<PAGE> 1
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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934
For the quarterly period ended December 31, 1996, or
___ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ________ to ________
Commission File Number 0-16588
OCTEL COMMUNICATIONS CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 77-0029449
------------------------------------- ---------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
</TABLE>
1001 MURPHY RANCH ROAD
MILPITAS, CALIFORNIA 95035-7912
(Address of principal executive offices)
Registrant's telephone number, including area code, is (408) 321-2000
____________________
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 number of shares outstanding of the registrant's Common Stock on
January 31, 1997 was 51,850,753.
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This document consists of 20 pages of which this is Page 1.
<PAGE> 2
OCTEL COMMUNICATIONS CORPORATION
INDEX
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance
Sheets - December 31, 1996 and
June 30, 1996.......................................................... 3
Condensed Consolidated Statements
of Operations - three and six months ended
December 31, 1996 and 1995............................................ 4
Condensed Consolidated Statements
of Cash Flows - six months ended
December 31, 1996 and 1995........................................... 5
Notes to Condensed Consolidated
Financial Statements ................................................ 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations .......................................................... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................... 17
Item 4. Matters Submitted to Vote of Security Holders.......................... 18
Item 6. Exhibits and Reports on Form 8-K ...................................... 19
SIGNATURES ............................................................................... 20
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OCTEL COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA - UNAUDITED)
<TABLE>
<CAPTION>
Dec. 31, June 30,
1996 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 46,325 $ 24,492
Short-term investments 27,343 51,257
Accounts receivable net of allowance for doubtful accounts
of $4,290 at Dec. 31, 1996 and $3,750 at June 30, 1996 161,797 166,918
Inventories, net 43,221 40,411
Prepaid expenses and other 20,591 18,639
------- --------
Total current assets 299,277 301,717
Property, plant and equipment, net of accumulated
depreciation and amortization of $104,455 at
Dec. 31, 1996 and $89,864 at June 30, 1996 143,112 136,916
Deposits and other assets 34,042 30,585
--------- --------
Total $476,431 $469,218
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade payables $ 17,621 $ 18,399
Accrued compensation and employee benefits 28,389 34,801
Income taxes payable 3,110 9,755
Accrued and other liabilities 41,955 40,897
-------- --------
Total current liabilities 91,075 103,852
Long-term obligations 331 374
Stockholders' equity:
Preferred stock, $.001 par value - authorized,
5.0 million shares; none outstanding -- --
Common stock, $.001 par value - Dec. 31, 1996 - authorized,
200.0 million shares; outstanding, 51.7 million shares,
June 30, 1996 - authorized, 100.0 million shares;
outstanding, 51.4 million shares 252,012 232,250
Notes receivable from employees (8,903) (4,152)
Retained earnings 142,048 138,239
Other (132) (1,345)
-------- --------
Total stockholders' equity 385,025 364,992
-------- --------
Total $476,431 $469,218
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
-3-
<PAGE> 4
OCTEL COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS - UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- --------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET REVENUES:
Systems $106,039 $ 93,697 $197,333 $165,656
Services and licenses 52,721 43,000 100,662 84,771
-------- -------- --------- --------
Total net revenues 158,760 136,697 297,995 250,427
COSTS AND EXPENSES:
Cost of systems 36,627 28,726 64,352 50,485
Cost of services and licenses 32,498 27,727 62,525 53,314
Research and development 23,052 19,747 44,966 37,313
Selling, general and administrative 51,142 42,578 95,530 81,756
-------- -------- --------- --------
Total costs and expenses 143,319 118,778 267,373 222,868
-------- -------- --------- --------
Operating income 15,441 17,919 30,622 27,559
Interest and other income, net 994 423 2,005 1,072
-------- -------- --------- --------
Income before income taxes 16,435 18,342 32,627 28,631
Provision for income taxes 5,800 6,600 11,500 10,300
-------- -------- --------- --------
NET INCOME $ 10,635 $ 11,742 $ 21,127 $ 18,331
======== ======== ========= ========
NET INCOME PER COMMON
AND EQUIVALENT SHARE $ 0.20 $ 0.22 $ 0.38 $ 0.35
======== ======== ========= ========
Weighted average number of
common shares and equivalents
used in computation 54,178 52,308 55,232 52,750
======== ======== ======== =======
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 5
OCTEL COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS - UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
-----------------------
Dec. 31, Dec. 31,
1996 1995
-------- -------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $21,127 $18,331
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 16,807 18,025
Amortization of (discount)/premium
on marketable securities (128) 123
Deferred income taxes (2,625) (99)
Changes in working capital:
Accounts receivable 6,439 (10,095)
Inventories (5,957) (11,529)
Prepaid expenses and other (1,225) (879)
Trade payables (1,039) 2,730
Accrued compensation and employee benefits (6,110) 721
Accrued and other liabilities 1,717 (364)
------- -------
Net cash provided by operating activities 29,006 16,964
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of common stock, net 13,821 13,362
Repurchases of common stock (23,773) (8,903)
Proceeds from payment of employees' notes receivable 243 50
Proceeds from sale of financial instruments - put warrants 1,610 571
Repayments of long-term obligations (155) (180)
------- -------
Net cash provided by/(used for) financing activities (8,254) 4,900
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (209,052) (18,460)
Sales and maturities of short-term investments 233,152 17,598
Property, plant and equipment additions (23,810) (18,957)
Changes in deposits and other assets 329 (4,997)
------- -------
Net cash provided by/(used for) investing activities 619 (24,816)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 462 (143)
------- -------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 21,833 (3,095)
------- -------
CASH AND CASH EQUIVALENTS:
Beginning of period 24,492 24,521
------- -------
End of period $46,325 $21,426
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 6
OCTEL COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DECEMBER 31, 1996 AND 1995 - UNAUDITED)
1. The condensed consolidated financial statements include the Company
and its wholly owned subsidiaries. Intercompany balances and
transactions are eliminated in consolidation. The preparation of
financial statements in conformity with United States' generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting
of normal recurring adjustments) necessary to present fairly the
financial position of the Company as of December 31, 1996, the results
of operations for the three and six months ended December 31, 1996 and
1995 and cash flows for the six months ended December 31, 1996 and
1995.
The financial statements and notes are presented as permitted by Form
10-Q and do not contain certain information included in the Company's
annual consolidated financial statements and related notes.
2. Short-term investments
At December 31, 1996 and June 30, 1996, all cash equivalents and
short-term investments were classified as "available-for-sale" and
consisted of the following (in thousands):
<TABLE>
<CAPTION>
Unrealized Unrealized Accrued Estimated
Cost Gains Losses Interest Fair Value
--------- ----------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
At December 31, 1996:
U.S. Government
securities $ 6,512 $ -- $(142) $ (65) $ 6,305
Municipal notes/bonds 26,757 83 (55) (295) 26,490
------- --- ----- ----- -------
$33,269 $83 $(197) $(360) $32,795
======= === ===== ===== =======
At June 30, 1996:
U.S. Government
securities $ 8,470 $ 3 $(194) $ (87) $ 8,192
Municipal notes/bonds 47,236 38 (20) (352) 46,902
------- --- ----- ----- -------
$55,706 $41 $(214) $(439) $55,094
======= === ===== ===== =======
</TABLE>
These securities were classified on the balance sheet as follows (in
thousands):
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1996
------------------ -------------
<S> <C> <C>
Cash equivalents $ 5,812 $ 4,276
Short-term investments 27,343 51,257
------- -------
$33,155 $55,533
======= =======
</TABLE>
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<PAGE> 7
OCTEL COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DECEMBER 31, 1996 AND 1995 - UNAUDITED)
The cost and estimated fair value of available-for-sale debt
securities by contractual maturity, consisted of the following (in
thousands):
<TABLE>
<CAPTION>
December 31, 1996
--------------------------
Estimated
Cost Fair Value
---------- ----------
<S> <C> <C>
Due in less than one year $12,094 $12,031
Due in one to five years 12,248 12,114
Due in five to ten years 926 931
Due thereafter 8,001 7,719
------- -------
$33,269 $32,795
======= =======
</TABLE>
For the three and six months ended December 31, 1996, the Company had
$58.6 million and $235.1 million in proceeds from sales of
available-for-sale investments, respectively. Gross realized gains
and gross realized losses on those sales were not material. For the
three and six months ended December 31, 1995, the Company had $40.6
million and $95.8 million in proceeds from sales of available-
for-sale investments, respectively. Gross realized gains and gross
realized losses on those sales were not material.
