<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM N/A TO N/A
------------- -------------
Commission file number 2-93426-D
UNISTAR FINANCIAL SERVICE CORP.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 87-0419568
- ------------------------------- ---------------------------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
4635 McEwen Road, Dallas, Texas 75244
-----------------------------------------------------------
(Address of Principal Executive Offices)
(972) 720-7110
-----------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
-----------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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[ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Common Stock, par value $.01
per share -- 24,388,354 shares outstanding as of August 17, 1999.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE> 2
UNISTAR FINANCIAL SERVICE CORP.
TABLE OF CONTENTS
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Page
Item Number
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PART I
FINANCIAL INFORMATION
1. Financial Statements ................................................................... 1
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .................................................................. 1
PART II
OTHER INFORMATION
1. Legal Proceedings ...................................................................... 5
2. Changes in Securities.................................. ................................ 5
3. Defaults Upon Senior Securities ........................................................ 6
4. Submission of Matters to a Vote of Security Holders..................................... 6
5. Other Information....................................................................... 6
6. Exhibits and Reports on Form 8-K ....................................................... 6
Appendix A - Unaudited consolidated financial statements of Unistar Financial
Service Corp. as of and for the Quarter and Six Months Ended June 30, 1999 ................... F-1
</TABLE>
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The financial statements of the Company are annexed to this report as
Appendix A, beginning on page F-1.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
Unistar Financial Service Corp. (the "Company"), through its subsidiaries,
is primarily engaged in the distribution, premium financing, reinsurance, claims
processing and other ancillary areas of personal lines auto insurance business.
As of June 30, 1999, the Company has over 157 company-owned ("captive") retail
auto insurance agency locations and over 463 appointed independent auto
insurance agencies that generate revenue from agency fees, commissions and the
marketing of ancillary financial services. The Company's premium finance
subsidiary, Eagle Premium Finance Company, generates revenue from premium
financing provided to the Company's customers. The Company's several managing
general agencies generate revenue through commissions, policy fee income and
other administrative fees from the marketing and administration of the Company's
insurance products through the Company's auto insurance agency distribution
network. Unistar Insurance Company, the Company's insurance subsidiary,
generates revenues from reinsurance premiums and the investment of its assets.
The Company completed several significant acquisitions late in 1998. These
transactions represented significant steps in transforming the Company from a
dormant public shell into a vertically integrated insurance and financial
service holding company, specializing in wholesale and retail auto insurance,
premium financing, and insurance claims management. The Company has implemented
a strategy of expanding its insurance product distribution system by acquiring
certain retail auto insurance agencies and other complimentary businesses in the
financial services industry. The Company expects to continue such acquisition
activity for the remainder of 1999, but there can be no assurance of its ability
to do so.
During the second quarter, the Company contemplated selling its
wholly-owned subsidiary, Unistar Insurance Company ("UIC"), a property and
casualty insurance company domiciled in Texas. Subsequent to the end of the
second quarter, the Company discontinued its efforts to sell UIC. The Company's
present strategy is to continue growing its commission-based and fee-for-service
distribution from which it currently derives most of its earnings, and UIC will
continue with a participation, via reinsurance, of the Company's own personal
lines auto insurance risks.
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RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1999
The Company acquired its present core business operations during August and
September of 1998, therefore a comparison of second quarter 1999 to second
quarter 1998 or six months ended June 30, 1999 to six months ended June 30, 1998
would not provide meaningful information. The Company believes that the most
appropriate comparison for the second quarter of 1999 is to the first quarter of
1999. The following discussion should be read in conjunction with the
consolidated financial statements and related notes included in this report and
in the Company's Annual Report on Form 10-KSB for the year ended December 31,
1998.
<TABLE>
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THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1999 MARCH 31, 1999
------------------ ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
GROSS WRITTEN PREMIUMS ................... $ 31,079,000 $ 44,209,000
================== ==================
Revenue:
Net commissions and fees earned ......... $ 12,138,000 $ 14,590,000
Finance revenue ......................... 4,981,000 4,469,000
Other income, net ....................... 2,509,000 501,000
------------------ ------------------
Total revenues and other income ......... 19,628,000 19,560,000
Expenses:
Commissions and loss adjustment
expenses ............................ 7,535,000 8,946,000
Other operating expenses ................ 9,067,000 6,560,000
------------------ ------------------
Total operating expenses ................ 16,602,000 15,506,000
------------------ ------------------
EBITDA ................................... 3,026,000 4,054,000
Amortization of customer lists .......... 630,000 551,000
Depreciation expense .................... 189,000 107,000
Interest expense ........................ 1,851,000 1,129,000
------------------ ------------------
Total non-operating expenses ............ 2,670,000 1,787,000
------------------ ------------------
Income before income taxes .............. 356,000 2,267,000
Income tax expense ...................... 140,000 896,000
------------------ ------------------
NET INCOME ............................... $ 216,000 $ 1,371,000
================== ==================
EARNINGS PER SHARE ....................... $ 0.01 $ 0.06
================== ==================
Weighted average shares outstanding ...... 24,380,807 24,110,729
================== ==================
</TABLE>
Gross written premiums. The Company's top-line production is measured by
gross written premiums. Gross written premiums of $31.1 million for the second
quarter of 1999 ("Q2") represented a 29.7% decrease from the first quarter of
1999 ("Q1"). This decrease was mainly due to seasonal fluctuations and a rating
increase in the Company's personal lines auto insurance on March 15, 1999.
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Net commissions and fees earned. The Company earned net commissions and
fees of $12.1 million during Q2, a 16.8% decrease from Q1. The Company earns
fees and commissions by placing insurance business with third-party insurers.
The decrease in net commissions and fees earned was also due to seasonal
fluctuations and a rating increase in personal lines auto insurance on
March 15, 1999.
Finance revenue. Finance revenue of $4.9 million during Q2 exceeded Q1 by
11.5%, due to the acquisition of First Grampian Premium Finance Company (a
Florida licensed entity) selling the Company's Florida retail agencies.
Other income, net. Other income of $2.5 million during Q2 was approximately
five times the amount recognized in Q1. The increase in other income was
primarily attributed to the Company's auto collision appraisal and repair center
divisions which commenced operations in Q2.
Commissions and loss adjustment expenses. Commissions and loss adjustment
expenses of $7.5 million for Q2 represented a 15.8% decrease from Q1.
Commissions and loss adjustment expenses, the Company's most significant
expense, represent actual commissions paid to retail agents, including expenses
required to settle claims and losses. The Company is reimbursed by reinsurers as
a percentage of earned premium to administer and settle claims. The decrease
corresponded with the decrease in premiums written by the Company during the
second quarter.
Other operating expenses. Other operating expenses of $9.1 million during
Q2 were 38.2% higher than Q1, due to increased operating expenses by the
company's auto collision appraisal and repair center divisions. The increase
corresponded with the increase in other income generated primarily by the
Company's auto collision appraisal and repair center divisions.
Interest expense. The 64.0% increase in interest expense, $1.9 million for
Q2 versus $1.1 million during Q1, was the result of a higher balance of the
credit facility that funds the Company's premium finance operations, due to the
greater number of premium finance contracts. The increase was also partially
attributable to the Term Loan (described below) being outstanding for a full
quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company's existing capital resources consist of cash, equity securities
available for sale and funds available under credit facilities for premium
financing. The Company's cash and equity securities available for sale increased
to $9.5 million at June 30,1999 from $6.2 million at December 31, 1998.
In March 1999, the Company entered into a credit facility with Eurostar
Interests, Ltd. that provided a term loan of $10 million, due in March 2003
(the "Term Loan"). The proceeds of the Term Loan have been partially used to
fund acquisitions and otherwise expand operations. The Term Loan bears interest
at 10% per annum and is unsecured.
Typically the Company maintains cash levels between $4 million and $6
million for general corporate needs, with any excess used to reduce borrowings
under the Company's premium financing facility. In the six months ended June 30,
1999, the Company's operations used $18.4 million of cash compared to $4.7
million in 1998. The primary use of cash was $20.3 million that was used to
finance premium contract receivables. The Company's financing activities for the
six months ended June 30, 1999, provided $25.5
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million of net cash, compared to $6.6 million in 1998. The increase was
primarily due to the $10 million proceeds from the Term Loan in March 1999. The
Company's investing activities used $3.8 million of net cash in the first
quarter of 1999, compared to $3.2 million provided in 1998, which was mostly
from acquired businesses.
The Company's cash requirements consist of working capital needs,
obligations under its leases and promissory notes and the funding of potential
acquisitions. Management believes that the Company's cash and funds available
under premium financing facilities are sufficient to meet its anticipated cash
requirements, subject to raising additional capital as necessary for
acquisitions.
Finance contracts receivable as of June 30, 1999 increased to 56.1 million
from $38.5 million at year end 1998, after deducting an allowance for credit
losses of approximately $1.0 million on each date. The increase reflects
increased business from existing operations and the addition of certain agency
acquisitions and other Florida agency acquisitions. Notes payable increased to
55.9 million as of June 30, 1999 from $38.6 million at year-end 1998, primarily
due to the Term Loan and increased premium finance facility.
In February, 1999, the Company converted $4 million of debt into equity.
YEAR 2000 MATTERS
In 1998, the Company began converting its computer systems to be year 2000
compliant. The Company has evaluated its internal systems, both hardware and
software, facilities, and interactions with business partners in relation to
year 2000 issues. The Company believes that it has completed its efforts to
bring the systems in compliance. The total cost incurred to modify these
existing systems, which include both internal and external costs of programming,
coding and testing, was not material. The Company continually evaluates computer
hardware and software upgrades and, therefore, many of the costs to replace
existing items with year 2000 compliant upgrades are not likely to be
incremental costs to the Company. During 1999, the Company will continue to
contact its business partners (including agents, banks, motor vehicle
departments and rating agencies) to determine the status of their compliance and
to assess the impact of noncompliance on the Company. The Company believes that
it is taking the necessary measures to mitigate issues that may arise relating
to the year 2000. To the extent that any additional issues arise, the Company
will evaluate the impact on its business, results of operations and financial
condition and, if material, make the necessary disclosures and take appropriate
remedial action.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-QSB
This Form 10-QSB contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, which are intended to be covered by the safe
harbors created thereby. These statements include the plans and objectives of
management for future operations, including plans and objectives relating to
future growth of the Company's business activities and availability of funds.
The forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions, regulatory framework, and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although the
Company believes that
4
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the assumptions underlying the forward-looking statements are reasonable, any of
the assumptions could be inaccurate and, therefore, there can be no assurance
that the forward-looking statements included in this Form 10-QSB will prove to
be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is subject to routine legal proceedings in the ordinary course
of business. The Company believes that the ultimate resolution of these lawsuits
will not have a material adverse effect on its business, financial condition or
results of operations. The Company provides for a liability for both the amount
of estimated damages attributable to these lawsuits and the estimated costs of
litigation.
ITEM 2. CHANGES IN SECURITIES.
On April 30, 1999, the Company filed a registration statement on Form 8-A
to register its common stock under Section 12(b) and 12(g) of the Securities
Exchange Act of 1934.
At the Company's Annual Shareholder's Meeting, held June 18, 1999, the
Company's shareholders approved an amendment to the Company's Articles of
Incorporation that increased the authorized shares of the Company from
50,000,000 shares to 200,000,000 shares (See Item 5. below). The Company filed
its Restated Certificate of Incorporation, which is filed as an exhibit to this
Form 10-QSB, with the Delaware Secretary of State on June 30, 1999.
On June 18, 1999, the Company's Board of Directors amended the Company's
Bylaws (the amended provision had previously allowed the closing of the stock
transfer records) in order to comply with a requirement of the American Stock
Exchange. The Company's Amended and Restated Bylaws are filed as an exhibit to
this Form 10-QSB.
On July 13, 1999, the Company's Board of Directors announced a 2-for-1
stock split, payable in the form of a stock dividend to the Company's
shareholders of record as of July 31, 1999, and payable on or before August 31,
1999. On July 23, 1999, the Board determined that a stock split would not be in
the best interests of the Company's shareholders, and the Board rescinded the
stock dividend.
During the second quarter of 1999, the Company issued the following shares
of its common stock without registration under the Securities Act of 1933:
In April 1999, the Company issued 2,010 shares of common stock in multiple
stock-for-asset transactions.
The above issuances were unregistered, as the Company was relying on the
exemption from registration contained in Section 4(2) of the Securities Act on
the basis that such transactions did not involve public offerings.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 18, 1999, the Annual Meeting of the Company's Shareholders was
held, at which the following three matters were submitted to a vote and approved
as indicated:
1. Proposal to elect nine individuals to the Board of Directors pursuant
to management's nominations: Marc A. Sparks, F. Jeffrey Nelson, James
G. Leach, Kerry A. Sebree, Morris Belzberg, Brent Brown, Noelle Hill,
Leonard Feldman and Patrick Rastiello. This proposal was approved with
15,770,151 shares voting in favor of each nominee, and no shares were
withheld.
2. Proposal to amend the Company's Certificate of Incorporation to
increase the authorized shares of the Company from 50,000,000 shares to
200,000,000 shares. This proposal was approved with 13,382,627 shares
voting in favor, no shares voting against, and 2,387,524 shares
abstaining.
3. Proposal to ratify the appointment of Karlins Arnold & Corbitt, P.C. as
the Company's independent auditors for 1999. This proposal was approved
with 15,770,151 shares voting in favor, no shares voting against, and
no shares abstaining.
ITEM 5. OTHER INFORMATION.
On May 17, 1999, the Company's common stock was accepted for listing
and commenced trading on the American Stock Exchange. The Company's common stock
had been quoted on the OTC Bulletin Board from September 1998 to May 1999.
In mid-July 1999, the Company's common stock experienced extreme price
volatility in its trading on the American Stock Exchange, after which the
Listing Investigations Department of The Nasdaq-Amex Market Group (the "Market
Group") commenced a review of the Company. Pending the results of such review,
the Market Group halted the trading of the Company's common stock on July 21,
1999. Among other things, the Market Group has requested and been supplied with
information about the valuation of certain assets (customer lists and a
reinsurance license) on the Company's balance sheet, and certain transfers and
recipients of the Company's common stock. Some of such transfers were made by
Marc A. Sparks, the Company's chairman and CEO, and F. Jeffrey Nelson, the
Company's President and CFO.
The Company is cooperating fully with the review process, but at this
time the Company's management cannot determine: (i) the outcome or duration of
the review; (ii) when, or if , the Company's common stock will resume trading on
the American Stock Exchange; or (iii) whether the results of the Market Group's
review will have a material effect on the Company's financial position or
results of operation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
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3.1 Restated Certificate of Incorporation.(2)
3.2 Amended and Restated Bylaws.(2)
10.1* Registrant's 1998 Stock Option Plan.(1)
27.0 Financial Data Schedule.(2)
* Denotes management contract or compensatory plan.
(1) Incorporated by reference to the Registrant's Report on Form 8-K filed
September 2, 1998.
(2) Filed herewith.
(b) Reports on Form 8-K
None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNISTAR FINANCIAL SERVICE CORP.
Dated: August 19, 1999 By /s/ MARC A. SPARKS
------------------------------------------
Marc A. Sparks
Chairman and Chief Executive Officer
Dated: August 19, 1999 By /s/ F. JEFFREY NELSON
------------------------------------------
F. Jeffrey Nelson
President and Chief Financial Officer
<PAGE> 11
APPENDIX A
UNAUDITED FINANCIAL STATEMENTS OF
UNISTAR FINANCIAL SERVICE CORP.
AS OF AND FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1999
<PAGE> 12
UNISTAR FINANCIAL SERVICE CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------------- ----------------
(Unaudited)
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ASSETS
Equity securities available for sale, at fair value $ 419,000 $ 347,000
Cash 9,133,000 5,865,000
Finance contracts receivable, net of allowance for
credit losses of [$1,008,445] and $996,146, respectively 56,116,000 38,454,000
Premiums due from agents and policyholders 5,896,000 1,685,000
Property and equipment, net 6,773,000 3,535,000
Customer lists, net of accumulated amortization 85,091,000 86,176,000
Reinsurance Intermediary License(s) 5,018,000 5,000,000
Investments 14,569,000 6,283,000
Other assets 4,031,000 1,988,000
---------------- ----------------
TOTAL ASSETS $ 187,046,000 $ 149,333,000
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Reserve for commissions and loss adjustment expenses $ 6,589,000 $ 5,340,000
Unearned commissions and policy fees 6,715,000 6,180,000
Amount due reinsurer 6,132,000 1,923,000
Notes payable 55,958,000 38,571,000
Accounts payable and accrued liabilities 4,857,000 9,426,000
Long-term debt 10,175,000 --
Income tax payable 3,065,000 2,929,000
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TOTAL LIABILITIES 93,491,000 64,369,000
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Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, authorized
5,000,000 shares; no shares issued or outstanding -- --
Common stock, $.01 par value, authorized 200,000,000
shares; 24,404,412 and 24,009,372 issued and
outstanding, respectively 244,000 240,000
Additional paid-in capital 92,130,000 85,203,000
Accumulated other comprehensive income (785,000) (858,000)
Retained earnings 2,140,000 553,000
Less treasury stock, at cost (63,333 shares) (174,000) (174,000)
---------------- ----------------
TOTAL STOCKHOLDERS' EQUITY 93,555,000 84,964,000
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 187,046,000 $ 149,333,000
================ ================
</TABLE>
See notes to consolidated financial statements.
F-1
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UNISTAR FINANCIAL SERVICE CORP.
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Three Six
Months Months
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(Unaudited) (Unaudited)
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GROSS WRITTEN PREMIUMS $ 31,079,000 $ 75,288,000
=============== ===============
REVENUE
Net commissions and fees earned $ 12,138,000 $ 26,728,000
Finance revenue 4,981,000 9,450,000
Other income, net 2,509,000 3,010,000
--------------- ---------------
Total revenues and other income 19,628,000 39,188,000
--------------- ---------------
EXPENSES
Commissions and loss adjustment expenses 7,536,000 16,481,000
Other operating expenses 9,067,000 15,627,000
Amortization of customer lists 630,000 1,181,000
Depreciation expense 189,000 296,000
Interest expense 1,850,000 2,980,000
--------------- ---------------
Total expenses 19,272,000 36,565,000
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INCOME BEFORE PROVISION FOR INCOME TAX 356,000 2,623,000
PROVISION FOR INCOME TAX 140,000 1,036,000
--------------- ---------------
NET INCOME $ 216,000 $ 1,587,000
=============== ===============
Basic earnings per share $ .01 $ .07
Diluted earnings per share $ .01 $ .07
Weighted average number of common shares outstanding:
Basic 24,380,807 24,244,547
Diluted 24,380,807 24,244,547
</TABLE>
See notes to consolidated financial statements.
F-2
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UNISTAR FINANCIAL SERVICE CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Six
Months
------------
(Unaudited)
<S> <C>
Cash flows from operating activities:
Net income $ 1,587,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,477,000
Finance contract receivables (20,294,000)
Amount due reinsurers 4,556,000
Reserve for commissions and loss expenses 1,295,000
Unearned commissions and policy fees (2,314,000)
Other, net (4,677,000)
------------
Net cash used in operating activities (18,370,000)
------------
Cash flows from investing activities:
Businesses acquired in purchase transactions net of
cash acquired (604,000)
Purchases of property and equipment (2,865,000)
Other (366,000)
------------
Net cash used in investing activities (3,835,000)
------------
Cash flows from financing activities:
Proceeds from notes payable 25,473,000
------------
Net cash provided by financing activities 25,473,000
------------
Net increase in cash 3,268,000
Cash, beginning of period 5,865,000
------------
Cash, end of period $ 9,133,000
============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 15
UNISTAR FINANCIAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unistar Financial Service Corp. ("Unistar" or "the Company") is a vertically
integrated insurance holding company which, through its subsidiaries controls
substantially all aspects of the auto insurance underwriting, distribution and
claims process. Through its insurance subsidiaries (U.S. Fidelity Insurance
Services), Unistar provides non-standard personal lines automobile insurance.
