<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended: May 3, 1997
-------------------------------------------------
Commission File Number: 0-17586
---------------------------------------------------------
STAPLES, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2896127
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Research Drive, Westborough, MA 01581
-----------------------------------------
(Address of principal executive office and zip code)
508-370-8500
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The registrant had 162,718,483 shares of Common Stock, par value $.0006,
outstanding as of May 30, 1997.
<PAGE> 2
FORM 10-Q
STAPLES, INC.
MAY 3, 1997
TABLE OF CONTENTS
-----------------
Page
----
Consolidated Balance Sheets ........................................... 3
Consolidated Statements of Income ..................................... 4
Consolidated Statements of Cash Flows ................................. 5
Notes to Consolidated Financial Statements ............................ 6-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................ 8-12
Part II ............................................................... 13
Signature ............................................................. 14
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STAPLES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
May 3,
1997 February 1,
(Unaudited) 1997
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ......................... $ 166,795 $ 98,143
Short-term investments ............................ 4,863 7,986
Merchandise inventories ........................... 828,450 813,661
Receivables, net .................................. 173,932 167,072
Prepaid expenses and other current assets ......... 61,042 64,486
---------- ----------
TOTAL CURRENT ASSETS ......................... 1,235,082 1,151,348
PROPERTY AND EQUIPMENT:
Land and buildings ................................ 82,059 73,070
Leasehold improvements ............................ 241,605 231,604
Equipment ......................................... 205,449 197,258
Furniture and fixtures ............................ 119,390 111,967
---------- ----------
TOTAL PROPERTY AND EQUIPMENT ................. 648,503 613,899
Less accumulated depreciation and amortization .... 188,074 171,042
---------- ----------
NET PROPERTY AND EQUIPMENT ................... 460,429 442,857
OTHER ASSETS:
Lease acquisition costs, net of amortization ...... 41,937 42,552
Investment in affiliates .......................... 36,034 40,542
Goodwill, net of amortization ..................... 84,235 81,306
Other ............................................. 31,593 29,147
---------- ----------
TOTAL OTHER ASSETS ........................... 193,799 193,547
---------- ----------
$1,889,310 $1,787,752
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .................................. $ 454,618 $ 421,051
Accrued expenses and other current liabilities .... 166,768 174,284
Debt maturing within one year ..................... 6,276 7,220
---------- ----------
TOTAL CURRENT LIABILITIES .................... 627,662 602,555
LONG-TERM DEBT .......................................... 156,576 91,342
OTHER LONG-TERM OBLIGATIONS ............................. 34,295 32,169
CONVERTIBLE DEBENTURES .................................. 300,000 300,000
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value-authorized
5,000,000 shares; no shares issued ................ 0 0
Common stock, $.0006 par value-authorized
500,000,000 shares; issued
162,618,125 shares at May 3, 1997 and
162,277,375 shares at February 1, 1997 ............ 99 98
Additional paid-in capital ........................ 512,363 508,868
Cumulative foreign currency translation
adjustments ....................................... (2,921) (128)
Unrealized gain/(loss) on short-term investments .. (7) 11
Retained earnings ................................. 261,589 253,183
Less: 39,433 shares of treasury stock, at cost .... (346) (346)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY ............... 770,777 761,686
---------- ----------
$1,889,310 $1,787,752
========== ==========
</TABLE>
See notes to consolidated financial statements.
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STAPLES, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
(Unaudited)
13 Weeks Ended
-------------------------------
May 3, May 4,
1997 1996
------------ ------------
<S> <C> <C>
Sales ................................ $ 1,154,994 $ 916,800
Cost of goods sold and occupancy
costs ............................. 886,239 708,227
------------ ------------
GROSS PROFIT ..................... 268,755 208,573
Operating expenses:
Operating and selling .............. 184,794 146,697
Pre-opening ........................ 2,862 1,788
General and administrative ......... 36,012 30,629
Amortization of goodwill ........... 572 560
------------ ------------
TOTAL OPERATING EXPENSES ......... 224,240 179,674
------------ ------------
OPERATING INCOME ................. 44,515 28,899
Other income (expense):
Interest and other expense, net .... (4,219) (4,028)
Merger-related costs ............... (20,562) 0
------------ ------------
TOTAL OTHER INCOME (EXPENSE) ..... (24,781) (4,028)
INCOME BEFORE EQUITY IN LOSS OF
AFFILIATES AND INCOME TAXES .... 19,734 24,871
Equity in gain/(loss) of
affiliates ........................ (5,953) (3,714)
------------ ------------
INCOME BEFORE INCOME TAXES ........ 13,781 21,157
Income tax expense ................... 5,375 8,145
------------ ------------
NET INCOME ........................ $ 8,406 $ 13,012
============ ============
Net income per common share .......... $ 0.05 $ 0.08
============ ============
Number of shares used in computing net
income per common share ........... 168,166,378 165,438,542
============ ============
</TABLE>
See notes to consolidated financial statements.
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STAPLES, INC. AND SUBSIDIARIES
<TABLE>
Consolidated Statements of Cash Flows
(Dollar Amounts in Thousands)
<CAPTION>
(Unaudited)
13 Weeks Ended
-----------------------
May 3, May 4,
1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities:
Net income ................................................. $ 8,406 $ 13,012
Adjustments to reconcile net income to net cash provided by/
(used in) operating activities:
Depreciation and amortization ........................... 18,889 18,846
Equity in loss of affiliates ............................ 5,953 3,714
Net increase in deferred tax assets ..................... (3,456) (16,764)
(Increase)/decrease in assets:
Merchandise inventories .............................. (16,760) (53,283)
Receivables .......................................... (7,023) (15,744)
Prepaid expenses and other assets .................... 862 (13,092)
Increase in accounts payable, accrued
expenses and other current liabilities ............... 29,786 57,399
Increase in other long-term obligations ................. 2,276 3,808
--------- --------
30,527 (15,116)
--------- --------
Net cash provided by/(used in) operating activities ........ 38,933 (2,104)
Investing Activities:
Acquisition of property and equipment ...................... (36,174) (37,052)
Proceeds from sales and maturities of short-term investments 3,123 7,078
Investment in affiliates ................................... (1,670) (3,069)
Acquisition of lease rights ................................ (375) 0
Other ...................................................... (1,991) 1,684
--------- --------
Net cash used in investing activities ...................... (37,087) (31,359)
Financing Activities:
Proceeds from sale of capital stock ........................ 3,513 4,798
Proceeds from borrowings ................................... 365,627 38,704
Payments on borrowings ..................................... (301,261) (14,823)
--------- --------
Net cash provided by financing activities .................. 67,879 28,679
Effect of exchange rate changes on cash .................... (1,073) (88)
Net increase/(decrease) in cash and cash equivalents ........... 68,652 (4,872)
Cash and cash equivalents at beginning of period ............... 98,143 98,130
--------- --------
Cash and cash equivalents at end of period ..................... $ 166,795 $ 93,258
========= ========
</TABLE>
See notes to consolidated financial statements.