3. Inventories, net of reserves, consist of (in thousands):
<TABLE>
<CAPTION>
Dec. 31, June 30,
1996 1996
-------- --------
<S> <C> <C>
Finished goods $ 7,569 $ 7,236
Work-in-process 9,728 11,218
Raw materials 25,924 21,957
------- --------
Total $43,221 $ 40,411
======= ========
</TABLE>
4. Net income per common and equivalent share is computed using the
weighted average number of common and dilutive common equivalent
shares from stock options (using the treasury stock method) and shares
subscribed under the Employee Stock Purchase Plan.
5. Line of credit and letters of credit
Effective June 1996, the Company obtained a $30.0 million bank
revolving line of credit which also allows the Company to obtain
stand- by letters of credit. Borrowings under the line are unsecured
and bear interest at either an adjusted London interbank offering rate
("LIBOR") plus one and one-quarter percent or the greater of the
Bank's base rate or the Federal Funds Effective Rate plus one-half of
one percent, at the Company's discretion upon borrowing the funds.
Borrowings under the line are subject to certain financial covenants
and restrictions on indebtedness, equity distributions, financial
guarantees, business combinations and other related items. The
Company was in compliance with these covenants and had no borrowings
under this line as of December 31, 1996. The line expires in June
1998.
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<PAGE> 8
OCTEL COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DECEMBER 31, 1996 AND 1995 - UNAUDITED)
At December 31, 1996, the Company had $4.9 million of stand-by letters
of credit outstanding. The letters of credit are primarily to
guarantee payments for inventory purchases and facility lease
payments. The majority of the letters of credit are denominated in
Pound Sterling, Japanese Yen, French Francs and U.S. Dollars and
expire on various dates through December 25, 1999.
6. Lease commitment
On July 6, 1995, the Company entered into a one-year operating lease
for a parcel of undeveloped land adjacent to its current campus on
which additional offices may be constructed over the next three years.
This lease provides for monthly payments which vary based on the LIBOR
and requires the Company to maintain certain financial covenants
similar to its credit facilities. In addition, this lease provides
the Company with the option at the end of the lease term of either
renewing the lease, acquiring the property at its original cost or
arranging for the property to be acquired. The Company is
contingently liable to the lessor under a 97% first-loss clause for up
to $9.9 million. In June 1996, the lease was extended for another
one-year period.
7. Interest and other income, net consists of the following (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ -----------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1996 1995
------- -------- ------- --------
<S> <C> <C> <C> <C>
Interest and investment income $789 $551 $1,660 $1,269
Loss on sale of short-term
investments, net 9 (3) 9 (7)
Foreign exchange gains (losses), net 470 (131) 491 (175)
Other income (expense), net (274) 6 (155) (15)
---- ---- ------- -------
Total $994 $423 $2,005 $1,072
==== ==== ====== ======
</TABLE>
-8-
<PAGE> 9
OCTEL COMMUNICATIONS CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NET REVENUES
The Company derives revenues from the sale of voice messaging systems,
performance of services and generation of license fees from its two strategic
business units: Global Business Solutions ("GBS") and Voice Information
Services ("VIS"). GBS consists of system sales, services and maintenance
contract sales to corporations and institutions, including universities and
governments. VIS consists of system sales, services and maintenance contract
sales to telecommunications service providers such as telephone companies and
wireless providers. Certain services are provided to the GBS and VIS markets
by the Company's Octel Network Services ("ONS") and OcteLink operations. The
services provided by ONS include a range of voice processing and network
management services.
Revenue by business unit was as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Increase/
1996 1995 Increase 1996 1995 (decrease)
---- ------ --------- ------- ------- ---------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Global Business Solutions
- -------------------------
Systems and services $69.6 $69.3 --% $132.7 $129.6 2%
ONS/OcteLink 10.7 10.5 2% 20.0 20.9 (4%)
----- ----- ----- ------
Total GBS revenues $80.3 $79.8 --% $152.7 $150.5 1%
===== ===== ====== ======
Voice Information Services
- --------------------------
Systems and services $67.1 $50.1 34% $123.9 $ 86.5 43%
ONS/OcteLink 11.3 6.8 66% 21.4 13.4 60%
----- ----- ------ ------
Total VIS revenues $78.4 $56.9 38% $145.3 $ 99.9 45%
===== ===== ====== ======
</TABLE>
GBS and VIS systems revenues consist of software, hardware, and
upgrades and expansions to existing systems. Services revenues, as presented
below, include ONS as well as service contracts, applications development,
spares sales and hardware repair and maintenance.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
Dec. 31, Dec. 31, Increase/ Dec. 31, Dec. 31,
1996 1995 (decrease) 1996 1995 Increase
-------- --------- ---------- ------- ------- --------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Systems $106.0 $ 93.7 13% $197.3 $165.6 19%
Services and licenses 52.7 43.0 23% 100.7 84.8 19%
------ ------ ------ ------
Total net revenues $158.7 $136.7 16% $298.0 $250.4 19%
====== ====== ====== ======
Percentage of Total Net Revenues
- --------------------------------
Systems 67% 69% (2%) 66% 66% --
Services and licenses 33% 31% 2% 34% 34% --
</TABLE>
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<PAGE> 10
OCTEL COMMUNICATIONS CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Systems
The increase in systems revenues for the second quarter of fiscal 1997 was due
primarily to a 35% increase in the VIS market. The majority of the VIS
increase (63%) occurred in Europe followed by increases in the United States
and Latin America which was slightly offset by a decrease in Canada VIS sales
compared to the second quarter of fiscal 1996. The increase in VIS revenues
was partially offset by flat GBS revenues which was primarily attributable to
revenue decreases in Canada and the United States, offset by an increase in
Europe. Despite an overall increase in the number of new systems sold, the
average selling price decreased from the second quarter of fiscal 1996
primarily as a result of a shift in channel mix toward sales through
distributors, which carry lower average selling prices. Included in GBS
revenue was a 13% decrease in sales by the Company's PC product line, which was
partially offset by a 20% increase in sales by the Company's Rhetorex
subsidiary.
The increase in systems revenues for the first six months of fiscal 1997 was
due primarily to higher VIS revenues, the most significant of which were in
Europe and The Philippines. These increases were partially offset by a
decrease in VIS sales in Canada. GBS systems revenues had a small increase for
the first six months of fiscal 1997 compared to the same period in fiscal 1996.
An increase in Europe was significantly offset by decreases in both the United
States and Canada. Both the volume and average selling price of new system
sales decreased on a year to date basis, with average selling price being
affected by the shift in channel mix toward distributors discussed above.
Revenue related to the Company's Rhetorex subsidiary, which is included in GBS
revenues, increased 22% from the first six months of fiscal 1996 to the first
six months of fiscal 1997, whereas sales of the Company's PC product line
decreased 4% over these periods.
Services and licenses
The increases in services revenues for both the second quarter and first six
months of fiscal 1997 compared to the same periods of fiscal 1996 were due
primarily to an increase in ONS revenues of 27% and 20%, respectively. ONS
revenues for the quarter benefited from a favorable price structure with a
major customer as well as an increase in voice mailboxes. Such benefits from
favorable pricing structures may or may not continue in future quarters.
Revenues resulting from services provided to the Company's larger installed
base (through installation and maintenance contracts) also increased for both
the second quarter and first six months of fiscal 1997 compared to the same
periods of fiscal 1996.
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<PAGE> 11
OCTEL COMMUNICATIONS CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
COST OF SALES
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
Dec. 31, Dec. 31, Increase/ Dec. 31, Dec. 31, Increase/
1996 1995 (decrease) 1996 1995 (decrease)
---- ---- ---------- ---- -------- ---------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Cost of systems $36.6 $28.7 28% $ 64.4 $ 50.5 27%
Cost of services
and licenses 32.5 27.7 17% 62.5 53.3 17%
----- ----- ------ -----
Total cost of sales $69.1 $56.4 22% $126.9 $103.8 22%
===== ===== ====== ======
Percentage of Net Revenues
- --------------------------
Cost of systems 35% 31% 4% 33% 30% 3%
Cost of services
and licenses 62% 64% (2%) 62% 63% (1%)
Total cost of sales 43% 41% 2% 43% 41% 2%
</TABLE>
Systems
The increase in cost of systems as a percentage of systems revenues
for both the second quarter and first six months of fiscal 1997 was due
primarily to a product mix shift in the VIS business from software upgrades to
equipment contracts, which carry lower margins. A shift in GBS distribution
channels to distributors also contributed to the increase in cost of systems as
a percentage of systems revenues, because distributor sales generally carry a
lower average selling price. In addition, adjustments made during the quarter
to write-off consigned inventory due to a change in vendors, a retrofit program
for defective disk drives and an inventory adjustment related to the Company's
Japan subsidiary negatively affected cost of systems as a percentage of systems
revenues by approximately 1%.
