<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended SEPTEMBER 30, 1995 or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
------------------ --------------
COMMISSION FILE NUMBER 0-11278
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MINNTECH CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1229121
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14605 - 28TH AVENUE NORTH
MINNEAPOLIS, MINNESOTA 55447
(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 553-3300
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 31, 1995
- ------------------------------- -------------------------------
Common Stock, $0.05 par value 6,540,975 shares
Page 1 of 9
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Minntech Corporation
Quarterly Report on Form 10-Q
September 30, 1995
Index
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Earnings 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
Exhibit index 10
Page 2 of 9
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MINNTECH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30 September 30
------------ ------------
1995 1994 1995 1994
----------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
REVENUES
Net sales - products $ 16,316 $ 13,438 $ 31,761 $ 27,106
Contract revenues -- 75 -- 150
----------- ----------- ---------- ---------
Total revenues 16,316 13,513 31,761 27,256
OPERATING COSTS AND EXPENSES
Cost of product sales 9,505 7,501 18,658 15,312
Research and development 926 821 1,681 1,557
Selling, general and administrative 3,631 2,929 7,210 5,708
Amortization of intangible assets 155 70 295 145
Loss due to fiber production scale-up 936 -- 936 --
----------- ----------- ---------- ---------
Total operating costs and expenses 15,153 11,321 28,780 22,722
----------- ----------- ---------- ---------
EARNINGS FROM OPERATIONS 1,163 2,192 2,981 4,534
Other income, net 2 62 47 129
----------- ----------- ---------- ---------
EARNINGS BEFORE INCOME TAXES 1,165 2,254 3,028 4,663
Provision for income taxes 418 785 1,088 1,649
----------- ----------- ---------- ---------
NET EARNINGS $ 747 $ 1,469 $ 1,940 $ 3,014
----------- ----------- ---------- ---------
----------- ----------- ---------- ---------
NET EARNINGS PER SHARE $.11 $.22 $.29 $.46
----------- ----------- ---------- ---------
----------- ----------- ---------- ---------
Weighted average common and common
equivalent shares 6,835 6,597 6,759 6,544
----------- ----------- ---------- ---------
----------- ----------- ---------- ---------
</TABLE>
Page 3 of 9
<PAGE>
MINNTECH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
ASSETS September 30, March 31,
1995 1995
------------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,900 $ 3,325
Marketable securities 1,172 1,163
Accounts receivable, net 11,051 10,329
Inventories
Finished goods 2,993 2,658
Materials and work-in-process 5,356 4,806
Prepaid expenses 1,211 911
---------- ----------
TOTAL CURRENT ASSETS 24,683 23,192
PROPERTY AND EQUIPMENT, AT COST
Land, buildings and improvements 9,217 9,146
Machinery and equipment 18,983 17,024
---------- ----------
28,200 26,170
Less accumulated depreciation (11,671) (10,538)
---------- ----------
16,529 15,632
OTHER ASSETS
Patent costs, net 652 617
Goodwill, net 1,625 1,151
Other 1,141 682
---------- ----------
$ 44,630 $ 41,274
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,384 $ 2,811
Accrued expenses 1,178 2,204
Income taxes payable 5 72
---------- ----------
TOTAL CURRENT LIABILITIES 5,567 5,087
DEFERRED COMPENSATION 100 -
DEFERRED INCOME TAXES 1,194 1,135
STOCKHOLDERS' EQUITY
Preferred stock, no par value - -
Common stock, $.05 par value 327 319
Additional paid-in capital 10,478 9,124
Retained earnings 26,964 25,609
---------- ----------
37,769 35,052
---------- ----------
$ 44,630 $ 41,274
---------- ----------
---------- ----------
</TABLE>
Page 4 of 9
<PAGE>
MINNTECH CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
September 30
-------------------
1995 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 1,940 $ 3,014
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities
Depreciation and amortization 1,636 1,320
Tax benefit from stock option exercises 65 14
Deferred contract revenue - (150)
Foreign currency exchange (gain) loss 118 (105)
Deferred income taxes 11 71
Other (77) 61
Changes in assets and liabilities:
Accounts receivable (629) (516)
Inventories (756) (427)
Prepaid expenses (267) 108
Accounts payable and accrued expenses 561 177
Income taxes payable (67) (64)
--------- ---------
Total adjustments 595 489