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STAPLES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
- ------------------------------
The accompanying interim unaudited consolidated financial statements include the
accounts of Staples, Inc. and its wholly owned subsidiaries (the "Company"). All
intercompany accounts and transactions are eliminated in consolidation.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, such interim statements reflect all adjustments (consisting of
normal recurring accruals) necessary to present fairly the financial position
and the results of operations and cash flows for the interim periods presented.
The results of operations for the interim periods are not necessarily indicative
of the results to be expected for the full year. These financial statements
should be read in conjunction with the audited consolidated financial statements
and footnotes included in the Company's Annual Report on Form 10-K dated April
25, 1997 for the year ended February 1, 1997.
Note 2 - Computation of Earnings Per Share
- ------------------------------------------
Average common and common equivalent shares used in computing earnings per share
include approximately 5,752,000 and 6,586,000 shares for the quarters ended May
3, 1997 and May 4, 1996, respectively, as a result of applying the treasury
stock method to outstanding stock options.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share" ("Statement 128"), which must be adopted in the
fourth quarter ended January 31, 1998. At that time, the Company will change
the method currently used to compute earnings per share and restate all prior
periods. The new requirements exclude the dilutive effect of stock options.
Note 3 - Plan of Merger with Office Depot, Inc.
- -----------------------------------------------
On September 4, 1996, the Company entered into an Agreement and Plan of Merger
with Marlin Acquisition Corp., a wholly-owned subsidiary of the Company
("Marlin"), and Office Depot, Inc. ("Office Depot") pursuant to which Marlin is
to be merged with and into Office Depot and Office Depot is to become a
wholly-owned subsidiary of Staples (the "Merger"). On March 10, 1997, the
Federal Trade Commission announced that it would seek to enjoin the Merger and
subsequently filed a motion for a preliminary injunction in Federal District
Court. Staples and Office Depot are opposing the motion for a preliminary
injunction. The United States District Court for the District of Columbia held a
five-day hearing, from May 19, 1997 through May 23, 1997 with respect to the
preliminary injunction motion.
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The Court has indicated that it expects to issue a ruling on that motion. The
Merger is structured as a tax-free exchange of shares in which the stockholders
of Office Depot would receive 1.14 shares of the Company's common stock for
each outstanding share of common stock of Office Depot they own. The Merger
would be accounted for as a pooling of interests. Office Depot operates over
500 retail office supply stores in the US and Canada, a national delivery and
contract stationer business, and joint ventures or licensed operations in seven
countries, and had revenues of $6.1 billion for the year ended December 28,
1996.
The Company charged to expense in the quarter ended May 3, 1997, merger costs
totaling $20,562,000. These costs relate primarily to legal, accounting,
transaction related costs, such as filing fees, and consulting fees incurred in
connection with the pending merger with Office Depot.
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STAPLES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
SALES. Sales increased 26% to $1,154,994,000 in the quarter ended May 3, 1997
from $916,800,000 in the quarter ended May 4, 1996. This growth is attributable
to an increase in the number of open stores, increased sales in existing stores
and increased sales in the delivery and contract stationer segments. Comparable
store and delivery hub sales for the quarter ended May 3, 1997 increased 9% over
the quarter ended May 4, 1996; comparable sales in the contract stationer
segment increased 13% for the quarter ended May 3, 1997 versus the quarter ended
May 4, 1996. The Company had 599 stores open as of May 3, 1997 compared to 473
stores as of May 4, 1996 and 557 stores open as of February 1, 1997.
GROSS PROFIT. Gross profit as a percentage of sales was 23.3% for the three
months ended May 3, 1997 as compared to 22.8% for the same period in the prior
year. The increase in gross profit rate for the three months ended May 3, 1997
was primarily due to the leveraging of fixed occupancy and distribution center
costs over a larger sales base, improved margins in the delivery business
segment as well as lower product costs from vendors as a result of increased
purchase discounts. This was partially offset by decreases in the merchandise
margin rates in the retail store segment, due to price reductions as well as an
increase in the sales of computer hardware (CPU's and laptops), which generate a
lower margin rate than other categories, from 8.3% of sales for the three months
ended May 4, 1996 to 8.4% of sales for the three months ended May 3, 1997.
OPERATING AND SELLING EXPENSES. Operating and selling expenses, which consist of
payroll, advertising and other store operating costs, were 16.0% of sales for
both the three months ended May 3, 1997 and the three months ended May 4, 1996.
Increases as a percentage of sales for the quarter ended May 3, 1997 in
advertising, in store labor and in costs incurred for the Company's store
remodel program, in which significant investments have been made in store
layouts and signing to improve shopability and enhance customer service, were
offset by increased leveraging of fixed store payroll expenses and other fixed
store operating costs as store sales have increased.
While most store expenses vary proportionately with sales, there is a fixed cost
component. Because new stores typically generate lower sales than the Company
average, the fixed cost component results in higher store operating and selling
expenses as a percentage of sales in these stores during their start-up period.
During periods when new store openings as a percentage of the base are higher,
store operating and selling expenses as a percentage of sales may increase. In
addition, as the store base matures, the fixed cost component of operating
expenses is leveraged over an increased level of sales, resulting in a decrease
in store operating and selling expenses as a percentage of sales. The Company's
strategy of continuing to add stores to many existing markets can result in some
new stores attracting sales away from existing stores.
PRE-OPENING EXPENSES. Pre-opening expenses relating to new store openings, which
consist primarily of salaries, supplies, marketing and occupancy costs, are
expensed by the Company as incurred and therefore fluctuate from period to
period depending on the timing and number of new store openings.
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Pre-opening expenses averaged $67,000 per store for the three months ended May
3, 1997 as compared to $60,000 per store for the same period in the prior year.
The increase is due primarily to increased marketing expenses as well as higher
costs incurred in the initial shipment of product from the distribution centers
to new stores.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for the
three months ended May 3, 1997 decreased as a percentage of sales to 3.1% as
compared to 3.3% for the same period in the prior year. This decrease was
primarily due to the Company's ability to increase sales without proportionately
increasing overhead expenses in its core retail business. This was partially
offset by investments in the Company's information systems staffing and
infrastructure, which the Company believes will reduce costs as a percentage of
sales in future years.
