______________________________________________________________________
______________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/ X / Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended April 21, 1996 Commission File Number 1-8881
SBARRO, INC.
(Exact name of registrant as specified in its Charter)
NEW YORK 11-2501939
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
763 Larkfield Road, Commack, New York 11725
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 864-0200
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Class Outstanding at May 31, 1996
Common Stock, $.01 par value 20,361,738
______________________________________________________________________
______________________________________________________________________<PAGE>
SBARRO, INC.
FORM 10-Q INDEX
PART I. FINANCIAL INFORMATION PAGES
Consolidated Financial Statements:
Balance Sheets - April 21, 1996 (unaudited) and
December 31, 1995. . . . . . . . . . . . . . . . . 3-4
Statements of Income (unaudited) - Sixteen Weeks
ended April 21, 1996 and April 23, 1995. . . . . . . .5
Statements of Cash Flows (unaudited) - Sixteen
Weeks ended April 21, 1996 and April 23, 1995. . . .6-7
Notes to Unaudited Consolidated Financial
Statements - April 21, 1996 . . . . . . . . . . . . . 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . 9-11
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . 12
Pg. 2<PAGE>
SBARRO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
April 21, 1996 December 31, 1995
(unaudited)
Current assets:
Cash and cash equivalents $82,492 $93,501
Receivables:
Franchisees 548 741
Other 2,391 1,863
2,939 2,604
Inventories 2,473 2,763
Prepaid expenses 3,105 1,754
Total current assets 91,009 100,622
Marketable securities 10,000 10,000
Property and equipment, net 124,785 126,757
Other assets:
Deferred charges, net of
accumulated amortization of
$2,022,000 at April 21, 1996 and
$1,573,000 at December 31, 1995 1,752 1,767
Other 3,710 3,584
5,462 5,351
$231,256 $242,730
(continued)
Pg. 3<PAGE>
SBARRO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
(In thousands)
April 21, 1996 December 31, 1995
(unaudited)
Current liabilities:
Accounts payable $6,992 $7,399
Accrued expenses 20,566 27,005
Dividend payable - 3,865
Income taxes 2,671 4,708
Total current liabilities 30,229 42,977
Deferred income taxes 12,883 14,087
Shareholders' equity:
Preferred stock, $1 par value;
authorized 1,000,000 shares;
none issued
Common stock, $.01 par value;
authorized 40,000,000 shares;
issued and outstanding 20,355,237
shares at April 21, 1996 and
20,345,483 shares at
December 31, 1995 203 203
Additional paid-in capital 30,514 30,330
Retained earnings 157,427 155,133
188,144 185,666
$231,256 $242,730
See notes to unaudited consolidated financial statements
Pg. 4<PAGE>
SBARRO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share data)
For the sixteen weeks ended:
April 21, 1996 April 23, 1995
Revenues:
Restaurant sales $85,283 $82,285
Franchise related income 1,672 1,510
Interest income 1,102 812
Total revenues 88,057 84,607
Costs and expenses:
Cost of food and paper products 18,561 18,033
Restaurant operating expenses:
Payroll and other employee
benefits 22,388 22,632
Occupancy and other 24,864 24,909
Depreciation and amortization 6,736 6,925
General and administrative 4,617 5,085
Other income (432) (460)
Total costs and expenses 76,734 77,124
Income before income taxes 11,323 7,483
Income taxes 4,348 2,873
Net income $ 6,975 $ 4,610
Per share data:
Earnings per common and common
equivalent share $0.34 $0.23
Weighted average number of shares
used in the computation 20,348,179 20,332,356
See notes to unaudited consolidated financial statements
Pg. 5<PAGE>
SBARRO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
For the sixteen weeks ended:
April 21, 1996 April 23, 1995
Operating activities:
Net income $6,975 $4,610
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 6,736 6,925
Provision for deferred income
taxes (1,204) 176
Changes in operating assets
and liabilities:
Increase (decrease) in
receivables (335) 336
Decrease in inventories 290 260
Increase in prepaid expenses (1,274) (1,481)
Increase in deferred charges (434) (433)
Decrease (increase) in other
assets (202) 95
Decrease in accounts payable
and accrued expenses (6,185) (4,681)
Decrease in income taxes
payable (2,037) (3,897)
Net cash provided by
operating activities 2,330 1,910
Investing activities:
Proceeds from disposition of
marketable securities - 10,022
Purchases of marketable securities - (3,750)
Purchases of property and equipment (4,977) (5,758)
Net cash (used in) provided by
investing activities (4,977) 514
(continued)<PAGE>
Pg. 6
SBARRO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
(In thousands)
For the sixteen weeks ended:
April 21, 1996 April 23, 1995
Financing activities:
Proceeds from exercise of
stock options 184 73
Cash dividends paid (8,546) (7,116)
Net cash used in financing
activities (8,362) (7,043)
Decrease in cash and cash
equivalents (11,009) (4,619)
Cash and cash equivalents at
beginning of period 93,501 42,362
Cash and cash equivalents at
end of period $82,492 $37,743
Supplemental disclosure of cash flow information:
Cash paid during the period
for income taxes $7,578 $6,549
See notes to unaudited consolidated financial statements
Pg. 7<PAGE>
SBARRO, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
1. The accompanying unaudited consolidated financial statements
have been prepared in accordance with the instructions for
Form 10-Q and Regulation S-X related to interim period
financial statements and, therefore, do not include all
information and footnotes required by generally accepted
accounting principles. However, in the opinion of
management, all adjustments (consisting of normal recurring
adjustments and accruals) considered necessary for a fair
presentation of the consolidated financial position of the
Company and its subsidiaries at April 21, 1996 and their
consolidated results of operations and cash flows for the
sixteen weeks ended April 21, 1996 and April 23, 1995 have
been included. The results of operations for the interim
periods are not necessarily indicative of the results that
may be expected for the entire year. Reference should be
made to the annual financial statements, including footnotes
thereto, included in the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1995.