The Company internally processes claims made by its customers through its claims
adjusting company, Eagle Claims Corp, and offers premium financing to its own
insureds through Eagle Premium Finance Company. The Company also provides
reinsurance brokerage services, renter's insurance, collision repair, appraisal
services and other ancillary services pertinent to its operations through other
wholly-owned subsidiaries. Unistar Insurance Company operates as a property and
casualty insurance company domiciled in the State of Texas and reinsures
non-standard automobile insurance produced and underwritten by affiliated
companies in Texas.
The accompanying consolidated financial statements include the accounts of
Unistar and its wholly owned subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation.
On August 17, 1998, the stockholders of the Company approved: (i) a Stock
Purchase Agreement, dated as of July 7, 1998 (the "IFHC Acquisition"), whereby
the Company purchased all of the issued and outstanding shares of common stock
of International Fidelity Holding Corporation, a Texas insurance holding
corporation ("IFHC"), in exchange for 19,777,000 shares of common stock, $.01
par value per share ("Common Stock"), of the Company on a post-Reverse Stock
Split basis, as defined below, (ii) an amendment to the Certificate of
Incorporation authorizing a one-for-fifteen reverse stock split of the Company's
outstanding Common Stock (the "Reverse Stock Split") and (iii) an amendment to
the Certificate of Incorporation to change the name of the Company to Unistar
Financial Service Corp. Following the closing of the IFHC Acquisition on August
17, 1998, IFHC became a wholly-owned subsidiary of the Company. The Company,
through its sole ownership of IFHC, controls IFHC's insurance subsidiary,
Unistar Insurance Company, a Texas property and casualty insurance corporation.
The IFHC Acquisition was accounted for as a reverse-takeover, meaning that for
accounting purposes IFHC was the acquirer of the Company. Therefore, the
financial results of IFHC for all of 1998 are included in the Company's
consolidated financial statements contained herein. The USFH Acquisition
(defined below), however, was accounted for as an asset purchase, therefore only
the financial results of USFH subsequent to September 30, 1998 are included in
the Company's consolidated financial statements contained herein.
On September 30, 1998, the Company completed the acquisition (the "USFH
Acquisition") of the assets and operations of U.S. Fidelity Holding Corp. and
its subsidiaries (collectively, "USFH"). USFH participates in the auto insurance
industry by providing multiple non-standard auto insurance products, premium
financing and claims administration and auto collision appraisal and repair
services. The USFH Acquisition was structured as a stock-for-assets exchange,
valued at approximately $75 million, with the Company issuing 3,975,000 shares
of Common Stock in exchange for substantially all of the assets of USFH.
Reclassifications - Certain reclassifications have been made to the prior year
financial statements to conform with the current year presentation.
Securities Available for Sale - Equity securities are classified as
"available-for-sale" as defined by SFAS 115. In accordance with SFAS 115, they
are reported at aggregate fair value with unrealized losses excluded from
earnings and reported as other comprehensive income, net of deferred taxes. The
cost of securities sold was determined by the average cost method.
F-4
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UNISTAR FINANCIAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Property, Plant and Equipment - Property, plant and equipment are stated at
cost. Depreciation of plant and equipment is provided over the estimated useful
lives of the respective assets using the straight-line method, generally from
five to forty years.
Expenditures for additions, major renewals and betterments are capitalized and
expenditures for maintenance and repairs are charged to earnings as incurred.
When property, plant and equipment are retired or otherwise disposed of, the
cost thereof and the applicable accumulated depreciation are removed from the
respective accounts and the resulting gain or loss is reflected in earnings.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles ("GAAP") 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.
Risks - The following is a description of the most significant risks facing the
Company and how it mitigates those risks:
Legal/regulatory risks - the Company utilizes third party policy-issuing
insurance companies to write premium which the Company produces. These companies
are subject to legal and regulatory risks. The risk that changes in the
regulatory environment in which insurer operates will create additional expenses
not anticipated by the insurer in pricing its products. That is, regulatory
initiatives designed to reduce insurer profits, restrict underwriting practices
and risk classifications, mandate rate reductions and refunds, and new legal
theories or insurance company insolvencies through guaranty fund assessments may
create costs for the insurer beyond those recorded in the financial statements.
The Company attempts to mitigate this risk by monitoring proposed regulatory
legislation and by assessing the impact of new laws.
Credit risk - the Company is subject to several credit risks, some of which
are the ability of agents to refund unearned commissions in the event that a
policy cancels, the ability of a premium finance customer to adhere to their
installment agreement, and solvency of its reinsurers. The Company is in the
practice of reserving a portion of each agent's commission as a contingency for
the refund of unearned commission, which reduces its exposure. In addition,
agents which do not timely remit unearned commissions lose their authority with
the Company. Premium finance contracts are strictly monitored and, via systems
automation, policies are promptly canceled for non-payment of premium finance
contracts, thereby eliminating exposure to the Company, for uncollectible
balances. The Company attempts to minimize reinsurance risk by maintaining sound
reinsurance agreements with a number of reinsurers, and by providing for any
amounts deemed uncollectible.
Interest rate risk - the risk that interest rates will change and cause a
decrease in the value of an insurer's investments. To the extent that
liabilities come due more quickly than assets mature, an insurer might have to
sell assets prior to maturity and potentially recognize a gain or a loss. The
Company attempts to mitigate this risk by attempting to match the maturity
schedule of its assets with the expected payouts of its liabilities.
Customer Lists - Customer lists are amortized on a straight-line basis over 40
years. Management reviews, on an annual basis, the carrying value of customer
lists in order to determine whether an impairment has occurred. Impairment is
based on several factors including the Company's projection of future
undiscounted operating cash flows. If an impairment of the carrying value were
to be indicated by this review, the Company would adjust the carrying value of
customer lists to their estimated fair value.
Long-Lived Assets - The Company reviews its long-lived assets and certain
identifiable intangibles to be held and used for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. If such events or changes in circumstances are present, a loss
is recognized to the extent the carrying value
F-5
<PAGE> 17
UNISTAR FINANCIAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of the asset is in excess of the sum of the undiscounted cash flows expected to
result from the use of the asset and its eventual disposition.
Premium Finance - Premium finance contracts are carried at unpaid balances.
Management, considering current information and events regarding the borrowers'
ability to repay their obligations, considers a loan to be impaired when it is
probable that Unistar will be unable to collect all amounts due according to the
original contractual terms of the note agreement. When a loan, in management's
judgment, becomes impaired, interest income is subsequently recognized only to
the extent of cash payments received.
Management maintains allowances for premium finance contracts at a level which
management believes is adequate to absorb potential losses in the portfolios.
The allowances are based on an evaluation of the notes, past loss experience,
current economic conditions, volume, growth and other relevant factors.
Reserve For Unpaid Commissions And Loss Adjustment Expenses - The reserve for
unpaid commissions and loss expenses is undiscounted and represents cash-basis
estimates of reported losses and estimates based on certain actuarial
assumptions regarding the past experience of unreported losses. Estimated
amounts of salvage and subrogation are deducted from the reserve for unpaid
commissions and loss expenses. Management believes that the reserve for unpaid
commissions and loss expenses is adequate to cover the ultimate liability.
However, such estimate may be more or less than the amount ultimately paid when
the claims are finally settled.
Revenue Recognition - Premium commissions are recognized upon the approval and
payment of the insurance policy. Policy fee income are recognized ratably over
the related policy terms, based upon the estimated ultimate amounts to be paid.
Finance charges are recorded as unearned income at the beginning of installment
finance contracts with customers. Unistar recognizes finance charge income using
the effective interest rate method over the life of each contract that typically
approximates eleven months.
Reinsurance arrangements are short-duration prospective contracts for which
prepaid reinsurance premiums are amortized ratably over the related policy terms
based on the estimated ultimate amounts to be paid. Premiums ceded for contracts
with retrospective adjustment features are calculated based upon the related
estimated incurred losses and loss expenses including a provision for unreported
losses.
Contingent Reinsurance Commission - The Company's reinsurance contracts provide
ceding commissions for premiums written which are subject to adjustment. The
amount of ceding commissions is determined by the loss experience for the
reinsurance agreement term. The reinsurer provides commissions on a sliding
scale with maximum and minimum achievable levels. The reinsurer provides the
Company with the provisional commissions. The Company has recognized the
commissions based on the current loss experience for the policy year premiums.
This results in establishing a contingent liability, included in due from
reinsurers, for the excess of provisional commissions retained compared to
amounts recognized, which is subject to variation until the ultimate loss
experience is determinable.
Fair Value - The fair value of the Company's investments are estimated based on
bid prices published by financial services or quotations received from
securities dealers and is reflective of the interest rate environment that
existed as of the close of business on December 31, 1998. Changes in interest
rates subsequent to December 31, 1998 may affect the fair value of the Company's
investments.
The carrying amounts for the following financial instrument categories
approximate their fair values at December 31, 1998 because of their short-term
nature: cash and cash equivalents, finance contracts receivable, due from
reinsurers, prepaid reinsurance premiums, unearned premiums, finance contracts
payable and notes payable.
Income Taxes - Deferred income tax has been provided for the effects of
temporary differences between financial
F-6
<PAGE> 18
UNISTAR FINANCIAL SERVICE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
reporting and tax based assets and liabilities and has been measured using the
enacted marginal tax rates and laws that are currently in effect.
Cash Equivalents - The Company considers all certificates of deposit, United
States government securities and commercial paper with original maturities of
three months or less to be cash equivalents.
Earnings per Share - Earnings per share is computed in accordance with the
Financial Accounting Standards Board (FASB) Statement No 128 "Earnings per
Share." Basic earnings per share is computed based on the weighted average
number of common shares outstanding, excluding any dilutive effects of options,
awards and convertible securities. Dilutive earnings per share is computed based
on the weighted average number of common shares outstanding plus the dilutive
effects of options, awards and convertible securities.
Other Comprehensive Income - In June 1997, the FASB issued SFAS 130, "Reporting
Comprehensive Income," which requires transactions that are currently reported
directly to stockholders' equity be reported in a financial statement that is
displayed as prominently as other financial statements. SFAS 130, which is
effective for fiscal years beginning after December 15, 1997, impacts disclosure
requirements only. Therefore, SFAS 130 will have no impact on the Company's
financial condition, cash flows or results of operations.