INTEREST AND OTHER EXPENSE, NET. Net interest and other expense for the three
months ended May 3, 1997 was $4,219,000 as compared to $4,028,000 for the same
period in the prior year. The interest expense relates primarily to borrowings
which funded the increase in store inventories related to new store openings,
expanded product assortment, and improvements in in-stock levels; the
acquisition of fixed assets for new stores opened and remodeled; and continued
investments in the information systems and distribution center infrastructure.
MERGER-RELATED COSTS. The Company charged to expense in the quarter ended May
3, 1997 certain nonrecurring costs consisting primarily of legal, accounting,
transaction related costs, such as filing fees, and consulting fees incurred in
connection with the pending merger with Office Depot, Inc.
EQUITY IN LOSS OF AFFILIATES. The Company's equity in loss of affiliates
increased to $5,953,000 for the three months ended May 3, 1997 as compared to
$3,714,000 for the same period in the prior year. The increase is primarily due
to the increase in the number of open stores from 47 as of May 4, 1996 to 56 as
of May 3, 1997. The initial investments in overhead, labor and advertising,
combined with the fact that new stores typically generate lower sales than
mature stores, cause new stores to be unprofitable initially. There can be no
assurance that the Company's joint ventures will become profitable.
On May 6, 1997 and May 7, 1997, the Company acquired from Kingfisher PLC its
interests in the two European joint ventures, Staples UK and
MAXI-Papier-Markt-GmbH ("MAXI"), respectively. As a result of the acquisition,
the Company's ownership interest of Staples UK increased to 100% and its
ownership of MAXI increased to approximately 92%. The transactions are being
accounted for as purchases and the consolidated results of these entities will
be reflected in the Company's financial statements in the second quarter of
fiscal 1997. As of May 3, 1997, Staples UK and MAXI operated 40 and 16 stores,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the three months ended May 3, 1997, cash and cash equivalents increased
by $68,652,000. The principal sources of cash consisted of cash provided by
financing activities of $67,879,000 which primarily represents an increase in
the borrowings under the existing revolving credit and term loan facility and
cash provided by operations of $38,933,000. The borrowings were primarily in
anticipation of the
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acquisition of Staples UK and MAXI for $57,000,000 on May 6 and 7, 1997,
respectively. The cash provided by operations primarily represents increases in
accounts payable and accrued expenses of $29,786,000 which financed the increase
in merchandise inventory related to new store openings and expanded product
assortments. This was partially offset by cash used in investing activities of
$37,087,000, which includes capital expenditures of $36,174,000 primarily
incurred in connection with the opening of 43 new stores.
The Company opened 43 stores and closed one store in North America during the
three months ended May 3, 1997, and expects to open approximately 75 additional
stores in the last three quarters of fiscal 1997. Management estimates that the
Company's cash requirements, including pre-opening expenses, leasehold
improvements and fixtures (net of store inventory financed under vendor trade
terms), will be approximately $1,400,000 for each new store (excluding the cost
of any acquisitions of lease rights). Accordingly, the Company expects to use in
excess of $105,000,000 for store openings during this period. In addition, the
Company plans to continue to make investments in information systems,
distribution centers and store remodels to improve operational efficiencies and
customer service, and may expend additional funds to acquire businesses or lease
rights from tenants occupying retail space that is suitable for a Staples store.
The Company expects to meet these cash requirements through a combination of
operating cash flow and borrowings from its existing revolving line of credit.
The Company maintains a five-year revolving credit facility, effective through
July 2001, with a syndicate of banks which provides up to $350,000,000 of
borrowings. This agreement, among other conditions, contains certain restrictive
covenants including net worth maintenance, minimum interest coverage and
limitations on indebtedness, sales of assets, and dividends. As of May 3, 1997,
borrowings pursuant to the revolving credit facility totaled $123,000,000. Total
cash, short-term investments and available revolving credit amounts totaled
$429,000,000 as of May 3, 1997.
The Company expects that its current cash and cash equivalents and funds
available under its revolving credit and term loan facility will be sufficient
to fund its planned store openings and other recurring operational cash needs
for at least the next twelve months. The Company is continually evaluating
financing possibilities, and it may seek to raise additional funds through any
one or a combination of public or private debt or equity-related offerings,
dependent upon market conditions, or through additional commercial bank debt
arrangements.
The discussion in this section relates to the Company's liquidity situation and
needs without giving effect to the pending merger with Office Depot, Inc.
FUTURE OPERATING RESULTS
- ------------------------
This quarterly report on Form 10-Q contains a number of forward-looking
statements. There are a number of important factors that could cause the
Company's results to differ materially from those indicated by such
forward-looking statements. These factors include, without limitation, the
following:
The Company operates in a highly competitive marketplace, in which it competes
with a variety of retailers, dealers and distributors. The Company competes in
most of its geographic markets with other high-volume office supply chains that
are similar in concept to the Company in terms of store format,
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pricing strategy and product selection, such as Office Depot and OfficeMax. The
Company also competes with independent dealers, contract stationers, mail order
stationers, warehouse clubs, mass merchandisers, consumer electronics retailers,
computer superstores and manufacturers, and other discount retailers. Some of
the Company's current and potential competitors in the office products industry
are larger than the Company and have substantially greater financial resources.
No assurance can be given that competition will not have an adverse effect on
the Company's business.
An important part of the Company's business plan is an aggressive store growth
strategy. The Company opened 115 stores in the United States and Canada in
fiscal 1996 and plans to open approximately 120 new stores in fiscal 1997. There
can be no assurance that the Company will be able to identify and lease
favorable store sites, hire and train employees, and adapt its management and
operational systems to the extent necessary to fulfill its expansion plans. The
failure to open new stores in accordance with its growth plans could have a
material adverse impact on the Company's future sales and profits. Moreover, the
Company's expansion strategy is based in part on the continued addition of new
stores to its suburban store network in existing markets to take advantage of
economies of scale in marketing, distribution and supervision costs; however,
this can result in the "cannibalization" of sales of existing stores. In
addition, there can be no assurance that the new stores opened by the Company
will achieve sales or profit levels commensurate with those of the Company's
existing stores.
