,
dates or images as may be approved from time to time by the directors.
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<PAGE>
Section 10. EXECUTION OF PAPERS
10.1. Except as the board of directors may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts or other obligations made,
accepted or endorsed by the corporation shall be signed by the president, a vice
president or the treasurer.
Section 11. FISCAL YEAR
11.1. The fiscal year of the corporation shall end on November 30 of each
year.
Section 12. AMENDMENTS
12.1. These by-laws may be adopted, amended or repealed by vote of a
majority of the directors then in office or by vote of a majority of the voting
power of the stock outstanding and entitled to vote. Any by-law, whether
adopted, amended or repealed by the stockholders or directors, may be amended or
reinstated by the stockholders or the directors.
-12-
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