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,535 3,503
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (2,274) (1,614)
Proceeds from sale of equipment - 12
Patent application costs (166) (94)
Purchase of product line (1,452) (434)
Other (1) (1)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (3,893) (2,131)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of long-term debt - (22)
Grant from foreign government 331 --
Proceeds from exercise of stock options 1,297 531
Payment of cash dividend (653) (623)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 975 (114)
--------- ---------
Effects of exchange rate changes on foreign currency cash balances (42) 1
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (425) 1,259
Cash and cash equivalents at beginning of period 3,325 6,207
--------- ---------
Cash and cash equivalents at end of period $ 2,900 $ 7,466
--------- ---------
--------- ---------
</TABLE>
Page 5 of 9
<PAGE>
MINNTECH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - FINANCIAL INFORMATION
The unaudited interim condensed consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission; accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.
These interim condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes in the
Company's Annual Report on Form 10-K for the year ended March 31, 1995 as filed
with the Securities and Exchange Commission.
In the opinion of management, the condensed consolidated financial statements
reflect all adjustments necessary for a fair presentation of the interim
periods.
NOTE B - NET EARNINGS PER SHARE
The calculations of net earnings per common and common equivalent shares are
presented in the following table. All amounts are in thousands except per share
amounts.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30 September 30
--------------------- ---------------------
1995 1994 1995 1994
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Net earnings $ 747 $ 1,469 $ 1,940 $ 3,014
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
Weighted average common shares
outstanding 6,473 6,221 6,442 6,204
Weighted average common
equivalent shares for stock options 362 376 317 340
---------- ----------- ----------- ----------
Weighted average common and common
equivalents shares 6,835 6,597 6,759 6,544
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
Net earnings per share $ .11 $ .22 $ .29 $ .46
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
</TABLE>
NOTE C - CASH DIVIDEND
The Company's Board of Directors on August 30, 1995 declared an annual cash
dividend of $.10 per share on the Company's common stock. The dividend was paid
on September 30, 1995 to stockholders of record as of September 15, 1995.
Page 6 of 9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales by product group are summarized on the following table:
Three Months Ended Six Months Ended
September 30 September 30
----------------- ----------------
1995 1994 1995 1994
-------- -------- -------- --------
Dialysis supplies and devices $ 4,762 $ 4,202 $ 9,722 $ 9,019
Reprocessing products 5,492 4,329 10,051 8,473
Cardiosurgery products 5,665 4,651 11,228 9,162
Water filtration products 397 256 760 452
-------- -------- -------- --------
$ 16,316 $13,438 $ 31,761 $27,106
-------- -------- -------- --------
-------- -------- -------- --------
Revenues for the second quarter and six months ended September 30, 1995
increased by $2,803,000, or 21%, and $4,505,000, or 17%, respectively, from
revenues in the comparable periods one year ago. The increase in revenues was
primarily due to increased sales of cardiosurgery products, in particular, unit
sales of hemoconcentrators and hemofilters, and unit sales of reprocessing
supplies. The revenue increases in dialysis supplies resulted from the addition
of the dialysate filter product line acquired from Amicon Ireland, Ltd. during
the first quarter and a doubling of dialyzer unit sales from the periods one
year ago. Reprocessing product sales increased due primarily to increased sales
of reuse supplies and sales of the endoscope product line which was purchased in
September 1994. Renatron-Registered Trademark- unit sales for the quarter
increased from the quarter one year ago. Renatron-Registered Trademark- sales
for the six months are comparable to the same period one year ago. Sales of
cardiosurgery products increased due to increased unit sales of
hemoconcentrators and hemofilters, including the Amicon product line of
hemoconcentrators and hemofilters, which more than offset a small decline in
sales of oxygenators.