Segment Information - In June 1997, the FASB issued SFAS 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS 131 supersedes SFAS 14,
"Financial Reporting for Segments of a Business Enterprise," and requires
companies to report financial and descriptive information about their reportable
operating segments. The financial information is required to be reported on the
basis that is used internally for evaluating segment performance and deciding
how to allocate resources to segments. SFAS 131 requires disclosure only and
will have no impact on the Company's financial condition, cash flows or results
of operations.
BUSINESS ACQUISITIONS
Effective September 30, 1998, the Company acquired substantially all of the
assets and assumed certain liabilities of U.S. Fidelity Holding Corp. The
purchase price exceed the fair value of net assets by approximately $84.1
million and has been included in customer lists. Effective December 31, 1998,
Unistar acquired the operations of independent insurance agencies in Texas.
These acquisitions were contributed to the Company by Unistar Insurance
Agencies, LLC, owned by significant stockholders of the Company and valued at
approximately $10.6 million based upon cash and note considerations. Included in
this amount is $5 million value assigned to Talon Financial Services, LTD.
("Talon"), a Bermuda-based reinsurance brokerage company.
STATUTORY INSURANCE ACCOUNTING PRINCIPLES
Statutory regulations generally limit the payment of cash dividends in any one
year to an amount equal to the greater of net investment income reported for the
previous calendar year or 10% of surplus as regards policyholders as of the
previous year-end. Surplus in excess of this limitation is not available for
dividends without special approval of the regulatory authorities.
Since August 26, 1997, Unistar Insurance Company ("UIC") has operated under
Regulatory Administrative Oversight by the Texas Department of Insurance (the
"TDI"). The more significant requirements were for UIC to provide certain
financial statements, projections and business plans for approval and review.
The TDI also required UIC to adopt and amend certain policies and procedures.
UIC responded to the Texas Department of Insurance on November 3, 1997 regarding
the aforementioned issues. As of June 30, 1999, management believes they have
adequately addressed all of the significant issues.
F-7
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation.(2)
3.2 Amended and Restated Bylaws.(2)
10.1* Registrant's 1998 Stock Option Plan.(1)
27.0 Financial Data Schedule.(2)
</TABLE>
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
UNISTAR FINANCIAL SERVICE CORP.
Unistar Financial Service Corp., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
I. The name of the corporation is Unistar Financial Service Corp., which was
originally incorporated as MW Companies Inc., and the original Certificate of
Incorporation of the corporation was filed with the Secretary of State of the
State of Delaware on December 20, 1985.
II. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of
Incorporation of this corporation.
III. The text of the Restated Certificate of Incorporation as heretofore
amended or supplemented is hereby restated and further amended to read in its
entirety as follows:
1. The name of this corporation (hereinafter called the "Corporation")
is Unistar Financial Service Corp.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, City of Wilmington, 19801, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the Corporation shall
have the authority to issue is Two Hundred Five Million (205,000,000), of which
Two Hundred Million (200,000,000) shares shall be Common Stock of the par value
of One Cent ($.01) per share, and Five Million (5,000,000) shares shall be
Preferred Stock, issuable in series, of the par value of One Cent ($.01) per
share, amounting in the aggregate to Two Million Fifty Thousand Dollars
($2,050,000).
COMMON STOCK
A. Each share of the Common Stock shall be equal in all
respects to every other share of the Common Stock. Every holder of the
Common Stock shall have one vote for each share of such stock held by
him for the election of directors and upon all other matters.
B. In the event of liquidation, dissolution, or winding up of
the corporation, the par value of all Preferred Stock, together with
all dividends declared thereon and remaining unpaid to the date fixed
for distribution of Preferred Stock, shall be paid in full before any
class of Common Stock or any part thereof or any dividend thereon is
paid.
<PAGE> 2
PREFERRED STOCK
A. The shares of the Preferred Stock may be issued in one or
more series as may be fixed from time to time by the Board of
Directors, each of such series to be distinctively designated. The
Board of Directors is authorized to fix from time to time before
issuance the designations and the powers, preferences and relative
rights, and the qualifications, limitations or restrictions of the
shares of each series of the Preferred Stock, respectively, except for
such provisions as are applicable to all shares of the Preferred Stock
irrespective of series.
B. All shares of any particular series of Preferred Stock
shall be alike in every particular, and all shares of all series shall
rank equally. The shares of Preferred Stock of different series may
vary as to:
(1) The designation of series:
(2) The annual dividend rate;
(3) The dividend payment dates and the date from
which dividends shall be cumulative, if cumulative;
(4) The sum payable per share upon the dissolution,
liquidation or winding up of the corporation;
(5) Whether or not the shares shall be redeemable,
and if made redeemable, the redemption price or prices per
share and the manner of effecting a redemption;
(6) Whether or not the shares of each series shall
be made convertible into or exchangeable for other securities
of the corporation, and if made convertible or exchangeable,
the price or prices or the rate or rates of conversion or
exchange, and the adjustments, if any, at which such
conversion or exchange may be made;
(7) Whether or not there shall be a sinking fund, or
other fund analogous thereto, with respect to the shares of
each series and the terms and provisions of such fund, if
any; and
(8) Any other relative, participating, optional or
other rights, preferences or limitations of the shares of
each series, not inconsistent with the provisions applicable
to all shares of the Preferred Stock irrespective of series.
C. The following provisions shall apply to all shares of the
Preferred Stock irrespective of series:
(1) The holders of the Preferred Stock of each
series at the time outstanding
2
<PAGE> 3
shall be entitled to receive, but only when and as declared
by the Board of Directors, dividends at the rate fixed for
such series and no more. Such dividends shall be payable
quarter-yearly in cash, stock or other property on such
dividend dates as may be fixed for said series, and, if
cumulative, shall be cumulative from such date as may be
fixed. All dividends accrued or declared (as the case may be)
on the Preferred Stock shall be fully paid, or set apart for
payment, before any dividends on any class of Common Stock
shall be paid or set apart for payment. Accruals for
dividends shall not bear interest. Dividends in full shall
not be declared and set apart for payment or paid on the
Preferred Stock of any series for any particular dividend
period unless dividends in full have been paid or are
contemporaneously declared and set apart for payment on the
Preferred Stock of all series then outstanding, for all the
dividend periods terminating at or before the end of the
particular dividend period. If the stated dividends on the
Preferred Stock are not paid in full, the shares of all
series of the Preferred Stock shall share ratably in the
payment of dividends including accumulations, if any, in
accordance with the sums which would be payable on such
shares if all dividends were declared and paid in full.
(2) The corporation may, by action of its Board of
Directors and in the manner hereinafter provided (except as
further or different requirements may by issue resolution be
made applicable to a particular series of the Preferred
Stock), redeem the whole or any part of any series of the
Preferred Stock, at any time or from time to time, by paying
the redemption price of the shares of the particular series
fixed therefor as herein provided, together with a sum in the
case of each share of each series so to be redeemed, computed
at the annual dividend rate for the series of which the
particular share is a part, from the date from which
dividends on such share became cumulative to the date fixed
for such redemption, less the aggregate of the dividends
theretofore or on such redemption dated paid thereon. No
Preferred Stock shall be called for redemption while any
dividend for a past dividend period shall be in arrears on
any share of any series of said stock.
(3) Upon any dissolution, liquidation or winding up
of the corporation, whether voluntary or involuntary, the
holders of the Preferred Stock of each and every series then
outstanding shall be entitled to receive out of the net
assets of the corporation, whether capital or surplus, the
sums per share fixed for the shares of the respective series
and payable upon such dissolution, liquidation or winding up,
plus, in the case of each share, an amount equal to the
dividends accrued and unpaid thereon, whether or not earned
or declared, before any distribution of the assets of the
corporation shall be made to the holders of any class of
Common Stock.
If the assets distributable on such dissolution, liquidation
or winding up shall be insufficient to permit the payment to the
holders of the Preferred Stock of the full amounts to which they
respectively are entitled as aforesaid, then said assets shall be
distributed ratably among the holders of the respective series of
Preferred Stock in proportion to the amounts which would be payable on
such dissolution, liquidation or winding up, if all such
3
<PAGE> 4
amounts were paid in full in preference and priority over the shares
of any class of Common Stock.
The sale, conveyance, exchange or transfer of all or
substantially all of the property of the corporation, or the merger or
consolidation into or with any other corporation, shall not be deemed
a dissolution, liquidation or winding up for the purposes hereof.
(4) Nothing herein contained shall limit any legal
right of the corporation to purchase or otherwise acquire any
shares of the Preferred Stock.
(5) No holder of the Preferred Stock of the
corporation shall have any preemptive right to purchase or
subscribe for any part of the unissued stock of the
corporation or of any stock of the corporation to be issued
by reason of any increase of the authorized capital stock of
the corporation, or to purchase or subscribe for any bonds,
certificates or indebtedness, debentures or other securities
convertible into or carrying options or warrants to purchase
stock or other securities of the corporation or to purchase
or subscribe for any stock of the corporation purchased by
the corporation or by its nominee or nominees, or to have any
other preemptive rights as now or hereafter defined by
applicable laws.
(6) Except as and to the extent otherwise provided
by this Certificate or by issue resolutions relating to
shares of a particular series of Preferred Stock or
applicable laws, the Preferred Stock shall not entitle any
holder thereof to vote at any meeting of stockholders or
election of the corporation, or otherwise to participate in
any action taken by the corporation or the stockholders
thereof. Except when some mandatory provision of law shall be
controlling and, as regards the special rights of any series
of the Preferred Stock, as provided in the resolutions
creating such series, whenever shares of two or more
particular series of the Preferred Stock shall be entitled to
vote as a separate series on any matter and all shares of the
Preferred Stock of all series shall be deemed to constitute
but one class for any purpose for which a vote of the
stockholders of the corporation by classes may now or
hereafter be required.
5. The Board of Directors is authorized to make, alter or repeal the
Bylaws of the corporation. Election of Directors need not be by ballot.
6. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this corporation under the provisions of section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of
4
<PAGE> 5
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
7. The corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of the State of Delaware, as the same may be
amended and supplemented, or by any successor thereto, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to
in or covered by said section. Such right to indemnification shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person. The indemnification provided for herein shall not be deemed exclusive
of any other rights to which those seeking indemnification may be entitled
under any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise.
8. A director of the Corporation shall have no personal liability to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except (i) for any breach of a director=s duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under section 174 of the General Corporation Law of Delaware as it
may from time to time be amended or any successor provision thereto, or (iv)
for any transaction from which a director derived an improper personal benefit.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which
restates and integrates and does further amend the provisions of the
Corporation's Certificate of Incorporation and having been duly adopted by the
Board of Directors of the Corporation in accordance with the provisions of
Section 245 of the General Corporation Laws of the State of Delaware, has been
executed this 28th day of June, 1999 by Marc A. Sparks, its authorized officer.
-------------------------------
Marc A. Sparks
Chairman and Chief Executive Officer
5
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
UNISTAR FINANCIAL SERVICE CORP.
A DELAWARE CORPORATION
(AS EFFECTIVE JUNE 18, 1999)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I. OFFICES ..................................................................1
Section 1.01 Registered Office............................................................1
Section 1.02 Locations of Offices.........................................................1
ARTICLE II. STOCKHOLDERS..............................................................1
Section 2.01 Annual Meeting...............................................................1
Section 2.02 Special Meetings.............................................................1
Section 2.03 Place of Meetings............................................................1
Section 2.04 Notice of Meetings...........................................................1
Section 2.05 Waiver of Notice.............................................................1
Section 2.06 Fixing Record Date...........................................................2
Section 2.07 Voting Lists.................................................................2
Section 2.08 Quorum ......................................................................2
Section 2.09 Vote Required................................................................2
Section 2.10 Voting of Stock..............................................................2
Section 2.11 Proxies .....................................................................3
Section 2.12 Written Consent to Action by Stockholders....................................3
ARTICLE III. DIRECTORS ................................................................3
Section 3.01 Number, Term, and Qualifications.............................................3
Section 3.02 Vacancies and Newly Created Directorships....................................3
Section 3.03 General Powers...............................................................3
Section 3.04 Regular Meetings.............................................................4
Section 3.05 Special Meetings.............................................................4
Section 3.06 Meetings by Telephone Conference Call........................................4
Section 3.07 Notice ......................................................................4
Section 3.08 Quorum ......................................................................4
Section 3.09 Manner of Acting.............................................................4
Section 3.10 Compensation.................................................................4
Section 3.11 Presumption of Assent........................................................4
Section 3.12 Resignations.................................................................4
Section 3.13 Written Consent to Action by Directors.......................................5
Section 3.14 Removal .....................................................................5
ARTICLE IV. OFFICERS .................................................................5
Section 4.01 Number ......................................................................5
Section 4.02 Election, Term of Office, and Qualifications.................................5
Section 4.03 Subordinate Officers, Etc....................................................5
Section 4.04 Resignations.................................................................5
Section 4.05 Removal .....................................................................5
Section 4.06 Vacancies and Newly Created Offices..........................................5
Section 4.07 The Chairman of the Board....................................................6
Section 4.08 The President................................................................6
Section 4.09 The Vice Presidents..........................................................6
Section 4.10 The Secretary................................................................6
Section 4.11 The Treasurer................................................................7
Section 4.12 General Manager..............................................................7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.13 Salaries .......................................................................7
Section 4.14 Surety Bonds.......................................................................8
ARTICLE V. EXECUTION OF INSTRUMENTS, BORROWING OF MONEY, AND DEPOSIT OF CORPORATE FUNDS....9
Section 5.01 Execution of Instruments...........................................................9
Section 5.02 Loans .............................................................................9
Section 5.03 Deposits ..........................................................................9
Section 5.04 Checks, Drafts, Etc................................................................9
Section 5.05 Bonds and Debentures...............................................................9
Section 5.06 Sale, Transfer, Etc. of Securities.................................................9
Section 5.07 Proxies ...........................................................................9
ARTICLE VI. CAPITAL SHARES.................................................................10
Section 6.01 Stock Certificates................................................................10
Section 6.02 Transfer of Stock.................................................................10
Section 6.03 Regulations ......................................................................10
Section 6.04 Maintenance of Stock Ledger at Principal Place of Business........................10
Section 6.05 Transfer Agents and Registrars....................................................10
Section 6.06 Fixing of Record Date.............................................................11
Section 6.07 Lost or Destroyed Certificates....................................................11
ARTICLE VII. EXECUTIVE COMMITTEE AND OTHER COMMITTEES.......................................11
Section 7.01 How Constituted...................................................................11
Section 7.02 Powers ...........................................................................11
Section 7.03 Proceedings ......................................................................11
Section 7.04 Quorum and Manner of Acting.......................................................11
Section 7.05 Resignations......................................................................12
Section 7.06 Removal ..........................................................................12
Section 7.07 Vacancies ........................................................................12
Section 7.08 Compensation......................................................................12
ARTICLE VIII. INDEMNIFICATION, INSURANCE, AND OFFICER AND DIRECTOR CONTRACTS ................12
Section 8.01 Indemnification: Third Party Actions..............................................12
Section 8.02 Indemnification: Corporate Actions................................................11
Section 8.03 Determination.....................................................................13
Section 8.04 Advances .........................................................................13
Section 8.05 Scope of Indemnification..........................................................13
Section 8.06 Insurance ........................................................................13
Section 8.07 Officer and Director Contracts....................................................13
ARTICLE IX. FISCAL YEAR....................................................................14
ARTICLE X. DIVIDENDS......................................................................14
ARTICLE XI. AMENDMENTS.....................................................................14
</TABLE>
<PAGE> 4
AMENDED AND RESTATED BYLAWS OF UNISTAR FINANCIAL SERVICE CORP.
(AS EFFECTIVE JUNE 18, 1999)
ARTICLE I.
OFFICES
SECTION 1.01 REGISTERED OFFICE. The registered office shall be in the city of
Wilmington, county of New Castle, state of Delaware.
SECTION 1.02 LOCATIONS OF OFFICES. The corporation may also have offices at such
other places both within and without the state of Delaware as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II.
STOCKHOLDERS
SECTION 2.01 ANNUAL MEETING. The annual meeting of the stockholders shall be
held within 180 days after the end of the corporation=s fiscal year at such time
as is designated by the board of directors and as is provided for in the notice
of the meeting. If the election of directors shall not be held on the day
designated herein for the annual meeting of the stockholders, or at any
adjournment thereof, the board of directors shall cause the election to be held
at a special meeting of the stockholders as soon thereafter as may be
convenient.
SECTION 2.02 SPECIAL MEETINGS. Special meetings of the stockholders may be
called at any time by the chairman of the board, the president, or by the board
of directors, or in their absence or disability, by any vice president, and
shall be immediately called by the president, or in his absence or disability,
by a vice president, or by the secretary, on the written request of the holders
of not less than one-tenth of all the shares entitled to vote at the meeting,
such written request to state the purpose, or purposes, of the meeting and to be
delivered to the president, such vice president or the secretary. In case of
failure to call such meeting within 90 days after such request, such stockholder
or stockholders may call the same.
SECTION 2.03 PLACE OF MEETINGS. The board of directors may designate any place,
either within or without the state of incorporation, as the place of meeting for
any annual meeting or for any special meeting called by the board of directors.
A waiver of notice signed by all stockholders entitled to vote at a meeting may
designate any place, either within or without the state of incorporation, as the
place for the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be at the
principal office of the corporation.
SECTION 2.04 NOTICE OF MEETINGS. The secretary or assistant secretary, if any,
shall cause notice of the time, place, and purpose or purposes of all meetings
of the stockholders (whether annual or special), to be mailed at least ten but
not more than 60 days prior to the meeting, to each stockholder of record
entitled to vote.
SECTION 2.05 WAIVER OF NOTICE. Any stockholder may waive notice of any meeting
of stockholders (however called or noticed, whether or not called or noticed and
whether before, during, or after the meeting), signing a written waiver of
notice or a consent to the holding of such meeting, or an approval of the
minutes thereof. Attendance at a meeting, in person or by proxy, shall
constitute waiver of all defects of notice regardless of whether waiver,
consent, or approval is signed or any objections are made, unless attendance is
solely for the purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. All such waivers, consents, or approvals
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shall be made a part of the minutes of the meeting.
SECTION 2.06 FIXING RECORD DATE. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or stockholder entitled to receive payment of any dividend or
other distribution or allotment of any rights or entitled to exercise any rights
in respect to any change, conversion, or exchange of stock, or for the purpose
of any other lawful action, the board of directors may fix in advance a date as
the record date for any such determination of stockholders, such date in any
case to be not more than 60 days and, in case of a meeting of stockholders, not
less than 10 days prior to the date on which the particular action requiring
such determination of stockholders is to be taken. If no record date is fixed
for the determination of stockholders entitled to notice of or to vote at a
meeting, the day preceding the date on which notice of the meeting is mailed
shall be the record date. For any other purpose, the record date shall be the
close of business on the date on which the resolution of the board of directors
pertaining thereto is adopted. When a determination of stockholders entitled to
vote at any meeting of stockholders has been made as provided in this section,
such determination shall apply to any adjournment thereof. Failure to comply
with this section shall not affect the validity of any action taken at a meeting
of stockholders.
SECTION 2.07 VOTING LISTS. The officers of the corporation shall cause to be
prepared from the stock ledger at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The original stock ledger shall be the only evidence
as to who are the stockholders entitled to examine the stock ledger, the list
required by this section, or the books of the corporation, or to vote in person
or by proxy at any meeting of stockholders.
SECTION 2.08 QUORUM. Stock representing one-third of the voting power of all
outstanding stock of the corporation entitled to vote, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except as otherwise provided by
statute or by the certificate of incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than 30 days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
SECTION 2.09 VOTE REQUIRED. When a quorum is present at any meeting, the vote of
the holders of stock having a majority of the voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one on which by express provision of the statutes of the
state of Delaware or of the certificate of incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
SECTION 2.10 VOTING OF STOCK. Unless otherwise provided in the certificate of
incorporation, each
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stockholder shall at every meeting of the stockholders be entitled to one vote
in person or by proxy for each share of the capital stock having voting power
held by such stockholder, subject to the modification of such voting rights of
any class or classes of the corporation=s capital stock by the certificate of
incorporation.