Services and licenses
The decrease in cost of services and licenses as a percentage of
services and licenses revenues for both the second quarter and first six months
of fiscal 1997 was due primarily to the favorable pricing structure with a
major customer (discussed above). The decreases for the second quarter and
first six months of fiscal 1997 were partially offset by an overall increase in
the cost of services provided by the Company's customer service organization
for maintenance, installation, etc.
On a quarter-to-quarter basis, the channel, geographic and product mix
of sales can fluctuate significantly. Such fluctuations can have a positive or
negative impact on operating margins and are difficult to predict.
-11-
<PAGE> 12
OCTEL COMMUNICATIONS CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
RESEARCH AND DEVELOPMENT
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
Dec. 31, Dec. 31, Increase/ Dec. 31, Dec. 31, Increase/
1996 1995 (decrease) 1996 1995 (decrease)
------- ------ ---------- ------ ------- ----------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Expenses $ 23.1 $19.7 17% $ 45.0 $ 37.3 21%
Percentage of revenues 15% 14% 1% 15% 15% --
</TABLE>
The increase in absolute dollars spent on research and development for
both the second quarter and first six months of fiscal 1997 was due primarily
to costs associated with increased development associated with Unified
Messaging, Intelligent Messaging Architecture ("IMA") and OcteLink, as well as
research activities for additional future products and services. This increase
was partially offset by a decrease in profit sharing and bonus expense during
the quarter and year-to-date. The Company believes that additional research
and development expenses will be required to maintain market position and
expects that expenses will increase in absolute terms and could increase as a
percentage of total net revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
Dec. 31, Dec. 31, Increase/ Dec. 31, Dec. 31, Increase/
1996 1995 (decrease) 1996 1995 (decrease)
------ ------ ---------- ------ -------- ----------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Expenses $ 51.1 $ 42.6 20% $ 95.5 $ 81.8 17%
Percentage of revenues 32% 31% 1% 32% 33% (1%)
</TABLE>
The increase for both the second quarter and first six months of
fiscal 1997 in selling, general and administrative expenses in absolute dollars
resulted primarily from increased headcount and costs associated with a new
marketing program effective for fiscal 1997. In addition, for the second
quarter of fiscal 1997, the Company had increased bad debt expense of
approximately $1.2 million which was recorded to mitigate the inherent risk
associated with expanding internationally. Higher consulting and travel
expenses also contributed to the increase during the first six months of fiscal
1997. These increases were partially offset by a reduction in profit sharing
and bonus expense in both the second quarter and first six months of fiscal
1997 combined with lower legal costs related to the Gilbarco litigation.
The Company believes that additional selling, general and administrative
expenses will be required to maintain its competitive position, including the
expansion of international sales activities, and expects that these expenses
will increase in absolute terms and could increase as a percentage of net
revenues. Additionally, the Company is currently involved in legal matters that
may cause an increase in legal expenses in the future.
-12-
<PAGE> 13
OCTEL COMMUNICATIONS CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
INTEREST AND OTHER INCOME, NET
Interest and other income, net for the second quarter and first six
months of fiscal 1997 increased $0.6 million and $0.9 million, respectively,
from the same periods of fiscal 1996. Net foreign exchanges gains were
recognized during the second quarter and first six months of fiscal 1997
compared to net foreign exchange losses in the same periods in fiscal 1996.
The gains for the second quarter and first six months of fiscal 1997 were due
primarily to the favorable rate change of the Pound Sterling during November
1996. Interest and investment income for the second quarter and first six
months of fiscal 1997 also increased as compared to the same periods in fiscal
1996. The increases resulted primarily from higher average cash and investment
balances in fiscal 1997 compared to fiscal 1996. Average investment yields
were also slightly higher for the second quarter of fiscal 1997 compared to
fiscal 1996. However, investment yields were slightly lower for the first six
months of fiscal 1997 compared to the same period of fiscal 1996.
INCOME TAXES
The Company's effective tax rate was 35.3 percent in the second
quarter and 35.2 percent in the first six months of fiscal 1997, as compared to
36.0 percent in the corresponding periods of fiscal 1996. The effective rate
was lower in fiscal 1997 due to the extension of the U.S. federal research and
development credit.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
Various paragraphs of this Item 2 (Management's Discussion and
Analysis of Financial Condition and Results of Operations) contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended including, but not limited to, statements regarding future
sales, revenues from the services and licenses business, possible legal
expenses, international expansion, fluctuations in the cost of systems, ability
to collect accounts receivable in a timely fashion, effect of investments in
property, plant and equipment, future tax rates, research and development
expenses and selling, general and administrative expenses. Actual results
could differ materially from those projected in the forward-looking statements
as a result of the factors set forth below and elsewhere in this document.
The Company believes that in the future its results of operations
could be affected by various factors including, but not limited to, market
acceptance of new products and upgrades, growth in the worldwide voice
processing market, competition, expansion of services by its VIS customers, the
outcome of litigation and changes in general economic conditions in any of the
countries in which the Company does business.
The Company believes that the successful introduction of new and
enhanced products and services will be essential for it to maintain or improve
its competitive position. In October 1996, the Company announced the delay of
a software release for its Sierra platform. The release, which is an upgrade
for existing customers, was originally expected to begin shipping late in the
first
-13-
<PAGE> 14
OCTEL COMMUNICATIONS CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
quarter of fiscal 1997 but has been delayed until the latter portion of fiscal
1997. As of January 17, 1997, the Company met a major milestone by shipping
the software product to one of its customers for evaluation. However, the
timeframe for acceptance by customers may negatively affect revenues in fiscal
1997 and the Company's quarterly trend of results of operations may be
negatively affected throughout the remainder of fiscal 1997. While the Company
believes that this delay will not put contracts or customer relationships at
risk, and that this delay is merely a timing issue, there can be no assurance
that further delays will not occur, that customer relationships will not be
damaged or that expected revenues related to this upgrade will not be
permanently lost.
In July 1995, the Company introduced OcteLink - a global "messaging
post office" that could eventually allow the interconnection of virtually any
voice messaging system with networking capability, regardless of protocol,
system size or geographic location. OcteLink revenues may be derived from
either the sale of hardware to service providers or from OcteLink directly
providing services to a customer. Revenues from OcteLink commenced during the
second quarter of fiscal 1996 but have not been material to date. The Company
has incurred additional research and development and selling, general and
administrative expenditures to launch OcteLink and expects to incur additional
costs in future quarters. Although the Company believes OcteLink is a viable
global messaging network, there is currently no reliable data regarding the
demand for such services. Furthermore, demand for a global messaging network
may be slow to materialize, may not materialize or competitors may successfully
introduce alternative solutions to OcteLink that achieve better market
acceptance.
The Company is currently engaged in various new projects and product
development which are necessary to help maintain market share and Octel's
leadership position in the industry. Two of the more significant projects are
"unified messaging" products for voice, fax and electronic mail messaging and
the Company's next-generation client/server architecture for its Sierra
platform, IMA. Unified messaging essentially unites voice, fax and e-mail
together in a client/server architecture that uses standard PC and LAN
technology. This integration brings together several discrete technologies
into a single mailbox that provides user access from a telephone or a PC. In
May 1995, Octel announced the first component of its unified messaging
technology that will be available on Microsoft Exchange, a LAN-based,
enterprise-wide messaging architecture. Current expectations are for revenue
to commence in the latter half of fiscal 1997 but are not expected to be
material for fiscal 1997. IMA was originally scheduled for first-phase release
during the end of fiscal 1996; however, shipment of this product has been
delayed in order to allow for incorporating newly available third-party
technologies, the completion of product development and the release of a more
feature-rich product. The successful introduction of these and other new
products is dependent on a number of factors, some of which are beyond the
Company's control, including product acceptance in the marketplace,
introduction of competitive products by existing or new competitors, changes in
technology, price competition and other factors. Any delay in introducing new
products or failure of such products to achieve substantial market share could
significantly reduce future expected revenues or result in the need for
additional expenses to bring the product to market. Furthermore, there can be
no assurance that the Company will be successful in completing and introducing
new products or that such products will generate significant revenues or
profits.