Pg. 8 <PAGE>
SBARRO, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The Company's business is subject to seasonal fluctuations,
the effects of weather and economic conditions. Earnings have been
highest in its fourth quarter due primarily to increased traffic in
shopping malls during the holiday shopping season. Normally, the
fourth fiscal quarter accounts for approximately 40% of net income for
the year. In 1995, the fourth fiscal quarter accounted for 42% of net
income for the year (prior to the provision in 1995 for unit
closings). In 1994, the fourth fiscal quarter accounted for 39% of
net income for the year. The length of the holiday shopping period
between Thanksgiving and Christmas and the number of weeks in the
fourth quarter can produce changes in the fourth quarter earnings
relationship from year to year.
The following table provides information concerning the
number of Company-owned and franchised restaurants in operation during
each indicated period:
16 Weeks 16 Weeks
Ended Ended Fiscal Year
04/21/96 04/23/95 1995 1994
Company-owned restaurants:
Opened during period 9 14 44 53
Acquired from (sold to)
franchisees during period-net - - - 2
Closed during period (3) (2) (40) (3)
Open at end of period 577 579 571 567
Franchised restaurants:
Opened during period 7 9 40 38
Purchased from (sold to)
Company during period-net - - - (2)
Closed or terminated during
period (5) - (2) (8)
Open at end of period 202 171 200 162
All restaurants:
Opened during period 16 23 84 91
Closed or terminated during
period (8) (2) (42) (11)
Open at end of period 779 750 771 729
In addition, franchisees operate seven kiosk/cart units.
Pg. 9 <PAGE>
Restaurant sales from Company-owned units increased 3.6 % to
$85,283,000 for the sixteen weeks ended April 21, 1996 from
$82,285,000 for the sixteen weeks ended April 23, 1995. This
increase resulted primarily from the opening of new units
subsequent to the first quarter 1995 which produce sales more
typical of the Company's existing units than the underperforming
units which the Company closed pursuant to the program announced
in late 1995, and .6% increase (from $79,437,000 in 1995 to
$79,938,000 in 1996) in comparable unit sales. Comparable unit
sales are made up of sales at locations that were open during the
entire current period and prior fiscal year. In mid April 1996,
the Company selectively increased menu prices by less than .5%.
In as much as these menu price increases were not material in
amount and were instituted in the later part of the quarter, they
did not affect the comparability of sales to the prior year's
quarter.
Franchise related income increased 10.7% to $1,672,000 for the
sixteen weeks ended April 21, 1996 from $1,510,000 for the
sixteen weeks ended April 23, 1995. This increase resulted from
higher royalties due principally to a higher number of franchise
units in operation in 1996.
Interest income increased to $1,102,000 for the sixteen weeks
ended April 21, 1996 from $812,000 for the sixteen weeks ended
April 23, 1995. This increase was primarily due to larger
amounts of cash invested in the current period over the
comparable period in 1995.
Cost of food and paper products as a percentage of restaurant
sales decreased slightly to 21.8% for the sixteen weeks ended
April 21, 1996 from 21.9% for the sixteen weeks ended April 23,
1995. This improvement resulted principally from the Company's
program announced in late 1995 to close underperforming units,
offset somewhat by higher cheese prices in 1996.
Restaurant operating expenses - payroll and other employee
benefits decreased to 26.3% for the sixteen weeks ended April 21,
1996 from 27.5% of restaurant sales for the period ended April
23, 1995. Restaurant operating expenses - occupancy and other
decreased to 29.2% for the sixteen weeks ended April 21, 1996
from 30.3% for the period ended April 23, 1995. These decreases
are partially due to the increase in comparable unit sales
enabling the spreading of such costs over a larger sales base,
and the Company's program of closing underperforming units which
had higher payroll and other restaurant operating cost
relationships.
Depreciation and amortization expenses decreased to $6,736,000
for the sixteen weeks ended April 21, 1996 from $6,925,000 for
the sixteen weeks ended April 23, 1995. This decrease is
principally due to the closing of underperforming units in
late 1995.
Pg. 10 <PAGE>
For the sixteen weeks ended April 21, 1996, general and
administrative expenses were $4,617,000 or 5.2% of total
revenues, compared to $5,085,000 or 6.0% of total revenues in the
sixteen weeks ended April 23, 1995. The dollar decrease was
primarily a result of the absence in 1996 of a $200,000 provision
in the first quarter 1995 for the closing of two stores and a
reduction in management level positions subsequent to the first
quarter 1995.
The effective income tax rate for the sixteen weeks ended April
21, 1996 and April 23, 1995 was 38.4%.
Liquidity and Capital Resources
At April 21, 1996, the Company had cash, cash equivalents and
marketable securities of $92,492,000 and its working capital was
$60,780,000. Cash provided by operations for the sixteen weeks
ended April 21, 1996 of $2,330,000 and a portion of the available
working capital was used to purchase restaurant property and
equipment of $4,977,000 and to pay two quarterly dividends
aggregating $8,546,000. The Company believes, based on current
projections, that its liquid assets presently on hand, together
with cash generated from operations, should be sufficient for its
presently contemplated operations, dividends and the purchase of
property and equipment relating to its development of
restaurants, as well as renovating and equiping the Company's new
headquarters building.
Dividends
On February 22, 1996, the Company increased its quarterly cash
dividend to $.23 per share, or an aggregate annual rate of $.92
per share. This dividend was paid on April 3, 1996 to
shareholders of record on March 19, 1996, and amounted to
$4,680,554.
On May 23, 1996, the Company declared a quarterly cash dividend
of $.23 per share. The cash dividend will be paid on July 8,
1996 to shareholders of record on June 19, 1996.