Gross profit from product sales for the second quarter ended September 30, 1995
was $6,811,000, or 41.7% of net sales, compared to $5,937,000, or 44.2% of net
sales, for the quarter one year ago. For the six months ended September
30,1995, gross profit from product sales was $13,103,000, or 41.3% of net sales,
compared to $11,794,000, or 43.5% of net sales, for the same period one year
ago. The decline in gross margin from one year ago was due primarily to
increased unit costs of dialyzer and cardio-filter products due to increased
manufacturing expenses related to expansion of the fiber products manufacturing
group. During the quarter, the Company recorded a non-recurring $936,000 charge
for additional expenses related to fiber production manufacturing expansion.
Research and development expenses for the second quarter totaled $926,000, or
5.7% of revenues, compared to $821,000, or 6.1% of revenues, in the quarter one
year ago. For the six months ended September 30, 1995, expenses totaled
$1,681,000, or 5.3% of revenues, compared to $1,557,000, or 5.7% of revenues,
for the same period one year ago. The Company expects that total research and
development expenses for the fiscal year ending March 31, 1996 will approximate
6% of revenues.
Selling, general and administrative expenses for the second quarter ended
September 30, 1995 were $3,631,000, or 22.3% of revenues, compared to
$2,929,000, or 21.7% of revenues, in the second quarter one year ago. For the
six months ended September 30, 1995, selling, general and administrative
expenses totaled $7,210,000, or 22.7% of revenues, compared to $5,708,000, or
20.9% of revenues, for the same period one year ago. Selling, general and
administrative expenses have increased due to expansion of sales and
administrative staffs and expanded marketing efforts in the United States and
Europe.
The Company's effective income tax rate for the second quarter and six months
ended September 30, 1995 was 35.9%, compared to 34.8% and 35.4% for the same
periods one year ago.
Page 7 of 9
<PAGE>
The Company reported net earnings of $747,000, or 4.6% of total revenues for the
quarter ended September 30, 1995, compared to $1,469,000, or 10.9% of total
revenues in the second quarter one year ago. For the six months ended September
30, 1995, earnings were $1,940,000, or 6.1% of total revenues, compared to
$3,014,000, or 11.1% of total revenues for the same period one year ago. The
decline in net earnings and profitability for the quarter and six months ended
September 30, 1995 was due to higher manufacturing expenses related to fiber
products production and increased selling, general and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995, the Company had $4,072,000 of cash, cash equivalents and
marketable securities, a decrease of $416,000 from the balance at March 31,
1995. Working capital at September 30, 1995 was $19,116,000 compared to
$19,576,000 at March 31, 1995. The decrease in cash and working capital was
primarily due to the purchase of a product line and capital equipment purchases
during the six months ended September 30, 1995, which exceeded cash generated
from profitable operations. The Company's current ratio at September 30, 1995
was 4.4 to 1 compared to 4.6 to 1 at March 31, 1995. The Company expects to
invest approximately $4,000,000 in capital equipment for the full fiscal year.
The Company believes that its strong financial condition at September 30, 1995,
along with funds expected to be generated from operations, will be sufficient to
meet its working capital and capital equipment needs in fiscal year 1996.
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on August 30, 1995.
The stockholders took the following actions: (i) the stockholders
elected two directors to serve for terms ending in 1998 and until their
successors are elected. The stockholders present in person or by proxy
cast the following numbers of votes in connection with the election of
directors, resulting in the election of all of the nominees:
Votes For Votes Withheld
---------- --------------
Louis C. Cosentino, Ph.D. 5,931,016 36,214
Donald J. Shapiro 5,897,691 69,539
The names of the remaining directors whose term of office as a director
continued after the Annual Meeting are George Heenan, Amos Heilicher,
Fred L. Shapiro, M.D., and Donald H. Soukup.