During the latter half of fiscal 1995, the Company adopted a new,
capacity-based pricing approach for its largest GBS system, the XC- 1000. This
pricing approach was also adopted for
-14-
<PAGE> 15
OCTEL COMMUNICATIONS CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Overture and Sierra system sales during fiscal 1996. This approach allows
customers to purchase systems with only part of the equipment's capacity
enabled and then have additional capacity enabled in the future upon payment of
additional fees. The Company adopted contract accounting during fiscal 1996
(based upon percentage-of-completion) to recognize revenue in connection with
capacity on demand transactions when firm commitments to purchase additional
capacity exist. Under this method, revenues are recognized as a function of the
capacity provided to the customer and costs are recognized proportionally to
revenue recognized. Consequently, certain costs are deferred in the Balance
Sheet under the caption "Deposits and other assets." While the Company believes
that capacity-based pricing will make it more competitive, difficulties in
implementing this approach, delays or adverse results due to renegotiation of
sales and distribution agreements to accommodate capacity-based pricing or the
failure to generate additional sales could have an adverse effect on the
Company's results of operations.
Due to the factors noted above and elsewhere in management's
discussion and analysis of financial condition and results of operations, the
Company's future earnings and Common Stock price may be subject to significant
volatility, particularly on a quarterly basis. Past financial performance
should not be considered a reliable indicator of future performance and
investors should not use historical trends to anticipate results or trends in
future periods. Any shortfall in revenue or earnings from the levels
anticipated by securities analysts could have an immediate and significant
adverse effect on the trading price of the Company's Common Stock in any given
period. Additionally, the Company may not learn of such shortfalls until late
in a fiscal quarter, which could result in an even more immediate and adverse
effect on the trading price of the Company's Common Stock. Finally, the
Company participates in a highly dynamic industry which often results in
volatility of the Company's Common Stock price.
The Company has been and may in the future continue to be required to
litigate enforcement of its intellectual property or commercial rights or to
defend itself in litigation arising out of claims by third parties. Such
litigation, even if the Company is ultimately victorious, can be extremely
expensive and may have a material adverse effect on the Company's results of
operations in any particular period. Litigation may also occupy management
resources that would otherwise be available to address other aspects of the
Company's business.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents and short-term investments in
the first six months of fiscal 1997 decreased $2.1 million from June 30, 1996.
Cash flows from operations resulted in a net source of cash of $29.0 million in
the first six months of fiscal 1997 compared to $17.0 million in the first six
months of fiscal 1996. The increase from the prior year was due primarily to
the collection of accounts receivable and reduction of inventory.
The primary sources of cash during the first six months of fiscal 1997
resulted from net income of $21.1 million, which included $16.8 million of
non-cash expenses for depreciation and amortization, proceeds from the sale of
short-term investments of $24.1 million, net of purchases, and cash provided by
the sale of common stock, resulting primarily from the exercise of stock
options, of $13.8 million. The primary uses of cash during the first six
months of fiscal 1997 were investment in property, plant and equipment of $23.8
million and the repurchase of common stock
-15-
<PAGE> 16
OCTEL COMMUNICATIONS CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
for $22.2 million, net of put warrant proceeds of $1.6 million. The Company
expects to purchase additional equipment and make certain leasehold
improvements during the remainder of fiscal 1997. The Company anticipates that
its property, plant and equipment investments will eventually result in greater
efficiencies and increased flexibility for the Company.
Effective July 6, 1995, the Company entered into a one-year operating
lease agreement to lease undeveloped land on which additional offices may be
constructed adjacent to the existing corporate offices over the next three years
under a similar leasing arrangement. In June 1996, the operating lease was
extended for another one-year period. Under the terms of the operating lease,
the Company is contingently liable under a 97% first-loss clause for up to $9.9
million. Cash payments under the operating lease were not significant during
the first six months of fiscal 1997.
In July 1994, the Company's Board of Directors approved the repurchase
of up to 3.5 million shares of its Common Stock over a period of approximately
two years. In June 1996, the Company's Board of Directors approved the
repurchase of an additional 3.5 million shares of its Common Stock over an
additional two-year period. In October 1996, the Company repurchased an
additional 1.5 million shares at an average per share price of $14.78, net of
the impact of sales of put warrants. As of December 31, 1996, the Company had
repurchased approximately 4.7 million shares of its Common Stock at an average
per share price of $12, net of the impact of sales of put warrants. The Company
expects to continue to repurchase its Common Stock under this program if
warranted by market conditions.
The Company anticipates that cash flows from operations, its existing
cash and cash equivalents balance, its short-term investment balance and its
existing $30 million bank revolving line of credit will be adequate to meet the
Company's cash requirements through the end of fiscal 1997.
NEW ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 will be
effective for fiscal years beginning after December 15, 1995, and will require
that the Company either recognize in its consolidated financial statements costs
related to its employee stock-based compensation plans, such as stock option and
stock purchase plans, or make pro forma disclosures of such costs in a footnote
to the consolidated financial statements.
The Company will continue to use the intrinsic value based method of
Accounting Principles Board Opinion No. 25, as allowed under SFAS No. 123, to
account for all of its employee stock-based compensation plans. Therefore, in
its annual consolidated financial statements for fiscal 1997, the Company will
make the required pro forma disclosures in a footnote to the consolidated
financial statements. SFAS No. 123 is not expected to have a material effect on
the Company's consolidated results of operations or financial position.
-16-
<PAGE> 17
OCTEL COMMUNICATIONS CORPORATION
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Theis Research, Inc.
In April 1992, the Company filed suit, in the United States District
Court in Northern California, against Theis Research, Inc. ("Theis") for a
declaratory judgment that the Company's products do not infringe three patents
of Theis and that those patents are invalid. In November 1992, Theis filed a
counterclaim against the Company alleging infringement of seven of Theis'
patents. Subsequently, Theis dismissed with prejudice the claims as to all but
four of the patents, and its claims as to one of the remaining four patents
were dismissed on summary judgment. During the first quarter of fiscal 1995,
the Company engaged in a jury trial regarding infringement of the three
remaining patents and the defense of patent invalidity. In October 1994, the
jury returned a verdict finding, among other things, that Octel was correct in
its claim that the three patents at issue were invalid. In August 1995, the
Court issued its decision holding that the patents are unenforceable. The
Court entered final judgment in the case in January 1996, declaring Octel a
"prevailing party" entitled to recover its substantial costs in connection with
the lawsuit. In November 1996, the Court overturned the jury's verdict that
Octel infringed one of the patents held invalid by the jury and that a fourth
patent, that the Court had found Octel not to have infringed, was also invalid.
Theis filed a notice of appeal in December 1996, and the Company thereafter
filed a notice of cross-appeal on certain issues.
Gilbarco Inc.
In January 1994, Gilbarco Inc. ("Gilbarco") filed suit in the U.S.
District Court for the District of Colorado against the Company and one of the
Company's telephone company customers, U.S. West, alleging infringement of a
Gilbarco patent and seeking unspecified damages. The Company filed an answer
to the complaint denying any infringement of the patent and raising several
affirmative defenses, including an assertion that the patent is invalid and
unenforceable. In September 1994, the claims asserted against the Company were
transferred to the U.S. District Court for the Northern District of California
and those claims asserted against U.S. West were stayed and administratively
closed pending the outcome of the California action. Both parties filed
motions for summary judgment on a variety of issues, including a motion by
Octel for summary judgment declaring the Gilbarco patent unenforceable due to
inequitable conduct during the procurement of the patent. In February 1996,
the Court granted Octel's motion for summary judgment (and denied Gilbarco's
counter-motion) and declared the patent unenforceable as a matter of law. The
Court subsequently entered judgment in favor of Octel and against Gilbarco and
awarded Octel its costs in connection with the lawsuit. Gilbarco's
subsequently filed motion for reconsideration of the Court's ruling was denied
and Gilbarco thereafter filed a notice of appeal. Briefing of the appeal has
been completed and oral argument is scheduled for February 5, 1997.