Pg. 11
PART II. OTHER INFORMATION<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's 1996 Annual Meeting of Shareholders held on May
22, 1996, shareholders:
(a) Elected the following to serve as Class 1 directors until
the Company's 1999 Annual Meeting of Shareholders and until their
respective successors are elected and qualified, by the following
vote:
For Withheld
Anthony Sbarro 15,974,754 322,983
Harold L. Kestenbaum 15,974,754 322,983
Paul A. Vatter 15,673,592 624,145
(b) Ratified the action of the Board of Directors in appointing
Arthur Andersen LLP as the Company's independent public
accountants for the Company's fiscal year ending December 29,
1996, by the following vote:
For Against Abstain Non-Votes
16,269,251 6,250 22,236 0
Item 5. Other Information.
At the Annual Meeting of the Board of Directors held on May 22,
1996, following the 1996 Annual Meeting of Shareholders, the
Board of Directors reelected the existing executive officers of
the Company except that Mario Sbarro was elected President and
Chief Operating Officer in addition to Chairman of the Board of
Directors and Chief Executive Officer, and Anthony Sbarro,
formerly President and Chief Operating Officer, was elected Vice
Chairman of the Board.
In connection therewith, the Board of Directors also amended the
By-Laws of the Company to establish the position of Vice Chairman
of the Board of Directors as an officer of the Company to have
such powers and perform such duties as may be assigned to him
from time to time by the Board of Directors or Chairman of the
Board.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
No. Description
3 By-Laws, as amended through May 22, 1996
27 Financial Data Schedule
(b) Reports on Form 8-K:
No Reports on Formm 8-K were filed during the quarter
for which this Report is filed.
Pg. 12<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
SBARRO, INC.
Registrant
Date: June 5, 1996 /s/ MARIO SBARRO
Mario Sbarro
Chairman of the Board
Date: June 5, 1996 /s/ ROBERT S. KOEBELE
Robert S. Koebele
Vice President-Finance
Pg. 13 <PAGE>
EXHIBIT INDEX
Exhibit Number Description Page
3 By-Laws, As amended through May 22, 1996 15
27 Financial Data Schedule 34
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> APR-21-1996
<CASH> 82,492
<SECURITIES> 0
<RECEIVABLES> 2,939
<ALLOWANCES> 0
<INVENTORY> 2,473
<CURRENT-ASSETS> 91,009
<PP&E> 238,767
<DEPRECIATION> 113,982
<TOTAL-ASSETS> 231,256
<CURRENT-LIABILITIES> 30,229
<BONDS> 0
0
0
<COMMON> 203
<OTHER-SE> 187,941
<TOTAL-LIABILITY-AND-EQUITY> 231,256
<SALES> 85,283
<TOTAL-REVENUES> 88,057
<CGS> 18,561
<TOTAL-COSTS> 47,252
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 11,323
<INCOME-TAX> 4,348
<INCOME-CONTINUING> 6,975
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,975
<EPS-PRIMARY> $.34
<EPS-DILUTED> $.34
</TABLE>
[Amended through May 22, 1996]]
BY-LAWS
of
SBARRO, INC.
ARTICLE I
OFFlCES
Section 1.1. Offices. The principal office of the
Corporation shall be located in the Town of Huntington, County of
Suffolk, State of New York; other offices, either within or
without the State of New York, shall be at such place or places as
the Board of Directors may from time to time determine.
ARTICLE II
SHAREHOLDERS
Section 2.1. Annual Meetings. Annual meetings of the
shareholders for the election of directors and for the transaction
of other business shall be held each year at such time, date and
place, within or without the State of New York, as may be
designated by the Board of Directors, or if no designation shall
be made, at 10:30 a.m. on the last day of the sixth month
following the close of the Corporation's fiscal year (or, if that
date is a legal holiday, then on the next succeeding day) at the
principal office of the Corporation.
Section 2.2. Special Meetings of Shareholders. Spe-
cial meetings of the shareholders may be held either within or
without the State of New York, at any time and place and for any
purpose or purposes, unless otherwise prescribed by law or by the<PAGE>
Certificate of Incorporation, and shall be called, by order of the
Board of Directors.
Section 2.3. Notice of Meetings. Notice of all
meetings of shareholders shall be in writing, shall state the
place, date and hour of the meeting and, except in the case of the
annual meeting, indicate that it is being issued by or at the
direction of the person or persons calling the meeting. Notice of
any special meeting shall also state the purpose or purposes of
which the meeting is called. If, at any meeting, action is
proposed to be taken which would, if taken, entitle shareholders
fulfilling the statutory requirements to receive payment for their
shares, the notice of such meeting shall include a statement of
that purpose and to that effect. A copy of the notice of any
meeting shall be given, personally or by first class mail, not
fewer than ten nor more than fifty days before the date of the
meeting to each shareholder entitled to vote at such meeting,
provided, however, that a copy of such notice may be given by
third class mail not fewer than twenty-four nor more than fifty
days before the date of the meeting. If mailed, such notice shall
be deemed given when deposited in the United States mail, wit
postage thereon prepaid, directed to each shareholder at such
shareholder's address as it appears on the record of shareholders,
or, if a shareholder shall have filed with the Secretary of the
Corporation a written request that notices to such shareholder be
mailed to some other address, then directed to such shareholder at
such other address.
2 <PAGE>
Section 2.4. Adjourned Meetings. The shareholders
present at a meeting of shareholders may adjourn the meeting
despite the absence of a quorum. Notice of any adjourned meeting
of the shareholders shall not be required, if the time and place
to which the meeting is adjourned are announced at the meeting at
which the adjournment is taken, but if after the adjournment the
Board of Directors fixes a new record date for the adjourned
meeting, notice of the adjourned meeting shall be given to each
shareholder of record on the new record date entitled to notice.