The Company has experienced and may experience in the future fluctuations in its
quarterly operating results. Moreover, there can be no assurance that Staples
will continue to realize the earnings growth experienced over recent years, or
that earnings in any particular quarter will not fall short of either a prior
fiscal quarter or investors' expectations. Factors such as the number of new
store openings (pre-opening expenses are expensed as incurred, and newer stores
are less profitable than mature stores), the extent to which new stores
"cannibalize" sales of existing stores, the mix of products sold, pricing
actions of competitors, the level of advertising and promotional expenses,
seasonality, and one-time charges associated with acquisitions or other events
could contribute to this quarterly variability. In addition, the Company's
expense levels are based in part on expectations of future sales levels, and a
shortfall in expected sales could therefore result in a disproportionate
decrease in the Company's net income.
The Company's business, including sales, number of stores and number of
employees, has grown dramatically over the past several years. In addition, the
Company has consummated a number of significant acquisitions in the last few
years, and may make additional acquisitions in the future (including the pending
acquisition of Office Depot). This internal growth, together with the
acquisitions made by the Company, have placed significant demand on the
management and operational systems of the Company. To manage its growth
effectively, the Company will be required to continue to upgrade its operational
and financial systems, expand its management team and increase and manage its
employee base.
The Company has a presence in international markets through its recently
acquired joint ventures in Germany and the United Kingdom, and may seek to
expand into other international markets in the future. The Company's operations
in foreign markets are subject to risks similar to those affecting its North
American stores, in addition to a number of risks inherent in foreign
operations, including local customs and competitive conditions, and foreign
currency fluctuations. Staples' foreign operations are currently unprofitable,
and there can be no assurance that they will become profitable.
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<PAGE> 12
The Company currently expects that its current cash and cash equivalents and
funds available under its revolving credit and term loan facility will be
sufficient to fund its planned store openings and other operating cash needs for
at least the next twelve months. However, there can be no assurance that the
Company will not require additional sources of financing prior to such time, as
a result of unanticipated cash needs or opportunities, an expanded growth
strategy or disappointing operating results. There also can be no assurance that
the additional funds required by the Company, whether within the next twelve
months or thereafter, will be available to the Company on satisfactory terms.
Page 12
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PART II -- OTHER INFORMATION
Items 1-5 - Not applicable.
- ---------------------------
Item 6 - Exhibits and Reports on Form 8-K.
- ------------------------------------------
A. Exhibits
3.1 By-laws, as amended and restated.
B. Reports on Form 8-K.
None.
Page 13
<PAGE> 14
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.
Date: June 13, 1997 /s/ John J. Mahoney
------------------ ----------------------------
John J. Mahoney
Executive Vice President and
Chief Financial Officer
Page 14
<PAGE> 1
BY-LAWS
of
STAPLES, INC.
(as amended and restated through May 27, 1997)
ARTICLE I
Stockholders
------------
Section 1. ANNUAL MEETING. The annual meeting of the stockholders for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held on a date to be fixed by
the Board of Directors or the President (which date shall not be a legal holiday
in the place where the meeting is to be held) at the time and place to be fixed
by the Board of Directors or the President and stated in the notice of meeting.
If no annual meeting is held in accordance with the foregoing provisions, the
Board of Directors shall cause the meeting to be held as soon thereafter as
convenient. If no annual meeting is held in accordance with the foregoing
provisions, a special meeting may be held in lieu of the annual meeting, and any
action taken at that special meeting shall have the same effect as if it had
been taken at the annual meeting, and in such case all references in these
By-laws to the annual meeting of the stockholders shall be deemed to refer to
such special meeting.
Section 2. SPECIAL MEETINGS. Special meetings of stockholders may be called
at any time by the chairman of the board, the president or the board of
directors. Business transacted at any special meeting of stockholders shall be
limited to matters relating to the purposes stated in the notice of the meeting.
Section 3. PLACE OF MEETINGS. Meetings of the stockholders may be held
anywhere within or without the United States.
Section 4. NOTICE. Except as hereinafter provided, a written or printed
notice of every meeting of stockholders stating the place, date, hour and
purposes thereof shall be given by the secretary or an assistant secretary (or
by any other officer in the case of an annual meeting or by the person or
persons calling the meeting in the case of a special meeting) not less than ten
<PAGE> 2
(10) days and not more than sixty (60) days before the meeting to each
stockholder entitled to vote thereat and to each stockholder who, by law, by the
certificate of incorporation or by these by-laws, is entitled to such notice, by
leaving such notice with him or at his residence or usual place of business or
by mailing it, postage prepaid, addressed to him at his address as it appears
upon the records of the corporation. No notice of the place, date, hour or
purposes of any annual or special meeting of stockholders need be given to a
stockholder if a written waiver of such notice, executed before or after the
meeting by such stockholder or his attorney thereunto authorized, is filed with
the records of the meeting, or to any stockholder who attends the meeting
without objecting at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened.
Section 5. ACTION AT A MEETING. Except as otherwise provided by the
certificate of incorporation, at any meeting of the stockholders a majority of
all shares of stock then issued, outstanding and entitled to vote shall
constitute a quorum for the transaction of any business. Though less than a
quorum be present, any meeting may without further notice be adjourned to a
subsequent date or until a quorum be had, and at any such adjourned meeting any
business may be transacted which might have been transacted at the original
meeting.
When a quorum is present at any meeting, the affirmative vote of the
holders of shares of stock representing a majority of the votes cast on a matter
(or if there are two or more classes of stock entitled to vote as a separate
class, then in the case of each such class, the holders of shares of stock of
that class representing a majority of the votes cast on the matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the certificate of
incorporation or the by-laws. When a quorum is present at any meeting, any
election by stockholders shall be determined by a plurality of the votes cast on
the election.
Except as otherwise provided by law or by the certificate of incorporation
or by these by-laws, each holder of record of shares of stock entitled to vote
on any matter shall have one vote for each such share held of record by him and
a proportionate vote for any fractional shares so held by him. Stockholders may
vote either in person or by proxy. No proxy shall be voted or acted upon more
than three years after its date unless the proxy provides for a longer period of
time. A proxy with respect to stock held in the name of two or more persons
shall be valid if executed by any one of them unless at or prior to the exercise
of the proxy the corporation receives a specific written notice to the contrary
from any one of them.