(ii)The stockholders ratified the appointment of Price Waterhouse LLP
as the independent auditors of the Company for the fiscal year ending
March 31, 1996. The stockholders present in person, or by proxy cast
the following numbers of votes on this item:
Votes For Votes Against Votes Abstaining
--------- ------------- ----------------
Ratify Price Waterhouse LLP 5,944,239 5,568 17,423
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(a) Amendment to By-Laws effective as of September 14, 1995
3(b) Restated By-Laws effective as of September 14, 1995
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended
September 30, 1995.
Page 8 of 9
<PAGE>
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.
MINNTECH CORPORATION
DATE: November 9, 1995
----------------
/s/ Louis C. Cosentino, Ph.D.
-----------------------------
President, Chairman
and Chief Executive Officer
(Duly authorized officer)
(Principal financial officer)
Page 9 of 9
<PAGE>
INDEX TO EXHIBITS
3(a) Amendment to By-Laws effective as of September 14, 1995
3(b) Restated By-Laws effective as of September 14, 1995
27 Financial data schedule
<PAGE>
EXHIBIT 3(a)
AMENDMENT TO MINNTECH CORPORATION BY-LAWS
EFFECTIVE AS OF SEPTEMBER 14, 1995
Section 2.3 of the Company's Bylaws be and hereby is restated in its entirety to
read as follows:
"Section 2.03. SPECIAL MEETINGS. Special meetings of the
stockholders may be called by the President, the Chief Financial
Officer, or by the Board of Directors or any two or more members
thereof only for the purpose of transacting such business as is
properly brought before the meeting in accordance with these
Bylaws. Special meetings may also be called by one or more
stockholders holding not less than ten percent (10%) of the
voting power of all shares of the corporation entitled to vote
(except that a special meeting called for the purpose of
considering any action to directly or indirectly facilitate or
effect a business combination, including any action to change or
otherwise affect the composition of the Board for that purpose,
must be called by stockholders holding not less than twenty-five
percent (25%) of the voting power of all shares of the
corporation entitled to vote), who shall demand such special
meeting by written notice given to the President or the Chief
Financial Officer of the corporation specifying the purposes of
such meeting. Within thirty (30) days after the receipt of such
a written demand for a special meeting of stockholders by the
President or the Chief Financial Officer, the Board of Directors
shall cause a special meeting of stockholders to be called and
held on notice no later than ninety (90) days after the receipt
of such written demand. Business transacted at any special
meeting of the stockholders shall be limited to the purpose or
purposes stated in the notice of meeting."
<PAGE>
EXHIBIT 3(b)
MINNTECH CORPORATION
RESTATED BYLAWS
AS OF SEPTEMBER 14, 1995
ARTICLE I.
CORPORATE OFFICES AND SEAL
Section 1.01. OFFICES. The corporation may have offices within the State
of Minnesota or at such other places as the Board of Directors may from time
to time appoint or the business of the corporation may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 2.01. PLACE OF MEETINGS. Meetings of the stockholders may be held
at any place, within or without the State of Minnesota, as designated by the
President or the Board of Directors in the notice of meeting, and in the absence
of such designation, shall be held at the office of the corporation in the State
of Minnesota.
Section 2.02. REGULAR MEETINGS. Regular meetings of the stockholders of
this corporation may be held at the discretion of the Board of Directors on an
annual or less frequent periodic basis on such date and at such time and place
as may be designated by the President or the Board of Directors in the notice of
meeting. At regular meetings, the stockholders shall elect Directors and
transact only such other business as is properly brought before the meeting in
accordance with these Bylaws. If a regular meeting of stockholders has not been
held for a period of fifteen (15) months, one or more stockholders holding not
less than three percent (3%) of all voting stock of the corporation may call a
regular meeting of stockholders by delivering to the President or Treasurer a
written demand for a regular meeting. Within thirty (30) days after receipt of
such written demand by the President and Treasurer, the Board of Directors shall
cause a regular meeting of stockholders to be called and held on notice no
later than ninety (90) days after the receipt of written demand, all at the
expense of the corporation.