SECTION 2.11 PROXIES. At each meeting of the stockholders, each stockholder
entitled to vote shall be entitled to vote in person or by proxy; PROVIDED,
however, that the right to vote by proxy shall exist only in case the instrument
authorizing such proxy to act shall have been executed in writing by the
registered holder or holders of such stock, as the case may be, as shown on the
stock ledger of the corporation or by his attorney thereunto duly authorized in
writing. Such instrument authorizing a proxy to act shall be delivered at the
beginning of such meeting to the secretary of the corporation or to such other
officer or person who may, in the absence of the secretary, be acting as
secretary of the meeting. In the event that any such instrument shall designate
two or more persons to act as proxy, a majority of such persons present at the
meeting, or if only one be present, that one shall (unless the instrument shall
otherwise provide) have all of the powers conferred by the instrument on all
persons so designated. Persons holding stock in a fiduciary capacity shall be
entitled to vote the stock so held and the persons whose shares are pledged
shall be entitled to vote, unless the transfer by the pledgor in the books and
records of the corporation shall have expressly empowered the pledgee to vote
thereon, in which case the pledgee, or his proxy, may represent such stock and
vote thereon. No proxy shall be voted or acted on after three years from its
date, unless the proxy provides for a longer period.
SECTION 2.12 WRITTEN CONSENT TO ACTION BY STOCKHOLDERS. Unless otherwise
provided in the certificate of incorporation, any action required to be taken at
any annual or special meeting of stockholders of the corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice, and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporation action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III.
DIRECTORS
SECTION 3.01 NUMBER, TERM, AND QUALIFICATIONS. The number of directors which
shall constitute the whole board shall be not less than three nor more than
nine. Within the limits above specified, the number of directors shall be
determined by resolution of the board of directors or by the stockholders at the
annual meeting of the stockholders or a special meeting called for such purpose,
except as provided in section 3.02 of this article, and each director elected
shall hold office until his successor is elected and qualified. Directors need
not be residents of the state of incorporation or stockholders of the
corporation.
SECTION 3.02 VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Vacancies and newly
created directorships resulting from any increase in the authorized number of
directors may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director, and the directors so chosen
shall hold office until the next annual election and until their successors are
duly elected and shall qualify. If there are no directors in office, then an
election of directors may be held in the manner provided by statute.
SECTION 3.03 GENERAL POWERS. The business of the corporation shall be managed
under the direction of its board of directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these bylaws directed or required
to be exercised or done by the stockholders.
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SECTION 3.04 REGULAR MEETINGS. A regular meeting of the board of directors shall
be held without other notice than this bylaw immediately following and at the
same place as the annual meeting of stockholders. The board of directors may
provide by resolution the time and place, either within or without the state of
incorporation, for the holding of additional regular meetings without other
notice than such resolution.
SECTION 3.05 SPECIAL MEETINGS. Special meetings of the board of directors may be
called by or at the request of the president, vice president, or any two
directors. The person or persons authorized to call special meetings of the
board of directors may fix any place, either within or without the state of
incorporation, as the place for holding any special meeting of the board of
directors called by them.
SECTION 3.06 MEETINGS BY TELEPHONE CONFERENCE CALL. Members of the board of
directors may participate in a meeting of the board of directors or a committee
of the board of directors by means of conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
SECTION 3.07 NOTICE. Notice of any special meeting shall be given at least five
days prior thereto by written notice delivered personally or mailed to each
director at his regular business address or residence, or by telegram. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail so addressed, with postage thereon prepaid. If notice be given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company.
Any director may waive notice of any meeting. Attendance of a director
at a meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting solely for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 3.08 QUORUM. A majority of the number of directors shall constitute a
quorum for the transaction of business at any meeting of the board of directors,
but if less than a majority is present at a meeting, a majority of the directors
present may adjourn the meeting from time to time without further notice.
SECTION 3.09 MANNER OF ACTING. The act of a majority of the directors present at
a meeting at which a quorum is present shall be the act of the board of
directors, and individual directors shall have no power as such.
SECTION 3.10 COMPENSATION. By resolution of the board of directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the board of directors, and may be paid a fixed sum for attendance at each
meeting of the board of directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
SECTION 3.11 PRESUMPTION OF ASSENT. A director of the corporation who is present
at a meeting of the board of directors at which action on any corporate matter
is taken shall be presumed to have assented to the action taken unless his
dissent shall be entered in the minutes of the meeting, unless he shall file his
written dissent to such action with the person acting as the secretary of the
meeting before the adjournment thereof, or shall forward such dissent by
registered or certified mail to the secretary of the corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
SECTION 3.12 RESIGNATIONS. A director may resign at any time by delivering a
written resignation to either the president, a vice president, the secretary, or
assistant secretary, if any. The resignation shall become effective on its
acceptance by the board of directors; PROVIDED, that if the board has not acted
thereon
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within ten days from the date presented, the resignation shall be deemed
accepted.
SECTION 3.13 WRITTEN CONSENT TO ACTION BY DIRECTORS. Any action required to be
taken at a meeting of the directors of the corporation or any other action which
may be taken at a meeting of the directors or of a committee, may be taken
without a meeting, if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors, or all of the members of the committee,
as the case may be. Such consent shall have the same legal effect as a unanimous
vote of all the directors or members of the committee.
SECTION 3.14 REMOVAL. At a meeting expressly called for that purpose, one or
more directors may be removed by a vote of a majority of the shares of
outstanding stock of the corporation entitled to vote at an election of
directors.
ARTICLE IV.
OFFICERS
SECTION 4.01 NUMBER. The officers of the corporation shall be a president, one
or more vice presidents, as shall be determined by resolution of the board of
directors, a secretary, a treasurer, and such other officers as may be appointed
by the board of directors. The board of directors may elect, but shall not be
required to elect, a chairman of the board, and the board of directors may
appoint a general manager.
SECTION 4.02 ELECTION, TERM OF OFFICE, AND QUALIFICATIONS. The officers shall be
chosen by the board of directors annually at its annual meeting. In the event of
failure to choose officers at an annual meeting of the board of directors,
officers may be chosen at any regular or special meeting of the board of
directors. Each such officer (whether chosen at an annual meeting of the board
of directors to fill a vacancy or otherwise) shall hold his office until the
next ensuing annual meeting of the board of directors and until his successor
shall have been chosen and qualified, or until his death or until his
resignation or removal in the manner provided in these bylaws. Any one person
may hold any two or more of such offices, except that the president shall not
also be the secretary. No person holding two or more offices shall act in or
execute any instrument in the capacity of more than one office. The chairman of
the board, if any, shall be and remain director of the corporation during the
term of his office. No other officer need be a director.
SECTION 4.03 SUBORDINATE OFFICERS, ETC. The board of directors from time to time
may appoint such other officers or agents as it may deem advisable, each of whom
shall have such title, hold office for such period, have such authority, and
perform such duties as the board of directors from time to time may determine.
The board of directors from time to time may delegate to any officer or agent
the power to appoint any such subordinate officer or agents and to prescribe
their respective titles, terms of office, authorities, and duties. Subordinate
officers need not be stockholders or directors.
SECTION 4.04 RESIGNATIONS. Any officer may resign at any time by delivering a
written resignation to the board of directors, the president, or the secretary.
Unless otherwise specified therein, such resignation shall take effect on
delivery.
SECTION 4.05 REMOVAL. Any officer may be removed from office at any special
meeting of the board of directors called for that purpose or at a regular
meeting, by the vote of a majority of the directors, with or without cause. Any
officer or agent appointed in accordance with the provisions of section 4.03
hereof may also be removed, either with or without cause, by any officer on whom
such power of removal shall have been conferred by the board of directors.
SECTION 4.06 VACANCIES AND NEWLY CREATED OFFICES. If any vacancy shall occur in
any office by reason of death, resignation, removal, disqualification, or any
other cause, or if a new office shall be created, then
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such vacancies or newly created offices may be filled by the board of directors
at any regular or special meeting.
SECTION 4.07 THE CHAIRMAN OF THE BOARD. The chairman of the board, if there be
such an officer, shall have the following powers and duties:
(a) He shall preside at all stockholders' meetings;
(b) He shall preside at all meetings of the board of directors; and
(c) He shall be a member of the executive committee, if any.
SECTION 4.08 THE PRESIDENT. The president shall have the following powers and
duties:
(a) If no general manager has been appointed, he shall be the chief
executive officer of the corporation and, subject to the direction of the board
of directors, shall have general charge of the business, affairs, and property
of the corporation and general supervision over its officers, employees, and
agents;
(b) If no chairman of the board has been chosen, or if such officer is
absent or disabled, he shall preside at meetings of the stockholders and board
of directors;
(c) He shall be a member of the executive committee, if any;
(d) He shall be empowered to sign certificates representing stock of
the corporation, the issuance of which shall have been authorized by the board
of directors; and
(e) He shall have all power and perform all duties normally incident to
the office of a president of a corporation and shall exercise such other powers
and perform such other duties as from time to time may be assigned to him by the
board of directors.
SECTION 4.09 THE VICE PRESIDENTS. The board of directors may, from time to time,
designate and elect one or more vice presidents, one of whom may be designated
to serve as executive vice president. Each vice president shall have such powers
and perform such duties as from time to time may be assigned to him by the board
of directors or the president. At the request or in the absence or disability of
the president, the executive vice president or, in the absence or disability of
the executive vice president, the vice president designated by the board of
directors or (in the absence of such designation by the board of directors) by
the president, as senior vice president, may perform all the duties of the
president, and when so acting, shall have all the powers of, and be subject to
all the restrictions on, the president.