Section 2.5. Fixing Record Date. The Board of
Directors may fix in advance a date as the record date for the
purpose of determining the shareholders entitled to notice of or
to vote at any meeting of shareholders or any adjournment thereof,
or to express consent to or to dissent from any proposal without a
meeting, or for the purpose of determining shareholders entitled
to receive payment of any dividend or the allotment of any rights,
or for any other purpose. Such date shall be not more than fifty
nor less than ten days before the date of any such meeting, nor
more than fifty days prior to any other action. If no record date
is fixed, the record date for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders
shall be at the close of the business day next preceding the day
on which notice is given; or, if no notice is given, the day on
which the meeting is held. The record date for determing
shareholders for any purpose other than that specified in the
preceding clause shall be at the close of business on the day on
which the resolution of the directors relating thereto is adopted.
3<PAGE>
Section 2.6. Quorum. Except as otherwise provided by
law, by the Certificate of Incorporation, or by these By-Laws, the
holders of record of a majority of the shares entitled to vote at
any meeting of shareholders, present in person or by proxy, shall
be necessary to constitute a quorum for the transaction of any
business, provided that when a specified item of business is
required to be voted on by a class or series, voting as a class,
the holders of a majority of the shares of such class or series
shall constitute a quorum for the transaction of such specified
item of business. When a quorum is once present to organize a
meeting of shareholders, it is not broken by the subsequent
withdrawal of any of the shareholders.
Section 2.7. Vote of Shareholders. Except as other-
wise required by law, or except as may be otherwise provided by
the Certificate of Incorporation, at any meeting of the Share-
holders at which a quorum is present, every holder of stock then
entitled to vote shall have one vote to cast for every share of
stock registered in such shareholder's name. All voting shall be
viva voce unless the chairman shall direct that the vote be by
written ballot or unless the owners and holders of not less than
20% of the shares entitled to vote shall in writing demand that
the vote in question be by written ballot.
Section 2.8. Proxies. Every shareholder entitled to
vote at a meeting of the shareholders may authorize another person
to act for him by proxy. Every proxy must be in writing and
signed by the shareholder or his attorney-in-fact, and no proxy
shall be valid after the expiration of eleven months from the date
4<PAGE>
thereof, unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the shareholder executing
it, except as otherwise provided by law.
Section 2.9. List of Shareholders at Meetings. A list
of shareholders as of the record date, certified by the Secretary
or other officer responsible for its preparation or by the
transfer agent, shall be produced at any meeting of shareholders
upon the request thereat or prior thereto of any shareholder. If
the right to vote at any meeting is challenged, the inspectors of
election, if any, or person presiding thereat, shall require such
list of shareholders to be produced as evidence of the right of
the persons challenged to vote at such meeting, and all persons
who appear from such list to be shareholders entitled to vote
thereat may vote at such meeting.
Section 2.10. Inspectors at Shareholders' Meetings.
The Board of Directors, in advance of any shareholders' meeting,
may appoint one or more inspectors to act at the meeting or any
adjournment thereof. If inspectors are not so appointed, the
person presiding at a shareholders' meeting may, and on the
request of any shareholder entitled to vote thereat shall, appoint
one or more inspectors. In case any person appointed fails to
appear or act, the vacancy may be filled by appointment made by
the Board in advance of the meeting or at the meeting by the
person presiding thereat. Each inspector, before entering upon
the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability.
5<PAGE>
Section 2.11. Waiver of Notice. Notice of a share-
holders' meeting need not be given to any shareholder who submits
a signed waiver of notice, in person or by proxy, whether before
or after the meeting. The attendance of any shareholder at a
meeting, in person or by proxy, without protesting prior to the
conclusion of the meeting the lack of notice of such meeting,
shall constitute a waiver of notice by him.
Section 2.12. Written Consent of Shareholders Without a
Meeting. Any shareholder action required by law, by the Cer-
tificate of Incorporation or by these By-Laws to be taken by vote
may be taken without a meeting on written consent, setting forth
the action so taken, signed by the holders of all outstanding
shares entitled to vote thereon.
ARTICLE III
DIRECTORS
Section 3.1. Powers of the Board of Directors. Except
as otherwise provided by law, by the Certificate of Incorporation
or by these By-Laws, the property, business and affairs of the
Corporation shall be managed by the Board of Directors (sometimes
hereinafter referred to as the "Board").
Section 3.2. Number, Election, Tenure and Qualifica-
tions of Directors. Until changed by an amendment to these By-
Laws the number of directors shall be not less than nine nor more
than twelve, the exact number to be determined from time to time
by resolution of a majority of the entire Board of Directors;
provided, however, that the number of directors shall be increased
beyond the foregoing limit, to the extent required, in the event
6<PAGE>
that (and for so long as) the holders of any Preferred Stock of
the Corporation, voting as a separate class or series under any
provisions of the Certificate of Incorporation, as it may be
amended from time to time, shall be entitled to elect directors.
Such an amendment or resolution shall require the affirmative vote
of a majority of the entire Board and of the holders of at least
66 2/3% of the total number of shares of Common Stock then
outstanding. Directors need not be shareholders. Except as
otherwise provided by law or by the Certificate of Incorporation,
the Directors shall be divided into three classes, each class to
be as nearly equal in number as possible. The term of office of
Directors of the first class shall expire at the first annual
meeting of shareholders after their election, that of the second
class shall expire at the second annual meeting after their
election and that of the third class shall expire at the third
annual meeting after their election. At each annual meeting after
such classification the number of Directors equal to the number of
the class whose term expires at the time of such meeting shall be
elected to hold office until the third succeeding annual meeting.
No classification of Directors shall be effective prior to the
first annual meeting of shareholders. No decrease in the number
of directors by amendment of these By-Laws shall shorten the term
of any incumbent director. Any Directors elected by holders of
any Preferred Stock of the Corporation voting as a separate class
or series under any provisions of the Certificate of Incorporation
shall be classified by the Board of Directors so that all addi-
tional Directors are so apportioned among the classes as to make
7<PAGE>
all the classes as nearly equal in number as possible. Notwith-
standing anything herein to the contrary, the term of office of
any Director elected by any holders of the Corporation's Preferred
Stock voting as a separate class or series shall terminate as
provided in the Certificate of Incorporation, notwithstanding the
fact that the term of the other members of any class in which any
such Director is included has not yet expired.