<PAGE>
Section 2.03. SPECIAL MEETINGS. Special meetings of the stockholders may
be called by the President, the Chief Financial Officer, or by the Board of
Directors or any two or more members thereof only for the purpose of transacting
such business as is properly brought before the meeting in accordance with these
Bylaws. Special meetings may also be called by one or more stockholders holding
not less than ten percent (10%) of the voting power of all shares of the
corporation entitled to vote (except that a special meeting called for the
purpose of considering any action to directly or indirectly facilitate or effect
a business combination, including any action to change or otherwise affect the
composition of the Board for that purpose, must be called by stockholders
holding not less than twenty-five percent (25%) of the voting power of all
shares of the corporation entitled to vote), who shall demand such special
meeting by written notice given to the President or the Chief Financial Officer
of the corporation specifying the purposes of such meeting. Within thirty (30)
days after the receipt of such a written demand for a special meeting of
stockholders by the President or the Chief Financial Officer, the Board of
Directors shall cause a special meeting of stockholders to be called and held on
notice no later than ninety (90) days after the receipt of such written demand.
Business transacted at any special meeting of the stockholders shall be limited
to the purpose or purposes stated in the notice of meeting.
Section 2.04. NOTICE OF MEETINGS. Except where a meeting of stockholders
is an adjourned meeting and the dates, time, and place of such meeting were
announced at the time of adjournment, notice of all meetings of stockholders
stating the date, time, and place thereof, and any other information required by
law or desired by the Board of Directors or by any other person or persons
calling the meeting, and in the case of a special meeting, the purpose thereof,
shall be given to each stockholder of record entitled to vote at such meeting
not less than seven (7) nor more than sixty (60) days prior to the date of such
meeting. In the event that a plan of merger, exchange, sale or other
disposition of all or substantially all of the assets of the corporation is to
be considered at a meeting of stockholders, notice of such meeting shall be
given to every stockholder, whether or not entitled to vote, not less than
fourteen (14) days prior to the date of such meeting.
<PAGE>
Section 2.05. Quorum; Adjourned Meetings. The holders of a majority of
the stock issued and outstanding and entitled to vote there at, present in
person or represented by proxy, shall constitute a quorum, and the presence of
such majority stockholders shall be required at all meetings of the stockholders
for the transaction of business, except as otherwise provided by law, by the
Articles of Incorporation, or by these Bylaws. If, however, such majority shall
not be present or represented at any meeting of stockholders, the stockholders
entitled to vote there at, present in person or represented by proxy, shall have
the power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of voting stock shall
be present. At any such adjourned meeting at which the requisite amount of
voting stock shall be represented, any business may be transacted which might
have been transacted at the meeting as originally called.
Section 2.06. VOTING AND PROXIES. At each meeting of the stockholders,
every stockholder having the right to vote shall be entitled to vote in person
or by proxy appointed by an instrument in writing subscribed by such stockholder
and conforming to the requirements established by law. Each stockholder shall
have one vote for each share of stock having voting power registered in his
name on the books of the corporation. All questions regarding the qualification
of voters, the validity of appointments of proxies, and the acceptance or
rejection of votes shall be decided by the presiding officer of the meeting.
The vote of the holders of the voting power of a majority of the shares having
voting power present in person or represented by proxy shall decide any
question brought before any duly held meeting, except as to any question upon
which any different vote is required by law, the Articles of Incorporation, or
these Bylaws.