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Section 6. TABULATION OF VOTES. At any annual or special meeting of
stockholders the presiding officer shall be authorized to appoint a Teller for
such meeting. The Teller shall be responsible for tabulating or causing to be
tabulated shares voted at the meeting and reviewing or causing to be reviewed
all proxies. In tabulating votes, the Teller shall be entitled to rely in whole
or in part on tabulations and analyses made by personnel of the corporation, its
transfer agent, its registrar or such other organizations as are customarily
employed to provide such services. The Teller shall be authorized to determine
the legality and sufficiency both under the corporation's Certificate of
Incorporation and by-laws and under applicable law of all votes cast and proxies
delivered. I making the determinations authorized in the preceding sentence, the
Teller shall e entitled to rely on advice of counsel to the corporation. All
determinations by the Teller shall be subject to review by the presiding officer
(who will be entitled to rely on advice of such counsel) and to further review
by any court of competent jurisdiction.
Section 7. NOMINATION OF DIRECTORS. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors. Nomination for election to the board of directors of the corporation
at a meeting of stockholders may be made by the board of directors or by any
stockholder of the corporation entitled to vote for the election of directors at
such meeting who complies with the notice procedures set forth in this Section
7. Such nominations, other than those made by or on behalf of the board of
directors, shall be made by notice, in writing delivered or mailed by first
class United States mail, postage prepaid, to the secretary of the corporation,
and received not less than 60 days nor more than 90 days prior to such meeting;
provided, however, that if less than 70 days' notice or prior public disclosure
of the date of the meeting is given or made to stockholders, such nomination
shall have been mailed or delivered to the secretary not later than the close of
business on the 10th day following the date on which the notice of the meeting
was mailed or public disclosure was made, whichever occurs first. Such notice
shall set forth (a) as to each proposed nominee (i) the name, age, business
address and, if known, residence address of each such nominee, (ii) the
principal occupation or employment of each such nominee, (iii) the number of
shares of stock of the corporation which are beneficially owned by each such
nominee, and (iv) any other information concerning the nominee that must be
disclosed as to nominees in proxy solicitations pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (including such person's written
consent to be named as a nominee and to serve as a director if elected); (b) as
to the stockholder giving the notice (i) the name and address, as they appear on
the corporation's books, of such
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stockholder, and (ii) the class and number of shares of the corporation which
are beneficially owned by such stockholder; and (c) as to the beneficial owner,
if any, on whose behalf the nomination is made, (i) the name and address of such
person and (ii) the class and number of shares of the corporation which are
beneficially owned by such person.
The officer presiding at a meeting of stockholders may, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be disregarded.
Nothing in the foregoing provision shall obligate the corporation or the
board of directors to include in any proxy statement or other stockholder
communication distributed on behalf of the corporation or the board of directors
information with respect to any nominee for directors submitted by a
stockholder.
Section 8. NOTICE OF BUSINESS AT MEETINGS. At a meeting of the
stockholders, only such business shall be conducted as shall have been (a)
specified in the notice of meeting (or any supplement thereto), (b) brought
before the meeting by or at the direction of the Board of Directors, or (c)
otherwise properly brought before the meeting by a stockholder. For business to
be properly brought before an annual meeting by a stockholder, if such business
relates to the election of directors of the corporation, the procedures in
Section 7 must be complied with. For business to be properly brought before a
special meeting by a stockholder, and for business other than the election of
directors to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the secretary of
the corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the corporation not
less than 60 days nor more than 90 days prior to the meeting; provided, however,
that if less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be delivered or mailed to the secretary not later than the close of
business on the 10th day following the date on which the notice of the meeting
was mailed or public disclosure was made, whichever occurs first. A
stockholder's notice to the secretary shall set forth as to each matter the
stockholder proposes to bring before the meeting (a) a brief description of the
business desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (b) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, and the name
and address of the beneficial owner, if any, on whose behalf the proposal is
made, (c) the class and number of shares of the corporation which are
beneficially owned
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by such stockholder and such person, if any, and (d) any material interest of
the stockholder, and such person, if any, in such business. Notwithstanding
anything in these by-laws to the contrary, no business shall be conducted at any
meeting of stockholders except in accordance with the procedures set forth in
this Section 8 and except that any stockholder proposal which complies with Rule
14a-8 of the proxy rules (or any successor provision) promulgated under the
Securities Exchange Act of 1934, as amended, and is to be included in the
corporation's proxy statement for an annual meeting of stockholders shall be
deemed to comply with the requirements of this Section 8.
The officer presiding at a meeting of stockholders shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section 8,
and if he should so determine, he shall so declare to the meeting that any such
business not properly brought before the meeting shall not be transacted.
ARTICLE II
Directors
---------
Section 1. NUMBER AND ELECTION. There shall be a Board of Directors
consisting of not less than five directors. The exact number of directors
(subject to the limitation specified in the preceding sentence) shall be fixed
from time to time by the board of directors pursuant to a duly adopted
resolution. No director need be a stockholder.
Section 2. TERMS. The directors shall be divided into three classes,
designated as Class 1, Class 2 and Class 3, as nearly equal in number as
possible as determined by the affirmative vote of a majority of the directors,
with the initial term of office of Class 1 to expire at the next annual meeting
of stockholders; the initial term of office of Class 2 to expire at the annual
meeting of stockholders held during the 1990 calendar year; and the initial term
of office of Class 3 to expire at the annual meeting of stockholders held during
the 1991 calendar year. At each annual meeting of stockholders following such
initial classification, directors whose terms expire shall be elected for a term
of office to expire at the third succeeding annual meeting of stockholders after
their election.
Section 3. RESIGNATIONS. Any director may resign by delivering his written
resignation to the corporation at its principal office or to the president or
the secretary. Such resignation shall become effective at the time or upon the
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happening of the condition, if any, specified therein or, if no such time or
condition is specified, upon its receipt.
Section 4. REMOVAL. Any one or more of the directors may be removed from
office, with or without cause, by the vote of the holders of a majority of the
shares outstanding and entitled to vote in the election of directors; provided,
however, that, if and for so long as the Board of Directors is classified
pursuant to Section 141(d) of the Delaware General Corporation Law, stockholders
may effect the removal of one or more directors only for cause. At any meeting
of the board of directors any director may be removed form office for cause by
vote of a majority of the directors then in office, but only after a reasonable
notice and opportunity to be heard.
Section 5. VACANCIES. Vacancies in the board of directors may be filled by
vote of a majority of the remaining directors or, if not yet so filled, by the
stockholders.
Section 6. REGULAR MEETINGS. Regular meetings of the board of directors may
be held at such times and places as the board of directors may fix from time to
time and, when so fixed, no notice thereof need be given. The first meeting of
the board of directors following the annual meeting of the stockholders shall be
held without notice immediately after and at the same place as the annual
meeting of the stockholders or the special meeting held in lieu thereof. If in
any year a meeting of the board of directors is not held at such time and place,
any elections to be held or business to be transacted at such meeting may be
held or transacted at any later meeting of the board of directors with the same
force and effect as if held or transacted at such meeting. Regular meetings of
the board of directors shall be held at least once during each of the
corporation's fiscal quarters.