The Company believes, based on information currently available, that
the Company is not infringing any valid patents of Theis or Gilbarco. The
Company will vigorously defend the patent infringement claims and any related
claims for compensatory damages. While litigation is inherently uncertain, the
Company believes that the ultimate resolution of these matters will not have a
material adverse effect on the Company's financial position.
-17-
<PAGE> 18
OCTEL COMMUNICATIONS CORPORATION
PART II
OTHER INFORMATION
ITEM 4. MATTERS SUBMITTED TO VOTE OF SECURITY HOLDERS
Octel Communications Corporation held its regular Annual Meeting of
Stockholders on December 5, 1996.
The following individuals were elected to serve on the Company's Board
of Directors.
<TABLE>
<CAPTION>
Number of Number of
affirmative votes votes withheld
----------------- --------------
<S> <C> <C>
Robert Cohn 48,241,539 165,775
Anson M. Beard, Jr. 48,251,727 155,587
Leo J. Chamberlain 48,246,333 160,981
Deborah A. Coleman 48,249,568 157,746
Nathaniel de Rothschild 48,247,619 159,695
Dag Tellefsen 48,244,377 162,937
W. Michael West 48,246,341 160,973
</TABLE>
The following matters were voted upon at the meeting:
1. Approval of proposal regarding the 1987 Employee Stock
Purchase Plan to increase the number of shares reserved for
issuance by 1,500,000 shares.
2. Approval of proposal regarding the Certificate of
Incorporation to increase the authorized number of shares to
200,000,000.
3. Ratification of appointment of KPMG Peat Marwick
LLP as independent auditors.
The votes of the stockholders on these proposals were as follows:
<TABLE>
<CAPTION>
Proposal Number of Number of Number of Number of
number affirmative votes negative votes abstentions broker non-votes
----- ---------------- -------------- ----------- ----------------
<S> <C> <C> <C> <C>
1. 45,041,461 2,982,283 132,266 251,304
2. 43,555,324 4,505,832 94,854 251,304
3. 48,264,128 60,401 82,785 --
</TABLE>
Mr. James McDivitt was elected to the Board of Directors on November 5, 1996.
Mr. Tellefsen resigned from the Board effective January 22, 1997.
-18-
<PAGE> 19
OCTEL COMMUNICATIONS CORPORATION
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
3.0 Amended and Restated Certificate of Incorporation
3.1 Amended Bylaws of the Company
11.0 Statement re computation of earnings per share
27.0 Financial Data Schedule
</TABLE>
(b) Report on Form 8-K
No report on Form 8-K was filed by the Company during its
fiscal quarter ended December 31, 1996.
-19-
<PAGE> 20
OCTEL COMMUNICATIONS CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
OCTEL COMMUNICATIONS CORPORATION
Dated: February 13, 1997
/s/ JEAN-YVES DEXMIER
------------------------
Jean-Yves Dexmier, Senior Vice President
and Chief Financial Officer
/s/ JODY BISSON
-----------------
Jody Bisson, Vice President and
Corporate Controller
-20-
<PAGE> 21
OCTEL COMMUNICATIONS CORPORATION
EXHIBIT INDEX
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Exhibit Page
Number Description Number
- --------------------------------------------------------------------------------
<S> <C> <C>
3.0 Amended and Restated Certificate of Incorporation.. 2
3.1 Amended Bylaws of the Company 5
11.0 Statement re computation of earnings per share...... 28
27.0 Financial Data Schedule............................. 29
</TABLE>
<PAGE> 1
Exhibit 3.0
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
OCTEL COMMUNICATIONS CORPORATION
Octel Communications Corporation, a Delaware corporation, hereby certifies
as follows:
The Certificate of Incorporation for Octel Communications Corporation (the
"Corporation") was filed in the office of the Secretary of State of the State of
Delaware on June 22, 1987. The Certificate of Incorporation was amended and
restated on December 15, 1989 and March 21, 1996 and is hereby amended and
restated pursuant to Section 242 and Section 245 of the Delaware General
Corporation Law. All amendments to the Certificate of Incorporation reflected
herein have been duly authorized and adopted by the Corporation's Board of
Directors and stockholders in accordance with the provisions of Sections 242 and
245.
This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the Certificate of Incorporation of the
Corporation. The text of the Certificate of Incorporation is amended hereby to
read in its entirety as set forth on Exhibit A attached hereto:
IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
signed by Robert Cohn, the Chief Executive Officer of the Corporation, and
attested by Derek S. Daley, the Secretary of the Corporation. The signatures
below shall constitute the affirmation or acknowledgment, under penalties of
perjury, that the facts herein stated are true.
Dated: Janaury 29, 1997
/s/ ROBERT COHN
----------------------
Robert Cohn
Chief Executive Officer
ATTEST:
/s/ DEREK S. DALEY
- -------------------
Derek S. Daley
Secretary
<PAGE> 2
EXHIBIT A
FIRST: The name of the Corporation is Octel Communications Corporation (the
"Corporation").
SECOND: The address of the Corporation's registered office in the State of
Delaware is 15 East North Street, Dover, Kent County, Delaware
19901. The name of its registered agent at such address is Paracorp
Incorporated.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: Section 1. The total number of shares which the Corporation shall
have authority to issue is 205,000,000 shares of capital stock.
Section 2. Of such authorized shares, two hundred million
(200,000,000) shares shall be designated "Common Stock," and have a
par value of $.001.
Section 3. Of such authorized shares, five million (5,000,000)
shares shall be designated "Preferred Stock," and have a par value
of $.001. The Preferred Stock may be issued from time to time in one
or more series. The Board of Directors of the Corporation is
authorized to determine or alter the powers, preferences, and rights
and the qualifications, limitations or restrictions granted to or
imposed upon any wholly unissued series of Preferred Stock, and
within the limitations or restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number
of shares constituting any series, to increase or decrease (but not
below the number of shares of any such series then outstanding) the
number of shares of any such series subsequent to the issue of
shares of that series, to determine the designation of any series,
and to fix the number of shares of any series. In case the number of
shares of any series shall be so decreased, the shares constituting
such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of
such series.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: Elections of directors need not be by written ballot unless a
stockholder demands election by written ballot at the meeting and
before voting begins or unless the Bylaws of the Corporation shall
so provide.
SEVENTH: The number of directors which constitute the whole Board of
Directors of the Corporation shall be designated in the Bylaws of
the Corporation.
<PAGE> 3
EIGHTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make,
alter, amend or repeal the Bylaws of the Corporation.
NINTH: To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or as it may hereafter be amended, no
director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director.
TENTH: At the election of directors of the Corporation, each holder of
stock of any class or series shall be entitled to as many votes as
shall equal the number of votes which (except for such provision as
to cumulative voting) he would be entitled to cast for the election
of directors with respect to his shares of stock multiplied by the
number of directors to be elected by him, and he may cast all of
such votes for a single director or may distribute them among the
number to be voted for, or for any two or more of them as he may see
fit, so long as the name of the candidate for director shall have
been placed in nomination prior to the voting and the stockholder,
or any other holder of the same class or series of stock, has given
notice at the meeting prior to the voting of the intention to
cumulate votes.
ELEVENTH: Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation
may be kept (subject to any provision contained in the statutes)
outside of the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the
Bylaws of the Corporation.
TWELFTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute,
and all rights conferred upon stockholders herein are granted
subject to this reservation.
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED
BYLAWS
OF
OCTEL COMMUNICATIONS CORPORATION
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation in the State of Delaware
shall be in the City of Dover, County of Kent, State of Delaware. The name of
the registered agent of the corporation at such location is Paracorp
Incorporated.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date
and at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the third
Wednesday of November in each year at 9:00 a.m. However, if such day falls on
a legal holiday, then the meeting shall be held at the same time and place on
the next succeeding full business day. At the meeting, directors shall be
elected and any other proper business may be transacted.