Section 2.07. To be properly brought before a regular or special meeting
of stockholders, business must be of a nature that is appropriate for
consideration at a meeting of share holders and must be (i) specified in the
notice of the meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (ii)otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (iii) otherwise properly
brought before the meeting by a shareholder. In addition to any other
applicable requirements for business to be properly brought
<PAGE>
before a meeting of shareholders by a shareholder, the shareholder must have
given timely notice thereof in writing to the Secretary of the corporation. To
be timely, each such notice must be given, either by personal delivery or by
United States Mail, postage prepaid, to the Secretary of the corporation, not
less than fifty (50) days nor more than seventy-five (75) days prior to the
meeting; provided, however, that in the event that less than sixty (60) days'
notice or prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made,
whichever first occurs. Each such notice to the Secretary shall set forth as to
each matter the shareholder proposes to bring before the meeting (w) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (x) the name and address of
record of the shareholder proposing such business, (y) the class or series (if
any) and the number of shares of the corporation which are owned by the
shareholder, and (z) any material interest of the shareholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
transacted at the meeting except in accordance with the procedures set forth in
this Article; provided, however, that nothing in this Article shall be deemed to
preclude discussion by any shareholder of any business properly brought before
the meeting, in accordance with these Bylaws.
ARTICLE III.
DIRECTORS
Section 3.01. POWERS. The property, affairs and business of the
corporation shall be managed by the Board of Directors. In addition to the
powers and authorities by these Bylaws expressly conferred upon it, the Board
may exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the Articles of Incorporation or by these
Bylaws directed or required to be exercised or done by the stockholders.
Section 3.02. QUALIFICATIONS; TERM OF OFFICE. Directors need not be
stockholders. A director shall hold office until the annual meeting for the
year in which his term expires and until
<PAGE>
his successor shall be elected and shall qualify, subject however to prior
death, resignation, retirement or removal for cause. stockholders may remove a
director from office only for cause.
Section 3.03. NOTICE OF NOMINATIONS OF THE DIRECTORS. Nominations for the
election of directors may be made by the Board of Directors or by any
stockholder entitled to vote for the election of directors. Notice of
nominations which are proposed by the Board of Directors shall be given by the
President or the Chairman of the Board of Directors on behalf of the Board of
Directors. However, any shareholder entitled to vote generally in the election
of directors may nominate one or more persons for election as directors at a
meeting only if written notice of such shareholder's intent to make such
nomination or nominations has been given, either by personal delivery or by
United States mail, postage prepaid, to the secretary of the corporation not
less than fifty (50) days nor more than seventy-five (75) days prior to the
meeting; provided, however, that in the event that less than sixty (60) days'
notice or prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of meeting was mailed or such public disclosure was made,
whichever first occurs. Each such notice to the secretary shall set forth: (i)
the name and address of record of the shareholder who intends to make the
nomination; (ii) a representation that the shareholder is a holder of record of
shares of the corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (iii) the name, age, business and residence addresses, and
principal occupation or employment of each nominee; (iv) a description of all
arrangements or understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; (v) such other
information regarding each nominee proposed by such shareholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission; and (vi) the consent of each nominee
to serve as a director of the corporation if so elected.
<PAGE>
The corporation may require any proposed nominee to furnish such other
information as may reasonably be required by the corporation to determine the
eligibility of such proposed nominee to serve as a director of the corporation.
The presiding officer of the meeting may, if the facts warrant, determine that a
nomination was not made in accordance with the foregoing procedure, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
Section 3.04. VACANCIES; NEWLY CREATED DIRECTORSHIPS. Any vacancy
occurring in the Board of Directors may be filled for the unexpired term by the
affirmative vote of a majority of the directors remaining in office, even though
said remaining directors be less than a quorum. Any newly created directorship
resulting from an increase in the authorized number of directors by action of
the Board of Directors may be filled, for a term determined by the Board of
Directors consistent with the Articles of Incorporation, by a majority vote of
the directors serving at the time of such increase.
Section 3.05. MEETINGS. Meetings of the Board of Directors shall be held
immediately after, and at the same place as, regular meetings of stockholders.
Other meetings of the Board of Directors may be held at such times and places as
shall from time to time be determined by the Board of Directors. Meetings of
the Board of Directors also may be called by any director, in which case the
person or persons calling such meeting may fix the date, time, and place
thereof, and shall cause notice of meeting to be given.