Section 7. SPECIAL MEETINGS. Special meetings of the board of directors may
be called at any time by the president or secretary or by any member of the
board of directors. A written, printed or telegraphic notice stating the place,
date and hour (but not necessarily the purposes) of the meeting shall be given
by the secretary or an assistant secretary or by the officer or directors
calling the meeting at least forty-eight (48) hours before such meeting to each
director by leaving such notice with him or at his residence or usual place of
business or by mailing it, postage prepaid, or sending it by prepaid telegram,
addressed to him at his last known address. Notwithstanding anything above to
the contrary, a notice relating to any special meeting of the board of directors
called by a member of the board may be given in the shortest period permitted
under Delaware law, as amended from time to time. No notice of the place, date
or hour of any meeting of the board of directors need be given to any director
if a written waiver of such notice, executed by him before or after
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the meeting, is filed with the records of the meeting, or to any director who
attends the meeting without objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened.
Section 8. ACTION AT A MEETING. At any meeting of the board of directors, a
majority of the directors then in office shall constitute a quorum. Though less
than a quorum be present, any meeting may without further notice be adjourned to
a subsequent date or until a quorum be had. When a quorum is present at any
meeting a majority of the directors present may take any action on behalf of the
board except to the extent that a larger number is required by law, by the
certificate of incorporation or by these by-laws.
Section 9. ACTION WITHOUT A MEETING. Any action required or permitted to be
taken at any meeting of the directors may be taken without a meeting if all the
directors consent to the action in writing and the written consents are filed
with the records of the meetings of the directors. Such consents shall be
treated for all purposes as a vote at the meeting.
Section 10. POWERS. The board of directors shall have and may exercise all
the powers of the corporation, except such as by law, by the certificate of
incorporation or by these by-laws are conferred upon or reserved to the
stockholders. In the event of any vacancy in the board of directors, the
remaining directors then in office, except as otherwise provided by law, shall
have and may exercise all of the powers of the board of directors until the
vacancy is filled.
Section 11. COMMITTEES. The board of directors may elect from the board an
executive committee or one or more other committees and may delegate to any such
committee or committees any or all of the powers of the board except those which
by law, by the certificate of incorporation or by these bylaws may not be so
delegated. Such committees shall serve at the pleasure of the board of
directors. Except as the board of directors may otherwise determine, each such
committee may make rules for the conduct of its business, but, unless otherwise
determined by the board or in such rules, its business shall be conducted as
nearly as may be as is provided in these by-laws for the conduct of the business
of the board of directors.
Section 12. MEETING BY TELECOMMUNICATIONS. Members of the board of
directors or any committee elected thereby may participate in a meeting of such
board or committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in a meeting can hear each
other and participation by such means shall constitute presence in person at the
meeting.
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ARTICLE III
Officers
--------
Section 1. ENUMERATION. The officers of the corporation shall consist of a
president, a treasurer and a secretary and such other officers, including
without limitation a chairman of the board of directors and one or more vice
presidents, assistant treasurers and assistant secretaries, as the board of
directors may from time to time determine.
Section 2. QUALIFICATIONS. No officer need be a stockholder or a director.
The same person may hold at the same time one or more offices unless otherwise
provided by law. Any officer may be required by the board of directors to give a
bond for the faithful performance of his duties in such form and with such
sureties as the board may determine.
Section 3. ELECTIONS. The president, treasurer and secretary and the
chairman of the board of directors, if any, shall be elected annually by the
board of directors at its first meeting following the annual meeting of the
stockholders. All other officers shall be chosen or appointed by the board of
directors.
Section 4. TERM. Except as otherwise provided by law, by the certificate of
incorporation or by these by-laws, the president, treasurer and secretary and
the chairman of the board of directors, if any, shall hold office until the
first meeting of the board of directors following the next annual meeting of the
stockholders and until their respective successors are chosen and qualified. All
other officers shall hold office until the first meeting of the board of
directors following the next annual meeting of the stockholders, unless a
shorter time is specified in the vote choosing or appointing such officer or
officers.
Section 5. RESIGNATIONS. Any officer may resign by delivering his written
resignation to the corporation at its principal office or to the president or
secretary. Such resignation shall be effective at the time or upon the happening
of the condition, if any, specified therein or, if no such time or condition is
specified, upon its receipt.
Section 6. REMOVAL. Any officer may be removed from office with or without
cause by vote of a majority of the directors then in office.
Section 7. VACANCIES. Vacancies in any office may be filled by the board of
directors.
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Section 8. CERTAIN DUTIES AND POWERS. The officers designated below,
subject at all times to modification by and to the direction and control of the
board of directors, shall have and may exercise the respective duties and powers
set forth below:
THE CHAIRMAN OF THE BOARD OF DIRECTORS. The chairman of the board of
directors, if there be one, shall be the chief executive officer of the
corporation and shall, when present, preside at all meetings of the board
of directors.
THE PRESIDENT. The President shall be the chief operating officer of
the corporation, if there is then a chairman of the board of directors, and
otherwise the president shall be the chief executive officer of the
corporation and shall have general operating charge of its business. Unless
otherwise prescribed by the board of directors, he shall, when present,
preside at all meetings of the stockholders, and, if a director, at all
meetings of the board of directors unless there be a chairman of the board
of directors who is present at the meeting.
THE TREASURER. The Treasurer shall be the chief financial officer of
the corporation, unless otherwise specified by the board of directors, and
shall cause to be kept accurate books of account.
THE SECRETARY. The Secretary shall keep a record of all proceedings of
the stockholders and of all proceedings of the board of directors in a book
kept for that purpose. In the absence of the secretary from any meeting of
the stockholders or from any meeting of the board of directors, an
assistant secretary, if there be one, otherwise a secretary pro-tempore
designated by the person presiding at the meeting, shall perform the duties
of the secretary at such meeting.
Section 9. OTHER DUTIES AND POWERS. Each officer, subject at all times to
these by-laws and to the direction and control of the board of directors, shall
have and may exercise, in addition to the duties and powers specifically set
forth in these by-laws, such duties and powers as are prescribed by law, such
duties and powers as are commonly incident to his office and such duties and
powers as the board of directors may from time to time prescribe.