<PAGE> 2
2.3 SPECIAL MEETING
Special meetings of the stockholders may be called only by the
chairman of the board or by the board of directors pursuant to a resolution
adopted by a majority of the total number of directors that the corporation
would have if there were no vacancies.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and
shall be sent or otherwise given in accordance with Section 2.5 of these bylaws
not less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder entitled to vote at such meeting. The notice shall
specify the place, date, and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called. Only such
business shall be conducted at a special meeting of stockholders as shall have
been brought before the meeting pursuant to the corporation's notice of
meeting. Any previously scheduled meeting of the stockholders may be
postponed, and (unless the Certificate of Incorporation otherwise provides) any
special meeting of the stockholders may be cancelled, by resolution of the
board of directors upon public notice given prior to the date previously
scheduled for such meeting of stockholders.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent
of the corporation that the notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
2.6 QUORUM
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the Certificate of
Incorporation and except that when specified business is to be voted on by a
class or series of stock voting as a class, the holders of a majority of the
shares of such class or series shall constitute a quorum of such class or
series for the transaction of such business. The chairman of the meeting or a
majority of the shares so represented may adjourn the meeting from time to
time, whether or not there is a quorum. The stockholders present at a duly
called meeting, at which a quorum is present may continue to transact business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum. At such adjourned meeting at which a quorum is
present or represented, any business may be transacted that might have been
transacted at the meeting as originally noticed.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the
question is one upon which, by express provisions of the statutes or of the
Certificate
-2-
<PAGE> 3
of Incorporation, a different vote is required, in which case such express
provision shall govern and control the decision of the question.
2.7 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these
bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact
any business that might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
2.8 NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS
a. Annual Meetings of Stockholders.
(1) Nominations of persons for election to the
board of directors of the corporation and the proposal of business to
be considered by the stockholders may be made at an annual meeting of
stockholders (a) pursuant to the corporation's notice of meeting, (b)
by or at the direction of the board of directors or (c) by any
stockholder of the corporation who was a stockholder of record at the
time of giving of notice provided for in this bylaw, who is entitled
to vote at the meeting and who complies with the notice procedures set
forth in this bylaw.
(2) For nominations or other business to be
properly brought before an annual meeting by a stockholder pursuant to
clause (c) of paragraph (a)(1) of this bylaw, the stockholder must
have given timely notice thereof in writing to the secretary of the
corporation and such other business must otherwise be a proper matter
for stockholder action. To be timely, a stockholder's notice shall be
delivered to the secretary at the principal executive offices of the
corporation not later than the close of business on the 60th day nor
earlier than the close of business on the 90th day prior to the first
anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is more than 30
days before or more than 60 days after such anniversary date, notice
by the stockholder to be timely must be so delivered not earlier than
the close of business on the 90th day prior to such annual meeting and
not later than the close of business on the later of the 60th day
prior to such annual meeting or the 10th day following the day on
which public announcement of the date of such meeting is first made by
the corporation. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the
giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to
be disclosed in solicitations of proxies for election of directors in
an election contest, or is otherwise required, in each case pursuant
to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and Rule 14a-11 thereunder (including
such person's written consent to being named in the proxy statement as
a nominee and to serving as a director if elected); (b) as to any
other business that the stockholder proposes to bring before
-3-
<PAGE> 4
the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder
and the beneficial owner, if any, on whose behalf the proposal is
made; (i) the name and address of such stockholder, as they appear on
the corporation's books, and of such beneficial owner and (ii) the
class and number of shares of the corporation which are owned
beneficially and of record by such stockholder and such beneficial
owner.
(3) Notwithstanding anything in the second
sentence of paragraph (a)(2) of this bylaw to the contrary, in the
event that the number of directors to be elected to the board of
directors of the corporation is increased and there is no public
announcement by the corporation naming all of the nominees for
director or specifying the size of the increased board of directors at
least 70 days prior to the first anniversary of the preceding year's
annual meeting, a stockholder's notice required by this bylaw shall
also be considered timely, but only with respect to nominees for any
new positions created by such increase, if it shall be delivered to
the secretary at the principal executive offices of the corporation
not later than the close of business on the 10th day following the
day on which such public announcement is first made by the
corporation.
b. Special Meetings of Stockholders. Only such business
shall be conducted at a special meeting of stockholders as shall have
been brought before the meeting pursuant to the corporation's notice
of meeting. Nominations of persons for election to the board of
directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the corporation's notice of
meeting (a) by or at the direction of the board of directors or (b)
provided that the board of directors has determined that directors
shall be elected at such meeting, by any stockholder of the
corporation who is a stockholder of record at the time of giving of
notice provided for in this bylaw, who shall be entitled to vote at
the meeting and who complies with the notice procedures set forth in
this bylaw. In the event the corporation calls a special meeting of
stockholders for the purpose of electing one or more directors to the
board of directors, any such stockholder may nominate a person or
persons (as the case may be), for election to such position(s) as
specified in the corporation's notice of meeting, if the stockholder's
notice required by paragraph (a)(2) of this bylaw shall be delivered
to the secretary at the principal executive offices of the corporation
not earlier than the close of business on the 90th day prior to such
special meeting and not later than the close of business on the later
of the 60th day prior to such special meeting or the 10th day
following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the board
of directors to be elected at such meeting. In no event shall the
public announcement of an adjournment of a special meeting commence a
new time period for the giving of a stockholder's notice as described
above.
c. General.
(1) Only such persons who are nominated in
accordance with the procedures set forth in this bylaw shall be
eligible to serve as directors and only such business shall be
conducted at a meeting of stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in this
bylaw. Except as otherwise provided by law, the
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Certificate of Incorporation or these bylaws, the chairman of the
meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting
was made or proposed, as the case may be, in accordance with the
procedures set forth in this bylaw and, if any proposed nomination or
business is not in compliance with this bylaw, to declare that such
defective proposal or nomination shall be disregarded.
(2) For purposes of this bylaw, "public
announcement" shall mean disclosure in a press release reported by the
Dow Jones News Service, Associated Press or comparable national news
service or in a document publicly filed by the corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d)
of the Exchange Act.
(3) Notwithstanding the foregoing provisions of
this bylaw, a stockholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this bylaw.
Nothing in this bylaw shall be deemed to affect any rights (i) of
stockholders to request inclusion of proposals in the corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii)
of the holders of any series of Preferred Stock to elect directors
under specified circumstances.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.12 of these
bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners of stock and to voting trusts and other voting agreements).
Except as provided in the last paragraph of this Section 2.9, or as
may be otherwise provided in the Certificate of Incorporation, each stockholder
shall be entitled to one vote for each share of capital stock held by such
stockholder.
At a stockholders' meeting at which directors are to be elected, or at
elections held under special circumstances, a stockholder shall be entitled to
cumulate votes (i.e., cast for any candidate a number of votes greater than the
number of votes which such stockholder normally is entitled to cast). Each
holder of stock of any class or series who elects to cumulate votes shall be
entitled to as many votes as equals the number of votes which (absent this
provision as to cumulative voting) he would be entitled to cast for the
election of directors with respect to his shares of stock multiplied by the
number of directors to be elected by him, and he may cast all of such votes for
a single director or may distribute them among the number to be voted for, or
for any two or more of them, as he may see fit, so long as the name of the
candidate for director shall have been placed in nomination prior to the voting
and the stockholder, or any other holder of the same class or series of stock,
has given notice at the meeting prior to the voting of the intention to
cumulate votes.
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2.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the Certificate of Incorporation or
these bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice unless so required by the Certificate of Incorporation or
these bylaws.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the board of
directors. Any stockholder of record seeking to have the stockholders
authorize or take corporate action by written consent shall, by written notice
to the secretary, request the board of directors to fix a record date. The
board of directors shall promptly, but in all events within ten (10) days after
the date on which such a request is received, adopt a resolution fixing the
record date (unless a record date has previously been fixed by the board of
directors pursuant to the first sentence of this Section). If no record date
has been fixed by the board of directors pursuant to the first sentence of this
Section or otherwise within ten (10) days of the date on which such a request
is received, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting, when no prior action by the
board of directors is required by applicable law, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation by delivery to its registered office in
Delaware, its principal place of business, or to any officer or agent or the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the board of directors and prior action by the board of directors is required
by applicable law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the date on which the board of directors adopts the resolution
taking such prior action.
In the event of the delivery, in the manner provided by the first
paragraph of this Section 2.11 to the corporation of the requisite written
consent or consents to take corporate action and/or any related revocation or
revocations, the corporation shall engage independent inspectors of elections
for the purpose of promptly performing a ministerial review of the validity of
the consents and revocations. For the purpose of permitting the inspectors to
perform such review, no action by written consent without a meeting shall be
effective until such date as the independent inspectors certify to the
corporation that the consents delivered to the corporation in accordance with
the first paragraph of this Section 2.11 of this Article represent at least the
minimum number of votes that would be necessary to take the corporate
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action. Nothing contained in this Section shall in any way be construed to
suggest or imply that the board of directors or any stockholder shall not be
entitled to consent the validity of any consent or revocation thereof, whether
before or after such certification by the independent inspectors, or to take
any other action (including, without limitation, the commencement, prosecution,
or defense or any litigation with respect thereto, and the seeking of
injunctive relief in such litigation).
Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated written consent received in accordance with the first
paragraph of this Section 2.11 of this Article, a written consent or consents
signed by a sufficient number of holders to take such action are delivered to
the corporation in the manner prescribed in Section 2.11 of this Article.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the board of directors may fix, in advance, a record date, which
shall be not more than sixty (60) nor less than ten (10) days before the date
of such meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be
at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held.
(ii) The record date for determining stockholders
for any other purpose shall be at the close of business on the day on
which the board of directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
2.13 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed
by the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
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stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged
in alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if
not so specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present. Such
list shall presumptively determine the identity of the stockholders entitled to
vote at the meeting and the number of shares held by each of them.
2.15 CONDUCT OF BUSINESS
The chairman of any meeting of stockholders shall determine the order
of business and the procedures at the meeting, including such matters as the
regulation of the manner of voting and conduct of business.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the Certificate of Incorporation or these bylaws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction
of the board of directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be not less than five
(5) nor more than nine (9). The exact number of directors shall be fixed,
within the limits specified above, by a resolution duly adopted by the board of
directors or by the stockholders. The indefinite number of directors may be
changed, or a definite number may be fixed without provision for an indefinite
number, by a duly adopted amendment to the Certificate of Incorporation or by
an amendment to this bylaw duly adopted by the vote or written consent of the
holders of a majority of the stock issued and outstanding and entitled to vote.
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No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
Certificate of Incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his successor is elected and qualified
or until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
corporation. When one or more directors so resigns and the resignation is
effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in this section in the filling of other vacancies.
A vacancy created by the removal of a director by the vote or written
consent of the stockholders or by a court order may be filled only by the vote
of a majority of the outstanding shares entitled to vote thereon represented at
a duly held meeting at which a quorum is present, or by the unanimous written
consent of all shares entitled to vote thereon. Each director so elected shall
hold office until the next annual meeting of the stockholders and until a
successor has been elected and qualified.
Unless otherwise provided in the Certificate of Incorporation or these
bylaws:
(i) Vacancies and newly created directorships
resulting from any increase in the authorized number of directors
elected by all of the stockholders having the right to vote as a
single class may be filed by a majority of the directors then in
office, although less than a quorum, or by a sole remaining director.
(ii) Whenever the holders of any class or classes
of stock or series thereof are entitled to elect one or more directors
by the provisions of the Certificate of Incorporation, vacancies and
newly created directorships of such class or classes or series may be
filled by a majority of the directors elected by such class or classes
or series thereof then in office, or by a sole remaining director so
elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a
stockholder, or other fiduciary entrusted with like responsibility for the
person or estate of a stockholder, may call a special meeting of stockholders
in accordance with the provisions of the Cer-
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tificate of Incorporation or these bylaws, or may apply to the Court of
Chancery for a decree summarily ordering an election as provided in Section 211
of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as
aforesaid, which election shall be governed by the provisions of Section 211 of
the General Corporation Law of Delaware as far as applicable.
A director elected or appointed to fill a vacancy shall serve until
the next annual meeting of stockholders or until a successor shall be elected
and qualified.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the Certificate of Incorporation or
these bylaws, members of the board of directors, or any committee designated by
the board of directors, may participate in a meeting of the board of directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the stockholders
at the annual meeting and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event of the failure of the stockholders to
fix the time or place of such first meeting of the newly elected board of
directors, or in the event such meeting is not held at the time and place so
fixed by the stockholders, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the board of directors, or as shall be specified in a written
waiver signed by all of the directors.
3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
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3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors may be called by the
chairman of the board of directors, a majority of the directors or the
president on notice given to each director, either personally (including by
telephone) or by hand delivery, first-class mail, overnight mail, courier
service, telegram or facsimile transmission sent to his business or home
address, stating the place, date and hour of the meeting. If mailed by
first-class mail, such notice shall be deemed to have been adequately given
when deposited in the United States mail, postage prepaid, directed to the
director at his business or home address, at least five (5) days before such
meeting. Notice given by telegraph, overnight mail or courier service shall be
deemed adequately given upon delivery of the message to the telegraph company
or to the overnight mail or courier service company at least two days before
such meeting. Notice given by facsimile transmission shall be deemed
adequately given upon transmission of the message at least twelve (12) hours
before such meeting. Notice given by hand delivery or personally shall be
deemed adequately given when delivered at least twelve (12) hours before such
meeting. Notice of a meeting need not be given to any director who signs a
waiver of notice, whether before or after the meeting. The attendance of any
director at a meeting, without protesting either prior thereto or at its
commencement the lack of notice of such meeting, shall constitute a waiver of
notice by him. Any notice or waiver of notice of a meeting of the board of
directors need not specify the purposes of the meeting.
3.9 QUORUM
At all meetings of the board of directors, a majority of the directors
then in office shall constitute a quorum for the transaction of business and
the act of a majority of the directors present at any meeting at which there is
a quorum shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation. If a
quorum is not present at any meeting of the board of directors, then the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
3.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the Certificate of Incorporation of
these bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so required
by the Certificate of Incorporation or these bylaws.
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3.11 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the board of directors,
then the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the Certificate of Incorporation or
these bylaws, 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 or committee, as the case may be, consent
thereto in writing and the writing or writings are filed with the minutes of
proceedings of the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the Certificate of Incorporation or
these bylaws, the board of directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any,
of attendance of each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefore.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute.
3.15 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the Certificate of
Incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that, so long as stockholders of the corporation are entitled to cumulative
voting, if less than the entire board is to be removed, no director may be
removed without cause if the votes cast against his or her removal would be
sufficient to elect him or her if then cumulatively voted at an election of the
entire Board of Directors.
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No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist
of one or more of the directors of the corporation. The board may designate
one or more directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of the committee. In the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
board of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors or in the bylaws of the corporation, shall
have and may exercise all the powers and authority of the board of directors in
the management of the business and affairs of the corporation, and may
authorize the seal of the corporation to be affixed to all papers that may
require it; but no such committee shall have the power or authority to (i)
amend the Certificate of Incorporation (except that a committee may, to the
extent authorized in the resolution or resolutions providing for the issuance
of shares of stock adopted by the board of directors as provided in Section
151(a) of the General Corporation Law of Delaware, fix any of the preferences
or rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the corporation),
(ii) adopt an agreement of merger or consolidation under Sections 251 or 252 of
the General Corporation Law of Delaware, (iii) recommend to the stockholders
the sale, lease or exchange of all or substantially all of the corporation's
property and assets, (iv) recommend to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or (v) amend the bylaws of the
corporation; and, unless the board resolution establishing the committee, the
bylaws or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend, to authorize
the issuance of stock, or to adopt a certificate of ownership and merger
pursuant to Section 253 of the General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
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4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws,
Section 3.5 (place of meetings and meetings by telephone), Section 3.7 (regular
meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum),
Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of
adjournment), and Section 3.12 (action without a meeting), with such changes in
the context of those bylaws as are necessary to substitute the committee and
its members for the board of directors and its members; provided, however, that
the time of regular meetings of committees may also be called by resolution of
the board of directors and that notice of special meetings of committees shall
also be given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a treasurer. The corporation may also have, at
the discretion of the board of directors, a chairman of the board, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
bylaws, shall be chosen by the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to
appoint, such other officers and agents as the business of the corporation may
require, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these bylaws or as the board of
directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
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Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled
by the Board of Directors.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the Board of Directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
Board of Directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be, given by the
Board of Directors to the chairman of the board, if there be such an officer,
the president shall be the chief executive officer of the corporation and
shall, subject to the control of the Board of Directors, have general
supervision, direction, and control of the business and the officers of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence or nonexistence of a chairman of the board, at all meetings of the
Board of Directors. He shall have the general powers and duties of management
usually vested in the office of president of a corporation and shall have such
other powers and duties as may be prescribed by the Board of Directors or these
bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the Board of Directors or, if not
ranked, a vice president designated by the Board of Directors, shall perform
all the duties of the president and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the president. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board of Directors,
these bylaws, the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and shareholders. The minutes shall show
the time and place of each meeting, whether regular or special (and, if
special, how authorized and the notice given), the names
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<PAGE> 16
of those present at directors' meetings or committee meetings, the number of
shares present or represented at shareholders' meetings, and the proceedings
thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names
of all shareholders and their addresses, the number and classes of shares held
by each, the number and date of certificates evidencing such shares, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the Board of Directors required to be given by law
or by these bylaws. He shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or by these bylaws.