Section 3.06. NOTICE OF MEETINGS. If the date, time, and place of the
meeting of the Board of Directors has been announced at the previous meeting, no
notice is required. In all other cases, twenty-four (24) hours' notice of
meetings of the Board of Directors, stating the date and time thereof and any
other information required by law or desired by the person or persons calling
such a meeting, shall be given to each director. If notice of meeting is
required, and such notice does not state the place of the meeting, such meeting
shall be held at the principal executive office of the corporation. Notice of
meetings of the Board of Directors shall be given to directors in the manner
provided in Article VI of these Bylaws for the giving of notice.
<PAGE>
Section 3.07. MEETINGS BY ELECTRONIC COMMUNICATION. Members of the Board
of Directors or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or of any such committee by
means of conference telephone or similar communication equipment by means of
which all persons participating in the meeting can simultaneously hear each
other, and participation in such a manner shall constitute presence in person at
such meeting.
Section 3.08. QUORUM AND VOTING. A majority of the directors currently
holding office shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors. In the absence of a quorum, a majority of
the directors present may adjourn the meeting from time to time until a quorum
is present. The Board of Directors shall take action by the affirmative vote of
the majority of the directors present at any duly held meeting, except as to any
question upon which any different vote is required by law, the Articles of
Incorporation, or these Bylaws.
Section 3.09. COMMITTEES. The Board of Directors, by resolution approved
by the affirmative vote of the majority of the directors then holding office,
may establish one or more committees of one or more persons having the authority
of the Board of Directors in the management of the business of the corporation
to the extent provided in such resolution. Such committees, however, shall at
all times be subject to the direction and control of the Board of Directors.
Committee members need not be directors and shall be appointed by the
affirmative vote of a majority of the directors present. The majority of the
members of any such committee shall constitute a quorum for the transaction of
business at a meeting of any such committee. In other matters of procedure, the
provisions of these Bylaws shall apply to the committees and the members thereof
to the same extent they apply to the Board of Directors and directors,
including, without limitation, the provisions with respect to meetings and
notice thereof, absent members, written actions, electronic communications, and
valid acts. Each committee shall keep regular minutes of its proceedings and
report the same to the Board of Directors.
Section 3.10. ACTION IN WRITING. Any action required or permitted to be
taken by a meeting of the Board of Directors, or lawfully constituted committee
thereof, may be taken by written
<PAGE>
action signed by all of the Directors then in office or by all of the members of
a committee established by the Board of Directors, as the case may be.
ARTICLE IV.
OFFICERS
Section 4.01. NUMBER. The officers of the corporation shall be chosen by
the directors, and shall consist of a Chairman of the Board (if one is elected
by the Board), a President, one or more Vice Presidents, a Secretary, a
Treasurer and such Assistant Secretaries and Assistant Treasurers and such other
officers and agents as the Board of Directors from time to time shall elect or
appoint. Any two offices may be held by the same person.
Section 4.02. TERM OF OFFICE; REMOVAL; AND VACANCIES. Any officer shall
hold office until his successor shall have been duly elected, unless prior
thereto he shall have resigned or been removed from office as hereinafter
provided. Any officer or agent elected or appointed by the Board of Directors
shall hold office at the pleasure of the Board of Directors and may be removed,
with or without cause, at any time by the vote of a majority of the Board of
Directors. Any vacancy in an office of the corporation shall be filled by the
Board of Directors.
Section 4.03. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one is
elected, shall preside at all meetings of the stockholders and directors and
shall have such other duties as may be prescribed from time to time, by the
Board of Directors.
Section 4.04. PRESIDENT. The President shall be the chief executive
officer of the corporation. In the absence of the Chairman of the Board, he
shall preside at all meetings of stockholders and directors; he shall be
responsible for general and active management of the business of the
corporation; and he shall see that all orders and resolutions of the Board are
carried into effect. He shall have the general powers and duties usually vested
in the office of the President and chief executive officer and shall have such
other powers and perform such other duties as the Board of Directors may from
time to time prescribe.