ARTICLE IV
Capital Stock
-------------
Section 1. AMOUNT AND ISSUANCE. The total number of shares and the par
value, if any, of each class of stock which the
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corporation is authorized to issue shall be stated in the certificate of
incorporation. The directors may at any time issue all or from time to time any
part of the unissued capital stock of the corporation from time to time
authorized under the certificate of incorporation and may determine, subject to
any requirements of law, the consideration for which stock is to be issued and
the manner of allocating such consideration between capital and surplus.
Section 2. CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates stating the number and the class and the designation
of the series, if any, of the shares held by him and otherwise in form approved
by the board of directors. Each such certificate shall be signed by the chairman
or vice-chairman of the board of directors or the president or vice-president,
and by the treasurer or an assistant treasurer or the secretary or an assistant
secretary. Any or all of the signatures on the certificate may be a facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
Every certificate issued for shares of stock at a time when such shares are
subject to any restriction on transfer pursuant to the certificate of
incorporation, these by-laws or any agreement to which the corporation is a
party shall have the restriction noted conspicuously on the certificate and
shall also set forth on the face or back of the certificate either (i) the full
text of the restriction or (ii) a statement of the existence of such restriction
and a statement that the corporation will furnish a copy thereof to the holder
of such certificate upon written request and without charge.
Every certificate issued for shares of stock at a time when the corporation
is authorized to issue more than one class or series of stock shall set forth on
the face or back of the certificate either (i) the full text of the preferences,
voting powers, qualifications and special and relative rights of the shares of
each class and series, if any, authorized to be issued, as set forth in the
certificate of incorporation or (ii) a statement of the existence of such
preferences, powers, qualifications and rights and a statement that the
corporation will furnish a copy thereof to the holder of such certificate upon
written request and without charge.
Section 3. TRANSFERS. The board of directors may make such rules and
regulations not inconsistent with the law, with the certificate of incorporation
or with these by-laws as it deems
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expedient relative to the issue, transfer and registration of stock
certificates. The board of directors may appoint a transfer agent and a
registrar of transfers or either and require all stock certificates to bear
their signatures. Except as otherwise provided by law, by the certificate of
incorporation or by these by-laws, the corporation shall be entitled to treat
the record holder of any shares of stock as shown on the books of the
corporation as the holder of such shares for all purposes, including the right
to receive notice of and to vote at any meeting of stockholders and the right to
receive any dividend or other distribution in respect of such shares.
Section 4. RECORD DATE. The board of directors may fix in advance a time as
the record date for determining the stockholders entitled to notice of and to
vote at any meeting of stockholders and any adjournment thereof, to express
consent to a stockholder action without a meeting, or to receive payment of any
dividend or distribution to stockholders or allotment of any rights in respect
of stock or for the purpose of any other lawful action; and in such case only
stockholders of record on such record date shall have such right,
notwithstanding any transfer of stock on the books of the corporation after the
record date. Such record date fixed by the board of directors shall be not more
than sixty (60) days or less than ten (10) days before the date of any meeting
of stockholders, not more than ten (10) days after the date of adoption of a
record date for a stockholder action by written consent, and not more than sixty
(60) days before any such other action. A determination of stockholders of
record entitled to notice of and to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the board of
directors may in its discretion fix a new record date for the adjourned meeting.
Section 5. LOST CERTIFICATES. The board of directors may, except as
otherwise provided by law, determine the conditions upon which a new certificate
of stock may be issued in place of any certificate alleged to have been lost,
mutilated or destroyed.
ARTICLE V
Miscellaneous Provisions
------------------------
Section 1. FISCAL YEAR. The fiscal year of the corporation shall end on the
Saturday nearest to January 31 in each year; except that for the year ending in
1991, the corporation shall have the option of using a January 26 or February 2
fiscal year end date.
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Section 2. CORPORATE SEAL. The seal of the corporation shall be in such
form as shall be determined from time to time by the board of directors.
Section 3. CORPORATION RECORDS. The original, or attested copies. of the
certificate of incorporation, by-laws and records of all meetings of the
incorporators and stockholders, and the stock and transfer records, which shall
contain the names of all stockholders and the record address and the amount of
stock held by each, shall be available at all reasonable times to inspection by
any stockholder for any proper purpose but not if the purpose for which such
inspection is sought is to secure a list of stockholders or other information
for the purpose of selling said list or information or copies thereof or of
using the same for a purpose other than the interest of the applicant, as a
stockholder, relative to the affairs of the corporation.
Section 4. VOTING OF SECURITIES. Except as the board of directors may
otherwise prescribe, the president or the treasurer shall have full power and
authority in the name and on behalf of the corporation, subject to the
instructions of the board of directors, to waive notice of, to attend, act and
vote at, and to appoint any person or persons to act as proxy or attorney in
fact for this corporation (with or without power of substitution) at any meeting
of stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
ARTICLE VI
Indemnification
---------------
Section 1. ACTIONS, SUITS AND PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF
THE CORPORATION. The corporation shall indemnify each person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, 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, or has agreed to become, a director or
officer of the corporation, or is or was serving, or has agreed to serve, at the
request of the corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he
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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 upon 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, had reasonable cause to believe that his conduct
was unlawful. Notwithstanding anything to the contrary in this Article, except
as set forth in Section 7 below, the corporation shall not indemnify an
Indemnitee seeking indemnification in connection with a proceeding (or part
thereof) initiated by the Indemnitee unless the initiation thereof was approved
by the Board of Directors of the corporation.
Section 2. ACTIONS OR SUITS BY OR IN THE RIGHT OF THE CORPORATION. The
corporation shall indemnify any Indemnitee 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, or has agreed to become, a director or
officer of the corporation, or is or was serving, or has agreed to serve, at the
request of the corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and amounts paid in settlement actually and
treasonably incurred by him or on his behalf in connection with such action,
suit or proceeding and any appeal therefrom, 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 of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware or such other court shall deem proper.
Section 3. INDEMNIFICATION FOR EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Article, to the extent that an
Indemnitee has been successful, on the merits or otherwise, in defense of any
action, suit or proceeding referred to in Sections 1 and 2 of this Article, or
in defense of any
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claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the corporation, (iii) a plea of
guilty or NOLO CONTENDERE by the Indemnitee, (iv) an adjudication that the
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
Section 4. NOTIFICATION AND DEFENSE OF CLAIM. As a condition precedent to
his right to be indemnified, the Indemnitee must notify the corporation in
writing as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the corporation is so
notified, the corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
corporation to the Indemnitee of its election so to assume such defense, the
corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the corporation, except
as otherwise expressly provided by this Article. The corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
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Section 5. ADVANCE OF EXPENSES. Subject to the provisions of Section 6
below, in the event that the corporation does not assume the defense pursuant to
Section 4 of this Article of any action, suit, proceeding or investigation of
which the corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the corporation in advance of the final disposition of such matter,
provided, however, that the payment of such expenses incurred by an Indemnitee
in advance of the final disposition of such matter shall be made only upon
receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts
so advanced in the event that it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified by the corporation as authorized in
this Article. Such undertaking may be accepted without reference to the
financial ability of such person to make such repayment.