Section 3.3. Newly Created Directorships and Vacan-
cies. Newly created directorships resulting from an increase in
the authorized number of directors and vacancies occurring in the
Board through death, resignation or disqualification or for any
other reason, may be filled by the vote of a majority of the
directors then in office, although less than a quorum exists, and
the directors so chosen shall hold office until the next annual
meeting of shareholders and until their successors shall be duly
elected and qualified unless sooner displaced.
Directors may be removed only for cause. Except as
otherwise provided by law, such removal shall be by vote of the
shareholders holding a majority of the outstanding stock of the
Corporation entitled to vote, present in person or by proxy, at
any special meeting of the shareholders or by action of the Board
of Directors at any regular or special meeting of the Board. A
vacancy or vacancies occurring from such removal may be filled at
a regular or special meeting of the Board of Directors.
Section 3.4. Regular Meetings. Regular meetings of
the Board of Directors may be held without call or forrmmal notice
at such place either within or without the State of New York, and
at such time as the Board may by vote froom time to time determine.
There shall be a regular meeting of the Board of Directors which
may be held without call or formal notice immediately after and at
the same place as the annual meeting of the shareholders or any
special meeting of the shareholders at which a Board of Directors
is elected.
Section 3.5. Special Meetings. Special meetings of
the Board of Directors may be held at any place within or without
the State of New York at any time when called by the Chairman of
the Board of Directors, the President or Secretary or two or more
directors, notice of the time and place thereof being given to
each director by leaving such notice with him at his residence or
usual place of business or by mailing, cabling, telegraphing or
telexing it, prepaid, addressed to him at his post office address
as it appears on the books of the Corporation, at least two days
before the meeting. Notice shall be deemed given when sent in
accordance with these By-Laws. Neither the call, notice nor waiver
of notice need specify the purpose of any special meeting of the
Board of Directors.
Section 3.6. Quorum. Except as may be otherwise
provided by law or in the Certificate of Incorporation, a majority
of the entire Board of Directors in office shall constitute a
quorum at any meeting of the Board. A majority of the directors
present, whether or not a quorum exists, may adjourn a meeting to
another time and place without further notice until a quorum shall
attend.
9<PAGE>
Section 3.7. Action by the Board of Directors. The
vote of a majority of the directors present at the time of the
vote, if a quorum is present at such time, shall be the act of the
Board, except where a larger vote is required by law, by the
Certificate of Incorporation or these By-Laws.
Section 3.8. Compensation of Directors. The Board of
Directors shall have the authority to fix the compensation of
directors for services in any capacity.
Section 3.9. Resignation of Directors. Any director
may resign at any time by giving written notice thereof to the
Chairman of the Board of Directors, the President or to the Board
of Directors, and such resignation shall take effect at the time
therein specified without the necessity of further action by the
Board.
Section 3.10. Waiver of Notice. Notice of a meeting
need not be given to any director who signs a waiver of notice
whether before or after the meeting, or who attends the meeting
without protesting, prior thereto or at its commencement, the lack
of notice to him.
Section 3.11. The Entire Board. As used in these By-
Laws the term "the entire Board of Directors" or "the entire
Board" means the number of directors the Board would have if there
were no vacancies.
Section 3.12. Participation at Meetings by Use of
Communications Equipment. Any one or more members of the Board of
Directors or any committee thereof may participate in a meeting of
the Board of Directors or of such committee by means of a
10<PAGE>
conference telephone or similar communications equipment that
allows all persons participating in the meeting to hear each other
at the same time.
Section 3.13. Consent of Lieu of Meeting. Unless
otherwise restricted by the Certificate of Incorporation or these
By-Laws, any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may
be taken without a meeting, if all members of the Board of
Directors or committee, as the case may be, consent in writing to
the adoption of a resolution authorizing the action and the
resolution and the written consents thereto are filed with the
minutes of the proceedings of the Board or committee.
ARTICLE IV
EXECUTIVE COMMITTEE AND OTHER
COMMITTEES OF THE BOARD
Section 4.1. How Constituted and Powers. The Board of
Directors, by resolution adopted by a majority of the entire
Board, may designate from among its members an executive commit-
tee, and other committees, each consisting of three or more
directors, and each of which, to the extent provided in the res-
olution and these By-Laws, shall have all the authority of the
Board of Directors, except that no such committee shall have
authority as to any of the following matters:
(1) The submission to shareholders of any action that
needs shareholders' authorization by law;
(2) The filling of vacancies in the Board of Directors
or in any committee;
11 <PAGE>
(3) The fixing of compensation of the directors for
serving on the Board or on any committee;
(4) The amendment or repeal of By-Laws, or the adoption
of new By-Laws; or
(5) The amendment or repeal of any resolution of the
Board which by its terms shall not be so amendable or
repealable.
Section 4.2. Alternate Committee Members. The Board
may designate one or more directors as alternate members of any
committee established under this Article, who may replace any
absent member or members at any meeting of such Committee.
Section 4.3. Organization, etc. The Executive
Committee (and any other Committee established under this Article)
may choose its own Chairman and Secretary and shall keep minutes
of all of its acts and proceedings and report the same from time
to time to the Board of Directors.
Section 4.4. Meetings. Regular meetings of the
Executive Committee (and of any other Committee established under
this Article), of which no notice shall be necessary, shall be
held at such times and in such places as shall be fixed by a
majority of the Committee. Special meetings of the Committee
shall be called at the request of any member of the Committee.