<PAGE>
Section 4.05. VICE PRESIDENT. The Vice President, if any, or Vice
Presidents in case there be more than one, shall have such powers and perform
such duties as the president or the Board of Directors may from time to time
prescribe.
Section 4.06. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and of the stockholders and shall maintain records of, and
whenever necessary, certify all proceedings of the Board of Directors and of the
stockholders. He shall keep the stock books of the corporation, and when so
directed by the Board of Directors, shall give or cause to be given notice of
meetings of the stockholders and meetings of the Board of Directors. He shall
also perform such other duties and have such other powers as the President or
the Board of Directors may from time to time prescribe.
Section 4.07. TREASURER. The Treasurer shall be the chief financial
officer of the corporation. He shall have the care and custody of the corporate
funds and securities of the corporation and shall disburse the funds of the
corporation as may be ordered from time to time by the President or the Board of
Directors. He shall keep full and accurate financial records for the
corporation and shall have such other powers and perform such other duties as
the President or the Board of Directors may from time to time prescribe.
Section 4.08. OTHER OFFICERS. The Assistant Secretaries and Assistant
Treasurers in the order of their seniority, unless otherwise determined by the
Board of Directors, shall, in the absence or disability of the Secretary or
Treasurer, perform the duties and exercise the powers of the Secretary and
Treasurer respectively. Such Assistant Secretaries and Assistant Treasurers
shall have such other powers and perform such other duties as the President or
the Board of Directors may from time to time prescribe. Any other officer
appointed by the Board of Directors shall hold office at the pleasure of the
Board of Directors. He shall have such powers, perform such duties, and be
responsible to such other officers as the Board of Directors may from time to
time prescribe.
Section 4.09. DELEGATION OF DUTIES. In case of the absence of any officer
of the corporation, or for any other reason that the Board may deem sufficient,
the Board may delegate
<PAGE>
for the time being the powers and duties, or any of them of such officer to any
other officer or to any director or directors.
ARTICLE V.
CERTIFICATES OF STOCK
Section 5.01. CERTIFICATES. Certificates of stock of the corporation
shall be numbered and shall be entered into the books of the corporation as they
are issued. Each such certificate shall exhibit the holder's name and number of
shares, and shall contain any other information required by law or desired by
the Board of Directors and shall be signed by the President or any Vice
President and the Treasurer or the Assistant Treasurer, or the Secretary or
Assistant Secretary.
Section 5.02. LOSS OF CERTIFICATES. Any person claiming a certificate of
stock to be lost or destroyed shall make an affidavit in such manner as the
Board of Directors may require and shall, if the Directors so require, give the
corporation a bond of indemnity in form and amount and with one or more sureties
satisfactory to the Board, whereupon a new certificate may be issued of the same
tenor and for the same number of shares as the one alleged to be lost or
destroyed.
ARTICLE VI.
NOTICES
Section 6.01. GENERAL. Whenever notice is required to be given to any
stockholder or director, such notice may be given by either oral or written
communication. A written notice shall be delivered by hand or mailed to the
stockholder or director for whom it is intended at such address as appears on
the books of the corporation or shall be given by any other method which
conforms to law. Notice by mail shall be deemed given when deposited in the
United States mail with sufficient postage affixed.
Section 6.02. WAIVER OF NOTICE. Whenever any notice is required to be
given to any stockholder, director or officer under the provisions of these
Bylaws, the Articles of Incorporation or by statute, such notice may be waived
in the manner provided by law.
<PAGE>
ARTICLE VII.
INDEMNIFICATION
Section 7.01. The corporation shall indemnify its officers, directors,
employees and agents to the full extent permitted by the laws of the State of
Minnesota, as now in effect, or as the same may be hereafter amended.
ARTICLE VIII.
AMENDMENTS
Section 8.01. These Bylaws may be amended or altered by the Board of
Directors at any meeting provided that notice of any such proposed amendment
shall have been given in the notice given to the directors of such meeting.
Such authority in the Board of Directors is subject to the power of the
stockholders to change or repeal such Bylaws.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<S> <C>
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0
0
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