Section 6. PROCEDURE FOR INDEMNIFICATION. In order to obtain
indemnification or advancement of expenses pursuant to Section 1, 2, 3 or 5 of
this Article, the Indemnitee shall submit to the corporation a written request,
including in such request such documentation and information as is reasonably
available to the Indemnitee and is reasonably necessary to determine whether and
to what extent the Indemnitee is entitled to indemnification or advancement of
expenses. Any such indemnification or advancement of expenses shall be made
promptly, and in any event within 60 days after receipt by the corporation of
the written request of the Indemnitee, unless with respect to requests under
Section 1, 2, or 5 the corporation determines within such 60-day period that the
Indemnitee did not meet the applicable standard of conduct set forth in Section
1 or 2, as the case may be. Such determination shall be made in each instance by
(a) a majority vote of a quorum of the directors of the corporation consisting
of persons who are not at that time parties to the action, suit or proceeding in
question ("disinterested directors"), (b) if no such quorum is obtainable, a
majority vote of a committee of two or more disinterested directors, (c) a
majority vote of a quorum of the outstanding shares of stock of all classes
entitled to vote for directors, voting as a single class, which quorum shall
consist of stockholders who are not at that time parties to the action, suit or
proceeding in question, (d) independent legal action (who may be regular legal
counsel to the corporation), or (e) a court of competent jurisdiction.
Section 7. REMEDIES. The right to indemnification or advances as granted by
this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise required by law, the burden
15
<PAGE> 16
of proving that the Indemnitee is not entitled to indemnification or advancement
of expenses under this Article shall be on the corporation. Neither the failure
of the corporation to have made a determination prior to the commencement of
such action that indemnification is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct, nor an actual
determination by the corporation pursuant to Section 6 that the Indemnitee has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the Indemnitee has not met the applicable standard of
conduct. The Indemnitee's expenses (including attorneys' fees) incurred in
connection with successfully establishing his right to indemnification, in
whole or in part, in any such proceeding shall also be indemnified by the
corporation.
Section 8. SUBSEQUENT AMENDMENT. No amendment, termination or repeal of
this Article or of the relevant provisions of the General corporation Law of
Delaware or any other applicable laws shall affect or diminish in any way the
rights of any Indemnitee to indemnification under the provisions hereof with
respect to any action, suit, proceeding or investigation arising out of or
relating to any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
Section 9. OTHER RIGHTS. The indemnification and advancement of expenses
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
Article shall be deemed to prohibit, and the corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
Article. In addition, the corporation may, to the extent authorized from time to
time by its Board of Directors, grant indemnification rights to other employees
or agents of the corporation or other persons serving the corporation and such
rights may be equivalent to, or greater or less than, those set forth in this
Article.
Section 10. PARTIAL INDEMNIFICATION. If an Indemnitee is entitled under any
provision of this Article to indemnification by the corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and
16
<PAGE> 17
any appeal therefrom but not, however, for the total amount thereof, the
corporation shall nevertheless indemnify the Indemnitee for the portion of such
expenses (including attorneys' fees), judgments, fines or amounts paid in
settlement to which the Indemnitee is entitled.
Section 11. INSURANCE. The corporation may purchase and maintain insurance,
at its expense, to protect itself and any director, officer, employee or agent
of the corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss 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
such person against such expense, liability or loss under the General
corporation Law of Delaware.
Section 12. MERGER OR CONSOLIDATION. If the corporation is merged into or
consolidated with another corporation and the corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
Section 13. SAVINGS CLAUSE. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
Section 14. DEFINITIONS. Terms used herein and defined in Section 145(h)
and Section 145(i) of the General corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
Section 15. SUBSEQUENT LEGISLATION. If the General Corporation Law of
Delaware is amended after adoption of this Article to expand further the
indemnification permitted to Indemnitees, then the corporation shall indemnify
such persons to the fullest extent permitted by the General Corporation Law of
Delaware, as so amended.
17
<PAGE> 18
ARTICLE VII
Amendments
----------
These by-laws may be amended or repealed at any annual or special meeting
of the stockholders by the affirmative vote of a majority of the shares of
capital stock then issued, outstanding and entitled to vote provided notice of
the Proposed amendment or repeal is given in the notice of the meeting. No
change in the date fixed in these by-laws for the annual meeting of the
stockholders shall be made within sixty (60) days before such date, and notice
of any change in such date shall be given to all stockholders at least twenty
(20) days before the new date fixed for such meeting.
If authorized by the certificate of incorporation, these by-laws may also
be amended or repealed in whole or in part, or new by-laws made, by the board of
directors except with respect to any provision hereof which by law, the
certificate of incorporation of these by-laws requires action by the
stockholders.
Notwithstanding the foregoing, the affirmative vote of the holders of
shares of stock representing at least sixty-seven percent of the outstanding
shares of stock of the corporation entitled to vote with respect to the annual
election of directors shall be required to amend or repeal, or to adopt any
provision inconsistent with, the provisions of Article II relating to the
classification of the Board of Directors into three classes.
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF STAPLES, INC. FOR THE THREE MONTHS ENDED MAY 3, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-03-1997
<CASH> 166,795
<SECURITIES> 4,863
<RECEIVABLES> 177,961
<ALLOWANCES> 4,029
<INVENTORY> 828,450
<CURRENT-ASSETS> 1,235,082
<PP&E> 648,503
<DEPRECIATION> 188,074
<TOTAL-ASSETS> 1,889,310
<CURRENT-LIABILITIES> 627,662
<BONDS> 456,576
0
0
<COMMON> 99
<OTHER-SE> 770,678
<TOTAL-LIABILITY-AND-EQUITY> 1,889,310
<SALES> 1,154,994
<TOTAL-REVENUES> 1,154,994
<CGS> 886,239
<TOTAL-COSTS> 1,071,033
<OTHER-EXPENSES> 65,961
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,219
<INCOME-PRETAX> 13,781
<INCOME-TAX> 5,375
<INCOME-CONTINUING> 8,406
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,406
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