Notice of each special meeting of the Committee shall be sent by
mail, telegraph, cable or wireless or telephone not later than the
day before the date on which the meeting to be held. Notice of
any such meeting need not be given to any member of the Committee,
however, if waived by him in writing or by telegraph, cable or
12 <PAGE>
wireless, before or after the meeting; and any meeting of the
Committee shall be a leal meeting without notice thereof having
been given, if all the members of the Committee shall be present
thereat.
Section 4.5. Quorum and Manner of Acting. A majority
of the Executive Committee (or of any other Committee established
under this Article), shall constitute a quorum for the transaction
of business, and the act of a majority of those present at the
meeting at which a quorum is present shall be the act of the
Executive Committee (or such other Committee).
Section 4.6. General. Each Committee established by
the Board of Directors shall serve at the pleasure of the Board of
Directors, which may fill vacancies in any such Committee.
ARTICLE V
OFFICERS
Section 5.1. Authorized Officers. The officers of the
Corporation shall be a Chairman of the Board of Directors, a
President, a Secretary and a Treasurer, and such other officers,
including one or more Vice Chairmen of the Board of Directors, one
or more Vice-Presidents, one or more Assistant Vice-Presidents,
Assistant Secretaries and Assistant Treasurers, as the Board may
from time to time determine. The Chairman of the Board of
Directors and Vice Chairmen shall be chosen from among the
directors, but no other officer need be a director. Any two or
more offices may be held by the same person except those of
Secretary and President.
13<PAGE>
Section 5.2. Election or Appointment and Term of
Office. The officers of the Corporation shall be elected by the
Board of Directors and shall hold office at the pleasure of the
Board of Directors.
Section 5.3. Resignation and Removal. Any officer may
resign at any time by giving written notice thereof to the
Chairman of the Board of Directors, the President or to the Board
of Directors, and such resignation shall take effect at the time
therein specified. Any officer may be removed from office, with
or without cause, by the Board of Directors.
Section 5.4. Vacancies. A vacancy occurring in any
office shall be filled by the Board of Directors.
Section 5.5. Compensation. Each officer shall receive
such salary as compensation as may be determined by the Board of
Directors, and no officer shall be prevented from receiving such
compensation by reason of the fact that he is also a director of
the Corporation.
Section 5.6. The Chairman of the Board of Directors.
The Chairman of the Board of Directors shall be the chief execu-
tive officer of the Corporation and when present, shall preside at
all meetings of the Board of Directors and at all meetings of the
shareholders. He shall from time to time report to the Board of
Directors all matters within his knowledge which he believes the
interests of the Corporation may require be brought to its notice,
and shall see that all orders and resolutions of the Board are
carried into effect. In general, he shall perform the duties and
have the powers incident to the office of the chief executive
14<PAGE>
officer and such further duties and powers as the Board of
Directors may from time to time determine or the By-Laws
prescribe. In the event of the absence, death or incapacity of
the Chairman of the Board of Directors, only the Board of
Directors may designate a successor Chairman of the Board of
Directors.
Section 5.7. Vice Chairmen of the Board of Directors.
Each Vice Chairman of the Board of Directors shall have such
powers and shall perform such duties as may be assigned to him
from time to time by the Board of Directors or the Chairman of the
Board.
Section 5.8. President. The President shall be the
chief operating officer of the Corporation, and, subject to the
direction of the Board of Directors, shall have general and active
control of its affairs and business and general supervision of its
officers, agents and employees. The President shall see that all
orders and resolutions of the Board are carried into effect. The
President, shall, in the absence or non-election of a Chairman of
the Board preside at all meetings of the shareholders and the
Board of Directors. He may sign deeds, mortgages, bonds,
contracts or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and
execution therof shall be expressly delegated by the Board of
Directors or by these By-Laws to some other officer or agent of
the Corporation, or shall be required by law to be otherwise
signed or executed. He shall perform all duties incident to the
office of the President and such other duties as may be prescribed
15<PAGE>
by the Board of Directors from time to time. He shall have
custody of the treasurer's bond, if any.
Section 5.9. Vice-Presidents. Each Vice-President
shall assist the President and shall perform such duties as may be
assigned to him by the Chairman of the Board of Directors, the
President or the Board of Directors. In the event of the absence,
death, or incapacity of the President, the Vice-Presidents in the
order designated by the Board of Directors, or if no such
designation has been made, in order of seniority in office, shall
have the powers and duties of the President. Any Vice-President
may sign, with the Secretary or other proper officer of the
Corporation thereunto authorized by the Board of Directors
certificates representing shares of the Corporation.
Section 5.10. The Secretary. The Secretary shall act
as Secretary of all meetings of the Board of Directors and of the
Executive Committee and of the shareholders of the Corporation,
and shall keep the minutes thereof in the proper book or books to
be provided for that purpose; he shall see that all notices
required to be given by the Corporation are duly given and served;
he may, with the President or any of the Vice-Presidents, sign
certificates for stock of the Corporation; he shall be custodian
of the seal of the Corporation and shall affix the seal or cause
it to be affixed to all certificates for stock of the Corporation
and to all documents the execution of which on behalf of the
Corporation under its corporate seal is duly authorized in
accordance with the provisions of these By-Laws; he shall have
charge of the stock records and also of the other books, records
16<PAGE>
and papers of the Corporation relating to its organization and
management as a Corporation, and shall see that the reports,
statements and other documents required by law are properly kept
and filed; and shall, in general, perform all the duties incident
to the office of secretary and such other duties as from time to
time may be assigned to him by the Board of Directors or by the
Executive Committee or by the Chairman of the Board of Directors,
or the President.
Section 5.11. Treasurer. The treasurer shall have
charge and custody of, and be responsible for, all funds, secu-
rities, evidences of indebtedness and other personal property of
the Corporation and shall deposit, or cause to be deposited, the
same in accordance with instructions of the Board of Directors. He
shall receive and give receipts and acquittances for moneys paid
in on account of the Corporation, and shall pay out of the funds
on hand all bills, payrolls and other debts of the Corporation.