SECTION 4.10 THE SECRETARY. The secretary shall have the following powers and
duties:
(a) He shall keep or cause to be kept a record of all of the
proceedings of the meetings of the stockholders and of the board of directors in
books provided for that purpose;
(b) He shall cause all notices to be duly given in accordance with the
provisions of these bylaws and as required by statute;
(c) He shall be the custodian of the records and of the seal of the
corporation, and shall cause such seal (or a facsimile thereof) to be affixed to
all certificates representing stock of the corporation prior to the issuance
thereof and to all instruments, the execution of which on behalf of the
corporation under its seal shall have been duly authorized in accordance with
these bylaws, and when so affixed, he may attest the same;
(d) He shall see that the books, reports, statements, certificates, and
other documents and records required by statute are properly kept and filed;
(e) He shall have charge of the stock ledger and books of the
corporation and cause such books to be kept in such manner as to show at any
time the amount of the stock of the corporation of each class issued and
outstanding, the manner in which and the time when such stock was paid for, the
names alphabetically arranged and the addresses of the holders of record
thereof, the amount of stock held by each holder and time when each became such
holder of record; and he shall exhibit at all reasonable times to any director,
on application, the original or duplicate stock ledger. He shall cause the stock
ledger referred to in section 6.04 hereof to be kept and exhibited at the
principal office of the corporation, or at such other place as the board
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of directors shall determine, in the manner and for the purpose provided in such
section;
(f) He shall be empowered to sign certificates representing stock of
the corporation, the issuance of which shall have been authorized by the board
of directors; and
(g) He shall perform in general all duties incident to the office of
secretary and such other duties as are given to him by these bylaws or as from
time to time may be assigned to him by the board of directors or the president.
SECTION 4.11 THE TREASURER. The treasurer shall have the following powers and
duties:
(a) He shall have charge and supervision over and be responsible for
the monies, securities, receipts, and disbursements of the corporation;
(b) He shall cause the monies and other valuable effects of the
corporation to be deposited in the name and to the credit of the corporation in
such banks or trust companies or with such banks or other depositories as shall
be selected in accordance with section 5.03 hereof;
(c) He shall cause the monies of the corporation to be disbursed by
checks or drafts (signed as provided in section 5.04 hereof) drawn on the
authorized depositories of the corporation, and cause to be taken and preserved
property vouchers for all monies disbursed;
(d) He shall render to the board of directors or the president,
whenever requested, a statement of the financial condition of the corporation
and of all of his transactions as treasurer, and render a full financial report
at the annual meeting of the stockholders, if called on to do so;
(e) He shall cause to be kept correct books of account of all the
business and transactions of the corporation and exhibit such books to any
directors on request during business hours;
(f) He shall be empowered from time to time to require from all
officers or agents of the corporation reports or statements giving such
information as he may desire with respect to any and all financial transactions
of the corporation; and
(g) He shall perform in general all duties incident to the office of
treasurer and such other duties as are given to him by these bylaws or as from
time to time may be assigned to him by the board of directors or the president.
SECTION 4.12 GENERAL MANAGER. The board of directors may employ and appoint a
general manager who may, or may not, be one of the officers or directors of the
corporation. The general manager, if any, shall have the following powers and
duties:
(a) He shall be the chief executive officer of the corporation and,
subject to the directions of the board of directors, shall have general charge
of the business affairs and property of the corporation and general supervision
over its officers, employees, and agents;
(b) He shall have the exclusive management of the business of the
corporation and of all of its dealings, but at all times subject to the control
of the board of directors;
(c) Subject to the approval of the board of directors or the executive
committee, if any, he shall employ all employees of the corporation, or delegate
such employment to subordinate officers, or such division chiefs, and shall have
authority to discharge any person so employed; and
(d) He shall make a report to the president and directors quarterly, or
more often if required to do so, setting forth the result of the operations
under his charge, together with suggestions looking to the improvement and
betterment of the condition of the corporation, and shall perform such other
duties as the board of directors shall require.
SECTION 4.13 SALARIES. The salaries or other compensation of the officers of the
corporation shall be fixed from time to time by the board of directors, except
that the board of directors may delegate to any person or group of persons the
power to fix the salaries or other compensation of any subordinate officers or
agents appointed in accordance with the provisions of section 4.03 hereof. No
officer shall be prevented from receiving any such salary or compensation by
reason of the fact that he is also a director of the corporation.
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SECTION 4.14 SURETY BONDS. In case the board of directors shall so require, any
officer or agent of the corporation shall execute to the corporation a bond in
such sums and with such surety or sureties as the board of directors may direct,
conditioned on the faithful performance of his duties to the corporation,
including responsibility for negligence and for the accounting of all property,
monies, or securities of the corporation which may come into his hands.
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ARTICLE V.
EXECUTION OF INSTRUMENTS, BORROWING OF MONEY,
AND DEPOSIT OF CORPORATE FUNDS
SECTION 5.01 EXECUTION OF INSTRUMENTS. Subject to any limitation contained in
the certificate of incorporation or these bylaws, the president or any vice
president or the general manager, if any, may, in the name and on behalf of the
corporation, execute and deliver any contract or other instrument authorized in
writing by the board of directors. The board of directors may, subject to any
limitation contained in the certificate of incorporation or in these bylaws,
authorize in writing any officer or agent to execute and deliver any contract or
other instrument in the name and on behalf of the corporation; any such
authorization may be general or confined to specific instances.
SECTION 5.02 LOANS. No loan or advance shall be contracted on behalf of the
corporation, no negotiable paper or other evidence of its obligation under any
loan or advance shall be issued in its name, and no property of the corporation
shall be mortgaged, pledged, hypothecated, transferred, or conveyed as security
for the payment of any loan, advance, indebtedness, or liability of the
corporation, unless and except as authorized by the board of directors. Any such
authorization may be general or confined to specific instances.
SECTION 5.03 DEPOSITS. All monies of the corporation not otherwise employed
shall be deposited from time to time to its credit in such banks or trust
companies or with such bankers or other depositories as the board of directors
may select, or as from time to time may be selected by any officer or agent
authorized to do so by the board of directors.
SECTION 5.04 CHECKS, DRAFTS, ETC. All notes, drafts, acceptances, checks,
endorsements, and, subject to the provisions of these bylaws, evidences of
indebtedness of the corporation shall be signed by such officer or officers or
such agent or agents of the corporation and in such manner as the board of
directors from time to time may determine. Endorsements for deposit to the
credit of the corporation in any of its duly authorized depositories shall be in
such manner as the board of directors from time to time may determine.
SECTION 5.05 BONDS AND DEBENTURES. Every bond or debenture issued by the
corporation shall be evidenced by an appropriate instrument which shall be
signed by the president or a vice president and by the secretary and sealed with
the seal of the corporation. The seal may be a facsimile, engraved or printed.
Where such bond or debenture is authenticated with the manual signature of an
authorized officer of the corporation or other trustee designated by the
indenture of trust or other agreement under which such security is issued, the
signature of any of the corporation=s officers named thereon may be a facsimile.
In case any officer who signed, or whose facsimile signature has been used on
any such bond or debenture, shall cease to be an officer of the corporation for
any reason before the same has been delivered by the corporation, such bond or
debenture may nevertheless be adopted by the corporation and issued and
delivered as though the person who signed it or whose facsimile signature has
been used thereon had not ceased to be such officer.
SECTION 5.06 SALE, TRANSFER, ETC. OF SECURITIES. Sales, transfers, endorsements,
and assignments of stocks, bonds, and other securities owned by or standing in
the name of the corporation, and the execution and delivery on behalf of the
corporation of any and all instruments in writing incident to any such sale,
transfer, endorsement, or assignment, shall be effected by the president, or by
any vice president, together with the secretary, or by any officer or agent
thereunto authorized by the board of directors.
SECTION 5.07 PROXIES. Proxies to vote with respect to stock of other
corporations owned by or standing in the name of the corporation shall be
executed and delivered on behalf of the corporation by the president or any vice
president and the secretary or assistant secretary of the corporation, or by any
officer or agent
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thereunder authorized by the board of directors.
ARTICLE VI.
CAPITAL SHARES
SECTION 6.01 STOCK CERTIFICATES. Every holder of stock in the corporation shall
be entitled to have a certificate, signed by the president or any vice president
and the secretary or assistant secretary, and sealed with the seal (which may be
a facsimile, engraved or printed) of the corporation, certifying the number and
kind, class or series of stock owned by him in the corporation; PROVIDED,
however, that where such a certificate is countersigned by (a) a transfer agent
or an assistant transfer agent, or (b) registered by a registrar, the signature
of any such president, vice president, secretary, or assistant secretary may be
a facsimile. In case any officer who shall have signed, or whose facsimile
signature or signatures shall have been used on any such certificate, shall
cease to be such officer of the corporation, for any reason, before the delivery
of such certificate by the corporation, such certificate may nevertheless be
adopted by the corporation and be issued and delivered as though the person who
signed it, or whose facsimile signature or signatures shall have been used
thereon, has not ceased to be such officer. Certificates representing stock of
the corporation shall be in such form as provided by the statutes of the state
of incorporation. There shall be entered on the stock books of the corporation
at the time of issuance of each share, the number of the certificate issued, the
name and address of the person owning the stock represented thereby, the number
and kind, class or series of such stock, and the date of issuance thereof. Every
certificate exchanged or returned to the corporation shall be marked "canceled"
with the date of cancellation.
SECTION 6.02 TRANSFER OF STOCK. Transfers of stock of the corporation shall be
made on the books of the corporation by the holder of record thereof, or by his
attorney thereunto duly authorized by a power of attorney duly executed in
writing and filed with the secretary of the corporation or any of its transfer
agents, and on surrender of the certificate or certificates, properly endorsed
or accompanied by proper instruments of transfer, representing such stock.
Except as provided by law, the corporation and transfer agents and registrars,
if any, shall be entitled to treat the holder of record of any stock as the
absolute owner thereof for all purposes, and accordingly shall not be bound to
recognize any legal, equitable, or other claim to or interest in such stock on
the part of any other person whether or not it or they shall have express or
other notice thereof.
SECTION 6.03 REGULATIONS. Subject to the provisions of articles IV and V of the
certificate of incorporation, the board of directors may make such rules and
regulations as they may deem expedient concerning the issuance, transfer,
redemption, and registration of certificates for stock of the corporation.