5.10 TREASURER
The treasurer shall keep and maintain, or cause to be kept and
maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The treasurer shall deposit all money and other valuables in the name
and to the credit of the corporation with such depositories as may be
designated by the Board of Directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as treasurer and of the financial condition of the corporation,
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or these bylaws.
5.11 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the Board of
Directors or the stockholders may from time to time prescribe.
5.12 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or Board of Directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the treasurer
and shall perform such other
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<PAGE> 17
duties and have such other powers as the Board of Directors or the stockholders
may from time to time prescribe.
5.13 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from
time to time by the Board of Directors or the stockholders.
ARTICLE VI
INDEMNITY
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements, and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation includes any person (i) who is or
was a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation
(other than a director or officer) includes any person (i) who is or was an
employee or agent of the corporation, (ii) who is or was serving at the request
of the corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or (iii) who was an employee or agent
of a corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such
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<PAGE> 18
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of the General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its shareholders listing their names and addresses and the number and class of
shares held by each shareholder, a copy of these bylaws as unended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean
a purpose reasonably related to such person's interest as a stockholder. In
every instance where an attorney or other agent is the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing that authorizes the attorney or other agent to
so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in Delaware or at its principal
place of business.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged
in alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if
not so specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether
a director is entitled to the inspection sought. The Court may summarily order
the corporation to permit the director to inspect any and all books and
records, the stock ledger, and the stock list and to make copies or extracts
therefrom. The Court may, in its discretion, prescribe any limitations or
conditions with reference to the inspection, or award such other and further
relief as the Court may deem just and proper.
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<PAGE> 19
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority
granted herein may be exercised either by such person directly or by any other
person authorized to do so by proxy or power of attorney duly executed by such
person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts,
other orders for payment of money, notes or other evidences of indebtedness
that are issued in the name of or payable to the corporation, and only the
persons so authorized shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply
to shares represented by a certificate until such certificate is surrendered to
the corporation. Notwithstanding the adoption of such a resolution by the
board of directors, every holder of stock represented by certificates and, upon
request, every holder of uncertificated shares, shall be entitled to have a
certificate signed by, or in the
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<PAGE> 20
name of the corporation 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 of such
corporation representing the number of shares registered in certificate form.
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 has 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.
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, or upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
corporation shall declare a dividend upon partly paid shares of the same class,
but only upon the basis of the percentage of the consideration actually paid
thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the
designations, the preferences, and the relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it
on account of the alleged loss, theft or destruction of any such certificate or
the issuance of such new certificate or uncertificated shares.
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<PAGE> 21
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions
contained in the Certificate of Incorporation, may declare and pay dividends
upon the shares of its capital stock pursuant to the General Corporation Law of
Delaware. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not
be limited to equaling dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
Board of Directors and may be changed by the Board of Directors.
8.9 SEAL
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock
of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the General Corporation Law of Delaware.
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<PAGE> 22
8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends
and to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of another person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted,
amended or repealed by the stockholders entitled to vote; provided, however,
that the corporation may, in its Certificate of Incorporation, confer the power
to adopt, amend or repeal bylaws upon the directors. The fact that such power
has been so conferred upon the directors shall not divest the stockholders of
the power, nor limit their power to adopt, amend or repeal bylaws.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the Board of
Directors of the corporation that the corporation should be dissolved, the
board, after the adoption of a resolution to that effect by a majority of the
whole board at any meeting called for that purpose, shall cause notice to be
mailed to each stockholder entitled to vote thereon of the adoption of the
resolution and of a meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation
entitled to vote thereon votes for the proposed dissolution, then a certificate
stating that the dissolution has been authorized in accordance with the
provisions of Section 275 of the General Corporation Law of Delaware and
setting forth the names and residences of the directors and officers shall be
executed, acknowledged, and filed and shall become effective in accordance with
Section 103 of the General Corporation Law of Delaware. Upon such
certificate's becoming effective in accordance with Section 103 of the General
Corporation Law of Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution
consent in writing, either in person or by duly authorized attorney, to a
dissolution, no meeting of directors or stockholders shall be necessary. The
consent shall be filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such consent's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved. If the consent is signed by an
attorney, then the original power of attorney or a photocopy thereof shall be
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<PAGE> 23
attached to and filed with the consent. The consent filed with the Secretary
of State shall have attached to it the affidavit of the secretary or some other
officer of the corporation stating that the consent has been signed by or on
behalf of all the stockholders entitled to vote on a dissolution; in addition,
there shall be attached to the consent a certification by the secretary or some
other officer of the corporation setting forth the names and residences of the
directors and officers of the corporation.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may
appoint one or more persons to be custodians and, if the corporation is
insolvent, to be receivers, of and for the corporation when:
(i) at any meeting held for the election of
directors the stockholders are so divided that they have failed to
elect successors to directors whose terms have expired or would have
expired upon qualification of their successors; or
(ii) the business of the corporation is suffering
or is threatened with irreparable injury because the directors are so
divided respecting the management of the affairs of the corporation
that the required vote for action by the board of directors cannot be
obtained and the stockholders are unable to terminate this division;
or
(iii) the corporation has abandoned its business
and has failed within a reasonable time to take steps to dissolve,
liquidate or distribute its assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver
appointed under Section 291 of the General Corporation Law of Delaware, but the
authority of the custodian shall be to continue the business of the corporation
and not to liquidate its affairs and distribute its assets, except when the
Court of Chancery otherwise orders and except in cases arising under Sections
226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.
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<PAGE> 1
EXHIBIT 11.0
OCTEL COMMUNICATIONS CORPORATION
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS - UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------- ---------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
PRIMARY NET INCOME PER SHARE
Net income ......................... $ 10,635 $ 11,742 $ 21,127 $ 18,331
======== ======== ======== ========
Weighted average shares
outstanding ...................... 51,514 48,936 51,799 48,714
Dilutive effect of outstanding stock
options (as determined by the
application of the treasury stock
method) .......................... 2,940 3,460 3,602 4,114
Other .............................. (276) (88) (169) (78)
-------- -------- -------- --------
54,178 52,308 55,232 52,750
======== ======== ======== ========
Primary net income per share ....... $ 0.20 $ 0.22 $ 0.38 $ 0.35
======== ======== ======== ========
FULLY DILUTED NET INCOME PER SHARE*
Net income ......................... $ 10,635 $ 11,742 $ 21,127 $ 18,331
======== ======== ======== ========
Weighted average shares
outstanding ...................... 51,514 48,936 51,799 48,714
Dilutive effect of outstanding stock
options (as determined by the
application of the treasury stock
method) .......................... 2,921 3,564 3,575 4,118
Other .............................. (275) (82) (169) (78)
-------- -------- -------- --------
54,160 52,418 55,205 52,754
======== ======== ======== ========
Fully diluted net income per
share ............................ $ 0.20 $ 0.22 $ 0.38 $ 0.35
======== ======== ======== ========
</TABLE>
* This computation is submitted in accordance with Securities Exchange Act of
1934 Release No. 9083 although not required for all periods under APB Opinion
No. 15 because it results in dilution of less than three percent.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 46,325
<SECURITIES> 27,343
<RECEIVABLES> 166,087
<ALLOWANCES> 4,290
<INVENTORY> 43,221
<CURRENT-ASSETS> 299,277
<PP&E> 247,567
<DEPRECIATION> 104,455
<TOTAL-ASSETS> 476,431
<CURRENT-LIABILITIES> 91,075
<BONDS> 0
0
0
<COMMON> 243,109
<OTHER-SE> 141,916
<TOTAL-LIABILITY-AND-EQUITY> 476,431
<SALES> 106,039
<TOTAL-REVENUES> 158,760
<CGS> 36,627
<TOTAL-COSTS> 69,125
<OTHER-EXPENSES> 74,194
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (789)
<INCOME-PRETAX> 16,435
<INCOME-TAX> 5,800
<INCOME-CONTINUING> 10,635
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,635
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