He shall enter regularly in the books belonging to the Corporation
to be kept by him for that purpose full and accurate accounts of
all moneys received and paid out by him on account of the
Corporation. He shall have the right to require, from time to
time, reports or statements giving such information as he may
desire with respect to any and all financial transactions of the
Corporation from the officers or agents transacting the same.
Upon the request of the Chairman of the Board of Directors, the
President, the Board of Directors or the Executive Committee, he
shall make such reports to them as they shall require from time to
time relating to the financial condition of the Corporation and
17<PAGE>
all his transactions as treasurer. He shall perform all other
duties incident to the office of treasurer and such other duties
as from time to time may be assigned to him by the Chairman of the
Board, the President, the Board of Directors or by the Executive
Committee. He may sign, with the Chairman of the Board of
Directors, President or a Vice-President, certificates for stock
of the Corporation.
The treasurer shall, if required by the Board of
Directors, give the Corporation a bond in such sums and with such
security as may be satisfactory to the Board, conditioned upon the
faithful performance of his duties and for the restoration to the
Corporation in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and
other property of whatever kind belonging to the Corporation in
his possession or under his control.
Section 5.12. Assistant Secretaries and Assistant
Treasurers. The assistant secretary and assistant treasurer, or if
there be more than one, the assistant secretaries and assistant
treasurers in the order determined by the Board of Directors
shall, in the absence or disability of the secretary or the
treasurer, perform the duties of the secretary and treasurer,
respectively, and shall perform such other duties and have such
other powers as from time to time may be assigned to them or any
of them by the Chairman of the Board, the President or Board of
Directors or Executive Committee. The assistant treasurer or
treasurers shall, if required by the Board of Directors, give the
Corporation a bond in such sums and with such security as shall be
18<PAGE>
satisfactory to the Board conditioned upon faithful performance of
their duties and for the restoration to the Corporation in case of
their death, resignation, retirement or removal from office, of
all books, paper, voucher, money and other property of whatever
kind belonging to the Corporation in their possession or under
their control.
ARTICLE VI
SHARES
Section 6.1. Certificates for Shares. Certificates
for stock of the Corporation shall be in such form as shall be
approved by the Board of Directors. The certificates for such
stock shall be numbered in the order of their issue, shall be
signed by the Chairman of the Board of Directors, the President or
one of the vice-presidents and by the secretary or an assistant
secretary or the treasurer or an assistant treasurer, and the seal
of the Corporation shall be affixed thereto, which seal may be
facsimile, engraved or printed. Where any such certificate is
signed by a transfer agent or transfer clerk acting on behalf of
the Corporation and by a registrar, the signatures of the Chairman
of the Board of Directors, the President, a vice-president,
secretary, assistant secretary, treasurer or assistant treasurer
upon such certificate may be facsimiles, engraved or printed. In
any case any officer or officers who shall have signed or whose
signature or facsimile signature or signatures shall be used on
any such certificate or certificates shall cease to be such
officer or officers of the Corporation, whether because of death,
resignation, removal or otherwise, before such certificate or
19<PAGE>
certificates shall have been delivered by the Corporation, such
certificate or certificates shall nevertheless, unless otherwise
ordered by the Board of Directors, be issued and delivered as
though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures shall have
been used thereon had not ceased to be such officer or officers of
the Corporation.
Section 6.2. Transfer of Shares. Upon surrender to
the Corporation or to a transfer agent of the Corporation of a
certificate representing shares, duly endorsed or accompanied with
proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, and to cancel the old
certificate. The Corporation shall be entitled to treat the
holder of record of any share or shares of stock as the holder in
fact thereof, and, accordingly, shall not be bound to recognize
any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not the
Corporation shall have express or other notice thereof, except as
may be required by law.
Section 6.3. Record of Shareholders. The Corporation
shall keep at its principal office in the State of New York, or at
the office of its transfer agent or registrar in the State of New
York a record in written form, or in any other form capable of
being converted into written form within a reasonable time, which
shall contain the names and addresses of all the shareholders, the
number and class of shares held by each, the dates when they
respectively became the owners thereof, and, when shares are
originally issued by the Corporation, the amount paid therefor.
Section 6.4. Lost Certificates. In case of the
alleged loss, destruction or mutilation of a certificate or cer-
tificates representing shares, the Board of Directors may direct
the issuance of a new certificate or certificates in lieu thereof
upon such terms and conditions in conformity with law as it may
prescribe.
ARTICLE VII
INDEMNIFICATION
Section 7.1. General. The Corporation shall indemnify
any officer or director of the Corporation made, or threatened to
be made, a party to an action or proceeding, whether civil,
criminal, administrative or investigative and including an action
by or in the right of a Corporation or by or in the right of any
other corporation of any type or kind, domestic or foreign, or any
partnership, joint venture, trust, employee benefit plan or other
enterprise, which any director or officer of the Corporation
served in any capacity at the request of the Corporation (any such
action or proceeding being hereinafter referred to as an
"Action"), by reason of the fact that he, his testator or
intestate was a director or officer of the Corporation, or served
such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable
expenses, including attorney's fees incurred as a result of such
Action, or any appeal therein, provided that no indemnification
21<PAGE>
shall be made to or on behalf of any director or officer if a
judgment or other final adjudication adverse to such director or
officer establishes that (i) his or her acts were committed in bad
faith or were the result of active and deliberate dishonesty and,
in either case, were material to the cause of action so
adjudicated, or (ii) he or she personally gained in fact a
financial profit or other advantage to which he or she was not
legally entitled. The Corporation may indemnify and advance
expenses to any other person to whom the Corporation is permitted
to provide indemnification or the advancement of expenses to the
fullest extent permitted by applicable law, whether pursuant to
rights granted pursuant to, or provided by, the New York Business
Corporation Law or other law, or other rights created by an
agreement approved by the Board, or resolution of shareholders or
the Board, and the adoption of any such resolution or the entering
into of any such agreement approved by the Board is hereby
authorized.