SECTION 6.04 MAINTENANCE OF STOCK LEDGER AT PRINCIPAL PLACE OF BUSINESS. A stock
ledger (or ledgers where more than one kind class, or series of stock is
outstanding) shall be kept at the principal place of business of the
corporation, or at such other place as the board of directors shall determine,
containing the names alphabetically arranged of original stockholders of the
corporation, their addresses, their interest, the amount paid on their shares,
and all transfers thereof and the number and class of stock held by each. Such
stock ledgers shall at all reasonable hours be subject to inspection by persons
entitled by law to inspect the same.
SECTION 6.05 TRANSFER AGENTS AND REGISTRARS. The board of directors may appoint
one or more transfer agents and one or more registrars with respect to the
certificates representing stock of the corporation, and may require all such
certificates to bear the signature of either or both. The board of directors may
from time to time define the respective duties of such transfer agents and
registrars. No certificate for stock shall be valid until countersigned by a
transfer agent, if at the date appearing thereon the corporation had a transfer
agent for such stock, and until registered by a registrar, if at such date the
corporation had a registrar for such stock.
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SECTION 6.06 FIXING OF RECORD DATE.
(a) The board of directors may fix in advance a date, not exceeding 60
days preceding the date of any meeting of stockholders, or the date for the
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into effect,
or a date in connection with obtaining any such consent, as a record date for
the determination of the stockholders entitled to a notice of, and to vote at,
any such meeting and any adjournment thereof, or entitled to receive payment of
any such dividend, or to any such allotment of rights, or to exercise the rights
in respect of any such change, conversion or exchange of capital stock, or to
give such consent.
(b) If the record date is set for the purpose of determining
stockholders entitled to notice of or to vote at a meeting of stockholders, such
record date shall be at least ten days immediately preceding such meeting.
SECTION 6.07 LOST OR DESTROYED CERTIFICATES. The corporation may issue a new
certificate for stock of the corporation in place of any certificate theretofore
issued by it, alleged to have been lost or destroyed, and the board of directors
may, in their discretion, require the owner of the lost or destroyed certificate
or his legal representatives, to give the corporation a bond in such form and
amount as the board of directors may direct, and with such surety or sureties as
may be satisfactory to the board, to indemnify the corporation and its transfer
agents and registrars, if any, against any claims that may be made against it or
any such transfer agent or registrar on account of the issuance of such new
certificate. A new certificate may be issued without requiring any bond when, in
the judgment of the board of directors, it is proper to do so.
ARTICLE VII.
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
SECTION 7.01 HOW CONSTITUTED. The board of directors may designate an executive
committee and such other committees as the board of directors may deem
appropriate, each of which committees shall consist of one or more directors.
Members of the executive committee and of any such other committee shall be
designated annually at the annual meeting of the board of directors; PROVIDED,
however, that at any time the board of directors may abolish or reconstitute the
executive committee or any such other committee. Each member of the executive
committee and of any such other committee shall hold office until his successor
shall have been designated or until his resignation or removal in the manner
provided in these bylaws.
SECTION 7.02 POWERS. During the intervals between meetings of the board of
directors, the executive committee shall have and may exercise all powers of the
board of directors in the management of the business and affairs of the
corporation, except for the power to fill vacancies in the board of directors or
to amend these bylaws, and except for such powers as by law may not be delegated
by the board of directors to an executive committee.
SECTION 7.03 PROCEEDINGS. The executive committee, and such other committees as
may be designated hereunder by the board of directors, may fix its own presiding
and recording officer or officers, and may meet at such place or places, at such
time or times and on such notice (or without notice) as it shall determine from
time to time. It will keep a record of its proceedings and shall report such
proceedings to the board of directors at the meeting of the board of directors
next following.
SECTION 7.04 QUORUM AND MANNER OF ACTING. At all meetings of the executive
committee, and of such other committees as may be designated hereunder by the
board of directors, the presence of members constituting a majority of the total
authorized membership of the committee shall be necessary and sufficient
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to constitute a quorum for the transaction of business, and the act of a
majority of the members present at any meeting at which a quorum is present
shall be the act of such committee. The members of the executive committee, and
of such other committees as may be designated hereunder by the board of
directors, shall act only as a committee and the individual members thereof
shall have no powers as such.
SECTION 7.05 RESIGNATIONS. Any member of the executive committee, and of such
other committees as may be designated hereunder by the board of directors, may
resign at any time by delivering a written resignation to either the president,
the secretary, or assistant secretary, or to the presiding officer of the
committee of which he is a member, if any shall have been appointed and shall be
in office. Unless otherwise specified therein, such resignation shall take
effect on delivery.
SECTION 7.06 REMOVAL. The board of directors may at any time remove any member
of the executive committee or of any other committee designated by it hereunder
either for or without cause.
SECTION 7.07 VACANCIES. If any vacancy shall occur in the executive committee or
of any other committee designated by the board of directors hereunder, by reason
of disqualification, death, resignation, removal, or removal, or otherwise, the
remaining members shall, until the filling of such vacancy, constitute the then
total authorized membership of the committee and continue to act, unless such
committee consisted of more than one member prior to the vacancy or vacancies
and is left with only one member as a result thereof. Such vacancy may be filled
at any meeting of the board of directors.
SECTION 7.08 COMPENSATION. The board of directors may allow a fixed sum and
expenses of attendance to any member of the executive committee, or of any other
committee designated by it hereunder, who is not an active salaried employee of
the corporation for attendance at each meeting of the said committee.
ARTICLE VIII.
INDEMNIFICATION, INSURANCE, AND OFFICER AND DIRECTOR CONTRACTS
SECTION 8.01 INDEMNIFICATION: THIRD PARTY ACTIONS. The corporation shall have
the power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending, or completed action, suit, or
proceedings, whether civil, criminal, administrative, or investigative (other
than an action by or in the right of the corporation), by reason of the fact
that he is or was a director, officer, employee, or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise, against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred by him in
connection with any such action, suit, or proceeding, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
SECTION 8.02 INDEMNIFICATION: CORPORATE ACTIONS. The corporation shall have the
power to indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending, or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by
12
<PAGE> 16
him in connection with the defense or settlement of such action or suit, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
shall be made in respect of any claim, issue, or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the court in which such action or suit was brought shall determine
on application that, despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
SECTION 8.03 DETERMINATION. To the extent that a director, officer, employee, or
agent of the corporation has been successful on the merits or otherwise in
defense of any action, suit, or proceeding referred to in sections 8.01 and 8.02
hereof, or in defense of any claim, issue, or matter therein, he shall be
indemnified against expenses (including attorneys= fees) actually and reasonably
incurred by him in connection therewith. Any other indemnification under
sections 8.01 or 8.02 hereof, unless ordered by a court, shall be made by the
corporation only in the specific case on a determination that indemnification of
the director, officer, employee, or agent is proper in the circumstances because
he has met the applicable standard or conduct set forth in sections 8.01 or 8.02
hereof. Such determination shall be made either (i) by the board of directors by
a majority vote of a quorum consisting of directors who were not parties to such
action, suit, or proceeding, (ii) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders by a majority
vote of a quorum of stockholders at any meeting duly called for such purpose.
SECTION 8.04 ADVANCES. Expenses incurred by an officer or director in defending
a civil or criminal action, suit, or proceeding may be paid by the corporation
in advance of the final disposition of such action, suit, or proceeding on
receipt of an undertaking by or on behalf of such director or officer to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized by this section. Such expenses
incurred by other employees and agents may be so paid on such terms and
conditions, if any, as the board of directors deems appropriate.
SECTION 8.05 SCOPE OF INDEMNIFICATION. The indemnification and advancement of
expenses provided by, or granted pursuant to, sections 8.01, 8.02, and 8.04:
(a) Shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled, under any
bylaw, agreement, vote of stockholders or disinterested directors, or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office; and
(b) Shall, unless otherwise provided when authorized or ratified,
continue as to a person who ceased to be a director, officer, employee, or agent
of the corporation, and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
SECTION 8.06 INSURANCE. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against any
such liability.
SECTION 8.07 OFFICER AND DIRECTOR CONTRACTS. No contract or other transaction
between the corporation and one or more of its directors or officers, or between
the corporation and any corporation, partnership, association, or other
organization in which one or more of the corporation's directors or officers are
directors, officers, or have a financial interest, is either void or voidable
solely on the basis of such relationship or solely because any such director or
officer is present at or participates in the meeting of the
13
<PAGE> 17
board of directors or a committee thereof which authorizes the contract or
transaction, or solely because the vote or votes of each director or officer are
counted for such purpose, if:
(a) The material facts of the relationship or interest are disclosed or
known to the board of directors or 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;
(b) The material facts of the relationship or interest is disclosed or
known to the stockholders and they approve or ratify the contract or transaction
in good faith by a majority vote of the shares voted at a meeting of
stockholders called for such purpose or written consent of stockholders holding
a majority of the shares entitled to vote (the votes of the common or interested
directors or officers shall be counted in any such vote of stockholders); or
(c) The contract or transaction is fair as to the corporation at the
time it is authorized, approved, or ratified by the board of directors, a
committee thereof, or the stockholders.
ARTICLE IX.
FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the board of
directors.
ARTICLE X.
DIVIDENDS
The board of directors may from time to time declare, and the corporation may
pay, dividends on its outstanding stock in the manner and on the terms and
conditions provided by the certificate of incorporation and bylaws.
ARTICLE XI.
AMENDMENTS
All bylaws of the corporation, whether adopted by the board of directors or the
stockholders, shall be subject to amendment, alteration, or repeal, and new
bylaws may be made, except that:
(a) No bylaw adopted or amended by the stockholders shall be altered or
repealed by the board of directors; and
(b) No bylaw shall be adopted by the board of directors which shall
require more than the stock representing a majority of the voting power for a
quorum at a meeting of stockholders, or more than a majority of the votes cast
to constitute action by the stockholders, except where higher percentages are
required by law; PROVIDED, however, that (i) If any bylaw regulating an
impending election of directors is adopted or amended or repealed by the board
of directors, there shall be set forth in the notice of the next meeting of the
stockholders for the election of directors, the bylaws so adopted or amended or
repealed, together with a concise statement of the changes made; and
(c) No amendment, alteration, or repeal of this article XI shall be
made except by the stockholders.
14
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