Section 7.2. Expense Advances. The Corporation shall,
from time to time, advance to any director or officer of the
Corporation expenses (including attorney's fees) incurred in
defending any Action in advance of the final disposition of such
Action; provided that no such advancement shall be made until
receipt of any undertaking by or on behalf of such director
or officer to repay such amount as, and to the extent, required
by law.
Section 7.3. Procedure for Indemnification. Indem-
nification and advancement of expenses under this Article VII
22<PAGE>
shall be made promptly and, in any event, no later than 30 days in
the case of indemnification and 15 in the case of expense
advancement following the request of the person entitled to such
indemnification or advancement of expenses hereunder, as the case
may be. The Board shall promptly (but, in any event, within such
30 or 15-day period, as the case may be) take all such actions
(including, without limitation, any authorizations and findings
required by law) as may be necessary to indemnify, and advance
expenses to, each person entitled thereto pursuant to this Article
VII. If the Board is or may be disqualified by law from granting
any authorization, making any finding or taking any other action
necessary or appropriate for such indemnification or advancement,
then the Board shall use its best efforts to cause appropriate
person(s) to promptly so authorize, find or act.
Section 7.4. Insurance. The Corporation shall be
permitted to purchase and maintain insurance for its own indem-
nification and that of its directors and officers and any other
proper persons to the maximum extent permitted by law.
Section 7.5. Non-Exclusivity. Nothing contained in
this Article VII shall limit the right to indemnification and
advancement of expenses to which any person would be entitled by
law in the absence of this Article VII, or shall be deemed
exclusive of any other rights to which those seeking indemnifi-
cation or advancement of expenses may have or hereafter be enti-
tled under any law, provision of the Certificate of Incorporation,
By-Law, agreement approved by the Board, or resolution of
shareholders or directors; and the adoption of any such resolution
23<PAGE>
or entering into of any such agreement approved by the Board is
hereby authorized.
Section 7.6. Continuity of Rights. The indemnifica-
tion and advancement of expenses provided by, or granted pursuant
to, this Article VII shall (i) continue as to a person who has
ceased to serve in a capacity which would entitle such person to
indemnification or advancement of expenses pursuant to this
Article VII with respect to acts or omissions occurring prior to
such cessation, (ii) inure to the benefit of the heirs, executors
and administrators of a person entitled to the benefits of this
Article VII, (iii) apply with respect to acts or omissions
occurring prior to the adoption of this Article VII to the fullest
extent permitted by law and (iv) survive the full or partial
repeal or restrictive amendment hereof with respect to events
occurring prior thereto. This Article VII shall constitute a
contract between the Corporation and each person eligible for
indemnification or advancement of expenses hereunder, pursuant to
which contract the Corporation and each such person intend to be
legally bound.
Section 7.7. Enforcement. The right to indemnifica-
tion and advancement of expenses provided by this Article VII
shall be enforceable by any person entitled to indemnification or
advancement of expenses hereunder in any court of competent
jurisdiction. In such an enforcement action, the burden shall be
on the Corporation to prove that the indemnification and
advancement of expenses being sought are not appropriate. Neither
the failure of the Corporation to determine whether indem-
24<PAGE>
nification or the advancement of expenses is proper in the cir-
cumstances nor an actual determination by the Corporation thereon
adverse to the person seeking such indemnification or advancement
shall constitute a defense to the action or create a presumption
that such person is not so entitled. Without limiting the scope
of section 7.1, (a) a person who has been successful on the merits
or otherwise in the defense of an Action shall be entitled to
indemnification as authorized in section 7.1 and (b) the
termination of any Action by judgment, settlement, conviction or
plea of nolo contendere or its equivalent shall not in itself
create a presumption that such person has not met the standard of
conduct set forth in section 7.1. Such person's reasonable
expenses incurred in connection with successfully establishing
such person's right to indemnification or advancement or expenses,
in whole or in part, in any such proceeding shall also be
indemnified by the Corporation.
Section 7.8. Severability. If this Article VII or any
portion hereof shall be invalidated on any ground by any court of
competent jurisdiction, then the Corporation nevertheless shall
indemnify and advance expenses to each person otherwise entitled
thereto to the fullest extent permitted by any applicable portion
of this Article VII that shall not have been invalidated.
ARTICLE VIII
25<PAGE>
MISCELLANEOUS
Section 8.1. Seal. The Corporate seal of the Corpo-
ration shall be circular in form and shall contain the name of the
Corporation, the year of its organization and such other legend as
may from time to time be determined by the Board.
Section 8.2. Fiscal Year. The fiscal year of the
Corporation, which may be changed by resolution of the Board of
Directors, shall end on the Sunday nearest to December 31.
ARTICLE IX
AMENDMENT AND REPEAL
Section 9.1. Mode of Amendment or Repeal. Except as
may be otherwise provided by law or in the Certificate of Incor-
poration, these By-Laws may be amended, repealed or new By-Laws
adopted, by a vote of the shareholders entitled to vote thereon or
by the affirmative vote of a majority of the members of the Board
of Directors present at any meeting duly called and held at which
a quorum is present, provided that a reference to the proposed
action is contained in the notice or waiver of notice of any
meeting held for such purpose. Any By-Law adopted by the Board
may be amended or repealed by the shareholders entitled to vote
thereon as herein provided.
Section 9.2. By-Laws Regulating Impending Election.
If any By-Law regulating an impending election of directors is
adopted, amended or repealed by the Board, there shall be set
forth in the notice of the next meeting of shareholders for the
election of directors the By-Laws so adopted, amended or repealed,
together with a concise statement of the changes made.
26<PAGE>
27<PAGE>
